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EXHIBIT 10.47
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SECURITIES PURCHASE AND EXCHANGE AGREEMENT
Among
AURORA ELECTRONICS, INC.
THE SEVERAL PURCHASERS NAMED IN ANNEX I HERETO
and
WCAS CAPITAL PARTNERS II, L.P.
Dated as of January 30, 1998
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TABLE OF CONTENTS
Page
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ARTICLE I. THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.01 Purchase and Sale of the Bridge Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.02 Purchase and Sale of the Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 1.03 Purchase and Sale of the Aurora
Preferred Stock to WCAS XX XX . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 1.04 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF AURORA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.01 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.02 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.03 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.04 Authorization of Agreements, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.05 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.06 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.07 Actions Pending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.08 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.09 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF
THE PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.01 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.02 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.03 Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.01 Conditions Precedent to the Obligations
of the Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.02 Condition Precedent to the Obligations
of Aurora . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE V. TERMINATION AND ABANDONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.01 Termination and Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.02 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.01 Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.02 Survival of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.03 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.04 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.05 Entire Agreement; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.06 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.07 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
TESTIMONIUM
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INDEX TO ANNEXES
Annex Description
ANNEX I The Purchasers
INDEX TO EXHIBITS
Exhibit Description
EXHIBIT A-1 Form of Aurora Bridge Notes
EXHIBIT A-2 Form of Aurora Senior Subordinated Notes
EXHIBIT B Form of Certificate of Designation
EXHIBIT C Form of Certificate of Amendment
EXHIBIT D Form of Amended and Restated Registration Rights
Agreement
EXHIBIT E Form of Opinion of Xxxxxx & Xxxx
INDEX TO SCHEDULES
Schedule Description
2.02 Subsidiaries
2.03 Subscriptions, Warrants, Etc.
2.07 Undisclosed Liabilities
2.09 Certain Changes
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SECURITIES PURCHASE AND EXCHANGE AGREEMENT dated as of January
30, 1998, among AURORA ELECTRONICS, INC., a Delaware corporation ("Aurora"),
Welsh, Carson, Xxxxxxxx & Xxxxx VII, L.P., a Delaware limited partnership
("WCAS VII"), and the other several Purchasers named in Annex I hereto
(collectively the "Purchasers") and WCAS Capital Partners II, L.P., a Delaware
limited partnership ("WCAS XX XX" and, collectively with the Purchasers the
"Participants").
WHEREAS, pursuant to an Agreement and Plan of Merger of even
date herewith (the "Merger Agreement") among Aurora, Xxxxx Acquisition Corp., a
newly organized wholly-owned Delaware subsidiary of Aurora ("Sub"), and The
Cerplex Group, Inc., a Delaware corporation ("Cerplex"), Aurora desires to
acquire Cerplex through the merger (the "Merger") of Sub with and into Cerplex;
and
WHEREAS, pursuant to an Irrevocable Proxy and Option Agreement
of even date herewith (the "Option Agreement"), certain stockholders of Cerplex
who own in the aggregate a majority of the outstanding shares of Cerplex
entitled to vote have agreed, among other things, (i) to grant irrevocable
proxies coupled with an interest to representatives of Aurora to vote their
shares of Cerplex in favor of the Merger, (ii) to grant to Aurora an option to
purchase their Cerplex shares for the consideration to be received by them in
the Merger, and (iii) not to transfer or otherwise dispose of their Cerplex
shares or any interest therein except pursuant to the Merger or such option,
all on the terms and subject to the conditions contained in the Option
Agreement; and
WHEREAS, pursuant to a Stockholders Agreement of even date
herewith (the "Stockholders Agreement") among WCAS VII, Aurora and Cerplex,
WCAS VII has agreed (i) to vote its shares of Aurora in favor of approval of
the Certificate of Amendment (as defined herein), (ii) subject to consummation
of the Merger, to convert all currently outstanding shares of convertible
preferred stock of Aurora into Common Stock, $.01 par value ("Aurora Common
Stock"), (iii) to make further assurances to Cerplex with respect to Aurora's
obligations under the Merger Agreement and this Agreement and (iv) to grant,
together with Parent, an option to Cerplex to purchase certain securities of
Cerplex held by WCAS VII and Aurora in the event the Merger Agreement
terminates and the Merger is not consummated in accordance with the Certificate
of Incorporation of Aurora, all on the terms and subject to the conditions
contained in the Stockholders Agreement; and
WHEREAS WCAS XX XX holds $10,000,000 principal amount of
Aurora's 10% Senior Subordinated Notes Due September 30, 2001 (the "XX XX
Notes") together with accrued interest thereon, being all the issued and
outstanding XX XX Notes; and
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WHEREAS, on December 5, 1997, in order to alleviate Aurora's
working capital shortage, the Purchasers purchased an aggregate $2,800,000
principal amount of Aurora's 10% Senior Subordinated Demand Notes (the "Demand
Notes") for cash in the amount of $2,800,000; and
WHEREAS, pursuant to a Note and Warrant Assignment and
Transfer Agreement of even date herewith (the "Cerplex Note Purchase
Agreement"), simultaneously with the execution and delivery hereof, WCAS VII is
purchasing (i) an aggregate $18,069,275 principal amount of 9.50% Senior
Subordinated Notes due 2001 (the "Cerplex Subordinated Notes") of Cerplex,
representing all the issued and outstanding Cerplex Subordinated Notes,
together with accrued interest thereon, and (ii) certain warrants (the "Cerplex
Warrants") to purchase shares of Common Stock, $.001 par value ("Cerplex Common
Stock") of Cerplex for cash at a price equal to 30% of the sum of the principal
amount of, and accrued interest on, the Cerplex Subordinated Notes (such price
being hereinafter called the "Cerplex Note and Warrant Purchase Price"); and
WHEREAS, pursuant to a Forbearance Agreement of even date
herewith and a Seventh Amendment to Credit Agreement and Limited Waiver
Agreement of even date herewith (the "Forbearance Agreement"), Citibank, N.A.
has agreed to waive certain defaults and forbear from enforcing certain of its
rights under the Credit Agreement dated as of October 12, 1994, as amended (the
"Cerplex Credit Agreement"), among Cerplex, the lenders named therein and Xxxxx
Fargo Bank, N.A., as Agent, pending consummation of the Merger and repayment of
the obligations of Cerplex under the Cerplex Credit Agreement, all on the terms
and subject to the conditions set forth in the Forbearance Agreement; and
WHEREAS, Aurora desires to obtain proceeds from a new Senior
lender of at least $17,000,000 (the "New Senior Loan") on terms acceptable to
Aurora; and
WHEREAS, pursuant to a letter agreement of even date herewith
(the "Chase Waiver"), The Chase Manhattan Bank N.A. ("Chase") is consenting to
the New Senior Loan and to the subordination to the New Senior Loan of Chase's
currently outstanding loan pursuant to the Credit Agreement dated as of March
29, 1996, as amended (the "Existing Aurora Credit Agreement"), among Aurora
Electronics Group, Inc., the guarantors named therein, the lenders named
therein, and Chase (formerly known as Chemical Bank), as Agent, all on the
terms and subject to the conditions set forth in the Chase Waiver; and
WHEREAS, in order to provide for the working capital needs of
Aurora and for other purposes, WCAS VII is willing, between the date hereof and
the consummation of the Merger, upon the terms and subject to the conditions
herein provided (i) on the date hereof, to purchase $3,200,000 principal amount
of
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Aurora's 10% Subordinated Bridge Notes in the form annexed hereto as Exhibit
A-1 (the "Bridge Notes"), and (ii) from time to time between the date hereof
and the consummation of the Merger, to purchase up to an additional $2,000,000
aggregate principal amount of Bridge Notes; and
WHEREAS, Aurora wishes to issue and sell (i) subject to the
rights offering referred to below, to the Purchasers, severally and not
jointly, up to an aggregate 15,000 units (the "Units") each consisting of (x)
$1,000 principal amount of Aurora's 10% Senior Subordinated Notes Due 2004 (the
"Aurora Senior Subordinated Notes"), in the form annexed hereto as Exhibit A-2,
and (y) 12 shares of Senior Convertible Preferred Stock, par value $1 per share
("Aurora Preferred Stock"), having the terms set forth in the form of
Certificate of Designations annexed hereto as Exhibit B, for a purchase price
of $2,200 per Unit payable in cash or by surrender or exchange of other
indebtedness of Aurora or Cerplex as hereinafter provided; and (ii) to WCAS XX
XX an aggregate 33,000 shares of Aurora Preferred Stock in exchange for
surrender for cancellation of the XX XX Notes and all interest accrued thereon;
and
WHEREAS Aurora wishes to afford to its public stockholders the
right to participate in the purchase of the Units on the same basis as the
Purchasers and, to that end, proposes to offer to such holders rights to
purchase their proportionate share of the Units based on fully-diluted holdings
of Aurora Common Stock; and
WHEREAS the Purchasers and WCAS XX XX are willing, on the
terms and subject to the conditions herein set forth, to purchase such Units
and Aurora Preferred Stock, including without limitation, in the case of the
Purchasers, any Units offered to but not subscribed for by the public holders
of Aurora Common Stock; and
WHEREAS, in order to provide sufficient Aurora Common Stock to
permit conversion of the Aurora Preferred Stock, Aurora wishes to increase the
authorized Aurora Common Stock from 50 million shares to 300 million shares,
pursuant to a Certificate of Amendment in the form annexed hereto as Exhibit C
(the "Certificate of Amendment"); and
WHEREAS, in connection with the Merger, (i) the Participants
and Aurora wish to amend and restate the Registration Rights Agreement dated as
of March 29, 1996, among Aurora and the other parties named therein, as
heretofore amended, pursuant to the Amended and Restated Registration Rights
Agreement substantially in the form annexed hereto as Exhibit D (the "Restated
Registration Rights Agreement"), to include among the shares entitled to
registration thereunder the shares of Aurora Common Stock issuable upon
conversion of shares of Aurora Preferred
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Stock and shares issued to certain affiliates of Cerplex in the Merger;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereby agree as follows:
ARTICLE I.
