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EXHIBIT 10.39
AMENDED AND RESTATED FINANCIAL SUPPORT AGREEMENT
AMENDED AND RESTATED FINANCIAL SUPPORT AGREEMENT, dated as of
July 31, 1997 (the "Agreement"), among Aurora Electronics, Inc., a Delaware
corporation (the "Company"), Aurora Electronics Group, Inc., a California
corporation and wholly-owned subsidiary of the Company ("AEG"), Welsh, Carson,
Xxxxxxxx & Xxxxx VII, L.P., a Delaware limited partnership ("WCAS VII"), and
WCAS Capital Partners II, L.P., a Delaware limited partnership ("WCAS XX XX" and
collectively with WCAS VII, the "Guarantors").
WHEREAS, pursuant to the Credit Agreement, dated as of March 29,
1996 (the "Credit Agreement"), as amended, among AEG, the guarantors named
therein, the lenders named therein (collectively, the "Lenders"), and The Chase
Manhattan Bank (formerly known as Chemical Bank, N.A.) as a Lender and as agent
for the Lenders (in such capacity, "Agent"), AEG is indebted to the Lenders and
the Company is a guarantor of the obligations of AEG to the Lenders thereunder;
WHEREAS, various defaults existed under the Credit Agreement,
which defaults gave the Lenders the right to accelerate the maturity of AEG's
indebtedness thereunder;
WHEREAS, in order to enhance and protect their existing
substantial equity investments in the Company and to facilitate the waiver of
such defaults and the amendment of certain provisions of the Credit Agreement by
the Lenders in various respects beneficial to the Company in accordance with the
Waiver and Amendment Agreement No. 3 to the Credit Agreement, dated as of
September 30, 1996, the Guarantors agreed to assume additional financial risk in
their roles as shareholders by issuing the Limited (Overadvance) Guarantee and
the Limited (Acquisition) Guarantee (each as hereinafter defined) pursuant to
the Financial Support Agreement, dated as of September 30, 1996 (the "Financial
Support Agreement"), among the Company, AEG and the Guarantors;
WHEREAS, in giving the Limited (Overadvance) Guarantee and the
Limited (Acquisition) Guarantee (collectively, the
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"Original Guarantees"), the Guarantors would make additional contributions to
the capital of the Company;
WHEREAS, in recognition of the additional financial risk that
each of the Guarantors assumed by agreeing to give the Original Guarantees (and
not as compensation or a payment (x) for any services or (y) otherwise in
connection with the carrying on of a trade or business) and for the other
consideration set forth in the Financial Support Agreement, and in respect of
the execution and delivery by the Guarantors of the Limited (Overadvance)
Guarantee, dated as of September 30, 1996 (the "Limited (Overadvance)
Guarantee"), among the Guarantors and the Agent, (i) the Company issued to the
Guarantors the Warrants, dated as of September 30, 1996 (collectively, the
"Original Overadvance Warrants"), to purchase up to the number of shares of
Common Stock, $.03 par value ("Common Stock"), of the Company set forth in each
Original Overadvance Warrant, and (ii) AEG agreed to issue one or more 10%
Senior Subordinated Notes of AEG due 2001 substantially in the form of Exhibit A
hereto ("Notes") to each Guarantor in the event that such Guarantor shall be
required to make any payment on its respective Limited (Overadvance) Guarantee;
WHEREAS, pursuant to the Amendment No. 1 to Financial Support
Agreement, dated as of January 27, 1997, and in connection with Amendment
Agreement No. 5 to the Credit Agreement, dated as of January 27, 1997, and
Amendment Agreement No. 6 to the Credit Agreement, dated as of February 13,
1997, (i) the Guarantors agreed to (A) amend the Limited (Overadvance) Guarantee
to increase the aggregate amount of indebtedness guaranteed thereby from
$3,000,000 to $8,000,000, and (B) amend the form of the Limited (Acquisition)
Guarantee attached to the Financial Support Agreement to reduce the aggregate
amount of indebtedness to be guaranteed thereby upon issuance from $9,000,000 to
$4,000,000; and (ii) the Company (A) issued to the Guarantors the Warrants,
dated as of January 27, 1997 (collectively, the "Supplemental (Overadvance)
Warrants"), to purchase up to the number of shares of Common Stock of the
Company set forth in each Supplemental (Overadvance) Warrant, and (B) agreed to
amend the form of warrant to be issued to the Guarantors pursuant to the
Financial Support Agreement upon execution and delivery by the Guarantors of the
Limited (Acquisition) Guarantee to reflect the decreased indebtedness to be
guaranteed upon the execution and
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delivery by the Guarantors of the Limited (Acquisition) Guarantee, as amended;
WHEREAS, pursuant to the Amended and Restated Financial Support
Agreement, dated as of June 6, 1997 (the "First Amended and Restated Financial
Support Agreement"), in connection with the Waiver and Amendment Agreement No. 7
