EXHIBIT (b)
ZERO CORPORATION
ELECTRONIC SOLUTIONS
PRIVATE SHELF AGREEMENT
$50,000,000
Shelf Facility with Electronic Solutions
$20,000,000
Shelf Facility with Zero Corporation
Dated as of January 31, 1996
TABLE OF CONTENTS
(not part of agreement)
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1A. AUTHORIZATION OF ISSUE OF ELECTRONIC NOTES.................... 1
1B. AUTHORIZATION OF ISSUE OF COMPANY NOTES....................... 1
2A. PURCHASE AND SALE OF ELECTRONIC NOTES......................... 2
2A(1). AGREEMENT TO PURCHASE ELECTRONIC NOTES........... 2
2A(2). AVAILABILITY PERIOD.............................. 2
2A(3). PURCHASE REQUEST................................. 2
2A(4). RATE QUOTES...................................... 3
2A(5). ACCEPTANCE....................................... 3
2A(6). MARKET DISRUPTION................................ 4
2B. PURCHASES AND SALE OF COMPANY NOTES........................... 4
2B(1). FACILITY......................................... 4
2B(2). ISSUANCE PERIOD.................................. 5
2B(3). REQUEST FOR PURCHASE............................. 5
2B(4). RATE QUOTES...................................... 6
2B(5). ACCEPTANCE....................................... 6
2B(6). MARKET DISRUPTION................................ 7
2C. CLOSINGS AND FEES............................................. 7
2C(1). CLOSINGS......................................... 7
2C(2). STRUCTURING FEE.................................. 8
2C(3). ISSUANCE FEE..................................... 8
2C(4). DELAYED DELIVERY FEE............................. 8
2C(5). CANCELLATION FEE................................. 9
3. CONDITIONS OF CLOSING......................................... 10
3A. CERTAIN DOCUMENTS................................ 10
3B. OPINION OF PURCHASER'S SPECIAL COUNSEL........... 11
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT....... 11
3D. PURCHASE PERMITTED BY APPLICABLE LAWS............ 11
3E. PAYMENT OF FEES.................................. 11
3F. ADDITIONAL ELECTRONIC CLOSING MATTERS............ 11
4. PREPAYMENTS................................................... 11
4A. REQUIRED PREPAYMENTS OF NOTES.................... 12
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT 12
4C. NOTICE OF OPTIONAL PREPAYMENT.................... 12
4D. APPLICATION OF PREPAYMENTS....................... 12
4E. RETIREMENT OF NOTES.............................. 12
5. AFFIRMATIVE COVENANTS......................................... 13
5A. FINANCIAL STATEMENTS; NOTICE OF DEFAULTS......... 13
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5B. INFORMATION REQUIRED BY RULE 144A................ 15
5C. INSPECTION OF PROPERTY........................... 15
5D. COVENANT TO SECURE NOTES EQUALLY................. 15
5E. MAINTENANCE OF INSURANCE......................... 15
5F. COMPLIANCE WITH LAWS............................. 16
6. NEGATIVE COVENANTS............................................ 16
6A. CURRENT RATIO.................................... 16
6B. TANGIBLE NET WORTH............................... 16
6C. CREDIT AND OTHER RESTRICTIONS.................... 16
6C(1). LIEN RESTRICTIONS................................ 16
6C(2). DEBT............................................. 17
6C(3). LOANS, ADVANCES AND INVESTMENTS.................. 18
6C(4). SALE OF STOCK AND DEBT OF SUBSIDIARIES........... 19
6C(5). MERGER AND CONSOLIDATION......................... 19
6C(6). TRANSFER OF ASSETS............................... 19
6C(7). LEASE RENTALS.................................... 20
6C(8). SALE, PLEDGE OR DISCOUNT OF RECEIVABLES.......... 20
6C(9). RELATED PARTY TRANSACTIONS....................... 20
6C(10). SUBSIDIARY DIVIDEND RESTRICTIONS................. 20
6D. ISSUANCE OF STOCK BY SUBSIDIARIES................ 20
7. EVENTS OF DEFAULT............................................. 21
7A. ACCELERATION..................................... 21
7B. RESCISSION OF ACCELERATION....................... 24
7C. NOTICE OF ACCELERATION OR RESCISSION............. 25
7D. OTHER REMEDIES................................... 25
8. REPRESENTATIONS, COVENANTS AND WARRANTIES..................... 25
8A. ORGANIZATION..................................... 25
8B. FINANCIAL STATEMENTS............................. 25
8C. ACTIONS PENDING.................................. 26
8D. OUTSTANDING DEBT................................. 26
8E. TITLE TO PROPERTIES.............................. 27
8F. TAXES............................................ 27
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS......... 27
8H. OFFERING OF NOTES................................ 28
8I. USE OF PROCEEDS, REGULATION G, ETC............... 28
8J. ERISA............................................ 28
8K. GOVERNMENTAL COMPLIANCE.......................... 29
8L. COMPLIANCE....................................... 29
8M. HOSTILE TENDER OFFERS............................ 29
8N. XXXXXXXXXX....................................... 00
0X. HOLDING COMPANY STATUS........................... 30
8P. INVESTMENT COMPANY STATUS........................ 30
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9. REPRESENTATIONS OF EACH PURCHASER............................. 30
9A. NATURE OF PURCHASE............................... 30
9B. SOURCE OF FUNDS.................................. 30
9C. NO RELIANCE ON PURCHASED COMMON STOCK............ 30
10. DEFINITIONS; ACCOUNTING MATTERS............................... 31
10A. YIELD-MAINTENANCE TERMS.......................... 31
10B. OTHER TERMS...................................... 32
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS.. 43
11. COMPANY GUARANTY OF ELECTRONIC'S OBLIGATIONS.................. 43
11A. GUARANTY OF PAYMENT & PERFORMANCE OF OBLIGATIONS. 43
11B. OBLIGATIONS UNCONDITIONAL........................ 44
11C. OBLIGATIONS UNIMPAIRED........................... 45
11D. WAIVERS OF COMPANY............................... 46
11E. REVIVAL.......................................... 48
11F. OBLIGATION TO KEEP INFORMED...................... 48
11G. BANKRUPTCY....................................... 49
12. MISCELLANEOUS................................................. 49
12A. NOTE PAYMENTS.................................... 49
12B. EXPENSES......................................... 49
12C. CONSENT TO AMENDMENTS............................ 50
12D. TRANSFER LIMITATIONS: FORM, REGISTRATION,
TRANSFER AND EXCHANGE OF NOTES; LOST NOTES....... 51
12E. PERSONS DEEMED OWNERS; PARTICIPATIONS............ 51
12F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
ENTIRE AGREEMENT................................. 52
12G. SUCCESSORS AND ASSIGNS........................... 52
12H. NOTICES.......................................... 52
12I. CONFIDENTIALITY.................................. 53
12J. PAYMENTS DUE ON NON-BUSINESS DAYS................ 54
12K. SATISFACTION REQUIREMENT......................... 54
12L. DESCRIPTIVE HEADINGS............................. 54
12M. GOVERNING LAW.................................... 54
12N. COUNTERPARTS..................................... 54
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EXHIBITS AND SCHEDULES
Information Schedule
Exhibit A - Form of Electronic Note
Exhibit A-2 - Form of Company Note
Exhibit B-1 - Form of Purchase Request (Electronic Notes)
Exhibit B-2 - Form of Request for Purchase (Company Notes)
Exhibit C-1 - Form of Confirmation of Acceptance (Electronic Notes)
Exhibit C-2 - Form of Confirmation of Acceptance (Company Notes)
Exhibit D-1 - Form of Opinion of Counsel, Electronic Note Closing
Exhibit D-2 - Form of Opinion of Counsel, Company Note Closings
Exhibit E - Subordination Terms
Schedule 6C(3) - Existing Loans, Advances and Investments
Schedule 6C(6) - Permitted Transfers of Assets
Schedule 8A - Subsidiary Information
Schedule 8C - Actions Pending
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ZERO CORPORATION
ELECTRONIC SOLUTIONS
000 Xxxxx Xxxxxx Xxxxxx, #0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
As of January 31, 1996
The Prudential Insurance Company
of America ("PRUDENTIAL")
Each Prudential Affiliate (as hereinafter
defined) which becomes bound by certain
provisions of this Agreement as hereinafter
provided (together with Prudential,
the "PURCHASERS")
c/o Prudential Capital Group
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
The undersigned, Zero Corporation (the "COMPANY") and Electronic Solutions
("ELECTRONIC"), hereby agree with you as follows:
1A. AUTHORIZATION OF ISSUE OF ELECTRONIC NOTES. Electronic will authorize
the issue of its guaranteed senior promissory notes (the "ELECTRONIC NOTES") in
the aggregate principal amount of $50,000,000, to be dated the date of issue
thereof, to mature no more than fifteen years from the date of original issuance
thereof, to have an Average Life to Maturity of not more than ten years, to bear
interest on the unpaid balance thereof at the rate per annum, and to have such
other particular terms as shall be set forth in the Confirmation of Acceptance
delivered pursuant to paragraph 2A(5), and to be substantially in the form of
Exhibit A-1 attached hereto. Each Electronic Note shall be unconditionally
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guaranteed by the Company pursuant to the guarantee set forth in paragraph 11
hereof.
1B. AUTHORIZATION OF ISSUE OF COMPANY NOTES. The Company will authorize
the issue of its senior promissory notes (the "COMPANY NOTES") in the aggregate
principal amount of $20,000,000, to be dated the date of issue thereof, to
mature, in
the case of each Note so issued, no more than fifteen years after the date of
original issuance thereof, to have an Average Life to Maturity of not more than
ten years, to bear interest on the unpaid balance thereof from the date thereof
at the rate per annum, and to have such other particular terms, as shall be set
forth, in the case of each Note so issued, in the Confirmation of Acceptance
with respect to such Note delivered pursuant to paragraph 2B(5), and to be
substantially in the form of Exhibit A-2 attached hereto. The terms "NOTE" and
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"NOTES" as used herein shall include each Electronic Note and each Company Note
delivered pursuant to any provision of this Agreement and each Note delivered in
substitution or exchange for any such Note pursuant to any such provision.
Notes which would have (i) the same final maturity, (ii) the same principal
prepayment dates, (iii) the same principal prepayment amounts (as a percentage
of the original principal amount of each Note), (iv) the same interest rate, (v)
the same interest payment periods, (vi) the same date of issuance (which, in the
case of a Note issued in exchange for another Note, shall be deemed for these
purposes the date on which such Note's ultimate predecessor Note was issued) and
(vii) the same issuer, are herein called a "SERIES" of Notes.
2A. PURCHASE AND SALE OF ELECTRONIC NOTES
2A(1). AGREEMENT TO PURCHASE ELECTRONIC NOTES. Subject to the occurrence
of an Electronic Acceptance with respect to any Electronic Notes and the terms
and conditions herein set forth, Prudential hereby agrees to purchase from
Electronic and/or cause the purchase thereof by one or more Prudential
Affiliates, Electronic Notes in an aggregate principal amount determined as
hereinafter provided, at a price equal to 100% of the principal amount thereof.
Electronic Notes shall not be issuable hereunder on more than one occasion.
2A(2). AVAILABILITY PERIOD. Electronic Notes may be issued and sold
pursuant to this Agreement until June 28, 1996. The period during which
Electronic Notes may be issued and sold pursuant to this Agreement is herein
called the "AVAILABILITY PERIOD".
2A(3). PURCHASE REQUEST. Electronic may during the Availability Period
make a request for purchase of Electronic Notes (any such request being herein
called a "PURCHASE REQUEST"). A Purchase Request shall be made to Prudential by
telecopier or overnight delivery service, and shall (i) specify the aggregate
principal amount of Electronic Notes covered thereby, which shall not be less
than $10,000,000 and shall not be greater than $50,000,000, (ii) specify the
principal amount, final maturity, principal prepayment dates and amounts and
interest payment periods (which shall be semi-annually in arrears) of the
Electronic Notes (which specification must
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provide for a maturity of not more than fifteen years and an Average Life to
Maturity of not more than ten years), (iii) confirm that the use of proceeds of
such Electronic Notes shall be the purchase of publicly traded common stock of
the Company pursuant to a tender offer therefor and payment of expenses related
thereto, (iv) specify the proposed day for the closing of the purchase and sale
of the Electronic Notes, which shall be a Business Day during the Availability
Period not less than 5 Business Days after the making of such Purchase Request
and not later than June 28, 1996, (v) specify the number of the account and the
name and address of the depository institution to which the aggregate purchase
price of such Electronic Notes are to be transferred on the Closing Day for such
purchase and sale, (vi) certify that the representations and warranties
contained in paragraph 8 are true on and as of the date of such Purchase
Request, that there exists on the date of such Purchase Request no Event of
Default or Default and that no Material Adverse Change has occurred and (vii) be
substantially in the form of Exhibit B-1 attached hereto. Each Purchase Request
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shall be in writing and shall be deemed made when such Purchase Request and any
supplemental information requested by Prudential have been received by
Prudential. No Purchase Request may be submitted during any period of Market
Disruption.
2A(4). RATE QUOTES. Not later than three Business Days after Prudential
shall have received from the Company a Purchase Request pursuant to paragraph
2A(3), Prudential shall, unless the Purchase Request contains a false
certification or is non-conforming or a Market Disruption or Material Adverse
Change has occurred, provide to the Company by telephone or telecopier, in each
case between 9:30 a.m. and 1:30 p.m. New York City local time (or such later
time as Prudential may elect) an interest rate quote ("RATE QUOTE") for the
Electronic Notes specified in such Purchase Request. Each Rate Quote shall
represent the interest rate per annum payable on the outstanding principal
balance of such Electronic Notes at which Prudential or a Prudential Affiliate
would be willing to purchase such Notes at 100% of the principal amount thereof.
Each Rate Quote provided shall be determined by Prudential by adding (a) the
yield reported (as of the time of determination thereof by Prudential) on the
Telerate Service (or any comparable successor service or publication used by
Prudential) for a series (the "BASE TREASURY NOTES") of actively traded U.S.
Treasury securities having an Average Life to Maturity comparable to that of the
Electronic Notes proposed to be issued (using more than one such series of Base
Treasury Notes and interpolating linearly between them, if appropriate in
Prudential's determination) plus (b) a credit spread determined by Prudential.
2A(5). ACCEPTANCE. Within 15 minutes after Prudential shall have provided
any Rate Quote or such shorter period as
3
Prudential may specify to Electronic (such period herein called the "ACCEPTANCE
WINDOW"), Electronic may, subject to paragraph 2A(6), elect to accept such Rate
Quote as to the Electronic Notes specified in the related Purchase Request.
Such election shall be made by an Authorized Officer of Electronic notifying
Prudential by telephone within the Acceptance Window that Electronic elects to
accept such interest rate quote, specifying the Notes (each such Note being
herein called an "ACCEPTED ELECTRONIC NOTE") as to which such acceptance (herein
called an "ELECTRONIC ACCEPTANCE") relates. The day Electronic notifies
Prudential of an Electronic Acceptance with respect to the Accepted Electronic
Notes is herein called the "ACCEPTANCE DAY" for such Accepted Electronic Notes.
Any interest rate quotes as to which Prudential does not receive an Electronic
Acceptance within the Acceptance Window shall expire, and no purchase or sale of
Electronic Notes hereunder shall be made based on such expired interest rate
quotes. Subject to paragraph 2A(6) and the other terms and conditions hereof,
the Company agrees to sell to Prudential or a Prudential Affiliate, and
Prudential agrees to purchase, or to cause the purchase by a Prudential
Affiliate of, any Accepted Electronic Notes at 100% of the principal amount of
such Notes. As soon as practicable following the Acceptance Day, Electronic,
the Company, Prudential and each Prudential Affiliate which is to purchase any
such Accepted Electronic Notes will execute a confirmation of such Electronic
Acceptance substantially in the form of Exhibit C-1 attached hereto (herein
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called a "CONFIRMATION OF ACCEPTANCE").
2A(6). MARKET DISRUPTION. Notwithstanding the provisions of paragraph
2A(5), if Prudential shall have provided a Rate Quote pursuant to paragraph
2A(4) and thereafter prior to the time an Electronic Acceptance with respect to
such Rate Quote shall have been notified to Prudential in accordance with
paragraph 2A(5) a Market Disruption occurs, then such Rate Quote shall be deemed
to have then expired, and no purchase or sale of Notes hereunder shall be made
based on such expired Rate Quote. If Electronic thereafter notifies Prudential
of an Electronic Acceptance of any such Rate Quote, such Electronic Acceptance
shall be ineffective for all purposes of this Agreement, and Prudential shall
promptly notify Electronic that the provisions of this paragraph 2A(6) are
applicable with respect to such Electronic Acceptance.
2B. PURCHASE AND SALE OF COMPANY NOTES.
2B(1). FACILITY. Prudential is willing to consider, in its sole
discretion and within limits which may be authorized for purchase by Prudential
and Prudential Affiliates from time to time, the purchase of Company Notes
pursuant to this Agreement. The willingness of Prudential to consider such
purchase of Company Notes is herein called the "FACILITY". At any time, the
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aggregate principal amount of Company Notes stated in paragraph 1B, minus the
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aggregate principal amount of Company Notes purchased and sold prior to such
time pursuant to this Agreement, minus the aggregate principal amount of
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Accepted Company Notes which have not yet been purchased and sold hereunder
prior to such time, is herein called the "AVAILABLE FACILITY AMOUNT" at such
time. NOTWITHSTANDING THE WILLINGNESS OF PRUDENTIAL TO CONSIDER PURCHASES OF
COMPANY NOTES, THIS AGREEMENT IS ENTERED INTO ON THE EXPRESS UNDERSTANDING THAT
NEITHER PRUDENTIAL NOR ANY PRUDENTIAL AFFILIATE SHALL BE OBLIGATED TO MAKE OR
ACCEPT OFFERS TO PURCHASE COMPANY NOTES, OR TO QUOTE RATES, SPREADS OR OTHER
TERMS WITH RESPECT TO SPECIFIC PURCHASES OF COMPANY NOTES, AND THE FACILITY
SHALL IN NO WAY BE CONSTRUED AS A COMMITMENT BY PRUDENTIAL OR ANY PRUDENTIAL
AFFILIATE.
2B(2). ISSUANCE PERIOD. Company Notes may be issued and sold pursuant to
this Agreement until the earlier of (i) the second anniversary of the date of
this Agreement (or if such anniversary is not a Business Day, the Business Day
next preceding such anniversary) and (ii) the thirtieth day after Prudential
shall have given to the Company, or the Company shall have given to Prudential,
written notice stating that it elects to terminate the issuance and sale of
Company Notes pursuant to this Agreement (or if such thirtieth day is not a
Business Day, the Business Day next preceding such thirtieth day). The period
during which Company Notes may be issued and sold pursuant to this Agreement is
herein called the "ISSUANCE PERIOD".
2B(3). REQUEST FOR PURCHASE. The Company may from time to time during the
Issuance Period make requests for purchases of Company Notes (each such request
being herein called a "REQUEST FOR PURCHASE"). Each Request for Purchase shall
be made to Prudential by telecopier or overnight delivery service, and shall (i)
specify the aggregate principal amount of Company Notes covered thereby, which
shall not be less than $5,000,000 and shall not be greater than the Available
Facility Amount at the time such Request for Purchase is made, (ii) specify the
principal amounts, final maturities, principal prepayment dates and amounts and
interest payment periods (which shall be semi-annually in arrears) of the
Company Notes covered thereby, (iii) specify the use of proceeds of such Company
Notes, (iv) specify the proposed day for the closing of the purchase and sale of
such Company Notes, which shall be a Business Day during the Issuance Period not
less than 10 days and not more than 30 days after the making of such Request for
Purchase, (v) specify the number of the account and the name and address of the
depository institution to which the aggregate purchase price of such Company
Notes are to be transferred on the Closing Day for such purchase and sale, (vi)
certify that the representations and warranties contained in paragraph 8 are
true on and as of the date of such Request for Purchase and that there exists on
the date of such
5
Request for Purchase no Event of Default or Default and (vii) be substantially
in the form of Exhibit B-2 attached hereto. Each Request for Purchase shall be
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in writing and shall be deemed made when received by Prudential.
2B(4). RATE QUOTES. Not later than five Business Days after the Company
shall have given Prudential a Request for Purchase pursuant to paragraph 2B(3),
Prudential may, but shall be under no obligation to, provide to the Company by
telephone or telecopier, in each case between 9:30 a.m. and 1:30 p.m. New York
City local time (or such later time as Prudential may elect) interest rate
quotes for the several principal amounts, maturities, principal prepayment
schedules, and interest payment periods of Company Notes specified in such
Request for Purchase. Each quote shall represent the interest rate per annum
payable on the outstanding principal balance of such Company Notes at which
Prudential or a Prudential Affiliate would be willing to purchase such Notes at
100% of the principal amount thereof.
2B(5). ACCEPTANCE. Within 15 minutes after Prudential shall have provided
any interest rate quotes pursuant to paragraph 2B(4) or such shorter period as
Prudential may specify to the Company (such period herein called the "ACCEPTANCE
WINDOW"), the Company may, subject to paragraph 2B(6), elect to accept such
interest rate quotes as to not less than $5,000,000 aggregate principal amount
of the Notes specified in the related Request for Purchase. Such election shall
be made by an Authorized Officer of the Company notifying Prudential by
telephone within the Acceptance Window that the Company elects to accept such
interest rate quotes, specifying the Notes (each such Note being herein called
an "ACCEPTED COMPANY NOTE") as to which such acceptance (herein called a
"COMPANY ACCEPTANCE") relates. The day the Company notifies Prudential of a
Company Acceptance with respect to any Accepted Company Notes is herein called
the "ACCEPTANCE DAY" for such Accepted Company Notes. Any interest rate quotes
as to which Prudential does not receive a Company Acceptance within the
Acceptance Window shall expire, and no purchase or sale of Notes hereunder shall
be made based on such expired interest rate quotes. Subject to paragraph 2B(6)
and the other terms and conditions hereof, the Company agrees to sell to
Prudential or a Prudential Affiliate, and Prudential agrees to purchase, or to
cause the purchase by a Prudential Affiliate of, the Accepted Notes at 100% of
the principal amount of such Notes. As soon as practicable following the
Company Acceptance Day, the Company, Prudential and each Prudential Affiliate
which is to purchase any such Accepted Company Notes will execute a confirmation
of such Acceptance substantially in the form of Exhibit C-2 attached hereto
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(herein called a "CONFIRMATION OF ACCEPTANCE"). If the Company should fail to
execute and return to Prudential (by facsimile or overnight delivery service)
within three Business Days following receipt thereof a Confirmation of
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Acceptance with respect to any Accepted Company Notes, Prudential may at its
election at any time prior to its receipt thereof cancel the closing with
respect to such Accepted Company Notes by so notifying the Company in writing.