THE CLOSING
SECTION 1.01 Purchase and Sale of the Bridge Notes.
(a) Purchase and Sale on the Date Hereof. Simultaneously
with the execution and delivery hereof, Aurora is executing and delivering to
WCAS VII $3,200,000 principal amount of the Bridge Notes, dated the date hereof
and registered in the name of WCAS VII. Receipt of such Bridge Notes is hereby
acknowledged by WCAS VII. In consideration of such Bridge Notes, and against
delivery thereof as aforesaid, WCAS VII is transferring to Aurora the sum of
$3,200,000 by wire transfer. Receipt of such wire transfer is hereby
acknowledged by Aurora.
(b) Purchases and Sales Between the Date Hereof and the
Closing Date.
(i) Subject to the terms and conditions set forth herein,
from time to time prior to the Closing Date (as hereinafter defined),
or the earlier termination of this Agreement, on a date (a "Drawdown
Date") designated by Aurora to WCAS VII upon not less than five days'
prior written notice (a "Bridge Notice"), Aurora shall execute and
deliver to WCAS VII additional Bridge Notes, dated such Drawdown Date
and registered in the name of WCAS VII, in a principal amount that,
taken together with any such additional Bridge Notes theretofore so
executed and delivered pursuant to this paragraph (b), does not exceed
$2,000,000 (or such higher limit, if any, as WCAS VII shall, in its
sole discretion, agree). Any Bridge Notice delivered hereunder shall
be executed by the principal financial officer of Aurora and shall
specify that the proceeds of such purchase and sale are to be relent
to Cerplex for working capital purposes.
(ii) As payment in full for the additional Bridge Notes being
purchased by it hereunder on any Drawdown Date, and against delivery
of such Notes as aforesaid, WCAS VII shall deliver to Aurora on each
Drawdown Date a certified or official bank check in New York Clearing
House funds payable to the order of Aurora in the amount of the
principal amount of additional Bridge Notes so being purchased by it,
or
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shall transfer such sum to the account of Aurora by wire transfer.
SECTION 1.02 Purchase and Sale of the Units.
(a) Subject to the terms and conditions set forth herein, on
the Closing Date, Aurora shall execute and deliver to each Purchaser the number
of Units (consisting of Aurora Senior Subordinated Notes and certificates
representing shares of Aurora Preferred Stock registered in the name of such
Purchaser) set forth opposite such Purchaser's name in Annex I hereto.
(b) Anything in paragraph (a) above to the contrary
notwithstanding, in the event that (A) the Rights Offering shall have become
effective as herein contemplated and (B) holders of Aurora Common Stock (or
transferees of stock purchase rights granted to such holders pursuant to the
Rights Offering) shall have elected to purchase Units pursuant thereto and
shall have complied with the requirements for payment therefor, the number of
Units to be purchased by each Purchaser shall be reduced pro tanto (subject to
rounding to the nearest one-tenth of a Unit), so that the aggregate number of
Units purchased by all the Purchasers shall be 15,000 minus the number of Units
so purchased by such holders.
(c) As payment in full for the Units being purchased by it on
the Closing Date, and against delivery thereof as aforesaid, each Purchaser
other than WCAS VII shall on the Closing Date:
(i) surrender to Aurora for cancellation a Demand Note, in the
principal amount set forth opposite the name of such Purchaser in
Annex I hereto, together with interest accrued thereon to the Closing
Date; and
(ii) deliver to Aurora a certified or official bank check in New York
Clearing House funds payable to the order of Aurora in an amount equal
to $2,200 times the number of Units to be purchased by such Purchaser
hereunder, as may be reduced pursuant to Section 1.02(b) above, less
the amount of principal and interest surrendered under clause (i)
above).
(d) As payment in full for the Units being purchased by WCAS
VII on the Closing Date, and against delivery thereof as aforesaid, WCAS VII
shall on the Closing Date:
(i) surrender to Aurora for cancellation a Demand Note, in the
principal amount set forth opposite the name of WCAS VII in Annex I
hereto, together with interest accrued thereon to the Closing Date;
and
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(ii) surrender to Aurora for cancellation each Bridge Note issued
hereunder to WCAS VII, together with interest accrued thereon to the
Closing Date; and
(iii) deliver to Aurora the Cerplex Subordinated Notes and the Cerplex
Warrants, duly endorsed for transfer, it being understood that such
securities will be valued for such purpose at the Cerplex Note and
Warrant Purchase Price; and
(iv) deliver to Aurora a certified or official bank check in New York
Clearing House funds payable to the order of Aurora in an amount equal
to $2,200 times the number of Units to be purchased by WCAS VII
hereunder, as may be reduced pursuant to Section 2.01(b) above, less
(A) the amount of principal and interest surrendered under clauses (i)
and (ii) above and (B) the Cerplex Note and Warrant Purchase Price.
SECTION 1.03 Purchase and Sale of the Aurora Preferred Stock
to WCAS XX XX.
(a) Subject to the terms and conditions set forth herein, on
the Closing Date Aurora shall issue and sell to WCAS XX XX, and WCAS XX XX
shall purchase from Aurora, 33,000 shares of Aurora Preferred Stock (such
shares, together with the shares included in the Units being purchased by the
Purchasers pursuant to Section 1.02 above, being herein referred to
collectively as the "Aurora Preferred Shares") in consideration for the
surrender by WCAS XX XX of $10,000,000 principal amount of XX XX Notes
(together with accrued interest thereon). Aurora shall issue and deliver to
WCAS XX XX a stock certificate or certificates in definitive form, registered
in the name of WCAS XX XX, evidencing the Aurora Preferred Shares being
purchased by it hereunder.
(b) As payment in full for the Aurora Preferred Shares
being purchased by it hereunder, and against delivery of the stock certificate
or certificates therefor as aforesaid, WCAS XX XX shall surrender to Aurora the
XX XX Notes, duly endorsed for transfer, with all signatures guaranteed.
SECTION 1.04 Closing Date. The closing of the transactions
contemplated hereby shall take place at the offices of Reboul, MacMurray,
Xxxxxx, Xxxxxxx & Kristol, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, at
10 a.m., New York time, on the Effective Date of the Merger, or at such other
date and time prior to the Merger as may be mutually agreed upon among the
majority of the Participants and Aurora (such date and time of closing being
herein called the "Closing Date").
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF AURORA
Aurora represents and warrants to, and agrees with, the
Participants as follows:
SECTION 2.01 Organization and Qualification. Aurora is a
corporation validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own or lease
and operate its properties and assets and to carry on its business as it is now
being conducted. Aurora is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the character
of its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the properties, assets, financial condition,
prospects, operating results or business of Aurora and its subsidiaries, taken
as a whole (a "Material Adverse Effect").
SECTION 2.02 Subsidiaries. (a) Except as set forth on
Schedule 2.02 hereto, neither Aurora nor any of its subsidiaries owns of record
or beneficially, directly or indirectly, (i) any shares of outstanding capital
stock or securities convertible into capital stock of any other corporation or
(ii) any participating interest in any partnership, joint venture or other
non-corporate business enterprise. Each subsidiary of Aurora is a corporation
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to own or
lease and operate its properties and assets and to carry on its business as it
is now being conducted. Each subsidiary of Aurora is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction in which the character of its properties owned or leased or the
nature of its activities makes such qualification necessary, except where the
failure to be so qualified would not have a Material Adverse Effect. All the
outstanding shares of capital stock of Aurora's subsidiaries are duly
authorized, validly issued, fully paid and nonassessable and, except as set
forth on Schedule 2.02, are owned by Aurora or by a wholly-owned subsidiary of
Aurora, free and clear of any liens, claims, charges, restrictions, rights of
others, security interests, prior assignments or other encumbrances
(collectively, "Claims"), and there are no proxies, voting or transfer
agreements or understandings outstanding with respect to any such shares.
(b) For purposes of this Agreement, the term
"subsidiary", when used with respect to Aurora, shall mean any corporation or
other business entity, a majority of whose outstanding equity securities is at
the time owned, directly or indirectly, by Aurora and/or one or more other
subsidiaries of Aurora.
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SECTION 2.03 Capitalization.