to the Credit Agreement, dated as of June 6, 1997, and in respect of the
execution and delivery by the Guarantors of the Limited (Microline) Guarantee,
dated as of June 6, 1997 (the "Limited (Microline) Guarantee"), among the
Guarantors and the Agent (which Limited (Microline) Guarantee is the "Limited
(Acquisition) Guarantee" contemplated by the Financial Support Agreement, as
amended), (i) the Company issued to the Guarantors the Warrants dated as of June
6, 1997 (collectively, the "Microline Acquisition Warrants", and collectively
with the Original Overadvance Warrants and the Supplemental (Overadvance)
Warrants, the "Outstanding Warrants"), to purchase up to the number of shares of
Common Stock of the Company set forth in each Microline Acquisition Warrant, and
(ii) AEG agreed to issue one or more Notes to each Guarantor in the event that
such Guarantor shall be required to make any payment on its respective Limited
(Microline) Guarantee;
WHEREAS, in connection with the Waiver and Amendment Agreement
No. 8 to the Credit Agreement, dated as of July 1, 1997, among the Company, AEG,
the Lenders and the Agent, the Guarantors have agreed to make the Guarantee,
substantially in the form of Exhibit B hereto (the "Final Guarantee");
WHEREAS, in recognition of the additional financial risk that
each of the Guarantors is assuming by agreeing to give the Final Guarantee (and
not as compensation or a payment (x) for any services or (y) otherwise in
connection with the carrying on of a trade or business) and for the other
consideration set forth in the Financial Support Agreement, and in respect of
the execution and delivery by the Guarantors of the Final Guarantee, (i) the
Company wishes to issue to the Guarantors the Warrants substantially in the form
of Exhibits C-1 and C-2 hereto (collectively, the "Final Warrants"), to purchase
up to the number of shares of Common Stock of the Company set forth in each
Final Warrant to reflect (together with the Outstanding Warrants) the full
amount of indebtedness to be guaranteed by the Final Guarantee, and (ii) AEG has
agreed to issue one or more Notes to each
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Guarantor in the event that such Guarantor shall be required to make any payment
on its respective Final Guarantee; and
WHEREAS, the Boards of Directors of the Company and AEG,
including a majority of disinterested directors in accordance with Section 144
of the General Corporation Law of the State of Delaware, have determined that
the transactions contemplated by this Agreement are in the best interests of the
Company and AEG, respectively, and their respective shareholders and creditors;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereby amend and restate their
agreement as follows:
I.
ISSUANCE OF WARRANTS AND NOTES
SECTION 1.01 Issuance of Final Warrants. Upon execution and
delivery by each of the Guarantors of the Final Guarantee, the Company shall
issue and deliver the Final Warrants, it being understood and agreed that the
number of shares of Common Stock into which the Final Warrants are exercisable
shall be allocated among the Guarantors in accordance with each Guarantor's
Fractional Share (as defined in the Final Guarantee).
SECTION 1.02 Allocation of Final Guarantee. Schedule I hereto
sets forth the aggregate amount of indebtedness guaranteed by each of the
Guarantors under the Final Guarantee, in each case after giving effect to the
transactions contemplated by this Agreement.
SECTION 1.03 Issuance of Notes. Subject to Article IV hereof, in
the event that at any time either Guarantor shall make a payment on its
respective Final Guarantee pursuant to a demand by the Agent, AEG shall
concurrently with such Guarantor's payment to the Agent issue and deliver to
such Guarantor Notes in an aggregate principal amount equal to the amount paid
by such Guarantor to the Agent.
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SECTION 1.04 Tax and Accounting Treatment. The Company, AEG and
the Guarantors agree that for federal, state and local income tax purposes, as
well as for financial accounting purposes: (i) they will treat the Guarantors as
having paid (x) cash consideration for the Final Warrants and (y) an amount
equal to the amount paid by the Guarantors pursuant to Section 1.03 of this
Agreement for the Notes; (ii) the issuance of the Final Warrants and the Notes
and the issuance of any shares of Common Stock upon the exercise of the
Outstanding Warrants and/or the Final Warrants (the "Warrant Shares" and
collectively with the Outstanding Warrants, the Final Warrants and the Notes,
the "Securities") is and shall be in the nature of a capital transaction; and
(iii) in no event will they treat the issuance of any of the Securities as
compensation or a payment (x) for any services or (y) otherwise in connection
with the carrying on of a trade or business, and in no event shall the Company
claim any tax deduction with respect to such issuance, exercise or conversion.
