EXHIBIT 10.3
Draft of September 18, 1997
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BEI TECHNOLOGIES, INC.
ASSUMPTION AGREEMENT
Dated as of September 15, 1997
Re: $13,440,000 7.23% Series A Senior Notes
Due October 1, 2000
and
$8,960,000 7.23% Series B Senior Notes
Due November 15, 2000
of
BEI TECHNOLOGIES, INC.
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TABLE OF CONTENTS
(Not a part of the Agreement)
SECTION HEADING PAGE
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT........................ 2
Section 1.1. Description of Notes...................................... 2
Section 1.2. Commitment, Closing Date.................................. 3
Section 1.3. Several Obligations....................................... 3
SECTION 2. PREPAYMENT OF NOTES........................................ 3
Section 2.1. Required Prepayments...................................... 3
Section 2.2. Optional Prepayment with Premium.......................... 4
Section 2.3. Notice of Optional Prepayments............................ 4
Section 2.4. Application of Prepayments................................ 4
Section 2.5. Direct Payment............................................ 5
SECTION 3. REPRESENTATIONS............................................ 5
Section 3.1. Representations of the Company............................ 5
Section 3.2. Representations of the Purchasers......................... 5
SECTION 4. CLOSING CONDITIONS......................................... 6
Section 4.1. Conditions................................................ 6
Section 4.2. Waiver of Conditions...................................... 7
SECTION 5. COMPANY COVENANTS.......................................... 7
Section 5.1. Corporate Existence, Etc.................................. 7
Section 5.2. Insurance................................................. 7
Section 5.3. Taxes, Claims for Labor and Materials, Compliance
with Laws................................................ 8
Section 5.4. Maintenance, Etc.......................................... 8
Section 5.5. Nature of Business........................................ 8
Section 5.6. Consolidated Adjusted Tangible Net Worth.................. 8
Section 5.7. Limitations on Total Debt................................ 9
Section 5.8. Fixed Charges Coverage Ratio.............................. 9
Section 5.9. Limitation on Liens....................................... 10
Section 5.10. Limitation on Sale and Leasebacks........................ 11
Section 5.11. Restricted Payments....................................... 11
Section 5.12. Investments............................................... 12
Section 5.13. Mergers, Consolidations and Sales of Assets............... 14
Section 5.14. Guaranties................................................ 16
Section 5.15. Repurchase of Notes....................................... 16
Section 5.16. Transactions with Affiliates.............................. 16
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Section 5.17. Termination of Pension Plans............................. 16
Section 5.18. Reports and Rights of Inspection......................... 16
Section 5.19. Certain Changes in Accounting Principles................. 20
Section 5.20. Fiscal Year.............................................. 21
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR................... 21
Section 6.1. Events of Default........................................ 21
Section 6.2. Notice to Holders........................................ 23
Section 6.3. Acceleration of Maturities............................... 23
Section 6.4. Rescission of Acceleration............................... 23
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.......................... 24
Section 7.1. Consent Required......................................... 24
Section 7.2. Solicitation of Holders.................................. 24
Section 7.3. Effect of Amendment or Waiver............................ 24
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.................. 25
Section 8.1. Definitions.............................................. 25
Section 8.2. Accounting Principles.................................... 32
Section 8.3. Directly or Indirectly................................... 32
SECTION 9. MISCELLANEOUS............................................. 32
Section 9.1. Registered Notes......................................... 32
Section 9.2. Exchange of Notes........................................ 33
Section 9.3. Loss, Theft, Etc. of Notes............................... 33
Section 9.4. Expenses, Stamp Tax Indemnity............................ 33
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative........ 34
Section 9.6. Notices.................................................. 34
Section 9.7. Successors and Assigns................................... 35
Section 9.8. Survival of Covenants and Representations................ 35
Section 9.9. Severability............................................. 35
Section 9.10. Governing Law............................................ 35
Section 9.11. Captions................................................. 35
Signature Page............................................................ 36
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ATTACHMENTS TO ASSUMPTION AGREEMENT:
Schedule I - Note Purchasers and Amounts of Commitments
Exhibit A-1 - Form of 7.23% Series A Senior Note due October 1, 2000
Exhibit A-2 - Form of 7.23% Series B Senior Note due November 15, 2000
Exhibit B - Representations and Warranties of the Company
Exhibit C - Description of Special Counsel's Closing Opinion
Exhibit D - Description of Closing Opinion of Counsel to the Company
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BEI TECHNOLOGIES, INC.
XXX XXXX XXXXXX - XXXXX 0000
XXX XXXXXXXXX, XXXXXXXXXX 00000
ASSUMPTION AGREEMENT
Re: $13,440,000 7.23% Series A Senior Notes
Due October 1, 2000
and
$8,960,000 7.23% Series B Senior Notes
Due November 15, 2000
------------------------------------------
Dated as of
September 15, 1997
To the Purchasers named in Schedule I
to this Agreement
Gentlemen:
Reference is made to the Note Agreement dated as of August 15, 1993 (the
"Original Note Agreement"), among BEI Electronics, Inc., a Delaware corporation
("Electronics"), and each of you (the "Purchasers"), as amended by First
Amendment to Note Agreement dated as of April 1, 1994, Second Amendment to Note
Agreement dated as of September 30, 1994, Third Amendment to Note Agreement
dated as of December 29, 1995, and Fourth Amendment to Note Agreement dated as
of March 27, 1997 (as so amended, the "Note Agreement"), under and pursuant to
which Electronics issued and sold and you (and your predecessor as a holder of
some of the Original Notes referred to below) purchased an aggregate original
principal amount of $16,800,000 6.73% Series A Senior Notes due October 1, 2000,
and an aggregate original principal amount of $11,200,000 6.73% Series B Senior
Notes due November 15, 2000 (respectively, the "Original Series A Notes" and the
"Original Series B Notes" and collectively, the "Original Notes").
Electronics has now formed a new subsidiary, the undersigned BEI
Technologies, Inc., a Delaware corporation ("Technologies" or the "Company"),
which will principally operate Electronics' established sensors and systems
business, and Electronics intends to distribute all of the common stock of
Technologies to the holders of the common stock of Electronics on a pro rata
basis, all as described in the Preliminary Registration Statement on Form 10
filed by Electronics with the Securities and Exchange Commission on July 2,
1997,
BEI Technologies, Inc. Assumption Agreement
as amended (the "Preliminary Registration Statement"). The transaction
described in the Preliminary Registration Statement is herein sometimes referred
to as the "Spin-off".
Electronics and Technologies have proposed that, concurrently with the
consummation of the Spin-off, the Note Agreement will be amended and restated as
herein set forth; the Original Notes will be amended to increase the interest
rate thereon to 7.23% per annum; Technologies will assume the indebtedness
evidenced by the Original Notes, as so amended, and the obligations of
Electronics under the Note Agreement, as so amended and restated; Technologies
will issue its Notes described in Section 1 hereof in exchange for the surrender
by you for cancellation of the Original Notes; and Electronics will be released
and discharged from its obligations and liabilities under the Note Agreement and
the Original Notes. Based on the representations and warranties and subject to
the satisfaction of the conditions precedent hereinafter set forth, by your
execution and delivery hereof you accept such proposition of Electronics and
Technologies and you further waive any Default or Event of Default arising under
the Note Agreement as a result of the Spin-off.
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.
Section 1.1. Description of Notes. The Company will authorize the issue
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and delivery of:
(a) $13,440,000 aggregate principal amount of its 7.23% Series A Senior
Notes (the "Series A Notes") to be dated the date of issue, to bear interest
from such date at the rate of 7.23% per annum, payable semiannually on the
first day of each April and October in each year (commencing October 1, 1997)
and at maturity and to bear interest on overdue principal (including any
overdue required or optional prepayment of principal) and premium, if any, and
(to the extent legally enforceable) on any overdue installment of interest at
the rate of 9.23% per annum after the date due, whether by acceleration or
otherwise, until paid, to be expressed to mature on October 1, 2000, and to be
substantially in the form attached hereto as Exhibit A-1.
(b) $8,960,000 aggregate principal amount of its 7.23% Series B Senior
Notes (the "Series B Notes") to be dated the date of issue, to bear interest
from such date at the rate of 7.23% per annum, payable semiannually on the
fifteenth day of each May and November in each year (commencing November 15,
1997) and at maturity and to bear interest on overdue principal (including any
overdue required or optional prepayment of principal) and premium, if any, and
(to the extent legally enforceable) on any overdue installment of interest at
the rate of 9.23% per annum after the date due, whether by acceleration or
otherwise, until paid, to be expressed to mature on November 15, 2000, and to
be substantially in the form attached hereto as Exhibit A-2.
The terms "Series A Notes" and "Series B Notes", as used herein shall include
each Series A Note and Series B Note, respectively, delivered pursuant to this
Agreement; the Series A Notes and the Series B Notes are hereinafter
collectively referred to as the "Notes"; and the term "Series" shall include all
of the Series A Notes, or as the case may be, all of the
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BEI Technologies, Inc. Assumption Agreement
Series B Notes. Interest on the Notes shall be computed on the basis of a 360-
day year of twelve 30-day months. The Notes are not subject to prepayment or
redemption at the option of the Company prior to their expressed maturity dates
except on the terms and conditions and in the amounts and with the premium, if
any, set forth in (S)2 of this Agreement.
Section 1.2. Commitment, Closing Date. Subject to the terms and
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conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to issue and deliver to each
Purchaser, and such Purchaser agrees to accept from the Company, Notes of the
Series and in the principal amount set forth opposite such Purchaser's name in
Schedule I hereto in exchange for the surrender for cancellation of Original
Series A Notes or, as the case may be, Original Series B Notes in an unpaid
principal amount equal to 100% of the principal amount thereof on the Closing
Date hereafter mentioned, all as specified in Schedule I hereto.
Delivery of the Notes will be made at the offices of Xxxxxxx and Xxxxxx,
000 Xxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, against surrender for
cancellation of Original Notes at 10:00 a.m., San Francisco time, on September
26, 1997 or such later date as shall mutually be agreed upon by the Company and
the Purchasers (the "Closing Date"). The Notes delivered to each Purchaser on
the Closing Date will be delivered to such Purchaser in the form of a single
registered Note in the form attached hereto as Exhibit A-1 or Exhibit A-2, as
the case may be, in the full amount to be acquired by such Purchaser (unless
different denominations are specified by such Purchaser), registered in such
Purchaser's name or in the name of such Purchaser's nominee, all as such
Purchaser may specify at any time prior to the date fixed for delivery.
Section 1.3. Several Obligations. The obligations of each Purchaser shall be
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several and not joint and no Purchaser shall be liable or responsible for the
acts of any other Purchaser.
SECTION 2. PREPAYMENT OF NOTES.
Section 2.1. Required Prepayments.
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(a) Series A Notes. On October 1 in each year, commencing October 1, 1997
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and ending October 1, 1999, both inclusive, the Company will prepay and apply
and there shall become due and payable on the principal indebtedness evidenced
by the Series A Notes an amount equal to the lesser of (i) $3,360,000 and (ii)
the principal amount of the Series A Notes then outstanding. The entire
remaining principal amount of the Series A Notes shall become due and payable
on October 1, 2000.
(b) Series B Notes. On November 15 in each year, commencing November 15,
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1997 and ending November 15, 1999, both inclusive, the Company will prepay and
apply and there shall become due and payable on the principal indebtedness
evidenced by the Series B Notes an amount equal to the lesser of (i)
$2,240,000 and (ii) the principal amount of the Series B Notes then
outstanding.
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BEI Technologies, Inc. Assumption Agreement
The entire remaining principal amount of the Series B Notes shall become due
and payable on November 15, 2000.
No premium shall be payable in connection with any required prepayment made
pursuant to this (S)2.1. For purposes of this (S)2.1, any prepayment of less
than all of the outstanding Notes of any Series pursuant to (S)2.2 shall be
deemed to be applied first, to the amount of principal scheduled to remain
unpaid at the maturity of such Series, and then to the remaining scheduled
principal payments on the Notes of such Series in inverse chronological order.
In the event of any purchase or other acquisition by the Company or
Electronics or by any Subsidiary or Affiliate of the Company or Electronics of
less than all of the Notes of either Series, the amount of the payments required
at maturity and each prepayment required to be made pursuant to this (S)2.1 on
the Notes of such Series shall be reduced in the proportion that the principal
amount of such purchase or other acquisition bears to the unpaid principal
amount of the Notes of such Series immediately prior to such purchase or other
acquisition (after giving effect to any prepayment of the Notes of such Series
made pursuant to this (S)2.1 on the date of such purchase or other acquisition).
Section 2.2. Optional Prepayment with Premium. In addition to the payments
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required by (S)2.1, upon compliance with (S)2.3 the Company shall have the
privilege, at any time and from time to time, of prepaying the outstanding
Notes, either in whole or in part (but if in part then in a minimum principal
amount of $100,000) by payment of the principal amount of the Notes, or portion
thereof to be prepaid, and accrued interest thereon to the date of such
prepayment, together with a premium equal to the Make-Whole Amount, determined
as of three business days prior to the date of such prepayment pursuant to this
(S)2.2.
Section 2.3. Notice of Optional Prepayments. The Company will give notice of
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any prepayment of the Notes pursuant to (S)2.2 to each Holder not less than 30
days nor more than 60 days before the date fixed for such optional prepayment
specifying (i) such date, (ii) the principal amount of the Holder's Notes to be
prepaid on such date, (iii) that a premium may be payable, (iv) the date when
such premium will be calculated, (v) the estimated premium, and (vi) the accrued
interest applicable to the prepayment. Such notice of prepayment shall also
certify all facts, if any, which are conditions precedent to any such
prepayment. Notice of prepayment having been so given, the aggregate principal
amount of the Notes specified in such notice, together with accrued interest
thereon and the premium, if any, payable with respect thereto shall become due
and payable on the prepayment date specified in said notice. Not later than two
business days prior to the prepayment date specified in such notice, the Company
shall provide each Holder written notice of the premium, if any, payable in
connection with such prepayment and, whether or not any premium is payable, a
reasonably detailed computation of the Make-Whole Amount.
