THIRD AMENDMENT TO NOTE AGREEMENT
This Third Amendment to Note Agreement (the "Third Amendment") is entered into
as of the 29th day of December, 1995 between BEI Electronics, Inc., a Delaware
corporation (the "Company"), having its principal place of business at Xxx Xxxx
Xxxxxx - Xxxxx 0000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, and Principal Mutual Life
Insurance Company, Berkshire Life Insurance Company and TMG Life Insurance
Company (each a "Holder" and together the "Holders").
RECITALS
The Company entered into a Note Agreement dated as of August 15, 1993 (the
"Original Note Agreement") with the Holders and Principal National Life
Insurance Company. In accordance with the terms of the Original Note Agreement
the Company issued its 6.73% Series A Senior Notes due October 1, 2000 (the
"Notes") in the original principal amount of $16,800,000 and its 6.73% Series B
Senior Notes due November 15, 2000 in the original principal amount of
$11,200,000. The Holders are the owners and registered holders of the entire
outstanding principal balance of Notes. Capitalized terms used but not defined
in this Third Amendment have the meanings set forth in the Note Agreement.
The Original Note Agreement was amended by First Amendment to Note Agreement
dated as of April 1, 1994 (the "First Amendment") and by Second Amendment to
Note Agreement dated as of September 30, 1994 (the "Second Amendment"). The
Original Note Agreement as amended by the First Amendment and the Second
Amendment is hereinafter referred to as the "Note Agreement".
The Company has requested, and the Holders have agreed, that the Note Agreement
be amended in certain particulars as set forth in this Third Amendment.
Capitalized terms used but not defined in this Third Amendment have the meanings
set forth in the Note Agreement.
NOW, THEREFORE, in consideration of the premises set forth above, and in
consideration of the sum of $21,000 paid by the Company ratably to the Holders,
the receipt and sufficiency of which is hereby acknowledged, the Company and the
Holders agree as follows:
1. Recitals Incorporated. The Recitals set forth above are incorporated
herein by reference.
2. Amendments to the Note Agreement.
2.1 Section 5.11 of the Note Agreement is hereby deleted in its
entirety and the following inserted in lieu thereof:
Section 5.11. Restricted Payments. The Company will not
except as hereinafter provided:
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(a) declare or pay any dividends, either in cash or
property, on any shares of its capital stock of any
class (except dividends or other distributions
payable solely in shares of capital stock of the
Company);
(b) directly or indirectly, or through any
Subsidiary, purchase, redeem or retire any shares of
its capital stock of any class or any warrants,
rights or options to purchase or acquire any shares
of its capital stock (other than in exchange for or
out of the net cash proceeds to the Company from the
substantially concurrent issue or sale of other
shares of capital stock of the Company or warrants,
rights or options to purchase or acquire any shares
of its capital stock);
(c) make any other payment or distribution, either
directly or indirectly or through any Subsidiary, in
respect of its capital stock;
(d) make, or permit any Restricted Subsidiary to
make, any Restricted Investment; or
(e) permit any Restricted Subsidiary to declare any
dividends, either in cash or property, on any shares
of the capital stock of such Restricted Subsidiary
(except for dividends which are payable solely to the
Company or to the Company and one or more
Wholly-owned Restricted Subsidiaries);
(such declarations or payments of dividends, purchases,
redemptions or retirements of capital stock and warrants,
rights or options and all such other payments or distributions
and such Restricted Investments being herein collectively
called "Restricted Payments"), if after giving effect thereto
any Event of Default shall have occurred and be continuing or
the sum of the aggregate amount of Restricted Payments made
during the period from and after September 30, 1995 to and
including the date of the making of the Restricted Payment in
question would exceed the sum of (i) $1,500,000 plus (ii) 50%
of Consolidated Net Income (less 100% thereof in case of a
deficit) for each fiscal year commencing after September 30,
1995, plus (iii) the aggregate net cash proceeds received by
the Company from the sale of its capital stock or warrants,
rights or options to purchase or acquire any shares of its
capital stock during said period, plus (iv) the aggregate net
proceeds from the sale of any Restricted Investments during
such period up to but not exceeding the original cost thereof.
The Company will not declare any dividend which constitutes a
Restricted Payment payable more than 60 days after the date of
declaration thereof.
For the purposes of this ss. 5.11, the amount of any
Restricted Payment declared, paid or distributed in property
shall be deemed to be the greater of the book value or fair
market value (as determined in good faith by the Board of
Directors of the
Page 3
Company) of such property at the time of the making of the
Restricted Payment in question.
2.2 Section 5.13(b) of the Note Agreement is deleted in its entirety and
the following inserted in lieu thereof:
(b) The Company will not permit any Restricted Subsidiary
to issue or sell any shares of stock of any class (including
as "stock" for purposes of this ss.5.13, any warrants, rights
or options to purchase or otherwise acquire stock or other
Securities exchangeable for or convertible into stock) of such
Restricted Subsidiary to any Person other than the Company or
a Wholly Owned Restricted Subsidiary, except (i) the sale of
stock described in Section 5.13(b) and Section B-1 of the
Disclosure Letter, (ii) for the purpose of qualifying
directors, (iii) in satisfaction of the validly pre-existing
rights of minority shareholders in connection with the
simultaneous issuance of stock to the Company and/or a
Restricted Subsidiary whereby the Company and/or such
Restricted Subsidiary maintain their same proportionate
interest in such Restricted Subsidiary, or (iv) the issuance
and sale of stock of BEI Medical Systems, Inc., provided,
however, the Company and/or one or more Wholly-owned
Restricted Subsidiaries will at all times own not less than
80% of the Voting Stock of BEI Medical Systems, Inc.