(a) The authorized capital stock of Aurora consists of (i)
50,000,000 shares of Common Stock and (ii) 1,000,000 shares of Preferred Stock,
$.01 par value ("Preferred Stock"), of Aurora of which 400,000 shares have been
designated Convertible Preferred Stock, 25,000 shares have been designated
Series B Convertible Preferred Stock, 25,000 shares have been designated Series
C Convertible Preferred Stock and 20,000 shares have been designated Series D
Convertible Preferred Stock. As of the date hereof, 6,847,583 shares of Common
Stock, 400,000 shares of Convertible Preferred Stock, 25,000 shares of Series B
Convertible Preferred Stock, 25,000 shares of Series C Convertible Preferred
Stock and 20,000 shares of Series D Convertible Preferred Stock are issued and
outstanding, all of which were duly authorized and validly issued and are fully
paid and nonassessable.
(b) Upon the filing with the Secretary of State of the
State of Delaware of a Certificate of Designations in the form attached hereto
as Exhibit B and a Certificate of Amendment in the form attached hereto as
Exhibit C, 213,000 shares of Preferred Stock shall be designated as authorized
Senior Convertible Preferred Stock, and the authorized Aurora Common Stock
shall be 300 million shares.
(c) Except as set forth in Aurora's SEC Filings or on
Schedule 2.03 hereto, as of the date hereof, no subscription, warrant, option,
convertible security, stock appreciation or other right (contingent or other)
to purchase or acquire any shares of any class of capital stock of Aurora or
any of its subsidiaries is authorized or outstanding and (except as otherwise
expressly contemplated by this Agreement) there is not any commitment of Aurora
or any of its subsidiaries to issue any shares, warrants, options or other such
rights or to distribute to holders of any class of its capital stock any
evidences of indebtedness or assets. Schedule 2.03 sets forth a complete and
correct list of the number of warrants or options, including a listing of the
vesting schedules thereof, held by each person with respect to the outstanding
capital stock of Aurora.
(d) Except as set forth on Schedule 2.03, neither Aurora nor
any of its subsidiaries has any obligation (contingent or other) to purchase,
redeem or otherwise acquire any shares of its capital stock or any interest
therein or to pay any dividend or make any other distribution in respect
thereof.
SECTION 2.04 Authorization of Agreements, Etc. (a) Each of
(i) the execution and delivery by Aurora of this Agreement, (ii) the
performance by Aurora of its obligations hereunder, (iii) the issuance, sale
and delivery by Aurora of the Aurora Preferred Shares and the Aurora Senior
Subordinated Notes,
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and (iv) the issuance and delivery of the shares of Aurora Common Stock
issuable upon the conversion of the Aurora Preferred Shares (collectively, the
"Conversion Shares") have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, the Certificate of Incorporation or By-laws of
Aurora, or, subject to the receipt of required consents from the lenders under
the Existing Aurora Credit Agreement, any provision of any indenture, agreement
or other instrument to which Aurora or any of its properties or assets is
bound, or conflict with, result in a breach of or constitute (with due notice
or lapse of time or both) a default under any such indenture, agreement or
other instrument, or result in the creation or imposition of any Claim in favor
of any third person upon any of the assets of Aurora or any of its
subsidiaries.
(b) The Aurora Preferred Shares have been duly authorized by
Aurora and, when sold and paid for in accordance with this Agreement, will be
validly issued, fully paid and nonassessable shares of Aurora Preferred Stock.
The Conversion Shares, when issued and delivered upon the conversion of the
Aurora Preferred Shares, will be duly authorized, validly issued, fully paid
and nonassessable shares of Aurora Common Stock. Neither the issuance, sale
and delivery of the Aurora Preferred Shares to the Participants hereunder, nor
the issuance and delivery of the Conversion Shares, is subject to any
preemptive rights of stockholders of Aurora or to any right of first refusal or
other similar right in favor of any person.
SECTION 2.05 Validity. This Agreement has been duly executed
and delivered by Aurora and constitutes the legal, valid and binding obligation
of Aurora, enforceable against Aurora in accordance with its terms.
SECTION 2.06 SEC Filings. Aurora has filed all forms,
reports and documents required to be filed with the SEC since September 30,
1992, and Aurora has made available to the Participants, as filed with the SEC,
complete and accurate copies of (i) the Annual Report of Aurora on Form 10-K
for the year ended September 30, 1997, and (ii) all other reports, statements
and registration statements (including Current Reports on Form 8-K) filed by
Aurora with the SEC since September 30, 1992, in each case including all
amendments and supplements (collectively, "Aurora's SEC Filings"). Aurora's
SEC Filings (including, without limitation, any financial statements or
schedules included therein) (i) were prepared in compliance with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, and the rules and regulations thereunder, as the case may
be, and (ii) did not at the time of filing (or if amended, supplemented or
superseded by a filing prior to the date hereof, on the date of that filing)
contain any untrue statement of a material fact or omit to state a material
fact required to
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be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
SECTION 2.07 Actions Pending. Except (i) for any actions,
suits, investigations or proceedings which individually do not involve claims
against Aurora or any of its subsidiaries for more than $25,000, or (ii) as set
forth in Aurora's SEC Filings, there is no action, suit, investigation or
proceeding pending or, to the best knowledge of Aurora, threatened against or
affecting Aurora, or any of its properties or rights, before any court or by or
before any governmental body or arbitration board or tribunal. There is no
judgment, decree, injunction or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against Aurora.
SECTION 2.08 Compliance with Law. Neither Aurora nor any of
its subsidiaries is in default in any respect under any order or decree of any
court, governmental authority, arbitrator or arbitration board or tribunal or
under any laws, ordinances, governmental rules or regulations to which Aurora
or any of such subsidiaries or any of their respective properties or assets is
subject, except where such default would not have a Material Adverse Effect.
SECTION 2.09 Brokers. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by
Aurora directly with the Participants, without the intervention of any other
person on behalf of Aurora in such manner as to give rise to any valid claim by
any other person against the Participants for a finder's fee, brokerage
commission or similar payment.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE PARTICIPANTS
Each Participant represents and warrants to, and agrees with,
Aurora as follows:
SECTION 3.01 Authorization. The execution, delivery and
performance by such Participant of this Agreement and the purchase and receipt
by such Participant of the Aurora Preferred Shares and the Aurora Senior
Subordinated Notes, as the case may be, being acquired by it hereunder, have
been duly authorized by all requisite action on the part of such Participant,
and will not violate any provision of law, any order of any court or other
agency of government, the charter or other governing documents of such
Participant, or any provision of any indenture, agreement or other instrument
by which such Participant or any of such Participant's properties or assets are
bound, or conflict with,
10
14
result in a breach of or constitute (with due notice or lapse of time or both)
a default under any such indenture, agreement or other instrument, or result in
any Claim upon any of the properties or assets of such Participant.
SECTION 3.02 Validity. This Agreement has been duly executed
and delivered by such Participant and constitutes the legal, valid and binding
obligation of such Participant, enforceable against such Participant in
accordance with its terms.
SECTION 3.03 Investment Representations.
(a) Such Participant is acquiring the Bridge Notes or the
Units, as the case may be, being purchased by such Participant hereunder for
such Participant's own account, for investment, and not with a view toward the
resale or distribution thereof.
(b) Such Participant understands that he, she or it, as
the case may be, must bear the economic risk of such Participant's investment
for an indefinite period of time.
(c) Such Participant is able to fend for itself in the
transactions contemplated by this Agreement and such Participant has the
ability to bear the economic risks of the investment in the Bridge Notes or the
Units, as the case may be, being purchased hereunder for an indefinite period
of time. Such Participant further acknowledges that he, she or it, as the case
may be, has received copies of Aurora SEC Filings and has had the opportunity
to ask questions of, and receive answers from, officers of Aurora with respect
to the business and financial condition of Aurora and the terms and conditions
of the offering of the Bridge Notes or the Units, as the case may be, and to
obtain additional information necessary to verify such information or can
acquire it without unreasonable effort or expense.
(d) Such Participant has such knowledge and experience in
financial and business matters that such Participant is capable of evaluating
the merits and risks of its investment in the Bridge Notes or the Units, as the
case may be. Such Participant further represents that such Participant that is
a limited partnership has not been formed solely for the purpose of purchasing
the Bridge Notes or the Units, as the case may be.
(e) If such Participant is a limited partnership, such
Participant represents that it has been organized and is existing as a limited
partnership under the laws of the State of Delaware.
11
15
ARTICLE IV.
CONDITIONS PRECEDENT
SECTION 4.01 Conditions Precedent to the Obligations of the
Participants. The obligations of the Participants hereunder are, at their
option, subject to the satisfaction, on or before the Closing Date, and, in the
case of paragraphs (d) and (e) below, the obligations of WCAS VII on each
Drawdown Date, of the following conditions:
(a) Consummation of Merger. The Merger shall have become
effective under the General Corporation Law of the State of Delaware.
(b) Certificate of Designations. The Certificate of
Amendment and the Certificate of Designations shall have become legally
effective with the Secretary of State of the State of Delaware.
(c) New Senior Loan. Aurora shall have obtained at least
$17,000,000 of proceeds from the New Senior Loan on terms reasonably acceptable
to WCAS VII, as determined in good faith by WCAS VII.