Section 2.4. Application of Prepayments. All partial prepayments of the Notes
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of either Series pursuant to (S)2.1 shall be allocated among all of the Notes of
such Series in accordance with the unpaid principal amounts thereof, and all
partial prepayments pursuant
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BEI Technologies, Inc. Assumption Agreement
to (S)2.2 shall be applied on all outstanding Notes of both Series ratably in
accordance with the unpaid principal amounts thereof.
Section 2.5. Direct Payment. Notwithstanding anything to the contrary
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contained in this Agreement or the Notes, in the case of any Note owned by any
Holder that is a Purchaser or any other Institutional Holder which has given
written notice to the Company requesting that the provisions of this (S)2.5
shall apply, the Company will punctually pay when due the principal thereof,
interest thereon and Make-Whole Amount, if any, due with respect to said
principal, without any presentment thereof, directly to such Holder at its
address set forth herein or such other address as such Holder may from time to
time designate in writing to the Company or, if a bank account with a United
States bank is so designated for such Holder, the Company will make such
payments in immediately available Federal funds to such bank account, marked for
attention as indicated, or in such other manner or to such other account in any
United States bank as such Holder may from time to time direct in writing.
SECTION 3. REPRESENTATIONS.
Section 3.1. Representations of the Company. The Company represents and
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warrants that all representations and warranties set forth in Exhibit B are true
and correct as of the date hereof and are incorporated herein by reference with
the same force and effect as though herein set forth in full.
Section 3.2. Representations of the Purchasers. Each Purchaser (i) represents
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that it is an insurance company regulated as an insurer under the laws of a
jurisdiction within the United States of America, (ii) represents and in
entering into this Agreement the Company understands, that such Purchaser is
acquiring the Notes for the purpose of investment and not with a view to the
distribution thereof, and that such Purchaser has no present intention of
selling, negotiating or otherwise disposing of the Notes and (iii) acknowledges
that this Note has not been registered under the Securities Act of 1933, as
amended, or any state securities law, and may not be sold, assigned, transferred
or otherwise disposed of in the absence of an effective registration statement
under the Securities Act of 1933, as amended, and applicable state securities
laws, or an exemption from such registration; it being understood, however, that
the disposition of such Purchaser's property shall at all times be and remain
within its control. Such Purchaser further represents that the Original Notes to
be surrendered by it for cancellation are held in, and the Notes being acquired
by it are being acquired for, an "insurance company general account" within the
meaning of Department of Labor Prohibited Transaction Exemption 95-60 (issued
July 12, 1995) and there is no employee benefit plan, treating as a single plan,
all plans maintained by the same employer or employee organization, with respect
to which the amount of the general account reserves and liabilities for all
contracts held by or on behalf of such plan, exceeds ten percent (10%) of the
total reserves and liabilities of such general account (exclusive of separate
account liabilities) plus surplus, as set forth in the NAIC Annual Statement
filed with such Purchaser's state of domicile. As used in this (S)3.2, the terms
"employee benefit plan" and "separate account" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
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BEI Technologies, Inc. Assumption Agreement
SECTION 4. CLOSING CONDITIONS.
Section 4.1. Conditions. The obligation of each Purchaser to acquire the Notes
-----------------------
on the Closing Date shall be subject to the performance by the Company of its
agreements hereunder which by the terms hereof are to be performed at or prior
to the time of delivery of the Notes and to the following further conditions
precedent:
(a) Closing Certificates. Such Purchaser shall have received
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(1) a certificate dated the Closing Date, signed by the President or a
Vice President of Technologies, the truth and accuracy of which shall be a
condition to such Purchaser's obligation to acquire the Notes proposed to be
delivered to such Purchaser on the Closing Date, to the effect that (i) the
representations and warranties of the Company set forth in Exhibit B hereto
are true and correct on and with respect to the Closing Date, (ii) the Company
has performed all of its obligations hereunder which are to be performed on or
prior to the Closing Date, (iii) no Default or Event of Default has occurred
and is continuing and (iv) the Spin-off has been consummated; and
(2) a certificate dated the Closing Date, signed by the President or a
Vice President of Electronics, the truth and accuracy of which shall be a
condition to such Purchaser's obligation to acquire the Notes to be delivered
to such Purchaser on the Closing Date, to the effect that (i) neither the
Preliminary Registration Statement nor any other written statement furnished
by Electronics to such Purchaser in connection with the negotiation of the
issuance of the Notes contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained therein not
misleading, (ii) there are no proceedings pending or, to the knowledge of
Electronics, threatened in any court or before any governmental authority or
arbitration board or tribunal, which challenge the Spin-off or the other
transactions contemplated by this Agreement, and (iii) neither Electronics,
directly or indirectly, nor any agent on its behalf, has offered or will offer
the Notes or any similar Security or has solicited or will solicit an offer to
acquire the Notes or any similar Security from, or has otherwise approached or
negotiated or will approach or negotiate in respect to the Notes or any
similar Security with any Person other than the Purchasers, and further
undertaking that neither Electronics, directly or indirectly, nor any agent on
its behalf, has offered or will offer the Notes or any similar Security or has
solicited or will solicit an offer to acquire the Notes or any similar
Security from any Person so as to bring the issuance and sale of the Notes
within the provisions of Section 5 of the Securities Act of 1933, as amended.
(b) Legal Opinions. On the Closing Date, such Purchaser shall have
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received from Xxxxxxx and Xxxxxx, who are acting as special counsel to the
Purchasers in this transaction, and from Xxxxxx Godward LLP, counsel to the
Company, their respective
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BEI Technologies, Inc. Assumption Agreement
opinions dated the Closing Date, in form and substance satisfactory to such
Purchaser, and covering the matters set forth in Exhibits C and D, respectively,
hereto.
(c) Payment of Counsel Fees. The Company shall have paid all reasonable
-----------------------
fees and expenses of special counsel to the Purchaser to the extent that such
fees and expenses are known as of the Closing Date and are reflected in
appropriate bills or invoices delivered by such special counsel.
(d) Related Transactions. On the Closing Date the Company shall have
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consummated the delivery of the entire principal amount of the Notes scheduled
to be delivered on the Closing Date pursuant to this Agreement to the other
Purchasers.
(e) Interest on Original Notes. Electronics shall have paid all accrued
--------------------------
and unpaid interest on the Original Notes to and including the Closing Date.
(f) Satisfactory Proceedings. All proceedings taken in connection with
------------------------
the transactions contemplated by this Agreement on the Closing Date, and all
documents necessary to the consummation thereof, shall be satisfactory in form
and substance to such Purchaser, and such Purchaser shall have received a copy
(executed or certified as may be appropriate) of all legal documents or
proceedings taken in connection with the consummation of said transactions.
Section 4.2. Waiver of Conditions. If on the Closing Date the
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Company fails to tender to any Purchaser the Notes to be issued to such
Purchaser on such date or if the conditions specified in (S)4.1 have not been
fulfilled, such Purchaser may thereupon elect to be relieved of all further
obligations under this Agreement. Without limiting the foregoing, if the
conditions specified in (S)4.1 have not been fulfilled, such Purchaser may waive
compliance by the Company with any such condition to such extent as such
Purchaser may in its sole discretion determine. Nothing in this (S)4.2 shall
operate to relieve the Company of any of its obligations hereunder or to waive
any Purchaser's rights against the Company.
SECTION 5. COMPANY COVENANTS.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
Section 5.1. Corporate Existence, Etc. The Company will preserve and keep in
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full force and effect, and will cause each Restricted Subsidiary to preserve and
keep in full force and effect, its corporate existence and all licenses and
permits necessary to the proper conduct of its business; provided, however, that
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the foregoing shall not prevent any transaction permitted by (S)5.13.
Section 5.2. Insurance. The Company will maintain, and will cause each
----------------------
Restricted Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers accorded a rating by A. M. Best Company, Inc. ("Best") of
A:XII or higher at the time of issuance of any such policy and in such forms and
amounts and against such risks as are
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BEI Technologies, Inc. Assumption Agreement
customary for corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties; provided, however,
that if during the term of any such insurance policy, the rating accorded the
insurer shall be less than A:XII, the Company, on the date of renewal of any
such policy (or, if such change in rating shall occur within 90 days prior to
such renewal date, within 90 days of the date of such change in rating), will
obtain such insurance policy from an insurer accorded such a rating; provided
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further, however, that (i) the Company's directors' and officers' liability
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insurance may be maintained with a syndicate of Lloyds of London, plc and (ii)
the Company's aircraft products liability insurance may be maintained with a
consortium of insurers so long as each member of such consortium is accorded a
rating by Best of A or higher at the time of issuance or renewal of any such
policy.
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with Laws. The
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Company will promptly pay and discharge, and will cause each Restricted
Subsidiary promptly to pay and discharge, all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or such Restricted
Subsidiary, respectively, or upon or in respect of all or any part of the
property or business of the Company or such Restricted Subsidiary, all trade
accounts payable in accordance with usual and customary business terms, and all
claims for work, labor or materials, which if unpaid might become a Lien upon
any property of the Company or such Restricted Subsidiary; provided, however,
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that the Company or such Restricted Subsidiary shall not be required to pay any
such tax, assessment, charge, levy, account payable or claim if (i) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any property of the Company or such Restricted Subsidiary or any material
interference with the use thereof by the Company or such Restricted Subsidiary,
and (ii) the Company or such Restricted Subsidiary shall set aside on its books,
reserves deemed by it to be adequate with respect thereto. The Company will
promptly comply and will cause each Subsidiary to comply with all laws,
ordinances or governmental rules and regulations to which it is subject
including, without limitation, the Occupational Safety and Health Act of 1970,
as amended, ERISA and all laws, ordinances, governmental rules and regulations
relating to environmental protection in all applicable jurisdictions, the
violation of which could materially and adversely affect the properties,
business, prospects, profits or condition of the Company and its Restricted
Subsidiaries or would result in any Lien not permitted under (S)5.9.
Section 5.4. Maintenance, Etc. The Company will maintain, preserve and keep,
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and will cause each Restricted Subsidiary to maintain, preserve and keep, its
properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order and from
time to time will make all necessary repairs, replacements, renewals and
additions so that at all times the efficiency thereof shall be maintained.
Section 5.5. Nature of Business. Neither the Company nor any
--------------------------------
Restricted Subsidiary will engage in any business (other than any activities
which are ancillary, incidental or necessary to the business engaged in by the
Company and its Restricted Subsidiaries on the date of the Spin-off) if, as a
result, the general nature of the business, taken on a
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BEI Technologies, Inc. Assumption Agreement
consolidated basis, which would then be engaged in by the Company and its
Restricted Subsidiaries would be substantially changed from the general nature
of the business engaged in by the Company and its Restricted Subsidiaries on the
date of the Spin-off.
Section 5.6. Consolidated Adjusted Tangible Net Worth. The Company will at all
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times keep and maintain a Consolidated Adjusted Tangible Net Worth at an amount
not less than the Benchmark Amount for the fiscal quarter of the Company
beginning September 28, 1997, and for each fiscal quarter thereafter, the
greater of (i) the Benchmark Amount and (ii) the sum of (x) the amount required
to be maintained during the immediately preceding fiscal quarter of the Company,
(y) an amount equal to 75% of Consolidated Net Income for such preceding fiscal
quarter, and (z) the amount by which the aggregate net cash proceeds to the
Company from the issue or sale of shares of capital stock of the Company or
warrants, rights or options to purchase or acquire any shares of its capital
stock after September 27, 1997 exceeds $5,000,000. "Benchmark Amount" means an
amount equal to 90% of the Consolidated Adjusted Tangible Net Worth of the
businesses to comprise the Company, determined as at September 27, 1997, as if
the Spin-off had occurred on that date.
Section 5.7. Limitations on Total Debt.
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(a) The Company will not at any time during any period set forth below
permit Total Debt of the Company and its Restricted Subsidiaries to exceed the
percentage of Total Capitalization set forth below opposite such period:
PERIOD PERCENTAGE
Fiscal year ending October 3, 1998 57%
Fiscal year ending October 2, 1999 53%
Fiscal year ending September 30, 52%
2000 and thereafter
(b) The Company will not permit any Restricted Subsidiary to create,
assume or incur or in any manner be or become liable in respect of any Current
Debt or Funded Debt, except:
(1) Current Debt and Funded Debt of the Company and its Restricted
Subsidiaries outstanding as of the Closing Date (after giving effect to the
Spin-off) and reflected in Section 5.7(b)(1) of the Disclosure Letter;
(2) Current Debt or Funded Debt of a Restricted Subsidiary to the
Company or to a Wholly-owned Restricted Subsidiary; and
(3) Additional Current Debt or Funded Debt of Restricted
Subsidiaries; provided, however, that at the time of issuance thereof and
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after giving effect thereto
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BEI Technologies, Inc. Assumption Agreement
and to the application of the proceeds thereof, Priority Obligations will not
exceed 15% of Consolidated Adjusted Tangible Net Worth.
(c) Any corporation which becomes a Restricted Subsidiary after the date
hereof shall for all purposes of this (S)5.7 be deemed to have created, assumed
or incurred at the time it becomes a Restricted Subsidiary all Current Debt and
Funded Debt of such corporation existing immediately after it becomes a
Restricted Subsidiary.
Section 5.8. Fixed Charges Coverage Ratio. The Company will keep and maintain
-----------------------------------------
the ratio of Net Income Available for Fixed Charges to Fixed Charges for each
period of four consecutive fiscal quarters at not less than 2.0 to 1.0.