2.3 Section 8.1 of the Note Agreement is hereby amended by deleting the
definition of "Adjusted Funded Debt" and inserting the following in lieu
thereof:
"Adjusted Funded Debt" shall mean the sum of (i) all
Indebtedness of the Company and its Restricted Subsidiaries
for borrowed money or which has been incurred in connection
with the acquisition of assets in each case having a final
maturity of one or more than one year from the date of origin
thereof (or which is renewable or extendible at the option of
the obligor for a period or periods more than one year from
the date of origin) including all payments in respect thereof
that are required to be made within one year from the date of
any determination of Adjusted Funded Debt, and (ii) Deemed
Funded Debt.
2.4 Section 8.1 of the Note Agreement is hereby amended by deleting the
definition of "Net Income Available for Fixed Charges" and inserting the
following in lieu thereof:
"Net Income Available for Fixed Charges" for any
period shall mean (I) the sum of (w) Consolidated Net Income
during such period, plus ( to the extent deducted in
determining Consolidated Net Income) (x) all provisions for
any Federal, state or other income taxes made by the Company
and its Restricted Subsidiaries during such period, plus (y)
Fixed Charges of the Company and its Restricted Subsidiaries
during such period, and (z) amortization as reported in the
published financial statements of the Company and its
Restricted Subsidiaries prepared using GAAP; provided,
however, that for any period which includes the fourth quarter
of fiscal year 1995 of the Company, "Net Income Available for
Fixed Charges" shall be calculated without regard for
non-recurring charges taken
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during such quarter as a result of (x) a preliminary
arbitration ruling regarding a royalty payment dispute, (y)
related to ending the HYDRA 70 rocket business of the Company,
and (z) a settlement with the U.S. government relating to the
testing of accelerometers from 1986 to 1992.
3. Representations and Warranties. The Company represents and warrants to
each Holder as of the date of this Agreement that, upon execution of this
Agreement, all of the following statements will be true and correct:
3.1 As of the date of this Agreement, no Default or Event of Default
under the Note Agreement, as amended, or under any other agreement for
borrowed money to which the Company is subject, exists or is continuing,
after giving effect to the waivers set forth herein.
3.2 Except as set forth in a letter dated December 21,1995 from the
Company to the Holders relating to certain legal proceedings and to
certain matters affecting the Company's HYDRA 70 rocket contract and
related contingencies, the representations and warranties of the Company
referred to in Section 3.1 of the Note Agreement are true and correct and
complete in all material respects as if made on the date hereof, except
as to those representations and warranties made as of a specific date,
which are true and correct and materially complete as of such date.
3.3 No dissolution proceedings with respect to the Company have been
commenced or are contemplated, and, except as previously disclosed in 10Q
or 10K reports delivered to each holder of the Notes, there has been no
material adverse change in the business, condition or operations
(financial or otherwise) of the Company, taken as a whole, since August
15, 1993.
3.4 This Agreement has been duly authorized, executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the
Company.
3.5 The Company has not made any modification of any material agreement
with any creditor of the Company, other than by this Agreement, unless
the Company has disclosed the terms of such modification to each Holder
in writing.
3.6 The Company has not paid or caused to be paid and will not pay or
cause to be paid, directly or indirectly, any remuneration, whether by
way of supplemental or additional interest, fee or otherwise, to any
Holder as consideration for or as an inducement to entering into by such
Holder of this Third Amendment, except as set forth herein.
4. Effective Date. This Agreement shall become effective as of the date
first written above upon receipt by each of the Holders of a counterpart of this
Agreement duly executed by the Company and the other Holders.
Page 5
5. Miscellaneous
5.1 Except as specifically amended in this Agreement all of the terms,
conditions and covenants of the Note Agreement and the Notes shall remain
unaltered and in full force and effect and shall be binding on the
Company. The Note Agreement is hereby ratified, confirmed and approved.
5.2 Except as expressly set forth in this Agreement the terms of this
Agreement shall not operate as a waiver by the Holders of any provisions
of, or otherwise prejudice the rights or remedies of the Holders under
the Note Agreement, the Notes or applicable law and shall not operate as
a waiver of or otherwise prejudice any rights the Holders may have
against any other Person. This Agreement shall not be construed as
establishing a course of conduct on the part of the Holders upon which
the Company may rely in the future.
5.3 All headings and captions preceding the text of the several
sections of this Agreement are intended solely for convenience of
reference and shall not constitute a part of this Agreement, nor shall
they alter its meaning, construction or effect.
5.4 This Agreement embodies the entire agreement and understanding
between the Company and the Holders with regard to the matters set forth
herein, and supersedes all prior agreements and undertakings relating to
such matters.
5.5 This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed shall be deemed an original
and all of which taken together shall constitute one and the same
agreement.
5.6 This Agreement shall be governed by, and construed and enforce in
accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
by their authorized officers as of the date first above written.
BEI ELECTRONICS, INC.
By /s/ Xxxx X. Wrench
-------------------
Xxxx X. Wrench, Sr. Vice President & CEO
By /s/ Xxxxxx X. Xxxx
-------------------
Xxxxxx X. Xxxx, Treasurer & Controller
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PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: /s/ Xxxxxx Xxxxx
-----------------
Xxxxxx Xxxxx
Assistant Director
Securities Investment
By: /s/ Xxxxxx X. Brattabo
-----------------------
Xxxxxx X. Brattabo
Second Vice President-Securities Investment
BERKSHIRE LIFE INSURANCE COMPANY
By:__________________________________
TMG LIFE INSURANCE COMPANY
By: THE MUTUAL GROUP, its Agent
By:___________________________________
By:____________________________________