II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND AEG
The Company and AEG represent and warrant to the Guarantors as
follows:
SECTION 2.01 Organization. Each of the Company and AEG is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and the State of California, respectively, and is
duly licensed or qualified to do business as a foreign corporation and is in
good standing in each of the jurisdictions in which it owns or leases any real
property or in which the nature of business transacted by it makes such
licensing or qualification necessary except where the failure to be so licensed
or qualified would not have a material adverse affect on the business,
operations or financial condition of the Company or AEG. Each of the Company and
AEG has the corporate power and authority to own and hold its properties and to
carry on its business as currently conducted, to execute, deliver and perform
this Agreement and to issue, sell and deliver its respective Securities.
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SECTION 2.02 Authorization of Agreement, Etc. (a) Each of (i) the
execution, delivery and performance by the Company and AEG of this Agreement,
the Final Warrants and the Notes, (ii) the performance by the Company and AEG of
their respective obligations hereunder and thereunder, and (iii) the issuance
and delivery by the Company of the Warrant Shares upon exercise of the
Outstanding Warrants and/or the Final Warrants has been duly authorized by all
requisite corporate action and will not violate any provision of law, any order
of any court or other agency of government, the Certificate of Incorporation or
By-laws of the Company or AEG, as the case may be, or any provision of any
indenture, agreement or other instrument by which the Company, AEG, or any of
their subsidiaries or any of their respective properties or assets is bound or
affected, or conflict with, result in a breach of or constitute (with due notice
or lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge or
encumbrance of any nature upon any of the properties or assets of the Company,
AEG, or any of their subsidiaries.
(b) The Warrant Shares have been duly reserved by the Company for
issuance upon exercise of the Warrants and, when so issued and delivered, will
be duly authorized, validly issued and outstanding, fully paid and nonassessable
shares of the Common Stock of the Company. The issuance and delivery of the
Warrant Shares upon exercise of the Outstanding Warrants and/or the Final
Warrants are not subject to any preemptive rights of stockholders of the Company
or any subsidiary of the Company or to any right of first refusal or other
similar right in favor of any person.
SECTION 2.03 Validity. This Agreement has been duly executed and
delivered by the Company and AEG and constitutes the legal, valid and binding
obligation of the Company and AEG, enforceable in accordance with its terms.
SECTION 2.04 Authorized Capital Stock. (a) The authorized capital
stock of the Company consists of 50,000,000 shares of Common Stock and 1,000,000
shares of Preferred Stock (of which 400,000 shares have been designated as
Convertible Preferred Stock), par value $.01 per share (the "Preferred Stock"),
of the Company. As of the date hereof, shares of Common Stock are
validly issued and outstanding, fully paid and
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nonassessable (of which shares constitute treasury shares), and
400,000 shares of Preferred Stock are issued and outstanding.
(b) Except as set forth on Schedule 2.04 hereto, (i) no
subscription, warrant, option, convertible security or other right (contingent
or other) to purchase or acquire any shares of any class of capital stock of the
Company is authorized or outstanding, (ii) there is no commitment of the Company
to issue any shares, warrants, options or other such rights or to distribute to
holders of any class of its capital stock any evidences of indebtedness or
assets, and (iii) the Company has no obligation (contingent or other) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.
III.
REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS
The Guarantors represent and warrant to the Company that they are
acquiring the Securities for their own respective accounts for purposes of
investment and not with a view to or for sale in connection with any
distribution thereof. The Guarantors further represent that they understand (i)
that the Securities have not been registered under the Securities Act by reason
of their issuance in transactions exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) thereof, (ii) the Securities must be
held indefinitely unless a subsequent disposition thereof is registered under
the Securities Act or is otherwise exempt from such registration, (iii) the
Securities will bear a legend to such effect, and (iv) the Company will make a
notation on its transfer books to such effect. The Guarantors further understand
that the exemption from registration afforded by Rule 144 under the Securities
Act depends on the satisfaction of various conditions and that, if applicable,
affords the basis of sales of the Securities in limited amounts under certain
conditions. The Guarantors acknowledge that they have had a full opportunity to
request from the Company to review, and have received, all information deemed
relevant in making a decision to enter into this Agreement and consummate the
transactions contemplated hereby. The Guarantors
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are "Accredited Investors" within the meaning of Rule 501(a) of the Securities
Act.
IV.