(d) Opinion of Counsel. The Participants shall have
received from Xxxxxx & Xxxx L.L.P., counsel for Aurora, an opinion dated the
Closing Date, in the form annexed hereto as Exhibit E.
(e) No Order. No governmental entity (including a federal
or state court) of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which materially restricts, prevents or prohibits
consummation of any transaction contemplated by this Agreement; provided,
however, that the parties shall use their reasonable best efforts to cause any
such decree, judgment, injunction or other order to be vacated or lifted.
SECTION 4.02 Condition Precedent to the Obligations of
Aurora. The obligations of Aurora hereunder on the Closing Date are subject to
the due filing with the Secretary of State of the State of Delaware and the
legal effectiveness of the Certificate of Incorporation and the Certificate of
Designations on or prior to the Closing Date.
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16
ARTICLE V.
TERMINATION AND ABANDONMENT
SECTION 5.01 Termination and Abandonment. This Agreement may
be terminated and the transactions contemplated hereby may be abandoned by a
majority in interest of the Participants (i) if the Effective Time of the
Merger shall not have occurred on or prior to June 30, 1998 and (ii) if the
Merger Agreement has terminated.
SECTION 5.02 Effect of Termination. In the event of
termination of this Agreement pursuant to this Article V, this Agreement shall
forthwith become void, without liability on the part of any party hereto,
except that nothing herein shall relieve any party from liability for any
breach of this Agreement.
ARTICLE VI.
MISCELLANEOUS
SECTION 6.01 Expenses, Etc. Aurora shall reimburse the
Participants or pay on their behalf any reasonable fees and expenses incurred
by them or any of them in connection with the negotiation and preparation of
this Agreement and the related documents contemplated hereby. For purposes
hereof, the "fees and expenses incurred by the Participants" shall include,
without limitation, the fees, disbursements and expenses of counsel,
accountants, financial advisors and other experts retained by the Participants
in connection with this Agreement and the transactions contemplated hereby.
SECTION 6.02 Survival of Agreements. All covenants,
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement and the issuance, sale and delivery of
the Aurora Preferred Shares pursuant hereto, notwithstanding any investigation
made at any time by or on behalf of any party hereto. All statements contained
in any certificate or other instrument delivered by Aurora hereunder shall be
deemed to constitute representations and warranties made by Aurora.
SECTION 6.03 Parties in Interest. All covenants and
agreements contained in this Agreement by or on behalf of any party hereto
shall bind and inure to the benefit of the respective successors and assigns of
such party hereto whether so expressed or not.
SECTION 6.04 Notices. Any notice or other communications
required or permitted hereunder shall be deemed to be
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17
sufficient if contained in a written instrument delivered in person or duly
sent by first class certified mail, postage prepaid, by nationally recognized
overnight courier, or by telecopy addressed to such party at the address or
telecopy number set forth below or such other address or telecopy number as may
hereafter be designated in writing by the addressee to the addressor listing
all parties:
if to Aurora, to:
Aurora Electronics, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Telecopy Number: (000) 000-0000
Attention: President
with a copy to:
Xxxxxx & Xxxx, L.L.P.
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx, Esq.
Xxxxxxx X. Xxxxxx, Esq.
if to any Participant, to:
Welsh, Carson, Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopy Number: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
Xxxxxx X. XxXxxxxxx
with a copy to:
Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Xxxxx X. Xxxxxxx, Esq.
or, in any case, at such other address or addresses as shall have been
furnished in writing by such party to the other parties hereto. All such
notices, requests, consents and other communications shall be deemed to have
been received (a) in the case of personal delivery, on the date of such
delivery, (b) in the case of mailing, on the fifth business day following the
date of such mailing, (c) in the case of delivery by overnight courier, on the
business day following the date of delivery to such courier, and (d) in the
case of telecopy, when received.
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18
SECTION 6.05 Entire Agreement; Assignment. This Agreement
(including the Schedules and Exhibits hereto) and the Registration Rights
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and may not be amended or modified nor any provisions
waived except in a writing signed by Aurora and the Participants. This
Agreement shall not be assigned by operation of law of otherwise without the
consent of the other parties hereto.
SECTION 6.06 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 6.07 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
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19
IN WITNESS WHEREOF, Aurora and the Participants have executed
this Agreement as of the day and year first above written.
AURORA ELECTRONICS, INC.
By /s/ XXX X. XXXXXX
---------------------------------
WELSH, CARSON, XXXXXXXX & XXXXX VII, L.P.
By WCAS VII Partners, L.P.,
General Partner
By /s/ XXXXX XXXXXXXX
--------------------------------
General Partner
WCAS CAPITAL PARTNERS II, L.P.
By WCAS XX XX Partners,
General Partner
By /s/ XXXXX XXXXXXXX
--------------------------------
General Partner
WCAS INFORMATION PARTNERS, L.P.
By WCAS Info Partners,
General Partner
By /s/ XXXXX XXXXXXXX
--------------------------------------
Attorney-in-fact
Xxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxx
Xxxxxxx X. xx Xxxxxx
Xxxxxx X. XxXxxxxxx
Xxxxx X. Xxxxxx
Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxx
Xxxx X. Xxxxxxx
Xxxxxxx X. Xxxxx
Xxxxx X. XxxXxxxx
Xxxxxxx X. Xxxxx
By /s/ XXXXX XXXXXXXX
----------------------------------------
Xxxxx X. XxxXxxxx
Individually and
as Attorney-in-Fact
20
Annex I
-------
===============================================================================================================================
MAXIMUM
PRINCIPAL AMOUNT OF MAXIMUM NUMBER OF AGGREGATE
MAXIMUM AURORA SENIOR SHARES OF AURORA PURCHASE PRICE PRINCIPAL AMOUNT
NAME OF PURCHASER NUMBER OF UNITS SUBORDINATED NOTES PREFERRED STOCK OF UNITS OF DEMAND NOTE
-------------------------------------------------------------------------------------------------------------------------------
Welsh, Carson, Xxxxxxxx & 14,253.2 $14,253,200 171,040 $31,357,200 $2,660,600
Xxxxx VII, L.P.
-------------------------------------------------------------------------------------------------------------------------------
WCAS Information Partners, 194.5 194,500 2,334 427,900 36,300
L.P.
-------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx 77.7 77,700 932 170,900 14,500
-------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 116.8 116,800 1,401 256,900 21,800
-------------------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxxxx 116.8 116,800 1,401 256,900 21,800
-------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx 58.4 58,400 701 128,500 10,900
-------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxx 39.1 39,100 469 86,000 7,300
-------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. XxXxxxxxx 68.0 68,000 816 149,600 12,700
-------------------------------------------------------------------------------------------------------------------------------
Xxxxx XxxXxxxx 3.7 3,700 45 8,200 700
-------------------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxx 19.3 19,300 231 42,400 3,600
-------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxxx 31.1 31,100 373 68,400 5,800
-------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. xx Xxxxxx 15.5 15,500 186 34,100 2,900
-------------------------------------------------------------------------------------------------------------------------------
Xxxx X. Xxxxxxx 5.9 5,900 71 13,000
-------------------------------------------------------------------------------------------------------------------------------
TOTAL 15,000.0 $15,000,000 180,000 $33,000,000 $2,800,000
===============================================================================================================================
21
EXHIBIT A-1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THAT ACT
OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
AURORA ELECTRONICS, INC.
10% Senior Subordinated Bridge Note
$[ ] , 1998
AURORA ELECTRONICS, INC., a Delaware corporation (hereinafter
called the "Company"), for value received, hereby promises to pay to [WELSH,
XXXXXX XXXXXXXX & XXXXX VII, L.P. ("WCAS VII")] or registered assigns, the
principal sum of [ ] DOLLARS ($[ ]) ON ANY DATE ON OR AFTER
JULY 1, 1998 ON DEMAND (subject to applicable restrictions set forth in Section
14 hereof), and to pay interest (computed on the basis of a 360-day year
consisting of twelve 30-day months) from the date hereof on the unpaid
principal amount hereof at the rate of 10% per annum semi-annually in arrears
on June 30 and December 31 of each year (each said day being an "Interest
Payment Date"), commencing on June 30, 1998, until the principal amount hereof
shall have become due and payable, whether on demand or by acceleration or
otherwise, and thereafter at the rate of 12% per annum on any overdue principal
amount and (to the extent permitted by applicable law) on any overdue interest
until paid.
All payments of principal and interest on this Note shall be
in such coin or currency of the United States of America as at the time of
payment shall be legal tender for payment of public and private debts.
If any payment on this Note is due on a day which is not a
Business Day, it shall be due on the next succeeding Business Day. For
purposes of this Note, "Business Day" shall mean any day other than a Saturday,
Sunday or a legal holiday or day on which banks are authorized or required to
be closed in Chicago or New York.
1. The Note. This Note is issued pursuant to and is subject
to the terms and provisions of the Securities Purchase and Exchange Agreement
dated as of January 30, 1998 (the "Purchase Agreement"), among the Company,
WCAS VII, WCAS Capital Partners II, L.P.("WCAS XX XX") and the several
purchasers named on Schedule I thereto and the terms of this Note include those
stated in the Purchase Agreement. As used herein, the term "Note" or "Notes"
includes this 10% Senior Subordinated Bridge Note of the Company,
22
any additional 10% Senior Subordinated Bridge Note or Notes issued pursuant to
the Purchase Agreement and any 10% Senior Subordinated Bridge Note or Notes
subsequently issued upon exchange or transfer hereof or thereof.
