-----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, EWmaH4hYmpcNYCEhWGRlBZNVuOn5yM0z0BDrl8TUs0nCqXSEhmo0luzrHm6gumZ4 KaaApAM866yaGVAuhQW8iw== 0000912057-97-012901.txt : 19970415 0000912057-97-012901.hdr.sgml : 19970415 ACCESSION NUMBER: 0000912057-97-012901 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19970414 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DECRANE AIRCRAFT HOLDINGS INC CENTRAL INDEX KEY: 0000880765 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728] IRS NUMBER: 341645569 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-19939 FILM NUMBER: 97580014 BUSINESS ADDRESS: STREET 1: 155 MONTROSE WEST AVE. SUITE 210 CITY: COPLEY STATE: OH BUSINESS PHONE: 3306683061 MAIL ADDRESS: STREET 1: 155 MONTROSE WEST AVENUE STREET 2: SUITE 210 CITY: COPLEY STATE: OH ZIP: 44321 S-1/A 1 S-1/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 1997 REGISTRATION NO. 333-19939 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 3 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ DECRANE AIRCRAFT HOLDINGS, INC. (Exact name of registrant as specified in its charter) DELAWARE 3728 34-1645569 (State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Incorporation or Organization) Classification Code No.) Identification No.)
155 MONTROSE WEST AVENUE SUITE 210 COPLEY, OH 44321 (330) 668-3061 (Address, including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) R. JACK DECRANE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER DECRANE AIRCRAFT HOLDINGS, INC. 155 MONTROSE WEST AVENUE SUITE 210 COPLEY, OH 44321 (330) 668-3061 (Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service) -------------------------- WITH COPIES TO: STEPHEN A. SILVERMAN, ESQ. KENNETH J. BARONSKY, ESQ. SPOLIN & SILVERMAN MILBANK, TWEED, HADLEY & McCLOY 100 Wilshire Boulevard, Suite 940 601 S. Figueroa, 30th Floor Santa Monica, California 90401 Los Angeles, California 90017 (310) 576-1221 (213) 892-4000 -------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. -------------------------- If any of the securities being registered on this form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. / / If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF TO BE REGISTERED REGISTERED (1) PER SHARE (2) PRICE (2) REGISTRATION FEE (2) Common Stock, Par Value, $.01 2,987,040 Shares $15.00 $44,805,600 $13,577(3)
(1) Includes 389,614 shares of Common Stock issuable upon exercise of the Underwriters' over-allotment option. (2) Estimated solely for the purpose of determining the registration fee pursuant to Rule 457. (3) Previously paid. -------------------------- 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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXPLANATORY NOTE This Amendment No. 3 is being filed by DeCrane Aircraft Holdings, Inc., a Delaware corporation (the "Company"), in order to amend certain portions of Part II of the Company's Registration Statement on Form S-1. Accordingly, Part I of the Form S-1 is not included in this Amendment No. 3. PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following is an itemization of all estimated expenses incurred or expected to be incurred by the Registrant in connection with the issuance and distribution of the securities being registered hereby, other than underwriting discounts and commissions.
ITEM AMOUNT - ------------------------------------------------------------------------------- ------------- SEC Registration Fee........................................................... $ 13,577 NASD Filing Fee................................................................ 4,981 Nasdaq National Marketing Listing Fee.......................................... 30,500 Blue Sky Filing Fees and Expenses.............................................. 3,000 Printing and Engraving Costs................................................... 225,000 Transfer Agent Fees............................................................ 5,000 Legal Fees and Expenses........................................................ 745,000 Accounting Fees and Expenses................................................... 340,000 Miscellaneous.................................................................. 20,442 ------------- Total...................................................................... $ 1,387,500
All amounts are estimated except for the SEC Registration Fee, the NASD Filing Fee and the NASDAQ National Market Listing Fee. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Company's Certificate of Incorporation contains a provision eliminating or limiting director liability to the Company and its stockholders for monetary damages arising from acts or omissions in the director's capacity as a director. The provision does not, however, eliminate or limit the personal liability of a director: (i) for any breach of such director's duty of loyalty to the Company 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 the Delaware statutory provision making directors personally liable, under a negligence standard, for unlawful dividends or unlawful stock purchases or redemptions; or (iv) for any transaction from which the director derived an improper personal benefit. This provision offers persons who serve on the Board of Directors of the Company protection against awards of monetary damages resulting from breaches of their duty of care (except as indicated above). As a result of this provision, the ability of the Company or a stockholder thereof to successfully prosecute an action against a director for breach of his duty of care is limited. However, the provision does not affect the availability of equitable remedies such as an injunction or recision based upon a director's breach of his duty of care. The Commission has taken the position that the provision will have no effect on claims arising under the Federal securities laws. In addition, the Certificate of Incorporation and the Company's Bylaws provide for mandatory indemnification rights, subject to limited exceptions, to any director or executive officer of the Company who by reason of the fact that he or she is a director or officer of the Company, is involved in a legal proceeding of any nature. Such indemnification rights include reimbursement for expenses incurred by such director or officer in advance of the final disposition of such proceeding in accordance with the applicable provisions of GCLSD. The Company may from time to time agree to provide similar indemnifications to certain employees and other agents. The Company also maintains directors' and officers' liability insurance. II-1 In addition, the Underwriting Agreement provides for indemnification by the Underwriters of the Registrant, its directors and officers against certain liabilities, including liabilities under the Securities Act of 1933, as amended. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES (1) Pursuant to a Securities Purchase Agreement dated November 2, 1994 and Electra Investment Trust P.L.C. and Electra Associates, Inc (collectively, "Electra") and DSV Partners, the Company sold 271,471 shares of Series C preferred stock for a purchase price of $1.50 per share. The sale of these securities was exempt from registration pursuant to Section 4(2) of the Act. (2) Pursuant to an Amended and Restated Credit Agreement dated as of November 2, 1994 among the Company, Provident Bank ("Provident") and Internationale Nederlanden (U.S.) Capital Corporation ("ING), the Company issued warrants to purchase an aggregate of 84,748 shares of Common Stock in connection with the amendment and restatement of the Company's credit agreement. Also in connection with the Amended and Restated Credit Agreement the Company issued warrants to purchase an aggregate of 94,558 shares of Common Stock to a former lender to the Company. The issuance of these securities was exempt from registration pursuant to Section 4(2) of the Act. (3) Pursuant to a Securities Purchase Agreement dated as of November 2, 1994 among the Company and Electra, the Company issued for a purchase price of $7.0 million (i) 12% Senior Subordinated Notes due December 31, 2001 having an aggregate principal amount of $7.0 million, and (ii) warrants to purchase 266,990 shares of Common Stock. The issuance of these securities was exempt from registration pursuant to Section 4(2) of the Act. (4) Pursuant to a Securities Purchase Agreement dated as of February 20, 1996 among the Company, Nassau Capital Partners, L.P. and NAS Partners I, L.L.C., the Company issued an aggregate purchase price of $6.5 million (i) 2,000,000 shares of Series D Preferred Stock, and (ii) warrants to purchase 194,618 shares of Common Stock. The issuance of these securities was exempt from registration pursuant to Section 4(2) of the Act. (5) In January 1994, the Company sold 2,269 shares of Common Stock for $.53 per share to John Schnepf. Such securities were sold pursuant to the exercise of stock options. (6) Pursuant to a Securities Purchase Agreement dated February 9, 1996 among the Company, R.G. MacDonald, Charles Becker, Robert Rankin and John Hinson the Company sold 75,000 shares of Series C preferred stock for a purchase price of $1.50 per share. The sale of these securities was exempt from registration pursuant to Section 4(2) of the Act. (7) Pursuant to a Securities Purchase Agreement dated September 18, 1996 among the Company, Nassau the Company sold (i) $2.0 million aggregate principal amount of 15% convertible Notes and 49,079 warrants to purchase Common Stock for a purchase price of $3.0 million, and (ii) 750,000 shares of Series E Preferred Stock and 49,079 warrants to purchase Common Stock for a purchase price of $3.0 million. The issuance of such securities was exempt from registration under Section 4(2) of the Act. (8) Pursuant to an Amended and Restated Credit Agreement dated as of September 18, 1996 among the Company, Provident and Internationale Nederlanden (U.S.) Capital Corporation., ING and Provident Bank, the Company issued 70,892 warrants to purchase Common Stock as additional consideration for amendments to documents governing certain indebtedness of the Company. The issuance of these securities was exempt from registration pursuant to Section 4(2) of the Act. II-2 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits 1.1 Form of Underwriting Agreement** 3.1 Certificate of Incorporation of Registrant** 3.2 Bylaws of Registrant** 4.1 Specimen Certificate (incorporated by reference to Exhibit 2(1) of the Company's Form 8-A/A filed April 14, 1997) 5.1 Opinion of Spolin & Silverman (re legality) 10.1 1993 Share Incentive Plan** 10.2 Tax Sharing Agreement dated March 15, 1993 between the Company TSH and Hollingsead International, Inc.** 10.3 Employment Agreement dated September 1, 1994 between the Company and R. Jack DeCrane** 10.4 Employment Agreement dated June 28, 1993 between the Company and R. G. MacDonald** 10.5 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and the Allard Children's Trust f/b/o John R. Allard** 10.6 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and the Allard Children's Trust f/b/o Michael E. Allard** 10.7 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and Younes Nazarian** 10.8 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and David and Angela Nazarian, Trustees of the Nazarian Family Trust** 10.9 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and Gerald R. Allard, Trustee of the Gerald R. Allard Revocable Trust of 1994** 10.10 Fourth Amended and Restated Registration Rights Agreement dated September 18, 1996 among the Company, Banc One Capital Partners Corporation, Brantley Venture Partners II, L.P., R. Jack DeCrane, DSV Parnters, IV, Electra Investment Trust, P.L.C., Internationale Nederlanden (U.S.) Capital Corporation, Electra Associates, Inc., The Provident Bank, Nassau Capital Partners L.P., NAS Partner I L.L.C.** 10.11 Fourth Amended and Restated Shareholders Agreement dated September 18, 1996 among the Company, Banc One Capital Partners Corporation, Brantley Venture Partners II, L.P., R. Jack DeCrane, DSV Partners, IV, Electra Investment Trust, P.L.C., Internationale Nederlanden (U.S.) Capital Corporation, Electra Associates, Inc., The Provident Bank, Nassau Capital Partners L.P., NAS Partner I L.L.C.** 10.12 Lease dated September 1989 as amended on December 15, 1993 among Continental Development Corporation, Tri-Star Electronics, Inc., and Cory Components, Inc. for real property in El Segundo, CA** 10.13 Amended and Restated Credit Agreement, dated September 18, 1996, among the Comapny, ADS Acquisition, Inc., Tri-Star Holdings, Inc., Tri-Star Electronics International, Inc., Tri-Star Technologies, Inc., Tri-Star Technologies, Tri-Star Electronics Europe S.A., Mezzovico, Cory Holdings, Inc., Cory Components, Inc., Hollingsead International, Inc., Hollingsead International Limited, The Provident Bank, and Internationale Nederlanden (U.S.) Capital Corporation**
II-3 10.14 General Terms Agreement dated July 5, 1995 between the Boeing Company and Cory Components, Number 6-5752-0002** 10.15 Special Business Provisions dated November 30, 1995 between the Boeing Company and Cory Components, Number 6-5752-0004** 10.16 Purchase Agreement 9423JC4548 between Boeing Defense & Space-Irving Co. and Cory Components, January 1, 1995 through December 31, 1999** 10.17 Electrical Contact Procurement Contract Letter of Agreement, dated June 28, 1993 between Boeing Commercial Airplane Group and Tri-Star Electronics International** 10.18 Asset Purchase and Sale Agreement by and among Allard Industries, Inc., Gerald R. Allard, Trustee of the Gerald R. Allard Revocable Trust of 1994, The Allard Children's Trust f/b/o John Allard, The Allard Children's Trust f/b/o Michael E. Allard, Younes Nazarian and David and Angela Nazarian, Trustees of the Nazarian Family Trust, the principal shareholders of Allard, the Company and ADS Acquisition, Inc.** 10.19 Assets Purchase and Sale Agreement dated December 4, 1996 among the Company, EE Acquisition, Inc., William Lyon, and Elsinore LP** 10.20 Asset Purchase and Sale Agreement dated November 25, 1996 among AMP, Incorporated, the Whitaker Corporation and DeCrane Aircraft Holdings, Inc.** 10.21 Stock Purchase Agreement, dated January 1, 1995, among the Company and Cory Components, Inc.** 10.22 Securities Purchase Agreement, dated September 18, 1996 among the Company, Nassau Capital Partners L.P., NAS Partners I L.L.C., and Electra Investment Trust P.L.C.** 10.23 Securities Purchase Agreement, dated February 20, 1996 among the Company, Nassau Capital Partners L.P. and NAS Partners I L.L.C.** 10.24 Securities Purchase Agreement dated November 2, 1994, as amended on February 20, 1996, among the Company, Electra Investment Trust P.L.C. and Electra Associates, Inc.** 10.25 Letter Agreement dated November 24, 1994 between the Company and Charles Becker** 10.26 Warrant Agreement dated November 2, 1994 between the Company and Internationale Nederlanden (U.S.) Capital Corporation** 10.27 Form of Warrant Agreement relating to the Company's Series E Warrants** 10.28 Form of Warrant Agreement relating to the Company's Series F Warrants** 10.29 Form of Warrant Agreement relating to the Company's Series G Warrants** 10.30 Form of Warrant Agreement relating to the Company's Series H Warrants** 10.31 Share Purchase Agreement dated February 9, 1996 among the Company, R.G. MacDonald, Charles Becker, Robert Rankin** 10.32 Form of Amendment Agreement dated March 7, 1997 between the Company and Nassau 10.33 401(k) Salary Reduction Non-Standardized Adoption Agreement dated April 30, 1992 between the Company and The Lincoln National Life Insurance Company** 10.34 Agreement dated January 10, 1997 among the Company and its shareholders relating to the Recapitalization** 10.35 Form of Loan and Security Agreement among DeCrane Aircraft Holdings, Inc., Bank of America Illinois, as agent and lender, and the other lenders party thereto 10.36 Agreement dated July 30, 1996 between Interactive Flight Technologies and Hollingsead International, Inc.
II-4 11.1 Statement regarding computation of per share earnings of the Company** 21.1 List of Subsidiaries of Registrant** 23.1 Consent of Price Waterhouse, LLP** 23.2 Consent of Spolin & Silverman (included in Exhibit 5.1) 24.1 Power of Attorney (appears on signature page)** 27 Financial Data Schedule**
- ------------------------ ** Previously filed. (b) FINANCIAL STATEMENT SCHEDULE: Schedule II--Valuation and Qualifying Accounts All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. ITEM 17. UNDERTAKINGS (a) The undersigned Registrant hereby undertakes to provide to the Underwriters at the Closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. (b) Insofar as indemnification for liabilities arising under the Securities Act, may be permitted to directors, officers and controlling persons of the Registrant pursuant to the 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 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person 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 such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (c) The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5 SIGNATURES This Amendment to Registration Statement and Power of Attorney, pursuant to the requirements of the Securities Act of 1933, as amended, has been signed on its behalf by the undersigned, thereunto duly authorized, in the State of California, on this 14th day of April, 1997. DECRANE AIRCRAFT HOLDINGS, INC. By: /s/ R. JACK DECRANE ------------------------------------------ Name: R. Jack DeCrane Title:Chairman of the Board and Chief Executive POWER OF ATTORNEY Pursuant to the requirement of the Securities Act of 1933, as amended, this Amendment to Registration Statement have been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE - --------------------------------------------- ------------------------- -------------------- /s/ R. JACK DECRANE Chairman of the Board, ------------------------------------------- Chief Executive Officer April 14, 1997 R. Jack DeCrane and Director R. G. MACDONALD* Vice Chairman of the ------------------------------------------- Board and Director April 14, 1997 R. G. MacDonald Chief Financial Officer ROBERT A. RANKIN* and Secretary ------------------------------------------- (principal accounting April 14, 1997 Robert A. Rankin officer) JAMES R. BERGMAN* ------------------------------------------- Director April 14, 1997 James R. Bergman PAUL H. CASCIO* ------------------------------------------- Director April 14, 1997 Paul H. Cascio JONATHAN A. SWEEMER* ------------------------------------------- Director April 14, 1997 Jonathan A. Sweemer *By: /s/ R. JACK DECRANE ------------------------------------------- Attorney in fact April 14, 1997 R. Jack DeCrane
II-6 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------ ----- 1.1 Form of Underwriting Agreement** 3.1 Certificate of Incorporation of Registrant** 3.2 Bylaws of Registrant** 4.1 Specimen Certificate (incorporated by reference to Exhibit 2(1) of the Company's Form 8-A/A filed April 14, 1997) 5.1 Opinion of Spolin & Silverman (re legality) 10.1 1993 Share Incentive Plan** 10.2 Tax Sharing Agreement dated March 15, 1993 between the Company TSH and Hollingsead International, Inc.** 10.3 Employment Agreement dated September 1, 1994 between the Company and R. Jack DeCrane** 10.4 Employment Agreement dated June 28, 1993 between the Company and R. G. MacDonald** 10.5 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and the Allard Children's Trust f/b/o John R. Allard** 10.6 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and the Allard Children's Trust f/b/o Michael E. Allard** 10.7 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and Younes Nazarian** 10.8 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and David and Angela Nazarian, Trustees of the Nazarian Family Trust** 10.9 Restrictive Covenant Agreement among the Company, ADS Acquisition, Inc. and Gerald R. Allard, Trustee of the Gerald R. Allard Revocable Trust of 1994** 10.10 Fourth Amended and Restated Registration Rights Agreement dated September 18, 1996 among the Company, Banc One Capital Partners Corporation, Brantley Venture Partners II, L.P., R. Jack DeCrane, DSV Parnters, IV, Electra Investment Trust, P.L.C., Internationale Nederlanden (U.S.) Capital Corporation, Electra Associates, Inc., The Provident Bank, Nassau Capital Partners L.P., NAS Partner I L.L.C.** 10.11 Fourth Amended and Restated Shareholders Agreement dated September 18, 1996 among the Company, Banc One Capital Partners Corporation, Brantley Venture Partners II, L.P., R. Jack DeCrane, DSV Partners, IV, Electra Investment Trust, P.L.C., Internationale Nederlanden (U.S.) Capital Corporation, Electra Associates, Inc., The Provident Bank, Nassau Capital Partners L.P., NAS Partner I L.L.C.** 10.12 Lease dated September 1989 as amended on December 15, 1993 among Continental Development Corporation, Tri-Star Electronics, Inc., and Cory Components, Inc. for real property in El Segundo, CA** 10.13 Amended and Restated Credit Agreement, dated September 18, 1996, among the Comapny, ADS Acquisition, Inc., Tri-Star Holdings, Inc., Tri-Star Electronics International, Inc., Tri-Star Technologies, Inc., Tri-Star Technologies, Tri-Star Electronics Europe S.A., Mezzovico, Cory Holdings, Inc., Cory Components, Inc., Hollingsead International, Inc., Hollingsead International Limited, The Provident Bank, and Internationale Nederlanden (U.S.) Capital Corporation**
EXHIBIT NUMBER DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------ ----- 10.14 General Terms Agreement dated July 5, 1995 between the Boeing Company and Cory Components, Number 6-5752-0002** 10.15 Special Business Provisions dated November 30, 1995 between the Boeing Company and Cory Components, Number 6-5752-0004** 10.16 Purchase Agreement 9423JC4548 between Boeing Defense & Space-Irving Co. and Cory Components, January 1, 1995 through December 31, 1999** 10.17 Electrical Contact Procurement Contract Letter of Agreement, dated June 28, 1993 between Boeing Commercial Airplane Group and Tri-Star Electronics International** 10.18 Asset Purchase and Sale Agreement by and among Allard Industries, Inc., Gerald R. Allard, Trustee of the Gerald R. Allard Revocable Trust of 1994, The Allard Children's Trust f/b/o John Allard, The Allard Children's Trust f/b/o Michael E. Allard, Younes Nazarian and David and Angela Nazarian, Trustees of the Nazarian Family Trust, the principal shareholders of Allard, the Company and ADS Acquisition, Inc.** 10.19 Assets Purchase and Sale Agreement dated December 4, 1996 among the Company, EE Acquisition, Inc., William Lyon, and Elsinore LP** 10.20 Asset Purchase and Sale Agreement dated November 25, 1996 among AMP, Incorporated, the Whitaker Corporation and DeCrane Aircraft Holdings, Inc.** 10.21 Stock Purchase Agreement, dated January 1, 1995, among the Company and Cory Components, Inc.** 10.22 Securities Purchase Agreement, dated September 18, 1996 among the Company, Nassau Capital Partners L.P., NAS Partners I L.L.C., and Electra Investment Trust P.L.C.** 10.23 Securities Purchase Agreement, dated February 20, 1996 among the Company, Nassau Capital Partners L.P. and NAS Partners I L.L.C.** 10.24 Securities Purchase Agreement dated November 2, 1994, as amended on February 20, 1996, among the Company, Electra Investment Trust P.L.C. and Electra Associates, Inc.** 10.25 Letter Agreement dated November 24, 1994 between the Company and Charles Becker** 10.26 Warrant Agreement dated November 2, 1994 between the Company and Internationale Nederlanden (U.S.) Capital Corporation** 10.27 Form of Warrant Agreement relating to the Company's Series E Warrants** 10.28 Form of Warrant Agreement relating to the Company's Series F Warrants** 10.29 Form of Warrant Agreement relating to the Company's Series G Warrants** 10.30 Form of Warrant Agreement relating to the Company's Series H Warrants** 10.31 Share Purchase Agreement dated February 9, 1996 among the Company, R.G. MacDonald, Charles Becker, Robert Rankin** 10.32 Form of Amendment Agreement dated March 7, 1997 between the Company and Nassau
EXHIBIT NUMBER DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------ ----- 10.33 401(k) Salary Reduction Non-Standardized Adoption Agreement dated April 30, 1992 between the Company and The Lincoln National Life Insurance Company.** 10.34 Agreement dated January 10, 1997 among the Company and its shareholders relating to the Recapitalization.** 10.35 Form of Loan and Security Agreement among DeCrane Aircraft Holdings, Inc., Bank of America Illinois, as agent and lender, and the other lenders party thereto. 10.36 Agreement dated July 30, 1996 between Interactive Flight Technologies and Hollingsead International, Inc. 11.1 Statement regarding computation of per share earnings of the Company** 21.1 List of Subsidiaries of Registrant** 23.1 Consent of Price Waterhouse LLP** 23.2 Consent of Spolin & Silverman (included in Exhibit 5.1) 24.1 Power of Attorney (appears on signature page)** 27 Financial Data Schedule**
- ------------------------ ** Previously filed. EX-5.1 2 EX5.1 EXHIBIT 5.1 [LETTERHEAD] April 14, 1997 DeCrane Aircraft Holdings, Inc. 155 Montrose West Avenue Suite 210 Copley, Ohio, 44321 Re: DeCrane Aircraft Holdings, Inc. Registration Statement on Form S-1 (No. 333-19939) Gentlemen: You have requested our opinion as counsel for DeCrane Aircraft Holdings, Inc., a Delaware corporation (the "Company"), in connection with the offer and sale by the Company of shares (the "Shares") of the Company's Common Stock, $0.01 par value per share (the "Offering"), in accordance with the Company's Registration Statement on Form S-1 No. 333-19939, as amended (the "Registration Statement"). In rendering our opinion herein, we have assumed, with your permission: the genuineness and authenticity of all signatures on original documents submitted to us; the authenticity of all documents submitted to us as originals; the conformity to originals of all documents submitted to us as copies or facsimiles; the continued accuracy of all certificates and other documents from public officials dated earlier than the date of this letter; the Registration Statement being declared effective by the Securities and Exchange commission; the issuance by any necessary regulatory agencies of appropriate permits, consents, approvals, authorizations and orders relating to the Offering; the offer and sale of the Shares being made in the manner set forth in the Registration Statement and pursuant to said permits, consents approvals, authorizations and orders; due adoption of resolutions by the Company's Board of Directors approving the offer and sale of the shares, the public offering price and underwriters' discount and commissions and the execution, delivery and performance of the Underwriting Agreement; and the receipt by the Company of full and valid consideration for the Shares. Based on the foregoing, it is our opinion that, when issued, the Shares will be legally issued, fully paid and non-assessable. DeCrane Aircraft Holdings, Inc. April 14, 1997 Page 2 This opinion is addressed solely to the Company, and no one else has the right to rely upon it, nor may anyone release it, quote from it, or employ it in any transaction other than those discussed herein without our written consent; however, we hereby consent to the filing of this opinion as an exhibit to, and the references to this firm contained in, the Registration Statement. Respectfully submitted, SPOLIN & SILVERMAN EX-10.32 3 EX 10.32 FORM OF AMEND AGRMT. EXHIBIT 10.32 AMENDMENT AGREEMENT AMENDMENT AGREEMENT, dated as of March 7, 1997 (this "Amendment Agreement"), among DeCrane Aircraft Holdings, Inc. (the "Company"), Nassau Capital Partners L.P., ("Nassau Capital") and NAS Partners I L.L.C. ("NAS", and together with Nassau Capital ("Nassau")). WHEREAS, the Company and Nassau are parties to a Securities Purchase Agreement dated as of February 20, 1996 (the "Agreement"); WHEREAS, in connection with the Agreement, the Company issued to Nassau Series E Warrants, Series F Warrants and Series G Warrants exercisable into shares of common stock, without par value (the "Common Stock"), of the Company (collectively, the "Warrants"); WHEREAS, Section 8.7 of the Agreement and Section 14.9 of the Warrants provide that the Agreement and the Warrants, as the case may be, may be amended by an instrument in writing which is executed by the Company and Nassau; WHEREAS, the Company has filed a registration statement with the Securities and Exchange Commission relating to an initial public offering of the Common Stock (the "IPO"); and WHEREAS, the Company and Nassau desire to amend the Agreement and the Warrants in the manner set forth below in the event of, and effective immediately upon, consummation of an IPO; NOW THEREFORE, in consideration of the premises and for other valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Upon consummation of an IPO, Sections 7.1, 7.2 and 7.4 of the Agreement shall be deleted in their entirety and replaced with the following: 7.1 TERM: EXERCISE. Subject to the terms and conditions contained in this Agreement and in the Series E Warrants, the Series E Warrants are exercisable, in the manner set forth in the Series E Warrants, in whole or in part, at any time and from time to time during the period commencing on the Effective Date (as defined in the Series E Warrants) and ending at 5:00 p.m. New York City time on December 31, 2003, and shall be void thereafter. 2 7.2 SERIES E WARRANTS. At the Closing, the Investors will receive Series E Warrants exercisable into an aggregate of 350,000 shares of Company Common Stock. 7.4 ANTIDILUTION PROVISIONS. The number of shares of Common Stock for which the Series E Warrants may be exercised shall be adjusted as set forth in the Series B Warrants in order to preserve the relative position of the holder of the Series E Warrants vis-a-vis the number of the issued and outstanding shares of Common Stock which such holder may acquire upon exercise of the Series E Warrants. 2. Upon consummation of an IPO, all references in the Agreement to the Warrants shall be deemed to be references only to the Series E Warrants. 3. Upon consummation of an IPO, the Series F Warrants and Series G Warrants issued to Nassau shall be null and void and of no further force and effect. 4. Upon consummation of an IPO, the cover page of the Series E Warrants shall be amended to provide that (i) Warrant No. E-1 is exercisable initially into 348,095 shares of Common Stock and (ii) Warrant No. E-2 is exercisable initially into 1905 shares of Common Stock. 5. Upon consummation of an IPO, the paragraph immediately preceding Section 1 of page 1 of the Series E Warrants shall be amended to delete the words "the Warrant Value (as defined herein)" on the ninth and tenth lines thereof in their entirety and replace them with the words "Three-hundred and forty-eight thousand, ninety-five shares" in the case of Warrant No. E-1 and "One-thousand, nine hundred and five shares" in the case of Warrant No. E-2. 6. Upon consummation of an IPO, the definition of "Effective Date" set forth in Section 1 of the Series E Warrants shall be deleted in its entirety and replaced with the following: "Effective Date" shall mean the date on which a registration statement of the Company relating to an initial public offering of Common Stock is declared effective by the Securities and Exchange Commission." 7. Upon consummation of an IPO, Section 2.1 of the Series E Warrants shall be deleted in its entirety and Sections 2.2 through 2.5 will be renumbered accordingly. 8. Upon consummation of an IPO, the first paragraph of Section 2.2 of the Series E Warrants (which will be renumbered as Section 2.1) shall be deleted in its entirety and shall be replaced by the following: 3 "2.1. MANNER OF EXERCISE. From and after the Effective Date, and until 5:00 P.M. New York time on the Expiration Date, the Holder may exercise this Warrant, on any Business Day, for all or any part of the number of shares of Common Stock purchasable hereunder." 9. Upon the execution of this Amendment Agreement by representatives of Nassau and the Company, Section 4.11 of the Series E Warrants shall be deleted in its entirety. 10. Upon consummation of an IPO, Nassau shall exercise the Series E Warrants. 11. (a) This Amendment Agreement has been duly executed and delivered by each party hereto and constitutes a valid and binding obligation of each such party, enforceable against such party in accordance with its terms. (b) This Amendment Agreement shall become effective upon execution and delivery by the parties hereto; PROVIDED, however that in the event that no IPO has been consummated by June 30, 1997, this Amendment Agreement may be terminated at any time after such date in the sole discretion of Nassau by delivery of written notice to the Company. In the event that Nassau terminates this Amendment Agreement pursuant to the proviso of the preceding sentence, the Agreement and the Warrants shall be deemed never to have been amended hereby. Except as expressly amended hereby, the provisions of the Agreement and the Series E Warrants are and shall remain in full force and effect. 12. This Amendment Agreement shall be governed by and construed in accordance with the laws of the State of New York. 13. This Amendment Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement to be executed as of the day and year first above written. DECRANE AIRCRAFT HOLDINGS, INC. By: /s/ (Illegible) ---------------------------- Name: Title: NASSAU CAPITAL PARTNERS L.P. By: NASSAU CAPITAL L.L.C. General Partner By: ---------------------------- Name: Title: NAS PARTNERS I L.L.C By: ---------------------------- Name: Title: EX-10.35 4 EX-10.35 FORM OF LOAN AND SEC. AGRMT. AMONG DECRAN LOAN AND SECURITY AGREEMENT DATED AS OF APRIL __, 1997 AMONG DECRANE AIRCRAFT HOLDINGS, INC., AS BORROWER, BANK OF AMERICA ILLINOIS, AS AGENT AND A LENDER, COMERICA BANK - CALIFORNIA, AS A LENDER, MELLON BANK, N.A., AS A LENDER, SUMITOMO BANK OF CALIFORNIA, AS A LENDER AND THE OTHER LENDERS PARTY HERETO
TABLE OF CONTENTS Page 1. DEFINITIONS AND OTHER TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2. Other Definitional Provisions. . . . . . . . . . . . . . . . . . . . . . . . . .16 1.3. Interpretation of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .16 1.4. Compliance with Financial Restrictions.. . . . . . . . . . . . . . . . . . . . .16 2. LOANS; LETTERS OF CREDIT; OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . .17 2.1. Revolving Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 2.2. Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 2.3. Loan Account; Demand Deposit Account . . . . . . . . . . . . . . . . . . . . . .20 2.4. Interest and Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 2.5. Requests for Revolving Loans and Letters of Credit; Other Information. . . . . .23 2.6. Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 2.7. All Loans One Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 2.8. Making of Payments; Charging of Accounts . . . . . . . . . . . . . . . . . . . .24 2.9. Agent's Election Not to Enforce. . . . . . . . . . . . . . . . . . . . . . . . .25 2.10. Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 2.11. Distributions and Apportionment of Payments . . . . . . . . . . . . . . . . . .25 3. COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 3.1. Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . .26 3.2. Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 3.3. Supplemental Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . .29 3.4. Collateral for the Benefit of Agent, Issuer and Lenders. . . . . . . . . . . . .30 4. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 4.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 4.2. Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 4.3. No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 4.4. Validity and Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . .31 4.5. No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 4.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 4.7. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 4.8. Litigation; Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . .32 4.9. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 4.10. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 4.11. Partnerships; Joint Ventures. . . . . . . . . . . . . . . . . . . . . . . . . .33 4.12. Business and Collateral Locations . . . . . . . . . . . . . . . . . . . . . . .33 4.13. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 4.14. Control of Collateral; Lease of Property. . . . . . . . . . . . . . . . . . . .34 -i- 4.15. Patents, Trademarks, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . .34 4.16. Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 4.17. Contracts; Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . .34 4.18. Pension and Welfare Plans . . . . . . . . . . . . . . . . . . . . . . . . . . .35 4.19. Regulations G and U . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 4.20. Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 4.21. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36 4.22. Investment Company Act Representation . . . . . . . . . . . . . . . . . . . . .36 4.23. Public Utility Holdings Company Act Representation. . . . . . . . . . . . . . .36 4.24. Environmental and Safety and Health Matters . . . . . . . . . . . . . . . . . .36 5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 5.1. Financial Statements and Other Reports . . . . . . . . . . . . . . . . . . . . .37 5.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39 5.3. Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 5.4. Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 5.5. Books, Records and Access. . . . . . . . . . . . . . . . . . . . . . . . . . . .41 5.6. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42 5.7. Repair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43 5.8. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43 5.9. Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43 5.10. Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 5.11. Merger, Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . .44 5.12. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 5.13. Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 5.14. Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 5.15. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 5.16. Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 5.17. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46 5.18. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46 5.19. Environmental Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46 5.20. Related Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 5.21. Unconditional Purchase Options. . . . . . . . . . . . . . . . . . . . . . . . .47 5.22. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 5.23. Transactions with Related Parties . . . . . . . . . . . . . . . . . . . . . . .47 5.24. Capital Expenditures Limitation . . . . . . . . . . . . . . . . . . . . . . . .47 5.25. Minimum Working Capital Ratio . . . . . . . . . . . . . . . . . . . . . . . . .48 5.26. Minimum Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 5.27. Maximum Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 5.28. Minimum Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . .48 6. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 6.1. Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 -ii- 6.2. Effect of Event of Default; Remedies.. . . . . . . . . . . . . . . . . . . . . .51 7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND AGENT'S RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 7.1. Notice of Disposition of Collateral. . . . . . . . . . . . . . . . . . . . . . .53 7.2. Application of Proceeds of Collateral. . . . . . . . . . . . . . . . . . . . . .53 7.3. Care of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53 7.4. Performance of Borrower's Obligations. . . . . . . . . . . . . . . . . . . . . .53 7.5. Agent's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54 8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54 8.1. Conditions Precedent to Initial Revolving Loans and Letters of Credit. . . . . .54 8.2. Continuing Conditions Precedent to all Revolving Loans; Certification. . . . . .56 9. INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 9.1. Environmental and Safety and Health Indemnity. . . . . . . . . . . . . . . . . .56 9.2. General Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 9.3. Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58 10. AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58 10.1. Appointment of Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58 10.2. Nature of Duties of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . .59 10.3. Agent in its Capacity as Lender . . . . . . . . . . . . . . . . . . . . . . . .59 10.4. Independent Credit Analysis . . . . . . . . . . . . . . . . . . . . . . . . . .59 10.5. General Immunity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60 10.6. Action by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61 10.7. Right to Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61 10.8. Rights and Remedies to be Exercised by Agent Only . . . . . . . . . . . . . . .62 10.9. Agent's Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62 10.10. Disbursement of Proceeds of Revolving Loans and Other Advances . . . . . . . .63 10.11. Release of Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 10.12. Agreement to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 10.13. Sharing of Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 10.14. Lenders to Act as Agents . . . . . . . . . . . . . . . . . . . . . . . . . . .64 11. GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 11.1. Borrower's Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 11.2. Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 11.3. Expenses and Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . .65 11.4. BAI's Fees and Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 11.5. Lawful Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 11.6. No Waiver by Agent or any Lender; Amendments. . . . . . . . . . . . . . . . . .67 11.7. Termination of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 -iii- 11.8. Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68 11.9. Assignments and Participations; Information.. . . . . . . . . . . . . . . . . .68 11.10. Borrower's Documentation.. . . . . . . . . . . . . . . . . . . . . . . . . . .70 11.11. Severability.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 11.12. Successors.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 11.13. Construction.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71 11.14. Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . .71 11.15. Waiver of Jury Trial.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