2B(6). MARKET DISRUPTION. Notwithstanding the provisions of paragraph
2B(5), if Prudential shall have provided interest rate quotes pursuant to
paragraph 2B(4) and thereafter prior to the time a Company Acceptance with
respect to such quotes shall have been notified to Prudential in accordance with
paragraph 2B(5) a Market Disruption occurs, then such interest rate quotes shall
be deemed to have then expired, and no purchase or sale of Notes hereunder shall
be made based on such expired interest rate quotes. If the Company thereafter
notifies Prudential of a Company Acceptance of any such interest rate quotes,
such Company Acceptance shall be ineffective for all purposes of this Agreement,
and Prudential shall promptly notify the Company that the provisions of this
paragraph 2B(6) are applicable with respect to such Company Acceptance.
2C. CLOSINGS AND FEES.
2C(1). CLOSINGS. Not later than 11:30 a.m. (New York City local time) on
the Closing Day for any Accepted Notes, the Company or Electronic (as the case
may be) will deliver to each Purchaser listed in the Confirmation of Acceptance
relating thereto at the offices of Prudential Capital Group, Xxx Xxxxxxxxxx
Xxxxx, Xxxxx 0000, Xxxxxxx, XX 00000-0000 (or such other address as Prudential
may specify), the Accepted Notes to be purchased by such Purchaser in the form
of one or more Notes in authorized denominations as such Purchaser may request
for each Accepted Note to be purchased on the Closing Day, dated the Closing Day
and registered in such Purchaser's name (or in the name of its nominee), against
payment of the purchase price thereof by transfer of immediately available funds
for credit to the Company's or Electronic's account specified in the Purchase
Request or Request for Purchase (as the case may be) with respect to such Notes.
If Electronic or the Company (as the case may be) fails to tender to any
Purchaser the Accepted Notes to be purchased by such Purchaser on the scheduled
Closing Day for such Accepted Notes as provided above in this paragraph 2C(1),
or any of the applicable conditions specified in paragraph 3 shall not have been
fulfilled by the time required on such scheduled Closing Day, the Company shall,
prior to 1:00 p.m., New York City local time, on such scheduled Closing Day
notify Prudential (which notification shall be deemed received by each
Purchaser) in writing whether (i) such closing is to be rescheduled (such
rescheduled date to be a Business Day during the Availability Period or the
Issuance Period, as applicable, not less than one Business Day and not more
than 10 Business Days after such scheduled Closing Day (the "RESCHEDULED CLOSING
DAY")) and
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certify to Prudential (which certification shall be for the benefit of each
Purchaser) that the Company reasonably believes that it will be able to comply
with the conditions set forth in paragraph 3 on such Rescheduled Closing Day and
that the Company will pay the Delayed Delivery Fee in accordance with paragraph
2C(4) or (ii) such closing is to be canceled. In the event that the Company
shall fail to give such notice referred to in the preceding sentence, Prudential
(on behalf of each Purchaser) may at its election, at any time after 1:00 p.m.,
New York City local time, on such scheduled Closing Day, notify the Company in
writing that such closing is to be canceled. Notwithstanding anything to the
contrary appearing in this Agreement, the Company may not elect to reschedule a
closing with respect to any given Accepted Notes on more than one occasion,
unless Prudential shall have otherwise consented in writing.
2C(2). STRUCTURING FEE. In consideration for the time, effort and expense
involved in the preparation, negotiation, execution and monitoring of this
Agreement, the Company will pay to Prudential a non-refundable structuring fee .
Prudential has previously received a $25,000 installment of such structuring
fee. A second and final $25,000 installment shall be paid by the Company to
Prudential on June 28, 1996; provided, however, that the Company shall not be
obligated to make payment of such second and final installment if a closing of
the purchase and sale of Electronic Notes occurs on or before June 28, 1996.
2C(3). ISSUANCE FEE. The Company will pay to Prudential in immediately
available funds a fee (herein called the "ISSUANCE FEE") on each Closing Day
with respect to Company Notes in an amount equal to 0.15% of the aggregate
principal amount of Company Notes sold on such Closing Day. No Issuance Fee
shall be due in connection with any issuance of the Electronic Notes.
2C(4). DELAYED DELIVERY FEE. If the closing of the purchase and sale of
any Accepted Note is delayed for any reason beyond the original Closing Day for
such Accepted Note, the Company or Electronic (as applicable) will pay to
Prudential (i) on the Cancellation Date or actual closing date of such purchase
and sale a fee (herein called the "DELAYED DELIVERY FEE") calculated as follows:
(BEY - MMY) X DTS/365 X PA
where "BEY" means Bond Equivalent Yield, i.e., the bond equivalent yield per
annum of such Accepted Note, "MMY" means Money Market Yield, i.e., the yield per
annum on a commercial paper investment of the highest quality selected by
Prudential on the date Prudential receives notice of the delay in the closing
for such Accepted Note having a maturity date or dates the same as, or closest
to, the Rescheduled Closing Day or Rescheduled
8
Closing Days (a new alternative investment being selected by Prudential each
time such closing is delayed); "DTS" means Days to Settlement, i.e., the number
of actual days elapsed from and including the original Closing Day with respect
to such Accepted Note (in the case of the first such payment with respect to
such Accepted Note) or from and including the date of the next preceding payment
to but excluding the date of such payment; and "PA" means Principal Amount,
i.e., the principal amount of the Accepted Note for which such calculation is
being made. In no case shall the Delayed Delivery Fee be less than zero.
Nothing contained herein shall obligate any Purchaser to purchase any Accepted
Note on any day other than the Closing Day for such Accepted Note, as the same
may be rescheduled from time to time in compliance with paragraph 2C(1)
2C(5). CANCELLATION FEE. If Electronic or the Company (as the case may
be) at any time notifies Prudential in writing that Electronic or the Company
(as the case may be) is canceling the closing of the purchase and sale of any
Accepted Note, or if Prudential notifies Electronic or the Company (as the case
may be) in writing under the circumstances set forth in the last sentence of
either paragraph 2A(5) or 2B(5) or the penultimate sentence of paragraph 2C(1)
that the closing of the purchase and sale of such Accepted Note is to be
canceled, or if the closing of the purchase and sale of such Accepted Note is
not consummated on or prior to the last day of the Availability Period or the
Issuance Period, as applicable (the date of any such notification, or the last
day of the Availability Period or Issuance Period, as the case may be, being
herein called the "CANCELLATION DATE"), Electronic or the Company , (as
applicable), will pay to Prudential in immediately available funds an amount
(the "CANCELLATION FEE") calculated as follows:
PI X PA
where "PI" means Price Increase, i.e., the quotient (expressed in decimals)
obtained by dividing (a) the excess of the ask price (as reasonably determined
by Prudential) of the Hedge Treasury Note(s) on the Cancellation Date over the
bid price (as reasonably determined by Prudential) of the Hedge Treasury
Notes(s) on the Acceptance Day for such Accepted Note by (b) such bid price; and
"PA" has the meaning ascribed to it in paragraph 2C(4). The foregoing bid and
ask prices shall be as reported by Telerate Systems, Inc. (or, if such data for
any reason ceases to be available through Telerate Systems, Inc., any publicly
available source of similar market data selected by Prudential and reasonably
acceptable to Electronic or the Company). Each price shall be based on a U.S.
Treasury security having a par value of $100.00 and shall be rounded to the
second decimal place. In no case shall the Cancellation Fee be less than zero.
9
3. CONDITIONS OF CLOSING. The obligation of any Purchaser to purchase and
pay for any Notes is subject to the satisfaction, on or before the Closing Day
for such Notes, of the following conditions:
3A. CERTAIN DOCUMENTS. Such Purchaser shall have received the following,
each dated the date of the applicable Closing Day:
(i) The Note(s) to be purchased by such Purchaser.
(ii) Certified copies of the resolutions of the Board of Directors of
the Company and Electronic , authorizing the execution and delivery of this
Agreement (including, in the case of the Company, its guarantee set forth
in paragraph 11 hereof) and the issuance of their respective Notes, and of
all documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement and the Notes.
(iii) Certificates of the Secretary or an Assistant Secretary and one
other officer of Electronic (if the closing involves Electronic Notes) and
the Company, certifying the names and true signatures of the officers
authorized to sign this Agreement and the Notes and the other documents to
be delivered hereunder.
(iv) Certified copies of the Certificate of Incorporation and By-laws
of Electronic (if the closing involves Electronic Notes) and the Company.
(v) A favorable opinion of Xxxxxx, Xxxx & Xxxxxxxx, special counsel
to the Company and Electronic (or such other counsel designated by the
Company and acceptable to the Purchaser(s)) satisfactory to such Purchaser
and substantially in the form of Exhibit D-1 (in the case of the Electronic
-----------
Notes) or D-2 (in the case of the Company Notes) attached hereto and as to
such other matters as such Purchaser may reasonably request. Electronic (if
the closing involves Electronic Notes) and the Company hereby direct such
counsel to deliver such opinion, agree that the issuance and sale of any
Notes will constitute a reconfirmation of such direction, and understand
and agree that each Purchaser receiving such an opinion will and is hereby
authorized to rely on such opinion.
(vi) A good standing certificate for Electronic (if the closing
involves Electronic Notes) from the Secretary of State of each of Nevada
and California and for the Company from the Secretary of State of each of
Delaware and California, in each case dated as of a recent date, and such
other evidence of the status thereof as such Purchaser may reasonably
request.
10
(vii) Additional documents or certificates with respect to legal
matters or corporate or other proceedings related to the transactions
contemplated hereby as may be reasonably requested by such Purchaser.
3B. OPINION OF PURCHASER'S SPECIAL COUNSEL. Such Purchaser shall have
received from Xxxxx X. Xxxxx, Assistant General Counsel of Prudential, or such
other counsel who is acting as special counsel for it in connection with this
transaction, a favorable opinion satisfactory to such Purchaser as to such
matters incident to the matters herein contemplated as it may reasonably
request.
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations and
warranties contained in paragraph 8 shall be true on and as of such Closing Day;
there shall exist on such Closing Day no Event of Default or Default (assuming
for purposes hereof, if no Notes are then outstanding, that Notes have been
issued and are outstanding); and the Company and Electronic (if the closing
involves Electronic Notes) shall have each delivered to such Purchaser an
Officer's Certificate, dated such Closing Day, to both such effects.
3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and payment
for the Notes to be purchased by such Purchaser on the terms and conditions
herein provided (including the use of the proceeds from the sale of such Notes)
shall not violate any applicable law or governmental regulation (including,
without limitation, Section 5 of the Securities Act or Regulation G, T or X of
the Board of Governors of the Federal Reserve System) and shall not subject such
Purchaser to any tax, penalty, liability or other onerous condition under or
pursuant to any applicable law or governmental regulation.
3E. PAYMENT OF FEES. The Company or Electronic shall have paid to
Prudential any fees due it pursuant to this Agreement, including any Structuring
Fee due pursuant to paragraph 2C(2), any Issuance Fee due pursuant to paragraph
2C(3) and any Delayed Delivery Fee due pursuant to paragraph 2C(4).
3F. ADDITIONAL ELECTRONIC CLOSING MATTERS. If the closing is with respect
to the Electronic Notes, (i) the Purchasers shall have received a solvency
certificate with respect to Electronic executed by the Company's chief financial
officer, (ii) the Company shall have prepared and delivered to Prudential a pro
---
forma consolidated balance sheet giving effect to the purchase of the Purchased
-----
Common Stock, which balance sheet shall be used in determining Base Tangible Net
Worth and (iii) the purchase price of the Purchased Common Stock, to the extent
in excess of $50,000,000, shall be funded with internally generated cash of
Electronic, the Company or one of the other Subsidiaries.
4. PREPAYMENTS. The Notes shall be subject to required prepayment as and
to the extent provided in paragraph 4A. The
11
Notes shall also be subject to prepayment under the circumstances set forth in
paragraph 4B. Any prepayment made by the Company pursuant to any other
provision of this paragraph 4 shall not reduce or otherwise affect its
obligation to make any required prepayment referenced in paragraph 4A.
4A. REQUIRED PREPAYMENTS OF NOTES. Each Series of Notes shall be subject
to required prepayments, if any, set forth in the Notes of such Series.
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. The Notes of each
Series shall be subject to prepayment, in whole at any time or in part from time
to time (in integral multiples of $500,000 and in a minimum amount of
$1,000,000), at the option of Electronic or the Company (as applicable), at 100%
of the principal amount so prepaid plus interest thereon to the prepayment date
and the Yield-Maintenance Amount, if any, with respect to each such Note. Any
partial prepayment of a Series of Notes pursuant to this paragraph 4B shall be
applied in satisfaction of required payments of principal in inverse order of
their scheduled due dates.
4C. NOTICE OF OPTIONAL PREPAYMENT. Electronic or the Company (as
applicable) shall give the holder of each Note of a Series to be prepaid
pursuant to paragraph 4B irrevocable written notice of such prepayment not less
than 10 Business Days prior to the prepayment date, specifying such prepayment
date, the aggregate principal amount of the Notes of such Series to be prepaid
on such date, the principal amount of the Notes of such Series held by such
holder to be prepaid on that date and that such prepayment is to be made
pursuant to paragraph 4B. Notice of prepayment having been given as aforesaid,
the principal amount of the Notes specified in such notice, together with
interest thereon to the prepayment date and together with the Yield-Maintenance
Amount, if any, herein provided, shall become due and payable on such prepayment
date.
4D. APPLICATION OF PREPAYMENTS. In the case of each prepayment of less
than the entire unpaid principal amount of all outstanding Notes of any Series
pursuant to paragraph 4A or 4B, the amount to be prepaid shall be applied pro
rata to all outstanding Notes of such Series (including, for the purpose of this
paragraph 4D only, all Notes prepaid or otherwise retired or purchased or
otherwise acquired by the Company or any of its Subsidiaries or Affiliates other
than be prepayment pursuant to paragraph 4A or 4B) according to the respective
unpaid principal amounts thereof.
4E. RETIREMENT OF NOTES. The Company shall not, and shall not permit any
of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in
part prior to their stated final maturity (other than by prepayment pursuant to
paragraphs 4A or 4B or upon acceleration of such final maturity pursuant to
paragraph 7A), or purchase or otherwise acquire, directly or
12
indirectly, Notes of any Series held by any holder unless the Company or such
Subsidiary or Affiliate shall have offered to prepay or otherwise retire or
purchase or otherwise acquire, as the case may be, the same proportion of the
aggregate principal amount of Notes of such Series held by each other holder of
Notes of such Series at the time outstanding upon the same terms and conditions.
Any Notes so prepaid or otherwise retired or purchased or otherwise acquired by
the Company or any of its Subsidiaries or Affiliates shall not be deemed to be
outstanding for any purposes under this Agreement, except as provided in
------
paragraph 4D.
5. AFFIRMATIVE COVENANTS. During the Availability Period, the Issuance
Period and for so long as any Note is outstanding and unpaid, the Company
covenants as follows:
5A. FINANCIAL STATEMENTS; NOTICE OF DEFAULTS. The Company covenants that
it will deliver to each Significant Holder in triplicate:
(i) as soon as practicable and in any event within 45 days after the
end of each quarterly period (other than the last quarterly period) in each
fiscal year, consolidated statements of income, cash flows and
shareholders' equity of the Company and its Subsidiaries for the period
from the beginning of the then current fiscal year to the end of such
quarterly period, and a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarterly period, setting forth in each
case in comparative form figures for the corresponding period in the
preceding fiscal year, all in reasonable detail and certified to by the
Chief Financial Officer or Corporate Controller of the Company, subject to
changes resulting from year-end adjustments; provided, however, that
-------- -------
delivery pursuant to clause (iii) below of copies of the Quarterly Report
on Form 10-Q of the Company for such quarterly period filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this clause (i);
(ii) as soon as practicable and in any event within 90 days after the
end of each fiscal year (a) consolidated statements of income, cash flows
and shareholders' equity, (b) consolidating statements of income, and (c)
to the extent prepared by the Company or reviewed or audited its
independent public accountants in the normal course of business,
consolidating statements of cash flows and shareholders' equity, in each
case of the Company and its Subsidiaries for such year, and a consolidating
and a consolidated balance sheet of the Company and its Subsidiaries as at
the end of such year, setting forth in each case in comparative form
corresponding consolidated figures from the preceding annual audit, all in
reasonable detail and satisfactory in form to the Required Holders and, as
to the consolidated financial statements, reported on by
13
independent public accountants of recognized national standing selected by
the Company whose report shall be unqualified and without limitation as to
the scope of their audit and otherwise reasonably satisfactory in substance
to the Required Holders and, as to the consolidating financial statements,
certified by an authorized financial officer of the Company; provided,
--------
however, that delivery pursuant to clause (iii) below of copies of the
-------
Annual Report on Form 10-K of the Company for such fiscal year filed with
the Securities and Exchange Commission shall be deemed to satisfy the
requirements of this clause (ii) (including with respect to consolidating
statements);
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall
send to its public stockholders and copies of all registration statements
(without exhibits) and all reports (if any) which it files with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission);
(iv) promptly upon any Significant Holder's request therefor, a copy
of each other report submitted to the Company by independent accountants in
connection with any annual, interim or special audit made by them of the
books of the Company; and
(v) with reasonable promptness, such other financial data as such
holder may reasonably request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each Significant Holder a certificate
from an Authorized Officer of the Company having knowledge of the Company's
financial matters (a) demonstrating (with computations in reasonable detail)
compliance by the Company and its Subsidiaries with the provisions of xxxxxxxxxx
0X, 0X, 0X(0), 0X(0), 0X(0), 0X(0), 0X(0), (x) identifying the sixty consecutive
day period referenced in paragraph 6C(2) and, if applicable, the maximum amount
of Current Debt referenced therein and (c) stating that there exists no Event of
Default or Default, or, if any Event of Default or Default exists, specifying
the nature and period of existence thereof and what action the Company proposes
to take with respect thereto. Together with each delivery of financial
statements required by clause (ii) above, the Company will deliver to each
Significant Holder a report from such accountants stating that, in making the
audit necessary for their report on such financial statements, they have
obtained no knowledge of any Event of Default or Default insofar at they relate
to financial or accounting matters, or, if they have obtained knowledge of any
such Event of Default or Default , specifying the nature and period of existence
thereof. Such accountants, however, shall not be liable to anyone by reason of
their failure to obtain
14
knowledge of any Event of Default or Default insofar as they relate to financial
or accounting matters which would not be disclosed in the course of an audit
conducted in accordance with generally accepted auditing standards.
The Company also covenants that immediately after any Responsible Officer
obtains knowledge of an Event of Default or Default, it will deliver to each
Significant Holder an Officer's Certificate specifying the nature and period of
existence thereof and what action the Company proposes to take with respect
thereto.
5B. INFORMATION REQUIRED BY RULE 144A. The Company covenants that it
will, upon the request of the holder of any Note, provide such holder, and any
qualified institutional buyer designated by such holder, such financial and
other information as such holder may reasonably determine to be necessary in
order to permit compliance with the information requirements of Rule 144A under
the Securities Act in connection with the resale of Notes, except at such times
as the Company is subject to the reporting requirements of section 13 or 15(d)
of the Exchange Act. For the purpose of this paragraph 5B, the term "qualified
institutional buyer" shall have the meaning specified in Rule 144A under the
Securities Act.
5C. INSPECTION OF PROPERTY. The Company covenants that it will permit any
Person designated by any Significant Holder in writing, at such Significant
Holder's expense, to visit and inspect any of the properties of the Company and
its Subsidiaries, to examine the corporate books and financial records of the
Company and its Subsidiaries and make copies thereof or extracts therefrom and
to discuss the affairs, finances and accounts of any of such corporations with
any Responsible Officer of the Company and its independent public accountants,
all at such reasonable times during normal business hours and as often as such
Significant Holder may reasonably request.
5D. COVENANT TO SECURE NOTES EQUALLY. The Company covenants that, if it
or any Subsidiary shall create or assume any Lien upon any of its property or
assets, whether now owned or hereafter acquired, other than Liens permitted by
the provisions of paragraph 6C(1) (unless prior written consent to the creation
or assumption thereof shall have been obtained pursuant to paragraph 12C), it
will make or cause to be made effective provision whereby the Notes will be
secured by such Lien equally and ratably with any and all other obligations
thereby secured so long as any such other obligations shall be so secured.
5E. MAINTENANCE OF INSURANCE. The Company covenants that it and each
Subsidiary will maintain, with financially sound and reputable insurers,
insurance in such amounts and against such liabilities and hazards as
customarily is maintained by other companies operating similar businesses.
Together with each
15
delivery of financial statements under paragraph 5A, the Company will, upon the
request of any Significant Holder, deliver an Officer's Certificate specifying
the details of such insurance in effect.
5F. COMPLIANCE WITH LAWS. The Company covenants that it will, and will
cause each of the Subsidiaries to, comply in a timely fashion with, or operate
pursuant to valid waivers of the provisions of, all applicable statutes, rules,
regulations and orders of all Federal, state, local and foreign governments,
courts, agencies or regulatory bodies, including all Environmental Laws,
except(i) where a good faith dispute exists between the Company or a Subsidiary
and any such governmental authority regarding compliance with or application of
any such statute, rule, regulation or order (including Environmental Laws)
and(ii)where noncompliance would not materially adversely affect the business,
condition (financial or otherwise) or operations of the Company and the
Subsidiaries taken as a whole.
6. NEGATIVE COVENANTS. During the Availability Period, the Issuance
Period and at all times during which any Note or other amount due hereunder is
outstanding and unpaid, the Company covenants as follows:
6A. CURRENT RATIO. The Company covenants that it will not permit the
ratio of the current assets of the Company and Subsidiaries on a consolidated
basis to the current liabilities of the Company and Subsidiaries on a
consolidated basis to be less than 1.25 to 1.0 at any time.
6B. TANGIBLE NET WORTH. The Company covenants that it will not permit
Consolidated Tangible Net Worth at any time to be less than the sum of (i) Base
Net Worth plus (ii) to the extent positive, 25% of the aggregate amount of
Consolidated Net Earnings for the period, taken as one accounting period,
commencing on October 1, 1995 and ending on the last day of the fiscal year most
recently ended as of any date of determination (exclusive of that portion (if
any) of Consolidated Net Earnings already reflected in Base Net Worth).