2. Transfer, Etc. of Notes. The Company shall keep at its
office or agency maintained as provided in paragraph (a) of Section 8 a
register in which the Company shall provide for the registration of this Note
and for the registration of transfer and exchange of this Note. The holder of
this Note may, at its option, and either in person or by its duly authorized
attorney, surrender the same for registration of transfer or exchange at the
office or agency of the Company maintained as provided in Section 8 and,
without expense to such holder (except for taxes or governmental charges
imposed in connection therewith), receive in exchange therefor a Note or Notes
each in such denomination or denominations (in integral multiples of $100,000)
as such holder may request, dated as of the date to which interest has been
paid on the Note or Notes so surrendered for transfer or exchange, for the same
aggregate principal amount as the then unpaid principal amount of the Note or
Notes so surrendered for transfer or exchange, and registered in the name of
such person or persons as may be designated by such holder. Every Note
presented or surrendered for registration of transfer or exchange shall be duly
endorsed, or shall be accompanied by a written instrument of transfer,
satisfactory in form to the Company, duly executed by the holder of such Note
or its attorney duly authorized in writing. Every Note so made and delivered
in exchange for such Note shall in all other respects be in the same form and
have the same terms as such Note. No transfer or exchange of any Note shall be
valid (x) unless made in the foregoing manner at such office or agency and (y)
unless registered under the Securities Act of 1933, as amended, or any
applicable state securities laws or unless an exemption from such registration
is available.
3. Loss, Theft, Destruction or Mutilation of Note. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Note, and, in the case of any such loss, theft or
destruction, upon receipt of an affidavit of loss and an indemnity reasonably
acceptable in form and substance to the Company from the holder thereof, or, in
the case of any such mutilation, upon surrender and cancellation of this Note,
the Company will make and deliver, in lieu of this Note, a new Note of like
tenor and unpaid principal amount and dated as of the date to which interest
has been paid on this Note.
4. Persons Deemed Owners; Holders. The Company may deem and
treat the person in whose name this Note is registered as the owner and holder
of this Note for the purpose of receiving payment of principal of and interest
on this Note and for all other purposes whatsoever, whether or not this Note
shall be overdue. With respect to any Note at any time outstanding, the term
2
23
"holder," as used herein, shall be deemed to mean the person in whose name such
Note is registered as aforesaid at such time.
5. Prepayments.
(a) Optional Prepayment. Subject to any applicable
restrictions contained in the Credit Agreement (as hereinafter defined), upon
notice given as provided in Section 5(b), the Company may, at its option,
prepay this Note, without premium or penalty, as a whole at any time or in part
from time to time in principal amounts which shall be integral multiples of
$100,000, together with any accrued and unpaid interest thereon through the
date of such prepayment.
(b) Notice of Prepayment. The Company shall give written
notice of any prepayment of this Note or any portion hereof pursuant to Section
5(a) not less than 20 nor more than 60 days prior to the date fixed for such
prepayment. Such notice of prepayment and all other notices to be given to the
holder of this Note shall be given by registered or certified mail to the
person in whose name this Note is registered at its address designated on the
register maintained by the Company on the date of mailing such notice of
prepayment or other notice. Upon notice of prepayment being given as
aforesaid, the Company covenants and agrees that it will prepay, on the date
therein fixed for prepayment, this Note or the portion hereof, as the case may
be, so called for prepayment, at the prepayment price determined in accordance
with Section 5(a) hereof. A prepayment of less than all of the outstanding
principal amount of this Note shall not relieve the Company of its obligation
to make scheduled payments of interest payable in respect of the principal
remaining outstanding on the Interest Payment Dates.
(c) Allocation of All Payments. In the event of any partial
payment of less than all of the interest then due on the Notes then outstanding
or any prepayment, purchase, redemption or retirement of less than all of the
outstanding Notes, the Company will allocate the amount of interest so to be
paid and the principal amount so to be prepaid, purchased, redeemed or retired
to each Note in proportion, as nearly as may be, to the aggregate principal
amount of all Notes then outstanding.
(d) Interest After Date Fixed for Prepayment. If this Note
or a portion hereof is called for prepayment as herein provided, this Note or
such portion shall cease to bear interest on and after the date fixed for such
prepayment unless, upon presentation for such purpose, the Company shall fail
to pay this Note or such portion, as the case may be, in which event this Note
or such portion, as the case may be, and, so far as may be lawful, any overdue
installment of interest, shall bear interest on and after the date fixed for
such prepayment and until paid at the rate per annum provided herein.
3
24
(e) Surrender of Note; Notation Thereon. Upon any prepayment
of a portion of the principal amount of this Note, the holder hereof, at its
option, may require the Company to execute and deliver at the expense of the
Company (other than for transfer taxes, if any), upon surrender of this Note, a
new Note registered in the name of such person or persons as may be designated
by such holder for the principal amount of this Note then remaining unpaid,
dated as of the date to which the interest has been paid on the principal
amount of this Note then remaining unpaid, or may present this Note to the
Company for notation hereon of the payment of the portion of the principal
amount of this Note so prepaid.
6. Offer to Repurchase Upon a Change of Control. Subject to
any applicable restrictions in the Credit Agreement with respect to paragraph
(a) below:
(a) Upon the occurrence of a Change of Control (as
hereinafter defined), the holder of this Note shall have the right, at such
holder's option, to require the Company to repurchase all or any part of such
holder's Note in amounts which shall be in multiples of $100,000 (pursuant to
the offer described below) of the Notes outstanding, in any such event, at a
purchase price equal to 101% of the principal amount thereof so to be
repurchased, plus accrued and unpaid interest, if any, to the date of purchase
(a "Change of Control Payment"). Within 10 Business Days after the Company
knows, or reasonably should know, of the occurrence of any Change of Control,
the Company shall make an irrevocable, unconditional offer (except that such
offer may be conditioned upon the closing of the transaction constituting the
Change of Control) (a "Change of Control Offer") to all holders of the Notes to
purchase all of the Notes for cash in an amount equal to the Change of Control
Payment by sending written notice (the "Change of Control Notice") of such
Change of Control Offer to each holder by registered or certified mail to the
person in whose name the Note is registered at its address maintained by the
Company on the date of the mailing of such notice. The Change of Control
Notice shall contain all instructions and materials required by applicable law
and shall contain or make available to the holder other information material to
such holder's decision to tender this Note pursuant to the Change of Control
Offer. The Change of Control Notice, which shall govern the terms of the
Change of Control Offer, shall state:
(i) that the Change of Control Offer is being made pursuant
to this Section 6, and that all Notes validly tendered will be accepted
for payment;
(ii) the Change of Control Payment (including the amount of
accrued and unpaid interest) and the purchase date, which will be no
later than 30 days from the date such notice is mailed (the "Change of
Control Payment Date");
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25
(iii) that any Note not validly tendered will continue to
accrue interest;
(iv) that, unless the Company defaults in the payment of the
Change of Control Payment, any Note accepted for payment pursuant to
the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date;
(v) that holders electing to have a Note, or portion thereof,
purchased pursuant to a Change of Control Offer will be required to
surrender the Note to the Company at the address specified in the
notice not later than the close of business on the Business Day prior
to the Change of Control Payment Date;
(vi) that holders will be entitled to withdraw their election
if the Company receives, not later than the close of business on the
second Business Day prior to the Change of Control Payment Date, a
telegram, facsimile transmission or letter setting forth the name of
the holder, the principal amount of the Note delivered for purchase
and a statement that such holder is withdrawing its election to have
such principal amount of Note purchased; and
(vii) that holders whose Notes are being purchased only in
part will be issued a new Note equal in principal amount to the
unpurchased portion of the Note surrendered, which unpurchased portion
must be equal to $100,000 in principal amount or an integral multiple
thereof.
On or before the Change of Control Payment Date, the Company
shall (i) accept for payment the Notes or portions thereof validly tendered
pursuant to the Change of Control Offer prior to the close of business on the
Change of Control Payment Date, (ii) promptly mail to the holders of Notes so
accepted payment in an amount equal to the Change of Control Payment (including
accrued and unpaid interest) for such Notes, and the Company shall promptly
mail or deliver to such holders a new Note equal in principal amount to any
unpurchased portion of the Note surrendered; provided, that each such new Note
will be in a principal amount of $100,000 or an integral multiple thereof. Any
Notes not so accepted shall be promptly mailed or delivered by the Company to
the holder thereof.
(b) In the event of a Change of Control, the Company will
promptly but in no event later than 30 days after the Change of Control, in
good faith, (i) obtain any required consent of the holders of any Senior
Indebtedness (as defined herein) to permit the Change of Control Offer and the
Change of Control Payment contemplated by this Section 6, or (ii) repay some or
all of such Senior Indebtedness to the extent necessary (including, if
necessary, payment in full of such Senior Indebtedness and payment
5
26
of any prepayment premiums, fees, expenses or penalties) to permit the Change
of Control Offer and the Change of Control Payment contemplated hereby without
such consent. Failure to comply with the foregoing shall not relieve the
Company from its obligations pursuant to paragraph (a) above.