-iv- LOAN AND SECURITY AGREEMENT THIS LOAN AND SECURITY AGREEMENT is made as of this _____ day of April, 1997 by and among BANK OF AMERICA ILLINOIS (in its individual capacity, "BAI"), having its principal office at 231 South LaSalle Street, Chicago, Illinois 60697, as Agent and a Lender, COMERICA BANK - CALIFORNIA, having an office located at 301 E. Ocean Boulevard, Suite 1800, Long Beach, California 90802, as a Lender, MELLON BANK, N.A., having an office located at Three Mellon Bank Center, 23rd Floor, Pittsburgh, Pennsylvania 15259, as a Lender, SUMITOMO BANK OF CALIFORNIA, having an office located at 611 W. 6th Street, Suite 3900, Los Angeles, California 90017-3140, as a Lender, the other Lenders from time to time party hereto, and DECRANE AIRCRAFT HOLDINGS, INC. ("Borrower"), a Delaware corporation having its principal office at 2361 Rosecrans Avenue, Suite 180, El Segundo, California 90245. W I T N E S S E T H - - - - - - - - - - WHEREAS, Borrower may, from time to time, request loans or other financial accommodations from Lenders, and the parties wish to provide for the terms and conditions upon which such loans and other financial accommodations shall be made; NOW, THEREFORE, in consideration of any loan or advance or grant of credit (including any loan or advance or grant of credit by renewal or extension) hereafter made to Borrower by, or on behalf of, Lenders, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. DEFINITIONS AND OTHER TERMS. 1.1. DEFINITIONS. In addition to terms defined elsewhere in this Agreement or any SCHEDULE or EXHIBIT hereto, when used herein, the following terms shall have the following meanings (such meanings shall be equally applicable to the singular and plural forms of the terms used, as the context requires): "Account Receivable" means any account of Borrower and any other right of Borrower to payment for goods sold or leased or for services rendered, whether or not evidenced by an instrument or chattel paper and whether or not yet earned by performance. "ADS Acquisition" means the acquisition by Aerospace Display Systems, Inc. of the business of the Aerospace Display Systems Division from Allard Industries pursuant to the terms of that certain Asset Purchase and Sale Agreement dated as of May ___, 1996 among Allard Industries, Inc., Borrower, ADS Acquisition, Inc., n/k/a Aerospace Display Systems, Inc. and certain shareholders of Allard Industries, Inc. "Agent" means Bank of America Illinois, in its capacity as agent for Lenders hereunder and under the Related Agreements, or any successor agent pursuant to SECTION 10. "Agreement" means this Loan and Security Agreement, as the same may be amended, modified or supplemented from time to time. "Applicable Base Margin" means, with respect to any portion of the Revolving Loans constituting a Base Rate Loan, the Applicable Margin pertaining thereto. "Applicable IBOR Margin" means, with respect to any portion of the Revolving Loans constituting a IBOR Rate Loan, the Applicable Margin with respect thereto. "Applicable Margin" means, with respect to any portion of the Revolving Loans constituting a IBOR Rate Loan, a percentage equal to one percent (1.00%), with respect to any portion of the Revolving Loans constituting a Base Rate Loan, a percentage equal to zero, and with respect to the non-use fee described in SECTION 2.4.2(a), a percentage equal to one-quarter of one percent (0.25%); provided, that the Applicable Margin for the Revolving Loans and such non-use fee will be adjusted on the forty-fifth day after the end of each calendar quarter ending March 31, June 30 or September 30 (commencing with the calendar quarter ending June 30, 1997) and, for each calendar quarter ending December 31, on the ninetieth day after the end of such calendar quarter, in each case depending on the Leverage Ratio on the last day of such calendar quarter as set forth below:
Applicable IBOR Applicable Base Margin for the Margin for the Applicable Non- Leverage Ratio Revolving Loans Revolving Loans Use Fee Margin -------------- --------------- --------------- -------------- Greater than or equal to 2.50:1.00 2.00% 0.75% 0.375% Greater than or equal to 2.00:1.00, but less than 2.50:1.00 1.75% 0.50% 0.375% Greater than or equal to 1.50:1.00, but less than 2.00:1.00 1.50% 0.25% 0.350% Greater than or equal to 1.00:1.00, but less than 1.50:1.00 1.25% 0.00% 0.300% Less than 1.00:1.00 1.00% 0.00% 0.250%
The calculation of the Leverage Ratio as of the last day of a calendar quarter shall be based on the financial statements received by Agent pursuant to SECTION 5.1.1 and as certified by Borrower's chief executive officer, president or chief financial officer pursuant to SECTION 5.1.1(c). If Borrower fails to deliver a certificate within forty-five (45) days (or, in the case of the fourth calendar quarter of any calendar year, ninety -2- (90) days) after the end of any calendar quarter as required pursuant to SECTION 5.1.1(d), the Applicable Margin from and including the forty-sixth or ninety-first day, as the case may be, after the end of such calendar quarter to but not including the date Borrower delivers to Agent such certificate shall conclusively be presumed to equal the highest Applicable Margin specified in the above chart for the type of loan or fee. "Applicable Non-Use Fee Margin" means, with respect to the non-use fee, the Applicable Margin with respect thereto. "Application" means an application by Borrower, in a form, and containing terms and provisions, acceptable to Agent and Issuer, for the issuance by Issuer of a Letter of Credit. "Assignment and Acceptance Agreement" means an agreement in the form of EXHIBIT C pursuant to which a Lender assigns all or a portion of its rights, and delegates all or such portion of its obligations, under this Agreement and the Related Agreements, to another Person. "Attorneys' Fees" has the meaning ascribed to such term in SECTION 11.3. "BAI" has the meaning ascribed to such term in the Preamble. "Banking Day" means any day other than a Saturday, Sunday or legal holiday on which banks are authorized or required to be closed for the conduct of commercial banking business in Chicago, Illinois or San Francisco, California; provided, with respect to IBOR Rate Loans, Banking Days shall not include a day on which dealings in Dollars may not be carried on by BAI in the London interbank IBOR market. "Base Net Worth" means Net Worth as of the Closing Date, after giving effect to the consummation of the IPO and the making of the initial Revolving Loans. "Base Rate" means, at any time, a rate per annum equal to the sum of the Reference Rate at such time plus the Applicable Base Margin at such time. "Base Rate Loan" means any portion of the Revolving Loans which bears interest at a rate determined with reference to the Base Rate. "Borrower" has the meaning ascribed to such term in the Preamble. "Capital Expenditures" means, for any period, the aggregate of all expenditures by Borrower and its Subsidiaries for the acquisition (including pursuant to Capitalized Leases) of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) which are capitalized under GAAP on a consolidated balance sheet of Borrower and its Subsidiaries; PROVIDED, that, notwithstanding the foregoing, solely for purposes of SECTION 5.24, any expenditures by Borrower and its Subsidiaries of the proceeds of casualty insurance maintained by Borrower and its Subsidiaries for purposes of replacing, -3- substituting or repairing fixed or capital assets damaged or destroyed in a casualty event shall not be deemed to be Capital Expenditures for purposes of said section. "Capitalized Lease" means any lease which is or is required to be capitalized on the balance sheet of the lessee at such time in accordance with GAAP. "Cash Equivalent Investment" means, at any time: (a) any evidence of Indebtedness, maturing not more than one year from the date of investment, issued or guaranteed by the United States Government or issued by an agency or instrumentality thereof; (b) commercial paper, maturing not more than one year from the date of issue, which is issued by either (i) a corporation (except any Company or Related Party of a Company) organized under the laws of any State of the United States of America or of the District of Columbia and rated at least A-1 by Standard & Poors Ratings Group, a division of McGraw-Hill, Inc. ("S&P") or P-1 by Moody's Investors Service, Inc. ("Moody's"), at the date of investment, or (ii) Agent or any Lender (or its holding company); (c) any certificate of deposit or bankers' acceptance or eurodollar time deposit, maturing not more than one year after the date of issue, which is issued by any Lender, or issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any United States branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than Two Hundred Fifty Million Dollars ($250,000,000), or issued by any other financial institution if the amount of such investment is less than One Hundred Thousand Dollars ($100,000); (d) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing or that may be put back to the issuer thereof within one year from the date of acquisition thereof and, at the time of acquisition, rated at least A-1 by S & P or P-1 by Moody's; (e) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (a) above entered into with any bank meeting the qualifications specified in clause (c) above; or (f) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (a) through (e) of this definition. "Closing Date" means the first date on which Revolving Loans are made, or Letters of Credit are issued, under this Agreement. -5- "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed to also refer to any successor sections. "Collateral" has the meaning ascribed to such term in SECTION 3.1. "Companies" means, collectively, Borrower and its Subsidiaries; and "Company" means any one of the Companies. "Credit" means the facility established under this Agreement pursuant to which Lenders will make Revolving Loans to Borrower and/or cause Issuer to issue Letters of Credit for the account of Borrower. "Default Rate" means the rate of interest which is applicable to Revolving Loans after the occurrence and during the continuance of an Event of Default and upon written notice by Agent to Borrower, pursuant to SECTION 2.4.1(c). "Demand Deposit Account" has the meaning ascribed to such term in SECTION 2.3. "Depository Accounts" has the meaning ascribed to such term in SECTION 3.2(B). "Dollars" and "$" each mean lawful money of the United States. "EBITDA" means for any period, the sum of (a) net income (or net loss) for such period less any tax credits for such period, plus (b) interest expense deducted in determining net income (or net loss) for such period, plus (c) tax expense deducted in determining net income (or net loss) for such period, exclusive of any tax benefits for such period, plus (d) depreciation and amortization deducted in determining net income (or net loss) for such period, all determined for Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP; provided, that net income (or net loss) shall be computed for these purposes without giving effect to (i) after tax gains or losses from the sale, transfer, conveyance, lease or other disposition of any fixed assets or investments of the Borrower and its Subsidiaries in excess of $100,000 in any Fiscal Year and (ii) extraordinary or non-recurring gains or losses. "Elsinore Acquisition" means the acquisition by Borrower of (i) the capital stock of Elsinore Aerospace Services, Inc. from Elsinore L.P. and (ii) the assets of the Elsinore Engineering Division of Elsinore L.P. pursuant to the terms of that certain Asset Purchase and Sale Agreement dated as of December 4, 1996 among Borrower, EE Acquisition, Inc., n/k/a Elsinore Engineering, Inc., William Lyon and Elsinore L.P.. "Environmental Laws" means the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, any so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act, and any -5- other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree or other requirement regulating, relating to, or imposing liability or standards of conduct (including but not limited to permit requirements, and emission or effluent restrictions) concerning any Hazardous Materials or any hazardous, toxic or dangerous waste, substance or constituent, or any pollutant or contaminant or other substance, whether solid, liquid or gas, as now or at any time hereafter in effect. "Environmental Lien" means a Lien in favor of any governmental entity for (a) any liability in excess of $100,000 under any Environmental Law or (b) damages in excess of $100,000 arising from or costs in excess of $100,000 incurred by such governmental entity in response to a Release of any Hazardous Material or the spillage, disposal or release into the environment of any other hazardous, toxic or dangerous waste, substance or constituent, or other substance. "Equipment" means all equipment of Borrower of every description, including, without limitation, fixtures, furniture, vehicles and trade fixtures, together with any and all accessions, parts and equipment attached thereto or used in connection therewith, and any substitutions therefor and replacements thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed to also refer to any successor sections. "ERISA Affiliate" means any corporation, partnership, or other trade or business (whether or not incorporated) that is, along with a Company, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in Sections 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA, or a member of the same affiliated service group within the meaning of Section 414(m) of the Code. "Eurocurrency Reserve Requirement" means, with respect to any IBOR Rate Loan for any Interest Rate Period, a percentage equal to the daily average during such Interest Rate Period of the percentages in effect on each day of such Interest Rate Period, as prescribed by the Federal Reserve Board, for determining the aggregate maximum reserve requirements (including all basic, emergency, supplemental, marginal and other reserves) applicable to "Eurocurrency liabilities" pursuant to Regulation D or any other then applicable regulation of the Federal Reserve Board which prescribes reserve requirements applicable to "Eurocurrency liabilities." Without limiting the effect of the foregoing, the Eurocurrency Reserve Requirement shall reflect any other reserves required to be maintained by Lenders against (i) any category of liabilities that includes deposits by reference to which the IBOR Rate is to be determined, or (ii) any category of extensions of credit or other assets that includes IBOR Rate Loans. For purposes of this Agreement, any IBOR Rate Loan hereunder shall be deemed to be "Eurocurrency liabilities," as defined in Regulation D, and, as such, shall be deemed to be subject to -6- such reserve requirements without the benefit of, or credit for, pro ration, exceptions or offsets which may be available to any Lender from time to time under Regulation D. "Event of Default" has the meaning ascribed to such term in SECTION 6.1. "Federal Funds Rate" means, for each day during any period, a fluctuating interest rate per annum 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, as published for such day (or, if such day is not a Banking Day, for the next preceding Banking Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Banking Day, the average of the quotations for such day on such transactions received by Agent from three federal funds brokers of recognized standing selected by it. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System or any successor thereto. "Fiscal Year" means any period of twelve (12) consecutive calendar months ending on December 31. References to a Fiscal Year with a number corresponding to any calendar year (e.g. "Fiscal Year 1997") refer to the Fiscal Year ending on the thirty-first (31st) day of December occurring during such calendar year. "Fixtures" means all personal property of Borrower of every description permanently attached or affixed to buildings or real property, and all substitutions and replacements of any thereof. "Funded Debt" means, as of the last day of any calendar quarter, the sum of (i) the average daily outstanding principal balance of the Revolving Loans for such calendar quarter, plus (ii) the aggregate outstanding amount of all other interest-bearing Indebtedness of Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "GAAP" means generally accepted accounting principles as in effect from time to time, as applied in the preparation of the audited financial statements referred to in SECTION 4.6. "General Intangibles" means all general intangibles now owned or hereafter acquired by Borrower, including, without limitation, all right, title and interest of Borrower, in and to: (a) all tax refunds and tax refund claims; (b) registered and unregistered patents, trademarks, service marks, copyrights, tradenames, applications for any of the foregoing; and (c) all trade secrets and other confidential information relating to the business of Borrower. "Hazardous Materials" means any toxic substance, hazardous substance, hazardous material, hazardous chemical or hazardous waste defined or qualifying as such in (or for the purposes of) any Environmental Law, or any pollutant or contaminant, or any hazardous, toxic or dangerous waste, substance or constituent, and shall include, but -7- not be limited petroleum, including crude oil, any radioactive material, including but not limited to any source, special nuclear or by-product material as defined at 42 U.S.C. Section 2011 ET SEQ., as amended or hereafter amended, polychlorinated biphenyls and asbestos in any form or condition. "IBOR Base Rate" means, with respect to each Interest Rate Period for a IBOR Rate Loan, the rate per annum at which Dollar deposits are offered to the IBOR Office of BAI two (2) Banking Days prior to the beginning of such Interest Rate Period by major banks in the interbank eurodollar market as at or about the relevant local time of such IBOR Office, for delivery on the first day of such Interest Rate Period, for the number of days comprised therein and in an amount equal to the amount of the IBOR Rate Loan to be outstanding during such Interest Rate Period. As used herein, "relevant local time" as to any IBOR Office means 11:00 a.m., London time, when such IBOR Office is located in Europe or the Middle East, and 10:00 a.m., Chicago time, when such IBOR Office is located in North America or the Caribbean. "IBOR Office" means with respect to any Lender the office or offices selected by such Lender which shall be making or maintaining the IBOR Rate Loans of such Lender hereunder or such other office or offices selected by such Lender through which such Lender determines its IBOR Base Rate. A IBOR Office of any Lender may be, at the option of such Lender, either a domestic or foreign office. "IBOR Rate" means, with respect to each Interest Rate Period for a IBOR Rate Loan, a rate per annum (rounded upward, if necessary, to the nearest one hundredth of one percent (1/100th of 1%)) determined pursuant to the following formula: IBOR Rate = IBOR BASE RATE + Applicable IBOR Margin ------------------------------ 1-Eurocurrency Reserve Requirement "IBOR Rate Loan" means any portion of the Revolving Loans which bears interest at a rate determined with reference to the IBOR Rate. "IFT Agreement" means that certain Agreement dated July 30, 1996 between Interactive Flight Technologies, Inc. and Hollingsead International, Inc., as amended by that certain Amendment No. 1 to Agreement dated October 25, 1996, between Interactive Flight Technologies, Inc. and Hollingsead International, Inc. "Indebtedness" of any Person means, without duplication, (a) any obligation of such Person for borrowed money, including, without limitation, (i) any obligation of such Person evidenced by bonds, debentures, notes or other similar debt instruments and (ii) any obligation for borrowed money which is non-recourse to the credit of such Person but which is secured by a Lien on any asset of such Person, (b) any obligation of such Person on account of deposits or advances, (c) any obligation of such Person for the deferred purchase price of any property or services, except Trade Accounts Payable, (d) any obligation of such Person as lessee under a Capitalized Lease, (e) any obligation of such Person with respect to interest rate swaps, interest rate caps, interest rate collars or -8- other interest hedging agreements, (f) any obligation of such Person in respect of foreign exchange contracts, (g) any obligation of such Person with respect to letters of credit, acceptances, or guarantees of the obligations of another Person, and (h) any Indebtedness of another Person secured by a Lien on any asset of such first Person, whether or not such Indebtedness is assumed by such first Person. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership in which such Person is a general partner or any joint venture to the extent such Person is personally liable for the Indebtedness of such joint venture. "ING Liens" means any and all Liens in favor of either ING (U.S.) Capital Corporation, as agent, or Internationale Nederlanden (U.S.) Capital Corporation, as agent, which Liens shall be terminated or released, as appropriate, in connection with the initial funding of Revolving Loans. "Interest Coverage" means, for any period, the ratio of (a) Pro Forma EBITDA for such period, to (b) interest expense of Borrower during such period, determined for Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP. "Interest Rate Period" means with respect to any portion of the Revolving Loan which is to bear interest at a rate determined with reference to the IBOR Rate, the period commencing on the date on which the IBOR Rate is deemed applicable to such portion of the Revolving Loan and ending on the numerically corresponding day one (1), two (2), three (3) or six (6) months thereafter; provided, however, that: (a) any Interest Rate Period which would otherwise end on a day which is not a Banking Day shall end on the next succeeding Banking Day unless such next succeeding Banking Day falls in another calendar month, in which case such Interest Rate Period shall end on the next preceding Banking Day; (b) any Interest Rate Period which begins on the last Banking Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Rate Period) shall end on the last Banking Day of the calendar month at the end of such Interest Rate Period; and (c) no Interest Rate Period shall extend beyond the Termination Date. "Inventory" means any and all of Borrower's goods (including, without limitation, goods in transit) wheresoever located, which are held for sale, furnished under any contract of service, or held as raw materials, work in process, or supplies or materials used or consumed in Borrower's business, or which are held for use in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods, and any and all goods the sale or other disposition of which has given rise to an Account Receivable which are returned to and/or repossessed and/or stopped in transit by, or at any time hereafter are in the possession or under the control of, Borrower, Agent or any -9- Lender or any agent or bailee of any of them, and all documents of title or other documents representing the same. "Investment" of any Person means any investment, made in cash or by delivery of any kind of property or asset, in any other Person, whether by acquisition of shares of stock or similar interest, Indebtedness or other obligation or security, or by loan, advance or capital contribution, or otherwise. "IPO" means the initial public offering of the common stock of Borrower as described in the Registration Statement. "Issuer" means BAI, any Related Party of BAI, or any other Lender reasonably acceptable to Agent to issue Letters of Credit under this Agreement upon the Application of Borrower. "L/C Draft" means a draft drawn on Issuer pursuant to a Letter of Credit. "Lenders" means, collectively, BAI and any other Person that becomes a Lender under this Agreement and each of their respective successors and assigns as provided in this Agreement; and "Lender" means any one of Lenders. "Letter of Credit" means a standby letter of credit issued by Issuer on the Application of Borrower. "Letter of Credit Obligations" means, at any time, an amount equal to the sum of, without duplication, (a) the aggregate outstanding face amount of all Letters of Credit, plus (b) the aggregate outstanding face amount of all accepted but unpaid L/C Drafts, plus (c) the unreimbursed amount of any payment by Issuer in respect of any L/C Draft. "Leverage Ratio" means, as of the last day of any calendar quarter, the ratio of (a) Funded Debt as of such date, to (b) Pro Forma EBITDA for the twelve (12) month period ending on such date. "Liabilities" means all of the liabilities, obligations (including obligations of performance) and indebtedness of Borrower to Agent, Issuer or any Lender of any kind or nature, however created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing or due or to become due, and arising under, or in connection with, this Agreement, any Note, any Related Agreement (including, without limitation, any Application or Letter of Credit with respect thereto), including, without limitation, all interest, charges, reasonable expenses, Attorneys' Fees and other sums chargeable to Borrower by Agent, Issuer or any Lender hereunder or thereunder. "Liabilities" shall also include any and all amendments, extensions and renewals of any of the foregoing. "Lien" means any security interest, mortgage, pledge, hypothecation, judgment lien or similar legal process, title retention lien, or other lien or encumbrance, -10- including, without limitation, the interest of a vendor under any conditional sale or other title retention agreement and the interest of a lessor under any Capitalized Lease. "Loan Account" has the meaning ascribed to such term in SECTION 2.3. "Margin Stock" has the meaning ascribed to such term in Regulation U of the Federal Reserve Board or any regulation substituted therefor, as in effect from time to time. "Material Adverse Effect" means (a) a material adverse effect upon the condition (financial or otherwise), operations, performance, prospects or properties of Borrower and its Subsidiaries taken as a whole, (b) the impairment of Agent's interest, for the benefit of itself, Issuer and Lenders, in any material portion of the property securing the Liabilities or securing any guaranty of the Liabilities or the material diminution in the value of such property taken as a whole, or (c) the prospect of payment or performance of any material obligation or material agreement of Borrower or any other Obligor hereunder or under any Related Agreement is materially impaired. "Material Operating Company" means each of Hollingsead International, Inc., Cory Components, Inc., Tri-Star Electronics International, Inc., Aerospace Display Systems, Inc., Elsinore Aerospace Services, Inc. and each additional Subsidiary of Borrower acquired or formed pursuant to or in connection with a Permitted Acquisition (or such other acquisition consented to in writing by Requisite Lenders) and deemed by Requisite Lenders to be a Material Operating Company. "Maximum Revolving Loan Amount" means, with respect to any Lender, the maximum amount of Revolving Loans which such Lender has agreed, pursuant to the terms and conditions of this Agreement, to make available to Borrower, as set forth on the signature page hereto or in an Assignment and Acceptance Agreement executed by such Lender. "Minimum Net Worth Amount" means, at any time, an amount equal to the sum of (i) ninety-five percent (95%) of Base Net Worth, plus (ii) fifty percent (50%) of net income of Borrower, determined in accordance with GAAP on a consolidated basis, for each calendar quarter period that has ended after April 1, 1997, plus (iii) the net proceeds received by Borrower from the sale, issuance, exchange or other disposition of any of its capital stock or other equity interests; provided, that any net loss of Borrower, determined in accordance with GAAP on a consolidated basis, for any calendar quarter period shall not be taken into account in the foregoing calculation. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA that is maintained for employees of Borrower or any ERISA Affiliate. "Net Worth" means, as of the last day of any calendar quarter, the consolidated assets of Borrower and its Subsidiaries on such date, less the consolidated -11- liabilities of Borrower and its Subsidiaries on such date, each as determined in accordance with GAAP. "Note" means any promissory note of Borrower evidencing any loan or advance made by any Lender to Borrower pursuant to this Agreement, as the same may be amended, modified or supplemented from time to time. "Obligor" means Borrower and each other Person who is or shall become primarily or secondarily liable on any of the Liabilities, or who grants to Agent, for the benefit of itself, Issuer and Lenders, a Lien on any property of such Person as security for any of the Liabilities. "Occupational Safety and Health Laws" means the Occupational Safety and Health Act of 1970 and any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning employee health and/or safety. "Participant" means any Person, now or at any time or times hereafter, participating with any Lender, pursuant to the provisions of SECTION 11.9, in the Revolving Loans made or Letters of Credit issued, pursuant to this Agreement or any Related Agreement. "Payment Liabilities" means all Liabilities other than (i) contingent obligations of Borrower with respect to which none of Agent, Issuer nor any Lender has asserted a claim against Borrower, and (ii) non-monetary obligations of performance; provided, that Payment Liabilities shall include the Letter of Credit Obligations. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "Pension Plan" means a "pension plan," as such term is defined in Section 3(2) of ERISA, that is subject to the provisions of Title IV of ERISA (other than a Multiemployer Plan) that is maintained for employees of Borrower or any ERISA Affiliate. "Permitted Acquisition" means any acquisition after the date hereof by Borrower, a Subsidiary of Borrower or any Subsidiary formed by Borrower for such purpose (a "New Subsidiary"), of all or substantially all of the business and assets or capital stock of any Person that is a going concern and that is in substantially the same field of business as Borrower and its Subsidiaries as of the date hereof, that satisfies the following conditions: (a) no Event of Default or Unmatured Event of Default is in existence at the time of such acquisition or would be caused thereby after giving effect thereto; (b) total consideration for any acquisition (including, without limitation, cash purchase price, liabilities assumed, deferred or financed purchase price and purchase -12- price characterized as consulting agreements, noncompetition payments and the like), does not exceed Ten Million Dollars ($10,000,000); (c) Agent has received copies of all agreements delivered in connection therewith; (d) if (i) a New Subsidiary is formed, (ii) Borrower or any Subsidiary of Borrower acquires all or substantially all of the capital stock of any Person or (iii) Borrower or any Subsidiary of Borrower acquires any assets not automatically subject to the Lien granted in favor of Agent pursuant to SECTION 3.1, Agent, as applicable, has obtained a guaranty from such New Subsidiary or such Person, or has obtained a first priority Lien on such New Subsidiary's or such Person's stock and assets, together with such opinions, certificates and other agreements as Agent shall request; (e) the boards of directors of the Persons involved in the proposed acquisition have approved such acquisition; and (f) Agent has received a certificate from Borrower's chief executive officer, president or chief financial officer (i) certifying that all of the applicable conditions contained herein to treating such acquisition as a Permitted Acquisition have been satisfied and (ii) containing a computation of, and showing compliance with, SECTIONS 5.24, 5.25, 5.26, 5.27 and 5.28 after giving effect to the proposed acquisition, together with such financial information as Requisite Lenders shall request to verify such compliance. "Person" means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, limited liability company, association, corporation, institution, entity, or government (whether national, federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Pro Forma EBITDA" means, for any period, EBITDA for such period PLUS, for any Permitted Acquisition and any acquisition consented to in writing by Requisite Lenders, in each case consummated during the period of measurement for which EBITDA is being calculated (each, a "Lender Approved Acquisition", it being agreed that, solely for purposes of this definition, the ADS Acquisition is a Lender Approved Acquisition, and that, solely for purposes of this definition, the Elsinore Acquisition is not a Lender Approved Acquisition), EBITDA attributable to such Lender Approved Acquisition based on the most recent financial statements (audited, if available) provided to Borrower or any of its Subsidiaries in connection with the consummation of such acquisition, but solely for a number of months immediately preceding the consummation of the applicable Lender Approved Acquisition, which number equals twelve (12) less the number of months following the consummation of the applicable Lender Approved Acquisition for which financial statements of Borrower and its Subsidiaries have been delivered to Agent pursuant to SECTION 5.1.1(b). EXHIBIT D sets forth the calculation of Pro Forma EBITDA for the twelve (12) month period ending December 31, 1996. -13- "Pro Rata Share" means, with respect to any Lender, a fraction (expressed as a percentage in nine (9) decimal places), the numerator of which shall be the Maximum Revolving Loan Amount of such Lender and the denominator of which shall be the aggregate amount of the Maximum Revolving Loan Amounts of all Lenders. "Recapitalization" means the transactions described in Borrower's Registration Statement under the heading "Description of Capital Stock -- The Recapitalization", which transactions shall be consummated prior to, or concurrently with, the initial funding of Revolving Loans. "Reference Rate" means, at any time, the higher of (a) the rate of interest then most recently announced by BAI at Chicago, Illinois as its reference rate, and (b) one-half of one percent (0.50%) per annum above the latest Federal Funds Rate. Each change in the interest rate on any Revolving Loan (other than a IBOR Rate Loan) shall take effect on the effective date of the change in the Reference Rate. "Register" has the meaning ascribed to such term in SECTION 11.9(d). "Registration Statement" means the Form S-1 Registration Statement of Borrower filed with the Securities and Exchange Commission on January 17, 1997, as amended. "Related Agreement" means any agreement, instrument or document (including, without limitation, notes, guarantees, chattel mortgages, pledges, powers of attorney, consents, assignments, contracts, notices, security agreements, leases, financing statements, subordination agreements, intercreditor agreements, trust account agreements and all other written matter) heretofore, now, or hereafter delivered to Agent or any Lender by any Company with respect to or in connection with or pursuant to this Agreement or any of the Liabilities, and executed by or on behalf of a Company, as each of the same may be amended, modified or supplemented from time to time by such Company, and shall specifically include any Notes. "Related Party" means, with respect to any Person, any other Person (a) that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such first Person or a subsidiary of such first Person, (b) that beneficially owns or holds ten percent (10%) or more of the equity interest of such first Person or a subsidiary of such first Person or (c) ten percent (10%) or more of the equity interest of which is beneficially owned or held by such first Person or a subsidiary of such first Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Release" means any actual or threatened spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of Hazardous Materials into the environment. -14- "Reportable Event" has the meaning given to such term in ERISA. "Requisite Lenders" means Lenders having, in the aggregate, Pro Rata Shares of at least sixty-six and two-thirds percent (66 2/3%). "Revolving Credit Amount" means the maximum amount of Revolving Loans which Lenders will make available to Borrower, as such amount may be reduced pursuant to SECTION 2.1.2. On the date hereof, Revolving Credit Amount is equal to Forty Million Dollars ($40,000,000). "Revolving Loan" has the meaning ascribed to such term in SECTION 2.1.1. "Revolving Loan Availability" means, at any time, the Revolving Credit Amount at such time minus the Letter of Credit Obligations at such time. "Subsidiary" means any Person of which or in which a Company and its other Subsidiaries own directly or indirectly more than fifty percent (50%) of (a) the combined voting power of all classes of stock having general voting power under ordinary circumstances to elect a majority of the board of directors of such Person, if it is a corporation, (b) the membership interests, the capital interest or profits interest of such Person, if it is a limited liability company, partnership, joint venture or similar entity or (c) the beneficial interest of such Person, if it is a trust, association or other unincorporated organization. "Supplemental Documentation" has the meaning ascribed to such term in SECTION 3.3. "Taxes" with respect to any Person means taxes, assessments or other governmental charges or levies imposed upon such Person, its income or any of its properties, franchises or assets. "Termination Date" means April __, 2002. "Trade Accounts Payable" of any Person means trade accounts payable of such Person incurred in the ordinary course of such Person's business and having payment terms consistent with past practices of such Person. "UCC" means the Uniform Commercial Code as in effect in the State of Illinois, and any successor statute, together with any regulations thereunder, in each case as in effect from time to time. References to sections of the UCC shall be construed to also refer to any successor sections. "Unmatured Event of Default" means any event or condition which, with the lapse of time or giving of notice to Borrower, would constitute an Event of Default. "Working Capital Ratio" means, at any time, the consolidated current assets of Borrower and its Subsidiaries (excluding the inventory of Borrower and its -15- Subsidiaries) at such time, divided by the sum (without duplication) of the consolidated current liabilities of Borrower and its Subsidiaries and the outstanding principal amount of the Liabilities, each as determined in accordance with GAAP. 1.2. OTHER DEFINITIONAL PROVISIONS. Unless otherwise defined or the context otherwise requires, all financial and accounting terms used herein or in any certificate or other document made or delivered pursuant hereto shall be defined in accordance with GAAP. If any changes in accounting principles from those used in the preparation of the financial statements referred to in SECTION 4.6 hereafter occur as a result of the promulgation of rules, regulations, pronouncements, or opinions by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or successors thereto or agencies with similar functions) and result in a change in the method of calculation of financial covenants, standards, or terms found in this Agreement, upon the request of Borrower or the Requisite Lenders, Borrower, Agent and Requisite Lenders agree to enter into negotiations to amend such financial covenants, standards or terms so as to equitably reflect such changes with the desired result that the evaluations of the Borrower's financial condition shall be the same after such changes as if such changes had not been made; provided, however, that until Borrower, Agent and Requisite Lenders have reached a definitive agreement on such amendments, Borrower's financial condition shall continue to be evaluated on the same principles as those used in the preparation of the financial statements referred to in SECTION 4.6 prior to such change in accounting principles. Unless otherwise defined therein, all terms defined in this Agreement shall have the defined meanings when used in any Related Agreement or Supplemental Documentation. Terms used in this Agreement which are defined in any SCHEDULE or EXHIBIT hereto shall, unless the context otherwise indicates, have the meanings given them in such SCHEDULE or EXHIBIT. Other terms used in this Agreement shall, unless the context indicates otherwise, have the meanings provided for by the UCC to the extent the same are used or defined therein. 