6C. CREDIT AND OTHER RESTRICTIONS. The Company covenants that it will not
and will not permit any Subsidiary to:
6C(1). LIEN RESTRICTIONS. Create, assume or suffer to exist any Lien upon
any of its property or assets (excluding the Purchased Company Stock), whether
now owned or hereafter acquired (whether or not provision is made for the equal
and ratable securing of Notes in accordance with the provisions of paragraph 5D
hereof), except:
------
(i) Liens for taxes not yet due or which are being actively contested
in good faith by appropriate proceedings,
16
(ii) Liens incidental to the conduct of its business or the ownership
of its property and assets which were not incurred in connection with the
borrowing of money or the obtaining of advances or credit, and which do not
in the aggregate materially detract from the value of its property or
assets or materially impair the use thereof in the operation of its
business,
(iii) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to the Company or a Wholly-Owned Subsidiary,
(iv) Liens existing on any property of any corporation at the time it
becomes a Subsidiary (so long as such Lien was not created or incurred in
anticipation of such corporation becoming a Subsidiary), or existing prior
to the time of acquisition upon any property acquired by the Company or any
Subsidiary through purchase, merger or consolidation or otherwise, whether
or not assumed by the Company or such Subsidiary, or placed upon property
at the time of acquisition by the Company or any Subsidiary to secure all
or a portion of (or to secure Debt incurred to pay all or a portion of) the
purchase price thereof, provided that (a) any such Lien shall not encumber
any other property of the Company or such Subsidiary, and (b) the aggregate
amount of Debt secured by all such Liens at no time exceeds an amount equal
to 15% of Consolidated Tangible Net Worth, and
(v) other Liens securing Debt so long as the aggregate amount of
Priority Debt at no time exceeds an amount equal to 15% of Consolidated
Tangible Net Worth;
6C(2). DEBT. Create, incur, assume or suffer to exist any Debt, except:
------
(i) Funded Debt and Current Debt of any Subsidiary to the Company or a
Wholly-Owned Subsidiary,
(ii) Funded Debt and Current Debt of the Company to any Subsidiary if
such Subsidiary has entered into and delivered to Prudential a
subordination agreement substantially in the form of Exhibit E hereto,
(iii) Funded Debt evidenced by the Notes,
(iv) additional Funded Debt, and
(v) additional Current Debt;
provided that (a) Aggregate Funded Debt shall not exceed 55% of
--------
Consolidated Tangible Capitalization at any time through March 31, 1998 or
50% of Consolidated Tangible Capitalization at any time thereafter, (b) all
Current Debt
17
described in clause (iv), above, has been simultaneously reduced to zero
for a period of sixty consecutive days in each rolling twelve month period
or, alternatively, there could have been incurred and outstanding on each
day of a sixty consecutive day period selected by the Company during each
such rolling twelve month period an amount of Funded Debt equal to the
maximum amount of Current Debt outstanding during such sixty consecutive
day period and (c) Priority Debt shall at no time exceed 15% of
Consolidated Tangible Net Worth;
6C(3). LOANS, ADVANCES AND INVESTMENTS. Make or permit to remain
outstanding any loan or advance to, or own, purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any Person, except:
------
(i) loans or advances to any Subsidiary,
(ii) Purchased Common Stock,
(iii) stock, obligations or securities of a Subsidiary or of a Person
which immediately after such purchase or acquisition will be a Subsidiary,
(iv) (a) direct obligations of, or obligations guaranteed by, the
United States of America, (b) certificates of deposit and banker's
acceptances (and repurchase agreements with respect to same) in each case
payable in the United States in United States dollars and maturing not more
than one year from the date of purchase and issued by a commercial bank
located and incorporated in the United States or Canada with capital and
surplus in excess of $250 million (U.S.), (c) commercial paper rated P-1 by
Xxxxx'x Investors Service, Inc. ("Moody's") or A-1 by Standard & Poor's
Corporation ("S&P") and maturing not more than one year from the date of
purchase thereof and (d) bonds, debentures, notes or similar debt
obligations issued by a United States domiciled corporation or by a state
or municipality which are rated "A" or better by Moody's or S&P and mature
not more than two years from the date of purchase,
(v) stock, obligations or securities received in settlement of debts
(created in the ordinary course of business) owing to the Company or any
Subsidiary,
(vi) travel and other like advances to officers and employees of the
Company or a Subsidiary in the ordinary course of business,
(vii) the cash value of life insurance policies owned by the Company
on the lives of members of the Company's management,
18
(viii) loans, advances and investments existing on the date hereof as
set forth on Schedule 6C(3), and
(ix) other loans, advances and investments, provided that the
aggregate amount thereof (determined using original cost in the case of
investments) shall at no time exceed 10% of Consolidated Tangible Net
Worth;
6C(4). SALE OF STOCK AND DEBT OF SUBSIDIARIES. Sell or otherwise dispense
of, or part with control of, any shares of stock or Debt of any Subsidiary,
except to the Company or a Wholly-Owned Subsidiary, and except that all shares
of stock and Debt of any Subsidiary (other than Electronic) at the time owned by
or owed to the Company and all Subsidiaries may be sold as an entirety for a
cash consideration which represents the fair value (as determined in good faith
by the Board of Directors of the Company) at the time of sale of the shares of
stock and Debt so sold; provided that (i) such sale or other disposition is
--------
treated as a Transfer of the assets of such Subsidiary and is permitted by
paragraph 6C(6) and (ii) at the time of such sale, such Subsidiary shall not
own, directly or indirectly, any shares of stock or Debt of any other Subsidiary
(unless all of the shares of stock and Debt of such other Subsidiary owned,
directly or indirectly, by the Company and all Subsidiaries are simultaneously
being sold as permitted by this paragraph 6C(4));
6C(5). MERGER AND CONSOLIDATION. Merge or consolidate with or into any
other Person, except that:
------
(i) any Subsidiary may merge or consolidate with or into the Company,
provided that the Company is the continuing or surviving corporation,
--------
(ii) any Subsidiary may merge or consolidate with or into a Wholly-
Owned Subsidiary,
(iii) the Company may merge with any other solvent corporation,
provided that (a) the Company shall be the continuing or surviving
--------
corporation, and (b) no Default or Event of Default exists or would exist
immediately after giving effect to such merger, and
(iv) the Company may merge with a Wholly-Owned Subsidiary which has
essentially no assets or liabilities and has been formed solely for
purposes of effecting a change of domicile of the Company through such
merger, so long as no Default or Event of Default exists or would exist
after giving effect thereto;
6C(6). TRANSFER OF ASSETS. Transfer any of its assets (excluding the
Purchased Company Stock) except that:
------
(i) any Subsidiary may Transfer assets to the Company or a Wholly-
Owned Subsidiary, and the Company or any
19
Subsidiary may sell inventory in the ordinary course of business,
(ii) the Company and Subsidiaries may Transfer the assets set forth
on Schedule 6C(6), provided that (a) each such Transfer shall be effected
on or before February 1, 1998, (b) the Company or the Subsidiary selling
such assets receives in each case an amount equal to the fair market value
thereof and (c) if the Transfer involves the Transfer of a Subsidiary, no
additional material loan, advance or investment is made in or to such
Subsidiary subsequent to the date hereof; and
(iii) the Company or any Subsidiary may otherwise Transfer assets,
provided that after giving effect thereto (a) the Twelve Month Percentage
--------
of Assets Transferred pursuant to this clause (iii) and paragraph 6C(4)
shall not exceed 15% and (b) the Cumulative Percentage of Assets
Transferred pursuant to this clause (iii) and paragraph 6C(4) shall not
exceed 40%;
6C(7). LEASE RENTALS. Enter into or permit to remain in effect any
operating lease as lessee if the aggregate rentals payable by the Company and
Subsidiaries on a consolidated basis under all operating leases during any
fiscal year would exceed 2.5% of the consolidated revenues of the Company and
Subsidiaries for the immediately preceding fiscal year of the Company;
6C(8). SALE, PLEDGE OR DISCOUNT OF RECEIVABLES. Sell with recourse,
pledge or discount or otherwise sell for less than the face value thereof, any
of its notes or accounts receivable, other than notes and accounts receivable
the collectability of which has become doubtful in accordance with generally
accepted accounting principles (provided that the foregoing shall not prohibit a
sale of a Subsidiary's notes and receivables which is effected pursuant to a
sale of such Subsidiary permitted by paragraph 6C(4));
6C(9). RELATED PARTY TRANSACTIONS. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, in the ordinary course of business or otherwise, any
Related Party; provided that the foregoing shall not apply to (i) any
--------
transaction between the Company and any Subsidiary or between Subsidiaries, or
(ii) transactions in the ordinary course of business (including payment of
officer and director compensation) which are on terms no less favorable to the
Company or such Subsidiary than if no such relationship existed; or
6C(10). SUBSIDIARY DIVIDEND RESTRICTIONS. Enter into, or be otherwise
subject to, any contract or agreement (including its charter) which limits the
amount of, or otherwise imposes restrictions on the payment of, dividends by any
Subsidiary.
20
6D. ISSUANCE OF STOCK BY SUBSIDIARIES. The Company covenants that it will
not permit any Subsidiary (either directly, or indirectly by the issuance of
rights or options for, or securities convertible into, such shares) to issue,
sell or otherwise dispose of any shares of any class of such Subsidiary's stock
(other than directors' qualifying shares) except to the Company or a Wholly-
Owned Subsidiary or if (i) no Default or Event of Default exists or would exist
immediately after giving effect thereto and (ii) such Subsidiary would continue
to be a Subsidiary hereunder.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) Electronic or the Company defaults in the payment of any
principal of or Yield-Maintenance Amount on any Note when the same shall
become due, either by the terms thereof or otherwise as provided in this
Agreement; or
(ii) Electronic or the Company defaults in the payment of any
interest on any Note for more than five Business Days after the date due;
or
(iii) Electronic, the Company or any Subsidiary defaults (whether as
primary obligor or as guarantor or other surety) in any payment of
principal of or interest on any other obligation for money borrowed (or any
Capital Lease Obligation, any obligation under a conditional sale or other
title retention agreement, any obligation issued or assumed as full or
partial payment for property whether or not secured by a purchase money
mortgage or any obligation under notes payable or drafts accepted
representing extensions of credit)in each case beyond any period of grace
provided with respect thereto, or Electronic, the Company or any Subsidiary
fails to perform or observe any other agreement, term or condition
contained in any agreement under which any such obligation is created (or
if any other event thereunder or under any such agreement shall occur and
be continuing) and the effect of such failure or other event is to cause,
or to permit the holder or holders of such obligation (or a trustee on
behalf of such holder or holders) to cause, such obligation to become due
prior to any originally stated maturity, or to be repurchased by
Electronic, the Company or any Subsidiary; provided that the aggregate
--------
amount of all obligations as to which such a payment default shall occur
and be continuing or such a failure or other event causing or permitting
acceleration (or resale to the Company, Electronic or any Subsidiary) shall
occur and be continuing exceeds $2,500,000; or
21
(iv) any representation or warranty made by Electronic or the Company
in this Agreement or in any writing furnished in connection with or
pursuant to this Agreement shall be false in any material respect on the
date as of which made; or
(v) the Company fails to perform or observe any agreement contained
in paragraph 6 of this Agreement; or
(vi) Electronic or the Company fails to perform or observe any other
agreement, term or condition contained in this Agreement and such failure
shall not be remedied within thirty (30) days after any officer of
Electronic or the Company obtains actual knowledge thereof; or
(vii) Electronic, the Company or any Subsidiary makes an assignment
for the benefit or creditors or is generally not paying its debts as such
debts become due; or
(viii) any decree or order for relief in respect of Electronic, the
Company or any Subsidiary is entered under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law, whether now or hereafter in effect ("Bankruptcy
Law"), of any jurisdiction; or
(ix) Electronic, the Company or any Subsidiary petitions or applies
to any tribunal for, or consents to, the appointment of, or the taking of
possession by, a trustee, receiver, custodian, liquidator or similar
official of the Company or any Subsidiary or of any substantial part of the
property of Electronic, the Company or any Subsidiary, or commences a
voluntary case under the Bankruptcy Law of the United States or any
proceedings relating to Electronic, the Company or any Subsidiary under the
Bankruptcy Law of any other jurisdiction; or
(x) any petition or application referred to in clause (ix) of this
paragraph 7A is filed, or any such proceedings are commenced, against
Electronic, the Company or any Subsidiary and Electronic, the Company or
such Subsidiary by any act indicates its approval thereof, consent thereto
or acquiescence therein, or an order, judgment or decree is entered
appointing any such trustee, receiver, custodian, liquidator or similar
official, or approving the petition in any such proceedings, and such
order, judgment or decree remains unstayed and in effect for more than
sixty (60) days; or
(xi) any order, judgment or decree is entered in any proceedings
against Electronic or the Company decreeing the dissolution of Electronic
or the Company and such order, judgment or decree remains unstayed and in
effect for more than sixty (60) days; or
22
(xii) any order, judgment or decree is entered in any proceedings
against Electronic, the Company or any Subsidiary decreeing a split-up of
Electronic, the Company or such Subsidiary that requires the divestiture of
property representing a substantial part, or the divestiture of the stock
of a Subsidiary whose property represents a substantial part, of the
property of Electronic or the Company and the Subsidiaries, and such order,
judgment or decree remains unstayed and in effect for more than sixty (60)
days; or
(xiii) one or more final judgments in an aggregate amount in excess
of $2,500,000 are rendered against Electronic, the Company or any
Subsidiary and, within sixty (60) days after entry thereof, any such
judgment is not discharged or execution thereof stayed pending appeal, or
within sixty (60) days after the expiration of any such stay, such judgment
is not discharged; or
(xiv) if (a) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code, (b) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer any Plan or
the PBGC shall have notified Electronic, the Company or any ERISA Affiliate
that a Plan may become a subject of any such proceedings, (c) the aggregate
"amount of unfunded benefit liabilities" (within the meaning of section
4001 (a) (18) of ERISA) under all Plans determined in accordance with Title
IV of ERISA, shall exceed $1,000,000, (d) Electronic, the Company or any
ERISA Affiliate withdraws from any Multiemployer Plan, or (f) Electronic,
the Company or any Subsidiary establishes or amends any employee welfare
benefit plan that provides post-employment welfare benefits in a manner
that would increase the liability of Electronic, the Company or any
Subsidiary thereunder; and any such event or events described in clauses
(a) through (f) above, either individually or together with any other such
event or events, could reasonably be expected to result in a Material
Adverse Change; or
(xv) the Company at any time when any Electronic Notes are
outstanding or Electronic has any obligation hereunder, shall contest or
deny in writing the validity or enforceability of, or deny in writing that
it has any liability or obligation under, its guarantee set forth in
paragraph 11 hereof, or such guarantee shall be determined
23
or asserted in writing by the Company to be void or unenforceable; or
(xvi) less than 80% of the outstanding Voting Stock of Electronic
shall be owned beneficially and of record by the Company;
then (a) if such event is an Event of Default specified in clause (i) or (ii)
of this paragraph 7A, any holder of any Note may at its option during the
continuance of such Event of Default, by notice in writing to Electronic or the
Company (as applicable) declare all of the Notes held by such holder to be, and
all of the Notes held by such holder shall thereupon be and become, immediately
due and payable at par together with interest accrued thereon, without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by the Company, (b) if such event is an Event of Default specified in
clause (viii), (ix) or (x) of this paragraph 7A with respect to the Company, all
of the Notes at the time outstanding shall automatically become immediately due
and payable together with interest accrued thereon and together with the Yield-
Maintenance Amount, if any, with respect to each Note, without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company, and (c) with respect to any event constituting an Event of Default, the
Required Holder(s) of the Notes of any Series may at its or their option during
the continuance of such Event of Default, by notice in writing to Electronic or
the Company (as applicable) declare all of the Notes of such Series to be, and
all of the Notes of such Series shall thereupon be and become, immediately due
and payable together with interest accrued thereon and together with the Yield-
Maintenance Amount, if any, with respect to each Note of such Series, without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by Electronic or the Company (as applicable).
7B. RESCISSION OF ACCELERATION. At any time after any or all of the Notes
of any Series shall have been declared immediately due and payable pursuant to
paragraph 7A, the Required Holder(s) of the Notes of such Series may, by notice
in writing to Electronic or the Company (as applicable), rescind and annul such
declaration and its consequences if (i) Electronic or the Company shall have
paid all overdue interest on the Notes of such Series, the principal of and
Yield-Maintenance Amount, if any, payable with respect to any Notes of such
Series which have become due otherwise than by reason of such declaration, and
interest on such overdue interest and overdue principal and Yield-Maintenance
Amount at the rate specified in the Notes of such Series, (ii) neither
Electronic nor the Company shall have paid any amounts which have become due
solely by reason of such declaration, (iii) all Events of Default and Defaults,
other than non-payment of amounts which have become due solely by reason of
24
such declaration, shall have been cured or waived pursuant to paragraph 12C, and
(iv) no judgment or decree shall have been entered for the payment of any
amounts due pursuant to the Notes of such Series or this Agreement. No such
rescission or annulment shall extend to or affect any subsequent Event of
Default or Default or impair any right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, Electronic
or the Company shall forthwith give written notice thereof to the holder of each
Note of each Series at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall occur and be
continuing, the holder of any Note may proceed to protect and enforce its rights
under this Agreement and such Note by exercising such remedies as are available
to such holder in respect thereof under applicable law, either by suit in equity
or by action at law, or both, whether for specific performance of any covenant
or other agreement contained in this Agreement or in aid of the exercise of any
power granted in this Agreement. No remedy conferred in this Agreement upon the
holder of any Note is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to every other
remedy conferred herein or now or hereafter existing at law or in equity or by
statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents,
covenants and warrants as follows:
8A. ORGANIZATION. The Company is a corporation duly organized and
existing in good standing under the laws of the State of Delaware, Electronic is
a corporation duly organized and existing in good standing under the laws of the
State of Nevada and each other Subsidiary is a corporation duly organized and
existing in good standing under the laws of the jurisdiction in which it is
incorporated. Schedule 8A sets forth as of the date of this Agreement the name
and jurisdiction of incorporation of each Subsidiary, as well as a description
of the share ownership thereof by the Company and Subsidiaries.
8B. FINANCIAL STATEMENTS. The Company has furnished each Purchaser of any
Accepted Notes with the following financial statements, identified by an
authorized Financial Officer of the Company: (i) consolidated and
consolidating balance sheets of the Company and its Subsidiaries as of the last
day in each of the five fiscal years of the Company most recently completed
prior to the date as of which this representation is made or repeated to such
Purchaser (other than fiscal years completed within 90 days prior to such date
for which audited financial
25
statements have not been released) and consolidated and consolidating statements
of income and cash flows of the Company and its Subsidiaries for each such
year, all such consolidated statements having been certified by Deloitte &
Touche (or another nationally recognized accounting firm) and all such
consolidating statements having been prepared by the Company; and (ii) unaudited
consolidated balance sheets of the Company and each of its Subsidiaries as at
the end of the quarterly period (if any) most recently completed prior to such
date and after the end of the most recent fiscal year (other than quarterly
periods completed within 45 days prior to such date for which financial
statements have not been released) and the comparable quarterly period in the
preceding fiscal year and unaudited consolidated statements of income and cash
flows of the Company and its Subsidiaries for the periods from the beginning of
the fiscal years in which such quarterly periods are included to the end of such
quarterly periods, prepared by the Company. The delivery of Annual Reports and
Quarterly Reports on Forms 10-K and 10-Q of the Company for the applicable
financial periods specified above shall be deemed to constitute compliance with
the foregoing representation. Such financial statements (including any related
schedules and/or notes) are true and correct in all material respects (subject,
as to interim statements, to changes resulting from year-end adjustments), have
been prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods involved and show all liabilities,
direct and contingent, of the Company and its Subsidiaries required to be shown
in accordance with such principles. The balance sheets fairly present the
condition of the Company and its Subsidiaries as at the dates thereof, and the
statements of income and statements of cash flows fairly present the results of
their operations for the periods indicated. There has been no Material Adverse
Change since the end of the most recent fiscal year for which such audited
financial statements have been furnished.
8C. ACTIONS PENDING. Set forth on Schedule 8C hereto is the litigation to
which the Company or any Subsidiary is a party on the date of this Agreement
where an adverse determination could,in any case, reasonably be expected to
exceed $500,000. There is no action, suit, investigation or proceeding pending
(including the litigation set forth on Schedule 8C) or, to the knowledge of the
Company, threatened against Electronic, the Company or any other Subsidiary or
any properties or rights of Electronic, the Company or any other Subsidiary, by
or before any court, arbitrator or administrative or governmental body which
individually or in aggregate could reasonably be expected to result in any
Material Adverse Change.
8D. OUTSTANDING DEBT. None of Electronic, the Company or any other
Subsidiary has any Debt outstanding except as permitted by paragraph 6C(2).
There exists no default under the provisions of any instrument evidencing such
Debt or of any agreement
26
relating thereto, other than defaults with respect to Debt which in aggregate
does not exceed $500,000 in principal amount.
8E. TITLE TO PROPERTIES. The Company has, and Electronic and each other
Subsidiary has, good and indefeasible title (subject to minor defects) to its
respective real properties (other than properties which it leases) and good
title to all of its other properties, including the properties reflected in the
most recent audited balance sheet referred to in paragraph 8B (other than
properties disposed of in the ordinary course of business), subject to no Lien
of any kind except Liens permitted by paragraph 6C(1). Electronic, the Company
and each other Subsidiary enjoys peaceful and undisturbed possession of all
leases necessary in any material respect for the conduct of their respective
businesses, none of which contains any unusual or burdensome provisions which
might materially affect or impair the operation of such businesses. All such
leases are valid and subsisting and are in full force and effect.
8F. TAXES. The Company has, and Electronic and each other Subsidiary has,
filed all Federal, state and other income tax returns which, to the best
knowledge of the officers of the Company, are required to be filed, and each has
paid all taxes as shown on such returns and on all assessments received by it to
the extent that such taxes have become due, except such taxes (i) as are being
contested in good faith by appropriate proceedings for which adequate reserves
have been established in accordance with generally accepted accounting
principles or (ii) which do not collectively, together with any interest or
penalties thereon, exceed $250,000.
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. None of Electronic, the
Company or any other Subsidiary is a party to any contract or agreement or
subject to any charter or other corporate restriction which materially and
adversely affects the business, property or assets, or financial condition of
the Company and its Subsidiaries taken as a whole. Neither the execution nor
delivery of this Agreement or the Notes, nor the offering, issuance and sale of
the Notes, nor fulfillment of nor compliance with the terms and provisions
hereof and of the Notes will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any Lien upon any of the properties
or assets of Electronic, the Company or any other Subsidiary pursuant to, the
charter or by-laws of Electronic, the Company or any other Subsidiary, any award
of any arbitrator or any agreement (including any agreement with stockholders),
instrument, order, judgment, decree, statue, law, rule or regulation to which
Electronic, the Company or any of its other Subsidiaries is subject. None of
Electronic, the Company or any of the other Subsidiaries is a party to, or
otherwise
27
subject to any provision contained in, any instrument evidencing indebtedness of
Electronic, the Company or any of the other Subsidiaries, any agreement relating
thereto or any other contract or agreement (including its charter) which limits
the amount of, or otherwise imposes restrictions on the incurring of, Debt of
Electronic or the Company of the type to be evidenced by the Notes or the
guarantee set forth in paragraph 11 hereof.