Section 5.9. Limitation on Liens. The Company will not, and will not permit
--------------------------------
any Restricted Subsidiary to, create or incur, or suffer to be incurred or to
exist, any Lien on its or their property or assets, whether now owned or
hereafter acquired, or upon any income or profits therefrom, or transfer any
property for the purpose of subjecting the same to the payment of obligations in
priority to the payment of its or their general creditors, or acquire or agree
to acquire, or permit any Restricted Subsidiary to acquire, any property or
assets upon conditional sales agreements or other title retention devices,
except:
(a) Liens for property taxes and assessments or governmental charges or
levies and Liens securing claims or demands of mechanics and materialmen,
provided payment thereof is not at the time required by (S)5.3;
(b) Liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or in
respect of which the Company or a Restricted Subsidiary shall at any time in
good faith be prosecuting an appeal or proceeding for a review and in respect
of which a stay of execution pending such appeal or proceeding for review
shall have been secured;
(c) Liens incidental to the conduct of business or the ownership of
properties and assets (including, without limitation, Liens in connection with
worker's compensation, unemployment insurance and other like laws,
warehousemen's and attorneys' liens and statutory landlords' liens) and Liens
to secure the performance of bids, tenders or trade contracts, or to secure
statutory obligations, surety or appeal bonds or other Liens of like general
nature incurred in the ordinary course of business and not in connection with
the borrowing of money; provided in each case, the obligation secured is not
overdue or, if overdue, is being contested in good faith by appropriate
actions or proceedings;
(d) Liens relating to advance or progress payments under United States
Government contracts, provided that any such Lien encumbers only the inventory
--------
purchased with such advance or progress payments.
(e) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar
-10-
BEI Technologies, Inc. Assumption Agreement
purposes, or zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the activities of the
Company and its Restricted Subsidiaries or which customarily exist on
properties of corporations engaged in similar activities and similarly
situated and which do not in any event materially impair their use in the
operation of the business of the Company and its Restricted Subsidiaries;
(f) Liens securing Indebtedness of a Restricted Subsidiary to the Company
or to another Restricted Subsidiary;
(g) Liens existing as of the Closing Date (after giving effect to the
Spin-off) and reflected in Section 5.9(g) of the Disclosure Letter;
(h) Liens incurred after the Closing Date given to secure the payment of
the purchase price incurred in connection with the acquisition of fixed assets
useful and intended to be used in carrying on the business of the Company or a
Restricted Subsidiary, including Liens existing on such fixed assets at the
time of acquisition thereof or at the time of acquisition by the Company or a
Restricted Subsidiary of any business entity then owning such fixed assets,
whether or not such existing Liens were given to secure the payment of the
purchase price of the fixed assets to which they attach so long as they were
not incurred, extended or renewed in contemplation of such acquisition,
provided that (i) the Lien shall attach solely to the fixed assets acquired or
purchased, (ii) at the time of acquisition of such fixed assets, the aggregate
amount remaining unpaid on all Indebtedness secured by Liens on such fixed
assets whether or not assumed by the Company or a Restricted Subsidiary shall
not exceed an amount equal to the lesser of the total purchase price or fair
market value at the time of acquisition of such fixed assets (as determined in
good faith by the Board of Directors of the Company), and (iii) all such
Indebtedness shall have been incurred within the applicable limitations
provided in (S)5.7;
(i) any extension, renewal or replacement of any Lien permitted by the
preceding clauses (g) and (h) hereof in respect of the same property
theretofore subject to such Lien in connection with the extension, renewal or
refunding of the Indebtedness secured thereby, provided that (x) such Lien
--------
shall attach solely to the same such property, and (y) such extension, renewal
or refunding of such Indebtedness shall be without increase in the principal
remaining unpaid as of the date of such extension, renewal or refunding; and
(j) Liens incurred after the Closing Date in addition to the Liens
permitted by the preceding clauses (a) through (i) hereof, provided that,
--------
after giving effect to the incurrence of the Indebtedness secured by such
Liens and to the application of the proceeds thereof, (i) Priority Obligations
will not exceed 15% of Consolidated Adjusted Tangible Net Worth and (ii)
Priority Obligations secured by Liens granted by the Company and its
Restricted Subsidiaries will not exceed 5% of Consolidated Adjusted Tangible
Net Worth.
-11-
BEI Technologies, Inc. Assumption Agreement
Section 5.10. Limitation on Sale and Leasebacks. The Company will not, and
------------------------------------------------
will not permit any Restricted Subsidiary to, enter into any arrangement whereby
the Company or any Restricted Subsidiary shall sell or transfer any property
owned by the Company or any Restricted Subsidiary to any Person other than the
Company or a Restricted Subsidiary and thereupon the Company or any Restricted
Subsidiary shall lease or intend to lease, as lessee, the same property.
Section 5.11. Restricted Payments. The Company will not except as hereinafter
---------------------------------
provided:
(a) declare 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 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 28, 1997 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 27, 1997, 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 received during such period
from the sale of any Restricted Investments made during such period up to but
not exceeding the original cost thereof.
-12-
BEI Technologies, Inc. Assumption Agreement
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 (S)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 Company) of such property at the time of the making of the
Restricted Payment in question.
Section 5.12. Investments. The Company will not, and will not permit any
-------------------------
Restricted Subsidiary to, make any Investments, other than:
(a) Investments by the Company and its Restricted Subsidiaries in and to
Restricted Subsidiaries, including any Investment in a corporation which,
after giving effect to such Investment, will become a Restricted Subsidiary;
(b) Investments in commercial paper maturing in 270 days or less from the
date of issuance which, at the time of acquisition by the Company or any
Restricted Subsidiary, is accorded a rating of A-2 or better by Standard &
Poor's Corporation or a rating of P2 or better by Xxxxx'x Investors Service,
Inc.;
(c) Investments in direct obligations of the United States of America or
any agency or instrumentality of the United States of America, the payment or
guarantee of which constitutes a full faith and credit obligation of the
United States of America, in either case, maturing in twelve months or less
from the date of acquisition thereof;
(d) Investments in certificates of deposit maturing within one year from
the date of issuance thereof, issued by a bank or trust company organized
under the laws of the United States or any state thereof, having capital,
surplus and undivided profits aggregating at least $100,000,000 and whose
long-term certificates of deposit are, at the time of acquisition thereof by
the Company or a Restricted Subsidiary, rated A or better by Standard & Poor's
Corporation or A2 or better by Xxxxx'x Investors Service, Inc.;
(e) loans or advances in the usual and ordinary course of business to
officers, directors and employees for expenses (including moving expenses
related to a transfer) incidental to carrying on the business of the Company
or any Restricted Subsidiary;
(f) receivables arising from the sale of goods and services in the
ordinary course of business of the Company and its Restricted Subsidiaries;
(g) Investments in shares of capital stock or securities acquired in
satisfaction or enforcement of any Indebtedness or Liens, in either case,
created in the ordinary course of business;
(h) Investments as set forth in Section 5.12(h) of the Disclosure Letter;
-13-
BEI Technologies, Inc. Assumption Agreement
(i) Investments constituting deposits with vendors representing advance
payments made in the ordinary course of business; and
(j) Restricted Investments made within the limitations of (S)5.11.
In valuing any Investments for the purpose of applying the limitations set
forth in (S)5.11 or this (S)5.12, such Investments shall be taken at the
original cost thereof, without allowance for any subsequent write-offs or
appreciation or depreciation therein, but less any amount repaid or recovered on
account of capital or principal.
For purposes of this (S)5.12, at any time when a corporation becomes a
Restricted Subsidiary by designation or otherwise, all Investments of such
corporation at such time shall be deemed to have been made by such corporation,
as a Restricted Subsidiary, at such time.
Section 5.13. Mergers, Consolidations and Sales of Assets. (a) The Company
---------------------------------------------------------
will not, and will not permit any Restricted Subsidiary to, (i) consolidate with
or be a party to a merger with any other corporation or (ii) sell, lease or
otherwise dispose of all or any substantial part (as defined in paragraph (d) of
this (S)5.13) of the assets of the Company and its Restricted Subsidiaries;
provided, however, that:
-------- -------
(1) any Restricted Subsidiary may merge or consolidate with or into the
Company or any Wholly-owned Restricted Subsidiary so long as in any merger or
consolidation involving the Company, the Company shall be the surviving or
continuing corporation;
(2) the Company may consolidate or merge with any other corporation if
(i) either (x) the Company shall be the surviving or continuing corporation or
(y) the surviving or continuing corporation shall (A) be a corporation
incorporated and existing under the laws of any state of the United States,
(B) have substantially all of its assets and conduct substantially all of its
business within the United States, and (C) expressly assume, by written
agreement delivered to each holder of the Notes and satisfactory in form and
substance to the Holders of a majority in principal amount of the Notes, all
of the obligations of the Company under this Agreement, and (ii) at the time
of such consolidation or merger and after giving effect thereto no Default or
Event of Default shall have occurred and be continuing; and
(3) any Restricted Subsidiary may sell, lease or otherwise dispose of
all or any substantial part of its assets to the Company or any Wholly-owned
Restricted Subsidiary.
(b) The Company will not permit any Restricted Subsidiary to issue or
sell any shares of stock of any class (including as "stock" for the purposes of
this (S)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
-14-
BEI Technologies, Inc. Assumption Agreement
stock described in Section 5.13(b) and Section B-1 of the Disclosure Letter,
(ii) for the purpose of qualifying directors, or (iii) in satisfaction of the
validly pre-existing preemptive 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.
(c) The Company will not sell, transfer or otherwise dispose of any
shares of stock of any Restricted Subsidiary (except to qualify directors) or
any Indebtedness of any Restricted Subsidiary, and will not permit any
Restricted Subsidiary to sell, transfer or otherwise dispose of (except to the
Company or a Wholly-owned Restricted Subsidiary) any shares of stock or any
Indebtedness of any other Restricted Subsidiary, unless:
(1) simultaneously with such sale, transfer, or disposition, all
shares of stock and all Indebtedness of such Restricted Subsidiary at the time
owned by the Company and by every other Restricted Subsidiary shall be sold,
transferred or disposed of as an entirety;
(2) the Board of Directors of the Company shall have determined, as
evidenced by a resolution thereof, that the proposed sale, transfer or
disposition of said shares of stock and Indebtedness is in the best interests
of the Company;
(3) said shares of stock and Indebtedness are sold, transferred or
otherwise disposed of to a Person, for a cash consideration or other
consideration which shall be treated as a Restricted Investment and on terms
reasonably deemed by the Board of Directors to be adequate and satisfactory;
(4) the Restricted Subsidiary being disposed of shall not have any
continuing investment in the Company or any other Restricted Subsidiary not
being simultaneously disposed of; and
(5) such sale or other disposition does not involve a substantial part
(as hereinafter defined) of the assets of the Company and its Restricted
Subsidiaries.
(d) As used in this (S)5.13, a sale, lease or other disposition of assets
shall be deemed to be a "substantial part" of the assets of the Company and its
Restricted Subsidiaries if the book value of such assets, when added to the book
value of all other assets sold, leased or otherwise disposed of by the Company
and its Restricted Subsidiaries (other than in the ordinary course of business)
during the 12-month period ending with the date of such sale, lease or other
disposition, exceeds 10% of consolidated assets, determined as of the end of the
immediately preceding fiscal year. For purposes of making any determination of
"substantial part", the net proceeds of a sale, lease or other disposition of
assets (in an amount not exceeding the book value of such assets) shall be
excluded from any computation thereof to the extent that the net proceeds of
such sale, lease or other disposition, when added to the book value of all other
assets sold, leased or otherwise disposed of by the Company and its Restricted
Subsidiaries (other than in the ordinary course of business) during the 12-month
period ending with the date of such sale, lease or other disposition,
-15-
BEI Technologies, Inc. Assumption Agreement
exceed 10% of consolidated assets, determined as of the end of the immediately
preceding fiscal year, are deposited within 90 days after such sale, lease or
other disposition in an account which is segregated from all other accounts and
funds of the Company and identified as holding such proceeds, provided that such
proceeds are applied within one year after such sale, lease or other disposition
to either (i) purchase a business enterprise, a line of business or fixed or
capital assets useful and intended to be used in the business of the Company or
a Restricted Subsidiary, or (ii) prepay the Notes in accordance with (S)2.2.
(e) The Company will not, and will not permit any Restricted Subsidiary
to, sell any bills, notes, accounts receivable, installment notes, credit
claims, chooses in action or securities from time to time owned by the Company
or any Restricted Subsidiary for less than face value or in any manner or on any
terms whereby there may be imposed upon the Company or any Restricted Subsidiary
any liability by way of endorsement, guaranty or agreement to repurchase, or any
direct or indirect liability on any contractual or other obligation of others.
Section 5.14. Guaranties. The Company will not, and will not permit any
------------------------
Restricted Subsidiary to, become or be liable in respect of any Guaranty except
Guaranties by the Company which either (a) are limited in amount to a stated
maximum dollar exposure or (b) constitute Guaranties of obligations incurred by
any Restricted Subsidiary, in either case, in compliance with the provisions of
this Agreement.
Section 5.15. Repurchase of Notes. Neither the Company nor any Restricted
---------------------------------
Subsidiary or Affiliate, directly or indirectly, may repurchase or make any
offer to repurchase any Notes unless an offer has been made to repurchase Notes,
pro rata, from all Holders at the same time and upon the same terms. In case the
Company repurchases or otherwise acquires any Notes, such Notes shall
immediately thereafter be cancelled and no Notes shall be issued in substitution
therefor. Without limiting the foregoing, upon the repurchase or other
acquisition of any Notes by the Company, any Restricted Subsidiary or any
Affiliate (or upon the agreement of the Company, any Restricted Subsidiary or
any Affiliate to purchase or otherwise acquire any Notes), such Notes shall no
longer be outstanding for purposes of any section of this Agreement relating to
the taking by the Holders of any actions with respect hereto, including, without
limitation, (S)6.3, (S)6.4 and (S)7.1.
Section 5.16. Transactions with Affiliates. Except as set forth in the
-------------------------------------------
Preliminary Registration Statement and in Section 5.16 of the Disclosure Letter,
the Company will not, and will not permit any Restricted Subsidiary to, enter
into or be a party to any transaction or arrangement with any Affiliate
(including, without limitation, the purchase from, sale to or exchange of
property with, or the rendering of any service by or for, any Affiliate), except
in the ordinary course of and pursuant to the reasonable requirements of the
Company's or such Restricted Subsidiary's business and upon fair and reasonable
terms no less favorable to the Company or such Restricted Subsidiary than would
obtain in a comparable arm's-length transaction with a Person other than an
Affiliate.