1.3. INTERPRETATION OF AGREEMENT. A SECTION, an EXHIBIT or a SCHEDULE is, unless otherwise stated, a reference to a section hereof, an exhibit hereto or a schedule hereto, as the case may be. Section captions used in this Agreement are for convenience only and shall not affect the construction of this Agreement. The words "hereof," "herein," "hereto" and "hereunder" and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. COMPLIANCE WITH FINANCIAL RESTRICTIONS. Compliance with each of the financial ratios and restrictions contained in SECTION 5 shall, except as otherwise provided herein, be determined in accordance with GAAP, consistently followed, subject to SECTION 1.2. -16- 2. LOANS; LETTERS OF CREDIT; OTHER MATTERS. 2.1. REVOLVING LOANS. 2.1.1. REVOLVING LOANS. (a) Subject to the terms and conditions of this Agreement and in reliance upon the warranties and representations of Borrower set forth herein and the warranties and representations of each other Obligor set forth in the Related Agreements, each Lender, severally and not jointly, agrees to make its Pro Rata Share of such loans or advances (individually each a "Revolving Loan" and collectively the "Revolving Loans") from time to time before the Termination Date to Borrower as Borrower may from time to time request; provided, that the aggregate outstanding principal amount of the Revolving Loans shall not at any time exceed Revolving Loan Availability. Revolving Loans made by or on behalf of Lenders may be repaid in a minimum amount of Two Hundred Fifty Thousand Dollars ($250,000) and in minimum increments of Two Hundred Fifty Thousand Dollars ($250,000) and, subject to the terms and conditions hereof, reborrowed to but not including the Termination Date unless the Credit extended under this Agreement is otherwise terminated as provided in this Agreement. No Lender shall be obligated at any time to make available to Borrower its Pro Rata Share of any requested Revolving Loan if such amount, plus its Pro Rata Share of all Revolving Loans then outstanding to Borrower plus its Pro Rata Share of all then existing Letter of Credit Obligations, would exceed such Lender's Maximum Revolving Loan Amount. No Lender shall be obligated to make available its Pro Rata Share of any Revolving Loans during the occurrence and continuance of any Event of Default or Unmatured Event of Default. Neither Agent nor any Lender shall be responsible for any failure by any other Lender to perform its obligations to make advances hereunder, and the failure of any Lender to make its Pro Rata Share of any advance hereunder shall not relieve any other Lender of its obligation, if any, to make its Pro Rata Share of Revolving Loans hereunder, nor require such other Lender to make more than its Pro Rata Share of any Revolving Loans hereunder. If Borrower makes a request for a Revolving Loan pursuant to the terms hereof, Agent shall notify each Lender by telecopy or other similar form of teletransmission of the proposed advance (A) on the same day Agent is notified by Borrower of Borrower's request for an advance hereunder if such notice is received by Agent by 11:30 a.m., Chicago time on such day or (B) on the next Banking Day following the day Agent is notified by Borrower of Borrower's request for an advance hereunder if such notice is received by Agent after 11:30 a.m. Chicago time, on such day. Each Lender will make the amount of its Pro Rata Share of each proposed advance available to Agent for the account of Borrower in immediately available funds, by 1:00 p.m (Chicago time) on the day requested. Agent shall promptly remit to Borrower such immediately available funds received from a Lender. -17- (b) All Revolving Loans hereunder shall be paid by Borrower on the Termination Date, unless payable sooner pursuant to the provisions of this Agreement, but may, at Borrower's election, be repaid at any time prior to such date in a minimum amount of Two Hundred Fifty Thousand Dollars ($250,000) and in minimum increments of Two Hundred Fifty Thousand Dollars ($250,000) without premium or penalty (other than as expressly provided in SECTION 2.4.5 with respect to IBOR Rate Loans repaid prior to the end of the applicable Interest Rate Period). 2.1.2. PREPAYMENT OF ALL LIABILITIES; REDUCTION OF REVOLVING CREDIT AMOUNT. Upon three (3) Banking Days prior written notice to Agent, Borrower may prepay in full all of the outstanding Revolving Loans and Letter of Credit Obligations, without premium or penalty (other than as expressly provided in SECTION 2.4.5 with respect to IBOR Rate Loans repaid prior to the end of the applicable Interest Rate Period), by prepaying the outstanding principal balance of the Revolving Loans, together with (a) all accrued and unpaid interest on the Payment Liabilities and (b) all other outstanding Payment Liabilities. Borrower may permanently reduce the Revolving Credit Amount in increments of One Million Dollars ($1,000,000). 2.2. LETTERS OF CREDIT. (a) In addition to Revolving Loans made pursuant to SECTION 2.1, Agent will, upon receipt of duly executed Applications and such other documents, instruments and/or agreements as Issuer or Agent may reasonably require, request, on Borrower's behalf, that Issuer issue Letters of Credit for the account of Borrower on such terms as are reasonably satisfactory to Agent and Issuer, provided, however that no Letter of Credit will be issued if, after taking such Letter of Credit into account, the Letter of Credit Obligations exceed either (x) Five Million Dollars ($5,000,000), exclusive of any Letter of Credit Obligations described in SECTION 5.14(g) or (y) the Revolving Credit Amount minus the outstanding principal balance of the Revolving Loans. No Letter of Credit shall be used to support worker's compensation obligations or have a tenor of more than one year from the issue date thereof (unless Requisite Lenders, in their sole discretion, otherwise agree in writing to a longer tenor) or an expiry date after the thirtieth (30th) day prior to the Termination Date. (b) Borrower agrees to pay to Issuer, on demand, Issuer's standard issuance, amendment, negotiation and administrative operating fees and charges in effect from time to time for issuing and administering any Letters of Credit on Borrower's Application. Borrower further agrees to pay Agent (i) for the benefit of Lenders, a per annum commission equal to the Applicable IBOR Margin then in effect for Revolving Loans (calculated on the basis of a year consisting of three hundred sixty (360) days and paid for actual days elapsed) of the daily average of the undrawn amount of each Letter of Credit issued on Borrower's Application and on each L/C Draft accepted in connection therewith and (ii) for the benefit of Issuer, a fronting fee upon the issuance of any Letter of Credit equal to the greater of one-quarter of one percent (0.25%) of the face amount of the Letter of Credit and Two Hundred Fifty Dollars ($250). Such Letter of Credit commissions shall be paid in arrears on the first day of -18- each calendar quarter, commencing April 1, 1997. At all times that any Default Rate is being charged under this Agreement, the Letter of Credit commission shall be equal to two percent (2.0%) per annum in excess of the otherwise applicable commission. Each Lender hereby agrees that if any of the fees and charges owing to the Issuer (or to the Agent for the benefit of Issuer) are not paid when due, each Lender shall, without regard to any other provision of this Agreement or any other Related Agreement, any defense that Borrower may have to its obligation to pay Issuer (or Agent for the benefit of Issuer) in connection with such fees and charges or any defense that any Lender may have in connection with the participation described in SECTION 2.2(e) in connection with any Letter of Credit or L/C Draft, pay Issuer (or, as applicable, Agent for the benefit of Issuer) for such Lender's Pro Rata Share of such fees and charges, and any payments so made by Lenders to Issuer (or, as applicable, to Agent for the benefit of Issuer) shall be deemed to be Revolving Loans to Borrower. Each Lender (other than a Lender that is Issuer) acknowledges and agrees that it shall not be entitled to any of the fees and charges of Issuer. (c) Subject to the remaining sentences of this clause (c), Borrower agrees to reimburse Issuer, on demand, for each payment made by Issuer under or pursuant to any Letter of Credit or L/C Draft issued or made on Borrower's behalf and if not so reimbursed, each Lender shall, without regard to any other provision of this Agreement or any other Related Agreement, any defense that Borrower may have to its obligation to reimburse Issuer in connection with such payment or any defense that any Lender may have in connection with the participation described in SECTION 2.2(e) in connection with any such Letter of Credit or L/C Draft, reimburse Issuer for such Lender's Pro Rata Share of such payment, and any payments so made by Lenders to Issuer shall be deemed to be Revolving Loans to Borrower. Agent and Lenders agree that so long as there is sufficient Revolving Loan Availability and provided that no Event of Default is then continuing in existence or would be caused thereby, upon the written request of Borrower, Agent will provide for the payment of any reimbursement obligations of Borrower under SECTION 2.2 and any interest accrued thereon by advancing the amount thereof to Borrower as a Revolving Loan. Prior to such advance, the amount of such reimbursement obligations shall bear interest at the Base Rate. In the event a Letter of Credit or L/C Draft is not reimbursed by Borrower or otherwise from a Revolving Loan as provided herein, Borrower agrees to pay Agent, for the benefit of itself and Lenders, on demand, interest at the Default Rate on any amounts paid by Issuer in respect of a Letter of Credit or an L/C Draft issued or made on Borrower's behalf until the reimbursement of Issuer by Borrower of such payment. (d) At the election of Agent at any time during the existence and continuance of an Event of Default, Borrower shall, upon Agent's demand, deliver to Agent cash collateral equal to the aggregate Letter of Credit Obligations. Any such cash collateral and/or any amounts received by Agent in payment of the Revolving Loan made pursuant to this paragraph (d) shall be held by Agent, for the benefit of itself, Issuer and Lenders, in a separate account appropriately designated as a cash collateral account in relation to this Agreement and the Letters of Credit and shall be retained by Agent, for the benefit of itself, Issuer and Lenders, as security in respect of the Liabilities under or in connection with the Letters of Credit and L/C Drafts. Such amounts shall not be used by Agent to pay any -19- amounts drawn or paid under or pursuant to any Letter of Credit or L/C Draft, but may be applied to reimburse Issuer for drawings or payments under or pursuant to Letters of Credit or L/C Drafts which Issuer has paid. Any amounts remaining in any cash collateral account established pursuant to this paragraph (d) following the first to occur of the nonexistence of all Events of Default or the reimbursement in full of all Payment Liabilities in respect of outstanding Letter of Credit Obligations, shall be returned to Borrower. (e) Immediately upon the issuance of a Letter of Credit in accordance with this Agreement, each Lender shall be deemed to have irrevocably and unconditionally purchased and received from Issuer, without recourse or warranty, an undivided interest and participation therein to the extent of such Lender's Pro Rata Share (including, without limitation, all obligations of Issuer thereunder to fund a draw with respect thereto); provided, that such interest and participation therein shall not entitle a Lender to any of Issuer's standard issuance, amendment, negotiation, or administration operating fees and charges in connection with such Letter of Credit. Borrower indemnifies each of Agent and each Lender against any and all liability and expense it may incur in connection with any Letter of Credit or L/C Draft to Persons other than Agent or any Lender and agrees to reimburse each of Agent and each Lender for any such payment made by Agent or any Lender to Issuer, except for any liability incurred or payment made as a result of Agent's or such Lender's gross negligence or willful misconduct. 2.3. LOAN ACCOUNT; DEMAND DEPOSIT ACCOUNT. Agent shall establish or cause to be established on its books in Borrower's name one or more accounts (each a "Loan Account") to evidence Revolving Loans made to Borrower. Agent or Lenders, as appropriate, will credit or cause to be credited to commercial accounts (each a "Demand Deposit Account") maintained by Borrower at BAI's 231 South LaSalle Street, Chicago, Illinois office, the amount of any sums advanced as Revolving Loans hereunder, which shall be disbursed at Borrower's direction. Any amounts advanced as Revolving Loans hereunder which are credited to Borrower's Demand Deposit Account will be debited to the Loan Account and result in an increase in the principal balance outstanding in the Loan Account in the amount thereof. 2.4. INTEREST AND FEES. 2.4.1. INTEREST. (a) INTEREST TO MATURITY. Unless Borrower elects to have a portion of the Revolving Loans bear interest at the IBOR Rate, each Revolving Loan shall be deemed to be a Base Rate Loan and the unpaid principal amount thereof shall bear interest until maturity at a per annum rate equal to the Base Rate. (b) IBOR RATE OPTION. Borrower shall have the right, from time to time, to designate portions of the Revolving Loans as bearing interest at the then applicable IBOR Rate, by means of a written notice to Agent specifying (i) the amount of such Revolving -20- Loans that will bear interest at a IBOR Rate, (ii) the date on which the applicable Interest Rate Period shall begin; and (iii) the Interest Rate Period applicable thereto. All designations of Revolving Loans as IBOR Rate Loans must be received by Agent not later than 11:00 a.m., Chicago time, two (2) Banking Days prior to the date the applicable Interest Rate Period is to begin (or is to be continued). Notwithstanding the foregoing, (A) all undesignated portions of the Revolving Loans shall bear interest at the rate set forth in SECTION 2.4.1(a), and (B) in no event may more than five (5) IBOR Rate Loans having different Interest Rate Periods be outstanding at any one time. Each designation by Borrower of a IBOR Rate Loan shall be irrevocable. Notwithstanding anything contained herein to the contrary, if an Event of Default exists (x) no IBOR Rate Loan may be commenced or continued, and (y) at the end of its Interest Rate Period, each IBOR Rate Loan shall be converted to a Base Rate Loan. (c) DEFAULT RATE. If any Event of Default is in existence, at the option of Requisite Lenders and upon written notice by Agent to Borrower, the entire unpaid principal balance of the Revolving Loans shall bear interest until no such Events of Default are in existence at a rate per annum equal to the greater of (i) the applicable interest rate from time to time in effect plus two percent (2%) and (ii) two percent (2%) above the applicable interest rate in effect at the time of such Event of Default. 2.4.2. FEES. (a) NONUSE FEE. Borrower agrees to pay to Agent, for the benefit of Lenders, a per annum fee equal to the Applicable Non-Use Fee Margin on the daily average amount by which the Revolving Credit Amount exceeds the outstanding principal balance of the Revolving Loans plus the Letter of Credit Obligations. The fee provided for in this SECTION 2.4.2 shall be payable quarterly in arrears on the first day of each calendar quarter commencing April 1, 1997, and on the date the Credit terminates for the portion of the calendar quarter then elapsed. (b) FEE LETTER. Borrower agrees to pay the fees set forth in that certain Fee Letter dated March 21, 1997 among Agent, Borrower and BancAmerica Securities, Inc. 2.4.3. PAYMENT OF INTEREST AND FEES. Until maturity, interest on the Revolving Loans shall be payable in arrears on the first (1st) day of each calendar quarter, commencing on April 1, 1997, and at maturity; provided, that interest on IBOR Rate Loans shall be payable in arrears on the last day of the Interest Rate Period applicable thereto and at maturity; provided, further, that if the Interest Rate Period applicable to a Revolving Loan has a tenor of more than three (3) months, interest on such Revolving Loan shall also be payable at the end of the third month following the beginning of such Interest Rate Period. After maturity, whether by acceleration or otherwise, accrued but unpaid interest shall be payable on demand. -21- 2.4.4. METHOD OF CALCULATING INTEREST AND FEES. Interest on the unpaid principal amount of each Revolving Loan shall accrue from and including the date such Revolving Loan is made to, but not including, the date such Revolving Loan is paid. Interest and any fees shall be calculated on the basis of a year consisting of three hundred sixty (360) days and paid for actual days elapsed; provided, that the computation of interest on IBOR Rate Loans shall include the date on which the applicable Interest Rate Period began, but shall exclude the last day of the applicable Interest Rate Period. IBOR Rate Loans not repaid on the last day of the Interest Rate Period applicable thereto shall be continued as IBOR Rate Loans (to the extent Borrower provides written notice thereof to Agent and satisfies the requirements of SECTION 2.4.1(b)) or converted into Base Rate Loans and bear interest as provided herein, from and including the last day of such Interest Rate Period. Changes in any interest rate provided for herein which are due to changes in the Reference Rate shall take effect on the effective date of the change in the Reference Rate. 2.4.5. FUNDING INDEMNIFICATION. If any payment of a IBOR Rate Loan occurs on a date which is not the last day of the applicable Interest Rate Period, whether because of acceleration, prepayment or otherwise, Borrower will indemnify each Lender and Agent for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain such Revolving Loan. Agent shall deliver a written statement as to the amount due, if any, under this SECTION 2.4.5, after consultation with each Lender so affected. Such written statement shall set forth in reasonable detail the calculations upon which Agent and such Lender determined such amount and shall be final, conclusive and binding on Borrower and Lenders in the absence of manifest error. Determination of amounts payable under this SECTION 2.4.5 shall be calculated as though each Lender funded its IBOR Rate Loans through the purchase of a deposit of the type and maturity corresponding to the IBOR Rate Loan and applicable Interest Rate Period bearing interest at the IBOR Base Rate whether or not the Lender actually funded the Revolving Loan in that manner. The amount specified in the written statement shall be payable on demand after receipt by Borrower of the written statement. 2.4.6. AVAILABILITY OF INTEREST RATE OPTIONS. If any Lender determines that maintenance of any of its IBOR Rate Loans would violate any applicable law, rule, regulation or directive, whether or not having the force of law, such Lender shall immediately notify Agent thereof and Agent shall suspend the availability of such IBOR Rate Loans and require any IBOR Rate Loans outstanding and so affected to be repaid or, at Borrower's option, converted to Base Rate Loans; or if any Lender determines that (i) deposits of a type or maturity appropriate to match fund IBOR Rate Loans are not available, (ii) the IBOR Rate does not accurately reflect the cost of making such Revolving Loans, or (iii) such Lender's ability to make or maintain IBOR Rate Loans has been materially adversely affected by the occurrence of any event -22- after the date hereof, then such Lender shall immediately notify Agent thereof and Agent shall suspend the availability of the IBOR Rate Loans, as applicable, after the date of any such determination, and any existing IBOR Rate Loans shall be converted to Base Rate Loans as soon as practicable and in any case no later than the end of the applicable Interest Rate Period. 2.4.7. OBLIGATION TO MITIGATE. Agent and each Lender agrees that if it becomes aware of either (i) the occurrence of an event or the existence of a condition described in SECTION 2.4.6 or SECTION 9.3 that would cause Agent or such Lender to make a determination of the nature described therein, or (ii) the imposition, assessment or collection of any Taxes on or in respect of any Revolving Loan or Letter of Credit (other than Taxes based on the income of Agent or such Lender, as the case may be), Agent or such Lender will, to the extent consistent with its internal policies, use reasonable efforts to make, fund or maintain the affected Revolving Loans or Letters of Credit through another lending office of such Agent or such Lender, if any, if, as a result thereof, the additional amounts (after taking into account the additional expenses incurred in connection with utilizing such other lending office) that would otherwise be required to be paid to Agent or such Lender in respect thereof, would be reduced, or IBOR Rate Loans could be maintained, as the case may be, and if, as determined by Agent or such Lender in its reasonable discretion, the issuing, making, funding or maintaining of such Revolving Loans or Letters of Credit through such other lending office would not adversely affect Agent or such Lender or such Revolving Loans or Letters of Credit. Borrower hereby agrees to pay all reasonable expenses incurred by Agent or any Lender in using another lending office pursuant to this SECTION 2.4.7. 2.5. REQUESTS FOR REVOLVING LOANS AND LETTERS OF CREDIT; OTHER INFORMATION. (a) Revolving Loans shall be in a minimum amount of Two Hundred Fifty Thousand Dollars ($250,000) and in minimum increments of Two Hundred Fifty Thousand Dollars ($250,000) and shall be requested in writing or by telephone and Letters of Credit shall be requested in writing. (b) In the event that Borrower shall at any time, or from time to time, make a request for a Revolving Loan hereunder, Borrower agrees to forthwith provide Agent and Lenders with such information, at such frequency and in such format, as is reasonably required by Agent, such information to be current as of the time of such request. (c) Borrower may request, telephonically or by written authorization, the disbursement of Revolving Loans by Agent or Lenders and by written authorization, the issuance of Letters of Credit by Issuer, as appropriate. Borrower shall provide Agent with documentation satisfactory to Agent indicating the names of those employees of Borrower authorized by Borrower to make telephonic requests for Revolving Loans, written requests for Letters of Credit, and/or to authorize disbursement of the proceeds of Revolving Loans by wire transfer or otherwise, and Agent and Lenders shall be entitled to rely upon such -23- documentation until notified in writing by Borrower of any change(s) in the names of the employees so authorized. Agent and Lenders shall be entitled to act on the instructions of anyone identifying himself as one of the persons authorized to request Revolving Loans, or disbursements of Revolving Loan proceeds by telephone and Borrower shall be bound thereby in the same manner as if the person were actually so authorized. Borrower agrees to indemnify and hold each of Agent and each Lender harmless from any and all claims, damages, liabilities, losses, costs and expenses (including Attorneys' Fees) which may arise or be created by the acceptance of instructions for making or paying Revolving Loans in writing or by telephone, except for such claims, damages, liabilities, losses, costs and expenses arising as a result of the gross negligence or willful misconduct of Agent or any Lender. Subject to SECTION 2.4.1(b), each such request must be received by Agent no later than (i) 11:30 a.m. (Chicago time), with respect to Revolving Loans on the date on which such Revolving Loan is requested to be made and (ii) with respect to Letters of Credit, on the date that is five (5) Banking Days prior to the date on which such Letter of Credit is requested to be issued. 2.6. STATEMENTS. All Revolving Loans and Letters of Credit and payments hereunder shall be recorded on Agent's books, which shall be rebuttably presumptive evidence of the amount of such Revolving Loans and Letters of Credit outstanding at any time hereunder. Agent will account monthly as to all Revolving Loans and Letters of Credit and payments hereunder and, absent demonstrable error, each monthly accounting will be fully binding on Borrower unless, within sixty (60) days of Borrower's receipt thereof, Borrower shall provide Agent with a reasonably specific listing of exceptions. Notwithstanding any term or condition of this Agreement to the contrary, however, the failure of Agent to record the date and amount of any Revolving Loan or Letter of Credit hereunder shall not limit or otherwise affect the obligation of Borrower to repay any such Revolving Loan or the amount of any Letter of Credit Obligation. 2.7. ALL LOANS ONE OBLIGATION. The Revolving Loans under this Agreement shall constitute one Revolving Loan, and all Indebtedness and other Liabilities of Borrower under this Agreement and any of the Related Agreements shall constitute one general obligation secured by Agent's Liens, for the benefit of itself, Issuer and Lenders, heretofore, now, or at any time or times hereafter granted by Borrower or any other Obligor to Agent, for the benefit of itself, Issuer and Lenders. Borrower agrees that all of the rights of Agent and Lenders set forth in this Agreement shall apply to any modification of or supplement to this Agreement, any Schedules or Exhibits hereto, and the Related Agreements, unless otherwise agreed in writing. MAKING OF PAYMENTS; CHARGING OF ACCOUNTS. (a) All payments hereunder (including payments with respect to any Notes) shall be made without set-off or counterclaim and shall be made to Agent, on the date due at BAI's office at 231 South LaSalle Street, Chicago, Illinois 60697, or at such other place as -24- may be designated by Agent to Borrower in writing. All payments by Borrower shall be made to Agent for the account of Lenders and shall be made in Dollars. Such payments shall be made in immediately available funds, and no later than 12:30 p.m. (Chicago time) on the date specified herein. Any payment which is received by the Agent later than 12:30 p.m. (Chicago time) shall be deemed to have been received on the following Banking Day and any applicable interest or fee shall continue to accrue. (b) Notwithstanding anything to the contrary herein, no checks, drafts or other instruments received by Agent shall constitute final payment with respect to any Liabilities unless and until such item of payment has actually been collected. 2.9. AGENT'S ELECTION NOT TO ENFORCE. Notwithstanding any term or condition of this Agreement to the contrary, Agent, as directed in the sole and absolute discretion of Requisite Lenders, at any time and from time to time, may suspend or refrain from enforcing any or all of the restrictions imposed in this SECTION 2, but no such suspension or failure to enforce shall impair any right or power of Agent or any Lender under this Agreement, including, without limitation, any right of each Lender to refrain from making a Revolving Loan or Issuer to refrain from issuing a Letter of Credit, if all conditions precedent applicable to such Lender's obligation to make such Revolving Loan or Issuer's obligation to issue such Letter of Credit have not been satisfied. 2.10. SETOFF. In addition to and not in limitation of all other rights and remedies (including other rights of offset or banker's lien) that Agent and Lenders may have under applicable law, each of Agent and each Lender shall, upon the occurrence and during the continuance of any Event of Default or any Unmatured Event of Default have the right to appropriate and apply to the payment of the Payment Liabilities, in such order of application as Requisite Lenders may elect, any and all balances, credits, deposits (general or special, time or demand, provisional or final), accounts or moneys of Borrower then or thereafter with Agent or any Lender. Agent and each Lender shall promptly advise Borrower of any such setoff and application but failure to do so shall not affect the validity of such setoff and application. 2.11. DISTRIBUTIONS AND APPORTIONMENT OF PAYMENTS. Payments actually received by Agent with respect to the following items shall be distributed by Agent to Lenders as follows: (a) On the same Banking Day of receipt thereof by Agent if received by Agent on or before 12:30 p.m. (Chicago time) or within one (1) Banking Day of receipt thereof by Agent if received after 12:30 p.m. (Chicago time), payments to be applied to interest on the Revolving Loans shall be paid to each Lender in proportion to its Pro Rata Share; -25- (b) On the same Banking Day of receipt thereof by Agent if received by Agent on or before 12:30 p.m. (Chicago time) or within one (1) Banking Day of receipt thereof by Agent if received after 12:30 p.m. (Chicago time), payments of principal in respect of the Revolving Loans shall be paid to each Lender in a proportion to its Pro Rata Share; and (c) On the same Banking Day of receipt thereof by Agent if received by Agent on or before 12:30 p.m. (Chicago time) or within one (1) Banking Day of receipt thereof by Agent if received after 12:30 p.m. (Chicago time), payments to be applied to the non-use line fee set forth in SECTION 2.4.2 and the Letter of Credit commission set forth in SECTION 2.2(b), shall each be paid to each Lender in proportion to its Pro Rata Share. Notwithstanding the foregoing, if a Lender has failed to remit its Pro Rata Share of any Revolving Loans required to be made pursuant to hereto, no payment shall be made to such Lender by Agent at any time such Lender's share of the outstanding Revolving Loans is less than such Lender's Pro Rata Share. If Agent or any Lender fails to pay the other any payment due under this Agreement on its due date, the party to whom such payment is due shall be entitled to recover interest from the party obligated to make such payment at a rate per annum equal to the Federal Funds Rate. No provision of this Agreement shall entitle any Lender to any portion of the fees described in the Fee Letter. 3. COLLATERAL. 3.1. GRANT OF SECURITY INTEREST. As security for the payment of all Revolving Loans now or hereafter made by, or on behalf of, Lenders to Borrower hereunder or under any Note, and as security for the payment or other satisfaction of all other Liabilities (including, without limitation, the Letter of Credit Obligations), Borrower hereby grants to Agent, for the benefit of itself, Issuer and Lenders, a security interest in and to the following property of Borrower, whether now owned or existing, or hereafter acquired or coming into existence, wherever now or hereafter located (all such property is hereinafter referred to collectively as the "Collateral"): (a) Accounts Receivable; (b) Equipment and Fixtures; (c) Inventory; (d) General Intangibles; (e) Documents of title; (f) All chattel paper and instruments evidencing, arising out of or relating to any obligations to Borrower for goods sold or leased or services rendered, or otherwise arising out of or relating to any property described in this SECTION 3.1; -26- (g) Any and all balances, credits, deposits (general or special, time or demand, provisional or final), accounts or monies of or in the name of Borrower now or hereafter with Agent, any Lender or any Participant and any and all property of every kind or description of or in the name of Borrower now or hereafter, for any reason or purpose whatsoever, in the possession or control of, or in transit to, or standing to Borrower's credit on the books of, Agent, any agent or bailee for Agent, any Lender, or any Participant; (h) All interest of Borrower in any goods the sale or lease of which shall have given or shall give rise to, and in all guaranties and other property securing the payment of or performance under, any Accounts Receivable, General Intangibles or any chattel paper or instruments referred to in clause (f) above; (i) All investment property of Borrower (including, but not limited to, securities, whether certificated or uncertificated, securities entitlements, securities accounts, commodity accounts and commodity contracts); (j) Any and all other property of Borrower, of any kind or description (including but not limited to real estate of Borrower), subject to a separate mortgage, pledge or security interest in favor of Agent, for the benefit of itself and Lenders, or in which Agent now or hereafter acquires a security interest securing any Liabilities, whether pursuant to a written agreement or instrument other than this Agreement or otherwise; (k) All interest of Borrower in leases of real or personal property, whether as lessor or lessee (including any option to purchase thereunder); (l) All replacements, substitutions, additions or accessions to or for any of the foregoing; (m) To the extent related to the property described in clauses (a) through (l) above, all books, correspondence, credit files, records, invoices and other papers and documents, including, without limitation, to the extent so related, all tapes, cards, computer runs, computer software and other papers and documents in the possession or control of Borrower or any computer bureau from time to time acting for Borrower, and, to the extent so related, all rights in, to and under all policies of insurance, including claims of rights to payments thereunder and proceeds therefrom, including business interruption insurance and any credit insurance; and (n) All products and proceeds (including but not limited to any Accounts Receivable or other proceeds arising from the sale or other disposition of any property described above, any returns of Inventory sold by Borrower, and the proceeds of any insurance covering any of the property described above) of any of the foregoing. 3.2. ACCOUNTS RECEIVABLE. (a) Agent is authorized and empowered (which authorization and power, being coupled with an interest, is irrevocable until the last to occur of termination of this -27- Agreement and payment and performance in full of all of the Payment Liabilities under this Agreement) at any time in its reasonable discretion: (i) After the occurrence and during the continuance of an Event of Default, to request, in the name of Agent, in the Borrower's or the name of a third party, at reasonable intervals determined by Agent, confirmation from any account debtor or party obligated under or with respect to any Collateral of the amount shown by the Accounts Receivable or other Collateral to be payable, or any other matter stated therein; (ii) After the occurrence and during the continuance of an Event of Default, to endorse in Borrower's name and to collect any chattel paper, checks, notes, drafts, instruments or other items of payment tendered to or received by Agent in payment of any Account Receivable or other obligation owing to Borrower; (iii) After the occurrence and during the continuance of an Event of Default, to notify, either in Agent's name or Borrower's name, and/or to require Borrower to notify, any account debtor or other Person obligated under or in respect of any Collateral, of the fact of Agent's Lien thereon, for the benefit of itself, Issuer and Lenders, and of the collateral assignment thereof to Agent, for the benefit of itself, Issuer and Lenders; (iv) After the occurrence and during the continuance of an Event of Default, to direct, either in Borrower's name or Agent's name, and/or to require Borrower to direct, any account debtor or other Person obligated under or in respect of any Collateral to make payment directly to Agent of any amounts due or to become due thereunder or with respect thereto; and (v) After the occurrence and during the continuance of an Event of Default, to demand, collect, surrender, release or exchange all or any part of any Collateral or any amounts due thereunder or with respect thereto, or compromise or extend or renew for any period (whether or not longer than the initial period) any and all sums which are now or may hereafter become due or owing upon or with respect to any of the Collateral, or enforce, by suit or otherwise, payment or performance of any of the Collateral either in Agent's own name or in the name of Borrower. Under no circumstances shall Agent be under any duty to act in regard to any of the foregoing matters. The costs relating to any of the foregoing matters, including Attorneys' Fees and out-of-pocket expenses, and the cost of any Depository Account or other bank account or accounts which may be required hereunder, shall be borne solely by Borrower whether the same are incurred by Agent, and Agent may advance same to Borrower as a Revolving Loan. -28- (b) Borrower will cause all collections of accounts receivable of each Company and other proceeds of property of each Company subject to Agent's Lien to be deposited into one of the deposit accounts listed on SCHEDULE 3.2 (the "Depository Accounts"). Upon thirty (30) days prior written notice from Agent, Borrower shall deliver to Agent bank agency agreements in the form of EXHIBIT A executed by the banks listed on SCHEDULE 3.2 (other than any such bank with which is Lender) and each applicable Company. (c) Borrower appoints Agent, or any Person whom Agent may from time to time designate, as Borrower's attorney and agent-in-fact with power, after the occurrence and during the continuance of an Event of Default: (i) to notify the post office authorities to change the address for delivery of Borrower's mail to an address designated by Agent; (ii) at reasonable intervals determined by Agent, to send requests for verification of Accounts Receivable or other Collateral to account debtors; (iii) to open lockbox accounts or other accounts under Agent's sole control for the collection of Accounts Receivable or other Collateral; and (iv) to do all other things which Agent is permitted to do under this Agreement or any Related Agreement or which are reasonably necessary to carry out this Agreement and the Related Agreements. Neither Agent nor any of its directors, officers, employees or agents will be liable for any acts of commission or omission nor for any error in judgment or mistake of fact or law, unless the same shall have resulted from gross negligence or willful misconduct. The foregoing appointment and power, being coupled with an interest, is irrevocable until all Payment Liabilities under this Agreement are paid and performed in full and this Agreement is terminated. Borrower expressly waives presentment, demand, notice of dishonor and protest of all instruments and any other notice to which it might otherwise be entitled. (d) If any Account Receivable is evidenced by chattel paper or promissory notes, trade acceptances, or other instruments for the payment of money, Borrower will, unless Agent shall otherwise agree, deliver the originals of same to Agent, appropriately endorsed to Agent's order and, regardless of the form of such endorsement, Borrower hereby expressly waives presentment, demand, notice of dishonor, protest and notice of protest and all other notices with respect thereto. 