(c) For purposes of this Note "Change of Control" means (i)
the sale, lease or transfer, whether direct or indirect, of all or
substantially all of the assets of the Company and its subsidiaries, taken as a
whole, in one transaction or a series of related transactions, to any "person"
or "group" (other than the WCAS Group), (ii) the liquidation or dissolution of
the Company or the adoption of a plan of liquidation or dissolution of the
Company, (iii) the acquisition of "beneficial ownership" by any "person" or
"group" (other than the WCAS Group) of voting stock of the Company representing
more than 50% of the voting power of all outstanding shares of such voting
stock, whether by way of merger or consolidation or otherwise, or (iv) during
any period of two consecutive years, the failure of those individuals who at
the beginning of such period constituted the Company's Board of Directors
(together with any new directors whose election or appointment by such Board or
whose nomination for election or appointment by the shareholders of the Company
was approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) to constitute a majority of
the Company's Board of Directors then in office; provided, however, that in no
event shall a foreclosure on any collateral pledged by the Company in respect
of obligations arising under or in connection with the Credit Agreement
constitute a Change of Control.
For purposes of this Section 6 and Section 7, (i) the terms
"person" and "group" shall have the meaning set forth in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether
or not applicable, (ii) the term "beneficial owner" shall have the meaning set
forth in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not
applicable, except that a person shall be deemed to have "beneficial ownership"
of all shares that any such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time or upon the
occurrence of certain events, (iii) any "person" or "group" will be deemed to
beneficially own any voting stock of the Company so long as such person or
group beneficially owns, directly or indirectly, in the aggregate a majority of
the voting stock of a registered holder of the voting stock of the Company, and
(iv) the term "WCAS Group" shall mean WCAS VII, WCAS XX XX, any general
partners thereof and any other investment limited partnerships or other
investment entities under common control therewith.
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7. Special Mandatory Prepayments.
(a) Subject to any applicable restrictions contained in the
Credit Agreement, within 5 days after the consummation of:
(i) any sale, transfer, lease, sale and leaseback or other
disposition by the Company to any person of all or any part of its
property or assets, in any case in a single transaction or a series of
related transactions (other than any of the foregoing for fair value
of property that (x) is of inventory in the ordinary course of
business or (y) is of worn-out or obsolete assets); or
(ii) the issuance (other than by dividend) of any capital
stock or other ownership interest of the Company pursuant to offerings
registered under the Securities Act of 1933, as amended (the
"Securities Act");
the Company shall be required to prepay the indebtedness outstanding under the
Notes in an amount equal to 100% of the gross cash proceeds received by the
Company from such transaction less all legal expenses, customary commissions
and other fees and expenses incurred and all federal, state, local and foreign
taxes assessed in connection therewith.
(b) Subject to any applicable restrictions contained in the
Credit Agreement, if there shall exist any Excess Cash Flow (as defined in
paragraph (c) hereof) for any fiscal year, a mandatory prepayment (an "Excess
Cash Flow Prepayment") of the indebtedness outstanding under the Notes shall be
made on the date (the "Excess Cash Flow Prepayment Date") which is 105 days
after the end of such fiscal year, in an amount equal to one hundred percent
(100%) of such Excess Cash Flow.
(c) "Excess Cash Flow" means, for any fiscal period of the
Company, an amount which, on a combined basis in conformity with GAAP, is equal
to:
(i) the excess of
the sum (without duplication) of the following amounts:
(A) net income for such fiscal period;
(B) expenses for such fiscal period for depreciation,
amortization and other similar non-cash charges, to the extent
that the same are deducted from net revenues in determining
net income for such fiscal period;
(C) the difference between (1) the amount of taxes
imposed on the Company deducted from net revenues to determine
net income for such fiscal period and (2) the
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amount of taxes actually paid by the Company during such fiscal
period; and
(D) the difference between (1) any extraordinary or
non-recurring items of expense deducted from net revenues to
determine net income for such fiscal period and (2) the
aggregate amount of all cash payments made by the Company
during such period on account of extraordinary or
non-recurring items of expense, whether or not accrued in such
period;
over
the sum (without duplication) of the following
amounts:
(1) the aggregate amount during such fiscal period of
scheduled payments of principal on (x) the Notes, (y) the
indebtedness under the Credit Agreement and (z) any
indebtedness permitted under the Credit Agreement;
(2) the amount of actual payments by the Company in cash
during such fiscal period for capital expenditures; and
(3) the difference between (1) any extraordinary or
non-recurring items of income added to net revenues to
determine net income and (2) the aggregate amount of all cash
receipts received by the Company during such period on account
of extraordinary or non-recurring items of income, whether or
not accrued in such period;
(ii) plus (in the case of a decrease) or minus (in the case of an
increase) the change in the amount of working capital as at the end of
such fiscal period as compared with the amount of working capital as
at the end of the immediately preceding fiscal period.
Each of the foregoing items shall be computed in accordance with GAAP
consistently applied.
8. Covenants Relating to the Notes. Unless approved by its
Board of Directors including the affirmative vote of a director designated by
WCAS VII, the Company covenants and agrees that so long as the Notes shall be
outstanding and, in the case of paragraphs (k) through (n) below, so long as
five million dollars ($5,000,000) of aggregate principal amount of the Notes is
outstanding:
(a) Maintenance of Office. The Company will maintain an
office or agency in such place in the United States of America as the Company
may designate in writing to the registered holder of
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this Note, where this Note may be presented for registration of transfer and
for exchange as herein provided, where notices and demands to or upon the
Company in respect of this Note may be served and where this Note may be
presented for payment. Until the Company otherwise notifies the holder hereof,
said office shall be the principal office of the Company located at 0000 Xxxxxx
Xxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000.
(b) Payment of Taxes. The Company will promptly pay and
discharge or cause to be paid and discharged, before the same shall become in
default, all material lawful taxes and assessments imposed upon the Company or
any of its subsidiaries or upon the income and profits of the Company or any of
its subsidiaries, or upon any property, real, personal or mixed, belonging to
the Company or any of its subsidiaries, or upon any part thereof by the United
States or any State thereof, as well as all material lawful claims for labor,
materials and supplies which, if unpaid, would become a lien or charge upon
such property or any part thereof; provided, however, that neither the Company
nor any of its subsidiaries shall be required to pay and discharge or to cause
to be paid and discharged any such tax, assessment, charge, levy or claim so
long as both (x) the Company has established adequate reserves for such tax,
assessment, charge, levy or claim and (y)(i) the Company or a subsidiary shall
be contesting the validity thereof in good faith by appropriate proceedings or
(ii) the Company shall, in its good faith judgment, deem the validity thereof
to be questionable and the party to whom such tax, assessment, charge, levy or
claim is allegedly owed shall not have made written demand for the payment
thereof.
(c) Corporate Existence. The Company will do or cause to
be done all things necessary and lawful to preserve and keep in full force and
effect (i) its corporate existence and the corporate existence of each of its
subsidiaries and (ii) the material rights and franchises of the Company and
each of its subsidiaries under the laws of the United States or any state
thereof, or, in the case of subsidiaries organized and existing outside the
United States, under the laws of the applicable jurisdiction; provided,
however, that nothing in this paragraph (c) shall prevent the abandonment or
termination of any rights or franchises of the Company, or the liquidation or
dissolution of, or a sale, transfer or disposition (whether through merger,
consolidation, sale or otherwise) of all or any substantial part of the
property and assets of, any subsidiary or the abandonment or termination of the
corporate existence, rights and franchises of any subsidiary if such
abandonment, termination, liquidation, dissolution, sale, transfer or
disposition is, in the good faith business judgment of the Company, in the best
interests of the Company and not disadvantageous to the holder of this Note.
(d) Maintenance of Property. The Company will at all times
maintain and keep, or cause to be maintained and kept, in
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good repair, working order and condition (reasonable wear and tear excepted)
all significant properties of the Company and its subsidiaries used in the
conduct of the Business, and will from time to time make or cause to be made
all needful and proper repairs, renewals, replacements, betterments and
improvements thereto, so that the Business may be conducted at all times in the
ordinary course consistent with past practice.
(e) Insurance. The Company will, and will cause each of its
subsidiaries to, (i) keep adequately insured, by financially sound and
reputable insurers, all property of a character usually insured by corporations
engaged in the same or a similar business similarly situated against loss or
damage of the kinds customarily insured against by such corporations and (ii)
carry, with financially sound and reputable insurers, such other insurance
(including without limitation liability insurance) in such amounts as are
available at reasonable expense and to the extent believed advisable in the
good faith business judgment of the Company.
(f) Keeping of Books. The Company will at all times keep,
and cause each of its subsidiaries to keep, proper books of record and account
in which proper entries will be made of its transactions in accordance with
generally accepted accounting principles consistently applied.