8H. OFFERING OF NOTES. Neither the Company nor Electronic, nor any agent
acting on either of their behalf has, directly or indirectly, offered the Notes
or any similar security of Electronic or the Company for sale to, or solicited
any offers to buy the Notes or any similar security of Electronic or the Company
from, or otherwise approached or negotiated with respect thereto with, any
Person other than institutional investors, and neither the Company nor
Electronic, nor any agent acting on either of their behalf has taken or will
take any action which would subject the issuance or sale of the Notes to the
provisions of section 5 of the Securities Act or to the provisions of any
securities or Blue Sky law of any applicable jurisdiction.
8I. USE OF PROCEEDS; REGULATION G, ETC. Electronic will use the proceeds
of the Electronic Notes to purchase publicly traded common stock of the Company
pursuant to a tender offer therefor and to pay expenses related thereto. As of
the date of this Agreement and as of the Closing Day for the Electronic Notes,
neither the Company nor any Subsidiary owns or has agreed or intends to acquire
any "margin stock" (as defined in Regulation G (12 CFR Part 207) of the Board of
Governors of the Federal Reserve System) other than (i) the Purchased Common
Stock and (ii) other margin stock the aggregate market value of which does not
exceed $250,000. The Company will use the proceeds of any Company Notes for the
purposes set forth in the applicable Confirmation of Acceptance therefor and to
pay expenses thereto. Neither Electronic nor the Company, nor any agent acting
on either's behalf, has taken or will take any action which might cause this
Agreement or the Notes to violate Regulation G, Regulation T, Regulation X, or
any other regulation of the Board of Governors of the Federal Reserve System or
to violate the Securities Exchange Act of 1934, in each case as in effect now or
as the same may hereafter be in effect.
8J. ERISA. No accumulated funding deficiency (as defined in section 302
of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC
has been or is expected by the Company or any ERISA Affiliate to be incurred
with respect to any Plan (other than a Multiemployer Plan) by Electronic, the
Company, any other Subsidiary or any ERISA Affiliate which has or may result in
Material Adverse Change. None of Electronic, the Company, any other Subsidiary
nor any
28
ERISA Affiliate has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan which
has or may result in a Material Adverse Change. The execution and delivery of
this Agreement and the issuance and sale of the Notes will be exempt from, or
will not involve any transaction which is subject to the prohibitions of,
section 406 of ERISA and will not involve any transaction in connection with
which a penalty could be imposed under section 502(i) of ERISA or a tax could be
imposed pursuant to section 4975 of the Code. The representation by the Company
in the next preceding sentence is made in reliance upon and subject to the
accuracy of each Purchaser's representation in paragraph 9B.
8K. GOVERNMENTAL CONSENT. Neither the nature of Electronic, the Company
or of any other Subsidiary, nor any of their respective businesses or
properties, nor any relationship between Electronic, the Company or any other
Subsidiary and any other Person, nor any circumstance in connection with the
offering, issuance, sale or delivery of the Notes is such as to require any
authorization, consent, approval, exemption or other action by or notice to or
filing with any court or administrative or governmental body (other than routine
filings after the date of closing with the Securities and Exchange Commission
and/or state Blue Sky authorities) in connection with the execution and delivery
of this Agreement, the offering, issuance, sale or delivery of the Notes or
fulfillment of or compliance with the terms and provisions hereof or of the
Notes.
8L. COMPLIANCE. Electronic, the Company and its other Subsidiaries, and
all of their respective properties and facilities, have complied at all times
and in all respects with all federal, state, local and regional statutes, laws,
ordinances and judicial or administrative orders, judgments, rulings and
regulations (including Environmental Laws) except, in any such case, where
failure to comply would not result in a Material Adverse Change.
8M. HOSTILE TENDER OFFERS. None of the proceeds of the sale of any Notes
will be used to finance a Hostile Tender Offer.
8N. DISCLOSURE. Neither this Agreement (as it relates to the Company and
its Subsidiaries) nor any other document, certificate or statement furnished to
any Purchaser by or on behalf of Electronic or the Company in connection
herewith contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. There is no fact peculiar to the Company or any of its
Subsidiaries which has or in the future may (so far as any of the Responsible
Officers of the Company can now foresee) result in a Material Adverse Change
which has not been set forth in this Agreement or in the other
29
documents, certificates and statements furnished to each Purchaser by or on
behalf of Electronic or the Company prior to the date this representation is
made or repeated in connection with the transactions contemplated hereby.
8O. HOLDING COMPANY STATUS. Neither Electronic nor the Company is a
"holding company", or a "subsidiary" or "affiliate" of a "holding company", or a
"public utility", within the meaning of the Public Utility Holding Company Act
of 1935, as amended, or a public utility within the meaning of the Federal Power
Act, as amended.
8P. INVESTMENT COMPANY STATUS. Neither Electronic nor the Company is an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or an "investment
adviser" within the meaning of the Investment Advisers Act of 1940, as amended.
9. REPRESENTATIONS OF EACH PURCHASER. Each Purchaser represents as
follows:
9A. NATURE OF PURCHASE. Such Purchaser is not acquiring the Notes to be
purchased by it hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, provided that the
disposition of such Purchaser's property shall at all times be and remain within
its control.
9B. SOURCE OF FUNDS. The source of the funds being used by such Purchaser
to pay the purchase price of the Notes being purchased by such Purchaser
hereunder constitutes assets allocated to: (i) the "insurance company general
account" of such Purchaser (as such term is defined under Section V of the
United States Department of Labor's Prohibited Transaction Class Exemption
("PTCE") 95-60), and as of the date of the purchase of the Notes such Purchaser
satisfies all of the applicable requirements for relief under Sections I and IV
of PTCE 95-60 or (ii) a separate account maintained by such Purchaser in which
no employee benefit plan, other than employee benefit plans identified on a list
which has been furnished by such Purchaser to the Company, participates to the
extent of 10% or more. For the purpose of this paragraph 9B, the terms
"SEPARATE ACCOUNT" and "EMPLOYEE BENEFIT PLAN" shall have the respective
meanings specified in Section 3 of ERISA.
9C. NO RELIANCE ON PURCHASED COMMON STOCK. In connection with the
purchase of the Electronic Notes, each Purchaser thereof, in good faith, has not
relied on any margin stock (including without limitation the Purchased Common
Stock)as indirect security in agreeing to purchase the Electronic Notes.
30
10. DEFINITIONS; ACCOUNTING MATTERS. For purposes of this Agreement, the
terms defined in paragraphs 10A and 10B (or within the text of any other
paragraph) shall have the respective meanings specified therein and all
accounting matters shall be subject to determination as provided in paragraph
10C.
10A. YIELD-MAINTENANCE TERMS.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to paragraph 4B or is declared to be
immediately due and payable pursuant to paragraph 7A, as the context requires.
"DESIGNATED SPREAD" shall mean 0% in the case of each Note of any Series
unless the Confirmation of Acceptance with respect to the Notes of such Series
specifies a different Designated Spread in which case it shall mean, with
respect to each Note of such Series, the Designated Spread so specified.
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective scheduled due dates to
the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (as converted to reflect
the periodic basis on which interest on such Note is payable, if payable other
than on a semi-annual basis) equal to the Reinvestment Yield with respect to
such Called Principal.
"REINVESTMENT YIELD" shall mean, with respect to the Called Principal of
any Note, the Designated Spread over the yield to maturity implied by (i) the
yields reported, as of 10:00 A.M. (New York City local time) on the Business Day
next preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Service (or such other display
as may replace page 678 on the Telerate Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or (ii) if such yields shall
not be reported as of such time or the yields reported as of such time shall not
be ascertainable, the Treasury Constant Maturity Series yields reported, for the
latest day for which such yields shall have been so reported as of the Business
Day next preceding the Settlement Date with respect to such Called Principal, in
Federal Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a constant
maturity equal to the Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield shall be determined, if necessary, by (a)
converting U.S. Treasury xxxx quotations to bond-equivalent
31
yields in accordance with accepted financial practice and (b) interpolating
linearly between yields reported for various maturities.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called Principal
of any Note, the number of years (calculated to the nearest one-twelfth year)
obtained by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) each Remaining Scheduled Payment of such Called
Principal (but not of interest thereon) by (b) the number of years (calculated
to the nearest one-twelfth year) which will elapse between the Settlement Date
with respect to such Called Principal and the scheduled due date of such
Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4B or is declared to be immediately due and payable pursuant to
paragraph 7A, as the context requires.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Called Principal of
such Note over the sum of (i) such Called Principal plus (ii) interest accrued
thereon as of (including interest due on) the Settlement Date with respect to
such Called Principal. The Yield-Maintenance Amount shall in no event be less
than zero.
10B. OTHER TERMS.
"ACCEPTANCE" shall mean an Electronic Acceptance or a Company Acceptance,
as applicable.
"ACCEPTANCE DAY" shall have the meaning specified in paragraph 2A(5) or
2B(5), as applicable.
"ACCEPTANCE WINDOW" shall have the meaning specified in paragraph 2A(5) or
2B(5), as applicable.
"ACCEPTED COMPANY NOTE" shall have the meaning specified in paragraph
2B(5).
32
"ACCEPTED NOTE" shall mean an Accepted Electronic Note or an Accepted
Company Note, as applicable.
"ACCEPTED ELECTRONIC NOTE" shall have the meaning specified in paragraph
2A(5).
"AFFILIATE" of any Person shall mean any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with,
such first Person, except a Subsidiary shall not be an Affiliate of the Company
or another Subsidiary. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
"AGGREGATE FUNDED DEBT" shall mean, as of any time of determination
thereof, the aggregate amount of Funded Debt of the Company and Subsidiaries,
excluding (i) any amount thereof which is owed by a Subsidiary to the Company or
---------
a Wholly-Owned Subsidiary and (ii) any amount thereof owed by the Company to a
Subsidiary which has been subordinated to the Notes pursuant to a note including
subordination terms in the form of Exhibit E hereto.
"AUTHORIZED OFFICER" shall mean (i) in the case of Electronic and the
Company, the Company's Chairman of the Board, President, Chief Executive
Officer, Chief Financial Officer, Treasurer, Corporate Secretary and any Vice
President thereof designated as an "Authorized Officer" of Electronic and the
Company for purposes of this Agreement in an Officer's Certificate executed by
the Company's Chairman of the Board, President, Chief Executive Officer, Chief
Financial Officer, Corporate Secretary or Treasurer and (ii) in the case of
Prudential, any officer of Prudential designated as its "Authorized Officer" in
the Information Schedule or any officer of Prudential designated as its
"Authorized Officer" for the purpose of this Agreement in a certificate executed
by one of its Authorized Officers. Any action taken under this Agreement on
behalf of Electronic or the Company by any individual who on or after the date
of this Agreement shall have been an Authorized Officer of Electronic or the
Company and whom Prudential in good faith believes to be an Authorized Officer
of Electronic or the Company at the time of such action shall be binding on
Electronic and the Company even though such individual shall have ceased to be
an Authorized Officer of Electronic and the Company, and any action taken under
this Agreement on behalf of Prudential by any individual who on or after the
date of this Agreement shall have been an Authorized Officer of Prudential, and
whom Electronic or the Company in good faith believes to be an Authorized
Officer of Prudential at the time of such action shall be binding on
33
Prudential even though such individual shall have ceased to be an Authorized
Officer of Prudential.
"AVAILABILITY PERIOD" shall have the meaning set forth in paragraph 2A(2).
"AVERAGE LIFE TO MATURITY" shall mean, as applied to any Debt at any date,
the number of years obtained by dividing (a) the then outstanding principal
amount of such Debt into (b) the sum of the products obtained by multiplying (x)
the amount of each then remaining installment, sinking fund, serial maturity or
other required payment, including payment at final maturity, in respect thereof,
by (y) the number of years (calculated to the nearest one-twelfth year) which
will elapse between such date and the date as of which such payment is to be
made.
"BANKRUPTCY LAW" shall have the meaning specified in clause (viii) of
paragraph 7A.
"BASE NET WORTH" shall mean the greater of (i) an amount equal to 75% of
the Company's consolidated stockholders' equity upon giving effect to the
purchase of the Purchased Common Stock, and (ii) $65,000,000.
"BASE TREASURY NOTES" shall have the meaning set forth in paragraph 2A(5).
"BUSINESS DAY" shall mean any day other than (i) a Saturday or a Sunday,
(ii) a day on which commercial banks in New York City are required or authorized
to be closed and (iii) for purposes of paragraphs 2A(3) and 2B(3) hereof only, a
day on which The Prudential Insurance Company of America is not open for
business.
"CANCELLATION DATE" shall have the meaning specified in paragraph 2C(5).
"CANCELLATION FEE" shall have the meaning specified in paragraph 2C(5).
"CAPITALIZED LEASE OBLIGATION" shall mean, with respect to any Person, any
rental obligation which, under generally accepted accounting principles, is or
will be required to be capitalized on the books of such Person, taken at the
amount thereof accounted for as indebtedness (net of interest expense) in
accordance with such principles.
"CLOSING DAY" shall mean, with respect to any Accepted Note, the Business
Day specified for the closing of the purchase and sale of such Accepted Note in
the Purchase Request or Request for Purchase with respect to such Accepted Note,
provided that (i) if
--------
34
Electronic or the Company (as applicable) and the Purchaser which is obligated
to purchase such Accepted Note agree on an earlier Business Day for such
closing, the "CLOSING DAY" for such Accepted Note shall be such earlier Business
Day, and (ii) if the closing of the purchase and sale of such Accepted Note is
rescheduled pursuant to paragraph 2C(1), the Closing Day for such Accepted Note,
for all purposes of this Agreement except references to "original Closing Day"
in paragraph 2C(4), shall mean the Rescheduled Closing Day with respect to such
Accepted Note.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY ACCEPTANCE" shall have the meaning specified in paragraph 2B(5).
"COMPANY NOTES" shall have the meaning specified in paragraph 1B.
"CONFIRMATION OF ACCEPTANCE" shall have the meaning specified in paragraph
2A(5) or 2B(5), as applicable.
"CONSOLIDATED NET EARNINGS" means, for any period, an amount equal to
consolidated gross revenues of the Company and the Subsidiaries less all
operating and non-operating expenses of the Company and the Subsidiaries
including all charges of a proper character (including current and deferred
taxes on income, provision for taxes on unremitted foreign earnings that are
included in gross revenues, and current additions to reserves), but not
including in gross revenues for such period
(i) any gains (net of expenses and taxes applicable thereto) in
excess of losses resulting from the sale, conversion or
other disposition of capital assets, any gains resulting
from the write-up of assets (other than the write-up of
current assets as a result of revaluations or realignment of
currencies),
(ii) any equity of the Company or any Subsidiary in the
unremitted earnings of any corporation that is not a
Subsidiary,
(iii) any earnings of any Person acquired by the Company or any
Subsidiary through purchase, merger or consolidation or
otherwise for any period prior to the acquisition, or
35
(iv) any deferred credit representing the excess of equity in any
Subsidiary at the date of acquisition over the cost of the
investment in such Subsidiary.
"CONSOLIDATED TANGIBLE CAPITALIZATION" shall mean, as of any time of
determination thereof, the sum of Consolidated Tangible Net Worth and Aggregate
Funded Debt.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, as of any time of
determination thereof, the stockholders' equity of the Company, less the amount
of any Intangibles in excess of $2,000,000 which are booked subsequent to
September 30, 1995.
"CUMULATIVE PERCENTAGE OF ASSETS TRANSFERRED" shall mean, as of an time of
determination thereof, the sum of the Percentages of Assets Transferred for all
assets of the Company and Subsidiaries Transferred pursuant to paragraph 6C(4)
or clause (iii) of paragraph 6C(6) after the date hereof.
"CURRENT DEBT" means, with respect to any Person at any time of
determination, any obligation of such Person for borrowed money (and any notes
payable and drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money) payable on demand or within a
period of one year from the date of creation thereof, and any Guarantee of any
such obligation of any other Person; provided that any obligation shall be
treated as Funded Debt, regardless of its term, if such obligation is renewable
pursuant to the terms thereof or of a revolving credit or similar agreement
effective for more than one year after the date of creation thereof, or may be
payable out of the proceeds of a similar obligation pursuant to the terms of
such obligation or of any such agreement. Any such obligation secured by a Lien
on property of such Person shall be deemed to be Current Debt of such Person
even though such obligation shall not be assumed by such Person.
"DEBT" shall mean Current Debt and Funded Debt.
"ELECTRONIC ACCEPTANCE" has the meaning specified in paragraph 2A(5).
"ELECTRONIC NOTES" has the meaning specified in paragraph 1A.
"ENVIRONMENTAL LAWS" shall mean all federal, state, local and foreign laws
relating to pollution or protection of the environment, including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air,
36
surface water, ground water or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes, and any and all regulations, codes, plans,
orders, decrees, judgements, injunctions, notices or demand letters issued,
entered, promulgated or approved thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" shall mean any corporation which is a member of the same
controlled group of corporations as the Company within the meaning of section
414(b) of the Code, or any trade or business which is under common control with
the Company within the meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph 7A,
provided that there has been satisfied any requirement in connection with such
event for the giving of notice, or the lapse of time, or the happening of any
further condition, event or act, and "DEFAULT" shall mean any of such events,
whether or not any such requirement has been satisfied.
"FACILITY" shall have the meaning specified in paragraph 2B(1).
"FUNDED DEBT" shall mean with respect to any Person without duplication,
(i) any obligation payable more than one year from the date of
creation thereof (including current maturities thereof) which under
generally accepted accounting principles should be shown on the balance
sheet as a liability (including Capitalized Lease Obligations and excluding
reserves for deferred income taxes and other reserves to the extent not
constituting an obligation),
(ii) any obligation payable more than one year from the date of
creation thereof which is secured by any Lien on property owned by such
Person, whether or not the obligation secured thereby shall have been
assumed by such Person,
(iii) all Swaps of such Person, and
(iv) all obligations of the type described in the foregoing clauses
(i), (ii) and (iii) with respect to which such Person has become liable by
way of a Guarantee;
but shall not include any contingent reimbursement obligation of such Person
with respect to letters of credit (i) issued to its
37
workers' compensation insurance carriers in connection with retrospective rated
insurance policies or (ii) to the extent the underlying obligation which is
supported by such letter of credit is already included in the calculation of
such Person's Funded Debt.
"GUARANTEE" shall mean, with respect to any Person, any direct or indirect
liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise directly or indirectly liable, including, without
limitation, any such obligation in effect guaranteed by such Person through any
agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire
such obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the solvency or
any balance sheet or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or for
any transportation or service, regardless of the non-delivery or non-furnishing
thereof, in any such case if the purpose or intent of such agreement is to
provide assurance that such obligation will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected against loss in respect thereof. The amount of any
Guarantee shall be equal to the outstanding principal amount of the obligation
guaranteed or such lesser amount to which the maximum exposure of the guarantor
shall have been specifically limited.
"HEDGE TREASURY NOTE(S)" shall mean, with respect to any Accepted Note, the
United States Treasury Note or Notes whose duration (as determined by
Prudential) most closely matches the duration of such Accepted Note.
"HOSTILE TENDER OFFER" shall mean, with respect to the use of proceeds of
any Note, any offer to purchase, or any purchase of, shares of capital stock of
any corporation or equity interests in any other entity, or securities
convertible into or representing the beneficial ownership of, or rights to
acquire, any such shares or equity interests, if such shares, equity interests,
securities or rights are of a class which is publicly traded on any securities
exchange or in any over-the-counter market, other than purchases of such shares,
equity interests, securities or rights which, together with any such shares,
equity interests, securities or rights then owned by the Company or
Subsidiaries, represent less than 5% of the equity interests or
38
beneficial ownership of such corporation or other entity for portfolio
investment purposes, and such offer or purchase has not been duly approved by
the board of directors of such corporation or the equivalent governing body of
such other entity prior to the date on which the Company makes the Request for
Purchase of such Note.
"INCLUDING" shall mean, unless the context clearly requires otherwise,
"including without limitation."
"INTANGIBLES" shall mean any patents, trademarks, copyrights, trade names,
licenses, operating agreements, treasury stock, deferred or capitalized research
and development costs, goodwill (including any amounts, however designated,
representing the cost of acquisition of businesses and investments in excess of
the book value thereof), unamortized debt discount and expense, any write-up of
asset values after September 30, 1995 and any other amounts reflected in contra-
equity accounts and any other assets treated as intangible assets under
generally accepted accounting principles.
"ISSUANCE PERIOD" shall have the meaning specified in paragraph 2B(2).
"LIEN" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any lease in
the nature thereof, and the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction).
"MARKET DISRUPTION" shall mean any suspension or material limitation or
significant disruption in trading in securities generally on the New York Stock
Exchange or in the markets for U.S. Treasury Notes and other financial
instruments conducted in New York, New York.
"MATERIAL ADVERSE CHANGE" shall mean a material adverse change in (i) the
business, prospects, assets, liabilities, condition (financial or otherwise) or
operations of the Company and its Subsidiaries, taken as a whole or (ii) the
Company's ability to perform its obligations with respect to the Notes and this
Agreement.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
"NOTES" shall have the meaning set forth in paragraph 1B.
39
"OBLIGATIONS" shall mean all indebtedness, obligations (including any
obligation to perform) and liabilities existing on the date hereof or arising
from time to time hereafter, whether direct or indirect, joint, several or joint
and several, actual, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise, of Electronic to Prudential and the holders of the Electronic Notes,
including, without limitation, the outstanding principal amount of the
Electronic Notes and all present and future indebtedness, liabilities and
obligations of Electronic now or hereafter owned to Prudential and the holders
of the Electronic Notes evidenced by or arising under, by virtue of or pursuant
to this Agreement, the Notes and all renewals and extensions thereof, including,
without limitation, all Yield-Maintenance Amounts and interest on the Electronic
Notes accruing before, during or after any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, liquidation or dissolution
proceeding, and, if interest ceases to accrue by operation of law by reason of
any such proceeding, interest which would have accrued in the absence of such
proceeding.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
Electronic or the Company by an Authorized Officer of Electronic or the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor or replacement entity thereto under ERISA.
"PERCENTAGE OF ASSETS TRANSFERRED" shall mean, with respect to each asset
Transferred pursuant to paragraph 6C(4) and clause (iii) of paragraph 6C(6), the
percentage of the total assets of the Company and Subsidiaries determined on a
consolidated basis which is represented by the greater of the book value or fair
market value of such asset, in each case as of the last day of the fiscal
quarter most recently ended prior to the effective date of such Transfer. In
each instance where a calculation is made utilizing an asset's fair market
value, the total assets of the Company and Subsidiaries on a consolidated basis
shall be increased by the difference between such asset's fair market value and
its book value for purposes of such calculation.
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.
"PLAN" shall mean any "employee pension benefit plan" (as such term is
defined in section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any ERISA
Affiliate.