-16-
BEI Technologies, Inc. Assumption Agreement
Section 5.17. Termination of Pension Plans. The Company will not and
-------------------------------------------
will not permit any Subsidiary to withdraw from any Multiemployer Plan
or permit any employee benefit plan maintained by it to be terminated if such
withdrawal or termination could result in withdrawal liability (as described in
Part 1 of Subtitle E of Title IV of ERISA) or the imposition of a Lien on any
property of the Company or any Subsidiary pursuant to Section 4068 of ERISA.
Section 5.18. Reports and Rights of Inspection. The Company will keep,
----------------------------------------------
and will cause each Restricted Subsidiary to keep, proper books of record and
account in which full and correct entries will be made of all dealings or
transactions of, or in relation to, the business and affairs of the Company or
such Restricted Subsidiary, in accordance with GAAP consistently applied (except
for changes disclosed in the financial statements furnished to the Holders
pursuant to this (S)5.18 and concurred in by the independent public accountants
referred to in (S)5.18(b) hereof), and will furnish to each Institutional Holder
(in duplicate if so specified below or otherwise requested):
(a) Quarterly Statements. As soon as available and in any event within
--------------------
60 days after the end of each quarterly fiscal period (except the last) of each
fiscal year, copies of:
(1) consolidated and consolidating balance sheets of the Company and
its Restricted Subsidiaries as of the close of such quarterly fiscal period,
setting forth in comparative form the consolidated figures for the fiscal year
then most recently ended,
(2) consolidated and consolidating statements of income of the Company
and its Restricted Subsidiaries for such quarterly fiscal period and for the
portion of the fiscal year ending with such quarterly fiscal period, in each
case setting forth in comparative form the consolidated figures for the
corresponding periods of the preceding fiscal year, and
(3) consolidated and consolidating statements of cash flows of the
Company and its Restricted Subsidiaries for the portion of the fiscal year
ending with such quarterly fiscal period, setting forth in comparative form
the consolidated figures for the corresponding period of the preceding fiscal
year,
all in reasonable detail and certified as complete and correct by an authorized
financial officer of the Company;
(b) Annual Statements. As soon as available and in any event within 120
-----------------
days after the close of each fiscal year of the Company, copies of:
(1) consolidated and consolidating balance sheets of the Company and
its Restricted Subsidiaries as of the close of such fiscal year, and
-17-
BEI Technologies, Inc. Assumption Agreement
(2) consolidated and consolidating statements of income and retained
earnings and cash flows of the Company and its Restricted Subsidiaries for
such fiscal year,
in each case setting forth in comparative form the consolidated figures for the
preceding fiscal year, all in reasonable detail and accompanied by a report
thereon of a firm of independent public accountants of recognized national
standing selected by the Company to the effect that the consolidated financial
statements present fairly, in all material respects, the consolidated financial
position of the Company and its Restricted Subsidiaries as of the end of the
fiscal year being reported on and the consolidated results of the operations and
cash flows for said year in conformity with GAAP and that the examination of
such accountants in connection with such financial statements has been conducted
in accordance with generally accepted auditing standards and included such tests
of the accounting records and such other auditing procedures as said accountants
deemed necessary in the circumstances;
(c) Management Letters Promptly upon receipt thereof, a copy of the
------------------
management letter submitted to the audit committee of the board of directors of
the Company by independent certified public accountants in connection with each
annual audit of the financial statements of the Company and its Restricted
Subsidiaries made by such accountants;
(d) SEC and Other Reports. Promptly upon their becoming available, one
---------------------
copy of each financial statement, report, notice or proxy statement sent by the
Company to stockholders generally and of each regular or periodic report, and
any registration statement or prospectus filed by the Company or any Subsidiary
with any securities exchange or the Securities and Exchange Commission or any
successor agency, and copies of any orders in any proceedings to which the
Company or any of its Subsidiaries is a named party, issued by the United States
Government Accounting Office or by any court or tribunal of any other
governmental agency, Federal or state, having jurisdiction over the Company or
any of its Subsidiaries;
(e) ERISA Reports. Promptly upon the occurrence thereof, written notice
-------------
of (i) a Reportable Event with respect to any Plan; (ii) the institution of any
steps by the Company, any ERISA Affiliate, the PBGC or any other person to
terminate any Plan; (iii) the institution of any steps by the Company or any
ERISA Affiliate to withdraw from any Plan; (iv) a non-exempt "prohibited
transaction" within the meaning of Section 406 of ERISA in connection with any
Plan; (v) any material increase in the contingent liability of the Company or
any Restricted Subsidiary with respect to any post-retirement welfare liability;
or (vi) the taking of any action by, or the threatening of the taking of any
action by, the Internal Revenue Service, the Department of Labor or the PBGC
with respect to any of the foregoing;
(f) Officer's Certificates. Within the periods provided in paragraphs
----------------------
(a) and (b) above, a certificate of an authorized financial officer of the
Company stating that such officer has reviewed the provisions of this Agreement
and setting forth: (i) the
-18-
BEI Technologies, Inc. Assumption Agreement
information and computations (in sufficient detail) required in order to
establish whether the Company was in compliance with the requirements of (S)5.6
through (S)5.16 at the end of the period covered by the financial statements
then being furnished, and (ii) whether there existed as of the date of such
financial statements and whether, to the best of such officer's knowledge, there
exists on the date of the certificate or existed at any time during the period
covered by such financial statements any Default or Event of Default and, if any
such condition or event exists on the date of the certificate, specifying the
nature and period of existence thereof and the action the Company is taking and
proposes to take with respect thereto;
(g) Accountant's Certificates. Within the period provided in paragraph
-------------------------
(b) above, a certificate of the accountants who render an opinion with respect
to such financial statements, stating that they have reviewed this Agreement and
stating further whether, in making their audit, such accountants have become
aware of any Default or Event of Default under any of the terms or provisions of
this Agreement insofar as any such terms or provisions pertain to or involve
accounting matters or determinations, and if any such condition or event then
exists, specifying the nature and period of existence thereof;
(h) Unrestricted Subsidiaries. Within the respective periods provided in
-------------------------
paragraphs (a) and (b) above, financial statements of the character and for the
dates and periods as in said paragraphs (a) and (b) provided covering each
Unrestricted Subsidiary (or groups of Unrestricted Subsidiaries on a
consolidated basis); and
(i) Requested Information. With reasonable promptness, such other data
---------------------
and information as any Institutional Holder may reasonably request and the
Company may provide to such Holder without any violation of law, governmental
rule or regulation, or any contractual obligation entered into in the ordinary
course of business; provided, however, that each Holder, by its acceptance of a
-----------------
Note, agrees that with respect to any data and information obtained by such
Holder pursuant to this Agreement which has theretofore been designated as
confidential to such Holder in writing by the Company (which shall in no event
include information contained in any Form 10-K, Form 10-Q or Form 8-K or other
publicly filed documents), such Holder will use its reasonable efforts
(consistent with its established policies) to reasonably maintain the
confidential nature of the data and information therein contained; provided
--------
further, however, that anything herein contained to the contrary
----------------
notwithstanding, such Holder may, to the extent necessary, disclose or
disseminate such data and information to: (i) its employees, agents, attorneys,
and accountants who would ordinarily have access to such data and information in
the normal course of the performance of their duties; (ii) such third parties as
it may, in its reasonable discretion, deem reasonably necessary or desirable in
connection with or in response to (x) compliance with any law, ordinance or
governmental order, regulation, rule, policy, subpoena, investigation,
regulatory authority request or request, or (y) any order, decree, judgment,
subpoena, notice of discovery or similar ruling or pleading issued, filed,
served or purported on its face to be issued, filed or served (A) by or under
authority of any court, tribunal, arbitration board of any governmental or
-19-
BEI Technologies, Inc. Assumption Agreement
industry agency, commission, authority, board or similar entity or (B) in
connection with any proceeding, case or matter pending (or on its face
purported to be pending) before any court, tribunal, arbitration board or
any governmental agency, commission, authority, board or similar entity;
(iii) any prospective purchaser, securities broker or dealer or investment
banker in connection with the resale or proposed resale by such Holder of
any portion of the Notes bound by a like obligation of confidentiality; (iv)
any Person holding debt Securities of such Holder who shall have requested
to inspect such information subject to the provisions of this paragraph (i);
(v) the National Association of Insurance Commissioners; and (vi) any entity
utilizing such information to rate or classify such Holder's debt or equity
Securities or to report to the public concerning the industry of which such
Holder is a part; and, provided still further, that such Holder shall not
----------------------
be liable to the Company or any other Person for damages for any failure by
such Holder, despite such Holder's reasonable efforts so to do, to comply
with the provisions of this paragraph (i).
Without limiting the foregoing, the Company will permit each Institutional
Holder (or such Persons as such Institutional Holder may designate), to visit
and inspect, under the Company's guidance, any of the properties of the Company
or any Restricted Subsidiary not requiring any level of official United States
Government security clearance, to examine all of their books of account, records
and reports, to make copies and extracts therefrom and to discuss their
respective affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Company authorizes
said accountants to discuss with any Institutional Holder the finances and
affairs of the Company and its Restricted Subsidiaries) all at such reasonable
times and upon reasonable notice and as often as may be reasonably requested.
The Company shall not be required to pay or reimburse any such Institutional
Holder for expenses which any such Institutional Holder may incur in connection
with any such visitation or inspection, except that if such visitation or
inspection is made during any period when a Default or an Event of Default shall
have occurred and be continuing, the Company agrees to reimburse such
Institutional Holder for all such expenses promptly upon demand.
Section 5.19. Certain Changes in Accounting Principles. In the
-------------------------------------------------------
event a change after the date of this Agreement in (i) GAAP or (ii) any
regulation issued by the Securities and Exchange Commission (either such event
being referred to herein as an "Accounting Change"), which results in a material
change in the calculations of any financial covenant contained in (S)5 (the
"Affected Computation") in such a manner and to such an extent that, in the good
faith judgment of the Chief Financial Officer of the Company or the Holder or
Holders of not less than 50% of the unpaid principal amount of the Notes, as
evidenced by notice in writing from such Holder or Holders to the Company
(collectively, the "Holder Notice"), the application of the Accounting Change to
the Affected Computation would no longer reflect the intention of the parties to
the Agreements, then and in any such event:
(a) the Company shall give written notice of such determination to the
Holders promptly after making such determination or receiving a Holder Notice,
which notice shall be accompanied by a copy of such Holder Notice or an
officer's
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BEI Technologies, Inc. Assumption Agreement
certificate signed by the President, the Treasurer or any Vice President of
the Company:
(i) describing the Accounting Change in question and the particular
covenant or covenants which will be affected by such Accounting Change;
(ii) setting forth in reasonable detail (including detailed
calculations) the manner and extent to which the covenant or covenants listed
in the officer's certificate are affected by such Accounting Change; and
(iii) setting forth in reasonable detail (including detailed
calculations) the information required in order to establish that the Company
would be in compliance with the requirements of the covenant or covenants
listed in the officer's certificate if such Accounting Change was not
effective.
(b) each Holder will enter into good faith negotiations with the Company
for an equitable amendment of such covenant or covenants pursuant to (S)7 so
as to place the parties, insofar as possible, in the same relative position as
if such Accounting Change had not occurred; and
(c) for the period from the date on which such Accounting Change becomes
effective (the "Effective Date") to the effective date of an amendment to this
Agreement pursuant to (S)7, the Company shall be deemed to be in compliance
with the covenant or covenants listed in the officer's certificate if and so
long as the Company would be in compliance with such covenant or covenants if
such Accounting Change had not occurred, and if no amendment to this Agreement
has become effective within 90 days after the Effective Date of such
Accounting Change, then all accounting computations required to be made for
purposes of this Agreement thereafter shall be done in accordance with GAAP as
in effect immediately prior to that Effective Date.
Section 5.20. Fiscal Year. The Company shall not change its fiscal year
-------------------------
without the prior, written consent of the Holders.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
Section 6.1. Events of Default. Any one or more of the following shall
------------------------------
constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note when the
same shall have become due and such default shall continue for more than five
business days; or
(b) Default shall occur in the making of any required prepayment on any
of the Notes as provided in (S)2.1; or
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BEI Technologies, Inc. Assumption Agreement
(c) Default shall occur in the making of any other payment of the
principal of any Note or premium, if any, thereon at the expressed or any
accelerated maturity date or at any date fixed for prepayment; or
(d) Default shall be made in the payment when due (whether by lapse of
time, by declaration, by call for redemption or otherwise) of the principal of
or interest on any Funded Debt or Current Debt (other than the Notes) of the
Company or any Restricted Subsidiary having an aggregate unpaid principal amount
exceeding $500,000, and such default shall continue beyond the period of grace,
if any, allowed with respect thereto; or
(e) Default or the happening of any event shall have occurred and be
continuing under one or more indentures, agreements or other instruments under
which Funded Debt or Current Debt of the Company or any Restricted Subsidiary in
an aggregate unpaid principal amount exceeding $500,000 is outstanding (for
purposes of this (S)6.1(e) any undrawn amounts under a revolving credit or other
bank facility shall be deemed to be outstanding), and such default or event
shall continue, without having been effectively waived by the requisite holders
of such Funded Debt or Current Debt, for a period of time sufficient to permit
the acceleration of the maturity of any Funded Debt or Current Debt of the
Company or any Restricted Subsidiary in an aggregate amount exceeding $500,000
outstanding under all such indentures, agreements or other instruments,
regardless of whether such default or event continues after such period of time
passes or whether such acceleration occurs; or
(f) Default shall occur in the observance or performance of any covenant
or agreement contained in (S)5.6 through (S)5.13; or
(g) Default shall occur in the observance or performance of any other
provision of this Agreement which is not remedied within 30 days after the
earlier of (i) the day on which the Company first obtains knowledge of such
default, or (ii) the day on which written notice thereof is given to the Company
by any Holder; or
(h) Any representation or warranty made by Technologies herein, or made
by Electronics or Technologies in any statement or certificate furnished by
Electronics or Technologies in connection with the consummation of the issuance
an d delivery of the Notes or furnished by Technologies pursuant hereto, is
untrue in any material respect as of the date of the issuance or making thereof;
or
(i) Final judgment or judgments for the payment of money aggregating in
excess of $2,000,000 is or are outstanding against the Company or any Restricted
Subsidiary or against any property or assets of either and any one of such
judgments has remained unpaid, unvacated, unbonded or unstayed by appeal or
otherwise for a period of 30 days from the date of its entry; or
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BEI Technologies, Inc. Assumption Agreement
(j) A custodian, liquidator, trustee or receiver is appointed for the
Company or any Restricted Subsidiary or for the major part of the property of
either and is not discharged within 30 days after such appointment; or
(k) The Company or any Restricted Subsidiary becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes an
assignment for the benefit of creditors, or the Company or any Restricted
Subsidiary applies for or consents to the appointment of a custodian,
liquidator, trustee or receiver for the Company or such Restricted Subsidiary
or for the major part of the property of either; or
(l) Bankruptcy, reorganization, arrangement or insolvency proceedings, or
other proceedings for relief under any bankruptcy or similar law or laws for
the relief of debtors, are instituted by or against the Company or any
Restricted Subsidiary and, if instituted against the Company or any Restricted
Subsidiary, are consented to or are not dismissed within 90 days after such
institution.