3.3. SUPPLEMENTAL DOCUMENTATION. At Agent's request, Borrower shall execute and deliver, or cause to be executed and delivered, to Agent, at any time or times hereafter, such agreements, documents, financing statements, warehouse receipts, bills of lading, notices of assignment of Accounts Receivable, schedules of Accounts Receivable assigned, and other written matter necessary or reasonably requested by Agent to perfect and maintain perfected Agent's Lien on the Collateral, for the benefit of itself, Issuer and Lenders (all the above hereinafter referred to as "Supplemental Documentation"), in form and substance reasonably acceptable to Agent, and pay all taxes, fees and other costs and expenses associated with any recording or filing of the Supplemental Documentation. Borrower hereby irrevocably makes, constitutes and appoints Agent (and all Persons designated by Agent for that purpose) as Borrower's true and lawful attorney (and agent-in- fact) (which appointment and power, being coupled with an interest, is irrevocable -29- until the last to occur of termination of this Agreement and payment and performance in full of all of the Payment Liabilities under this Agreement) to sign the name of Borrower on any of the Supplemental Documentation and to deliver any of the Supplemental Documentation to such Persons as Agent may elect. Borrower agrees that a carbon, photographic, photostatic, or other reproduction of this Agreement or of a financing statement is sufficient as a financing statement. 3.4. COLLATERAL FOR THE BENEFIT OF AGENT, ISSUER AND LENDERS. All Liens granted to Agent hereunder and under the Related Agreements and all Collateral delivered to Agent hereunder and under the Related Agreements shall be deemed to have been granted and delivered to Agent, for the benefit of itself, Issuer and Lenders, to secure the Liabilities. 4. REPRESENTATIONS AND WARRANTIES. To induce Agent and Lenders to make Revolving Loans to, and Issuer to issue Letters of Credit for the account of, Borrower under this Agreement, Borrower makes the following representations and warranties to Agent and Lenders, all of which shall be true and correct as of the date the initial Revolving Loan is made and the initial Letter of Credit is issued and shall survive the execution of this Agreement and the making of the initial Revolving Loan: 4.1. ORGANIZATION. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each Company other than Borrower is a corporation (or, in the case of Tri-Star Technologies, a general partnership) duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, as applicable. Each Company is in good standing and is duly qualified to do business in each jurisdiction where, because of the nature of its activities or properties, such qualification is required, except for those jurisdictions where the failure to be qualified is not reasonably likely to have a Material Adverse Effect. Except as set forth on SCHEDULE 4.1, on the date hereof, each Company conducts business in its own name exclusively. SCHEDULE 4.1 sets forth a complete and accurate list, as of the date of this Agreement, of (a) the jurisdiction of incorporation or organization of each Company, (b) each jurisdiction in which such Company is qualified to do business and (c) all of such Company's tradenames, trade styles or doing business forms and a description of how such forms are used by such Company. 4.2. AUTHORIZATION. Borrower is duly authorized to execute and deliver this Agreement, any Notes, and any Related Agreements or Supplemental Documentation contemplated by this Agreement, and is and will continue to be duly authorized to borrow monies hereunder and to perform its obligations under this Agreement, any Notes and any such Related -30- Agreements and Supplemental Documentation. Each Company other than Borrower is duly authorized to execute and deliver any Related Agreements or Supplemental Documentation contemplated to be delivered by such Company and is and will continue to be duly authorized to perform its obligations thereunder. The execution, delivery and performance by (a) Borrower of this Agreement, any Notes, and any Related Agreements or Supplemental Documentation contemplated by this Agreement, and the borrowings hereunder and (b) each Company other than Borrower of any Related Agreements or Supplemental Documentation to which it is a party, do not and will not require any consent or approval of any governmental agency or authority. 4.3. NO CONFLICTS. The execution, delivery and performance by Borrower of this Agreement, any Notes, and any Related Agreements or Supplemental Documentation contemplated by this Agreement to which it is a party do not conflict with (i) any provision of applicable law, (ii) its By-laws, (iii) its Certificate of Incorporation, (iv) any material agreement binding upon Borrower, or (v) any court or administrative order or decree applicable to Borrower, and do not require, or result in, the creation or imposition of any Lien on any asset of Borrower, except as provided herein. The execution, delivery and performance by each Company other than Borrower of any Related Agreements or Supplemental Documentation to which it is a party, do not conflict with (i) any provision of applicable law, (ii) the organizational documents of such Company, (iii) any material agreement binding upon such Company, or (iv) any court or administrative order or decree applicable to such Company, and do not require, or result in, the creation or imposition of any Lien securing Indebtedness in excess of Two Hundred Fifty Thousand Dollars ($250,000) on any asset or assets of such Company, except as provided herein. 4.4. VALIDITY AND BINDING EFFECT. This Agreement, any Notes, and any Related Agreements or Supplemental Documentation contemplated by this Agreement, when duly executed and delivered, will be legal, valid and binding obligations of each Company party thereto, as applicable, enforceable against such Company in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies. 4.5. NO DEFAULT. No Company is in default under any agreement or instrument to which such Company is a party or by which any of its respective properties or assets is bound or affected, which default is reasonably likely to have a Material Adverse Effect. No Event of Default or Unmatured Event of Default has occurred and is continuing. -31- 4.6. FINANCIAL STATEMENTS. Borrower has furnished to Agent and Lenders the following: (i) the audited balance sheet of Borrower as of December 31, 1995 and the related audited statements of income and cash flow for the year then ended; and (ii) the audited balance sheet of Borrower as of December 31, 1996 and the related audited statements of income and cash flow for the year then ended. The foregoing financial statements present fairly, in all material respects, the financial position and results of operations of Borrower and its Subsidiaries in accordance with GAAP (except for year-end adjustments and footnotes with respect to the unaudited financial statements). As of the date hereof, except as described on SCHEDULE 4.6, since December 31, 1996, there has been no event, circumstance or condition that has had a Material Adverse Effect. 4.7. INSURANCE. SCHEDULE 4.7 hereto is in all material respects a complete and accurate summary as of the date hereof of the property and casualty insurance program carried by Borrower and its Subsidiaries on the date hereof. SCHEDULE 4.7 includes the insurer's(s') name(s), policy number(s), expiration date(s), amount(s) of coverage, type(s) of coverage, the annual premium(s), deductibles and self-insured retention and describes any retrospective rating plan, fronting arrangement or any other self-insurance or risk assumption agreed to by Borrower or any Subsidiary or imposed upon Borrower or any Subsidiary by any such insurer. This summary also includes any self-insurance program that is in effect. 4.8. LITIGATION; CONTINGENT LIABILITIES. (a) Except for those referred to in SCHEDULE 4.8, as of the date hereof, there are no claims, litigation, arbitration proceedings or governmental proceedings pending or threatened against or affecting any Company which, if determined adversely to such Company, are reasonably likely to have a Material Adverse Effect. (b) Other than any liability incident to the claims, litigation or proceedings disclosed in SCHEDULE 4.8 or SCHEDULE 4.18, no Company has any contingent liabilities which are reasonably likely to have a Material Adverse Effect. 4.9. LIENS. None of the Collateral or other property of any Company is subject to any Lien (including but not limited to Liens pursuant to Capitalized Leases under which such Company is a lessee) except: (a) Liens in favor of Agent, for the benefit of itself, Issuer and Lenders; (b) Liens for current Taxes not delinquent or Taxes being contested in good faith and by appropriate proceedings and as to which such reserves or other appropriate provisions as may be required by GAAP are being maintained; (c) landlord's, carriers', warehousemen's, mechanics', materialmen's and other like statutory Liens arising in the ordinary course of business securing obligations which are not overdue or which are -32- being contested in good faith and by appropriate proceedings and as to which such reserves or other appropriate provisions as may be required by GAAP are being maintained; (d) Liens listed on SCHEDULE 4.9; (e) Liens permitted by SECTION 5.15; (f) deposits under worker's compensation, unemployment insurance and social security legislation or to secure the performance of bids, tenders, contracts or leases or to secure obligations under surety, appeal, indemnity, performance or similar bonds, all in the ordinary course of business; (g) banker's Liens and other similar Liens in respect of bank deposits; (h) zoning restrictions, easements, rights-of-way, title irregularities and other similar encumbrances pertaining to the real property of Borrower and existing on the date hereof, which do not materially detract from the value of the property subject thereto or interfere in any material respect with the ordinary conduct of business of Borrower; (i) the ING Liens; and (j) Liens consented to in writing by Requisite Lenders. 4.10. SUBSIDIARIES. As of the date hereof, all Subsidiaries of each Company are listed on SCHEDULE 4.10. SCHEDULE 4.10 sets forth, as of the date hereof, for each such Subsidiary, a complete and accurate statement of the owners of each Subsidiary and each owner's percentage ownership therein. 4.11. PARTNERSHIPS; JOINT VENTURES. As of the date hereof, no Company is a partner or joint venturer in any partnership or joint venture other than the partnerships and joint ventures listed on SCHEDULE 4.11. As of the date hereof, SCHEDULE 4.11 sets forth, for each such partnership or joint venture, a complete and accurate statement of (a) the owners and each owner's percentage ownership of each such partnership or joint venture, (b) the state or other jurisdiction of formation or incorporation, as appropriate, of each such partnership or joint venture, (c) each state or other jurisdiction in which each such partnership or joint venture is qualified to do business and (d) all of each such partnership's or joint venture's trade names, trade styles or doing business forms on the date of this Agreement. 4.12. BUSINESS AND COLLATERAL LOCATIONS. (a) On the date hereof, the office where Borrower keeps its books and records, and Borrower's chief place of business and chief executive office, is located at the address of Borrower set forth on the signature pages of this Agreement. SCHEDULE 4.12 accurately identifies, as of the date hereof, the office where each Company other than Borrower has its chief executive office and chief place of business and keeps its books and records. SCHEDULE 4.12 contains a complete and accurate list, as of the date of this Agreement, of each Company's places of business other than that referred to in the first two sentences of this paragraph (a). (b) SCHEDULE 4.12 contains a complete and accurate list, as of the date of this Agreement, of the locations of (i) each Company's property, other than property sent off -33- site for processing or finishing with an aggregate value at any time not to exceed One Hundred Thousand Dollars ($100,000), which property shall remain at locations other than as set forth on SCHEDULE 4.12 for a period not to exceed ten (10) days and (ii) if any such property is not in the possession or control of a Company, the name and mailing address of each bailee, processor, warehouseman, consignee or other Person in possession or control thereof. 4.13. REAL PROPERTY. SCHEDULE 4.13 contains a complete and accurate list, as of the date of this Agreement of (a) the address and legal descriptions of any real property owned by each Company and (b) in the case of fixtures located on property not owned by a Company occupying such property, the name(s) and mailing addresses of the record owners of such property. 4.14. CONTROL OF COLLATERAL; LEASE OF PROPERTY. SCHEDULE 4.14 contains a complete and accurate list as of the date hereof of (a) all leases (including Capitalized Leases) under which a Company is the lessee covering any machinery, equipment or real property used by such Company and (b) the name and mailing address of each lessor or owner of such machinery, equipment or real property, in each case except for leases of machinery, equipment or real property with an annual aggregate rental of less than One Hundred Thousand Dollars ($100,000). 4.15. PATENTS, TRADEMARKS, ETC. Each Company possesses adequate licenses, patents, patent applications, copyrights, trademarks, trademark applications, trade styles, and tradenames to continue to conduct its respective business in all material respects as heretofore conducted by it, and all such licenses, patents, patent applications, copyrights, trademarks, trademark applications, trade styles, and tradenames existing on the date hereof of that are material to the operation of such Company's business or of a material value are listed on SCHEDULE 4.15. 4.16. SOLVENCY. Each Company has capital sufficient to carry on its businesses and transactions and all businesses and transactions in which it is about to engage, and is able to pay its debts as they mature. Each Company is solvent and owns property having a value, both at fair valuation and at present fair salable value, greater than the amount required to pay its debts as they become due. 4.17. CONTRACTS; LABOR MATTERS. Except as disclosed on SCHEDULE 4.17, as of the date hereof: (a) no Company is a party to any contract or agreement, or is subject to any judgment, decree or order, which is reasonably likely to have a Material Adverse Effect; (b) no Company has any employment contracts with any of its employees; (c) no Company has any contract -34- with any Person that is material to such Company's business or financial condition; (d) no collective bargaining agreement to which any Company is a party or is otherwise subject is scheduled to expire prior to the Termination Date; (e) no Company has, within the two (2)-year period preceding the date of this Agreement, taken any action which would have constituted or resulted in a "plant closing" or "mass layoff" within the meaning of the Federal Worker Adjustment and Retraining Notification Act of 1988 or any similar applicable federal, state or local law, and no Company has a reasonable expectation that any such action is or will be required at any time prior to the initial Termination Date and (f) on the date of this Agreement (i) no Company is a party to any labor dispute which is reasonably likely to have a Material Adverse Effect, and (ii) there are no strikes or walkouts relating to any labor contracts to which any Company is a party or is otherwise subject. 4.18. PENSION AND WELFARE PLANS. Each Pension Plan complies, and has been administered in compliance, in all material respects, with all applicable statutes and governmental rules and regulations; no Reportable Event has occurred and is continuing with respect to any Pension Plan which is reasonably likely to have a Material Adverse Effect; neither any Company nor any ERISA Affiliate has withdrawn from any Multiemployer Plan in a "complete withdrawal" or a "partial withdrawal" as defined in Section 4203 or 4205 of ERISA, respectively, which is reasonably likely to have a Material Adverse Effect; no steps have been instituted to terminate any Pension Plan which is reasonably likely to have a Material Adverse Effect; no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; and no condition exists or event or transaction has occurred in connection with any Pension Plan or Multiemployer Plan that is reasonably likely to have a Material Adverse Effect. Except as listed in SCHEDULE 4.18, as of the date hereof, no Company has any liability to pay any welfare benefits under any employee welfare benefit plan within the meaning of Section 3(l) of ERISA to former employees thereof or to current employees with respect to claims incurred after the termination of their employment other than as required by Section 4980B of the Code or Part 6 of Subtitle B of Title 1 of ERISA. 4.19. REGULATIONS G AND U. No Company is engaged in the business of purchasing or selling Margin Stock or extending credit to others for the purpose of purchasing or carrying Margin Stock, and no part of the proceeds of any borrowing hereunder will be used to purchase or carry any Margin Stock or for any other purpose which would violate any of the margin regulations of the Federal Reserve Board. 4.20. COMPLIANCE. Except as described on SCHEDULE 4.20 or SCHEDULE 4.24, as of the date hereof, each Company is in compliance with all statutes and governmental rules and -35- regulations applicable to it, the noncompliance with which is reasonably likely to have a Material Adverse Effect. 4.21. TAXES. As of the date hereof, each Company has filed all tax returns which are required to have been filed and has paid, or made adequate provisions for the payment of, all of its Taxes which are due and payable, except such Taxes, if any, as are being contested in good faith and by appropriate proceedings and as to which such reserves or other appropriate provisions as may be required by GAAP have been maintained. Except as set forth on SCHEDULE 4.21, as of the date hereof, there has been no audit of the federal income tax liability of any of the Companies by the Internal Revenue Service. The current status of each such audit (if any) is described on SCHEDULE 4.21. As of the date hereof, no Company is aware of any proposed assessment against any Company for additional Taxes (or any basis for any such assessment) which is reasonably likely to have a Material Adverse Effect. 4.22. INVESTMENT COMPANY ACT REPRESENTATION. No Company is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 4.23. PUBLIC UTILITY HOLDINGS COMPANY ACT REPRESENTATION. No Company is a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of a "Holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 4.24. ENVIRONMENTAL AND SAFETY AND HEALTH MATTERS. Except as disclosed on SCHEDULE 4.24, each Company and/or each property, operations and facility that such Company owns, operates or controls (a) complies in all respects with (i) all applicable Environmental Laws, except for those laws with respect to which the failure to comply is not reasonably likely to have a Material Adverse Effect and (ii) all applicable Occupational Safety and Health Laws, except for those laws with respect to which the failure to comply is not reasonably likely to have a Material Adverse Effect; (b) is not subject to any pending judicial or administrative proceeding alleging the violation of any Environmental Law or any Occupational Safety and Health Law; (c) has not received any notice (i) that it may be in violation of any Environmental Law or any Occupational Safety and Health Law, (ii) threatening the commencement of any proceeding relating to allegedly unlawful, unsafe or unhealthy conditions, or (iii) alleging that it is or may be responsible for any response, cleanup, or corrective action, including but not limited to any remedial investigation/feasibility studies, under any Environmental Law or Occupational Safety and Health Law; (d) is not the subject of any pending federal or state investigation evaluating whether any investigation, remedial action or other -36- response is needed to respond to (i) a Release or threatened Release into the environment of any Hazardous Material or (ii) any allegedly unsafe or unhealthful condition; (e) has not filed any notice under or relating to any Environmental Law or any Occupational Safety and Health Law indicating or reporting (i) any past or present Release into the environment of, or treatment, storage or disposal of, any Hazardous Material or (ii) any potentially unsafe or unhealthful condition, and, to the best of Borrower's knowledge, there exists no reasonable basis for such notice irrespective of whether such notice was actually filed; and (f) has no contingent liability in connection with (i) any actual or potential Release into the environment of, or otherwise with respect to, any Hazardous Material, whether on any premises owned or occupied by such Company or, to the best of Borrower's knowledge, on any other premises or (ii) any unsafe or unhealthful condition. Except as disclosed on SCHEDULE 4.24, there are no Hazardous Materials on, in or under any property or facilities owned, operated or controlled by any Company, including but not limited to such Hazardous Materials that may be contained in underground storage tanks, except those Hazardous Materials necessary for the operation of a Company's business that are used in compliance with all applicable Environmental Laws. 5. COVENANTS. From the date of this Agreement and thereafter until the Credit is terminated and all Payment Liabilities of Borrower hereunder are paid in full, Borrower agrees that, unless Agent (at the written direction of Requisite Lenders) shall otherwise consent in writing, it will: 5.1. FINANCIAL STATEMENTS AND OTHER REPORTS. Furnish to Agent and each Lender, in form reasonably satisfactory to Agent: 5.1.1. FINANCIAL REPORTS: (a) ANNUAL AUDITED FINANCIAL STATEMENTS. Within ninety (90) days after each Fiscal Year, a copy of (i) the annual audited financial statements of Borrower prepared on a consolidated basis and in conformity with GAAP and certified by an independent certified public accountant who shall be reasonably satisfactory to Agent, together with the unqualified opinion of such accountant with respect to such audited financial statements; and (ii) the unaudited consolidating schedules prepared by, or at the direction of, Borrower's chief financial officer used in the production of, and reconciliation with, Borrower's annual audited financial statements, signed by Borrower's Chief Financial Officer. (b) QUARTERLY FINANCIAL STATEMENTS. Within forty-five (45) days after the end of each calendar quarter (commencing with the calendar quarter ending March 31, 1997), (i) a copy of the unaudited consolidated financial statement of Borrower, prepared by, or at the direction of, Borrower's Chief Financial Officer in the same manner as the audit report referred to in preceding clause (a) (except for year end adjustments and footnotes), signed by Borrower's Chief Financial Officer and consisting of at least a balance sheet as at the close of such calendar quarter and statements of earnings and cash flows for such calendar quarter and -37- for the period from the beginning of such Fiscal Year to the close of such calendar quarter and (ii) copies of the unaudited financial statements of each Material Operating Company as at the close of such calendar quarter prepared by, or at the direction of, Borrower's chief financial officer consisting of at least a balance sheet as at the close of such calendar quarter and statements of earnings and cash flows for such calendar quarter and for the period from the beginning of such Fiscal Year to the close of such calendar quarter, signed by Borrower's Chief Financial Officer. (c) OFFICER'S CERTIFICATE. Together with the financial statements under the preceding clauses (a), and (b), a certificate of Borrower's chief executive officer, president or chief financial officer in the form of EXHIBIT B, dated the date of such annual audit report or such quarterly financial statement, as the case may be, containing a statement that no Event of Default or Unmatured Event of Default has occurred and is continuing, or, if there is any such event, describing it and the steps, if any, being taken to cure it, and containing (A) a computation of, and showing compliance with, SECTIONS 5.24, 5.25, 5.26, 5.27 and 5.28, and (B) a certification as to the Applicable Margin then in effect based on the calculation of the Leverage Ratio. (d) ANNUAL BUDGETS. Within thirty (30) days after the end of each Fiscal Year, (i) an annual budget for Borrower for the succeeding Fiscal Year, prepared on a consolidated basis and in conformity with the financial statements furnished under the preceding clauses (a) and (b), signed by Borrower's chief executive officer, president or chief financial officer and consisting of at least a balance sheet, an income statement and a cash flow statement and (ii) an annual budget for each Material Operating Company for the succeeding Fiscal Year, prepared in conformity with the financial statements for the Material Operating Companies furnished under the preceding clause (b), signed by Borrower's chief executive officer, president or chief financial officer and consisting of at least a balance sheet, an income statement and a cash flow statement. (e) MANAGEMENT LETTERS. Within ten (10) days after receipt thereof by any Company, copies of any management letters or comparable letters delivered to such Company by any accountant retained by such Company. 5.1.2. OTHER REPORTS AND INFORMATION: (a) SEC AND OTHER REPORTS. If applicable, copies of each filing and report made by any Company with or to any securities exchange or the Securities and Exchange Commission and of each material communication from any Company to shareholders generally, promptly upon the filing or making thereof; (b) REPORT OF CHANGES RELATING TO BORROWER, SUBSIDIARIES OR PARTNERSHIPS. Promptly from time to time, a written report of any change in the information set forth in SCHEDULE 4.1, SCHEDULE 4.10 or SCHEDULE 4.11 concerning any Company, any partnership or any joint venture; -38- (c) PATENTS, ETC. Promptly from time to time, a written report of any change to, or addition of, any federally registered patents, trademarks or copyrights, or any applications therefor, set forth in SCHEDULE 4.15; and (d) OTHER REPORTS. Any information required to be provided pursuant to other provisions of this Agreement, and such other reports or information from time to time reasonably requested by Agent on behalf of itself or any Lender. 5.1.3. ANNUAL INSURANCE CERTIFICATE. Within thirty (30) days after the end of each anniversary of the Closing Date, Borrower shall provide new insurance certificates satisfying the requirements of SECTION 5.6. 5.2. NOTICES. Notify Agent in writing of any of the following promptly upon learning of the occurrence thereof (or, in the case of clauses (e) and (f) of this SECTION 5.2, at least ten (10) days prior to the occurrence thereof), describing the same and, if applicable, the steps being taken by the Person(s) affected with respect thereto: (a) DEFAULT. The occurrence of (i) an Event of Default or Unmatured Event of Default and (ii) to the extent not included in clause (i) of this SECTION 5.2(a), the default by any Company or any other Obligor under any note, indenture, loan agreement, mortgage, lease, deed or other material similar agreement to which such Company or any other Obligor, as appropriate, is a party or by which it is bound, other than any such default which is not reasonably likely to have a Material Adverse Effect; (b) LITIGATION. The institution of any litigation, arbitration, proceeding or governmental proceeding affecting any Company or any other Obligor or property subject to a Lien in favor of Agent, for the benefit of itself, Issuer and Lenders, whether or not considered to be covered by insurance, if the amount claimed exceeds Five Hundred Thousand Dollars ($500,000); (c) JUDGMENT. The entry of any judgment or decree against any Company or any other Obligor, if the amount of such judgment exceeds One Hundred Thousand Dollars ($100,000); (d) PENSION PLANS AND WELFARE PLANS. The occurrence of a Reportable Event with respect to any Pension Plan; the filing of a notice of intent to terminate a Pension Plan by any Company or any ERISA Affiliate; the institution of proceedings to terminate a Pension Plan by the PBGC or any other Person; the withdrawal in a "complete withdrawal" or a "partial withdrawal" as defined in Sections 4203 and 4205, respectively, of ERISA by any Company, any ERISA Affiliate or any other Obligor from any Multiemployer Plan; the failure of any Company, any other Obligor or any ERISA Affiliate to make a required contribution to any Pension Plan, including but not limited to the any failure to pay an amount sufficient to give rise to a Lien under Section 302(f) of ERISA; the taking of any action with respect to a -39- Pension Plan which could result in the requirement that any Company or any ERISA Affiliate furnish a bond or other security to the PBGC or such Pension Plan; the occurrence of any other event with respect to any Pension Plan which could result in the incurrence by any Company or any ERISA Affiliate of any material liability, fine or penalty; or the establishment of a new plan subject to ERISA or an amendment to any existing plan which will result in a material increase in contributions or benefits under such plan or the incurrence of any material increase in the liability of any Company, any other Obligor (or an ERISA Affiliate to the extent there is joint and several liability with any Company) or any Subsidiary, with respect to any "employee welfare benefit plan" as defined in Section 3(l) of ERISA which covers former employees thereof or current employees and their beneficiaries with respect to claims incurred after the termination of their employment; (e) BUSINESS AND COLLATERAL INFORMATION. Any change or proposed change in any of the information set forth on SCHEDULE 4.12, SCHEDULE 4.13 or SCHEDULE 4.14 including but not limited to (i) any change in the location where any property of a Company is kept, other than property sent off site for processing or finishing with an aggregate value at any time not to exceed One Hundred Thousand Dollars ($100,000), which property shall remain at locations other than as set forth on SCHEDULE 4.12 for a period not to exceed ten (10) days, (ii) the identity of any new bailee, processor, warehouseman, consignee or other Person in possession or control of any property of a Company, other than property with an aggregate value at any time not to exceed One Hundred Thousand Dollars ($100,000), which property shall remain at locations other than as set forth on SCHEDULE 4.12 for a period not to exceed ten (10) days, (iii) any change in the name or address of the lessor or owner of any real property or equipment leased to any Company or any other Obligor, (iv) any proposed change in the location of any Company's or any other Obligor's chief executive office or chief place of business, (v) any proposed opening, closing or other change in the list of offices and other places of business of any Company and (vi) any opening, closing or other change in the offices and other places of business of each other Obligor; (e) CHANGE OF NAME. Any change in the name of any Company or any other Obligor; (g) ENVIRONMENTAL AND SAFETY AND HEALTH MATTERS. The occurrence of any event, or the acquisition of any information which, if it had occurred or was true on or before the Closing Date, would have been required to have been disclosed and included on SCHEDULE 4.24, and to the existence of any Environmental Lien and receipt of any notice from any federal, state or local government or agency with respect to any actual or alleged violation of any Environmental Law or any Occupational Safety and Health Law; (h) MATERIAL ADVERSE EFFECT. The occurrence of any event, circumstance or condition that would be reasonably likely to have a Material Adverse Effect; (i) DEFAULT BY OTHERS. Any material default by any account debtor or other Person obligated to any Company or any other Obligor, under any contract, note or other evidence of amounts payable or due or to become due to such Company, or such other -40- Obligor if the amount payable under such contract, note or other evidence of amounts payable or due or to become due is reasonably likely to have a Material Adverse Effect; (j) MOVEABLE COLLATERAL. With respect to any equipment of a Company of a type normally used in more than one state, whether or not actually so used, the change in location of any use of any such equipment in any state other than a state in which such Company shall have previously advised Agent such equipment will be used. Borrower agrees that such equipment will not, unless Agent shall otherwise consent in writing, be used outside the continental United States; (k) CHANGE IN MANAGEMENT OR LINE(S) OF BUSINESS. Any substantial change in the senior management of Borrower, any change with respect to the office of the president or chief executive officer of any Company, or any change in any Company's field of business, as set forth in SECTION 5.4; and (l) OTHER NOTICES. Any notices required to be provided pursuant to any Related Agreement or the other provisions of this Agreement. 5.3. EXISTENCE. Maintain and preserve, and cause each other Company to maintain and preserve, its respective existence as a corporation or other form of business organization, as the case may be, and all rights, privileges, licenses, patents, patent rights, copyrights, trademarks, trade names, trade styles, franchises and other authority to the extent the failure to so maintain and preserve is reasonably likely to have a Material Adverse Effect. 5.4. NATURE OF BUSINESS. Engage in, and cause each other Company to engage in, the aerospace industry. 5.5. BOOKS, RECORDS AND ACCESS. Maintain, and cause each other Company to maintain, complete (Agent hereby acknowledging that each Company's system as of the date of this Agreement is complete) and accurate books and records (including but not limited to records relating to accounts receivable, inventory, equipment and other collateral and property), in which full and correct entries in conformity in all material respects with GAAP shall be made of all dealings and transactions in relation to its respective business and activities; permit, and, without unreasonable interference with such Company's business operations, cause each other Company to permit, access by Agent and Lenders and their agents and employees to the books and records of each Company at such Company's place or places of business at intervals to be determined by Agent upon reasonable prior notice and during normal business hours and without hindrance or delay; and permit and cause each other Company to permit Agent and Lenders and their agents and employees to inspect each Company's inventory and equipment, to perform appraisals of each Company's equipment and to inspect, audit, check and make copies and/or extracts from the books, -41- records, computer data and records, computer programs, journals, orders, receipts, correspondence and other data relating to inventory, accounts receivable, equipment and any other property of a Company. So long as no Event of Default is in existence and continuing, all audits, inspections and visits by Agent and Lenders and/or their agents or employees shall be at intervals to be determined by Agent upon reasonable prior notice and during normal business hours and without hindrance or delay. Borrower shall not be liable for any costs and expenses of such inspections, audits, visits or appraisals by Agent and Lenders and their agents and employees unless an Event of Default then exists and is continuing. 5.6. INSURANCE. Maintain, and cause each Company to maintain, insurance to such extent and against such hazards and liabilities as is consistent with usual and customary levels of insurance for the nature of the businesses conducted, including, without limitation business interruption insurance and product liability insurance, and keep the property of each Company insured for its full insurable value against loss or damage by earthquake, fire, theft, explosion, sprinklers and such other risks as is consistent with usual and customary levels of insurance for the nature of the businesses conducted, with such companies, in such amounts and under policies in such form as shall be satisfactory to Requisite Lenders; PROVIDED, that, notwithstanding anything to the contrary set forth herein, Borrower and the other Companies shall maintain (i) business interruption insurance in an aggregate amount for each fiscal year of the Companies equal to the greater of (x) Fifteen Million Dollars ($15,000,000) and (y) aggregate sales of the Companies for the immediately preceding fiscal year of the Companies, MINUS the aggregate cost of sales of the Companies for such preceding fiscal year, PLUS the aggregate payroll expense of the Companies for such preceding fiscal year and (ii) earthquake and flood insurance in an aggregate amount at all times equal to or in excess of Ten Million Dollars ($10,000,000). Certificates of such policies of insurance in form and substance reasonably satisfactory to Agent have been delivered to Agent prior to the date hereof together with evidence of payment of all premiums therefor then due, and Agent and Lenders acknowledge that as of the date hereof the same are satisfactory. Borrower shall cause each issuer of an insurance policy to provide Agent, prior to the Closing Date, with an endorsement or an independent instrument (i) containing such terms as shall be acceptable to Agent, (ii) with respect to property and casualty insurance, showing Agent, for the benefit of itself, Issuer and the Lenders, as loss payee and, (iii) naming Agent, for the benefit of itself, Issuer and the Lenders, and each Lender, as additional insured. Borrower hereby directs all insurers under Borrower's policies of insurance to pay all proceeds payable thereunder in respect of any property of a Company subject to Agent's Lien directly to Agent, as its interest may appear and applied to the Payment Liabilities, whether or not then due, in such order of application as Agent may determine. Borrower appoints Agent and any Person whom Agent may from time to time designate (and all officers, employees or agents designated by Agent or such Person) as Borrower's true and lawful attorney and agent in fact with power, during the continuance of an Event of Default, to make, settle and adjust claims under such policies of insurance, -42- endorse the name of Borrower on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance relating to the any property of a Company subject to Agent's Lien which are payable to Agent or any Lender hereunder and make all determinations and decisions with respect to such policies of insurance. The foregoing appointment and power, being coupled with an interest, is irrevocable until all Payment Liabilities under this Agreement are paid and performed in full and this Agreement is terminated. In the event any Company at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required herein or to pay any premium in whole or in part relating thereto when due, then Agent, without waiving or releasing any obligation of or default by Borrower hereunder, may at any time or times thereafter (but shall be under no obligation to do so) obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto which Requisite Lenders deem advisable. All sums so disbursed by Agent, including Attorneys' Fees, court costs, expenses and other charges relating thereto, shall be payable on demand by Borrower to Agent, and Agent may, in its sole and absolute discretion, advance such sums to Borrower as a Revolving Loan. 5.7. REPAIR. Maintain, preserve and keep, and cause each other Company to maintain, preserve and keep, its Equipment and other properties in good operating condition and repair, ordinary wear and tear and casualty excepted; and from time to time make, and cause each other Company to make, all reasonable and proper repairs, renewals, replacements, additions, betterments and improvements thereto and to such extent so that at all times the efficiency thereof shall be fully preserved and maintained. 