COVENANTS OF THE COMPANY AND AEG
SECTION 4.01 Convertible Preferred Stock. The Company and AEG
covenant and agree that the Notes or any right to payment received by the
Guarantors in respect of the loans made under the Credit Agreement and their
guarantees thereof, whether by way of purchase, subrogation or otherwise, and
regardless whether and to what extent the same shall be subordinated to other
indebtedness to the Lenders or shall have been waived pending certain events,
may be applied, both as to principal and accrued and unpaid interest, dollar for
dollar, by the Guarantors as the purchase price at the option of the Guarantors
for Convertible Preferred Stock of the Company, substantially in the form of the
Company's Convertible Preferred Stock, $.01 par value (the "Convertible
Preferred Stock"), outstanding on the date hereof. In addition, in the event
that the Company or AEG shall be unable to make a payment under the Credit
Agreement, as amended, the Guarantors shall have the right (but not the
obligation) (i) to purchase additional Convertible Preferred Stock and (ii) to
require the Company to use the net proceeds of such purchase to make such
payment of its or AEG's obligations under the Credit Agreement, as amended. Each
share of Convertible Preferred Stock so purchased at $100 per share shall be
convertible into a number of shares of Common Stock at a conversion price equal
to the lower of Fair Market Value of the Common Stock as of the date hereof or
Fair Market Value of the Common Stock as of the date of the issuance of the
Notes. The Company and AEG shall use their best efforts to provide the
Guarantors with sufficient notice in advance of a payment default under the
Credit Agreement, as amended, to enable the Guarantors to exercise their
respective rights under this Article IV.
SECTION 4.02 Further Assurances. Subject to the prior written
consent of the Agent on behalf of the Lenders, upon the making of a payment by
the Guarantors on any of the Guarantees, AEG agrees to take all reasonable
actions necessary to grant a security interest in its assets to the Guarantors
(which security
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interest will be subordinate to the security interest of the Agent) as
collateral security for the payments that are made by the Guarantors with
respect to the Guarantees, including without limitation the execution and
delivery of a security agreement, financing statements and such other documents
as the Guarantors may reasonably request, and the making of all filings to
perfect such security interest as may be required under the provisions of the
Uniform Commercial Code or other applicable law or regulation in effect in each
state and Canadian province in which assets of AEG are located.
V.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE GUARANTORS
The obligations of the Guarantors hereunder are subject, at the
option of the Guarantors, to the satisfaction of each of the following
conditions:
(a) Amendments to Warrants. The Company shall have executed and
delivered to the Guarantors an amendment to each of the Outstanding Warrants,
substantially in the respective forms attached as Exhibits X-0, X-0, X-0, X-0,
X-0 and D-6 hereto.
(b) Opinion of Counsel to the Company. The Guarantors shall have
received from Xxxxxx & Xxxx L.L.P., counsel for the Company, an opinion dated
the date hereof, substantially in the form of Annex I attached hereto.
VI.
MISCELLANEOUS
SECTION 6.01 Expenses. Each party hereto will pay its own
expenses in connection with the transactions contemplated hereby, whether or not
such transactions shall be consummated.
SECTION 6.02 Survival of Agreements. All covenants, agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the
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Final Warrants and the issuance, sale and delivery of the Notes, if any.
SECTION 6.03 Parties in Interest. All covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not.
SECTION 6.04 Consent of WCAS XX XX. WCAS XX XX, in its capacity
as the holder of the 10% Senior Subordinated Note Due September 30, 2001 of the
Company in the principal amount of $10,000,000, hereby consents to the issuance
of the Notes as contemplated by this Agreement.
SECTION 6.04 Confirmation of Warrants. Each of the Outstanding
Warrants is hereby ratified and confirmed in all respects and shall remain in
full force and effect in accordance with its terms.
SECTION 6.05 Notices. All notices, requests, consent and other
communications hereunder shall be in writing and shall be mailed by first class
registered mail, postage prepaid, or sent by a recognized courier service
addressed as follows:
If to the Company to it at:
0000 Xxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: President
If to the Guarantors to them at:
000 Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx
Xxxxxx X. XxXxxxxxx
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the other.
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SECTION 6.06 Law Governing. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 6.07 Entire Agreement. This Agreement together with the
exhibits hereto and the Waiver and Amendment Agreement constitutes the entire
Agreement of the parties with respect to the subject matter hereof and may not
be modified or amended except in writing.
SECTION 6.08 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one in and the same instrument.
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IN WITNESS WHEREOF, the Company, AEG and the Guarantors have
executed this Agreement as of this 31st day of July, 1997.
AURORA ELECTRONICS, INC.
By
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Name:
Title:
AURORA ELECTRONICS GROUP, INC.
By
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Name:
Title:
WELSH, CARSON, XXXXXXXX &
XXXXX VII, L.P.
By WCAS VII Partners,
General Partner
By
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General Partner
WCAS CAPITAL PARTNERS II, L.P.
By
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Attorney-in-Fact
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SCHEDULE I
Final
Guarantor Guarantee
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WCAS VII $11,592,000
WCAS XX XX $ 408,000
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Total $12,000,000
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SCHEDULE 2.04
None.