Section 6.2. Notice to Holders. When any Event of Default described in the
------------------------------
foregoing (S)6.1 has occurred, or if any Holder or the holder of any other
evidence of Funded Debt or Current Debt of the Company gives any notice or takes
any other action with respect to a claimed default, the Company agrees to give
notice within three business days of such event to all Holders.
Section 6.3. Acceleration of Maturities. When any Event of Default described
---------------------------------------
in paragraph (a), (b) or (c) of (S)6.1 has happened and is continuing, any
Holder may by notice to the Company, declare the entire principal and all
accrued interest on the Notes held by such Holder to be, and all such Notes
shall thereupon become, forthwith due and payable, without any presentation,
demand, protest or other notice of any kind, all of which are hereby expressly
waived. When any Event of Default described in paragraphs (a) through (j),
inclusive, of said (S)6.1 has happened and is continuing, the Holder or Holders
of 25% or more of the principal amount of Notes at the time outstanding may, by
notice to the Company, declare the entire principal and all interest accrued on
all Notes to be, and all Notes shall thereupon become, forthwith due and
payable, without any presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived. When any Event of Default described in
paragraph (k) or (l) of (S)6.1 has occurred, then all outstanding Notes shall
immediately become due and payable without presentment, demand or notice of any
kind. Upon the Notes becoming due and payable as a result of any Event of
Default as aforesaid, the Company will forthwith pay to the Holders the entire
principal and interest accrued on the Notes and, to the extent not prohibited by
applicable law, an amount as liquidated damages for the loss of the bargain
evidenced hereby (and not as a penalty) equal to the Make-Whole Amount,
determined as of the date on which the Notes shall so become due and payable. No
course of dealing on the part of a Holder nor any delay or failure on the part
of any Holder to exercise any right shall operate as a waiver of such right or
otherwise prejudice such Holder's rights, powers and remedies. The Company
further agrees, to the extent permitted by law, to pay to each Holder all costs
and expenses incurred by it in the collection of any Notes upon any default
hereunder or thereon, including
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BEI Technologies, Inc. Assumption Agreement
reasonable compensation to such Holder's attorneys for all services rendered in
connection therewith.
Section 6.4. Rescission of Acceleration. The provisions of (S)6.3 are subject
---------------------------------------
to the condition that (i) in the case of an acceleration pursuant to the first
sentence of (S)6.3, such Holder may, by written notice filed with the Company,
rescind and annul such declaration and the consequence thereof and (ii) in the
case of an acceleration pursuant to the second sentence of (S)6.3, Holders
holding 66-2/3% in aggregate principal amount of the Notes then outstanding may,
by written instrument filed with the Company, rescind and annul such declaration
and the consequences thereof, in either case provided that at the time such
declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any principal,
interest or premium on the Notes which has become due and payable solely by
reason of such declaration under (S)6.3) shall have been duly paid; and
(c) each and every other Default and Event of Default shall have been
made good, cured or waived pursuant to (S)7.1;
and provided further, that no such rescission and annulment shall extend to or
----------------
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.
Section 7.1. Consent Required. Any term, covenant, agreement or
------------------------------
condition of this Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), if the Company shall have obtained
the consent in writing of Holders holding at least 66-2/3% in aggregate
principal amount of outstanding Notes; provided that without the written consent
--------
of all of the Holders, no such amendment or waiver shall be effective (i) which
will change the time or priority of payment (including any prepayment required
by (S)2.1) of the principal of or the interest on any Note or change the
principal amount thereof or change the rate of interest thereon, or (ii) which
will change any of the provisions with respect to optional prepayments, or (iii)
which will change the percentage of Holders required to consent to any such
amendment or waiver of any of the provisions of this (S)7 or (S)6.
Section 7.2. Solicitation of Holders. So long as there are any
-------------------------------------
Notes outstanding, the Company will not solicit, request or negotiate for or
with respect to any proposed waiver or amendment of any of the provisions of
this Agreement or the Notes unless each Holder (irrespective of the amount of
Notes then owned by it) shall be informed thereof by the Company and shall be
afforded the opportunity of considering the same and shall be supplied
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BEI Technologies, Inc. Assumption Agreement
by the Company with sufficient information to enable it to make an informed
decision with respect thereto. The Company will not, directly or indirectly, pay
or cause to be paid 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 any waiver or amendment of any
of the terms and provisions of this Agreement or the Notes unless such
remuneration is concurrently offered, on the same terms, ratably to all Holders.
Section 7.3. Effect of Amendment or Waiver. Any such amendment or waiver
-------------------------------------------
shall apply equally to all of the Holders and shall be binding upon them, upon
each future Holder and upon the Company, whether or not such Note shall have
been marked to indicate such amendment or waiver. No such amendment or waiver
shall extend to or affect any obligation not expressly amended or waived or
impair any right consequent thereon.
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.
Section 8.1. Definitions. Unless the context otherwise requires, the terms
------------------------
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"Acquired Technology" of any Person shall mean as of the date of any
determination thereof, the book value of technology acquired under license
agreement (less amortization) as shown on the most recent consolidated balance
sheet of such Person.
"Adjusted Intangible Assets" shall mean, as of the date of any
determination thereof, all amounts included in "Other Non Current Assets" on the
consolidated financial statements of the Company and its Restricted
Subsidiaries, including all goodwill, patents, trademarks and tradenames but
excluding Acquired Technology, land and buildings held for expansion,
investments in stock of other companies, long-term deposits and any other
tangible assets.
"Affiliate" shall mean any Person (other than a Restricted Subsidiary) (i)
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of the
Company or (iii) 5% or more of the Voting Stock (or in the case of a Person
which is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Company or a Subsidiary. 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 Stock, by contract or otherwise.
"Agreement" shall mean this Assumption Agreement.
"Benchmark Amount" is defined in (S)5.6.
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BEI Technologies, Inc. Assumption Agreement
"Capitalized Lease" shall mean any lease the obligation for Rentals with
respect to which is required to be capitalized on a consolidated balance sheet
of the lessee and its subsidiaries in accordance with GAAP.
"Capitalized Rentals" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person.
"Closing Date" shall have the meaning set forth in (S)1.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean BEI Technologies, Inc., a Delaware corporation, and
any Person who succeeds to all, or substantially all, of the assets and business
of BEI Technologies, Inc.
"Consolidated Adjusted Tangible Net Worth" shall mean, as of the date of
any determination thereof, the stockholders' equity of the Company and its
Restricted Subsidiaries determined on a consolidated basis less all Adjusted
Intangible Assets plus the lesser of (i) the aggregate amount of Adjusted
Intangible Assets acquired by the Company and its Subsidiaries after September
27, 1997 and (ii) $2,000,000.
"Consolidated Funded Debt" shall mean all Funded Debt of the Company and
its Restricted Subsidiaries, determined on a consolidated basis eliminating
intercompany items.
"Consolidated Net Income" shall mean the net income of the Company and its
Restricted Subsidiaries before extraordinary items determined on a consolidated
basis in accordance with GAAP.
"Current Debt" of any Person shall mean as of the date of any determination
thereof (i) all Indebtedness of such Person for borrowed money other than Funded
Debt of such Person and (ii) Guaranties by such Person of Current Debt of
others.
"Default" shall mean any event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, constitute an Event of
Default.
"Disclosure Letter" shall mean the disclosure letter dated September __,
1997, delivered by Electronics and Technologies to each of the Purchasers.
"Electronics" shall mean BEI Electronics, Inc., a Delaware corporation, and
any Person who succeeds to all, or substantially all, of the assets and business
of BEI Electronics, Inc.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations
-26-
BEI Technologies, Inc. Assumption Agreement
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" shall mean any corporation, trade or business that is,
along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"Event of Default" shall have the meaning set forth in (S)6.1.
"Fixed Charges" for any period shall mean on a consolidated basis the sum
of (i) all Rentals under Long-Term Leases (other than Capitalized Leases)
payable during such period by the Company and its Restricted Subsidiaries, and
(ii) all Interest Charges on all Indebtedness (including the interest component
of Rentals on Capitalized Leases) of the Company and its Restricted
Subsidiaries. The determination of Fixed Charges for any period commencing
prior to the date of the Spin-off shall be made on a pro forma basis for the
businesses to comprise the Company as if the Spin-off had occurred on the last
day prior to the commencement of such period.
"Funded Debt" of any Person shall mean (i) all Indebtedness of such Person
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),
excluding all payments in respect thereof that are required to be made within
one year from the date of any determination of Funded Debt, (ii) all Capitalized
Rentals of such Person, and (iii) all Guaranties by such Person of Funded Debt
of others.
"GAAP" shall mean generally accepted accounting principles at the time in
the United States.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, (iii) to lease property or to purchase Securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any
-27-
BEI Technologies, Inc. Assumption Agreement
Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the
principal amount of such Indebtedness for borrowed money which has been
guaranteed, and a Guaranty in respect of any other obligation or liability or
any dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such obligation, liability or dividend.
"Holder" shall mean any Person which is, at the time of reference, the
registered holder of any Note.
"Indebtedness" of any Person shall mean and include all obligations of such
Person which in accordance with GAAP shall be classified upon a balance sheet of
such Person as liabilities of such Person, and in any event shall include all
(i) obligations of such Person for borrowed money or which has been incurred in
connection with the acquisition of property or assets (excluding any obligation
with respect to covenants not to compete to the extent that such obligations are
not reflected as debt on the balance sheet of the Company and its Restricted
Subsidiaries or considered debt for income tax purposes), (ii) obligations
secured by any Lien upon property or assets owned by such Person, even though
such Person has not assumed or become liable for the payment of such
obligations, (iii) obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the event of default are limited to
repossession or sale of property, (iv) Capitalized Rentals and (v) Guaranties of
obligations of others of the character referred to in this definition.
"Institutional Holder" shall mean any Holder which is a Purchaser or an
insurance company, bank, savings and loan association, trust company, investment
company, charitable foundation, employee benefit plan (as defined in ERISA) or
other institutional investor or financial institution.
"Interest Charges" for any period shall mean all interest and all
amortization of debt discount and expense on any particular Indebtedness for
which such calculations are being made.
"Investments" shall mean all investments, in cash or by delivery of
property made, directly or indirectly in any Person, whether by acquisition of
shares of capital stock, indebtedness or other obligations or Securities or by
loan, advance, capital contribution or otherwise; provided, however, that
"Investments" shall not mean or include routine investments in property to be
used or consumed in the ordinary course of business.
"Lien" shall mean any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock,
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BEI Technologies, Inc. Assumption Agreement
stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting property. For the purposes of this
Agreement, the Company or a Restricted Subsidiary shall be deemed to be the
owner of any property which it has acquired or holds subject to a conditional
sale agreement, Capitalized Lease or other arrangement pursuant to which title
to the property has been retained by or vested in some other Person for security
purposes and such retention or vesting shall constitute a Lien.
"Long-Term Lease" shall mean any lease of real or personal property (other
than a Capitalized Lease) having a remaining term at the date of determination,
including any period for which the lease may be renewed or extended at the
option of the lessor, of more than three years.
"Make-Whole Amount" shall mean in connection with any prepayment or
acceleration of the Notes of any Series the excess, if any, of (i) the aggregate
present value as of the date of such prepayment of each dollar of principal
being prepaid (taking into account the application of such prepayment required
by (S)2.1) and the amount of interest (exclusive of interest accrued to the date
of prepayment) that would have been payable in respect of such dollar if such
prepayment had not been made, determined by discounting such amounts at the
Reinvestment Rate from the respective dates on which they would have been
payable, over (ii) 100% of the principal amount of the outstanding Notes of such
Series being prepaid. If the Reinvestment Rate is equal to or higher than
7.23%, the Make-Whole Amount shall be zero. For purposes of any determination
of the Make-Whole Amount:
"Reinvestment Rate" shall mean .50%, plus the Treasury Rate.
"Treasury Rate" shall mean the yield to maturity for actively traded
marketable U.S. Treasury fixed interest rate securities (with maturities equal
to the remaining Weighted Average Life to Maturity (rounded to the nearest
month) of the principal being prepaid (taking into account the application of
such prepayment or payment required by (S)2.1 as of the date of the proposed
prepayment of the Notes), as set forth on page "USD" of the Bloomberg
Financial Markets Service (or, if not available, any other nationally
recognized trading screen reporting on-line intraday trading in United States
government securities) at 10:00 a.m. (New York time) three business days
immediately preceding the prepayment date or as of the business day of
acceleration. In the event that no such nationally recognized trading screen
reporting on-line trading in U.S. Treasury fixed interest rate securities is
available, "Treasury Rate" shall mean the arithmetic mean of the yields
published in the Statistical Release under the caption "Treasury Constant
Maturities" for the maturity corresponding to the remaining Weighted Average
Life to Maturity (rounded to the nearest month) of the principal being prepaid
taking into account the application of such prepayment required by (S)2.1. If
no maturity exactly corresponds to such rounded Weighted Average Life to
Maturity, yields for the published maturity next longer than the Weighted
Average Life to Maturity and for the published maturity next shorter than the
Weighted Average Life to Maturity shall be interpolated from such yields on a
straight-line basis, rounding in each of such relevant periods to the nearest
month.