5.8. TAXES. Pay, and cause each other Company to pay, when due, all of its Taxes, unless and only to the extent that such Company is contesting such Taxes in good faith and by appropriate proceedings and such Company has set aside on its books such reserves or other appropriate provisions therefor as may be required by GAAP; not file a consolidated tax return together with any other Person other than the other Companies, unless consented to in writing by Requisite Lenders; not, and not permit any Subsidiary to, enter into any tax sharing arrangement except as described on SCHEDULE 5.8; and not change, or permit any other Company to change, its Fiscal Year without Agent's prior written consent. 5.9. COMPLIANCE. Comply, and cause each other Company to comply, with all statutes and governmental rules and regulations applicable to it, except where the failure to so comply would not be reasonably likely to have a Material Adverse Effect. -43- 5.10. PENSION PLANS. Not permit, and not permit any other Company to permit, any condition to exist in connection with any Pension Plan that would constitute grounds for the PBGC to institute proceedings to have such Pension Plan terminated or a trustee appointed to administer such Pension Plan; not fail, and not permit any other Company to fail, to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA; and not engage in, or permit to exist or occur, or permit any other Company to engage in, or permit to exist or occur, any other condition, event or transaction with respect to any Pension Plan which could result in the incurrence by such Company of any liability, fine or penalty, which is reasonably likely to have a Material Adverse Effect. 5.11. MERGER, PURCHASE AND SALE. Not, and not permit any other Company to: (a) be a party to any merger, liquidation or consolidation, except that any Subsidiary may merge or consolidate with, or liquidate into, any other Subsidiary or merge or consolidate with, or liquidate into, the Borrower; (b) except for sales of inventory of such Company in the normal course of its business and sales of obsolete equipment of such Company so long as the aggregate proceeds from the sale of such equipment does not exceed Five Hundred Thousand Dollars ($500,000) in any Fiscal Year and the proceeds thereof are remitted to Agent for application to the Payment Liabilities, sell, transfer, convey, lease or otherwise dispose of any of its property, (c) sell or assign, with or without recourse, any accounts receivable, notes receivable or chattel paper and (d) except for Permitted Acquisitions, purchase or otherwise acquire all or substantially all of the assets or stock of any Person. 5.12. RESTRICTED PAYMENTS. Except in connection with the Recapitalization, not purchase or redeem, or permit any other Company to purchase or redeem, any shares of its stock, warrants or equity interests, declare or pay any distributions or dividends (other than stock dividends) or set aside any funds for any such purpose. Notwithstanding the foregoing, the provisions of SECTION 5.12 shall not prohibit the payment of any dividend by any Subsidiary to Borrower. 5.13. STOCK. Not take any action, or permit any other Company to take any action, which would result in a decrease in any Company's ownership interest in any Subsidiary. 5.14. INDEBTEDNESS. Not, and not permit any other Company to, incur or permit to exist any Indebtedness (including but not limited to Indebtedness as lessee under Capitalized Leases and including any intercompany Indebtedness among the Companies), except: (a) the Liabilities; (b) Indebtedness of a Company having maturities and terms, and which is -44- subordinated to payment of the Liabilities, in a manner approved in writing by Requisite Lenders; (c) other Indebtedness outstanding on the date hereof and listed on SCHEDULE 5.14; (d) Indebtedness in connection with Liens permitted under SECTION 5.15(c); (d) Indebtedness arising from guarantees permitted by SECTION 5.16; (e) Indebtedness arising under forward exchange contracts to purchase Swiss francs as a general economic hedge against inventory procurement and manufacturing costs with respect to Tri-Star Electronic Europe, S.A.; (f) Indebtedness arising from the agreement of Borrower to guarantee the contractual performance of a Subsidiary, including without limitation, (i) obligations owing by Tri-Star Electronic Europe, S.A. in respect of money borrowed (PROVIDED, that the aggregate Dollar equivalent of such obligations shall not, at any time, exceed $1,000,000), and (ii) real property lease obligations of any Subsidiary; (g) if required pursuant to the terms of the IFT Agreement, Indebtedness in an amount not to exceed $5,000,000 arising from a performance guarantee and/or letter of credit delivered by, or issued for the account of, Hollingsead International, Inc. in connection with its performance obligations under the IFT Agreement; (h) other Indebtedness of a Company so long as the aggregate amount of such other Indebtedness of the Companies outstanding at any time does not exceed Two Hundred Fifty Thousand Dollars ($250,000); and (i) other Indebtedness approved in writing by Requisite Lenders. 5.15. LIENS. Not, and not permit any other Company to, create or permit to exist any Lien with respect to any property, revenue or assets now owned or hereafter acquired, except: (a) Liens in favor of Agent, for the benefit of itself, Issuer and Lenders; (b) without duplication, Liens referred to in SECTION 4.9; (c) Liens in connection with the acquisition of fixed assets after the date hereof by way of purchase money mortgage, conditional sale or other title retention agreement, Capitalized Lease or other deferred payment contract, and attaching only to the property being acquired, if the Indebtedness secured thereby does not exceed one hundred percent of the fair market value of such property at the time of the acquisition thereof and so long as the aggregate amount of such Indebtedness outstanding at any time does not exceed One Million Dollars ($1,000,000); (d) Liens filed in connection with one or more judgments entered against any of the Companies, but only to the extent (i) the aggregate amount of such judgments secured by Liens does not exceed Two Hundred Fifty Thousand Dollars ($250,000), (ii) such judgments have been stayed pending appeal, and (iii) a bond or letter of credit has been posted in the full amount of such judgments; and (e) Liens consented to in writing by Requisite Lenders. 5.16. GUARANTIES. Not, and not permit any other Company to, become or be a guarantor or surety of, or otherwise become or be responsible in any manner (whether by agreement to purchase any obligations, stock, assets, goods or services, or to supply or advance any funds, assets, goods or services, or otherwise) with respect to, any undertaking of any other Person, except for (a) the endorsement, in the ordinary course of collection, of -45- instruments payable to it or its order, (b) any guaranty of the Liabilities in favor of Agent, Issuer and Lenders and (c) any guaranty described in SECTION 5.14(f) and SECTION 5.14(g). 5.17. INVESTMENTS. Not, and not permit any other Company to, make or permit to exist any Investment in any Person, except for: (a) advances to employees of such Company for travel or other ordinary business expenses provided that the aggregate amount outstanding at any one time for all Companies shall not exceed Two Hundred Fifty Thousand Dollars ($250,000); (b) Investments (other than loans) outstanding on the date hereof and listed on SCHEDULE 5.17; (c) extensions of credit in the nature of accounts receivable or notes receivable arising from the sale of goods and services in the ordinary course of business by a Company; (d) Investments in Cash Equivalent Investments; (e) Investments to acquire a Subsidiary after the Closing Date, to the extent such acquisition constitutes a Permitted Acquisition and Investments in New Subsidiaries permitted in connection with, and to the extent necessary to consummate, Permitted Acquisitions; and (f) other Investments consented to by Requisite Lenders in writing. 5.18. SUBSIDIARIES. Not, and not permit any other Company to, acquire any stock or similar interest in any Person or create, establish or acquire any Subsidiaries other than those existing on the date of this Agreement or in connection with a Permitted Acquisition. 5.19. ENVIRONMENTAL ISSUES. Provide such information and certifications as Requisite Lenders may request from time to time at reasonable intervals pertaining to the environmental aspects of each Company and any property owned, operated or controlled by any Company. In order to investigate environmental aspects of each Company and its properties, facilities and operations, Agent and its agents shall have the right at reasonable intervals during normal business hours and upon reasonable notice to enter upon the property of such Company, take samples, review the books, records or other documents of such Company, interview officers and employees of such Company, and conduct such other activities as Requisite Lenders, in their reasonable discretion, deems appropriate. Borrower shall, and shall cause each other Company to, cooperate fully in the conduct of any such investigation. If Requisite Lenders decide to cause any such investigation to be conducted because of (a) Requisite Lenders' considering taking possession of or title to the property during the continuance of an Event of Default or (b) a material change in the use of the property, which in Requisite Lenders' reasonable opinion, materially increases the risk of noncompliance with Environmental Laws or materially increases the risk of cost or liabilities thereunder, then Borrower shall pay upon demand all costs and expenses (including Attorneys' Fees) connected with such investigation. Nothing in this SECTION 5.19, and no actions taken by Agent or any Lender pursuant thereto, shall give, or be construed as controlling, or giving to Agent or any Lender the right or obligation to direct or control, the conduct or action or inaction of any Company with respect to any -46- environmental matters, including but not limited to those pertaining to compliance with any Environmental Laws. 5.20. RELATED AGREEMENTS. After the date hereof, not enter into, or permit any other Company to enter into, any agreement containing any provision which would be violated or breached by the performance by such Company of its obligations hereunder or under any Related Agreement or any instrument or document delivered or to be delivered by such Company in connection herewith. 5.21 UNCONDITIONAL PURCHASE OPTIONS. Not enter into or be a party to, or permit any other Company to enter into or be a party to, any contract for the purchase of materials, supplies or other property or services, if such contract requires that payment be made by it regardless of whether or not delivery is ever made of such materials, supplies or other property or services. 5.22. USE OF PROCEEDS. Not use or permit, or permit any other Company to use or permit, any proceeds of the Revolving Loans or Letters of Credit to be used, either directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of "purchasing or carrying" any Margin Stock, and furnish to Agent or cause to be furnished to Agent upon request, a statement in conformity with the requirements of Federal Reserve Form U-l referred to in Regulation U of the Board of Governors of the Federal Reserve System. 5.23. TRANSACTIONS WITH RELATED PARTIES. Except in connection with the Recapitalization, not, and not permit any other Company to, enter into or be a party to any other transaction or arrangement, including, without limitation, the purchase, sale, lease or exchange of property or the rendering of any service, with any Related Party, except in the ordinary course of such Company's business and upon terms no less favorable to such Company than those that might reasonably have been obtained in a comparable arm's-length transaction with a Person not a Related Party. Notwithstanding the foregoing, the provisions of this SECTION 5.23 shall not prohibit (i) reasonable fees paid to directors of Borrower or any of its Subsidiaries as determined in good faith by Borrower's Board of Directors; and (ii) payments permitted by SECTION 5.12. 5.24. CAPITAL EXPENDITURES LIMITATION. Not permit Capital Expenditures in any Fiscal Year to be greater than the sum of (A) Four Million Dollars ($4,000,000) and (B) the amount by which Four Million Dollars ($4,000,000) exceeds the amount of Capital Expenditures in the immediately prior Fiscal Year. -47- 5.25. MINIMUM WORKING CAPITAL RATIO. Not permit the Working Capital Ratio as of the last day of each calendar quarter (commencing with the calendar quarter ending June 30, 1997) to be less than thirty-three one hundredths (0.33). 5.26. MINIMUM NET WORTH. Not permit Net Worth as of the last day of each calendar quarter (commencing with the calendar quarter ending June 30, 1997) to be less than the Minimum Net Worth Amount at such time. 5.25. MAXIMUM LEVERAGE RATIO. Not permit the Leverage Ratio as of the last day of each calendar quarter ending during the periods (inclusive) set forth below to be more than the ratio set forth opposite such period: PERIOD RATIO -------- --------- June 30, 1997 through December 31, 1998 3.00:1.00 March 31, 1999 through December 31, 2000 2.75:1.00 March 31, 2001 and the last day of each calendar quarter thereafter 2.50:1.00 5.28. MINIMUM INTEREST COVERAGE RATIO. Not permit Interest Coverage for the twelve (12) month period ending the last day of each calendar quarter ending during the periods (inclusive) set forth below to be less than the ratio set forth opposite such period: PERIOD RATIO -------- --------- June 30, 1997 through December 31, 1998 3.00:1.00 March 31, 1999 through December 31, 2000 4.00:1.00 March 31, 2001 and the last day of each calendar quarter thereafter 5.00:1.00 -48- 6. DEFAULT. 6.1. EVENT OF DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: (a) NON-PAYMENT. Default in the payment, when due or declared due, of any amount of principal of any Revolving Loan, or default in the payment, within three (3) days after the same shall become due, of any of the other Payment Liabilities. (b) NON-PAYMENT OF OTHER INDEBTEDNESS. Default in the payment when due, whether by acceleration or otherwise, after giving effect to the expiration of any applicable grace period, if any, of any Indebtedness of, or guaranteed by, any Company or any other Obligor with a principal balance aggregating in excess of Two Hundred Fifty Thousand Dollars ($250,000) (other than any Indebtedness under this Agreement and any Notes). (c) ACCELERATION OF OTHER INDEBTEDNESS. Any event or condition shall occur which, after giving effect to the expiration of any applicable grace period, if any, either (i) results in the acceleration of the maturity of any Indebtedness of, or guaranteed by, any Company or any other Obligor with a principal balance in aggregating excess of Two Hundred Fifty Thousand Dollars ($250,000) (other than the Indebtedness under this Agreement and any Notes), or (ii) enables the holder or holders of such other Indebtedness or any trustee or agent for such holders to accelerate the maturity of such other Indebtedness. (d) OTHER OBLIGATIONS. Default in the performance or observance of any obligation or agreement (other than default in the payment when due of Indebtedness) of any Company or any other Obligor to or with any other Person involving potential liability in an amount in excess of Five Hundred Thousand Dollars ($500,000). (e) BANKRUPTCY. Any Company or any other Obligor applies for, consents to, or acquiesces in the appointment of a trustee, receiver or other custodian for such Company or such other Obligor, or for a substantial part of the property of such Company or such other Obligor, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for such Company or such other Obligor, or for a substantial part of the property of such Company or such other Obligor and is not discharged or dismissed within sixty (60) days; or any bankruptcy, reorganization, debt arrangement or other proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is instituted by such Company or such other Obligor; or, in the absence of application, consent or acquiescence, any bankruptcy, reorganization, debt arrangement or other proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceedings, is instituted against such Company or such Obligor and is not discharged or dismissed within sixty (60) days; or any warrant of attachment or similar legal process is issued against any substantial part of the property of such Company or such other Obligor. -49- (f) INSOLVENCY. Any Company or any other Obligor becomes insolvent, or generally fails to pay, or admits in writing its inability to pay, its debts as they mature. (g) ERISA LIABILITIES. Any of the following events shall have occurred, if such event is reasonably likely to have a Material Adverse Effect: (i) the existence of a Reportable Event, (ii) the withdrawal of any Company or any ERISA Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (iii) the occurrence of an obligation to provide affected parties with a written notice of intent to terminate a Pension Plan in a distress termination under Section 4041 of ERISA, (iv) the institution by PBGC of proceedings to terminate any Pension Plan, (v) any event or condition that would require the appointment of a trustee to administer a Pension Plan, and (vi) the withdrawal of any Company or any ERISA Affiliate from a Multiemployer Plan. (h) NON-COMPLIANCE WITH THIS AGREEMENT. Default in the performance of any of the agreements set forth in SECTIONS 5.5 or 5.11 through 5.28 (and not constituting an Event of Default under any of the other subsections of this SECTION 6.1); or default in the performance of any of the agreements set forth in SECTION 5.1.1, 5.1.2, 5.1.3, 5.2 or 5.6 (and not constituting an Event of Default under any of the other subsections of this SECTION 6.1), and continuance of such default for five (5) days after the occurrence thereof; or default in the performance of any other agreements herein set forth (and not constituting an Event of Default under any of the other subsections of this SECTION 6.1), and continuance of such default for thirty (30) days after the occurrence thereof. (h) NON-COMPLIANCE WITH RELATED AGREEMENTS. Default in the performance by any Company or any other Obligor of any of its agreements set forth in any Related Agreement (and not constituting an Event of Default under any of the other subsections of this SECTION 6.1), and continuance of such default after notice from Agent and the expiration of the grace or cure period (if any) set forth therein. (j) REPRESENTATIONS AND WARRANTIES. Any representation or warranty made by any Company or any other Obligor herein or in any Related Agreement is untrue or misleading in any material respect when made or deemed made; or any schedule, statement, report, notice, certificate or other writing furnished by any Company or any other Obligor to Agent or any Lender is untrue or misleading in any material respect on the date as of which the facts set forth therein are stated or certified; or any certification made or deemed made by any Company or any other Obligor to Agent or any Lender is untrue or misleading in any material respect on or as of the date made or deemed made. (k) JUDGMENTS. There shall be entered against any of the Companies and the other Obligors as a group one or more judgments or decrees involving the payment of monies in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate at any one time outstanding, excluding those judgments or decrees (i) that shall have been outstanding less than thirty (30) calendar days from the entry thereof, (ii) for and to the extent which such Company or such Obligor, as applicable, is insured and with respect to which the insurer has assumed responsibility in writing, or (iii) which have been stayed pending appeal and with -50- respect to which such Company or such Obligor has posted any required bond or letter of credit and in connection with which no property of any Company or any other Obligor has been attached. (l) TERMINATION OF OBLIGATIONS. If any Obligor shall terminate or attempt to terminate any of its obligations to Agent or any Lender in respect of the Liabilities. (m) VALIDITY. If the validity or enforceability of this Agreement or any Related Agreement shall be challenged by any Company, any other Obligor or any other Person, which challenge shall remain for thirty (30) days undismissed, or if this Agreement or any Related Agreement shall fail to remain in full force and effect. (n) CONDUCT OF BUSINESS. If any Company or any other Obligor is enjoined, restrained or in any way prevented by court order, which has not been dissolved or stayed within ten (10) days, from conducting all or any material part of its business affairs constituting a material portion of the Companies' businesses taken as a whole. (o) MATERIAL ADVERSE EFFECT. An event, circumstance or condition has occurred which has a Material Adverse Effect; PROVIDED, that for purposes of this SECTION 6.1(o), (x) no Material Adverse Effect shall be deemed to exist solely as a result of a casualty loss or related series of casualty losses equal to or less than Five Million Dollars ($5,000,000) if such loss is fully covered by insurance as required pursuant to SECTION 5.6 and (y) no Material Adverse Effect shall be deemed to exist solely as result of a casualty loss or related series of casualty losses in excess of Five Million Dollars ($5,000,000) if (i) such loss is fully covered by insurance as required pursuant to SECTION 5.6, and (ii) the Borrower has demonstrated in writing to the satisfaction of Agent that (A) insurance proceeds received in respect of such insurance are necessary and in an amount sufficient, together with any funds that may be contributed by Borrower, to pay all costs of repair, replacement, restoration or substitution of the damaged property to an economical unit of substantially the same character and value as such property was prior to such damage, (B) the damaged property can be repaired, replaced, restored or substituted prior to the termination of the Credit to an economical unit of substantially the same character and value as such property was prior to such damage, and (C) after giving effect to such casualty loss and to any insurance proceeds paid in connection with such loss, the Companies are currently in compliance with all affirmative and negative covenants set forth in the Agreement or any Related Agreement, including without limitation covenants set forth at SECTIONS 5.24, 5.25, 5.26, 5.27 and 5.28 of the Agreement, and are reasonably likely to continue to be in compliance with all such covenants for the anticipated length of time it will take to repair, replace, restore or substitute such property. 6.2. EFFECT OF EVENT OF DEFAULT; REMEDIES. (a) In the event that one or more Events of Default described in SECTION 6.1(e) shall occur and be continuing, then each Lender's commitment and the Credit extended under this Agreement shall terminate and all Liabilities hereunder and under any Notes shall -51- be immediately due and payable without demand, notice or declaration of any kind whatsoever. (b) In the event an Event of Default other than one described in SECTION 6.1(e) shall occur and be continuing, at the option of Requisite Lenders, each Lender's commitment shall terminate and all Liabilities hereunder and under any Notes shall immediately be due and payable without demand or notice of any kind whatsoever, whereupon the Credit extended under this Agreement shall terminate. Agent shall promptly advise Borrower of any such declaration, but failure to do so shall not impair the effect of such declaration. (c) In the event of the occurrence and continuance of any Event of Default, Agent may, and at the request of Requisite Lenders shall, exercise any one or more or all of the following remedies, all of which are cumulative and non-exclusive: (i) Any remedy contained in this Agreement or in any of the Related Agreements or any Supplemental Documentation; (ii) Any rights and remedies available to Agent or any Lender under the UCC, and any other applicable law; (iii) To the extent permitted by applicable law, Agent may, without notice, demand or legal process of any kind, take possession of any or all of the Collateral (in addition to Collateral which it may already have in its possession), wherever it may be found, and for that purpose may pursue the same wherever it may be found, and may enter into any premises where any of the Collateral may be or is supposed to be, and search for, take possession of, remove, keep and store any of the Collateral until the same shall be sold or otherwise disposed of, and Agent shall have the right to store the same in any of Borrower's premises without cost to Agent; (iv) At Agent's request, Borrower will, at Borrower's expense, assemble the Collateral and make it available to Agent at a place or places to be designated by Agent which is reasonably convenient to Agent and Borrower; and (v) Agent at its option, and pursuant to notification given to Borrower as provided for below, may sell any Collateral actually or constructively in its possession at public or private sale and apply the proceeds thereof as provided below. -52- 7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND AGENT'S RIGHTS. 7.1. NOTICE OF DISPOSITION OF COLLATERAL. Any notification of intended disposition of any of the Collateral required by law shall be deemed reasonably and properly given if given at least five (5) calendar days before such disposition. 7.2. APPLICATION OF PROCEEDS OF COLLATERAL. During the continuance of an Event of Default, any proceeds of the Collateral and any other payments received by Agent may be applied by Agent to the payment of expenses in connection with the taking possession of, storing, preparing for sale, and disposition of Collateral, including Attorneys' Fees and legal expenses, and any balance of such proceeds may be applied by Agent toward the payment of such of the Payment Liabilities, and in such order of application, as Agent may from time to time elect. 7.3. CARE OF COLLATERAL. Agent shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if it takes such action for that purpose as Borrower requests in writing, but failure of Agent to comply with such request shall not, of itself, be deemed a failure to exercise reasonable care, and no failure of Agent to preserve or protect any rights with respect to such Collateral against prior parties, or to do any act with respect to the preservation of such Collateral not so requested by Borrower, shall be deemed a failure to exercise reasonable care in the custody or preservation of such Collateral. 7.4. PERFORMANCE OF BORROWER'S OBLIGATIONS. During the continuance of an Event of Default, Agent shall have the right, but shall not be obligated, to discharge any claims or Liens against, and any Taxes at any time levied or placed upon any or all Collateral, including, without limitation, those arising under statute or in favor of landlords, taxing authorities, government, public and/or private warehousemen, common and/or private carriers, processors, finishers, draymen, coopers, dryers, mechanics, artisans, laborers, attorneys, courts, or others. During the continuance of an Event of Default, Agent may also pay for maintenance and preservation of Collateral. Agent may, but is not obligated to, perform or fulfill any of Borrower's responsibilities under this Agreement which Borrower has failed to perform or fulfill. Agent may advance to Borrower as a Revolving Loan any payment made or expense incurred under this SECTION 7.4. -53- 7.5. AGENT'S RIGHTS. None of the following shall affect the obligations of any Company or any other Obligor to Agent or any Lender under this Agreement or Agent's right with respect to the remaining Collateral (any or all of which actions may be taken by Agent at any time, whether before or after an Event of Default, at its sole and absolute discretion and without notice to Borrower): (a) acceptance or retention by Agent or any Lender of other property or interests in property as security for the Liabilities, or acceptance or retention of any Obligor(s), in addition to Borrower, with respect to any of the Liabilities; (b) release of its Lien on, or surrender or release of, or the substitution or exchange of or for, all or any part of the Collateral or any other property securing any of the Liabilities (including but not limited to any property of any Obligor other than Borrower), or any extension or renewal for one or more periods (whether or not longer than the original period), or release, compromise, alteration or exchange, of any obligations of any guarantor or other Obligor with respect to any Collateral or any such property; (c) extension or renewal for one or more periods (whether or not longer than the original period), or release, compromise, alteration or exchange of any of the Liabilities, or release or compromise of any obligation of any Obligor with respect to any of the liabilities; or (d) failure by Agent or any Lender to resort to other security or pursue any Person liable for any of the Liabilities before resorting to the Collateral. 8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS. 8.1. CONDITIONS PRECEDENT TO INITIAL REVOLVING LOANS AND LETTERS OF CREDIT. The obligation of each Lender that is a party to this Agreement on the date hereof to make the initial Revolving Loans and for Issuer to issue the initial Letters of Credit, if any, is subject to satisfaction of the following conditions precedent (in addition to those provided in SECTION 8.2): 8.1.1. SECURITY INTEREST. Except for the ING Liens, the security interest in the property of each Company granted under this Agreement and the Related Agreements, and all other Liens granted to Agent, for the benefit of itself, Issuer and Lenders, to secure the Liabilities, shall be a senior, perfected Lien except as otherwise agreed by Requisite Lenders or as otherwise permitted herein, and all financing statements and other documents relating to such property shall have been filed or recorded, as appropriate. -54- 8.1.2. LITIGATION. No material litigation shall have been instituted against any Company relating to the transactions contemplated by this Agreement or any Related Agreement. 8.1.3. SOLVENCY. After giving effect to the initial Revolving Loans made hereunder and the initial Letters of Credit issued hereunder, Borrower shall have sufficient assets having a value, both at present fair salable value and at fair valuation, greater than the amount of Borrower's liabilities (including trade debt and Indebtedness to Lenders). Lenders shall be satisfied that all of the assets supporting the Revolving Loans and Letters of Credit under this Agreement shall be sufficient in value to provide Borrower with sufficient cash flow and working capital to enable it to profitably operate its business and to meet its obligations as they become due. 8.1.4. MINIMUM WORKING CAPITAL RATIO. The Working Capital Ratio calculated as of December 31, 1996 but after giving effect to the initial Revolving Loans and Letters of Credit shall exceed thirty-three one hundredths (0.33). 8.1.5. CONSENTS. Borrower shall have received all consents and approvals required to consummate the transactions contemplated in this Agreement. 8.1.6. EFFECT OF LAW. No law or regulation affecting Agent's or any Lender's entering into the secured financing transaction contemplated by this Agreement shall impose upon Agent or any Lender any material obligation, fee, liability, loss, cost, expense or damage. 8.1.7. EXHIBITS; SCHEDULES. All Exhibits and Schedules to this Agreement shall have been completed and submitted to Agent and Lenders, shall be in form and substance satisfactory to Agent and Lenders and shall contain no facts or information which Agent and Lenders, in their sole judgment, determine to be unacceptable. 8.1.8. IPO. The IPO shall have been consummated. Borrower shall have received net proceeds from the IPO of at least Twenty-Five Million Dollars ($25,000,000), which proceeds have been applied to consummate the Recapitalization. -55- 8.1.9. FEES. Agent shall have received the closing fee referred to in the Fee Letter and any other fees due and payable by Borrower on the funding of the initial Revolving Loans and issuing the initial Letters of Credit. 8.1.10. DOCUMENTS. Lenders shall have received all documents as Lenders shall determine to be necessary and desirable, including, without limitation, the documents, agreements, instruments, certificates, opinions and organizational documents listed on SCHEDULE 8.1.10, each duly executed where appropriate and dated as of the date of the initial Revolving Loan (or such other date as shall be satisfactory to Agent), in form and substance satisfactory to Agent. 8.2. CONTINUING CONDITIONS PRECEDENT TO ALL REVOLVING LOANS; CERTIFICATION. The obligation of each Lender to make the initial Revolving Loans and each subsequent Revolving Loan and to establish any IBOR Rate Loans and/or for Issuer to issue the initial Letters of Credit and each subsequent Letter of Credit, is subject to satisfaction of the following conditions precedent in addition to those provided in SECTION 8.1: (a) NO MATERIAL ADVERSE EFFECT. No event, circumstance or condition has occurred which has a Material Adverse Effect. (b) NO DEFAULT. Before and after giving effect to such Revolving Loan and/or Letter of Credit, no Event of Default or Unmatured Event of Default shall have occurred and be continuing. (c) REPRESENTATIONS AND WARRANTIES. Before and after giving effect to such Revolving Loan and/or Letter of Credit, the representations and warranties in SECTION 4 shall be true and correct in all material respects as though made on the date of such Revolving Loan and/or Letter of Credit. Each request for a Revolving Loan or Letter of Credit hereunder made or deemed to have been made by Borrower shall be deemed to be a certificate of Borrower as to the matters set out in the foregoing provisions of this SECTION 8.2. 9. INDEMNITY. 9.1. ENVIRONMENTAL AND SAFETY AND HEALTH INDEMNITY. Borrower hereby indemnifies and agrees to hold Agent and each Lender, and the officers, directors, employees, agents and affiliates of each of Agent and each Lender (collectively, the "Indemnitees") harmless from and against any and all losses, liabilities, damages, injuries, costs, claims and expenses of any and every kind -56- whatsoever (including, without limitation, court costs and Attorneys' Fees) which at any time or from time to time may be paid, incurred or suffered by, or asserted against, any of such Indemnitees for, with respect to, or as a direct or indirect result of the violation by, any Company of any Environmental Law or Occupational Safety and Health Law, or with respect to, or as a direct or indirect result of (a) the presence on or under, or the Release from, properties utilized by such Company in the conduct of its business into or upon any land, the atmosphere, or any watercourse, body of water or wetland, of any Hazardous Material or the escape, seepage, leakage, spillage, disposal, discharge, emission or release of any other hazardous or toxic waste, substance or constituent, or other substance (including, without limitation, any losses, liabilities, damages, injuries, costs, claims or reasonable expenses asserted or arising under any Environmental Law) or (b) the existence of any unsafe or unhealthful condition on or at any premises utilized by such Company in the conduct of its business; provided, that Borrower shall not have any obligation to any Indemnitee hereunder with respect to indemnified liabilities arising from any Indemnitee's gross negligence or willful misconduct. The provisions of and undertakings and indemnification set out in this SECTION 9.1 shall survive satisfaction and payment of the Liabilities and termination of this Agreement. 9.2. GENERAL INDEMNITY. In addition to the payment of expenses pursuant to SECTION 11.3, whether or not the transactions contemplated hereby shall be consummated, Borrower hereby indemnifies and agrees to hold each Indemnitee harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, and reasonable expenses of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel, and, without duplication, the allocated cost of in- house counsel, for any of such Indemnities in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not any of such Indemnities shall be designated a party thereto) that may be imposed on, incurred by, or asserted against any Indemnitee, in any manner relating to or arising out of this Agreement or any Related Agreement, Agent's or any Lender's agreement to make the Revolving Loans or issue the Letters of Credit hereunder, or the use or intended use of any of the Revolving Loans or Letters of Credit hereunder or proceeds thereof (the "indemnified liabilities"); provided, that Borrower shall not have any obligation to an Indemnitee hereunder with respect to indemnified liabilities arising from the gross negligence or willful misconduct of such Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, Borrower shall contribute the maximum portion that it is permitted to pay under applicable law to the payment and satisfaction of all indemnified liabilities incurred by the Indemnities or any of them. The provisions of the undertakings and indemnification set out in this SECTION 9.2 shall survive satisfaction and payment of the Liabilities and termination of this Agreement. -57- 9.3. CAPITAL ADEQUACY. If Agent or any Lender shall reasonably determine that the application or adoption after the date hereof of any law, rule, regulation, directive, interpretation, treaty or guideline regarding capital adequacy, or any change therein or in the interpretation or administration thereof, whether or not having the force or law (including, without limitation, application of changes to Regulation H and Regulation Y of the Federal Reserve Board issued by the Federal Reserve Board on January 19, 1989 and regulations of the Comptroller of the Currency, Department of the Treasury, 12 CFR Part 3, Appendix A, issued by the Comptroller of the Currency on January 27, 1989) increases the amount of capital required or expected to be maintained by Agent or such Lender or any Person controlling Agent or such Lender in excess of the amount required as of the date hereof, and such increase is based upon the existence of Agent's or such Lender's obligations hereunder and other commitments of this type, then from time to time, within thirty (30) days after demand from Agent or such Lender, Borrower shall pay to Agent or such Lender, as applicable, such amount or amounts as will compensate Agent or such Lender or such controlling Person, as the case may be, for such increased capital requirement. The determination of any amount to be paid by Borrower under this SECTION 9.3 shall take into consideration the policies of Agent or such Lender or any Person controlling Agent or such Lender with respect to capital adequacy and shall be based upon any reasonable averaging, attribution and allocation methods. A certificate of Agent or such Lender, as applicable, setting forth the amount or amounts as shall be necessary to compensate Agent or such Lender as specified in this SECTION 9.3 shall be delivered to Borrower and shall be conclusive in the absence of manifest error. 10. AGENT. 