(g) Transactions with Affiliates. The Company shall not
enter into, or permit any of its subsidiaries to enter into, any transaction
with any of its or any subsidiary's officers, directors, employees or any
person related by blood or marriage to any such person or any entity in which
any such person owns any beneficial interest, except for (i) normal employment
arrangements, benefit programs and employee incentive option programs on
reasonable terms, (ii) any transaction approved by the Board of Directors of
the Company in accordance with the provisions of Section 144 of the Delaware
General Corporation Law, or otherwise permitted by such Section, (iii) customer
transactions in the ordinary course of business and on arm's length terms and
(iv) the transactions contemplated by the Purchase Agreement.
(h) Notice of Certain Events. The Company shall,
immediately after it becomes aware of the occurrence of (i) any Event of
Default (as hereinafter defined) or any event which, upon notice or lapse of
time or both, would constitute such an Event of Default, or (ii) any action,
suit or proceeding at law or in equity or by or before any governmental
instrumentality or agency which, if adversely determined, would materially
impair the right of the Company to carry on its business substantially as now
or then conducted, or would have a material adverse effect on the properties,
assets, financial condition, prospects, operating results or business of the
Company and its subsidiaries taken as a whole, give notice to the holder of
this Note, specifying the nature of such event.
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(i) Payment of Principal and Interest on the Note. The
Company will use its best efforts, subject to the provisions of applicable
credit arrangements (including the Credit Agreement), contractual obligations
of the Company and/or its subsidiaries and any applicable law restricting the
same, to provide funds from its subsidiaries to the Company, by dividend,
advance or otherwise, sufficient to permit payment by the Company of the
principal of and interest on this Note in accordance with its terms. Subject
to any applicable provisions in the Credit Agreement and documents executed and
delivered in connection therewith, the Company will not, and will not permit
any subsidiary to, directly or indirectly create or otherwise cause to exist
any encumbrance or restriction on the ability of any subsidiary to pay
dividends or make any other distributions to the Company or any wholly-owned
subsidiary of the Company in respect of its capital stock.
(j) Consolidation, Merger and Sale. The Company will not
consolidate or merge with or into, or sell or otherwise dispose of all or
substantially all of its property in one or more related transactions to, any
other corporation or other entity, unless:
(i) The Company is the surviving corporation or the
entity formed by or surviving any such consolidation or merger (if
other than the Company) or to which such sale or other disposition
shall have been made is a corporation organized or existing under the
laws of the United States of any state thereof or the District of
Columbia;
(ii) the surviving corporation or other entity (if other
than the Company) shall expressly and effectively assume in writing
the due and punctual payment of the principal of and interest on this
Note, according to its tenor, and the due and punctual performance and
observance of all the terms, covenants, agreements and conditions of
this Note to be performed or observed by the Company to the same
extent as if such surviving corporation had been the original maker of
this Note;
(iii) the Company or such other corporation or other entity
shall not otherwise be in default in the performance or observance of
any covenant, agreement or condition of this Note or the Purchase
Agreement; and
(iv) the holder of this Note shall have received, in connection
therewith, an opinion of counsel for the Company (or other counsel
satisfactory to the holder), in form and substance satisfactory to the
holder, to the effect that any such consolidation, merger, sale or
conveyance and any such assumption complies with the provisions of
this paragraph (j).
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Notwithstanding anything to the contrary herein, in no event shall a
foreclosure on any collateral pledged by the Company in respect of obligations
arising under or in connection with the Credit Agreement be deemed to
constitute a violation of the Company's obligations pursuant to this paragraph
(j).
(k) Limitation on Indebtedness and Disqualified Stock.
The Company will not, and will not permit any of its subsidiaries to, (i) incur
or permit to remain outstanding any indebtedness for money borrowed
("Indebtedness"), except (A) Senior Indebtedness (as defined in Section 14),
(B) Indebtedness existing on the date of original issuance of this Note, (C)
Indebtedness permitted to be incurred under the Credit Agreement as in effect
from time to time after the original issuance of this Note (other than
Indebtedness that is subordinate or junior in right of payment (to any extent)
to any Senior Indebtedness and senior or pari passu in right of payment (to any
extent) to the Notes), or (D) in the event that the Credit Agreement has
terminated, Indebtedness permitted to be incurred under any successor credit
agreement of the Company with respect to Senior Indebtedness, or if there
exists no such credit agreement, such Indebtedness as may be mutually agreed
upon by the Company and the holders of a majority of the aggregate principal
amount of the Notes then outstanding, or (ii) issue any capital stock
("Disqualified Stock") of the Company or any of its subsidiaries (other than
the Convertible Preferred Stock (as hereinafter defined)) which by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event, matures, or is
mandatorily redeemable, whether pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in whole or in
part, on or prior to December 31, 2005.
(l) Restricted Payments. The Company will not, and will not
permit any of its subsidiaries to: (i) declare or pay any dividends on, or make
any other distribution or payment on account of, or redeem, retire, purchase or
otherwise acquire, directly or indirectly, any shares of any class of stock of
the Company, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in
cash, property or in obligations of the Company or any of its subsidiaries,
except for (X) distributions of shares of the same class or of a different
class of stock pro rata to all holders of shares of a class of stock, (Y) the
payment of cash dividends on account of the Company's 7% Senior Cumulative
Convertible Preferred Stock, $.01 par value (the "Convertible Preferred
Stock"), or (Z) dividends, distributions or payments by any subsidiary to the
Company or to any wholly-owned subsidiary of the Company, or (ii), except as
permitted under the Credit Agreement, make any payments of principal of, or
retire, redeem, purchase or otherwise acquire any Indebtedness other than any
Senior Indebtedness or the Notes (such declarations, payments, purchases,
redemptions, retirements,
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acquisitions or distributions being herein called "Restricted Payments").
(m) Limitation on Liens. The Company shall not, and shall
not permit any of its subsidiaries to, directly or indirectly, create, incur,
assume or otherwise cause or suffer to exist any lien, pledge , charge,
security interest or encumbrance (collectively, "Liens") on any asset now owned
or hereafter acquired, or on any income or profits therefrom or assign or
convey any right to receive income therefrom, except for (i) Liens permitted
under the Credit Agreement, (ii) liens for current taxes not yet due, (iii)
landlord's liens, (iv) purchase money liens and (v) xxxxxxx'x, materialman's,
warehouseman's and similar liens arising by law or statute.
(n) Inspection of Property. The Company will permit the
holder hereof to visit and inspect any of the properties of the Company and any
other subsidiaries and their books and records and to discuss the affairs,
finances and accounts of any of such corporations with the principal officers
of the Company and such subsidiaries and their independent public accountants,
all at such reasonable times and as often as such holders may reasonably
request.
9. Modification by Holders; Waiver. The Company may, with the
written consent of the holders of not less than a majority in principal amount
of the Notes then outstanding, modify the terms and provisions of this Note or
the rights of the holders of this Note or the obligations of the Company
hereunder, and the observance by the Company of any term or provision of this
Note may be waived with the written consent of the holders of not less than a
majority in principal amount of the Notes then outstanding.
Any such modification or waiver shall apply equally to each
holder of the Notes and shall be binding upon them, upon each future holder of
any Note and upon the Company, whether or not such Note shall have been marked
to indicate such modification or waiver, but any Note issued thereafter shall
bear a notation referring to any such modification or waiver. Promptly after
obtaining the written consent of the holders as herein provided, the Company
shall transmit a copy of such modification or waiver to the holders of the
Notes at the time outstanding.
10. Events of Default. If any one or more of the following
events, herein called "Events of Default," shall occur (for any reason
whatsoever, and whether such occurrence shall, on the part of the Company or
any of its subsidiaries, be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of a court of competent jurisdiction or any order, rule or
regulation of any administrative or other governmental authority) and such
Event of Default shall be continuing:
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(i) default shall be made in the payment of the principal
of this Note when and as the same shall become due and payable,
whether on demand (to the extent demand is permitted to be made under
Section 14 hereof) or at a date fixed for prepayment or repurchase
(including default of any optional prepayment in accordance with the
requirements of Section 5, any Change of Control Payment in accordance
with the requirements of Section 6 or any special mandatory prepayment
in accordance with the requirements of Section 7, as the case may be)
or by acceleration or otherwise; or
(ii) default shall be made in the payment of any installment of
interest on this Note according to its terms when and as the same
shall become due and payable; or
(iii) default shall be made in the due observance or performance
of any covenant, condition or agreement on the part of the Company
contained herein in Section 8(j); or
(iv) default shall be made in the due observance or performance
of any other covenant, condition or agreement on the part of the
Company to be observed or performed pursuant to the terms hereof or of
the Purchase Agreement, and such default shall continue for 10 days
after written notice thereof, specifying such default and requesting
that the same be remedied; or
(v) any representation or warranty made by or on behalf of the
Company herein or in the Purchase Agreement shall prove to have been
false or incorrect in any material respect on the date on or as of
which made; or
(vi) the entry of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Company or any
of its subsidiaries in any involuntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar
laws, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Company or any of
its subsidiaries for any substantial part of any of their property or
ordering the winding-up or liquidation of any of their affairs and the
continuance of any such decree or order unstayed and in effect for a
period of 30 consecutive days; or
(vii) the commencement by the Company or any of its subsidiaries
of a voluntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or any other applicable federal or
state bankruptcy, insolvency or other similar laws, or the consent by
any of them to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other
similar official)
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35
of the Company or any of its subsidiaries for any substantial part of
any of their property, or the making by any of them of any general
assignment for the benefit of creditors, or the failure of the Company
or of any of its subsidiaries generally to pay its debts as such debts
become due, or the taking of corporate action by the Company or any of
its subsidiaries in furtherance of or which might reasonably be
expected to result in any of the foregoing; or
(viii) a default or an event of default as defined in any
instrument evidencing or under which the Company or any of its
subsidiaries has outstanding at the time any Indebtedness in excess of
$500,000 in aggregate principal amount shall occur and as a result
thereof the maturity of any such Indebtedness shall have been
accelerated so that the same shall have become due and payable prior
to the date on which the same would otherwise have become due and
payable and such acceleration shall not have been rescinded or
annulled within 20 days; or
(ix) final judgment (not reimbursed by insurance policies of the
Company or any of its subsidiaries) for the payment of money in excess
of $500,000 shall be rendered against the Company or any of its
subsidiaries and the same shall remain undischarged for a period of 30
days during which execution shall not be effectively stayed;
then the holders of at least 33-1/3% in aggregate principal amount of the Notes
at the time outstanding may, at their option, by a notice in writing to the
Company declare this Note to be, and this Note shall thereupon be and become
immediately due and payable together with interest accrued thereon, without
diligence, presentment, demand, protest or further notice of any kind, all of
which are expressly waived by the Company to the extent permitted by law.