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BEI Technologies, Inc. Assumption Agreement
For the purposes of calculating the Treasury Rate, the most recent Statistical
Release published prior to the date of determination of the Make-Whole Amount
shall be used.
"Statistical Release" shall mean the then most recently published
statistical release designated "H.15(519)" or any successor publication which
is published weekly by the Federal Reserve System and which establishes yields
on actively traded U.S. Government Securities adjusted to constant maturities
or, if such statistical release is not published at the time of any
determination hereunder, then such other reasonably comparable index which
shall be designated by the Holders of 66-2/3% in aggregate principal amount of
the outstanding Notes.
"Weighted Average Life to Maturity" of the principal amount of the Notes
being prepaid shall mean, as of the time of any determination thereof, the
number of years obtained by dividing the then Remaining Dollar-Years of such
principal by the aggregate amount of such principal. The term "Remaining
Dollar-Years" of such principal shall mean the amount obtained by (i)
multiplying (x) the remainder of (1) the amount of principal that would have
become due on each scheduled payment date if such prepayment had not been
made, less (2) the amount of principal on the Notes scheduled to become due on
such date after giving effect to such prepayment and the application thereof
in accordance with the provisions of (S)2.1, by (y) the number of years
(calculated to the nearest one-twelfth) which will elapse between the date of
determination and such scheduled payment date, and (ii) totalling the products
obtained in (i).
"Material Adverse Effect" shall mean any material and adverse effect on the
properties, business, prospects, profits or condition (financial or otherwise)
of the Company and its Restricted Subsidiaries, taken as a whole.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Net Income Available for Fixed Charges" for any period shall mean the sum
of (i) Consolidated Net Income during such period plus (to the extent deducted
in determining Consolidated Net Income), (ii) all provisions for any Federal,
state or other income taxes made by the Company and its Restricted Subsidiaries
during such period, (iii) Fixed Charges of the Company and its Restricted
Subsidiaries during such period and (iv) amortization as reported in the
published financial statements prepared using GAAP. The determination of Net
Income Available for Fixed Charges for any period commencing prior to the date
of the Spin-off shall be made on a pro forma basis for the businesses to
---------
comprise the Company as if the Spin-off had occurred on the last day prior to
the commencement of such period.
"Note Agreement" shall have the meaning set forth in the introductory
paragraphs of this Agreement.
"Original Note Agreement" shall have the meaning set forth in the
introductory paragraphs of this Agreement.
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BEI Technologies, Inc. Assumption Agreement
"Original Notes" shall have the meaning set forth in the introductory
paragraphs of this Agreement.
"Original Series A Notes" shall have the meaning set forth in the
introductory paragraphs of this Agreement.
"Original Series B Notes" shall have the meaning set forth in the
introductory paragraphs of this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political subdivision
thereof.
"Plan" means a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Preliminary Registration Statement" shall have the meaning set forth in
the introductory paragraphs of this Agreement.
"Priority Obligations" shall mean the aggregate principal amount of (i) all
Indebtedness secured by Liens on property of the Company or any Restricted
Subsidiary other than Liens permitted by paragraphs (a) through (i) of (S)5.9
and (ii) all Current Debt or Funded Debt of Restricted Subsidiaries other than
Indebtedness permitted by clauses (1) and (2) of (S)5.7(b).
"Purchasers" shall have the meaning set forth in (S)1.1.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of the
property) payable by the Company or a Restricted Subsidiary, as lessee or
sublessee under a lease of real or personal property, but shall be exclusive of
any amounts required to be paid by the Company or a Restricted Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges. Fixed rents under
any so-called "percentage leases" shall be computed solely on the basis of the
minimum rents, if any, required to be paid by the lessee regardless of sales
volume or gross revenues.
"Reportable Event" shall have the same meaning as in ERISA.
"Restricted Investment" shall mean all Investments other than Investments
described in clauses (a) through (i) of (S)5.12.
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BEI Technologies, Inc. Assumption Agreement
"Restricted Subsidiary" shall mean any Subsidiary which is designated as a
Restricted Subsidiary on Annex A to Exhibit B hereto or any newly created or
acquired Subsidiary (i) which is organized under the laws of the United States
or any State thereof, and (ii) which conducts substantially all of its business
and has substantially all of its assets within the United States and (iii) which
is designated by the Company as a Restricted Subsidiary.
"Security" shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
"Spin-off" shall have the meaning set forth in the introductory paragraphs
of this Agreement.
The term "subsidiary" shall mean as to any particular parent corporation
any corporation, association or partnership of which more than 50% (by number of
votes) of the Voting Stock shall be beneficially owned, directly or indirectly,
by such parent corporation. The term "Subsidiary" shall mean a subsidiary of
the Company.
"Technologies" shall mean BEI Technologies, Inc., a Delaware corporation,
and any Person who succeeds to all, or substantially all, of the assets and
business of BEI Technologies, Inc.
"Total Capitalization" shall mean the sum of Consolidated Adjusted Tangible
Net Worth and Total Debt.
"Total Debt" of the Company shall mean as of the date of any determination
thereof the sum of all Current Debt of the Company and its Restricted
Subsidiaries and all Consolidated Funded Debt as of such date determined on a
consolidated basis eliminating intercompany items.
"Unrestricted Subsidiary" shall mean any Subsidiary which is not a
Restricted Subsidiary.
"Voting Stock" shall mean Securities of any class or classes, the Holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) and all Funded Debt and Current
Debt shall be owned by the Company and/or one or more of its Wholly-owned
Subsidiaries.
Section 8.2. Accounting Principles. Where the character or amount of
-----------------------------------
any asset or liability or item of income or expense is required to be determined
or any consolidation or other accounting computation is required to be made for
the purposes of this Agreement, the
-32-
BEI Technologies, Inc. Assumption Agreement
same shall be done in accordance with GAAP, to the extent applicable, except
where such principles are inconsistent with the requirements of this Agreement.
Section 8.3. Directly or Indirectly. Where any provision in this Agreement
------------------------------------
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such Person.
SECTION 9. MISCELLANEOUS.
Section 9.1. Registered Notes. The Company shall cause to be kept at its
------------------------------
principal office a register for the registration and transfer of the Notes
(hereinafter called the "Note Register") and the Company will register or
transfer or cause to be registered or transferred as hereinafter provided any
Note issued pursuant to this Agreement.
At any time and from time to time any Holder which has been duly registered
as hereinabove provided may transfer its Note upon surrender thereof at the
principal office of the Company duly endorsed or accompanied by a written
instrument of transfer duly executed by such Holder or its attorney duly
authorized in writing.
The Person in whose name any registered Note shall be registered shall be
deemed and treated as the owner and holder thereof and a Holder for all purposes
of this Agreement. Payment of or on account of the principal, premium, if any,
and interest on any registered Note shall be made to or upon the written order
of such Holder.
Section 9.2. Exchange of Notes. At any time and from time to time, upon
-------------------------------
not less than ten days' notice to that effect given by the Holder of any Notes
initially delivered or of any Notes substituted therefor pursuant to (S)9.1,
this (S)9.2 or (S)9.3, and, upon surrender of such Notes at its office, the
Company will deliver in exchange therefor, without expense to such Holder,
except as set forth below, Notes (a) of the same Series as the Notes so tendered
for exchange and (b) for the same principal amount as the then unpaid principal
amount of each of the Notes so surrendered or Notes in the denomination of not
less than 5% of the unpaid principal amount of the outstanding Notes or any
amount in excess thereof as such Holder shall specify. Each Holder agrees that
in the event it shall make any transfer of Notes, such Holder shall transfer a
ratable portion of the Series A Notes held by such Holder and Series B Notes
held by such Holder. Each exchanged Note will be dated as of the date to which
interest has been paid on the Notes so surrendered or, if such surrender is
prior to the payment of any interest thereon, then dated as of the date of
issue, registered in the name of such Person or Persons as may be designated by
such Holder, and otherwise of the same form and tenor as the Notes so
surrendered for exchange. The Company may require the payment of a sum
sufficient to cover any stamp tax or governmental charge imposed upon such
exchange or transfer. For purposes of this (S)9.2, (x) any affiliated Holder or
Holders or (y) any Holder or Holders who acquire Notes pursuant to an advisory
agreement with a single advisor who has discretion to act on behalf of such
Holder or Holders shall, in each case (x) and (y), be treated as a single
Holder.
-33-
BEI Technologies, Inc. Assumption Agreement
Section 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence
----------------------------------------
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the Holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If an Institutional Holder is the owner of any such lost, stolen
or destroyed Note, then the affidavit of an authorized officer of such owner,
setting forth the fact of loss, theft or destruction and of its ownership of
such Note at the time of such loss, theft or destruction shall be accepted as
satisfactory evidence thereof and no further indemnity shall be required as a
condition to the execution and delivery of a new Note other than the written
agreement of such owner to indemnify the Company.
Section 9.4. Expenses, Stamp Tax Indemnity. Whether or not the transactions
-------------------------------------------
herein contemplated shall be consummated, the Company agrees to pay directly all
of the Purchasers' reasonable out-of-pocket expenses in connection with the
preparation, execution and delivery of this Agreement and the transactions
contemplated hereby, including but not limited to the reasonable charges and
disbursements of special counsel to the Purchasers, duplicating and printing
costs and charges for shipping the Notes, adequately insured to each Purchaser's
home office or at such other place as such Purchaser may designate, and all such
expenses of the Holders relating to any amendment, waivers or consents pursuant
to the provisions hereof, including, without limitation, any amendments,
waivers, or consents resulting from any work-out, renegotiation or restructuring
relating to the performance by the Company of its obligations under this
Agreement and the Notes. The Company also agrees that it will pay and save each
Purchaser harmless against any and all liability with respect to stamp and other
taxes, if any, which may be payable or which may be determined to be payable in
connection with the execution and delivery of this Agreement or the Notes,
whether or not any Notes are then outstanding. The Company agrees to protect and
indemnify each Purchaser against any liability for any and all brokerage fees
and commissions payable or claimed to be payable to any Person in connection
with the transactions contemplated by this Agreement. The Company agrees, to the
extent permitted by applicable law, to pay and indemnify each Holder against any
reasonable costs and expenses, including attorneys' fees and disbursements,
incurred by such Holder in evaluating (in connection with any investigation,
litigation or other proceeding involving the Company (including, without
limitation, any threatened investigation or proceeding) relating to this
Agreement or the Notes) and enforcing any rights or remedies under this
Agreement or the Notes or in responding to any subpoena or other legal process
issued in connection with this Agreement or the transactions contemplated hereby
or by reason of any Holder's having acquired any Note, including without
limitation costs and expenses incurred in any bankruptcy case. Without limiting
the foregoing, to the extent permitted by applicable law, the Company also will
pay the reasonable fees, expenses and disbursements of an investment bank or
other firm acting as financial adviser to the Holders of the Notes following the
occurrence and during the continuance of a Default or an Event of Default or in
connection with any such amendment or waiver proposed in connection with any
potential Default or Event of Default or any workout, restructuring or similar
negotiations relating to the Notes.
-34-
BEI Technologies, Inc. Assumption Agreement
The obligations of the Company under this (S)9.4 shall survive the transfer of
any Note or portion thereof or interest therein by any Holder and the payment of
any Note.
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative. No delay or
--------------------------------------------------------------
failure on the part of any Holder in the exercise of any power or right shall
operate as a waiver thereof; nor shall any single or partial exercise of the
same preclude any other or further exercise thereof, or the exercise of any
other power or right, and the rights and remedies of each Holder are cumulative
to, and are not exclusive of, any rights or remedies any such Holder would
otherwise have.
Section 9.6. Notices. All communications provided for hereunder shall be in
---------------------
writing and, if to a Holder, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication, in each
case addressed to such Holder at its address appearing beneath its signature at
the foot of this Agreement or such other address as any Holder may designate to
the Company in writing, and if to the Company, delivered or mailed by registered
or certified mail or overnight air courier, or by facsimile communication, to
the Company at the address beneath its signature at the foot of this Agreement
or to such other address as the Company may in writing designate to the Holders;
provided, however, that a notice to a Holder by overnight air courier shall only
-----------------
be effective if delivered to such Holder at a street address designated for such
purpose in accordance with this Section, and a notice to such Holder by
facsimile communication shall only be effective if made by confirmed
transmission to such Holder at a telephone number designated for such purpose in
accordance with this Section and promptly followed by the delivery of such
notice by registered or certified mail or overnight air courier, as set forth
above.
Section 9.7. Successors and Assigns. This Agreement shall be binding upon the
-----------------------------------
Company and its successors and assigns and shall inure to the benefit of each
Purchaser and its successor and assigns, including each successive Holder or
Holders.
Section 9.8. Survival of Covenants and Representations. All covenants,
-------------------------------------------------------
representations and warranties made by Technologies herein and by Electronics
and Technologies in any certificates delivered pursuant hereto, whether or not
in connection with the Closing Date, shall survive the closing and the delivery
of this Agreement and the Notes.
Section 9.9. Severability. Should any part of this Agreement for any reason be
-------------------------
declared invalid or unenforceable, such decision shall not affect the validity
or enforceability of any remaining portion, which remaining portion shall remain
in force and effect as if this Agreement had been executed with the invalid or
unenforceable portion thereof eliminated and it is hereby declared the intention
of the parties hereto that they would have executed the remaining portion of
this Agreement without including therein any such part, parts or portion which
may, for any reason, be hereafter declared invalid or unenforceable.
Section 9.10. Governing Law. This Agreement and the Notes issued and sold
---------------------------
hereunder shall be governed by and construed in accordance with Illinois law.
-35-
BEI Technologies, Inc. Assumption Agreement
Section 9.11. Captions. The descriptive headings of the various
-----------------------
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
-36-
BEI Technologies, Inc. Assumption Agreement
The execution hereof by the Purchasers shall constitute a contract among
the Company and the Purchasers for the uses and purposes hereinabove set forth.
This Agreement may be executed in any number of counterparts, each executed
counterpart constituting an original but all together only one agreement.
Dated as of September 15, 1997.