10.1. APPOINTMENT OF AGENT. Each Lender hereby irrevocably appoints and authorizes BAI to act as its Agent under this Agreement and the Related Agreements. Each Lender hereby irrevocably appoints and authorizes Agent to take such action on such Lender's behalf under the provisions of this Agreement and the Related Agreements and to exercise such powers and perform such duties under this Agreement and the Related Agreements as are specifically delegated to Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental hereto and thereto. Agent may perform any of its duties hereunder or under the Related Agreements by or through its agents or employees. The provisions of this SECTION 10 are solely for the benefit of Agent and Lenders, and neither Borrower nor any other Obligor shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement and the Related Agreements, Agent shall act solely as agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for Borrower or any other Obligor. -58- 10.2. NATURE OF DUTIES OF AGENT. Agent shall have no duties, obligations or responsibilities except those expressly set forth in this Agreement and the Related Agreements. Neither Agent nor any of its officers, directors, employees or agents shall be liable for any action taken or omitted by it as such hereunder or under the Related Agreements or in connection herewith or therewith, unless caused by its or their gross negligence or willful misconduct. The duties of Agent shall be mechanical and administrative in nature; Agent shall not have by reason of this Agreement or the Related Agreements a fiduciary relationship in respect of any Lender; and nothing in this Agreement or the Related Agreements, expressed or implied, is intended to or shall be so construed as to impose upon Agent any obligations in respect of this Agreement or the Related Agreements except as expressly set forth herein or therein. No duty to act, or refrain from acting, and no other obligation whatsoever, shall be implied on the basis of or imputed in respect of any right, power or authority granted to Agent or shall become effective in the event of any temporary or partial exercise of such rights, power or authority. 10.3. AGENT IN ITS CAPACITY AS LENDER. With respect to its obligations under this Agreement and the Related Agreements, and the Revolving Loans made by it, Agent shall have the same rights and powers under this Agreement and the Related Agreements as any Lender and may exercise the same as though it were not Agent, and the terms "Lender" or "Lenders" shall, unless the context otherwise indicates, include Agent in its capacity as a Lender hereunder. Agent, any Lender and their respective affiliates may accept deposits from, lend money to, and generally engage in any kind of banking or trust business with Borrower or any other Obligor, or Related Parties of Borrower, as if it were not Agent or as if it or they were not a Lender hereunder and without any duty to account therefor to the other parties to this Agreement; provided, that the obligations of Borrower under such transactions shall not be deemed to be Liabilities or secured by any property of any Company subject to Agent's Lien without the prior written agreement of the Requisite Lenders; provided, further, that Lenders acknowledge and agree that the obligations of Borrower with respect to the Letter of Credit Obligations, and to BAI or any other Lender and with respect to any lockbox or bank account maintained by or for the benefit of Borrower, including the Demand Deposit Accounts and the Depository Accounts, shall be deemed to be Liabilities secured by any property of any Company subject to Agent's Lien. 10.4. INDEPENDENT CREDIT ANALYSIS. Each Lender agrees that it has, independently and without reliance upon Agent, any other Lender, or the directors, officers, agents, attorneys or employees of Agent or of any other Lender, and instead in reliance upon information supplied to it by or on behalf of Borrower and each other Obligor, made its own independent credit analysis and decision to enter into this Agreement and the Related Agreements to which it is a party, and that it shall independently and without reliance upon Agent, any other Lender, or the directors, officers, agents, attorneys or employees of Agent or of any other -59- Lender, continue to make its own independent credit analysis and decisions in acting or not acting under this Agreement and the Related Agreements. Except as otherwise expressly provided herein, Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information concerning the affairs, financial condition, litigation, liabilities, or business of Borrower or any other Obligor which may at any time come into the possession of Agent (or any of its affiliates). In the event such information is furnished to any Lender by Agent, Agent shall have no duty to confirm or verify its accuracy or completeness and shall have no liability whatsoever with respect thereto. 10.5. GENERAL IMMUNITY. Neither Agent nor any of its directors, officers, agents, attorneys or employees shall be liable to any Lender for any action taken or omitted to be taken by it or them under this Agreement or the Related Agreements or in connection herewith or therewith except for its or their own willful misconduct or gross negligence. Without limiting the generality of the foregoing, Agent: (i) shall not be responsible to Lenders for any recitals, statements, warranties or representations under this Agreement or the Related Agreements or any agreement or document relative hereto or thereto or for the financial or other condition of any Obligor, (ii) shall not be responsible for the authenticity, accuracy, completeness, value, validity, effectiveness, due execution, legality, genuineness, enforceability, collectibility or sufficiency of this Agreement or the Related Agreements or any other agreements or any assignments, certificates, requests, financial statements, projections, notices, schedules or opinions of counsel executed and delivered pursuant hereto or thereto, (iii) shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the Related Agreements on the part of Obligors or of any of the terms of any such agreement by any party hereto or thereto and shall have no duty to inspect the property (including the books and records) of any Obligor, (iv) shall have no obligation whatsoever to Lenders or to any other Person to assure that the property subject to Agent's Lien exists or is owned by Borrower or any other Obligor or is cared for, protected or insured or that the Liens granted to Agent herein or in Related Agreements or pursuant hereto or thereto have been properly or sufficiently or lawfully created, perfected, protected, enforced, realized upon or are entitled to any particular priority, and (v) shall incur no liability under or in respect of this Agreement or the Related Agreements or any other document by acting upon any telephone or written notice, consent, certificate or other instrument or writing (which may be by telegram, cable, telex, telecopier or similar form of facsimile transmission), telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons. Agent may consult with legal counsel (including counsel for Borrower), independent public accountants and other experts selected by Agent and shall not be liable for any action taken or omitted to be taken in good faith in accordance with the advice of such counsel, accountants or experts. -60- 10.6. ACTION BY AGENT. (a) ACTUAL KNOWLEDGE. Agent shall not be deemed to have knowledge or notice of the occurrence of any Unmatured Event of Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to Agent for the account of Lenders, unless Agent shall have received written notice from a Lender, Borrower or Borrower's independent certified public accountants referring to this Agreement, describing such Unmatured Event of Default or Event of Default and stating that such notice is a "notice of default." Agent will notify Lenders of its receipt of any such notice. (b) DISCRETION TO ACT. Agent shall have the right to request instructions from Requisite Lenders by notice to each Lender. If Agent shall request instructions from Requisite Lenders with respect to any act or action (including the failure to act) in connection with this Agreement or any Related Agreement, Agent shall be entitled to refrain from such act or taking such action unless and until Agent shall have received instructions from Requisite Lenders, and Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting hereunder or under any Related Agreement in accordance with the instructions of Requisite Lenders. Agent may give any notice required under SECTION 6 hereof without the consent of any of Lenders unless otherwise directed by Requisite Lenders in writing and will, at the direction of Requisite Lenders, give any such notice required under SECTION 6. Except for any obligation expressly set forth in this Agreement or the Related Agreements, Agent may, but shall not be required to, exercise its discretion to act or not act, except that Agent shall be required to act or not act upon the instructions of Requisite Lenders (unless all of Lenders are required to provide such instructions as provided in SECTION 11.6) and those instructions shall be binding upon Agent and all Lenders; provided, that Agent shall not be required to act or not act if to do so would, in Agent's opinion, expose Agent to liability or would be contrary to this Agreement or any Related Agreements or to applicable law. (c) SATISFACTION OF CONDITIONS. For purposes of determining compliance with the conditions specified in SECTION 8.1, each Lender that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by Agent to such Lender for consent, approval, acceptance or satisfaction, or required to be consented to or approved by or acceptable or satisfactory to such Lender. 10.7. RIGHT TO INDEMNITY. Agent shall be fully justified in failing or refusing to take any action under this Agreement or the Related Agreements or in relation hereto or thereto unless it shall first be indemnified (upon requesting such indemnification) to its satisfaction by Lenders against any and all liability and expense which it may incur by reason of taking or continuing to take any such action. Lenders further agree to indemnify Agent ratably in accordance with their Pro Rata Shares for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any -61- kind and nature whatsoever which may be imposed on, incurred by or asserted against Agent in any way relating to or arising out of this Agreement or the other Related Agreements or the transactions contemplated hereby or thereby, or the enforcement of any of the terms hereof or thereof or of any other documents; provided no such liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement results from Agent's gross negligence or willful misconduct. Each Lender agrees to reimburse Agent in the amount of its Pro Rata Share of any out-of-pocket expenses for which Agent is entitled to receive, but has not received, reimbursement pursuant to this Agreement. The agreements in this SECTION 10.7 shall survive the payment and fulfillment of the Liabilities and termination of this Agreement. 10.8. RIGHTS AND REMEDIES TO BE EXERCISED BY AGENT ONLY. In the event any remedy may be exercised with respect to this Agreement or the Related Agreements or the property subject to Agent's Lien that secures the Liabilities or any guaranty thereof, Agent shall pursue remedies designated by Requisite Lenders subject to the proviso set forth in SECTION 10.6(b). Each Lender agrees that no Lender shall have any right individually (a) to realize upon the security created by this Agreement or the Related Agreements, (b) enforce any provision of this Agreement or the Related Agreements, or (c) make demand under this Agreement or the Related Agreements; provided, that any Lender that is an Issuer may make demand upon Borrower as Issuer pursuant to SECTION 2.2, BAI may make demand upon Borrower pursuant to SECTION 11.4. 10.9. AGENT'S RESIGNATION. Agent may, and at the request of Requisite Lenders shall, resign as Agent upon thirty (30) days notice to Lenders. If Agent resigns under this Agreement, Requisite Lenders shall appoint from among Lenders a successor agent for Lenders. If no successor agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, with the consent of Borrower, which consent will not be unreasonably withheld or delayed, and after consulting with Lenders, a successor agent from among Lenders. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this SECTION 10 and SECTIONS 11.3 and 11.4 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is thirty (30) days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and Lenders shall perform all of the duties of Agent hereunder until such time, if any, as Requisite Lenders appoint a successor agent as provided for above. -62- 10.10. DISBURSEMENT OF PROCEEDS OF REVOLVING LOANS AND OTHER ADVANCES. Agent may (and is hereby irrevocably authorized by Lenders), but shall have no duty to make such other disbursements and advances as Revolving Loans on behalf of Lenders, including, without limitation, the making of advances for the expenditures described in SECTION 7.4 of this Agreement, which Agent, in its sole discretion, deems necessary or desirable to preserve or protect any property securing the Liabilities or the guaranty thereof, or any portion thereof. Agent's use of its own checks upon its funds or Agent's transfer of its own funds, by wire or otherwise, to an account of Borrower or any other Obligor shall be deemed to be disbursements made by each Lender under this Agreement and pursuant to the Related Agreements. 10.11. RELEASE OF COLLATERAL. Each Lender hereby irrevocably authorizes Agent, at its option and in its discretion, to release any and all guaranties of the Liabilities and any Lien granted to or held by Agent upon any property securing the Liabilities or the guaranty thereof (i) upon termination of Lenders' obligations to make Revolving Loans and payment and satisfaction of all Revolving Loans, Letter of Credit Obligations and all other Payment Liabilities and which Agent has been notified in writing are then due and payable under this Agreement; (ii) constituting any property securing the Liabilities or the guaranty thereof being sold or disposed of if Borrower certifies to Agent that the sale or disposition is made in compliance with the terms of this Agreement (and, absent any actual knowledge of Agent to the contrary, Agent may rely conclusively on any such certificate, without further inquiry); (iii) constituting property in which neither Borrower nor any Obligor has any interest at the time the Lien was granted and at all times thereafter; or (iv) if approved, authorized or ratified in writing by Agent at the direction of Requisite Lenders. Upon request by Agent at any time, each Lender will confirm in writing Agent's authority to release particular types or items of property pursuant to this SECTION 10.11. 10.12. AGREEMENT TO COOPERATE. Each Lender agrees to cooperate to the end that the terms and provisions of this Agreement may be promptly and fully carried out. Lenders also agree, from time to time, at the request of Agent, to execute and deliver any and all other agreements, documents or instruments and to take such other actions, all as may be reasonably necessary or desirable to effectuate the terms, provisions and intent of this Agreement and the Related Agreements. 10.13. SHARING OF COLLATERAL. If any Lender shall obtain any payment (whether voluntary, involuntary, through exercise of any right of set off, or otherwise) on account of the Liabilities in excess of the amount to which it is entitled pursuant to this Agreement, such Lender shall forthwith purchase from the other Lenders such participations in such other Lenders' -63- claims against Borrower as shall be necessary to cause such purchasing Lender to share the excess payment with the other Lenders in accordance with the provisions of this Agreement; provided, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from such other Lender shall be rescinded and such other Lenders shall repay to the purchasing Lender the purchase price to the extent of their portion of such recovery together with an amount equal to the share (according to the proportion of (i) the amount of such other Lenders' required repayment, to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by purchasing Lender in respect of the total amount recovered. 10.14. LENDERS TO ACT AS AGENTS. If any property securing the Liabilities or the guaranty thereof or proceeds thereof at any time comes into the possession or under the control of any Lender, such Lender shall hold such property or proceeds thereof as agent for the joint benefit of Lenders, and will, upon receipt therefor, deliver such property or proceeds thereof to Agent. 11. GENERAL. 11.1. BORROWER'S WAIVER. Except as otherwise provided for in this Agreement, to the extent permitted by applicable law, Borrower waives (a) presentment, demand and protest and notice of presentment, protest, default, non-payment, maturity, release, compromise, settlement, one or more extensions or renewals of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Agent or any Lender on which Borrower may in any way be liable and hereby ratifies and confirms whatever Agent or any Lender may do in this regard; and (b) all rights to notice and a hearing prior to Agent's or any Lender's taking possession or control of, or Agent's or any Lender's replevy, attachment or levy on or of, the Collateral or any bond or security which might be required by any court prior to allowing Agent or any Lender to exercise any of Agent's or any Lender's remedies. 11.2. POWER OF ATTORNEY. Borrower appoints Agent, or any Person whom Agent may from time to time designate, as Borrower's attorney and agent-in-fact with power (which appointment and power, being coupled with an interest, is irrevocable until all Payment Liabilities under this Agreement are paid and performed in full and this Agreement is terminated), without notice to Borrower, to: (a) At such time or times hereafter as Agent or said agent, in its sole and absolute discretion, may determine in Borrower's or Agent's name after the occurrence and during the continuance of an Event of Default (i) to endorse Borrower's name on any checks, notes, drafts or any other items of payment relating to and/or proceeds of the Collateral which -64- come into the possession of Agent or under Agent's control and apply such payment or proceeds to the Liabilities; (ii) to endorse Borrower's name on any chattel paper, document, instrument, invoice, freight bill, bill of lading or similar document or agreement in Agent's possession relating to Accounts Receivable, Inventory or any other Collateral; (iii) use the information recorded on or contained in any data processing equipment and computer hardware and software to which Borrower has access relating to Accounts Receivable, Inventory and/or other Collateral; and (iv) if not done by Borrower, do all acts and things determined by Agent to be reasonably necessary, to fulfill Borrower's obligations under this Agreement; and (b) At such time or times after the occurrence and during the continuance of an Event of Default, as Agent or said agent, in its sole and absolute discretion, may determine, in Borrower's or Agent's name: (i) demand payment of the Accounts Receivable; (ii) enforce payment of the Accounts Receivable, by legal proceedings or otherwise; (iii) exercise all Borrower's rights and remedies with respect to the collection of the Accounts Receivable and other Collateral; (iv) settle, adjust, compromise, extend or renew the Accounts Receivable; (v) settle, adjust or compromise any legal proceedings brought to collect the Accounts Receivable; (vi) if permitted by applicable law, sell or assign the Accounts Receivable and/or other Collateral upon such terms for such amounts and at such time or times as Agent may deem advisable; (vii) discharge and release the Accounts Receivable and/or other Collateral; (viii) prepare, file and sign Borrower's name on any proof of claim in bankruptcy or similar document against any account debtor; (ix) prepare, file and sign Borrower's name on any notice of lien, assignment or satisfaction of lien or similar document in connection with the Accounts Receivable and/or other Collateral; and (x) do all acts and things necessary, in Agent's sole and absolute discretion, to obtain repayment of the Payment Liabilities and to fulfill Borrower's other obligations under this Agreement. 11.3. EXPENSES AND ATTORNEYS' FEES. Borrower agrees, whether or not any Revolving Loan is made or Letter of Credit is issued, to pay within fifteen (15) days of demand therefor, all Attorneys' Fees and out-of-pocket expenses of Agent in connection with the transactions contemplated hereby. For purposes of this Agreement, "Attorneys' Fees" means the reasonable value of the services (and costs, charges and expenses related thereto) of the attorneys (and all paralegals and any outside consultants employed by such attorneys) employed by Agent or, if an Event of Default is then in existence, any Lender (including but not limited to attorneys and paralegals who are employees of Agent or any Lender) from time to time (a) in connection with the negotiation, preparation, execution, delivery, administration and enforcement of this Agreement, any Related Agreement, any Supplemental Documentation and all other documents or instruments provided for herein or in any thereof or delivered or to be delivered hereunder or under any thereof or in connection herewith or with any thereof, (b) to prepare documentation related to the Revolving Loans made and other Liabilities incurred hereunder, (c) to prepare any amendment to or waiver under this Agreement or any Related Agreement and any documents or instruments related thereto, (d) to represent Agent or any Lender in any litigation, contest, -65- dispute, suit or proceeding or to commence, defend or intervene in any litigation, contest, dispute, suit or proceeding or to file a petition, complaint, answer, motion or other pleading, or to take any other action in or with respect to, any litigation, contest, dispute, suit or proceeding (whether instituted by Agent or any Lender, Borrower or any other Person and whether in bankruptcy or otherwise) in any way or respect relating to the Collateral, this Agreement or any Related Agreement, or any Company's or any other Obligor's affairs, (e) to protect, collect, lease, sell, take possession of, or liquidate any of the Collateral, (f) to perfect or attempt to enforce any security interest in any of the Collateral or to give any advice with respect to such enforcement and (g) to enforce any of Agent's or any Lender's rights to collect any of the Liabilities. Agent may advance all such amounts to Borrower as a Revolving Loan. Borrower also agrees, (y) to indemnify and hold Agent and each Lender harmless from any loss or expense which may arise or be created by the acceptance of telephonic or other instructions for making Revolving Loans or issuing Letters of Credit except for any such loss or expense arising from Agent or such Lender's gross negligence or willful misconduct, and (z) to pay, and save Agent and each Lender harmless from all liability for, any stamp or other taxes which may be payable with respect to the execution or delivery of this Agreement, or any Related Agreement or Supplemental Documentation, or the issuance of any Note or of any other instruments or documents provided for herein or to be delivered hereunder or in connection herewith. In addition to the foregoing, "Attorneys' Fees" shall include Agent's fees and expenses of the types described in the preceding sentence incurred in connection with the syndication, participation and assignment of this Agreement, any Related Agreement and any Supplemental Documentation. 11.4. BAI'S FEES AND CHARGES. To the extent not already covered by SECTION 11.3, Borrower agrees to pay BAI on demand by BAI the customary fees and charges of BAI for maintenance of accounts with BAI or for providing other services to Borrower and if not so paid, each Lender shall, without regard to any other provision of this Agreement or any other Related Agreement or any defense that Borrower may have to its obligation to pay BAI in connection with such fees and charges, pay BAI for such Lender's Pro Rata Share of such fees and charges, and any payments so made by Lenders to BAI shall be deemed to be Revolving Loans. Each Lender (other than BAI) acknowledges and agrees that it shall not be entitled to any of the fees and charges of BAI as provided in the immediately preceding sentence. 11.5. LAWFUL INTEREST. In no contingency or event whatsoever shall the interest rate charged pursuant to the terms of this Agreement exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that any Lender has received interest hereunder in excess of the highest applicable rate, such Lender shall promptly refund its Pro Rata Share of such excess interest to Borrower. -66- 11.6. NO WAIVER BY AGENT OR ANY LENDER; AMENDMENTS. No failure or delay on the part of Agent or any Lender in the exercise of any power or right, and no course of dealing between Borrower and Agent or any Lender shall operate as a waiver of such power or right, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof or the exercise of any other power or right. The remedies provided for herein are cumulative and not exclusive of any remedies which may be available to Agent or any Lender at law or in equity. No notice to or demand on Borrower not required hereunder shall in any event entitle Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of Agent or any Lender to any other or further action in any circumstances without notice or demand. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or any Related Agreement shall in any event be effective unless the same shall be in writing and signed and delivered by Requisite Lenders, and with respect to any amendment or modification, also by Borrower. Notwithstanding the foregoing, (a) any amendment, modification, termination, waiver or consent with respect to any of the following provisions of this Agreement shall be effective only by a written agreement, signed by each Lender affected thereby: (i) increase in the amount of the Maximum Revolving Loan Amount or Maximum Revolving Loan Amount of such Lender, (ii) reduction of the principal of, rate or amount of interest on the Revolving Loans or any fees or charges payable to such Lender (other than by the payment or prepayment thereof), (iii) postponement of the date fixed for any payment of principal of, or interest on, the Revolving Loans or any fees or charges) or other amounts payable to such Lender, (iv) change in the aggregate Pro Rata Share of Lenders which shall be required for Lenders or any of them to take action hereunder or amend the definition of "REQUISITE LENDERS," or (v) amendment of this SECTION 11.6 and (b) any amendment, modification, termination, waiver or consent affecting Agent or Issuer shall be effective only by a written agreement signed by Agent or Issuer, as applicable. Agent may, but shall have no obligation to, with the written concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver of any provision of this Agreement, and any consent to any departure by Borrower from the terms of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which given. 11.7. TERMINATION OF CREDIT. Borrower may terminate the Credit at any time upon notice to Agent and payment in full of the outstanding principal balance of the Revolving Loans and all other Payment Liabilities under this Agreement and the Related Agreements. All of Agent's and each Lender's rights and remedies, the Liens of Agent on the property securing the Liabilities or the guaranty thereof, for the benefit of itself, Issuer and Lenders, and all of Borrower's duties and obligations under this Agreement shall survive termination of the Credit extended to Borrower hereunder until all of the Payment Liabilities hereunder have been finally paid and performed in full. The termination or cancellation of the Credit shall not affect or impair the liabilities and obligations of Borrower or any one or more of -67- the Obligors to Agent and Lenders or Agent's and each Lender's rights with respect to any Revolving Loans and advances made and other Liabilities incurred prior to such termination or with respect to the property securing the Liabilities or the guaranty thereof. 11.8. NOTICES. Except as otherwise expressly provided herein, any notice hereunder to Borrower, Agent or any Lender shall be in writing (including facsimile communication) and shall be given to Borrower, Agent or such Lender at its address or facsimile number set forth on the signature pages hereof or at such other address or facsimile number as Borrower, Agent or such Lender may, by written notice, designate as its address or facsimile number for purposes of notices hereunder. All such notices shall be deemed to be given: (a) if delivered by facsimile, when transmitted, (b) if delivered by courier, when delivered by such courier, (c) if delivered in person, when delivered, and (d) if delivered by mail, when actually received; provided, however, that notice to Agent of Borrower's intent to terminate the Credit shall not be effective until actually received by Agent. 11.9. ASSIGNMENTS AND PARTICIPATIONS; INFORMATION. (a) This Agreement may not be assigned by Borrower without the prior written consent of Agent and Lenders. Whenever in this Agreement reference is made to any of the parties hereto, such reference shall be deemed to include, wherever applicable, a reference to the successors and permitted assigns of Borrower and the successors and assigns of Agent and each Lender. (b) Borrower and each Lender hereby agree that on or after the date hereof, each Lender may, in its discretion, without any other Lender's consent, but with the prior consent of Agent and Borrower, which consents will not be unreasonably withheld, sell one or more assignments of portions of its interest in the Credit to any Person; provided, that any Lender may sell an assignment of any or all of its interest in the Credit to any Related Party of such Lender or another Lender without the consent of any Person. Each assignment shall be of a constant, and not a varying, ratable percentage of all of the assigning Lender's rights and obligations under this Agreement, and the Maximum Revolving Loan Amount assigned shall be in a minimum amount of Five Million Dollars ($5,000,000) (unless such Lender sells all of its interest in the Credit). (c) The parties to each assignment of an interest in the Credit as permitted pursuant to clause (b) above shall execute and deliver to Agent, for its acceptance and recording in the Register, an Assignment and Acceptance Agreement, with a copy to Borrower. Upon such execution, delivery, acceptance and recording in the Register, from and after the effective date specified in each Assignment and Acceptance Agreement and agreed to by Agent, (i) the assignee thereunder shall, in addition to any rights and obligations hereunder held by it immediately prior to such effective date, if any, have the rights and obligations hereunder that have been assigned to it pursuant to such Assignment and Acceptance Agreement and shall, to the fullest extent permitted by law, have the same rights and benefits hereunder as if it were an original Lender hereunder and (ii) the assigning Lender -68- shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance Agreement, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance Agreement covering all or the remaining portion of such assigning Lender's rights and obligations under this Agreement, the assigning Lender shall cease to be a party hereto). (d) Agent shall maintain a copy of each Assignment and Acceptance Agreement delivered to and accepted by it and a register (the "Register") for the recordation of the names and addresses of Lenders and the Maximum Revolving Loan Amount and principal amount of the Revolving Loans owing to each Lender from time to time. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Borrower, Agent and Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance Agreement executed by the assigning Lender and the assignee and a processing and recordation fee of Two Thousand Five Hundred Dollars ($2,500) (payable by the assigning Lender or the assignee, as shall be agreed between them), Agent shall, if such Assignment and Acceptance Agreement has been completed and is in compliance with this Agreement and in substantially the form of EXHIBIT C and Borrower and Agent have consented to the assignment evidenced thereby, (i) accept such Assignment and Acceptance Agreement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to Borrower. (f) Each Lender may, with the consent of Agent, which may not be unreasonably withheld, sell participations to one or more other financial institutions in or to all or a portion of its rights and obligations under and in respect of any and all facilities under this Agreement; provided, that any Lender may sell a participation in any or all of its interest in the Credit to any Related Party of such Lender without the consent of any Person; provided, further, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) Borrower, Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and (iv) such participant's rights to agree or to restrict such Lender's ability to agree to the modification, waiver or release of any of the terms of this Agreement or the Related Agreements or to the release of any property securing the Liabilities or any guaranty thereof covered by this Agreement or the Related Agreements, to consent to any action or failure to act by any party to this Agreement or any of the Related Agreements, or to exercise or refrain from exercising any powers or rights which any Lender may have under or in respect of this Agreement or the Related Agreements or any property securing the Liabilities or any guaranty thereof, shall be limited to the right to consent to (A) an increase in the Maximum Revolving Loan Amount of the Lender from whom such participant purchased a participation, (B) reduction of the principal of, or rate or amount of interest on the Revolving Loans subject to such participation (other than by the payment or prepayment thereof) or (C) -69- postponement of any date fixed for any payment of principal of, or interest on, the Revolving Loans subject to such participation. Each Lender agrees to promptly notify Agent and Borrower of each sale of a participation hereunder. (g) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this SECTION 11.9, disclose to the assignee or participant or proposed assignee or participant, any information relating to any Company or any other Obligor furnished to such Lender; provided, that prior to any such disclosure, such assignee or participant, or proposed assignee or participant, shall agree to preserve the confidentiality of any confidential information described therein and such Lender shall notify Borrower of the assignee or participant, or proposed assignee or participant. (h) Anything in this Agreement to the contrary notwithstanding, in the case of any participation, all amounts payable by Borrower under this Agreement or the Related Agreements shall be calculated and made in the manner and to the parties required hereby as if no such participation had been sold. (i) Agent agrees to promptly notify Borrower of each sale of a permitted participation or permitted assignment hereunder. Borrower agrees to use its reasonable efforts to assist Lenders in their efforts to sell assignments and participations hereunder. In addition, Borrower agrees to execute new Notes in favor of each of the selling and purchasing Lender, upon each sale of an assignment hereunder, provided that the existing Notes in favor of the selling Lender are simultaneously therewith returned to Borrower. 11.10. BORROWER'S DOCUMENTATION. Borrower hereby acknowledges and agrees that Agent and Lenders shall be under no obligation to return any due diligence reports, schedules, financial statements or any other disclosure documents furnished to Agent or any Lender by Borrower, any Company or any third party in connection with the Revolving Loans. 11.11. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 11.12. SUCCESSORS. This Agreement shall be binding upon Borrower, Agent and each Lender and their respective successors and permitted assigns, and shall inure to the benefit of Borrower, Agent and each Lender and their respective successors and permitted assigns. -70- 11.13. CONSTRUCTION. This Agreement and the Related Agreements and Supplemental Documents shall, unless otherwise expressly provided therein, be deemed to have been negotiated and entered into in, and shall be governed and controlled by the laws of, the State of Illinois as to interpretation, enforcement, validity, construction, effect, choice of law, and in all other respects, including but not limited to the legality of the interest rate and other charges, but excluding perfection of security interests and liens which shall be governed and controlled by the laws of the relevant jurisdiction. 11.14. CONSENT TO JURISDICTION. Agent, each Lender and Borrower each irrevocably agrees that, subject to Agent's sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE RELATED AGREEMENTS, OR THE SUPPLEMENTAL DOCUMENTATION OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. AGENT, EACH LENDER AND BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED TO IT AT THE ADDRESS STATED ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. 11.15. WAIVER OF JURY TRIAL. BORROWER, AGENT AND EACH LENDER EACH WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS AGREEMENT OR ANY RELATED AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (b) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. -71- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first written above. DECRANE AIRCRAFT HOLDINGS, INC., as Borrower By ------------------------------------- Its ------------------------------------- Address: 2361 Rosecrans Ave. El Segundo, California 90245 Telecopier: (310) 643-0746 Attention: Robert A. Rankin Chief Financial Officer BANK OF AMERICA ILLINOIS, as Agent By ------------------------------------- Its ------------------------------------- Address: 231 South LaSalle Street 8th Floor - Mail Drop 0830 Chicago, Illinois 60697 Telecopier: (312) 974-9102 Attention: David A. Johanson Agency Management Services BANK OF AMERICA ILLINOIS, as a Lender By ------------------------------------- Its ------------------------------------- Address: 231 South LaSalle Street 6th Floor - Mail Drop 0612 Chicago, Illinois 60697 Telecopier: (312) 828-1974 Attention: David A. Stang Maximum Revolving Loan Amount: $16,000,000.00 -72- COMERICA BANK - CALIFORNIA, as a Lender By ------------------------------------- Its ------------------------------------- Address: 301 E. Ocean Boulevard, Suite 1800 Long Beach, California 90802 Telecopier: (310) 595-8251 Attention: Mr. Jack Kasakian Maximum Revolving Loan Amount: $8,000,000.00 -73- MELLON BANK, N.A., as a Lender By ------------------------------------- Its ------------------------------------- Address: 400 South Hope Street, Fifth Floor Los Angeles, California 90071-2806 Telecopier: (213) 629-0484 Attention: Mr. Richard McNiven Maximum Revolving Loan Amount: $8,000,000.00 -74- SUMITOMO BANK OF CALIFORNIA, as a Lender By ------------------------------------- Its ------------------------------------- Address: 611 W. 6th Street, Suite 3900 Los Angeles, California 90017 Telecopier: (213) 622-1385 Attention: Mr. Steven K. Sloan Maximum Revolving Loan Amount: $8,000,000.00 -75- LIST OF EXHIBITS AND SCHEDULES Exhibits: - --------- Exhibit A Form of Bank Agency Agreement Exhibit B Form of Compliance Certificate Exhibit C Form of Assignment and Acceptance Agreement Exhibit D Pro Forma EBITDA for the twelve (12) month period ending December 31, 1996 Exhibit E Projections Schedules: - ---------- Schedule 3.2 Schedule of Deposit Accounts Schedule 4.1 Schedule of Tradenames, State of Incorporation and Qualification Schedule 4.6 Schedule of Certain Events Schedule 4.7 Schedule of Insurance Schedule 4.8 Schedule of Litigation and Contingent Liabilities Schedule 4.9 Schedule of Liens Schedule 4.10 Schedule of Subsidiaries Schedule 4.11 Schedule of Partnerships and Joint Ventures Schedule 4.12 Schedule of Business and Collateral Locations Schedule 4.13 Schedule of Real Property Descriptions and Owners Schedule 4.14 Schedule of Leases Schedule 4.15 Schedule of Patents, Trademarks and Copyrights Schedule 4.17 Schedule of Labor Matters Schedule 4.18 Schedule of Contingent Employee Benefit Plan Liabilities Schedule 4.20 Schedule of Noncompliance Schedule 4.21 Schedule of Tax Audits Schedule 4.24 Schedule of Environmental Matters Schedule 5.8 Schedule of Tax Sharing Arrangements Schedule 5.14 Schedule of Indebtedness Schedule 5.17 Schedule of Investments Schedule 8.1.10 Schedule of Documents -76- EXHIBIT A BANK AGENCY AGREEMENT _____________, 1997 _______________________________ _______________________________ _______________________________ Attention: ___________________ Re: __________________________ Ladies and Gentlemen: This Letter Agreement, among ____________________________ (the "Bank"), ______________________ (the "Borrower") and Bank of America Illinois, individually and as agent (the "Agent"), shall serve as instructions regarding the operation and procedures for all bank accounts now or hereafter maintained at the Bank by, or for the deposit, credit or custody of property of, the Borrower. 