40
"PREFERRED STOCK" shall mean, with respect to any corporation or limited
liability company, any capital stock or equity interest that is preferred in
right of payment of dividends, earnings, or liquidation proceeds over any other
class of capital stock or equity interest.
"PRIORITY DEBT" shall mean (i) Debt of the Company secured by any Lien, and
(ii) Debt and Preferred Stock of Subsidiaries (including any Guarantee by a
Subsidiary of Debt of the Company), but excluding (a) Debt and Preferred Stock
---------
of Subsidiaries which are held by the Company or a Wholly-Owned Subsidiary, (b)
the Electronic Notes and (c) Debt secured by any Lien described in clause (iv)
of paragraph 6C(1), subject to the limitation on the amount thereof.
"PRUDENTIAL" shall mean The Prudential Insurance Company of America.
"PRUDENTIAL AFFILIATE" shall mean any corporation or other entity all of
the Voting Stock (or equivalent voting securities or interests) of which is
owned by Prudential either directly or through Prudential Affiliates.
"PURCHASED COMPANY STOCK" shall mean the publicly traded common stock of
the Company purchased by Electronic pursuant to a tender offer therefor
concurrently with the closing of the purchase and sale of the Electronic Notes.
"PURCHASE REQUEST" shall have the meaning specified in paragraph 2A(3).
"PURCHASER(S)" shall mean Prudential or a Prudential Affiliate purchasing
any Note.
"RATE QUOTE" shall have the meaning specified in paragraph 2A(4).
"RELATED PARTY" shall mean (i) any Significant Stockholder, (ii) all
Persons to whom any Significant Stockholder is related by blood, adoption or
marriage and (iii) all Affiliates of the foregoing Persons.
"REQUEST FOR PURCHASE" shall have the meaning specified in paragraph 2B(3).
"REQUIRED HOLDER(S)" shall mean the holder or holders of at least 51% of
the aggregate principal amount of the Notes or of a Series of Notes, as the
context may require, from time to time outstanding.
41
"RESCHEDULED CLOSING DAY" shall have the meaning specified in paragraph
2C(1).
"RESPONSIBLE OFFICER" means each of the Chairman of the Board, Chief
Executive Officer, Chief Financial Officer, President, any Vice President, or
the Treasurer or Corporate Secretary of Electronic or the Company, as the case
may be.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES" shall have the meaning specified in paragraph 1B.
"SIGNIFICANT HOLDER" shall mean (i) Prudential or any Prudential Affiliate,
so long as Prudential or any Prudential Affiliate shall hold any Note or any
amount remains available under the Facility or (ii) any other holder of at least
5% of the aggregate principal amount of any Series of Notes from time to time
outstanding.
"SIGNIFICANT STOCKHOLDER" shall mean and include any Person who owns,
beneficially or of record, directly or indirectly, at any time during any year
with respect to which a computation is being made, either individually or
together with all persons to whom such Person is related by blood, adoption or
marriage, 5% or more of the Voting Stock of the Company.
"SUBSIDIARY" means any corporation at least 80% of the outstanding Voting
Stock of which is, at the time as of which any determination is being made,
owned by the Company either directly or through Subsidiaries.
"SWAPS" shall mean, with respect to any Person, payment obligations with
respect to interest rate swaps or xxxxxx, currency swaps or xxxxxx and similar
obligations obligating such Person to make payments, whether periodically or
upon the happening of a contingency. For the purposes of this Agreement, the
amount of the obligation under any Swap shall be the amount determined in
respect thereof as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such Swap had terminated at the end of
such fiscal quarter, and in making such determination, if any agreement relating
to such Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"TRANSFER" shall mean, with respect to any item, the sale, exchange,
conveyance, lease, transfer or other disposition of such item.
42
"TRANSFEREE" shall mean any direct or indirect transferee of all or any
part of any Note purchased under this Agreement.
"TWELVE MONTH PERCENTAGE OF ASSETS TRANSFERRED" shall mean, as of any time
of determination thereof, the sum of the Percentages of Assets Transferred for
all assets of the Company and Subsidiaries Transferred pursuant to paragraph
6C(4) or clause (iii) of paragraph 6C(6) during the immediately preceding twelve
month period.
"VOTING STOCK" shall mean, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
"WHOLLY-OWNED SUBSIDIARY" means any Subsidiary 100% of the outstanding
stock of every class of which (except directors' qualifying shares) is, at the
time of determination, owned by the Company or Wholly-Owned Subsidiaries.
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All references in
this Agreement to "generally accepted accounting principles" shall be deemed to
refer to generally accepted accounting principles in effect in the United States
at the time of application thereof. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all unaudited
financial statements and certificates and reports as to financial matters
required to be furnished hereunder shall be prepared, in accordance with
generally accepted accounting principles, applied on a basis consistent with the
most recent audited consolidated financial statements of the Company and its
Subsidiaries delivered pursuant to clause (ii) of paragraph 5A or, if no such
statements have been so delivered, the most recent audited financial statements
referred to in clause (i) of paragraph 8B.
11. COMPANY GUARANTY OF ELECTRONIC'S OBLIGATIONS.
11A. GUARANTY OF PAYMENT AND PERFORMANCE OF ELECTRONIC'S OBLIGATIONS. The
Company absolutely, unconditionally and irrevocably guaranties the full and
prompt payment when due (whether at maturity, a stated or optional prepayment
date, by reason of acceleration or otherwise) and at all times thereafter, and
the due and punctual performance, of all Obligations. The Company agrees to pay
and to indemnify and save Prudential and each holder of Notes harmless from and
against any damage, loss, cost or expense (including attorneys' fees) which such
Person may incur or be subject to as a consequence, direct or indirect, of
43
endeavoring to enforce any rights under this paragraph 11 or to collect all or
any part of the Obligations from, or in pursuing any action against Electronic
or the Company or enforcing any rights of Prudential or any holder of Notes in
any security for the Obligations or the liabilities of the Company hereunder and
any taxes, fees or penalties which may be paid or payable in connection
therewith. This is a continuing guarantee of payment and performance and not of
collection.
Upon an Event of Default specified in clause (i) or (ii) of paragraph 7A,
any holder of a Note may, and upon any Event of Default, the Required Holders
may, at its or their sole election and without notice, proceed directly and at
once against the Company to seek and enforce performance of, and to collect and
recover, the Obligations, or any portion thereof, without first proceeding
against Electronic or any other Person, or any security for the Obligations or
for the liability of any such other Person. Prudential and the holders of Notes
shall have the exclusive right to determine the application of payments and
credits, if any, from the Company, Electronic, or from any other Person on
account of the Obligations or otherwise. The obligations under this paragraph
11 and all covenants and agreements of the Company contained herein shall
continue in full force and effect and shall not be discharged until such time as
all of the Obligations shall be paid or otherwise performed in full.
11B. OBLIGATIONS UNCONDITIONAL. The obligation of the Company under this
paragraph 11 shall be continuing, absolute and unconditional, irrespective of
(i) the invalidity or unenforceability of any part of this Agreement or any
Electronic Note or any provision of any thereof;(ii) the absence of any attempt
by any holder of an Electronic Note to collect the Obligations or any portion
thereof from Electronic, any other guarantor of all or any portion of the
Obligations or any other Person or other action to enforce the same; (iii) any
action taken by Prudential or any holder of a Note whether or not authorized by
this paragraph 11; (iv) any failure by Prudential or any holder of a Note to
acquire, perfect or maintain any security interest or lien in, or take any steps
to preserve its rights to, any security for the Obligations or any portion
thereof or for the liability of the Company hereunder or the liability of any
other guarantor of any or all of the Obligations; (v) any defense arising by
reason of any disability or other defense (other than a defense of payment,
unless the payment on which such defense is based was or is subsequently
invalidated, declared to be fraudulent or preferential, otherwise avoided and/or
required to be repaid to Electronic or the Company, as the case may be, or the
estate of any such party, a trustee, receiver or any other Person under any
bankruptcy law, state or federal law, common law or equitable cause, in which
44
case there shall be no defense of payment with respect to such payment) of
Electronic or any other Person liable on the Obligations or any portion thereof;
(vi) any election by a holder of any Note in any proceeding instituted under
Chapter 11 of Title 11 of the Federal Bankruptcy Code (11 U.S.C. (S)101 et seq.)
-- ---
(the "Bankruptcy Code"), of the application of Section 1111(b)(2) of the
Bankruptcy Code; (vii) any borrowing or grant of a security interest to any
holder of a Note by Electronic, as debtor-in-possession, or extension of credit,
under Section 364 of the Bankruptcy Code; (viii) the disallowance or avoidance
of all or any portion of any claim(s) of Prudential or a holder of a Note for
repayment of the Obligations under the Bankruptcy Code or any similar state law
or the avoidance, invalidity or unenforceability of any Lien securing the
Obligations or the liability of the Company hereunder or of any other guarantor
of all or any part of the Obligations; (ix) any amendment to, waiver or
modification of, or consent, extension, indulgence or other action or inaction
under or in respect of other provisions of this Agreement or the Notes,
including, without limitation, any increase in the interest rate on or method of
calculation of any Obligations; (x) any change in any provision of any
applicable law or regulation; (xi) any order, judgment, writ, award or decree of
any court, arbitrator or governmental authority, domestic or foreign, binding on
or affecting the Company or Electronic or any of their assets; (xii) the charter
or by-laws of the Company or Electronic; (xiii) any mortgage, indenture, lease,
contract, or other agreement (including, without limitation, any agreement with
stockholders), instrument or undertaking to which the Company or Electronic is a
party or which purports to be binding on or affect such Person or any of its
assets; (xiv) any bankruptcy, insolvency, readjustment, composition, liquidation
or similar proceeding with respect to Electronic or any other guarantor of all
or any portion of any Obligations or such Persons's property and any failure by
Prudential or any holder of a Note to file or enforce a claim against Electronic
or such other Person in any proceeding; (xv) any failure on the part of
Electronic for any reason to comply with or perform any of the terms of any
other agreement with the Company; or (xvi) any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor or
surety.
11C. OBLIGATIONS UNIMPAIRED. Prudential and each holder of a Note is
authorized, without demand or notice, which demand and notice are hereby waived,
and without discharging or otherwise affecting the obligations of the Company
hereunder (which shall remain absolute and unconditional notwithstanding any
such action or omission to act), from time to time to (i) renew, extend,
accelerate or otherwise change the time for payment of, or other terms relating
to, the Obligations or any portion thereof, including, without limitation,
increasing the interest rate on
45
any Obligations, or otherwise modify, amend or change the terms of this
Agreement or the Notes; (ii) accept partial payments on the Obligations; (iii)
take and hold security for the Obligations or any portion thereof or any other
liabilities of Electronic and the obligations under any other guaranties and
sureties of all or any of the Obligations, and exchange, enforce, waive,
release, sell, transfer, assign, abandon, fail to perfect, subordinate or
otherwise deal with any such security; (iv) apply such security and direct the
order or manner of sale thereof as such holder may determine in its sole
discretion; (v) settle, release, compromise, collect or otherwise liquidate the
Obligations or any portion thereof and any security therefor or guarantee
thereof in any manner; (vi) extend additional loans, credit and financial
accommodations to Electronic and otherwise create additional Obligations; (vii)
waive strict compliance with any of the terms of this Agreement or the Notes and
otherwise forbear from asserting Prudential's or such holder's rights and
remedies thereunder; (viii) take and hold additional guarantees or sureties and
enforce or forbear from enforcing any guarantee or surety of any other guarantor
or surety of the Obligations, any portion thereof or release or otherwise take
any action with respect to any such guarantor or surety; (ix) assign the
obligations hereunder in part or in whole in connection with any assignment of
the Obligations or any portion thereof; (x) exercise or refrain from exercising
any rights against Electronic; and (xi) apply any sums, by whomsoever paid or
however realized, to the payment of the Obligations as Prudential or such holder
of a Note in its sole discretion may determine.
11D. WAIVERS OF COMPANY. The Company waives for the benefit of Prudential
and each holder of a Note:
(i) any right to require Prudential or any holder of a Note, as a
condition of payment or performance by the Company or otherwise, to (a) proceed
against Electronic or any other guarantor of the Obligations or any other
Person, (b) proceed against or exhaust any security given to or held by
Prudential or any holder of a Note in connection with the Obligations or any
other guarantee, or (c) pursue any other remedy available to Prudential or any
holder of a Note whatsoever;
(ii) any defense arising by reason of (a) the incapacity, lack of
authority or any disability or other defense of Electronic, including, without
limitation, any defense based on or arising out of the lack of validity or the
unenforceability of the Obligations or any agreement or instrument relating
thereto, (b) the cessation of the liability of Electronic from any cause other
than indefeasible payment in full of the Obligations, or (c) any act or omission
of Prudential, any holder of a Note or any other Person which directly or
indirectly, by operation of law or otherwise, results in or aids the discharge
or release of
46
Electronic or any security given to or held by any holder of a Note in
connection with the Obligations or any other guarantee;
(iii) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in other
respects more burdensome than that of the principal;
(iv) any defense based upon Prudential's or any holder's errors or
omissions in the administration of the Obligations;
(v) (a) any principles or provisions of law, statutory or otherwise, which
are or might be in conflict with the terms of this paragraph 11 and any legal or
equitable discharge of the Company's obligations hereunder, (b) the benefit of
any statute of limitations affecting the Obligations or the Company's liability
hereunder or the enforcement hereof, (c) any rights to set-offs, recoupments and
counterclaims, and (d) promptness, diligence and any requirement that Prudential
and any holder of a Note protect, maintain, secure, perfect or insure any Lien
or any property subject thereto;
(vi) notices (a) of the issuance of any Electronic Notes, (b) of
nonperformance or dishonor, (c) of acceptance of this paragraph 11 by
Prudential, the Purchasers or any holder of a Note, (d) of default in respect of
the Obligations or any other guarantee, (e) of the existence, creation or
incurrence of new or additional indebtedness, arising either from additional
loans extended to Electronic or otherwise, (f) that the principal amount, or any
portion thereof, and/or any interest or Yield Maintenance Amount on any document
or instrument evidencing all or any part of the Obligations is due, (g) of any
and all proceedings to collect from Electronic or any other guarantor of all or
any part of the Obligations, or from any other Person, (h) of exchange, sale,
surrender or other handling of any security or collateral given to Prudential or
any holder of a Note to secure payment of the Obligations or any guarantee
therefor, (i) of incurrence, renewal, extension or modification of any of the
Obligations, (j) of assignment, sale or other transfer of any Note to another
Person, or (k) of any of the matters referred to in paragraph 11B and any right
to consent to any thereof;
(vii) presentment, demand for payment or performance and protest and
notice of protest with respect to the Obligations or any guarantee with respect
thereto; and
(viii) any defenses or benefits that may be derived from or afforded by
law which limit the liability of or exonerate guarantors or sureties, or which
may conflict with the terms of this paragraph 11.
47
The Company agrees that no holder of a Note shall be under any obligation
to xxxxxxxx any assets in favor of the Company or against or in payment of any
or all of the Obligations.
The Company will not exercise any rights which it may have acquired by way
of subrogation under this paragraph 11, by any payment made hereunder or
otherwise, or accept any payment on account of such subrogation rights, or any
rights of contribution, reimbursement, indemnity, exoneration or any rights or
recourse to any security for the Obligations unless at the time of its exercise
of any such right there shall have been performed and indefeasibly paid in full
all of the Obligations.
11E. REVIVAL. The Company agrees that, if any payment made by Electronic
or any other Person is applied to the Obligations and is at any time annulled,
set aside, rescinded, invalidated, declared to be fraudulent or preferential or
otherwise required to be refunded or repaid, or the proceeds of any security are
required to be returned by Prudential or any holder of a Note to Electronic or
its estate, trustee, receiver or any other Person, under any bankruptcy law,
state or federal law, common law or equitable cause, then, to the extent of such
payment or repayment, the Company's liability hereunder (and any Lien or other
collateral securing such liability) shall be and remain in full force and
effect, as fully as if such payment had never been made, or, if prior thereto
the obligations under this paragraph 11 shall have been canceled or surrendered
(and if any Lien or other collateral securing the Company's liability hereunder
shall have been released or terminated by virtue of such cancellation or
surrender), the obligations under this paragraph 11 (and such Lien or other
collateral) shall be reinstated and returned in full force and effect, and such
prior cancellation or surrender shall not diminish, release, discharge, impair
or otherwise affect the obligations of the Company in respect of the amount of
such payment (or any Lien or other collateral securing such obligation).
11F. OBLIGATION TO KEEP INFORMED. The Company shall be responsible for
keeping itself informed of the financial condition of Electronic and any other
Persons primarily or secondarily liable on the Obligations or any portion
thereof, and of all other circumstances bearing upon the risk of nonpayment of
the Obligations or any portion thereof, and the Company agrees that neither
Prudential nor any holder of a Note shall have a duty to advise the Company of
information known to Prudential or such holder regarding such condition or any
such circumstance. If Prudential or any holder of a Note, in its discretion,
undertakes at any time or from time to time to provide any such information to
the Company, neither Prudential nor any such holder shall be under any
obligation (i) to undertake any investigation, whether or not a part of its
regular business
48
routine, (ii) to disclose any information which it wishes to maintain as
confidential, or (iii) to make any other or future disclosures of such
information or any other information to the Company.
11G. BANKRUPTCY. Upon an Event of Default specified in clause (viii),
(ix) or (x) of paragraph 7A with respect to Electronic, any and all obligations
of the Company hereunder shall forthwith become due and payable without notice.
12. MISCELLANEOUS.
12A. NOTE PAYMENTS. Electronic and the Company each agree that, so long
as any Purchaser shall hold any Note, it will make payments of principal of,
interest on and any Yield-Maintenance Amount payable with respect to such Note,
which comply with the terms of this Agreement, by wire transfer of immediately
available funds for credit (not later than 12:00 noon, New York City time, on
the date due) to (i) the account or accounts specified in the applicable
Confirmation of Acceptance or (ii) such other account or accounts in the United
States as such Purchaser may designate in writing, notwithstanding any contrary
provision herein or in any Note with respect to the place of payment. Each
Purchaser agrees that, before disposing of any Note, such Purchaser will make a
notation thereon (or on a schedule attached thereto) of all principal payments
previously made thereon and of the date to which interest thereon has been paid.
Electronic and the Company each agree to afford the benefits of this paragraph
12A to any Transferee which shall have made the same agreement as each Purchaser
has made in this paragraph 12A.
12B. EXPENSES. Electronic and the Company jointly and severally agree,
whether or not the transactions contemplated hereby shall be consummated, to
pay, and save Prudential, each Purchaser and any Transferee harmless against
liability for the payment of, all out-of-pocket expenses arising in connection
with such transactions, including (i) all document production and duplication
charges and the fees and expenses of any special counsel engaged by Prudential,
such Purchaser or such Transferee in connection with this Agreement, the
transactions contemplated hereby and any subsequent proposed modification of, or
proposed consent under, this Agreement, whether or not such proposed
modification shall be effected or proposed consent granted, and (ii) the costs
and expenses, including attorneys' fees, incurred by Prudential, such Purchaser
or such Transferee in enforcing (or in determining whether or how to enforce)
any rights under this Agreement or the Notes or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
this Agreement or the transactions contemplated hereby or by reason of such
Purchaser or such Transferee having acquired
49
any Note, including without limitation costs and expenses incurred in any
bankruptcy case. The obligations of Electronic and the Company under this
paragraph 12B shall survive the transfer of any Note or portion thereof or
interest therein by any Purchaser or any Transferee and the payment of any Note.
12C. CONSENT TO AMENDMENTS. This Agreement may be amended, and Electronic
or the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if Electronic or the Company (as the case
may be) shall obtain the written consent to such amendment, action or omission
to act, of the Required Holder(s) of the Notes of each Series except that, (i)
with the written consent of the holders of all Notes of a particular Series, and
if an Event of Default shall have occurred and be continuing, of the holders of
all Notes of all Series, at the time outstanding (and not without such written
consents), the Notes of such Series may be amended or the provisions thereof
waived to change the maturity thereof, to change or affect the principal
thereof, or to change or affect the rate or time of payment of interest or
Yield-Maintenance Amount payable with respect to the Notes of such Series, (ii)
without the written consent of the holder or holders of all Notes at the time
outstanding, no amendment to or waiver of the provisions of this Agreement shall
change or affect the provisions of paragraph 7A or this paragraph 12C insofar as
such provisions relate to proportions of the principal amount of the Notes of
any Series, or the rights of any individual holder of Notes, required with
respect to any declaration of Notes to be due and payable or with respect to any
consent, (iii) with the written consent of Prudential (and not without the
written consent of Prudential), the provisions of paragraph 2 may be amended or
waived (except insofar as any such amendment or waiver would affect any rights
or obligations with respect to the purchase and sale of Notes which shall have
become Accepted Notes prior to such amendment or waiver) and (iv) with the
written consent of all of the Purchasers which shall have become obligated to
purchase Accepted Notes of any Series (and not without the written consent of
all such Purchasers), any of the provisions of paragraphs 2 and 3 may be amended
or waived insofar as such amendment or waiver would affect only rights or
obligations with respect to the purchase and sale of the Accepted Notes of such
Series or the terms and provisions of such Accepted Notes. Each holder of any
Note at the time or thereafter outstanding shall be bound by any consent
authorized by this paragraph 12C, whether or not such Note shall have been
marked to indicate such consent, but any Notes issued thereafter may bear a
notation referring to any such consent. No course of dealing between Electronic
or the Company and Prudential or the holder of any Note nor any delay in
exercising any rights hereunder or under any Note shall operate as a waiver of
any rights of Prudential or any holder of such Note. As used herein and in the
50
Notes, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
12D. TRANSFER LIMITATIONS; FORM, REGISTRATION, TRANSFER AND EXCHANGE OF
NOTES; LOST NOTES. The Notes are issuable as registered notes without coupons
in denominations of at least $1,000,000, except as necessary to reflect any
amount not evenly divisible by $1,000,000. Electronic and the Company shall
each keep at its principal office a register in which it shall provide for the
registration of Notes and of transfers of Notes which it has issued. Upon
surrender for registration of transfer of any Note at the principal office of
Electronic or the Company, Electronic or the Company (as appropriate) shall, at
its expense, execute and deliver one or more new Notes of like tenor and of a
like aggregate principal amount, registered in the name of such transferee or
transferees. At the option of the holder of any Note, such Note may be
exchanged for other Notes of like tenor and of any authorized denominations, of
a like aggregate principal amount, upon surrender of the Note to be exchanged at
the principal office of Electronic or the Company (as appropriate). Whenever
any Notes are so surrendered for exchange, Electronic or the Company (as
appropriate) shall, at its expense, execute and deliver the Notes which the
holder making the exchange is entitled to receive. Every Note surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer duly executed, by the holder of such Note or
such holder's attorney duly authorized in writing. Any Note or Notes issued in
exchange for any Note or upon transfer thereof shall carry the rights to unpaid
interest and interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall result from any
such transfer or exchange. Upon receipt of written notice from the holder of
any Note of the loss, theft, destruction or mutilation of such Note and, in the
case of any such loss, theft or destruction, upon receipt of such Person's
unsecured indemnity agreement, or in the case of any such mutilation upon
surrender and cancellation of such Note, Electronic or the Company (as
appropriate) will make and deliver a new Note, of like tenor, in lieu of the
lost, stolen, destroyed or mutilated Note. Notwithstanding anything to the
contrary appearing herein, each Purchaser agrees, and each Transferee by its
acceptance of a Note agrees, not to transfer any Note or any interest therein to
any Person other than an institutional investor which is domiciled in North
America, Europe, Australia or South America.