BEI TECHNOLOGIES, INC.
By________________________________________
Its Senior Vice President and Chief
Financial Officer
By_______________________________________
Its Treasurer, Secretary and Controller
BEI TECHNOLOGIES, INC.
Xxx Xxxx Xxxxxx - Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
-37-
BEI Technologies, Inc. Assumption Agreement
Accepted as of September 15, 1997:
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By________________________________________
Its
By________________________________________
Its
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
000 Xxxx Xxxxxx
Xxx Xxxxxx, Xxxx 00000-0000
Attention: Investment Department - Securities Division
Telefacsimile: (000) 000-0000
Confirmation: (000) 000-0000
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds to:
With respect to the Series A Notes:
ABA #000000000
Norwest Bank Iowa, N.A.
7th and Xxxxxx Xxxxxxx
Xxx Xxxxxx, Xxxx 00000
For credit to Principal Mutual Life Insurance Company
Account No. 014752
OBI PFGSE(S)24800()[BEI Technologies, Inc. 7.23% Series A Senior Notes due
October 1, 2000]
With respect to the Series B Notes:
ABA #000000000
Norwest Bank Iowa, N.A.
7th and Xxxxxx Xxxxxxx
Xxx Xxxxxx, Xxxx 00000
For credit to Principal Mutual Life Insurance Company
Account No. 014752
OBI PFGSE(S)24801()
-38-
BEI Technologies, Inc. Assumption Agreement
In each case with sufficient information (including interest rate, maturity
date, interest amount, principal amount and premium amount, if applicable) to
identify the source and application of such funds.
Notices
All notices with respect to payments to:
Principal Mutual Life Insurance Company
000 Xxxx Xxxxxx
Xxx Xxxxxx, Xxxx 00000-0000
Attention: Investment-Accounting & Treasury-Securities
Telefacsimile: (000) 000-0000
Confirmation: (000) 000-0000
All other notices and communications to be addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Tax Identification No.: 00-0000000
-39-
BEI Technologies, Inc. Assumption Agreement
Accepted as of September 15, 1997:
BERKSHIRE LIFE INSURANCE COMPANY
By___________________________________
Its
BERKSHIRE LIFE INSURANCE COMPANY
000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Securities Department
Telefacsimile: (000) 000-0000
Telephone: (000) 000-0000
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "BEI
Technologies, Inc., 7.23% Series A Senior Notes due October 1, 2000, PPN 05538P
A*5 or 7.23% Series B Senior Notes due November 15, 2000, PPN 05538P A@3, as the
case may be, principal or interest") to:
The Chase Manhattan Bank, N.A. (ABA #000000000)
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
for credit to: Berkshire Life Insurance Company
Account Number 002-4-020877
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 00-0000000
-40-
BEI Technologies, Inc. Assumption Agreement
Accepted as of September 15, 1997:
TMG LIFE INSURANCE COMPANY
By: THE MUTUAL GROUP, its Agent
By______________________________
Name:
Title:
By______________________________
Name:
Title:
TMG LIFE INSURANCE COMPANY
000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000-0000
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "BEI
Technologies, Inc., 7.23% Series A Senior Notes due October 1, 2000, PPN 05538P
A*5 or 7.23% Series B Senior Notes due November 15, 2000, PPN 05538P A@3, as the
case may be, principal, premium or interest") to:
Federal Reserve Bank Minneapolis
Norwest Bank MN/Trust (ABA #000000000)
Credit Account Number: 00-00-000
For credit to: TMG Life Universal
Account Number 00000000
Contact: Xxxxxxx Xxxxxx
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed to:
-41-
BEI Technologies, Inc. Assumption Agreement
Xxxx Xxxxxx
The Mutual Group (U.S.)
000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000-0000
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 00-0000000
-42-
PRINCIPAL AMOUNT OF
NOTES TO BE ACQUIRED
NAMES AND ADDRESSES --------------------------
OF PURCHASERS SERIES A SERIES B
------------------- ----------- ----------
Principal Mutual Life Insurance
Company $12,000,000 $8,000,000
Berkshire Life Insurance Company $ 960,000 $ 640,000
The Mutual Group $ 480,000 $ 320,000
----------- ----------
Total $13,440,000 $8,960,000
=========== ==========
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
LAWS, OR AN EXEMPTION FROM SUCH REGISTRATION.
BEI TECHNOLOGIES, INC.
7.23% Series A Senior Note
Due October 1, 2000
PPN: 05538P A/*/5
No. AR-
$_________________ $____________, 19__
BEI Technologies, Inc., a Delaware corporation (the "Company"),
for value received, hereby promises to pay to
or registered assigns
on the first day of October, 2000
the principal amount of
DOLLARS ($____________)
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 7.23% per annum from the date hereof until maturity, payable
semiannually on the first day of each April and October in each year (commencing
on the first of such dates after the date hereof) and at maturity. The Company
agrees to pay interest on overdue principal (including any overdue required or
optional prepayment of principal) and premium, if any, and (to the extent
legally enforceable) on any overdue installment of interest, at the rate of
9.23% per annum after the due date, whether by acceleration or otherwise, until
paid. Both the principal hereof and interest hereon are payable at the principal
office of The First National Bank of Chicago, Chicago, Illinois, in coin or
currency of the United States of America which at the time of payment shall be
legal tender for the payment of public and private debts.
This Note is one of the 7.23% Series A Senior Notes due October 1,
2000 of the Company in the aggregate principal amount of $13,440,000 (the
"Series A Notes") issued or to be issued together with the 7.23% Series B Senior
Notes due November 15, 2000 of the
EXHIBIT A-1
[to Assumption Agreement)
Company in the aggregate principal amount of $8,960,000 (the "Series B Notes")
(the Series A Notes and the Series B Notes are hereinafter collectively referred
to as the "Notes"), under and pursuant to the terms and provisions of the
Assumption Agreement dated as of September 15, 1997 (the "Assumption
Agreement"), entered into by the Company with the original Purchasers therein
referred to, and this Note and the holder hereof are entitled equally and
ratably with the holders of all other Notes outstanding under the Assumption
Agreement to all the benefits provided for thereby or referred to therein.
Reference is hereby made to the Assumption Agreement for a statement of such
rights and benefits.
This Note and the other Notes outstanding under the Assumption
Agreement may be declared due prior to their expressed maturity dates and
certain prepayments are required to be made thereon, all in the events, on the
terms and in the manner and amounts as provided in the Assumption Agreement.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Assumption Agreement.
This Note is registered on the books of the Company and is
transferable only by surrender thereof at the principal office of the Company
duly endorsed or accompanied by a written instrument of transfer duly executed
by the registered holder of this Note or its attorney duly authorized in
writing. Payment of or on account of principal, premium, if any, and interest
on this Note shall be made only to or upon the order in writing of the
registered holder.
BEI TECHNOLOGIES, INC.
By
-------------------------------
Its
By
-------------------------------
Its
A-1-2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
LAWS, OR AN EXEMPTION FROM SUCH REGISTRATION.
BEI TECHNOLOGIES, INC.
7.23% Series B Senior Note
Due November 15, 2000
PPN: 05538P A@ 3
No. BR-
$_________________ $____________, 19__
BEI Technologies, Inc., a Delaware corporation (the "Company"),
for value received, hereby promises to pay to
or registered assigns
on the fifteenth day of November, 2000
the principal amount of
DOLLARS ($____________)
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 7.23% per annum from the date hereof until maturity, payable
semiannually on the fifteenth day of each May and November in each year
(commencing on the first of such dates after the date hereof) and at maturity.
The Company agrees to pay interest on overdue principal (including any overdue
required or optional prepayment of principal) and premium, if any, and (to the
extent legally enforceable) on any overdue installment of interest, at the rate
of 9.23% per annum after the due date, whether by acceleration or otherwise,
until paid. Both the principal hereof and interest hereon are payable at the
principal office of The First National Bank of Chicago, Chicago, Illinois, in
coin or currency of the United States of America which at the time of payment
shall be legal tender for the payment of public and private debts.
This Note is one of the 7.23% Series B Senior Notes due November 15,
2000 of the Company in the aggregate principal amount of $8,960,000 (the "Series
B Notes") issued or to be issued together with the 7.23% Series A Senior Notes
due October 1, 2000 of the
EXHIBIT A-2
[to Assumption Agreement)
Company in the aggregate principal amount of $13,440,000 (the "Series A Notes")
(the Series B Notes and the Series A Notes are hereinafter collectively referred
to as the "Notes"), under and pursuant to the terms and provisions of the
Assumption Agreement dated as of September 15, 1997 (the "Assumption
Agreement"), entered into by the Company with the original Purchasers therein
referred to, and this Note and the holder hereof are entitled equally and
ratably with the holders of all other Notes outstanding under the Assumption
Agreement to all the benefits provided for thereby or referred to therein.
Reference is hereby made to the Assumption Agreement for a statement of such
rights and benefits.
This Note and the other Notes outstanding under the Assumption
Agreement may be declared due prior to their expressed maturity dates and
certain prepayments are required to be made thereon, all in the events, on the
terms and in the manner and amounts as provided in the Assumption Agreement.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Assumption Agreement.
This Note is registered on the books of the Company and is
transferable only by surrender thereof at the principal office of the Company
duly endorsed or accompanied by a written instrument of transfer duly executed
by the registered holder of this Note or its attorney duly authorized in
writing. Payment of or on account of principal, premium, if any, and interest
on this Note shall be made only to or upon the order in writing of the
registered holder.
BEI TECHNOLOGIES, INC.
By
-------------------------------
Its
By
-------------------------------
Its
A-2-2
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each Purchaser as follows:
1. Subsidiaries. Section B-1 of the Disclosure Letter states
------------
the name of each of the Company's Subsidiaries, its jurisdiction of
incorporation and the percentage of its Voting Stock owned by the Company and/or
its Subsidiaries. Those Subsidiaries listed in paragraph 1 of Section B-1
constitute Restricted Subsidiaries. The Company and each Subsidiary has good
and marketable title to all of the shares it purports to own of the stock of
each Subsidiary, free and clear in each case of any Lien. All such shares have
been duly issued and are fully paid and non-assessable.
2. Corporate Organization and Authority. The Company, and
------------------------------------
each Restricted Subsidiary,
(a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry on
its business as now conducted and as presently proposed to be conducted,
except where the failure of which would not have a Material Adverse
Effect; and
(c) is duly licensed or qualified and is in good standing as
a foreign corporation in each jurisdiction wherein the nature of the
business transacted by it or the nature of the property owned or leased
by it makes such licensing or qualification necessary, except where the
failure of which would not have a Material Adverse Effect.
3. Business and Property. Each Purchaser has heretofore been
---------------------
furnished with a copy of the Preliminary Registration Statement, which generally
sets forth the business conducted and proposed to be conducted by the Company
and its Subsidiaries and the principal properties of the Company and its
Subsidiaries.
4. Financial Statements. (a) The combined balance sheets of
--------------------
the businesses to comprise the Company as of September 28, 1996 and September
30, 1995 and related combined statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended September 28, 1996,
accompanied by a report thereon containing an opinion unqualified as to scope
limitations imposed by the Company and otherwise without qualification except as
therein noted, by Ernst & Young, LLP, have been prepared in accordance with GAAP
consistently applied except as therein noted, are correct and complete and
present fairly the financial position of the businesses to comprise the Company
and its Subsidiaries as of such dates and the results of their operations and
changes in their financial position or cash flows for such periods. The selected
unaudited pro forma condensed combined statement of operations and balance sheet
--- -----
of the businesses to comprise the Company and its Subsidiaries as of March 29,
1997 and for the six-month period ended
EXHIBIT B
[to Assumption Agreement)
on said date prepared by the Company have been prepared in accordance with GAAP
consistently applied, are correct and complete and present fairly the financial
position of the businesses to comprise the Company and its Subsidiaries as of
such date and the results of results of their operations and changes in their
financial position or cash flows for such period.
(b) Since September 28, 1996, there has been no change in
the condition, financial or otherwise, of the businesses to comprise the
Company and its consolidated Subsidiaries as shown on the combined
balance sheet as of such date except changes in the ordinary course of
business, none of which individually or in the aggregate has had a
Material Adverse Effect.
5. Indebtedness. Sections 5.7(b)(1) and B-5 of the Disclosure
------------
Letter correctly describe all Current Debt, Funded Debt, Capitalized Leases and
Long-Term Leases of the Company and its Restricted Subsidiaries outstanding on
the Closing Date, giving effect to the consummation of the Spin-off.
6. Full Disclosure. Neither the financial statements referred
---------------
to in paragraph 4 hereof nor the Agreement, the Preliminary Registration
Statement or any other written statement furnished by Electronics or
Technologies to such Purchaser in connection with the negotiation of the
issuance of the Notes, contains any untrue statement of a material fact or omits
a material fact necessary to make the statements contained therein or herein not
misleading. There is no fact peculiar to the Company or its Subsidiaries which
Electronics or Technologies has not disclosed to such Purchaser in writing which
materially affects adversely nor, so far as Technologies can now foresee, will
have a Material Adverse Effect.
7. Pending Litigation. Except as disclosed in Section B-7 of
------------------
the Disclosure Letter, there are no proceedings pending or, to the knowledge of
the Company, threatened against or affecting the Company or any Restricted
Subsidiary in any court or before any governmental authority or arbitration
board or tribunal which would reasonably be expected to result in a Material
Adverse Effect.
8. Title to Properties. The Company and each Restricted
-------------------
Subsidiary has good and marketable title in fee simple (or its equivalent under
applicable law) to all material parcels of real property and has good title to
all the other material items of property it purports to own, including that
reflected in the most recent balance sheet referred to in paragraph 4 hereof,
except as sold or otherwise disposed of in the ordinary course of business and
except for Liens permitted by the Agreement.
9. Patents and Trademarks. The Company and each Restricted
----------------------
Subsidiary owns or possesses all the patents, trademarks, trade names, service
marks, copyright, licenses and rights with respect to the foregoing necessary
for the present and planned future conduct of its business, without any known
conflict with the rights of others, which failure to own or possess would have a
Material Adverse Effect.