1. ACCOUNT IDENTIFICATION. This Agreement applies to the accounts identified below that have been established at the Bank on behalf of the Borrower and to each other account existing or hereafter established at the Bank on behalf of the Borrower (collectively, the "Accounts") (provided, that the Bank will deliver written notice thereof to the Agent of the establishment of any other such accounts): DESCRIPTION OF ACCOUNT ACCOUNT NUMBER _______________________ _______________________ _______________________ _______________________ 2. SECURITY INTEREST; AGENCY. The Borrower has granted to the Agent a continuing lien upon, and security interest in, the Accounts and all funds, items, instruments, investments, securities and other things of value at any time paid, deposited, credited or held in or in transit to any Account (whether for collection, provisionally or otherwise). The Agent hereby appoints the Bank as the Agent's agent and pledgee-in-possession for the Accounts, and all of the funds of the Borrower and such other items, instruments, investments, securities, things of value, ________________________ __________________, 1997 Page 2 property and proceeds; and the Bank by its execution and delivery of this Agreement hereby accepts such appointment and agrees to be bound by the terms of this Agreement. The Borrower hereby agrees to such appointment of the Bank and further agrees that the Bank, on behalf of the Agent, shall be entitled to exercise, upon the instructions of the Agent, any and all rights that the Agent may have under that certain Loan and Security Agreement dated as of ___________, 1997 among the Borrower, Agent and the Lenders named therein (as the same may be amended, supplemented or otherwise modified from time to time, the "Loan Agreement"; capitalized terms used herein without definition shall have the meaning ascribed to them in the Loan Agreement) and all other agreements and instruments executed pursuant thereto, or under applicable law, with respect to the Accounts and all other collateral described in this Section 2. The Bank agrees to take such action as shall from time to time be specified in writing from the Agent to enable the Agent to exercise its rights and remedies with respect to the lien and security interest described in this Section 2. 3. EVENTS OF DEFAULT. At all times after the Bank's receipt of any notice from the Agent of the occurrence of any Unmatured Event of Default or Event of Default under the Loan Agreement, the Bank shall follow the instructions of the Agent as to the holding, investment and transfer of all collected amounts from time to time on deposit in any Account (including without limitation, any instructions to transfer such collected amounts to Agent or to an account designated by Agent). In addition, the Borrower agrees that the Bank may act as the agent of the Agent in exercising as to any funds or items from time to time on deposit in any of the Accounts any rights of set-off provided by applicable law or by any Related Agreement. The Borrower agrees that the Bank shall be entitled to rely, without independent investigation, on any statement of the Agent to the effect that an Unmatured Event of Default or an Event of Default has occurred and is continuing or to the effect that any exercise of set-off requested by the Agent is permitted under applicable law or any Related Agreement. 4. INFORMATION. The Bank shall provide the Agent with such information with respect to the Accounts as the Agent may from time to time reasonably request, and the Borrower hereby consents to such information being provided to the Agent. 5. EXCULPATION; INDEMNITY. The Bank undertakes to perform only such duties as are expressly set forth herein. Notwithstanding any other provisions of this Agreement, the parties hereto agree that the Bank shall not be liable for any action taken by it or any of its directors, officers, agents or employees in accordance with this Agreement, including, without limitation, any action so taken at the request of the Agent, except for the Bank's or such person's ________________________ __________________, 1997 Page 3 own gross negligence or willful misconduct. In no event shall the Bank be liable for losses or delays resulting from causes beyond the Bank's reasonable control or for indirect, special or consequential damages. 6. IRREVOCABLE AGREEMENT. The Borrower acknowledges that the agreements made by it and the authorizations granted by it herein are irrevocable and that the authorizations granted in Section 2 are powers coupled with an interest. 7. SET-OFF. The Bank waives, with respect to all of its existing and future claims against the Borrower, all existing and future rights of set- off and banker's liens against the Accounts and all items (and proceeds thereof) that come into its possession in connection with the Accounts, except those rights of set-off and banker's liens arising in connection with (a) items deposited therein that are subsequently returned to the Bank unpaid and (b) any past due compensation and expenses with respect to the Accounts. 8. MISCELLANEOUS. This Agreement shall supersede any other agreement (to the extent conflicting herewith) relating to the matters referred to herein, including any other account agreement between the Borrower and the Bank. This Agreement is binding upon the parties hereto and their respective successors and assigns (including any trustee of the Borrower appointed or elected in any action under the Bankruptcy Reform Act of 1978, as amended) and shall inure to their benefit. Bank of America Illinois acts herein individually and as agent for itself and any present and future holders of indebtedness owing from time to time by the Borrower pursuant to the terms of the Loan Agreement. Neither this Agreement nor any provision hereof may be changed, amended, modified or waived orally, but only by an instrument in writing signed by the parties hereto, provided that such instrument need be signed only by the Bank and the Agent if it does not change any rights or obligations of, or authorizations granted by, the Borrower hereunder and notice thereof is provided by the Agent to the Borrower. Any provision of this Agreement that may prove unenforceable under any law or regulation shall not affect the validity of any other provision hereof. This Agreement may be executed in any number of counterparts which together shall constitute one and the same instrument. 9. TERMINATION. This Agreement shall remain in full force and effect until such time as the Agent shall deliver written notice to the Bank as to the full and final payment of all Liabilities and the termination of the Loan Agreement. All rights of the Bank under Section 5 for the period prior to any such termination shall survive such termination. ________________________ __________________, 1997 Page 4 10. NOTICES. All notices, requests or other communications given to the Borrower, the Agent or the Bank hereunder shall be given in writing (including telex, facsimile transmission or similar writing), at the address specified below: Agent: Bank of America Illinois 231 South LaSalle Street Chicago, Illinois 60697 Attn: David Stang Facsimile No.: (312) 828-1974 Bank: ________________________________ ________________________________ ________________________________ ________________________________ Attn: _________________________ Facsimile No.: (___) ___-____ Borrower: ________________________________ ________________________________ ________________________________ ________________________________ Attn: _________________________ Facsimile No.: (___) ___-____ Any party may change its address for notices hereunder by notice to each other party hereunder. Each notice, request or other communication shall be effective (a) if given by telex or facsimile transmission, when such telex or facsimile transmission is transmitted and the appropriate answerback is received, (b) if given by mail (registered or certified), five (5) days after such communication is deposited in the mails with registered first class postage prepaid, addressed as aforesaid or (c) if given to any other means, when delivered at the address specified in this Section. ________________________ __________________, 1997 Page 5 11. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. DECRANE AIRCRAFT HOLDINGS, INC. By__________________________________ Its_________________________________ BANK OF AMERICA ILLINOIS, individually and as Agent for the Lenders By__________________________________ Its_________________________________ ACCEPTED AND AGREED TO this ________ day of ___________, 1997: __________________________________ (Bank) By_____________________________ It_____________________________ EXHIBIT B _______________, 1997 Bank of America Illinois, as Agent 231 South LaSalle Street Chicago, Illinois 60697 RE: COMPLIANCE CERTIFICATE Ladies and Gentlemen: Pursuant to SECTION 5.1.1(c) of that certain Loan and Security Agreement (the "Loan Agreement") among DeCrane Aircraft Holdings, Inc., as borrower, Bank of America Illinois, as agent for itself and each other lender now or hereafter a party to the Loan Agreement, and such other Lenders, the undersigned, in his capacity as [PRESIDENT/CHIEF EXECUTIVE OFFICER/CHIEF FINANCIAL OFFICER] of DeCrane Aircraft Holdings, Inc., hereby certifies that: (a) as of the date hereof, no "Event of Default" (as defined in the Loan Agreement) or "Unmatured Event of Default" (as defined in the Loan Agreement) exists [, EXCEPT AS DESCRIBED BELOW]. [DESCRIBE EVENTS OF DEFAULT AND UNMATURED EVENTS OF DEFAULT] (b) [WE ARE PRESENTLY TAKING THE FOLLOWING ACTIONS WITH RESPECT TO THE ABOVE-DESCRIBED EVENTS OF DEFAULT AND UNMATURED EVENTS OF DEFAULT:] (c) The calculations with respect to the following financial covenants set forth in SECTION 5 of the Loan Agreement for the period covered by the attached financial statements are set forth on attachments hereto: (i) Capital Expenditures Limitation; (ii) Minimum Working Capital (iii) Minimum Net Worth; (iv) Maximum Leverage Ratio; and (v) Minimum Interest Coverage Ratio (d) Based on the calculation of the Leverage Ratio for purposes of determining compliance with the Maximum Leverage Ratio covenant, the Applicable Margin is as follows: 1. Applicable IBOR Margin for the Revolving Loans: ____% Bank of America Illinois, as Agent ________________, 1997 Page 2 2. Applicable Base Margin for the Revolving Loans: _____% 3. Applicable Non-Use Fee Margin: _____% Very truly yours, DECRANE AIRCRAFT HOLDINGS, INC. By__________________________________________ Its_________________________________________ -2- EXHIBIT C ASSIGNMENT AND ACCEPTANCE ASSIGNMENT AND ACCEPTANCE (this "Assignment and Acceptance") dated as of __________, 199_ among __________________________________________ ("Assignor"), ___________________________________________ ("Assignee"), and BANK OF AMERICA ILLINOIS, as agent ("Agent") under the Loan Agreement referred to below. W I T N E S S E T H: WHEREAS, Assignor is a party to a Loan and Security Agreement dated as of _____________, 199_, (as the same may be amended, restated, modified or supplemented from time to time, the "Loan Agreement"; unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to them in the Loan Agreement), among DeCrane Aircraft Holdings, Inc., as Borrower ("Borrower"), the Persons (including Assignor) identified as Lenders thereto (collectively, "Lenders" and each individually, "Lender") and Agent; WHEREAS, from and after the Assignment Effective Date (as defined below), Assignee shall be a "Lender" for all purposes under the Loan Agreement and shall benefit from all of the rights and obligations of a "Lender" under the Loan Agreement and under any security documents in favor of Agent and Lenders in connection therewith, whether now existing or hereafter executed and delivered by Borrower and any other Obligor (the Loan Agreement, together with such security agreements, in each case, as the same may be amended from time to time, the "Security Documents"); WHEREAS, pursuant to the Loan Agreement, Assignor may have made, or may from time to time be required to make, Revolving Loans or other extensions of credit to or for the account of Borrower; and WHEREAS, Assignor desires to assign to Assignee and Assignee desires to assume from Assignor the rights of Assignor under the Loan Agreement with respect to all or a portion of Assignor's Maximum Revolving Loan Amount. NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows: 1. ASSIGNMENT. Assignor hereby assigns to Assignee, without recourse, representation or warranty (other than expressly provided herein), that percentage listed on Annex I hereto as the "Assignee's Share" ("Assignee's Share") of all of Assignor's rights, title and interest arising under the Loan Agreement and the other Security Documents relating to Assignor's Maximum Revolving Loan Amount, including, without limitation, all rights with respect to Assignee's Share of the Revolving Loans and Letter of Credit Obligations heretofore made by Assignor (in each case without giving effect to any assignments or participations thereof by Assignor). The dollar amount of Assignee's Share of Assignor's Maximum Revolving Loan Amount is listed on Annex I hereto together with interest rates payable on Assignee's Share of the Maximum Revolving Loan Amount and other fees (if any) payable to Assignee (collectively, the "Fees"). 2. ASSUMPTION. Assignee hereby assumes from Assignor all of Assignor's obligations arising under the Loan Agreement and Security Documents relating to Assignee's Share of Assignor's Maximum Revolving Loan Amount and of the outstanding Revolving Loans and Letter of Credit Obligations. It is the intent of the parties hereto that Assignor shall be released from all of its obligations under the Loan Agreement and the other Security Documents relating to Assignee's Share of Assignor's Maximum Revolving Loan Amount and pursuant to the terms of the Loan Agreement. 3. PAYMENT OF INTEREST AND FEES TO ASSIGNEE. (a) Assignor hereby advises Agent of the assignment of Assignee's Share of Assignor's Maximum Revolving Loan Amount and the outstanding Revolving Loans and Letter of Credit Obligations, and directs Agent to pay Assignee (i) on any payment of interest on any Revolving Loan paid by, or on behalf of, Borrower pursuant to the Loan Agreement and attributable to Assignee's Share of any Revolving Loans or Letter of Credit Obligations those rates of interest, as applicable, specified in Annex I hereto, and (ii) any fees paid by, or on behalf, of Borrower and attributable to Assignee's Share of the Maximum Revolving Loan Amount and Revolving Loans which are Fees specified in Annex I hereto. To the extent the amount of any interest or fees paid by, or on behalf of, Borrower under the Loan Agreement in respect of the Assignee's Share is greater than such amount payable to Assignee under this Assignment and Acceptance, Assignee hereby directs Agent to pay the difference directly to Assignor as an administrative fee. Notwithstanding anything to the contrary contained in this Assignment and Acceptance, Agent shall have no liability or obligation to pay any amounts to Assignee except as provided in the Loan Agreement and subject to Agent's receipt of monies paid by, or on behalf of, Borrower for the account of Assignee. (b) If the Loan Agreement shall be amended after the date hereof so as to raise or reduce the rate or rates of interest payable on any Revolving Loan during any period or the rate at which the Fees are payable or if an Event of Default by Borrower shall raise the rate of interest payable on any Revolving Loan for any period, then the rate or rates at which interest or Fees, as the case may be, shall be distributable to Assignee hereunder for such period shall be raised or reduced to the same extent. (c) Notwithstanding anything to the contrary contained in this Assignment and Acceptance, if and when Assignor receives or collects any payment of interest on any Revolving Loan attributable to Assignee's Share or any payment of Fees attributable to Assignee's Share which, in any such case, is required to be paid to Assignee pursuant to clause (a) above, Assignor shall distribute to Assignee such payment, but only to the extent of such interest or Fees accrued after the Assignment Effective Date. (d) Notwithstanding anything to the contrary contained in this Assignment and Acceptance, if and when Assignee receives or collects any payment of interest on any -2- Revolving Loan or any payment of Fees which, in any such case, are required to be paid to Assignor pursuant to clause (a) above, Assignee shall distribute to Assignor such payment. To the extent payments of funds payable to Assignor under this clause (d) are not made within two (2) Banking Days of receipt, Assignor shall be entitled to recover such amount, together with interest thereon, accruing from the date of receipt of such funds by Assignee at the Federal Funds Rate. (e) Agent, by its execution hereof, hereby consents to the assignments described above and agrees to make payments in respect of interest and Fees as described in said clause (a) above. 4. PAYMENTS ON ASSIGNMENT EFFECTIVE DATE. In consideration of the assignment by Assignor to Assignee of Assignee's Share of Assignor's Maximum Revolving Loan Amount, Revolving Loans and Letter of Credit Obligations as set forth above, (a) Assignee agrees to pay to Assignor on or prior to the Assignment Effective Date an amount specified by Assignor in writing on or prior to the Assignment Effective Date which represents Assignee's Share of the principal amount of Revolving Loans made by Assignor pursuant to the Loan Agreement and outstanding on the Assignment Effective Date and purchase a participation in the Letter of Credit Obligations outstanding on the Assignment Effective Date and (b) Assignor agrees to pay to Assignee the Fees (if any) specified in Annex I hereto on the date specified in Annex I hereto. 5. EFFECTIVENESS. (a) This Assignment and Acceptance shall become effective as of the date listed on Annex I as the Assignment Effective Date (the "Assignment Effective Date") upon (i) execution of this Assignment and Acceptance by Assignor, Assignee, Agent and Borrower (whether the same or different copies), and (ii) payment by Assignee to Assignor of the amount described in clause (a) of Section 4 above. (b) It is agreed that all interest on any Revolving Loan attributable to Assignee's Share and all Fees attributable to Assignee's Share, which, in each case, accrues on and after the Assignment Effective Date, shall be paid directly to Assignee in the manner set forth in Section 3 above. 6. REPRESENTATIONS AND WARRANTIES. (a) Each of Assignor and Assignee represents and warrants to the other party as follows: (1) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to fulfill its obligations under, and to consummate the transactions contemplated by, this Assignment and Acceptance; (2) the making and performance by it of this Assignment and Acceptance and all documents required to be executed and delivered by it hereunder do not and -3- will not violate any law or regulation of the jurisdiction of its incorporation or any other law or regulation applicable to it; (3) this Assignment and Acceptance has been duly executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms; and (4) all approvals, authorizations, or other actions by, or filing with, any governmental authority necessary for the validity or enforceability of its obligations under this Assignment and Acceptance have been obtained. (b) Assignor represents and warrants to Assignee that Assignee's Share of Assignor's Maximum Revolving Loan Amount, Revolving Loans and Letter of Credit Obligations being assigned hereunder are subject to no liens or security interests created by Assignor. 7. MISCELLANEOUS. (a) Assignor shall not be responsible to Assignee for the execution (by any party other than Assignor), effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of the Loan Agreement, the other Security Documents or any of the agreements, documents or instruments now or hereafter executed and/or delivered in connection therewith (collectively, the "Loan Documents") or for any representations, warranties, recitals or statements now or hereafter made therein or in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents made or furnished or made available by Assignor to Assignee or by or on behalf of Borrower or any other person obligated under the Loan Documents (collectively, the "Credit Parties") to Assignor or Assignee in connection with the Loan Documents and the transactions contemplated thereby. Assignor shall not be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as to the use of the proceeds of the Revolving Loans and Letter of Credit Obligations or as to the existence or possible existence of any default (matured or unmatured) under the Loan Documents. (b) Assignee represents and warrants that it has made its own independent investigation of the financial condition and affairs of the Credit Parties in connection with the making of the Revolving Loans and Letter of Credit Obligations and the assignment of Assignee's Share of Assignor's Maximum Revolving Loan Amount, Revolving Loans and Letter of Credit Obligations to Assignee hereunder and has made and shall continue to make its own appraisal of the creditworthiness of the Credit Parties. Assignor shall have no duty or responsibility either initially or on a continuing basis to make any such investigation or any such appraisal on behalf of Assignee or to provide Assignee with any credit or other information with respect thereto, whether coming into its possession before the making of the Revolving Loans and Letter of Credit Obligations or at any time or times thereafter and shall further have no responsibility with respect to the accuracy of, or the completeness of, any information provided to Assignee, whether by Assignor or by or on behalf of any Credit Party. -4- (c) Assignee (x) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Agreement are required to be performed by it as a Lender and (y) represents that it is either (i) a corporation organized under the laws of the United States or a state thereof or (ii) it is entitled to complete exemption from United States withholding tax imposed on or with respect to any payments to be made to it pursuant to the Loan Agreement. (d) ANY DISPUTE BETWEEN AGENT, ASSIGNOR AND ASSIGNEE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS AND NOT THE CONFLICTS OF LAW PROVISIONS OF THE STATE OF ILLINOIS. (e) The terms or provisions of this Assignment and Acceptance may be changed, waived, discharged or terminated solely pursuant to an instrument in writing signed by the parties to this Assignment and Acceptance. (f) This Assignment and Acceptance may be executed in one or more counterparts, each of which shall be an original but all of which, taken together, shall constitute one and the same instrument. (g) Assignor may at any time or from time to time grant to others assignments or participations in its Maximum Revolving Loan Amount, Revolving Loans and Letter of Credit Obligations in accordance with the terms of the Loan Agreement, but not in the portions thereof assigned to Assignee pursuant to this Assignment and Acceptance. (h) All payments hereunder or in connection herewith shall, unless otherwise specified in Annex I hereto, be made in Dollars and in immediately available funds, if payable to Assignor, to the account of Assignor at its office as designated in Annex I hereto, and if payable to Assignee, to the account of Assignee, as designated in Annex I hereto. The address of Assignee for notice purposes under the Loan Agreement shall be as set forth below its signature on the signature pages hereof. (i) This Assignment and Acceptance shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Neither of the parties hereto may assign or transfer any of its rights or obligations under this Assignment and Acceptance without the prior consent of the other party. The preceding sentence shall not limit the right of Assignee to assign all or part of Assignee's Share of Assignor's Maximum Revolving Loan Amount and any outstanding Revolving Loans and Letter of Credit Obligations assigned under this Assignment and Acceptance in the manner contemplated by the Loan Agreement. (j) All representations and warranties made herein and indemnities provided for herein shall survive the consummation of the transactions contemplated hereby. -5- IN WITNESS WHEREOF, the parties hereto have executed this Assignment and Acceptance as the date first above written. ---------------------------------- By ----------------------------------------- Its ----------------------------------------- Notice Address: ---------------------------- ---------------------------- By ----------------------------------------- Its ----------------------------------------- Notice Address: ---------------------------- ---------------------------- Acknowledged as of _____________, 199_ BANK OF AMERICA ILLINOIS, as Agent By ----------------------------------- Its ----------------------------------- DECRANE AIRCRAFT HOLDINGS, INC. By ----------------------------------- Its ----------------------------------- -6- ANNEX I TO ASSIGNMENT AND ACCEPTANCE 1.BORROWER: DeCrane Aircraft Holdings, Inc. ("DeCrane") 2.DATE OF LOAN AGREEMENT: ___________, 1997 3.ASSIGNOR: __________________________ 4.ASSIGNEE: __________________________ 5.DATE OF ASSIGNMENT AND ACCEPTANCE: _______________ 6.ASSIGNMENT EFFECTIVE DATE: _______________ 7.ASSIGNEE'S SHARE:____% of Assignor's Maximum Revolving Loan Amount 8.AMOUNTS: a. Assignor's Maximum Revolving Loan Amount $___________________ b. Assignee's Share of Assignor's Maximum Revolving Loan Amount (%) _____________% c. Assignee's Maximum Revolving Loan Amount $___________________ d. Revolving Loans made by Assignor to DeCrane outstanding as of Assignment Effective Date $___________________ e. Amount of outstanding Revolving Loans to DeCrane assigned to Assignee $___________________ f. Letter of Credit Obligations in which Assignor has a participation as of the Assignment Effective Date $___________________ g. Amount of Letter of Credit Obligations assigned to Assignor $___________________ 10.INTEREST RATES: 11.FEES: -7- 12.PAYMENT INSTRUCTIONS: Assignor:________________________ ________________________ Attn:____________________ Assignee:________________________ ________________________ Attn:____________________ Accepted and Agreed: _________________________ _________________________ By_______________________ By_______________________ Its______________________ Its______________________ BANK OF AMERICA ILLINOIS, as Agent By_______________________ Its______________________ DECRANE AIRCRAFT HOLDINGS, INC. By_______________________ Its______________________ -8- EX-10.36 5 AGREEMENT BETWEEN IFT AND HI Exhibit 10.36 AGREEMENT BETWEEN INTERACTIVE FLIGHT TECHNOLOGIES, INC. AND HOLLINGSEAD INTERNATIONAL Eben Kane Control No. 09 HOLLINGSEAD INTERNATIONAL --------- INTERACTIVE FLIGHT TECHNOLOGIES TABLE OF CONTENTS 1. AGREEMENT BETWEEN INTERACTIVE FLIGHT TECHNOLOGIES, INC. AND HOLLINGSEAD INTERNATIONAL. 2. STATEMENT OF WORK TO THE AGREEMENT BETWEEN INTERACTIVE FLIGHT TECHNOLOGIES, INC. AND HOLLINGSEAD INTERNATIONAL FOR SWISSAIR. 3. PRICING AND PAYMENT SCHEDULE TO THE AGREEMENT BETWEEN INTERACTIVE FLIGHT TECHNOLOGIES, INC. AND HOLLINGSEAD INTERNATIONAL FOR SWISSAIR. 4. SUPPLEMENT I - KIT COMPONENTS AND PRICE RECONCILIATION 5. PROJECT TIME SCHEDULE. AGREEMENT BETWEEN INTERACTIVE FLIGHT TECHNOLOGIES, INC. AND HOLLINGSEAD INTERNATIONAL This agreement ("Agreement") is made and entered into July 30, 1996 by and between Interactive Flight Technologies, Inc. ("IFT") and Hollingsead International, Inc. ("HI") based on the following facts and circumstances: A. IFT has designed a unique interactive entertainment system for use on commercial aircraft ("Aircraft") which includes video on demand, interactive entertainment games and casino style gaming (the "System"). B. To date the system has been installed on first and business class seats for a limited number of Aircraft. C. The parties are entering into this Agreement for the purpose of HI providing to IFT the engineering services ("Services"), manufacture of the installation kit ("Kits"), the installation labor ("Installation Labor") and airworthiness certification ("Certification") to be performed in accordance with the time schedule attached hereto (the "Project Schedule") to enable use of the System by the airlines who are IFT's customers (the "Customers") subject to the terms of this Agreement. D. IFT shall have the sole responsibility for technical validation and total system architecture. E. This Agreement will specify the terms and conditions pursuant to which (i) HI will be the exclusive System Integrator and Program Manager to provide the Services, Kits, Installation Labor and Certification for installation of IFT's System for Swissair and (ii) IFT and HI will work together toward forming a strategic alliance for the growth, development and marketing of the System. The Terms and Conditions of the Strategic Alliance will be mutually developed and agreed upon within 45 days following the execution of this Agreement or such later date as may further mutually determined. /// /// /// /// 1 Based on the foregoing facts and circumstances and for good and valuable consideration, IFT and HI hereby agree as follows: 1. ORDER FOR SERVICES, KITS, INSTALLATION LABOR AND CERTIFICATION. IFT hereby orders from HI and HI hereby agrees to provide to IFT the Services, Kits, Installation Labor and Certification specified in the Statement of Work - Swissair ("SOW") attached hereto. 2. PRICES AND PAYMENT. HI agrees to provide the Services, Kits, Installation Labor and Certification at the prices specified in the schedules of prices and payment attached hereto (the "Pricing and Payment Schedules"), Exhibit 3 hereto; IFT hereby agrees to pay HI on the dates and in the manner specified the prices for the Services, Kits, Installation Labor, Certification and Travel & Lodging as specified in the Pricing and Payment Schedules. 3. STANDARDS FOR PERFORMANCE BY HI. 3.1 KITS. HI shall deliver all Kits in accordance with the Engineering Drawings, the Specifications and the SOW. 3.2 SERVICES. HI shall perform all of the Services as required by the SOW. 3.3 INSTALLATION LABOR. HI shall provide the Installation Labor so as to install the Kits in accordance with the provisions of the SOW in such time periods as are provided in the Project Schedule. 3.4 CERTIFICATION. Subject to the performance of the System in accordance with the specifications for the System within the responsibility of IFT, HI shall obtain Certification of the First of Type ("FOT") Aircraft for each type of Aircraft subject to this Agreement. /// /// /// /// 2 3.5 INSPECTION AND TESTING, REJECTION AND RETURN. During the course of the performance of the Services and the manufacture of the Kits or part(s) thereof, IFT (together with any representative of the Customer) shall be entitled to (i) witness the work associated with the Services, manufacture of the Kits or part(s) thereof or Installation Labor, (ii) inspect or test the Kits or part(s) thereof to determine if the Kits or part(s) thereof comply with the Engineering Drawings, Specifications and Statement of Work. The inspection which IFT may perform, at IFT's option, may take place either at HI's facility, IFT's facility in the United States or at the airport facility of the Customer at the installation location. Provided that HI shall have complied with the provisions of Sections 3.1 through 3.4, IFT shall accept the performance of HI pursuant to this Agreement. To the extent the Kits or part(s) thereof do not conform to the Engineering Drawings, Specifications or SOW ("Non-Conforming Kits or part(s) thereof'), IFT may reject any Non-Conforming Kits or part(s) thereof and return any such part to HI in accordance with HI's return material authorization procedure at HI's expense to HI's facility. HI will promptly repair or replace any Non-Conforming Kits or part(s) thereof with Kits or part(s) thereof which comply with the Engineering Drawings, Specifications and SOW. 4. DELIVERY. IFT shall from time to time specify the method for delivery of the Kits to IFT or any Customer, delivery of Kits shall be FOB, Santa Fe Springs, CA and the cost of freight transportation shall be borne by IFT. Title to the goods shall pass upon delivery of the kits by HI to the delivery site and the risk of loss or damage to the Kits shall then become the risk of IFT. Upon delivery of the Kits, HI shall warrant to IFT that IFT has acquired full title to the Kits See and clear of any security interest, lien or other claim. 5. PROJECT MANAGEMENT AND COORDINATION. 5.1 APPOINTMENT OF PROJECT MANAGERS. HI shall appoint a Project Manager (the "HI Project Manager") who will have overall authority and responsibility for the supply of Kits and Services pursuant to this Agreement. IFT shall appoint a Project Manager (the "IFT Project Manager") who will have overall authority and responsibility for the performance of IFT's obligations pursuant to this Agreement. 5.2 DUTIES OF THE PROJECT MANAGERS. The IFT Project Manager and the HI Project Manager shall have the responsibility to meet (or confer by telephone) with such frequency as is desirable to maintain the Project Schedule, but no less frequently than weekly. At each meeting, each Project Manager will present to his or her counterpart the overall Project status, including identifying all issues and specifying the actions to be taken with respect to such open issues by HI, IFT, the seat manufacturers or other vendors to IFT. 3 5.3 REPORTS OF THE PROJECT MANAGERS. On or before the 10th day of each calendar month until installation is complete for each Aircraft for Swissair, the HI Project Manager shall prepare a report comparing actual performance by HI to the Project Schedule (the "Monthly Project Report"); if there are any variations from the Project Schedule, the Monthly Project Report shall specify the variations and the reasons for such variation as well as providing an updated Project Schedule ("Updated Project Schedule") in the event there is any reason which results in a change in the time or manner of performance by HI. On or before the 20th day of each calendar month, until installation is complete for each Aircraft for Swissair, the IFT Project Manager shall deliver to the HI Project Manager a response to the Monthly Project Report in which any matter which IFT believes reflects a failure of performance by HI is specified. 6. WARRANTY. 6.1 If within 60 months after installation of any of the Kits on any Customers' Aircraft, there shall be any defect in the Kits or part(s) thereof as a result of HI's defective design, faulty materials or workmanship or faulty installation which defect arises under normal use of the Kits and occurs without abuse or negligence of IFT, the Customer or any third party, HI shall remedy the defect at its option by either replacement or repair of the defective Kits or any part(s) thereof. Any such repair or replacement of Kits or part(s) thereof shall be made within 10 business days of receipt of the defective Kits or part(s) thereof by HI. IFT shall be responsible for all transportation of parts and materials returned to HI for warranty disposition. HI shall be responsible for surface transportation charges from its facility in Santa Fe Springs, California to the designated Freight Forwarder in Los Angeles, California. 6.2 HI hereby represents and warrants to IFT that (i) HI shall comply with all applicable federal, state and local laws in effect at the time services are performed and goods are delivered, including all professional registration requirements; (ii) that all Services and Installation Labor shall be performed consistent with generally accepted professional standards and in an expeditious and economical manner. 7. OWNERSHIP OF THE SERVICES. For all Aircraft Types, all of the Services, including but not limited to the Engineering Drawings and the STC, shall be the sole and exclusive property of IFT within 45 days following completion of the First of Type Installation date or issuance of the STC by the FAA, whichever is the later. 4 8. FORCE MAJEURE. If any failure to perform on a timely basis arises from causes beyond the control or without the fault of HI, including without limitation (i) acts of God, (ii) acts of a public enemy, (iii) acts of any Government, (iv) fires, (v) floods, (vi) earthquake or landslide, (vii) epidemics, (viii) quarantine restrictions, (ix) strikes, (x) other causes of materials not being commercially available, (xi) freight embargoes, (xii) unusually severe weather conditions, and (xiii) acts of IFT or any Customer or any of their agents, subagents, contractors employees officers or directors or other events which have been determined to constitute FORCE MAJEURE, to the extent of the delay resulting from such cause, HI's performance shall be excused. 9. ASSIGNMENT. Without the other party's prior written consent, neither party to this Agreement will assign this Agreement; provided that performance of any part of the Agreement by an affiliate of HI shall not constitute an Assignment unless the majority of assets is purchased by a third party. 10. INSURANCE. HI will maintain property insurance on all of the Kits at full replacement value while the Kits are in the possession of HI against all risk of physical loss. HI maintains products liability insurance in the sum of $20 million which insurance insures HI's performance of the Services, Kits, Installation Labor and Certification pursuant to the terms of this Agreement. 11. PATENT AND COPYRIGHT INDEMNITY. HI and IFT do hereby indemnify and hold one another harmless against any and all liability, loss, damages, claims, costs and expenses, including all reasonable legal fees, arising out of any claim and any defense thereof in respect of any infringement or alleged infringement of any patent, trademark, copyright or other proprietary right whether in the United States or elsewhere resulting from the Services or the System respectively. 12. EXPORT AND IMPORT LICENSES. IFT is responsible for any and all export and import licenses for the System, including the Kits or any part(s) thereof. 13. CONFIDENTIALITY. 13.1 OBLIGATIONS. Each party agrees that (a) it shall maintain the confidential nature of any Proprietary Information (as defined below) received from the other party, using the same degree of care used by such party with regard to its own information of a like character and (b) it shall use such Proprietary Information solely for the purpose of meeting its obligations under this Agreement and not in connection with any other business or activity. Each party acknowledges 5 that the other parties may disclose the existence and nature of this Agreement (but not the specific financial or other contractual terms) to prospective customers and to the general public, and may refer to this Agreement and the other parties hereto in any promotional materials. At the termination of this Agreement, or any time upon demand of a disclosing party, each of the parties agree to return any and all materials containing any Proprietary Information. 13.2 LIMITATIONS ON CONFIDENTIALITY OBLIGATIONS AND USE RESTRICTIONS. The restrictions on use and the obligations of confidentiality contained in the Agreement will not apply to any item or combination of items of information (a) that the receiving party can demonstrate (i) is then in the public domain by acts not attributable to such party, (ii) is hereafter received on an unrestricted basis by the receiving party from a third party source who to the receiving party's knowledge after due inquiry is not and was not bound by confidentiality obligations to the disclosing party, or (iii) was known to the receiving party as shown by its written records prior to the date of disclosure hereunder. 