12E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment for
registration of transfer, Electronic and the Company may treat the Person in
whose name any Note is registered as the owner and holder of such Note for the
purpose of receiving
51
payment of principal of, interest on and any Yield-Maintenance Amount payable
with respect to such Note and for all other purposes whatsoever, whether or not
such Note shall be overdue, and Electronic and the Company shall not be affected
by notice to the contrary. Subject to the preceding sentence, the holder of any
Note may from time to time grant participations in all or any part of such Note
to any Person on such terms and conditions as may be determined by such holder
in its sole discretion and absolute discretion.
12F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein or made in writing by or on
behalf of Electronic or the Company in connection herewith shall survive the
execution and delivery of this Agreement and the Notes, the transfer by any
Purchaser of any Note or portion thereof or interest therein and the payment of
any Note, and may be relied upon by any Transferee, regardless of any
investigation made at any time by or on behalf of any Purchaser or any
Transferee. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between Prudential, the
Purchasers, Electronic and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
12G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in this
Agreement contained 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 (including, without limitation, any Transferee) whether so expressed or
not.
12H. NOTICES. All written communications provided for hereunder (other
than communications provided for under paragraph 2, which shall be sent in the
manner so specified therein) shall be sent by first class mail or nationwide
overnight delivery service (with charges prepaid) and (i) if to any Purchaser,
addressed to such Purchaser at the address specified for such communications in
the applicable Confirmation of Acceptance, or at such other address as any
Purchaser shall have specified to the Company in writing, (ii) if to any other
holder of any Note, addressed to such other holder at such address as such other
holder shall have specified to the Company in writing or, if any such other
holder shall not have so specified an address to the Company, then addressed to
such other holder in care of the last holder of such Note which shall have so
specified an address to the Company, and (iii) if to Electronic or the Company,
addressed to it at 000 Xxxxx Xxxxxx Xxxxxx, #0000, Xxx Xxxxxxx, Xxxxxxxxxx
00000, Attention: Chief Financial Officer, or at such other address as
Electronic or the Company shall have specified to the holder of each Note in
writing; provided, however, that any such communication to Electronic or the
Company may also, at the
52
option of the holder of any Note, be delivered by any other means either to
Electronic or the Company at its address specified above or to any officer of
the Company.
12I. CONFIDENTIALITY. Each holder of a Note agrees to use its best
efforts to hold in confidence and not disclose any written information delivered
or made available to such holder by or on behalf of the Company, Electronic or
any Subsidiary in connection with or pursuant to this Agreement that is clearly
marked or labeled as being confidential information, other than information
(i) that was publicly known or otherwise known to such holder at the
time of disclosure (except pursuant to disclosure in connection with
this Agreement),
(ii) that subsequently becomes publicly known through no act or omission
by such holder, or
(iii) that otherwise becomes known to such holder, other than through
disclosure by the Company, Electronics or any other Subsidiary,
and provided that nothing in this Agreement shall prevent the holder of any Note
from delivering copies of any financial statements and other documents delivered
to such holder, or from disclosing any confidential information disclosed to
such holder, by or on behalf of the Company, Electronic or any Subsidiary in
connection with our pursuant to this Agreement, to,
(a) such holder's directors, officers, employees, agents and
professional consultants,
(b) any other holder of any Note,
(c) any Person to which such holder offers to sell such Note or any
part thereof (excluding any Person to which a Note may not be
sold pursuant to paragraph 12D), subject to such Person first
agreeing to be bound by the terms of this paragraph 12I,
(d) any Person to which such holder sells or offers to sell a
participation in all or any part of such Note, subject to such
Person first agreeing to be bound by the terms of this paragraph
12I,
(e) any federal or state regulatory authority having jurisdiction
over such holder,
53
(f) the National Association of Insurance Commissioners or any
similar organization, or
(g) any other Person to which such delivery or disclosure may be
necessary or appropriate, in compliance with any law, rule,
regulation or order applicable to such holder, in response to any
subpoena or other legal process, in connection with any
litigation to which such holder is a party, or in order to
protect such holder's investment in such Note.
12J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the
Notes to the contrary notwithstanding, any payment of principal of or interest
on any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day. If the date for any payment is extended to the
next succeeding Business Day by reason of the preceding sentence, the period of
such extension shall be included in the computation of the interest payable on
such Business Day.
12K. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to Prudential, a Purchaser or the Required
Holder(s), the determination of such satisfaction shall be made by Prudential,
such Purchaser or the Required Holder(s), as the case may be, in the sole and
exclusive judgment (exercised in good faith) of the Person or Persons making
such determination.
12L. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
12M. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the
internal law of the State of New York.
12N. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
[Balance of Page Left Blank Intentionally.]
54
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this letter shall become a binding agreement between you and
Electronic and the Company.
Very truly yours,
ZERO CORPORATION
By: ________________________
Title:______________________
ELECTRONIC SOLUTIONS
By: ________________________
Title: _____________________
The foregoing Agreement is hereby accepted as of the date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: ______________________________
Title: ___________________________
55
INFORMATION SCHEDULE
Authorized Officers for Prudential
----------------------------------
Xxxxx Xxxxxx E. Xxxxx Xxxxxxxxx
Managing Director Vice President
Prudential Capital Group Prudential Capital Group
000 Xxxxx Xxxxxxx Xxxxxx 000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000 Xxxxx 0000
Xxxxxxx, XX 00000-0000 Xxx Xxxxxxx, XX 00000
Tel.: (000) 000-0000 Tel.: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
Xxxxxxx Xxxxxxx Xxx Xxxxx
Vice President Managing Director
Prudential Capital Group Prudential Capital Group
000 Xxxxx Xxxxxxxx Xxxxxx 000 Xxxxxxxx Xxxxxx
Xxxxx 0000 Gateway Center Four, 7th Fl.
Los Angeles, CA 90017 Xxxxxx, XX 00000
Tel.: (000) 000-0000 Tel.: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
Authorized Officers for Electronic Solutions and Zero Corporation
-----------------------------------------------------------------
Each of the officers referenced in the definition of "Authorized Officer"
appearing in paragraph 10B of the Agreement.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
EXHIBIT A-1
-----------
[FORM OF SHELF NOTE]
ELECTRONIC SOLUTIONS
GUARANTEED SENIOR SERIES A NOTE
No. ____
ORIGINAL PRINCIPAL AMOUNT:
ORIGINAL ISSUE DATE:
INTEREST RATE:
INTEREST PAYMENT DATES:
FINAL MATURITY DATE:
PRINCIPAL PREPAYMENT DATES AND AMOUNTS:
FOR VALUE RECEIVED, the undersigned, Electronic Solutions (herein
called the "Company"), a corporation organized and existing under the laws of
the State of Nevada, hereby promises to pay to ________________________, or
registered assigns, the principal sum of
__________________________________________ DOLLARS [on the Final Maturity Date
specified above] [, payable on the Principal Prepayment Dates and in the amounts
specified above, and on the Final Maturity Date specified above in an amount
equal to the unpaid balance of the principal hereof,] with interest (computed on
the basis of a 360-day year--30-day month) (a) on the unpaid balance thereof at
the Interest Rate per annum specified above, payable on each Interest Payment
Date specified above and on the Final Maturity Date specified above, commencing
with the Interest Payment Date next succeeding the date hereof, until the
principal hereof shall have become due and payable, and (b) on any overdue
payment (including any overdue prepayment) of principal, any overdue payment of
Yield Maintenance Amount and any overdue payment of interest, payable on each
Interest Payment Date as aforesaid (or, at the option of the registered holder
hereof, on demand), at a rate per annum from time to time equal to the greater
of (i) 2% over the Interest Rate specified above or (ii) 2% over the rate of
interest publicly announced by Xxxxxx Guaranty Trust Company of New York from
time to time in New York City as its Prime Rate.
Payments of principal, Yield Maintenance Amount, if any, and interest
are to be made at the main office of Xxxxxx Guaranty Trust Company of New York
in New York City or at such other place as the holder hereof shall designate to
the Company in writing, in lawful money of the United States of America.
A-1-1
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to a Private Shelf Agreement, dated as of January 31,
1996 (herein called the "Agreement"), between the Company and Zero Corporation,
on the one hand, and The Prudential Insurance Company of America and each
Prudential Affiliate (as defined in the Agreement) which becomes party thereto,
on the other hand.
This Note is subject to optional prepayment, in whole or from time to
time in part, on the terms specified in the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for the then outstanding principal amount will be issued to, and registered in
the name of, the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
In case an Event of Default shall occur and be continuing, the
principal of this Note may be declared or otherwise become due and payable in
the manner and with the effect provided in the Agreement.
The Company's obligations under this Note are guaranteed by Zero
Corporation pursuant to the guarantee set forth in paragraph 11 of the
Agreement.
Capitalized terms used and not otherwise defined herein shall have the
meanings provided in the Agreement.
This Note is intended to be performed in the State of New York and
shall be construed and enforced in accordance with the internal law of such
State.
ELECTRONIC SOLUTIONS
By: ________________________________
Title: _____________________________
X-0-0
XXXXXXX X-0
-----------
[FORM OF SHELF NOTE]
ZERO CORPORATION
SENIOR SERIES ___ NOTE
No. ____
ORIGINAL PRINCIPAL AMOUNT:
ORIGINAL ISSUE DATE:
INTEREST RATE:
INTEREST PAYMENT DATES:
FINAL MATURITY DATE:
PRINCIPAL PREPAYMENT DATES AND AMOUNTS:
FOR VALUE RECEIVED, the undersigned, Zero Corporation (herein called
the "Company"), a corporation organized and existing under the laws of the State
of Delaware, hereby promises to pay to ________________________, or registered
assigns, the principal sum of __________________________________________ DOLLARS
[on the Final Maturity Date specified above] [, payable on the Principal
Prepayment Dates and in the amounts specified above, and on the Final Maturity
Date specified above in an amount equal to the unpaid balance of the principal
hereof,] with interest (computed on the basis of a 360-day year--30-day month)
(a) on the unpaid balance thereof at the Interest Rate per annum specified
above, payable on each Interest Payment Date specified above and on the Final
Maturity Date specified above, commencing with the Interest Payment Date next
succeeding the date hereof, until the principal hereof shall have become due and
payable, and (b) on any overdue payment (including any overdue prepayment) of
principal, any overdue payment of Yield Maintenance Amount and any overdue
payment of interest, payable on each Interest Payment Date as aforesaid (or, at
the option of the registered holder hereof, on demand), at a rate per annum from
time to time equal to the greater of (i) 2% over the Interest Rate specified
above or (ii) 2% over the rate of interest publicly announced by Xxxxxx Guaranty
Trust Company of New York from time to time in New York City as its Prime Rate.
Payments of principal, Yield Maintenance Amount, if any, and interest
are to be made at the main office of Xxxxxx Guaranty Trust Company of New York
in New York City or at such other place as the holder hereof shall designate to
the Company in writing, in lawful money of the United States of America.
A-2-1
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to a Private Shelf Agreement, dated as of January 31,
1996 (herein called the "Agreement"), between the Company and Electronic
Solutions, on the one hand, and The Prudential Insurance Company of America and
each Prudential Affiliate (as defined in the Agreement) which becomes party
thereto, on the other hand.
This Note is subject to optional prepayment, in whole or from time to
time in part, on the terms specified in the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for the then outstanding principal amount will be issued to, and registered in
the name of, the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
In case an Event of Default shall occur and be continuing, the
principal of this Note may be declared or otherwise become due and payable in
the manner and with the effect provided in the Agreement.
Capitalized terms used and not otherwise defined herein shall have the
meanings provided in the Agreement.
This Note is intended to be performed in the State of New York and
shall be construed and enforced in accordance with the internal law of such
State.
ZERO CORPORATION
By: ________________________________
Title: _____________________________
X-0-0
XXXXXXX X-0
-----------
[FORM OF PURCHASE REQUEST]
ELECTRONIC SOLUTIONS
Reference is made to the Private Shelf Agreement (the "Agreement"), dated
as of January 31, 1996, between Electronic Solutions (the "Company") and Zero
Corporation, on the one hand, and The Prudential Insurance Company of America
("Prudential") and each Prudential Affiliate which becomes party thereto, on the
other hand. Capitalized terms used and not otherwise defined herein shall have
the respective meanings specified in the Agreement.
Pursuant to Paragraph 2A(3) of the Agreement, the Company hereby makes the
following Request for Purchase:
1. Aggregate principal amount of
the Notes covered hereby
(the "Notes") ................... $________________/1/
2. Individual specifications of the Notes:
Principal
Final Prepayment Interest
Principal Maturity Dates and Payment
Amount Date Amounts Period
--------- -------- ---------- --------
Semi-annually
3. Use of proceeds of the Notes: Purchase shares of the publicly
traded common stock of Zero Corporation pursuant to a tender offer
therefor and payment of related expenses.
4. Proposed day for the closing of the purchase and sale of the Notes:
__________________
/1/ Minimum principal amount of $10,000,000.
B-1-1
5. The purchase price of the Notes is to be transferred to:
Name, Address
and ABA Routing Number of
Number of Bank Account
--------------- ---------
6. The Company certifies (a) that the representations and warranties
contained in paragraph 8 of the Agreement are true on and as of the
date of this Purchase Request (b) that there exists on the date of
this Purchase Request no Event of Default or Default and (c) no
Material Adverse Change has occurred since the date of the most recent
audited financial statements delivered pursuant to paragraph 5A of the
Agreement or, if no such audited financial statements have been
delivered, since the date of the most recent audited financial
statements referenced in paragraph 8B of the Agreement.
7. In connection with any rate quotes it may provide, Prudential should
assume a Designated Spread of _____%.
Dated: ELECTRONIC SOLUTIONS
By: ____________________
Authorized Officer
B-1-2
EXHIBIT B-2
-----------
[FORM OF REQUEST FOR PURCHASE]
ZERO CORPORATION
Reference is made to the Private Shelf Agreement (the "Agreement"), dated
as of January 31, 1996, between Zero Corporation (the "Company") and Electronic
Solutions, on the one hand, and The Prudential Insurance Company of America
("Prudential") and each Prudential Affiliate which becomes party thereto, on the
other hand. Capitalized terms used and not otherwise defined herein shall have
the respective meanings specified in the Agreement.
Pursuant to Paragraph 2B(3) of the Agreement, the Company hereby makes the
following Request for Purchase:
1. Aggregate principal amount of
the Notes covered hereby
(the "Notes") ................... $________________/1/
2. Individual specifications of the Notes:
Principal
Final Prepayment Interest
Principal Maturity Dates and Payment
Amount Date Amounts Period
--------- -------- ---------- --------
Semi-annually
3. Use of proceeds of the Notes:
4. Proposed day for the closing of the purchase and sale of the Notes:
__________________
/1/ Minimum principal amount of $5,000,000.
B-2-1
5. The purchase price of the Notes is to be transferred to:
Name, Address
and ABA Routing Number of
Number of Bank Account
--------------- ---------
6. The Company certifies (a) that the representations and warranties
contained in paragraph 8 of the Agreement are true on and as of the
date of this Request for Purchase (b) that there exists on the date of
this Request for Purchase no Event of Default or Default and (c) no
Material Adverse Change has occurred since the date of the most recent
audited financial statements delivered pursuant to paragraph 5A of the
Agreement or, if no such audited financial statements have been
delivered, since the date of the most recent audited financial
statements referenced in paragraph 8B of the Agreement.
7. In connection with any rate quotes it may provide, Prudential should
assume a Designated Spread of _____%.
Dated: ZERO CORPORATION
By: ____________________
Authorized Officer
B-2-2
EXHIBIT C-1
-----------
[FORM OF CONFIRMATION OF ACCEPTANCE]
ELECTRONIC SOLUTIONS
Reference is made to the Private Shelf Agreement (the "Agreement"), dated
as of January 31, 1996 between Electronic Solutions (the "Company") and Zero
Corporation, on the one hand, and The Prudential Insurance Company of America
("Prudential") and each Prudential Affiliate which becomes party thereto, on the
other hand. Capitalized terms used and not otherwise defined herein shall have
the respective meanings specified in the Agreement.
Prudential or the Prudential Affiliate which is named below as a Purchaser
of Notes hereby confirms the representations as to such Notes set forth in
paragraph 9 of the Agreement, and agrees to be bound by the provisions of
paragraphs 2A(5) and 2A(7) of the Agreement relating to the purchase and sale of
such Notes and by the provisions of the penultimate sentence of paragraph 12A of
the Agreement.
Pursuant to paragraph 2A(5) of the Agreement, an Acceptance with respect to
the following Accepted Notes is hereby confirmed:
I. Accepted Notes: Aggregate principal
amount $__________________
(A) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal prepayment dates and amounts:
(e) Interest rate:
(f) Interest payment period: Semi-annually
(g Payment and notice instructions: As set forth on the
attached Purchaser Schedule
(h) Designated Spread: ___%
(B) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal prepayment dates and amounts:
(e) Interest rate:
(f) Interest payment period: Semi-annually
(g) Payment and notice instructions: As set forth on the
attached Purchaser Schedule
(h) Designated Spread: ___%
[(C), (D)..... same information as above.]
C-1-1
II. Closing Day:
Dated: ELECTRONIC SOLUTIONS
By: ________________________________
Title: _____________________________
ZERO CORPORATION
By: ________________________________
Title: _____________________________
[THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA]
By: ________________________________
Vice President
[PRUDENTIAL AFFILIATE]
By: ________________________________
Vice President
C-1-2
EXHIBIT C-2
-----------
[FORM OF CONFIRMATION OF ACCEPTANCE]
ZERO CORPORATION
Reference is made to the Private Shelf Agreement (the "Agreement"), dated
as of January 31, 1996 between Zero Corporation (the "Company") and Electronic
Solutions, on the one hand, and The Prudential Insurance Company of America
("Prudential") and each Prudential Affiliate which becomes party thereto, on the
other hand. Capitalized terms used and not otherwise defined herein shall have
the respective meanings specified in the Agreement.
Prudential or the Prudential Affiliate which is named below as a Purchaser
of Notes hereby confirms the representations as to such Notes set forth in
paragraph 9 of the Agreement, and agrees to be bound by the provisions of
paragraphs 2B(5) and 2B(7) of the Agreement relating to the purchase and sale of
such Notes and by the provisions of the penultimate sentence of paragraph 12A of
the Agreement.
Pursuant to paragraph 2B(5) of the Agreement, an Acceptance with respect to
the following Accepted Notes is hereby confirmed:
I. Accepted Notes: Aggregate principal
amount $__________________
(A) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal prepayment dates and amounts:
(e) Interest rate:
(f) Interest payment period: Semi-annually
(g) Payment and notice instructions: As set forth on the
attached Purchaser Schedule
(h) Designated Spread: ___%
(B) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal prepayment dates and amounts:
(e) Interest rate:
(f) Interest payment period: Semi-annually
(g) Payment and notice instructions: As set forth on the
attached Purchaser Schedule
(h) Designated Spread: ___%
[(C), (D)..... same information as above.]
C-2-1
II. Closing Day:
Dated: ZERO CORPORATION
By: ________________________________
Title: _____________________________
[THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA]
By: ________________________________
Vice President
[PRUDENTIAL AFFILIATE]
By: ________________________________
Vice President
X-0-0
[XXXXXXXXXX XX XXXXXX, XXXX & XXXXXXXX]
XXXXXXX X-0
_____________, 1996
(000) 000-0000 C99007-00937
To: The Purchasers listed on Schedule 1 hereto (the "Purchasers")
Re: Note Purchase Agreement dated as of January __, 1996 among Zero
Corporation, Electronic Solutions and The Prudential Insurance Company of
America (the "Note Purchase Agreement")
-------------------------
Ladies and Gentlemen:
We have acted as counsel to Zero Corporation, a Delaware corporation
(the "Guarantor"), and Electronic Solutions, a Nevada corporation (the "Issuer"
or, together with the Guarantor, the "Companies"), in connection with the Note
Purchase Agreement and the Notes of the Issuer in the aggregate principal amount
of $____________ dated the date hereof and issued pursuant thereto
(collectively, the "Documents"). Capitalized terms not otherwise defined herein
have the respective meanings set forth in the Note Purchase Agreement. This
opinion is delivered to you pursuant to Section 3A(v) of the Note Purchase
Agreement and with the understanding that the Purchasers are purchasing the
Notes in reliance hereon.
We have assumed with your permission that:
(a) The signatures on all documents examined by us are genuine, all
individuals executing such documents had all requisite legal capacity and
____________, 1996
Page 2
competency and (except individuals acting on behalf ofthe Companies) were
duly authorized, the documents submitted to us as originals are authentic
and the documents submitted to us as certified or reproduction copies
conform to the originals;
(b) Each Purchaser is an "insurance company" within the meaning of
Section 2(13) of the Securities Act of 1933, as amended, and an
"incorporated admitted insurer" within the meaning of Section 1100.1 of the
California Insurance Code;
(c) Each Purchaser has access to such information as it deems
necessary to make its investment decisions with respect to the Notes;
(d) Each Purchaser has filed all required franchise tax returns, if
any, and paid all required taxes, if any, under the California Revenue &
Taxation Code (see White Dragon Productions, Inc. v. Performance
-------------------------------------------------
Guarantees, Inc., 196 Cal. App. 3d 163, 24 Cal. Rptr. 745 (1987); Xxxxxx v.
---------------- ---------
Xxxxxx, 214 Cal. App. 3d 668, 262 Cal. Xxxx. 000 (1989); California Revenue
------
and Taxation Code Section 23301 et seq.); and
-- ---
(e) There are no agreements or understandings between or among the
Purchasers, the Companies or third parties that would expand, modify or
otherwise affect the terms of the Documents or the respective rights or
obligations of the parties thereunder (see Trident Center v. Connecticut
---------------------------------
General Life Insurance Company, 847 F.2d 564 (9th Cir. 1988)).
------------------------------
In rendering this opinion, we have made such inquiries and examined,
among other things, originals or copies, certified or otherwise identified to
our satisfaction, of such records, agreements, certificates, instruments and
other documents as we have considered necessary or appropriate for purposes of
this opinion. As to certain factual matters, we have relied upon the
representations and warranties of the Companies in the Documents, certificates
of officers of the Companies or certificates obtained from public officials.