-2-
10. Sale is Legal and Authorized. The issuance of the Notes by
----------------------------
the Company and compliance by the Company with all of the provisions of the
Agreement and the Notes --
(a) are within the corporate powers of the Company;
(b) will not violate any provisions of any law or any order
of any court or governmental authority or agency and will not conflict
with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under the Certificate of
Incorporation or By-laws of the Company or any indenture or other
agreement or instrument to which the Company is a party or by which it
may be bound or result in the imposition of any Liens or encumbrances on
any property of the Company; and
(c) have been duly authorized by proper corporate action on
the part of the Company (no action by the stockholders of the Company
being required by law, by the Certificate of Incorporation or By-laws of
the Company or otherwise). The Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding
obligation, contract and agreement of the Company enforceable in
accordance with its terms. On the Closing Date the Notes will have been
duly executed and delivered by the Company and will constitute the
legal, valid and binding obligations of the Company enforceable in
accordance with their respective terms.
11. No Defaults. No Default or Event of Default has occurred
-----------
and is continuing. The Company is not in default in the payment of principal or
interest on any Funded Debt or Current Debt and is not in default under any
instrument or instruments or agreements under and subject to which any Funded
Debt or Current Debt has been issued, and no event has occurred and is
continuing under the provisions of any such instrument or agreement which with
the lapse of time or the giving of notice, or both, would constitute an event of
default thereunder.
12. Governmental Consent. No approval, consent or withholding
--------------------
of objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the Spin-off or the execution and delivery by the
Company of the Agreement or the Notes or compliance by the Company with any of
the provisions of the Agreement or the Notes.
13. Taxes. All tax returns required to be filed by the Company
-----
or any Restricted Subsidiary and their respective predecessors in any
jurisdiction have, in fact, been filed, and all taxes, assessments, fees and
other governmental charges upon the Company or any Restricted Subsidiary or
their respective predecessors or upon any of their respective properties, income
or franchises, which are shown to be due and payable in such returns have been
paid. For all taxable years ending on or before ______________, the Federal
income tax liability of Electronics and its Subsidiaries has been satisfied and
either the period of limitations on assessment of additional Federal income tax
has expired or Electronics and its Subsidiaries have entered into an agreement
with the Internal Revenue Service closing conclusively the total tax liability
for the taxable year. Technologies does
-3-
not know of any proposed additional tax assessment against it for which adequate
provision has not been made on its accounts, and no material controversy in
respect of additional Federal or state income taxes due since said date is
pending or to the knowledge of the Company threatened. The provisions for taxes
on the books of the Company and each Restricted Subsidiary are adequate for all
open years, and for its current fiscal period.
14. Private Offering. Neither the Company, directly or
----------------
indirectly, nor any agent on its behalf has offered or will offer the Notes or
any similar Security or has solicited or will solicit an offer to acquire the
Notes or any similar Security from or has otherwise approached or negotiated or
will approach or negotiate in respect of the Notes or any similar Security with
any Person other than the Purchasers. Neither the Company, directly or
indirectly, nor any agent on its behalf has offered or will offer the Notes or
any similar Security or has solicited or will solicit an offer to acquire the
Notes or any similar Security from any Person so as to bring the issuance and
sale of the Notes within the provisions of Section 5 of the Securities Act of
1933, as amended.
15. ERISA. The consummation of the Spin-off and of the
-----
transactions provided for in the Agreement and compliance by the Company with
the provisions thereof and the Notes issued thereunder will not involve any
prohibited transaction within the meaning of ERISA or Section 4975 of the
Internal Revenue Code of 1986, as amended. Each Plan complies in all material
respects with all applicable statutes and governmental rules and regulations,
and (a) no Reportable Event has occurred and is continuing with respect to any
Plan, (b) neither the Company nor any ERISA Affiliate has withdrawn from any
Plan or Multiemployer Plan or instituted steps to do so, and (c) no steps have
been instituted to terminate any Plan. No condition exists or event or
transaction has occurred in connection with any Plan which could result in the
incurrence by the Company or any ERISA Affiliate of any material liability, fine
or penalty. No Plan maintained by the Company or any ERISA Affiliate, nor any
trust created thereunder, has incurred any "accumulated funding deficiency" as
defined in Section 302 of ERISA nor does the present value of all benefits
vested under all Plans exceed, as of the last annual valuation date, the value
of the assets of the Plans allocable to such vested benefits by an amount
greater than (i) $1,000,000 in the aggregate. Neither the Company nor any ERISA
Affiliate has any contingent liability with respect to any post-retirement
"welfare benefit plan" (as such term is defined in ERISA) except as has been
disclosed to the Purchasers or which would not have a Material Adverse Effect.
16. Compliance with Law. Neither the Company nor any Restricted
-------------------
Subsidiary (a) is in violation of any law, ordinance, franchise, governmental
rule or regulation to which it is subject; or (b) has failed to obtain any
license, permit, franchise or other governmental authorization necessary to the
ownership of its property or to the conduct of its business, which violation or
failure to obtain would have a Material Adverse Effect or impair the ability of
the Company to perform its obligations contained in the Agreement or the Notes.
Neither the Company nor any Restricted Subsidiary is in default with respect to
any order of any court or governmental authority or arbitration board or
tribunal.
17. Compliance with Environmental Laws. Except as set forth in
----------------------------------
paragraph 6 of Section B-7 of the Disclosure Letter, the Company is not in
violation of any applicable
-4-
Federal, state, or local laws, statutes, rules, regulations or ordinances
relating to public health, safety or the environment, including, without
limitation, relating to releases, discharges, emissions or disposals to air,
water, land or ground water, to the withdrawal or use of ground water, to the
use, handling or disposal of polychlorinated biphenyls (PCBs), asbestos or urea
formaldehyde, to the treatment, storage, disposal or management of hazardous
substances (including, without limitation, petroleum, crude oil or any fraction
thereof, or other hydrocarbons), pollutants or contaminants, to exposure to
toxic, hazardous or other controlled, prohibited or regulated substances which
violation could have a material adverse effect on the business, prospects,
profits, properties or condition (financial or otherwise) of the Company and its
Restricted Subsidiaries, taken as a whole. The Company does not know of any
liability or class of liability of the Company or any Restricted Subsidiary
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended (42 U.S.C. Section 9601 et seq.), or the Resource
-- ---
Conservation and Recovery Act of 1976, as amended (42 U.S.C. Section 6901 et
--
seq.) which would have a Material Adverse Effect.
---
-5-
DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION
The closing opinion of Xxxxxxx and Xxxxxx, special counsel to the
Purchasers, called for by (S)4.1 of the Assumption Agreement in connection with
the Closing Date, shall be dated the Closing Date and addressed to the
Purchasers, shall be satisfactory in form and substance to the Purchasers and
shall be to the effect that:
1. The Company is a corporation, validly existing and in
good standing under the laws of the State of Delaware and has the
corporate power and the corporate authority to execute and deliver the
Assumption Agreement and to issue the Notes.
2. The Assumption Agreement has been duly authorized by
all necessary corporate action on the part of the Company, has been duly
executed and delivered by the Company and constitutes the legal, valid
and binding agreement of the Company enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance and
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
3. The Notes have been duly authorized by all necessary
corporate action on the part of the Company, and the Notes being
delivered on the Closing Date have been duly executed and delivered by
the Company and constitute the legal, valid and binding obligations of
the Company enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent conveyance and similar laws affecting
creditors' rights generally, and general principles of equity
(regardless of whether the application of such principles is considered
in a proceeding in equity or at law).
4. The issuance and delivery of the Notes issued on the
Closing Date under the circumstances contemplated by the Assumption
Agreement do not, under existing law, require the registration of the
Notes under the Securities Act of 1933, as amended, or the qualification
of an indenture under the Trust Indenture Act of 1939, as amended.
The opinion of Xxxxxxx and Xxxxxx shall also state that the opinion of
Xxxxxx Godward LLP is satisfactory in scope and form to Xxxxxxx and Xxxxxx and
that, in their opinion, the Purchasers are justified in relying thereon.
In rendering the opinion set forth in paragraph 1 above, Xxxxxxx and
Xxxxxx may rely solely upon an examination of the Certificate of Incorporation
of the Company certified by, and a certificate of good standing of the Company
from, the Secretary of State of the State of Delaware and the By-laws of the
Company.
With respect to matters of fact upon which such opinion is based,
Xxxxxxx and Xxxxxx may rely on appropriate certificates of public officials and
officers of the Company.
EXHIBIT C
(to Assumption Agreement)
DESCRIPTION OF CLOSING OPINION
OF COUNSEL TO THE COMPANY
The closing opinion of Xxxxxx Godward LLP, counsel for the Company,
which is called for by (S)4.1 of the Assumption Agreement in connection with
the Closing Date, shall be dated the Closing Date and addressed to the
Purchasers, shall be satisfactory in scope and form to the Purchasers and shall
be to the effect that:
We have acted as counsel to BEI Technologies, Inc., a Delaware
corporation (the "Company"), in connection with the Assumption Agreement and the
Notes. This opinion is rendered to you in compliance with Section 4.1(b) of the
Assumption Agreement. Capitalized terms used herein without definition have the
same meanings as in the Assumption Agreement.
In our capacity as such counsel, we have examined originals, or copies
identified to our satisfaction as being true copies, of such records, documents
or other instruments as in our judgment are necessary or appropriate to enable
us to render the opinions expressed below. These records, documents and
instruments included the following:
A. The Certificate of Incorporation of the Company, as
amended to date;
B. The Bylaws of the Company, as amended to date;
C. The records of proceedings and actions of the Board
of Directors of the Company relating to the Assumption Agreement and the
transactions contemplated thereby;
D. The Assumption Agreement;
E. The Notes; and
F. The contracts, agreements and instruments involving
the borrowing of money to which the Company is subject or by which the
Company or any of its assets are bound, identified to us by responsible
officers of the Company as being all of such agreements material to the
Company (the "Material Agreements").
With your consent, in connection with this opinion, we have examined
and relied upon the representations and warranties of the Purchasers as to
factual matters contained in and made pursuant to the Assumption Agreement and
upon originals or copies certified to our satisfaction of such records,
documents, certificates, opinions, memoranda and other instruments as in our
judgment are necessary or appropriate to enable us to render the opinion
expressed below.
In rendering this opinion, we have assumed the genuineness and
authenticity of all signatures on original documents (other than the signatures
of the Company on the Assumption Agreement and the Notes); the authenticity of
all documents submitted to us as
EXHIBIT D
(to Assumption Agreement)
originals; the conformity to originals of all documents submitted to us as
copies; the accuracy, completeness and authenticity of certificates of public
officials; and the due authorization, execution and delivery of all documents
(except the due authorization, execution and delivery by the Company of the
Assumption Agreement and the Notes) where authorization, execution and delivery
are prerequisites to the effectiveness of such documents. We have also assumed
that all individuals executing and delivering documents in their individual
capacity had the legal capacity to so execute and deliver; that the Assumption
Agreement is an obligation binding upon you; and that there are no extrinsic
agreements or understandings among the parties to the Assumption Agreement that
would modify or interpret the terms of the Assumption Agreement or the
respective rights or obligations of the parties thereunder.
Our opinion is expressed with respect only to United States federal
law, the laws of the State of California (without regard to laws regarding
choice of applicable law) and the General Corporation Law of the State of
Delaware. We express no opinion as to whether the laws of any particular
jurisdiction apply.
With regard to our opinion in paragraph III below, we have, with your
permission, assumed that Illinois law is same in all material respects as
California law.
Except as set forth in paragraphs IV and VI, we express no opinion
relative to the applicability or effect of any law, rule or regulation relating
to securities or to the sale or issuance thereof.
With regard to our opinion in paragraph V below with respect to
conflicts, breaches or defaults under the Material Agreements, we have relied
solely upon (a) inquiries of officers of the Company, (b) a list supplied to us
by the Company, a copy of which has been supplied to your counsel, Xxxxxxx and
Xxxxxx, of the Material Agreements, and (c) an examination of the items on the
aforementioned list; we have made no further investigation.
We express no opinion as to the applicability or effect of any rule or
regulation relating to fraudulent transfers.
On the basis of the foregoing, and in reliance thereon, we are of the
opinion that:
I. The Company is a corporation duly organized, validly
existing and in good standing under the laws of Delaware and has all
requisite corporate power and authority to execute and perform the
Assumption Agreement and to issue the Notes and to own and operate its
properties and to carry on business and is duly qualified as a foreign
corporation to do business in California.
II. The Assumption Agreement and the Notes have been duly
authorized by all necessary corporate action on the part of the Company,
and have been duly executed and delivered by the Company and constitute
the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as
enforceability may be subject to or limited by (i) general
D-2
equity principles and to limitations on the availability of equitable
relief including specific performance; (ii) the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting the rights of creditors generally; and (iii)
limitations on a borrower's ability to waive rights or benefits given by
statute or otherwise, but in our view such limitations will not, subject
to the other exceptions, qualifications and limitations in this letter,
render the Assumption Agreement or the Notes invalid as a whole or
substantially interfere with the realization of the principal benefits
provided by the Assumption Agreement and the Notes.
III. No governmental consents, approvals, authorizations,
registrations, declarations or filings on the part of the Company are
required under United States federal law or the laws of the State of
California for the due execution and delivery by the Company of the
Assumption Agreement or the Notes.
IV. The issuance of the Notes issued on the date hereof and
the execution, delivery and performance by the Company of the Assumption
Agreement do not conflict with or result in any breach of any of the
provisions of or constitute a default under or result in the creation or
imposition of any Lien upon any of the property of the Company pursuant
to the provisions of its Certificate of Incorporation or bylaws or any
of the Material Agreements.
VI. The offer and issuance of the Notes is exempt from the
registration requirements of the Securities Act of 1933, as amended, and
does not require the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
VII. The Spin-off has been consummated.
This opinion is rendered only to the Purchasers and is solely for
their benefit in connection with the above transactions. This opinion may not
be relied upon by any other person, firm or corporation for any purpose without
our prior written consent. You may, however, deliver a copy of this opinion to
transferees of the Notes in connection with such transfer and they may rely upon
it as if it were addressed and had been delivered to them on the date hereof.
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