13.3 ACTIONS IF DISCLOSURE REQUIRED. If the receiving party is requested pursuant to, or required by, applicable law or regulation or by legal process to make any disclosure otherwise prohibited hereunder, it shall provide the disclosing party with prompt notice of such requests or requirements prior to disclosure so that (a) the disclosing party (with the reasonable cooperation of the receiving party) may seen an appropriate protective order or other remedy and/or (b) the parties can seek in good faith to agree on the appropriate scope and approach to disclosure. If a protective order or other remedy is not obtained, the receiving party may furnish only that portion of the Proprietary Information which it is legally compelled to disclose and shall use its reasonable efforts to obtain confidential treatment for the Proprietary Information. 13.4 PROPRIETARY INFORMATION. "Proprietary Information" means all oral, written or recorded information about or related to the party (or any subsidiaries or other affiliates) or, its or their technology, assets, liabilities, or business, which is furnished by its officers, directors, employees, agents or controlling persons, and is identified as confidential or proprietary in nature, whether furnished before or after the date hereof, and regardless of the manner which it is furnished, together with any summaries, extracts, analyses, compilations, studies or other documents or records prepared by the receiving party with contain, reflect or are generated from such information. Proprietary Information shall also include information relating to IFT's customers provided to IFT and/or HI under obligations or confidentiality. 14. GENERAL. 14.1 Any and all amendments to this Agreement must be in writing, specify that they are an amendment to this Agreement and be signed by IFT and HI. 14.2 This Agreement, together with the Schedules hereto, constitutes the entire understanding between IFT and HI on the subject matter hereof and all prior discussions and writings between IFT and HI are superseded by this Agreement. 6 14.3 This Agreement shall be interpreted pursuant to the laws of the State of California for contracts made in and to be performed in California. 14.4 Any and all disputes between IFT and HI shall be resolved by binding arbitration conducted at the Los Angeles offices of the Judicial Arbitration and Mediation Service ("JAMS") or in Phoenix, Arizona if IFT initiates such proceedings, in accordance with its procedures and any of its rules and regulations for commercial arbitration. Any such proceeding shall be conducted by a retired judge of the Superior Court of the State of California in accordance with the selection process of JAMS. The decision in such proceeding will be binding on the parties to this Agreement. 14.5 Any notices required or permitted shall be sent by either (i) facsimile transmission and United States mail, postage prepaid or (ii) overnight courier providing proof of delivery to the party at the address specified below or at such other address for which notice is given pursuant to the provisions of this Section. Notices shall be effective upon receipt. If to HI: Hollingsead International, Inc. Attention: President 13701 Excelsior Drive Santa Fe Springs, CA 90670-5178 Fax Number: (310) 921-6313 With a copy to: DeCrane Aircraft Holdings, Inc. Attention: Chief Executive Officer 155 Montrose West Avenue, Suite 210 Copley, OH 44321 Fax Number: (216) 668-2518 If to IFT: Interactive Flight Technologies, Inc. Attention: Chief Executive Officer 4041 North Central Avenue, Suite 2000 Phoenix, AZ 85012 Facsimile: (602) 274-8372 14.6 Captions and paragraph headings are for convenience only and are not to be used in construing and interpreting this Agreement; the recitals are to be used in construing and interpreting this Agreement. 7 15. PRODUCT SUPPORT. Product Support and Spares is the subject of a separate agreement between the parties. IFT and HI will make reasonable best efforts to enter to be into such an agreement within 45 days after the execution of this Agreement. 13. CHANGES AND ADDITIONAL WORK. IFT or HI may make changes or obtain additional work in any of the Services or Kits to be provided by HI pursuant to this Agreement; provided, however, that to make a change in any Service or Kit, (i) IFT shall first give notice ("Change Request") to HI of the specifications for the IFT proposed change; (ii) HI may propose a Change Request to IFT; (iii) within (10) working days, HI shall give notice (the "Change Order") to IFT of the cost of such change and terms of payment for such change and the effect of the change on the dates for delivery of Services and Kits (and any corresponding delays in Installation and Certification, if any), and (iv) the change will become effective only at such time as HI receives a Change Order signed by an authorized agent of IFT. IN WITNESS WHEREOF, the parties have hereto caused this Agreement to be executed by their duly authorized representative. Hollingsead International, Inc. [Illegible] 7/30/96 - ----------------------------------- By: PRESIDENT, DAH INC. Interactive Flight Technologies, Inc. 7/30/90 - ------------------------------------ By: 8 STATEMENT OF WORK TO THE AGREEMENT BETWEEN INTERACTIVE FLIGHT TECHNOLOGIES, INC AND HOLLINGSEAD INTERNATIONAL, INC. FOR SWISSAIR 1.0 APPLICABLE AIRCRAFT TYPES The following Aircraft types and quantities per Table 1 will be retrofitted with the IFT System. The appropriate airline interior arrangement drawing (Layout Passenger Accommodations, or LOPA), installation and applicable revision per Aircraft type are also given. Table 1 A/C TYPE A/C QUANTITY LOPA DRAWING -------- ------------ --------------------- B747 3 991021 Rev 10.10.95 B747 2 991041 Rev 10.10.95 MD11 7 991057 Dated 10.05.96 MD11 9 991056 Dated 10.05.96 LOPA numbers and revision levels will be updated upon occasion by the Customer. 1.1 LRU QUANTITIES PER AIRCRAFT TYPE The installation design furnished by HI shall support the LRU quantities defined in the hardware matrices in Appendix I of this document. 1 2.0 RESPONSIBILITIES 2.1 IFT DESIGN RESPONSIBILITIES ARE: a) Overall definition of System function and performance requirements. b) Allocation of System function within the System. c) Definition of System interfaces. d) Dissemination of air line Customer requirements. e) Coordination of supplier/airline interface. f) All seat console interfaces and design. g) Design, test and manufacture of all System LRU's. h) All System development, EMI, qualification and acceptance testing and related reports. i) Design, test and manufacture of all special test equipment. j) Design, test and production of all software. k) Definition of power load shedding capability/requirements. 2.2 HI DESIGN RESPONSIBILITIES ARE: a) Establishment of the program management structure. b) Identification of key points of contact. c) Management of the internal engineering effort. d) Definition of data exchange requirement and procedures. e) Compilation of System baseline technical data. f) Compilation of Aircraft baseline technical data. 2 g) Definition of power requirements and availability. h) Definition of Aircraft discretes. i) Identification of third party equipment interface requirements. j) Conduct physical survey of various Aircraft. k) Development of all Supplier Data Requirement List(s)SDRL defined items and provide per SDRL defined dates. l) Participation in all defined technical meetings and reviews. m) Confirmation of installation structural compatibility with Aircraft manufacturer. n) Development of installation plans, instruction and engineering orders. o) Development of STC Certification package. p) Provide assembly and detail documentation per the SDRL. q) Produce all cables and installation provisions required for System integration. r) Perform First Article Inspections in conjunction with IFT. s) Production of Illustrated Part Catalogs, Aircraft Maintenance Manuals, Service Bulletins and System Maintenance Practices as they pertain to the installation provisions. t) Scheduling, conducting and obtaining IFT approval (where required by IFT) of all design review and technical meeting minutes and action plans. u) Development of level 1 through level 4 project schedules and controls. v) Preparing ground test, EMI/RFI test, and flight test plans/report. LRU integration at the seat shall be the responsibility of a separate seat integrator under contract to IFT, and is thus not included in the document. 3 HI shall formulate a development plan defined from the technical requirements contained in this document and in this document and in the referenced documentation. Following IFT review and approval, the support shall use the design and production process called out in their plans to design, manufacture and support the provisions for the System. HI shall inform IFT of selected design decisions by providing the documentation required as listed in the Sub-contractor Data Requirements List (SDRL) in the format called out by the technical requirements section of the document. Documentation required by IFT shall be produced, prior to the formal delivery date, as working documents during the course of the program. HI shall be responsible for those design decisions not covered by IFT design or documentation requirements. This allows HI to use parts or detailed design common to other products, or those of which they may have experience or expertise, provided such decisions do not adversely affect the IFT system or IFT's customers 2.3 IFT VALIDATION RESPONSIBILITIES IFT will evaluate and validate HI's design to ensure that the technical requirements are operationally acceptable, acceptable to the airline Customer, and that the design allows implementation of the System. IFT may elect to perform independent testing as a part of the validation process. Set points or design review milestones will be scheduled by HI for this purpose. 2.4 HI DESIGN QUALIFICATION HI shall verify by means of a compliance matrix that the design meets the technical design requirements of this document by paragraph. HI shall present, at CDR, verifiable evidence of compliance. 2.5 TECHNICAL COORDINATION MEETINGS When considered necessary by HI and upon reasonable notice to IFT Technical Coordination Meetings (TCMs) shall be held between IFT, HI, and if deemed necessary, the seat manufacturer(s) and the Customer. A TCM is defined as a design review meeting to establish and record agreement on basic configuration, design requirements, technical data requirements, data submittals, Certification requirements, schedule review and to determine future action resulting thereof. The agenda, frequency, location and responsibility as to the preparation, distribution and approval of minutes of such meetings shall be mutually determined by IFT and HI. Items requiring action resulting from the review will be recorded and tracked for closure by HI. 4 2.6 DESIGN REVIEWS HI shall coordinate each review and shall establish the time, place and agenda for each review subject to coordination and the approval of IFT. The agenda shall be received by IFT five (5) working days prior to the review. HI Project Management shall prepare minutes from the review and submit for IFT and airline Customer's approval within ten (10) working days after the review. Items requiring action resulting from the review wll be recorded and tracked for closure by HI. 2.6.1 INSTALLATION PRELIMINARY DESIGN REVIEW (PDR) HI shall support and participate in a preliminary design review that supports mutually agreed upon program schedules. The PDR shall consist of a formal technical review of the basic design approach prior to the detailed design. The results of the PDR will signify a "freeze" of the design direction. At this point, all general requirements of IFT and the airline Customer should be in place, including all source data, hardware and System documentation deliverables and processes required to complete the objectives. The following shall be addressed at the PDR: a) General Requirements - The requirements of IFT and the airline Customer shall be addressed by HI as to how they shall be met. Any additional requirements, such as those of the airframe manufacturer, shall also be addressed. HI shall clearly identify where HI's design deviates from the requirements, if applicable. A physical description of the components, installation locations and hardware shall be provided, including sizes, weights, and provisions for future upgrades. b) Documentation Structure - Development and production documentation shall be identified by HI. Availability of such documentation shall also be stated. HI is responsible to provide all documentation specified in the SDRL ten (10) working days prior to the scheduled PDR. c) Certification - System and Installation component Certification strategies shall be identified by HI and approved by IFT. 5 d) Scheduling - Program schedules shall be presented by HI including key milestone dates for design, development, production, installation and Certification. Cut-off dates for IFT and airline Customer initiated changes shall be clearly stated and known risks identified. The start dates for production and subsequent production rate shall be stated. PDR deliverables will be identified and scheduled by line item. e) Project Management - Processes for progress tracking and reporting shall be identified by HI. f) Personnel - Staffing levels, points of contact and communication paths shall be identified by HI. g) Data Requirements - HI shall present requirements in regard to hardware, documentation, additional information, etc. to continue the detailed design by HI. 2.6.2 INSTALLATION INTERMEDIATE DESIGN REVIEW (IDR) Due to the tight program schedule constraints, HI shall participate in intermediate design reviews that support mutually agreed upon program schedules. The IDR shall consist of formal technical reviews of the basic design approach prior to the detailed design. The results of the PDR will be reviewed and progress towards IDR statused. At this point, all general requirements of IFT and the Airline Customer shall be reviewed. The following shall be addressed at the IDR: a) General Requirements - The requirements of IFT and the airline Customer shall be addressed by HI as to how they shall be met. Any additional requirements, such as those of the airframe manufacturer, shall also be addressed. A physical description of the components, installation locations and hardware shall be provided, including sizes, weights, and provisions for future upgrades. b) Documentation - Development and production documentation shall be statused by HI. c) Certification - System and Installation component Certification strategies shall be statused. 6 d) Scheduling - Program schedules shall be presented by HI including key milestone dates for design, development, production, installation and Certification. Cut-off dates for IFT and airline Customer initiated changes shall be reviewed. e) Data Requirements - HI shall present any outstanding data that are impacting the program. f) HI will provide risk mitigation strategies to enhance IFT program success. 2.6.3 INSTALLATION CRITICAL DESIGN REVIEW (CDR) HI shall support and participate in a critical design review that supports mutually agreed upon program schedules. The CDR is the formal technical review of the detailed design prior to production and constitutes a "freeze" of the detailed design. At this time IFT's and the airline Customer's complete requirements should be in place. HI shall be responsible for providing all documentation specified in the SDRL. The CDR shall insure that the installation design meets the following criteria: a) HI shall address how IFT's and airline Customer requirements, and any additional requirements, have been met. b) HI shall address what effect the design has on existing Aircraft interfaces. c) HI shall review how the design meets Certification requirements. d) HI shall review how the technical data submittal requirements listed in the SDRL are proceeding as scheduled and are still feasible. e) HI shall demonstrate how all applicable issues raised at IDR shall be resolved. 2.7 TECHNICAL SUPPORT Technical support shall include personnel, and spare installation provisioning parts necessary to test, calibrate, modify and maintain the provision hardware and support equipment, generate engineering change orders, and update documentation as required. HI shall provide technical representation for all installations to answer all inquiries with a direct communication line between IFT and HI. HI shall also provide on-site support through the completion of installation and aircraft return to service as required on each Aircraft type. 7 2.8 INSTALLATION SUPPORT HI shall provide sufficient number of qualified personnel to perform the installation of the IFT System to a mutually agreed upon schedule. IFT will be responsible for coordinating the sufficient installation access to the Aircraft with the airline Customer. 3.0 TECHNICAL REQUIREMENTS 3.1 GENERAL REQUIREMENTS HI shall be responsible for the installation engineering, mechanical mounting provision design, kitting, substantiation, and installation of System equipment and related cabling in First Class, Business Class and Economy Class. The seat integrator(s) chosen by the Customer airline shall be responsible for the engineering required to install IFT in-seat equipment and related cabling, and to restore the original seat Technical Service Order (TSO). All Aircraft interface designs shall be coordinated with, and approved by, IFT and the airline Customer s technical fleet Services. 3.1.1 OFF-THE-SHELF VS. NEW DESIGN HI shall utilize existing off-the-shelf installation hardware whenever possible. New designs shall be considered only as needed to adapt existing components to meet the intent of the technical requirements or to facilitate mutually agreed installation schedule reduction. 3.1.2 INTERCHANGEABILITY Interchangeability shall conform with Requirements 7 of MIL-STD-454. All parts, subassemblies, assemblies, etc., having the same part number shall be designed to be directly interchangeable without System or interface adjustment to either the components, part, System or Aircraft. Electrical connectors mating with interconnecting wiring harnesses that are not functionally interchangeable shall not be physically interchangeable. Interchangeability of hardware components across fleets is the design objectives. 3.1.3 AIRFRAME MOUNTED EQUIPMENT HI shall obtain approval for all equipment installations that mount to the airframe. As part of that approval, HI shall provide a complete stress analysis of the mounting structure and the interface loads per FAR 25.561. HI shall endeavor in all instances to avoid modification of the primary Aircraft structure in the installation 8 design. IFT will aid HI in coordinating and obtaining from the airline approval for the interface loads imparted into the structure. All reports to the airline shall be submitted through IFT, however, HI is ultimately responsible for design changes and updating of the reports to obtain final approval. 3.1.4 INTERFACE CONTROL HI shall assure that the provisions developed for System installation is physically, functionally, and procedurally compatible for existing interfacing units and Systems in current use on the affected Aircraft. IFT will initially supply through the airline Customer, data considered necessary for establishing interfaces. HI must identify and request any additional data that may be required to fulfill their responsibilities. 3.1.5 WEIGHT CONTROL HI shall assure that the weight of the installation provisions is as light as possible while consistent with other requirements. 3.1.6 MISCELLANEOUS PROVISIONS HI shall be responsible for engineering that modifies existing floor and sidewall panels to accept any required disconnect brackets and cabling. 3.1.7 CABLING INSTALLATION REQUIREMENTS All cabling shall be installed per FAR. 25.1353, and the routing shall be subject to approval by IFT. Installation of cables and harnesses shall meet the applicable general requirements of Boeing or McDonnell Douglas documents as applicable. HI shall utilize existing cable runs as much as possible to route all System cabling. HI shall install any required cable clamps and standoffs to support the installation of the System cabling. Cabling shall be clamped every twenty (20) to twenty-two (22) inches and wherever the cable routing makes a change in direction. HI shall define clamping techniques and components based on approved airline Customer repair and maintenance procedures. HI shall meet the separation requirements between System cabling and existing cabling that are heavy transmitters of electrical power to avoid the induction of electrical interference into the System. Cabling installation drawings shall contain the Aircraft station (STA), left or right buttock line (BL), and waterline (WL) of each cable run and disconnect location as well as the airline Customer assigned disconnect number as applicable for each installation. 9 This shall apply to the following: a) Aircraft to head-end equipment. b) Head-end equipment to head-end equipment. c) Head-end equipment to zone equipment. d) Zone equipment to seat equipment. All hardware required to mount the cabling shall be included. For seat-to-seat cabling installation drawings, the required Customer airline supplied cable raceway shall be called out and installed. This raceway will be included in the Aircraft provisioning Kits supplied by HI. 3.1.8 AIRCRAFT POWER AND EXISTING SYSTEM INTERFACE System cabling interfaces to Aircraft power and existing Aircraft Systems will be defined by the airline Customer and will be communicated to HI. 3.1.9 CABLING AND HARNESS DESIGN REQUIREMENTS HI shall design and supply specified cabling to connect the individual System components together and to connect the System to Aircraft power and existing System. The number of disconnects within the Aircraft shall be kept to a minimum to enhance reliability but support the maintainability of the System. It shall be the responsibility of HI to define the number and location of disconnects and grouping of cables between equipment within the Aircraft. Cable and harness design and assembly shall follow the guidelines of Boeing and McDonnell Douglas as applicable. All HI provided System cables and harness shall be designed with sufficient length to facilitate ease of installation, a lack of static tension on the cables and good installation maintenance practices (i.e., "drip loops, etc.). Mounting hardware used to install all HI provided cables and harnesses shall be provided as part of the cable or harness assembly. 3.1.10 WIRE AND CABLE REQUIREMENTS Single wire used in all cables and harnesses shall meet the requirements of MIL-W-22759. Multiple twisted conductors used in all cables and harnesses shall meet the requirements of MIL-C-27500. Coaxial wire used in cables or harnesses shall meet the requirements of MIL-C-17. 10 3.1.11 CONNECTOR REQUIREMENTS Connectors used to interface between LRUs, disconnects, or interface with Aircraft wiring and Systems shall be of the following types (or equivalent): a) Circular connectors shall meet the requirements of MIL-C-83723, MIL-C-26482. b) Rectangular connectors shall meet the requirements of MIL-C-83659. c) Coaxial connectors shall meet the requirements of MIL-C-39012. d) ARINC style connectors shall meet the requirements of ARINC 600 or ARINC 404. Connectors, plug-type or receptacle-type, will be selected to appropriately match the mating half of the LRU or other cable end to avoid problems caused by differing contact alignment, insertion force tolerances, contact materials, and contact construction causing mechanical tolerance relaxation due to environmental extremes. 4.0 TECHNICAL DOCUMENTATION REQUIREMENTS All technical data identified in Supplier Data Requirements List in Appendix II of this document shall be provided per the SDRL in the format specified in the following paragraphs of this section. All drawings/documentation or changes to the drawings/documentation shall be transmitted to IFT in accordance with the submittal requirements of the SDRL. HI shall also provide maintenance of engineering drawings or documentation developed under the Purchase Order/Contract. All drawings/documentation, including installation drawings, work scopes, engineering orders, structural substantiation, block diagrams, wiring diagrams, System schematics and other engineering data shall be delivered to IFT when either specified in the SDRL or within 30 days of written request. Documentation and subsequent revisions (including magnetic tape) written and/or provided for the System by HI will be warranted for completeness of technical information, as defined in the requirements of ATA 100. Further, the accuracy of HI provided technical documentation will be warranted to agree with the applicable IFT or airline Customer source specifications, documents, and drawings. Computer generated drawings and documents shall be submitted to IFT on IBM formatted 1.44 megabyte High density floppy disks unless otherwise specified. 11 4.1 DOCUMENTATION REVISION SERVICES HI shall provide documentation revision Services for all engineering documentation at no charge to IFT for a period of six months after completion of FOT installation, where FOT installation is defined as the first Aircraft of a particular type (i.e., 747), model (i.e., -3), and interior furnishing and seating arrangement assuming that the revisions assuming that the revisions are performed to convert and clarify information. 4.2 INSTALLATION BLOCK DIAGRAM HI shall prepare an Installation Block Diagram showing basic LRU- to-LRU System connections. The System Block Diagram may serve as a top level sheet to the System Schematic Diagram. 4.3 STRUCTURAL, CABLING AND EQUIPMENT INSTALLATION DRAWINGS HI shall prepare all structural, cabling and equipment installation drawings. They shall be prepared and provided to IFT by HI as a Computer Aided Design (CAD) electronic file using AutoCAD 12.0, or later version, as a software design format. The installation drawings shall contain in the drawing parts list all supplier-manufactured parts, supplier-purchased parts and IFT- supplied equipment necessary to install and certify the IFT System. All installation drawings shall be executed per HI Engineering Drawing Practices. The installation drawings shall be provided to IFT by HI as electronic and paper copies. 4.4 INSTALLATION WORKSCOPE HI shall prepare a detailed installation workscope based on HI- prepared installation drawings and test documents that provides written installation instruction sufficient to install all HI manufactured parts, HI purchased parts and IFT supplied equipment. In addition, the workscope shall contain all System level hot and cold electrical test plans, power-up test plans, Electro-Magnetic Interference (EMI) test plans, ground test plans, flight test plans, and acceptance test plans to verify that the IFT System does not interfere with the existing Aircraft Systems in any way. The installation workscope shall comply with HI format. They shall be prepared and provided to IFT by HI in a computer generated electronic file using Microsoft Word 6.0, or later version, software. The installation workscope shall also be provided to IFT by HI as paper copies. 4.5 ENGINEERING RELEASES HI shall prepare Task Card designed as mechanic installation instructions based on the content of the installation workscope, in a format compliant to HI standard. 12 4.6 AIRCRAFT SYSTEM WIRING DIAGRAM HI shall prepare a System wiring diagram, showing the entire System wiring definition, equipment pin assignments, grounds, etc., in a format following the airline Customer layout and symbology, and executed per ATA 100. Diagrams shall be readable from left to right in reference to power, control, actuation, and indication. The diagrams shall be based on the following Aircraft condition: Aircraft on the ground; landing gear down; power off; throttles closed; parking brake on; landing flaps up; and all doors closed. All wire assemblies shall have a unique wire number for identification purposes. This number shall follow the Aircraft manufacturer's format for identifying external (Aircraft), internal (component), twisted, shielded, and coaxial wire assemblies and shall be assigned by HI through the airline Customer. Each component shall be assigned a unique equipment designator of the format set forth by the airline Customer. All Aircraft effectivities shall be specified by assigned Aircraft registration numbers. The System wiring diagram shall be prepared and provided by HI as a Computer Aided Design (CAD) electronic file using AutoCAD 12.0, or later version, as a software design format. 4.7 AIRCRAFT SYSTEM SCHEMATIC DIAGRAM HI shall prepare a System schematic diagram, showing the entire System connectivity and LRU internal functionality in a format following Swissair layout and symbology, and executed per ATA 100. Diagrams shall be readable from left to right in reference to power, control, actuation, and indication. The diagrams shall be based on the following Aircraft condition: Aircraft on the ground; landing gear down; power off; throttles closed; parking brake on; landing flaps up; and all doors closed. Each component shall be assigned a unique equipment designator of the format set forth by the airline Customer. All Aircraft effectivities shall be specified by assigned Aircraft registration numbers. 4.8 CHAPTER 91 WIRE LIST HI shall prepare a wire list, hookup and ground list in compliance with ATA 100. This list shall, be prepared and provided by HI in a computer generated electronic file using Microsoft Excel 4.0, or later version, software. 4.9 STRUCTURAL SUBSTANTIATION REPORT HI shall prepare a structural substantiation report that verifies HI's design. This document shall also define and verify interface loads imparted into existing Aircraft structure by HI's installation provisions. The structural substantiation shall be prepared and provided by HI in a computer 13 generated electronic file using Microsoft Word -Registered Trademark- 6.0 or later version, software. 4.10 ELECTRICAL LOAD ANALYSIS HI shall prepare an electrical load analysis defining the electrical load imparted to the existing Aircraft electrical System by the System. The electrical load analysis shall be prepared and provided by HI in a computer generated electronic file using Microsoft Excel 4.0 or later version, software. 4.11 MASTER DRAWING AND DATA LIST (MDL) HI shall prepare a master drawing and data list of all IFT and HI drawings and documents that affect the configuration and Certification of the existing Customer Aircraft The master drawing and data list shall be of an indentured format, complying with HI standard format, and showing the applicable drawing number title, revision status, outstanding change notices, and approval dates. The MDL shall be prepared and provided in a computer generated electronic file using Microsoft Excel -Registered Trademark- 4.0, or later version, software. 4.12 WEIGHT AND BALANCE REPORT HI shall prepare a weight and balance report giving the station, waterline and combined center of gravity for all installed HI equipment. The weight and balance report shall be prepared and provided by HI in a computer generated electronic file using Microsoft Word -Registered Trademark- 6.0, or later version (text), and Microsoft Excel -Registered Trademark- 4.0, or later version (tables), software. 4.13 ASSEMBLY AND DETAIL DRAWINGS HI shall prepare all mechanical and cabling assembly and detail drawings and shall be prepared and provided by HI as a Computer Aided Design (CAD) electronic file using AutoCAD 12.0, or later version, as a software design format. The assembly and detail drawings shall contain all parts, material, physical and electrical characteristics, and manufacturing information necessary to manufacture the installation provisions for the System. 14 5.0 CERTIFICATION REQUIREMENTS HI shall, for this program, be responsible for providing all engineering documentation required by the SDRL to support the planning, coordination and completion of FAA Certification activities on behalf of IFT for application and receipt of a Supplemental Type Certificate (STC) of each FOT Aircraft through a DAS authority. IFT hereby grants HI a license in perpetuity to use the STC in conjunction with IFT's system. In support of the STC activity, HI will provide all documentation such as FAA Form 8110-3 required by the applicable FARs. HI shall provide on-site Certification support through STC approval for all FOT installations. 6.0 SUPPLIER PARTS PRODUCTION AND KITTING REQUIREMENTS HI shall produce, or subcontract to production, all parts in HI's installation design. This shall include all brackets, mounting trays, rocks, cables, and other hardware. IFT shall assume responsibility for manufacture of all LRUs. HI shall also be responsible for procurement of all mounting hardware, cable clamps, standoffs, grommets, etc., required to install IFT System equipment. HI shall also be responsible for all FAA PMA activities for parts manufactured and controlled by HI. All installation provisions designed and manufactured by HI shall meet the design, safety, quality and conformance standards of FAR Part 21.303. When deemed necessary, IFT will participate First Article Inspections conducted by HI or their subcontractors. All repairable assemblies shall be composed of off-the shelf components available in the United States. HI shall be responsible for all installation parts logistics including staging, kitting of parts and shipping to IFT for System testing. Installation provisions shall be kitted by installation drawing and dash number for ease of conformance. Parts kitting and packaging shall conform, at a minimum, to ATA 300. IFT shall be responsible for final packaging and shipping of the complete kit to the airline Customer. 7.0 SUPPLIER QUALITY REQUIREMENTS HI, and/or their subcontractors, shall meet all quality requirements of accepted industry standards. 15 APPENDIX 1 [Confidential Material Omitted] APPENDIX II 17 APPENDIX II
Req'd Req'd Req'd Req'd Req'd Document Initial Due Date for for for for for PDR IDR CDR Final STC - ---------------------------------------------------------------------------------------------------------- Aircraft System Wiring Diagram 3 days prior to PDR X X X X X Aircraft System General Arrangement 3 days prior to PDR X X X X X Installation Block Diagram 3 days prior to PDR X X X X X Cabling Installation Drawings 3 days prior to PDR X X X X X Equipment Installation Drawings 3 days prior to PDR X X X X X Electrical Load Analysis 3 days prior to PDR X X X X Weight and Balance Diagram 3 days prior to IDR X X X X Installation Workscope 10 days prior to CDR X X X Structural Installation Drawings 3 days prior to CDR X X X Master Data and Drawing List 10 days after CDR X X Stress Analysis Report 10 days after CDR X X Wire List Data 10 days after CDR X HI Formatted Engineering Releases 10 days after CDR X System Ground Test Plan 10 days after CDR X System EMI/RFI Test Plan 10 days after CDR X Flight Test Plan 10 days after CDR X System Ground Test Procedures 10 days after CDR X (To be incorporated into Workscope) System EMI/RFI Test Procedures 10 days after CDR X (To be incorporated into Workscope) Flight Test Procedures 10 days after CDR X (To be incorporated into Workscope) System Ground Test Report and 8110-3 3 days prior to A/C OD X System EMI/RFI Test Report and 8110-3 3 days prior to A/C OD X Ground Test Report and 8110-3 3 days prior to A/C OD X Aircraft Flight Manual Supplement 3 days or to A/C OD X Aircraft System Schematic Diagram 3 days prior to A/C OD X Cabin Compliance Inspection Report 1 week prior STC Issuance
PRICING AND PAYMENT SCHEDULE TO THE AGREEMENT BETWEEN INTERACTIVE FLIGHT TECHNOLOGIES, INC. AND HOLLINGSEAD INTERNATIONAL, INC. SWISSAIR PRICES AND PAYMENT FOR SERVICES IFT will pay HI for the Services, on or before the last day of the calendar month following the month during which HI issues and sends its invoice to IFT for Services. The HI invoices ("Services Invoices") shall be in the following amounts: MDll Stage of Services Completed Price ---------------------------- ----- Aircraft Surveys, Technical Coordination Meetings(1) [Confidential Material Omitted] Preliminary Design Review (PDR) [Confidential Material Omitted] Preliminary Electrical Analysis Report and Preliminary Certification Plan [Confidential Material Omitted] Intermediate Design Review (IDR)(2) [Confidential Material Omitted] Preliminary Weight and Balance and Stress Analysis Reports [Confidential Material Omitted] Ground Test EMI/RFI and Flight Test Plans [Confidential Material Omitted] Critical Design Review (CDR) [Confidential Material Omitted]
- ------------------------ 1 [Confidential Information Omitted] 2 [Confidential Information Omitted] Installation [Confidential Information Omitted] Final Submittal of Data Package to FAA [Confidential Information Omitted] ------- TOTAL MD-11 [Confidential Information Omitted]
B747 Stage of Services Completed Price --------------------------- ----- Aircraft Surveys, Technical Interface Meetings(3) [Confidential Information Omitted] Preliminary Design Review (PDR) [Confidential Information Omitted] Preliminary Electrical Analysis Report and Preliminary Certification Plan [Confidential Information Omitted] Intermediate Design Review (IDR)(4) [Confidential Information Omitted] Preliminary Weight and Balance and Stress Analysis Reports [Confidential Information Omitted] Ground Test EMI/RFI and Flight Test Plans [Confidential Information Omitted] Critical Design Review (CDR) [Confidential Information Omitted] Installation [Confidential Information Omitted] Final Submittal of Data Package to FAA [Confidential Information Omitted] ------- TOTAL B747 NRE [Confidential Information Omitted]
- ------------------------ 3 [Confidential Information Omitted] 4 [Confidential Information Omitted] PRICES AND PAYMENT FOR KITS [Confidential Information Omitted] PRICES AND PAYMENT FOR INSTALLATION LABOR [Confidential Information Omitted] PRICES AND PAYMENT FOR CERTIFICATION Upon the completion of Certification for each FOT Aircraft for the Customer, HI shall invoice IFT for the Certification at the prices listed below; IFT will pay HI for the Certification on or before the last day of the calendar month, following the month during which HI issues and sends its invoice to IFT for Certification. The price for Certification of each type of Aircraft is: MD11 Aircraft [Confidential Information Omitted] B747 Aircraft [Confidential Information Omitted] PRICES AND PAYMENT FOR TRAVEL AND LODGING During each calendar month during which HI has (i) incurred expenses for Travel, Lodging or Per Diem for its employees for the performance of Engineering Services, Certification or Installation Labor and (ii) charged an administrative fee for the management of Travel, Lodging and Per Diem, HI shall invoice IFT for 100% of the cost of Travel, Lodging and Per Diem, (a "Travel and Lodging Invoice"); IFT will pay HI the Travel and Lodging Invoice on or before the last day of the calendar month following the calendar month during which such invoice was received by IFT. PROJECT SCHEDULES [Confidential Information Omitted]
SUPPLEMENT I SUPPLEMENT I Kit Price Components and Reconciliation All Swissair MD11 and B747 Kits contain basic component part groupings which are as follows: - STRUCTURE (ST) including: Pallets, Verticle Supports, Rods/Rod Fittings, Angles, Fittings, Mounting Plate, Disconnect Panels, Brackets, Floor Disconnect Bores. - TRAYS/TRAY HARNESSES (TT) including: Trays, Shock Mounts, Input/Output Cables. - CABIN WIRING (CW) including: SDU to SDU Cabling, SDU to SEB Cabling. - AIRCRAFT WIRING/INTERFACES (AWI) including: Pallet to Pallet Wiring, Clamp Hardware, Zone Output Cabling, P/A Interface, Power Interface, Circuit Breakers, Ceiling Panels, SATCOM Interface. Price Per Appendix I Extended Warranty/ 06/27/96 Draft Changes Insurance Cost New Kit Value -------------- ---------- ------------------ ------------- MD 11 Series 56 - --------------- ST TT [Confidential Information Omitted] CW AWI SUPPLEMENT I Page 2 MD 11 SERIES 57 - --------------- ST TT [Confidential Information Omitted] CW AWI B747 COMBI - ---------- ST TT [Confidential Information Omitted] CW AWI B747 FULL PAX - ------------- ST TT [Confidential Information Omitted] CW AWI -----END PRIVACY-ENHANCED MESSAGE-----