Except as expressly stated otherwise herein, whenever an opinion
herein with respect to the existence or
_____________, 1996
Page 3
absence of facts is stated to be to the best of our knowledge, such statement is
intended to signify that no information has come to the attention of the lawyers
who have devoted substantive attention to the representation of the Companies
during the twelve months preceding the date hereof that would give us actual
knowledge of facts contrary to the existence or absence of the facts indicated.
However, we have not undertaken any independent investigation to determine the
existence or absence of such facts, and no inference as to our knowledge of the
existence or absence of such facts should be drawn from our representation of
the Companies or any affiliate thereof.
Based on the foregoing and in reliance thereon, and subject to the
assumptions, exceptions, qualifications and limitations set forth herein, we are
of the opinion that:
1. The Issuer is a validly existing corporation in good standing
under the laws of the State of Nevada and the Guarantor is a validly existing
corporation in good standing under the laws of the State of Delaware. Each of
the Companies is duly qualified as a foreign corporation under the laws of the
State of California and has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Documents.
2. The execution and delivery of the Documents by the Companies party
thereto and the performance of their respective obligations thereunder have been
duly authorized by all necessary corporate action of the Companies. The
Documents have each been duly executed and delivered by the Companies party
thereto.
3. The Note Purchase Agreement and the Notes constitute legal, valid
and binding obligations of the Issuer, enforceable against the Issuer in
accordance with their respective terms.
4. The Note Purchase Agreement constitutes a legal, valid and binding
obligation of the Guarantor, enforceable against the Guarantor in accordance
with its terms.
5. Neither the execution and delivery by either Company of the Note
Purchase Agreement or by the Issuer of
_____________, 1996
Page 4
the Notes, nor the consummation of the transactions contemplated by the Note
Purchase Agreement nor the performance by the Companies of the terms and
provisions thereof, or by the Issuer of the Notes, will (A) violate or conflict
with the charter or bylaws of either Company, or, to the best of our knowledge,
any order, judgment or decree of any court or other agency of government binding
on either Company, (B) to the best of our knowledge based solely upon review of
documents identified to us by officers of the Companies as material contracts of
the Companies (the "Contractual Obligations"), conflict in any material respect
with, result in a material breach of or constitute a material default under any
Contractual Obligation of the Companies, (C) violate any material law, statute,
rule or regulation of the State of California or the State of New York or the
United States of America applicable to either Company that, in our experience,
is normally applicable to unsecured debt securities transactions entered into by
companies similar to the Companies (other than (i) federal securities laws, as
to which we express no opinion, other than as set forth in paragraph 7 below,
and (ii) securities or "blue sky" laws of any state, including California and
New York, as to which we express no opinion), or (D) to the best of our
knowledge result in or require the creation or imposition of any Lien upon any
of the assets of either Company.
6. The extension, arranging and obtaining of the credit represented
by the Notes do not result in a violation of Regulation G or X of the Board of
Governors of the Federal Reserve System.
7. The issuance and sale of the Notes on the date hereof is exempt
from the registration requirement of Section 5 of the Securities Act and it is
not necessary to qualify the Note Purchase Agreement under the Trust Indenture
Act of 1939, as amended, in connection therewith.
The foregoing opinions are subject to the following exceptions,
qualifications and limitations:
A. We render no opinion herein as to matters involving the laws of
any jurisdiction other than the State of California, the State of New York, the
United States of America and, solely for purposes of paragraphs 1 and 2 above,
the States of Delaware and Nevada. We are not
_____________, 1996
Page 5
admitted to practice in the States of Delaware and Nevada; however, we are
generally familiar with the Delaware General Corporation Law and the Nevada
General Corporation Law as presently in effect and have made such inquiries as
we consider necessary to render the opinions contained in paragraphs 1 and 2. We
have not examined the question of what law would govern the interpretation or
enforcement of the Documents and our opinion is based on the assumption that the
internal laws of either the State of New York or the State of California, and
the laws of the United States of America, would govern the provisions of the
Documents and the transactions contemplated thereby. This opinion is limited to
the effect of the present state of the laws of the State of California, the
State of New York, the United States of America and, to the limited extent set
forth above, the States of Delaware and Nevada and the facts as they presently
exist. We assume no obligation to revise or supplement this opinion in the event
of future changes in such laws or the interpretations thereof or such facts.
B. Our opinions set forth in paragraphs 3 and 4 are subject to (i)
the effect of any bankruptcy, insolvency, reorganization, moratorium,
arrangement or similar laws affecting the enforcement of creditors' rights
generally (including, without limitation, the effect of statutory or other laws
regarding fraudulent transfers or preferential transfers or distributions by
corporations to stockholders) and (ii) general principles of equity, including
without limitation concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance, injunctive
relief or other equitable remedies, regardless of whether enforceability is
considered in a proceeding in equity or at law.
C. We express no opinion with respect to the legality, validity,
binding nature or enforceability of any provision of the Documents to the effect
that rights or remedies are not exclusive, that every right or remedy is
cumulative and may be exercised in addition to any other right or remedy, that
the election of some particular remedy does not preclude recourse to one or more
others or that failure to exercise or delay in exercising rights or remedies
will not operate as a waiver of any such right or remedy.
_____________, 1996
Page 6
D. We express no opinion as to the legality, validity, binding nature
or enforceability (i) of provisions relating to indemnification (or
contribution) to the extent such indemnification relates to any claims under the
Federal securities laws or state securities or Blue Sky laws, or any other
provisions in the Documents indemnifying a party, to the extent such provisions
may be held unenforceable as contrary to public policy, (ii) of any provision of
any Document insofar as it provides for the payment or reimbursement of costs
and expenses or for claims, losses or liabilities in excess of a reasonable
amount determined by any court or other tribunal or (iii) regarding any
Purchaser's ability to collect attorneys' fees and costs in an action involving
the Documents if such Purchaser is not the prevailing party in such action (we
call your attention that, under California law, where a contract permits one
party thereto to recover attorneys' fees, the prevailing party in any action to
enforce any provision of the contract shall be entitled to recover its
reasonable attorneys' fees).
E. We express no opinion with respect to the legality, validity,
binding nature or enforceability of (i) any waiver of unknown future rights or
any waiver of rights existing, or duties owed, that is broadly or vaguely stated
or does not describe the right or duty purportedly waived with reasonable
specificity, (ii) any waivers or consents (whether or not characterized as a
waiver or consent in the Documents) relating to the rights of the Issuer or the
Guarantor or duties owing to it existing as a matter of law, including, without
limitation, waivers of the benefits of statutory or constitutional provisions,
to the extent such waivers or consents may be found by a court to be against
public policy or which are ineffective pursuant to applicable statutes and
judicial decisions, (iii) provisions in the Documents that may be construed as
imposing penalties or forfeitures, or (ii) covenants (other than covenants
relating to the payment of principal, interest, yield maintenance amounts,
indemnities and expenses) to the extent they are construed to be independent
requirements as distinguished from conditions to the declaration or occurrence
of a default or an event of default.
F. We express no opinion as to any provision of the Documents
requiring written amendments or waivers of
_______________, 1996
Page 7
such documents insofar as it suggests that oral or other modifications,
amendments or waivers could not be effectively agreed upon by the parties or
that the doctrine of promissory estoppel might not apply.
G. In rendering our opinions expressed in paragraph 5 insofar as they
require interpretation of Contractual Obligations, (i) we have assumed that all
courts of competent jurisdiction would enforce such agreements as written but
would apply the internal laws of the State of California without giving effect
to any choice of law provisions contained therein or any choice of law
principles that would result in application of the internal laws of any other
state, (ii) to the extent that any questions of legality or legal construction
have arisen in connection with our review, we have applied the laws of the State
of California in resolving such questions, and (iii) we express no opinion with
respect to the compliance by the Issuer or the Guarantor with, or any financial
calculations or data in respect of, financial covenants included in any
Contractual Obligation. We advise you that certain of the Contractual
Obligations may be governed by other laws, that such laws may vary substantially
from the law assumed to govern for purposes of this opinion and that this
opinion may not be relied upon as to whether or not a breach or default would
occur under the law actually governing such Contractual Obligations.
Furthermore, with respect to paragraph 5, while we advise you that (subject to
the other assumptions, exceptions, qualifications and limitations herein) the
Documents may be performed in a manner that does not result in a violation,
conflict, breach, default or Lien described therein, we express no opinion as to
whether the actual performance of the terms and provisions of the Documents
after the date hereof will not violate, be in conflict with, breach or
constitute a default under, or result in the creation or imposition of any Lien
in respect of any property of the Issuer or the Guarantor under, any Contractual
Obligation, or violate any statute, rule, regulation, order, judgment or decree
applicable to the Issuer or the Guarantor.
H. We express no opinion regarding the effect on the enforceability
against the Guarantor of the guaranty contained in the Note Purchase Agreement
of any facts or circumstances occurring after the date hereof that would
constitute a defense to the obligation of a surety, unless
_______________, 1996
Page 8
such defense has been waived effectively by the Guarantor. Without limitation,
we advise you of California statutory provisions and case law to the effect
that, in certain circumstances, a guarantor may be exonerated if the creditor
materially alters the original obligation of the principal without the consent
of the guarantor, elects remedies for default which impair the subrogation
rights of the guarantor against the principal, or otherwise takes any action
without notifying the guarantor which materially prejudices the guarantor.
See, e.g., California Civil Code Section 2810; Union Bank x. Xxxxxxx, 265 Cal.
--- ---- ---------------------
App. 2d 40, 71 Cal. Xxxx. 00 (1968); Sumitomo Bank of California x. Xxxxxxx, 70
--------------------------------------
Cal. 2d 81, 447 P.2d 956, 73 Cal. Rptr. 564 (1968); Cathay Bank x. Xxx, 14 Cal.
------------------
App.4th 1533, 18 Cal. Rptr. 2d 420 (1993). In addition, the California Supreme
Court has found that in some circumstances the creditor has a duty to disclose
certain facts known to it to a guarantor. Sumitomo Bank x. Xxxxxxx, supra.
------------------------ -----
I. Our opinion set forth in Paragraph 4 is subject to the effect of
California statutory provisions and case law to the effect that a continuing
guaranty may be revoked at any time by a guarantor, in respect to future
transactions, unless there is a continuing consideration as to such transactions
which the guarantor does not renounce. See California Civil Code Section 2815;
---
Sumitomo Bank x. Xxxxxxx, supra.
------------------------ -----
J. We express no opinion as to the applicability or effect of any
Purchaser's compliance with any state or federal laws applicable to the
transactions contemplated by the Documents because of the nature of its
business.
K. We render no opinion regarding any violation of statutory or other
laws regarding fraudulent transfers or distributions by corporations to
stockholders in connection with the distribution by the Issuer to the Guarantor
of any Purchased Common Stock or the effect of any such violation.
L. For purposes of our opinions in paragraph 6 (and our opinions in
paragraph 5, to the extent they cover the same matters), we have assumed,
without any independent investigation by us, the accuracy of each Purchaser's
representations set forth in paragraph 9C of the Note Purchase Agreement.
_______________, 1996
Page 9
M. For purposes of our opinion under paragraph 7 we have assumed,
without any independent investigation by us, (a) the accuracy of each
Purchaser's representations set forth in paragraph 9A of the Note Purchase
Agreement and of the Companies' representations and warranties set forth in
Section 8H of the Note Purchase Agreement, (b) that each Purchaser and each
other person to which offers were made is an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act, (c) none of the
Purchasers has taken or intends to take any action that would subject the
issuance and sale of the Notes to the registration requirements of the
Securities Act, (d) that the offer and sale of the Notes occurred pursuant to
private negotiations between The Prudential Insurance Company of America and the
Companies and Prudential Capital Group, but that no offers with respect to the
Notes were made to any other person.
This opinion is rendered to the Purchasers in connection with the
Documents and may not be relied upon by any person other than the Purchasers and
their Transferees or by the Purchasers or their Transferees in any other
context, provided that the Purchasers and their Transferees may provide this
opinion (i) to insurance regulators and examiners and other regulatory
authorities should they so request or in connection with their normal
examinations, (ii) to the independent auditors and attorneys of the Purchasers
or their Transferees, (iii) pursuant to order or legal process of any court or
governmental agency or (iv) in connection with any legal action to which the
Purchasers or their Transferees are a party arising out of the transactions
contemplated by the Documents. This opinion may not be quoted without the
prior written consent of this Firm.
Very truly yours,
XXXXXX, XXXX & XXXXXXXX
[LETTERHEAD OF XXXXXX, XXXX & XXXXXXXX]
EXHIBIT D-2
_____________, 1996
(000) 000-0000 C99007-00937
To: The Purchasers listed on Schedule 1 hereto (the "Purchasers")
Re: Note Purchase Agreement dated as of January __, 1996 among Zero
Corporation, Electronic Solutions and The Prudential Insurance Company of
America (the "Note Purchase Agreement")
-----------------------
Ladies and Gentlemen:
We have acted as counsel to Zero Corporation, a Delaware corporation
(the "Parent"), and Electronic Solutions, a Nevada corporation (the "Subsidiary"
or, together with the Parent, the "Companies"), in connection with the Note
Purchase Agreement and the Notes of the Parent in the aggregate principal amount
of $____________ dated the date hereof and issued pursuant thereto
(collectively, the "Documents"). Capitalized terms not otherwise defined herein
have the respective meanings set forth in the Note Purchase Agreement. This
opinion is delivered to you pursuant to Section 3A(v) of the Note Purchase
Agreement and with the understanding that the Purchasers are purchasing the
Notes in reliance hereon.
We have assumed with your permission that:
(a) The signatures on all documents examined by us are genuine, all
individuals executing such documents had all requisite legal capacity and
________________, 1996
Page 2
competency and (except individuals acting on behalf ofthe Companies) were
duly authorized, the documents submitted to us as originals are authentic
and the documents submitted to us as certified or reproduction copies
conform to the originals;
(b) Each Purchaser is an "insurance company" within the meaning of
Section 2(13) of the Securities Act of 1933, as amended, and an
"incorporated admitted insurer" within the meaning of Section 1100.1 of the
California Insurance Code;
(c) Each Purchaser has access to such information as it deems
necessary to make its investment decisions with respect to the Notes;
(d) Each Purchaser has filed all required franchise tax returns, if
any, and paid all required taxes, if any, under the California Revenue &
Taxation Code (see White Dragon Productions, Inc. v. Performance
-------------------------------------------------
Guarantees, Inc., 196 Cal. App. 3d 163, 24 Cal. Rptr. 745 (1987); Xxxxxx v.
---------------- ---------
Xxxxxx, 214 Cal. App. 3d 668, 262 Cal. Xxxx. 000 (1989); California Revenue
------
and Taxation Code Section 23301 et seq.); and
-- ---
(e) There are no agreements or understandings between or among the
Purchasers, the Companies or third parties that would expand, modify or
otherwise affect the terms of the Documents or the respective rights or
obligations of the parties thereunder (see Trident Center v. Connecticut
---------------------------------
General Life Insurance Company, 847 F.2d 564 (9th Cir. 1988)).
------------------------------
In rendering this opinion, we have made such inquiries and examined,
among other things, originals or copies, certified or otherwise identified to
our satisfaction, of such records, agreements, certificates, instruments and
other documents as we have considered necessary or appropriate for purposes of
this opinion. As to certain factual matters, we have relied upon the
representations and warranties of the Companies in the Documents, certificates
of officers of the Companies or certificates obtained from public officials.
Except as expressly stated otherwise herein, whenever an opinion
herein with respect to the existence or
_______________, 1996
Page 3
absence of facts is stated to be to the best of our knowledge, such statement is
intended to signify that no information has come to the attention of the lawyers
who have devoted substantive attention to the representation of the Companies
during the twelve months preceding the date hereof that would give us actual
knowledge of facts contrary to the existence or absence of the facts indicated.
However, we have not undertaken any independent investigation to determine the
existence or absence of such facts, and no inference as to our knowledge of the
existence or absence of such facts should be drawn from our representation of
the Companies or any affiliate thereof.
Based on the foregoing and in reliance thereon, and subject to the
assumptions, exceptions, qualifications and limitations set forth herein, we are
of the opinion that:
1. The Subsidiary is a validly existing corporation in good standing
under the laws of the State of Nevada and the Parent is a validly existing
corporation in good standing under the laws of the State of Delaware. Each of
the Companies is duly qualified as a foreign corporation under the laws of the
State of California and has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Documents.
2. The execution and delivery of the Documents by the Companies party
thereto and the performance of their respective obligations thereunder have been
duly authorized by all necessary corporate action of the Companies. The
Documents have each been duly executed and delivered by the Companies party
thereto.
3. The Note Purchase Agreement and the Notes constitute legal, valid
and binding obligations of the Parent, enforceable against the Parent in
accordance with their respective terms.
4. The Note Purchase Agreement constitutes a legal, valid and binding
obligation of the Subsidiary, enforceable against the Subsidiary in accordance
with its terms.
5. Neither the execution and delivery by either Company of the Note
Purchase Agreement or by the Parent of
________________, 1996
Page 4
the Notes, nor the consummation of the transactions contemplated by the Note
Purchase Agreement nor the performance by the Companies of the terms and
provisions thereof, or by the Parent of the Notes, will (A) violate or conflict
with the charter or bylaws of either Company, or, to the best of our knowledge,
any order, judgment or decree of any court or other agency of government binding
on either Company, (B) to the best of our knowledge based solely upon review of
documents identified to us by officers of the Companies as material contracts of
the Companies (the "Contractual Obligations"), conflict in any material respect
with, result in a material breach of or constitute a material default under any
Contractual Obligation of the Companies, (C) violate any material law, statute,
rule or regulation of the State of California or the State of New York or the
United States of America applicable to either Company that, in our experience,
is normally applicable to unsecured debt securities transactions entered into by
companies similar to the Companies (other than (i) federal securities laws, as
to which we express no opinion, other than as set forth in paragraph 7 below,
and (ii) securities or "blue sky" laws of any state, including California and
New York, as to which we express no opinion), or (D) to the best of our
knowledge result in or require the creation or imposition of any Lien upon any
of the assets of either Company.
6. The extension, arranging and obtaining of the credit represented
by the Notes do not result in a violation of Regulation G or X of the Board of
Governors of the Federal Reserve System.
7. The issuance and sale of the Notes on the date hereof is exempt
from the registration requirement of Section 5 of the Securities Act and it is
not necessary to qualify the Note Purchase Agreement under the Trust Indenture
Act of 1939, as amended, in connection therewith.
The foregoing opinions are subject to the following exceptions,
qualifications and limitations:
A. We render no opinion herein as to matters involving the laws of
any jurisdiction other than the State of California, the State of New York, the
United States of America and, solely for purposes of paragraphs 1 and 2 above,
the States of Delaware and Nevada. We are not
________________, 1996
Page 5
admitted to practice in the States of Delaware and Nevada; however, we are
generally familiar with the Delaware General Corporation Law and the Nevada
General Corporation Law as presently in effect and have made such inquiries as
we consider necessary to render the opinions contained in paragraphs 1 and 2. We
have not examined the question of what law would govern the interpretation or
enforcement of the Documents and our opinion is based on the assumption that the
internal laws of either the State of New York or the State of California, and
the laws of the United States of America, would govern the provisions of the
Documents and the transactions contemplated thereby. This opinion is limited to
the effect of the present state of the laws of the State of California, the
State of New York, the United States of America and, to the limited extent set
forth above, the States of Delaware and Nevada and the facts as they presently
exist. We assume no obligation to revise or supplement this opinion in the event
of future changes in such laws or the interpretations thereof or such facts.
B. Our opinions set forth in paragraphs 3 and 4 are subject to (i)
the effect of any bankruptcy, insolvency, reorganization, moratorium,
arrangement or similar laws affecting the enforcement of creditors' rights
generally (including, without limitation, the effect of statutory or other laws
regarding fraudulent transfers or preferential transfers or distributions by
corporations to stockholders) and (ii) general principles of equity, including
without limitation concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance, injunctive
relief or other equitable remedies, regardless of whether enforceability is
considered in a proceeding in equity or at law.
C. We express no opinion with respect to the legality, validity,
binding nature or enforceability of any provision of the Documents to the effect
that rights or remedies are not exclusive, that every right or remedy is
cumulative and may be exercised in addition to any other right or remedy, that
the election of some particular remedy does not preclude recourse to one or more
others or that failure to exercise or delay in exercising rights or remedies
will not operate as a waiver of any such right or remedy.
_________________, 1996
Page 6
D. We express no opinion as to the legality, validity, binding nature
or enforceability (i) of provisions relating to indemnification (or
contribution) to the extent such indemnification relates to any claims under the
Federal securities laws or state securities or Blue Sky laws, or any other
provisions in the Documents indemnifying a party, to the extent such provisions
may be held unenforceable as contrary to public policy, (ii) of any provision of
any Document insofar as it provides for the payment or reimbursement of costs
and expenses or for claims, losses or liabilities in excess of a reasonable
amount determined by any court or other tribunal or (iii) regarding any
Purchaser's ability to collect attorneys' fees and costs in an action involving
the Documents if such Purchaser is not the prevailing party in such action (we
call your attention that, under California law, where a contract permits one
party thereto to recover attorneys' fees, the prevailing party in any action to
enforce any provision of the contract shall be entitled to recover its
reasonable attorneys' fees).
E. We express no opinion with respect to the legality, validity,
binding nature or enforceability of (i) any waiver of unknown future rights or
any waiver of rights existing, or duties owed, that is broadly or vaguely stated
or does not describe the right or duty purportedly waived with reasonable
specificity, (ii) any waivers or consents (whether or not characterized as a
waiver or consent in the Documents) relating to the rights of the Subsidiary or
the Parent or duties owing to it existing as a matter of law, including, without
limitation, waivers of the benefits of statutory or constitutional provisions,
to the extent such waivers or consents may be found by a court to be against
public policy or which are ineffective pursuant to applicable statutes and
judicial decisions, (iii) provisions in the Documents that may be construed as
imposing penalties or forfeitures, or (ii) covenants (other than covenants
relating to the payment of principal, interest, yield maintenance amounts,
indemnities and expenses) to the extent they are construed to be independent
requirements as distinguished from conditions to the declaration or occurrence
of a default or an event of default.
F. We express no opinion as to any provision of the Documents
requiring written amendments or waivers of
_________________, 1996
Page 7
such documents insofar as it suggests that oral or other modifications,
amendments or waivers could not be effectively agreed upon by the parties or
that the doctrine of promissory estoppel might not apply.
G. In rendering our opinions expressed in paragraph 5 insofar as they
require interpretation of Contractual Obligations, (i) we have assumed that all
courts of competent jurisdiction would enforce such agreements as written but
would apply the internal laws of the State of California without giving effect
to any choice of law provisions contained therein or any choice of law
principles that would result in application of the internal laws of any other
state, (ii) to the extent that any questions of legality or legal construction
have arisen in connection with our review, we have applied the laws of the State
of California in resolving such questions, and (iii) we express no opinion with
respect to the compliance by the Subsidiary or the Parent with, or any financial
calculations or data in respect of, financial covenants included in any
Contractual Obligation. We advise you that certain of the Contractual
Obligations may be governed by other laws, that such laws may vary substantially
from the law assumed to govern for purposes of this opinion and that this
opinion may not be relied upon as to whether or not a breach or default would
occur under the law actually governing such Contractual Obligations.
Furthermore, with respect to paragraph 5, while we advise you that (subject to
the other assumptions, exceptions, qualifications and limitations herein) the
Documents may be performed in a manner that does not result in a violation,
conflict, breach, default or Lien described therein, we express no opinion as to
whether the actual performance of the terms and provisions of the Documents
after the date hereof will not violate, be in conflict with, breach or
constitute a default under, or result in the creation or imposition of any Lien
in respect of any property of the Subsidiary or the Parent under, any
Contractual Obligation, or violate any statute, rule, regulation, order,
judgment or decree applicable to the Subsidiary or the Parent.
H. We express no opinion regarding the effect on the enforceability
against the Parent of the guaranty contained in the Note Purchase Agreement of
any facts or circumstances occurring after the date hereof that would constitute
a defense to the obligation of a surety, unless
_________________, 1996
Page 8
such defense has been waived effectively by the Parent. Without limitation, we
advise you of California statutory provisions and case law to the effect that,
in certain circumstances, a guarantor may be exonerated if the creditor
materially alters the original obligation of the principal without the consent
of the guarantor, elects remedies for default which impair the subrogation
rights of the guarantor against the principal, or otherwise takes any action
without notifying the guarantor which materially prejudices the guarantor.
See, e.g., California Civil Code Section 2810; Union Bank x. Xxxxxxx, 265 Cal.
--- ---- ---------------------
App. 2d 40, 71 Cal. Xxxx. 00 (1968); Sumitomo Bank of California x. Xxxxxxx, 70
--------------------------------------
Cal. 2d 81, 447 P.2d 956, 73 Cal. Rptr. 564 (1968); Cathay Bank x. Xxx, 14 Cal.
------------------
App.4th 1533, 18 Cal. Rptr. 2d 420 (1993). In addition, the California Supreme
Court has found that in some circumstances the creditor has a duty to disclose
certain facts known to it to a guarantor. Sumitomo Bank x. Xxxxxxx, supra.
------------------------ -----
I. Our opinion set forth in Paragraph 4 is subject to the effect of
California statutory provisions and case law to the effect that a continuing
guaranty may be revoked at any time by a guarantor, in respect to future
transactions, unless there is a continuing consideration as to such transactions
which the guarantor does not renounce. See California Civil Code Section 2815;
---
Sumitomo Bank x. Xxxxxxx, supra.
------------------------ -----
J. We express no opinion as to the applicability or effect of any
Purchaser's compliance with any state or federal laws applicable to the
transactions contemplated by the Documents because of the nature of its
business.
K. We render no opinion regarding any violation of statutory or other
laws regarding fraudulent transfers or distributions by corporations to
stockholders in connection with the distribution by the Subsidiary to the Parent
of any Purchased Common Stock or the effect of any such violation.
L. For purposes of our opinions in paragraph 6 (and our opinions in
paragraph 5, to the extent they cover the same matters), we have assumed,
without any independent investigation by us, the accuracy of each Purchaser's
representations set forth in paragraph 9C of the Note Purchase Agreement.
________________, 1996
Page 9
M. For purposes of our opinion under paragraph 7 we have assumed,
without any independent investigation by us, (a) the accuracy of each
Purchaser's representations set forth in paragraph 9A of the Note Purchase
Agreement and of the Companies' representations and warranties set forth in
Section 8H of the Note Purchase Agreement, (b) that each Purchaser and each
other person to which offers were made is an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act, (c) none of the
Purchasers has taken or intends to take any action that would subject the
issuance and sale of the Notes to the registration requirements of the
Securities Act, and (d) that the offer and sale of the Notes occurred pursuant
to private negotiations between The Prudential Insurance Company of America and
the Companies and Prudential Capital Group, but that no offers with respect to
the Notes were made to any other person.
This opinion is rendered to the Purchasers in connection with the
Documents and may not be relied upon by any person other than the Purchasers and
their Transferees or by the Purchasers or their Transferees in any other
context, provided that the Purchasers and their Transferees may provide this
opinion (i) to insurance regulators and examiners and other regulatory
authorities should they so request or in connection with their normal
examinations, (ii) to the independent auditors and attorneys of the Purchasers
or their Transferees, (iii) pursuant to order or legal process of any court or
governmental agency or (iv) in connection with any legal action to which the
Purchasers or their Transferees are a party arising out of the transactions
contemplated by the Documents. This opinion may not be quoted without the
prior written consent of this Firm.
Very truly yours,
XXXXXX, XXXX & XXXXXXXX
EXHIBIT E
---------
As of ___________, 199__
The Prudential Insurance Company of America
Each Prudential Affiliate described below
c/o Prudential Capital Group
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Gentlemen:
In order to induce, and in consideration of, your purchase from (i) Electrical
Solutions ("Electrical") of up to $50,000,000 aggregate principal amount of its
Guaranteed Senior Notes ("Electrical Notes"), which have been guaranteed by Zero
Corporation (the "Company") and (ii) the Company of up to $20,000,000 aggregate
principal amount of its Senior Notes ("Company Notes"), in each case issued
under the Private Shelf Agreement (the "Note Agreement") dated as of [January
___], 1996, as amended from time to time, between the Company and Electrical, on
the one hand, and Prudential and each Prudential Affiliate (as defined therein)
which may become a party thereto, on the other hand, the undersigned agrees with
you as hereinafter provided:
1. All Subordinated Debt is expressly subordinated to the extent and in the
manner set forth in paragraphs 2 through 6 hereof to Senior Debt.
The term "Subordinated Debt" as used in this agreement shall mean and
include the principal, interest, premium, if any, and other amounts due in
connection with all obligations of Company to the undersigned, direct or
contingent, joint, several or independent, now or hereafter existing, due
or to become due to, or held or to be held by, the undersigned, whether
created directly or acquired by assignment or otherwise, and whether "open
account", evidenced by a note or other instrument, or otherwise.
The term "Senior Debt" as used in this agreement shall mean and include the
principal, interest, premium and yield-maintenance amounts, if any, and
other amounts due in connection with all contingent and non-contingent
liabilities of the Company (directly or indirectly by way of its guaranty)
under or with respect to the Note Agreement, the Company Notes, and the
Electrical Notes, and interest thereon at the rate stated in the
instruments evidencing Senior Debt from the date of filing of any petition
(by or with respect to Electrical or the Company) under the United States
Bankruptcy Code to the date of payment.
E-1
2. If there shall occur an Event of Default or Default, as defined in the Note
Agreement, then unless and until such Event of Default or Default shall
have been cured, or unless and until all Senior Debt shall be paid in full,
the undersigned will not receive or accept any payment on or of
Subordinated Debt from the Company.
3. The undersigned will not receive or accept any principal, interest or other
payment (including, but not limited to, payments-in-kind) from the Company
on account of Subordinated Debt, if the making of such payment would result
in a Default or Event of Default as defined in the Note Agreement.
4. In the event that the undersigned shall receive any payment on Subordinated
Debt which the undersigned is not entitled to receive under the provisions
of the foregoing paragraph 2 or 3, the undersigned will hold any amount so
received in trust for Prudential, each Prudential Affiliate (if any) which
has purchased a Company Note or an Electrical Note and will forthwith turn
over such payment to Prudential or such Prudential Affiliate in the form
received to be applied to Senior Debt pro rata according to the then
--- ----
outstanding principal amounts under such Notes at the time outstanding.
5. The undersigned will not commence any action or proceeding against the
Company to recover all or any part of the Subordinated Debt or join with
any creditor, unless Prudential and each Prudential Affiliate (if any)
which has purchased a Company Note or an Electrical Note shall also join,
in bringing any proceedings against the Company under any bankruptcy,
reorganization, readjustment of debt, arrangement of debt, receivership,
liquidation or insolvency law or statute of the Federal or any state
government unless and until all Senior Debt shall be paid in full.
6. In the event of any receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization or arrangement with creditors,
whether or not pursuant to bankruptcy laws, sale of all or substantially
all of the assets, dissolution, liquidation or any other marshalling of the
assets and liabilities of the Company, the undersigned will, at the request
of Prudential or any Prudential Affiliate which has purchased a Company
Note or an Electrical Note, file any claim, proof of claim or other
instrument of similar character necessary to enforce the obligations of the
Company in respect of Subordinated Debt and will hold in trust for
Prudential and any Prudential Affiliate which has purchased a Company Note
or an Electrical Note and pay over to Prudential or any such Prudential
Affiliate, in the form received, to be applied to Senior Debt pro rata
--- ----
according to the then outstanding principal amounts under the Company Notes
and the Electrical Notes, any and all moneys, dividends or other assets
received in any such proceedings on account of Subordinated Debt, unless
and until Senior Debt shall be paid in full. In the event that the
undersigned shall fail to take such action requested by Prudential or any
Prudential Affiliate, Prudential or any such Prudential Affiliate may, as
attorney-in-fact for the undersigned, take such action on behalf of the
undersigned, and the undersigned hereby appoints Prudential and any such
Prudential Affiliate (and any of them) as attorney-in-fact for the
undersigned to demand, xxx for, collect and receive any and all such
moneys, dividends or other assets and give acquittance therefor and to file
any claim, proof of claim or other instrument of similar character and to
take such other action (including acceptance or
E-2
rejection of any plan of reorganization or arrangement) in its or their own
name or in the name of the undersigned as Prudential or any such Prudential
Affiliate may deem necessary or advisable for the enforcement of the
agreement contained in this letter; and the undersigned will execute and
deliver to Prudential and any such Prudential Affiliate (and any of them)
such other and further powers of attorney or other instruments as any may
request in order to accomplish the foregoing.
7. Each of Prudential and any Prudential Affiliate which has purchased a
Company Note or an Electrical Note may, at any time and from time to time,
without the consent of or notice to the undersigned, without incurring
responsibility to the undersigned and without impairing or releasing any of
its rights, or any of the obligations of the undersigned hereunder:
(a) Change the amount, manner, place or terms of payment or change or
extend the time of payment of or renew or alter Senior Debt or
amend the Note Agreement, Company Notes, or the Electrical Notes
so as to restrict or further restrict payments of principal of
and interest on Subordinated Debt in any manner or enter into or
amend in any manner any other agreement relating to Senior Debt
(including provisions restricting or further restricting payments
of principal of and interest on Subordinated Debt);
(b) Sell, exchange, release or otherwise deal with all or any part of
any property by whomsoever at any time pledged or mortgaged to
secure, or howsoever securing, Senior Debt;
(c) Release anyone liable in any manner for the payment or collection
of Senior Debt;
(d) Exercise or refrain from exercising any rights against the
Company and others (including the undersigned); and
(e) Apply any sums, by whomsoever paid or however realized, to Senior
Debt.
8. The undersigned will (i) cause all Subordinated Debt to be evidenced by a
note or other instrument which shall bear upon its face a statement or
legend to the effect that such note or other instrument is subordinated to
Senior Debt in the manner and to the extent in this letter set forth, (ii)
will xxxx the undersigned's books to show that the Subordinated Debt is so
subordinated to Senior Debt.
9. The undersigned represents and warrants that (i) neither the execution nor
delivery of this letter (or any amendment and restatement hereof) nor
fulfillment of nor compliance with the terms and provisions hereof will
conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, any agreement or instrument to which the
undersigned is now subject, and (ii) none of the Subordinated Debt is or
will be subordinated to any Funded Debt or Current Debt (as defined in the
Note Agreement) of the Company other than Senior Debt.
X-0
00. Notice of acceptance of the agreement contained in this letter is hereby
waived by the undersigned.
11. This agreement is for your benefit, the benefit of your successors and
assigns and the benefit of any subsequent holder or holders of the Company
Notes and the Electrical Notes, and shall bind the successors and assigns
of the undersigned and any subsequent holder(s) of the Subordinated Debt.
12. This agreement shall be governed by the laws of the State of New York , and
shall be construed and enforced in accordance with, the law thereof.
Very truly yours,
[Name of Subsidiary]
By: ________________________________
Its: ___________________________
The foregoing agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA (directly and on behalf of
each Prudential Affiliate)
By: __________________________________
Title: _______________________________
E-4
SCHEDULE 6C(3)
EXISTING LOANS, ADVANCES AND INVESTMENTS
1. Promissory Note dated November 22, 1991
X. X. Xxxxxxxx and Xxxx Xxxxxxxx
Principal $3,200,000, current balance $2,600,000
Issued by Purchasers for Property located at
0000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx
Interest at 10% payable monthly
Principal payable $150,000 annually on each November 22
Maturity November 22, 1998 with payment of balance of
principal of $2,450,000 plus interest through such date
2. Series A Preferred Stock of IAC Industries
Issued to ZERO Corporation for assets sold on
September 21, 1990, annual redemption provisions
and dividends payable, carrying value of $257,305
3. Cambridge Aeroflo, Inc.
Loan from ZERO Corporation for $250,000
Interest payable at Bank of America prime
through Maturity October 10, 1996
May be converted to common stock of Cambridge Aeroflo
Anticipate conversion and purchase of all outstanding
Common Stock by March 31, 1996
4. Anvil Cases, Inc.
Wholly-owned subsidiary
Currently negotiating for the sale of this subsidiary
the closing of which is scheduled for January 31, 1996.
Purchase price of $3.8 million payable $300,000 at closing
and delivery of a promissory note to mature in 2002.
Purchase price adjustments provided for based on Adjusted
Shareholders' Equity.
5. Balcor Pension Investors-I and Balcor Pension Investors-VII
Two Illinois real estate limited partnerships
Value $486,994
SCHEDULE 6C(6)
PERMITTED TRANSFERS OF ASSETS
1. 000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx
Approximately 286,556 square feet of concrete tilt-up and
office buildings on approximately 8.26 acres.
2. 00 Xxxxxxxxxx Xxxx
Xxxxxxxxx Xxxxxxxx, Xxx Xxxxxx
Approximately 52,000 square feet of assembly/warehouse/office space
currently occupied by XxXxxx Engineering, a division of the Company.
3. Air Cargo Equipment Corporation
Wholly-owned subsidiary
The Company is evaluating the strategic fit of this subsidiary as it
relates to the long-range plans for the Company. Air Cargo Equipment
Corporation manufactures air cargo systems, containers and related
accessories.
4. Anvil Cases, Inc.
Wholly-owned subsidiary
Currently negotiating for the sale of this subsidiary the closing of which
is currently scheduled for January 31, 1996. Purchase price of $3.8
million payable $300,000 at closing and delivery of a promissory note to
mature in 2002. Purchase price adjustments provided for based on Adjusted
Shareholders' Equity.
SCHEDULE 8A
SUBSIDIARY INFORMATION
Name and Jurisdiction of Each Subsidiary Share Ownership
---------------------------------------- ---------------
Air Cargo Equipment Corporation 100% ZERO Corporation
Delaware
Air Cooling Technology, Inc. 100% ZERO Corporation
California
Anvil Cases, Inc. 100% ZERO Corporation
California
Composite Research, Inc. 100% ZERO Corporation
California (inactive)
Contempo Engineering Co. 100% ZERO Corporation
California
Electronic Solutions 100% ZERO Corporation
Nevada
XxXxxx Midwest Corporation 100% ZERO Corporation
Minnesota
Xxxxxxx Hardware Corporation 100% ZERO Corporation
Connecticut
Precision Fabrication Technologies, Inc. 100% ZERO Corporation
Indiana
Xxxxxx Xxxxxx & Co. Limited 99.9% ZERO Corporation
United Kingdom .01% Xxxxxx Xxxxxxx
ZERO XxXxxx Europe Ltd. 100% Xxxxxx Xxxxxx & United
Kingdom (inactive) Co. Limited
Productos Aereos, S.A. 99.9% ZERO Corporation
Mexico .01% Xxxxxx Xxxxxx,
Xxxxxx Xxxxx, Xxxx
Xxxxxx, X. Xxxxxxxx
ZERO FSC Corp. 100% ZERO Corporation
Virgin Islands (foreign sales)
ZERO-East Division, ZERO Corporation 100% ZERO Corporation
Massachusetts
ZERO Integrated Systems 100% ZERO Corporation
California
ZERO Manufacturing Corporation 100% ZERO Corporation
California (inactive)
ZERO International, Inc. 100% ZERO Corporation
California (inactive)
SCHEDULE 8C
ACTIONS PENDING
I. ENVIRONMENTAL
The following facilities have been identified by the State of California
and/or the Federal government and the Company has received notification
(except as to the Hawker Pacific facility referred to below) that certain
of its operations may have impacted the environment at particular
facilities and as a result the Company may be potentially responsible for
response costs and/or penalties as a result of the Company's operations.
000 Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx (Burbank)
000 Xxxxx Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx (Hyrail)
Electronic Solutions, El Monte, California
Xxxxxxx Way, North Hollywood, California (Hawker Pacific)
Chatham Brothers Barrel Yard, Escondido, California
In addition, the Company is conducting soil remediation activities at
certain locations identified below.
X. Xxxxxxx Facility
The EPA has identified the Company as a PRP at the San Xxxxxxxx Valley
Superfund Site, Glendale North Operable Unit. The Company has agreed to
participate in the design of the EPA selected interim remedies for the
Glendale North and Glendale South Operable Units.
The Company has joined with other PRPs which have collectively organized a
response to the EPA and negotiated an Administrative Order on Consent to
design the EPA selected interim remedy. The AOC, signed by 24 PRPs
including the Company, became effective on March 30, 1994.
On October 20, 1995 the Company (along with forty-four other PRPs) received
a Special Notice Letter from the EPA in connection with the construction,
operation and maintenance costs for the twelve year interim remedy for the
Site, and for response costs incurred by the government. The PRP Group has
commenced negotiations with the EPA for the formulation of a good faith
offer for the implementation of the interim remedy.
An interim allocation, through the use of mediators using surrogate data,
was established in early-1994, with the Company's current interim
allocation of costs for the design of 9.39%. The PRP Group is also
currently involved in a process to arrive at a final allocation for the
costs for the interim remedy and the remedial design work.
The Company's liability at the San Xxxxxxxx Valley Superfund Site is
uncertain at this time because of a number of factors, including: EPA has
not selected the final remedy for the entire Site; there exist
uncertainties regarding the design and therefore the cost; additional PRPs
have been and will continue to be identified; the Company's relative
contribution of VOCs, if any, to the groundwater has not yet been
determined.
In addition, the Company has submitted a workplan to the Regional Water
Quality Control Board for the remediation of the soil at 000 Xxxxx Xxxxxx,
Xxxxxxx.
B. Hyrail Facility
The Company received and responded to an information request of the EPA in
December 1992 as a result of the Company's operations on a certain portion
of the Hyrail facility. The Company has not received any further contact
regarding the Hyrail facility since its response to the EPA information
request.
C. Electronics Solutions-El Monte Facility
The Company conducted certain subsurface investigations at this facility at
the request of the State of California Regional Water Quality Control Board
and detected low levels of volatile organic compounds in the near surface
soils nd soil gas. The Company implemented a plan to remediate the soil.
Electronic Solutions received a letter from the EPA on August 18, 1995
advising that the EPA considered it (along with forty-eight other parties)
a PRP for the South El Monte Operable Unit of the San Xxxxxxx Valley
Superfund Sites. The EPA informed the PRPs that it had entered into an AOC
with Cardinal Industrial Finishes for a PRP lead remedial investigation and
feasibility study at the Site, and encouraging the parties to cooperate
with Cardinal. The Company agreed to and has paid funds to Cardinal for
the work to be performed under this AOC.
X. Xxxxxx Pacific Facility
The Company received and responded to an information request from the EPA
in 1992 regarding this facility. The Company has not received any further
contact from the EPA since its response to that request.
In an action entitled United States v. Allied Signal, et al., Consolidated
Case Nos. CIV 93-6490 MRP (Tx) and CIV 93-6570 MRP (Tx), the EPA sued
Hawker Pacific and Xxxxxx and Xxxxxxxx
who have filed third party complaints, and two co-defendants on these
third-party complaints have filed cross-claims for contribution,
declaratory relief, and/or contractual indemnity against the Company.
The plaintiffs are seeking to recover response costs in connection with
actions taken by several governmental agencies in response to groundwater
and soil contamination in the North Hollywood Operable Unit of the San
Xxxxxxxx Valley Superfund Site.
The third-party complaints against the Company were served on or about
October 1994 by the current owner and operator of the property, alleging
the predecessors in interest operated the property from 1969 to 1987.
Cross-claims filed against the Company by Parker Hannifin Corporation and
Inchcape are a part of their responses to the third-party complaints seek
contribution declaratory relief, and/or contractual indemnity from one
another and from the Company, and the third-party plaintiffs.
Counsel for Hawker Pacific has recently notified the Company that
negotiations are being conducted with the EPA whereby each party in this
action would contribute funds to a final settlement. The Company has
received an offer to settle which is currently under consideration. In
addition, the Company intends to file an action against its insurance
carrier for its failure to defend the Company in this action.
X. Xxxxxxx Facility
The Company has agreed to participate with other potentially responsible
parties to perform investigative and remedial work at the Chatham facility
and to pay a portion of the past response costs incurred by the State of
California. The Company has been identified as having a 0.05 percent
allocation of material associated with the Chatham facility.
F. 00000 00xx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx
The Company entered into a Consent Order with the State of Florida
Department of Environmental Regulation for the remediation of soil at this
former facility in Pinellas County, Florida. The leasehold interest in
this property was sold to the County in 1990, subject to compliance by the
Company of the requirements of the Consent Order. The Company is currently
negotiating with the Florida DEP for authority to reduce the testing
required to semi-annual testing and to ultimately reduce the cleanup levels
required under the Consent Order.
II. SIGNIFICANT LITIGATION
A. West Texas Utilities vs General Electric, et al, including ZERO
Corporation and its ZERO East Division
United States District Court, Northern District of
Texas, Dallas Division
Case No. 394CV-1853-T
In November 1994 the Company received service of the above action in which
the plaintiff seeks to recover damages allegedly suffered as a result of
the failure of transformers, gears for which were sold by ZERO East
Division to General Electric. The damages include repair costs in excess
of $2,000,000. The Company and ZERO East Division are being defended by
The Home Insurance Company.
B. USA and CA vs Allied Signal, Hawker Pacific, et al. See paragraph I-D
above.