At any time after any declaration of acceleration has been
made as provided in this Section 10, the holders of a majority in principal
amount of the Notes then outstanding may, by notice to the Company, rescind
such declaration and its consequences, provided, however, that no such
rescission shall extend to or affect any subsequent default or Event of Default
or impair any right consequent thereon.
Without limiting the foregoing, the Company hereby waives any
right to trial by jury in any legal proceeding related in any way to this Note
and agrees that any such proceeding may, if the holder so elects, be brought
and enforced in the Supreme Court of the State of New York for New York County
or the United States District Court for the Southern District of New York and
the Company hereby waives any objection to jurisdiction or venue in any such
proceeding commenced in such court. The Company further agrees that any
process required to be served on it for purposes of
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36
any such proceeding may be served on it, with the same effect as personal
service on it within the State of New York, by registered mail addressed to it
at its office or agency set forth in paragraph (a) of Section 8 for purposes of
notices hereunder.
11. Suits for Enforcement. Subject to the provisions of
Section 14 of this Note, in case any one or more of the Events of Default
specified in Section 10 of this Note shall happen and be continuing (subject to
any applicable cure period expressly set forth herein), the holder of this Note
may proceed to protect and enforce its rights by suit in equity, action at law
and/or by other appropriate proceeding, whether for the specific performance of
any covenant or agreement contained in this Note or in aid of the exercise of
any power granted in this Note, or may proceed to enforce the payment of this
Note or to enforce any other legal or equitable right of the holder of this
Note.
In case of any default under this Note, the Company will pay
to the holder hereof reasonable collection costs and reasonable attorneys'
fees, to the extent actually incurred.
12. Remedies Cumulative. No remedy herein conferred upon the
holder of this 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 given hereunder or now or hereafter existing at law or in equity
or by statute or otherwise.
13. Remedies Not Waived. No course of dealing between the
Company and the holder of this Note or any delay on the part of the holder
hereof in exercising any rights hereunder shall operate as a waiver of any
right of the holder of this Note.
14. Subordination. (a) Anything contained in this Note
to the contrary notwithstanding, the indebtedness evidenced by the Notes shall
be subordinate and junior, to the extent set forth in the following paragraphs
(A), (B), (C) and (D), to all Senior Indebtedness of the Company. "Senior
Indebtedness" shall mean the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on, and
all reasonable fees, reimbursement and indemnity obligations, and all other
obligations arising in connection with, any indebtedness for borrowed money of
the Company, contingent or otherwise, now outstanding or created, incurred,
issued, assumed or guaranteed in the future, for which, in the case of any
particular indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
indebtedness shall not be subordinate in right of payment to any other
indebtedness of the Company. Without limiting the generality of the foregoing,
Senior Indebtedness shall include all
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Obligations (under and as defined in the Credit Agreement); notwithstanding the
foregoing, Senior Indebtedness shall include only such Obligations until such
time as the same are paid in full in cash and all obligations to provide
financial accommodations under the Credit Agreement have terminated. For
purposes of this Note, "Credit Agreement" shall mean, collectively, (i) the
Credit Agreement, dated as of March 29, 1996, as amended or otherwise modified,
among the Company and other Guarantors named therein, the Lenders named therein
and The Chase Manhattan Bank N.A., as Agent (the "Agent"), and (ii) the senior
credit facility contemplated by Section 4.01(c) of the Purchase Agreement,
together with any agreement entered into in connection with the restatement,
renewal, extension, restructuring, refunding or refinancing of the obligations
under such credit agreements.
(A) In the event of any insolvency, bankruptcy,
liquidation, reorganization or other similar proceedings, or any
receivership proceedings in connection therewith, relative to the
Company or its creditors or its property, and in the event of any
proceedings for voluntary liquidation, dissolution or other winding up
of the Company, whether or not involving insolvency or bankruptcy
proceedings, then all Senior Indebtedness shall first be paid in full
in cash and all obligations to provide financial accommodations under
the Credit Agreement have terminated, before any payment, whether on
account of principal, interest or otherwise, is made upon the Notes.
(B) In any of the proceedings referred to in paragraph
(A) above, any payment or distribution of any kind or character,
whether in cash, property, stock or obligations which may be payable
or deliverable in respect of the Notes shall be paid or delivered
directly to the holders of Senior Indebtedness for application in
payment thereof, unless and until all Senior Indebtedness shall have
been paid in full in cash and all obligations to provide financial
accommodations under the Credit Agreement have terminated.
(C) No payment shall be made, directly or indirectly, on
account of the Notes (i) upon maturity of any Senior Indebtedness
obligation, by lapse of time, acceleration (unless waived), or
otherwise, unless and until all principal thereof and interest thereon
and all other obligations in respect thereof shall first be paid in
full in cash and all obligations to provide financial accommodations
under the Credit Agreement have terminated, or (ii) upon the happening
of any default in payment of any principal of, premium, if any, or
interest on or any other amounts payable in respect of Senior
Indebtedness when the same becomes due and payable whether at maturity
or at a date fixed for prepayment or by declaration or otherwise (a
"Senior Payment Default"), unless and until
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such Senior Payment Default shall have been cured or waived or shall
have ceased to exist.
(D) Upon the happening of an event of default with
respect to any Senior Indebtedness permitting (after notice or lapse
of time or both) one or more holders of such Senior Indebtedness (or,
in the case of the Credit Agreement, the Agent) to declare such Senior
Indebtedness due and payable prior to the date on which it is
otherwise due and payable (a "Nonmonetary Default"), upon the
occurrence of (i) receipt by the holders of the Notes of written
notice from the holders of said Senior Indebtedness (or, in the case
of the Credit Agreement, the Agent) of a Nonmonetary Default (any such
notice, a "Blockage Notice"), or (ii) if such Nonmone- tary Default
results from the acceleration of the Notes, the date of such
acceleration; then (x) the Company will not make, directly or
indirectly, to the holder of the Notes any payment of any kind of or
on account of all or any part of the Notes; (y) the holders of the
Notes will not accept from the Company any payment of any kind of or
on account of all or any part of the Notes and (z) the holders of the
Notes may not take, demand, receive, xxx for, accelerate or commence
any remedial proceedings with respect to any amount payable under the
Notes, unless and until in each case described in clauses (x), (y) and
(z) all such Senior Indebtedness shall have been paid in full in cash
and all obligations to provide financial accommodations under the
Credit Agreement have terminated; provided, however, that if such
Nonmonetary Default shall have occurred and be continuing for a period
(a "Blockage Period") commencing on the earlier of the date of receipt
of such Blockage Notice or the date of the acceleration of the Notes
and ending 179 days thereafter (it being understood that not more than
one Blockage Period may be commenced with respect to the Notes during
any period of 360 consecutive days), and during such Blockage Period
(i) such Nonmonetary Default shall not have been cured or waived, (ii)
the holder of such Senior Indebtedness (or, in the case of the Credit
Agreement, the Agent) shall not have made a demand for payment and
commenced an action, suit or other proceeding against the Company and
(iii) none of the events described in subsection (A) above shall have
occurred, then (to the extent not otherwise prohibited by subsections
(A), (B) or (C) above) the Company may, not less than 10 days after
receipt by the holders of such Senior Indebtedness or the Agent, as
the case may be, of written notice to such effect from the holders of
the Notes, make and the holders of the Notes may accept from the
Company all past due and current payments of any kind of or on account
of the Notes, and such holder may demand, receive, retain, xxx for or
otherwise seek enforcement or collection of all amounts payable on
account of principal of or interest on the Notes.
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(b) Subject to the payment in full in cash of all Senior
Indebtedness as aforesaid and the termination of all obligations to provide
financial accommodations under the Credit Agreement, the holders of the Notes
shall be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions of any kind or character, whether in cash,
property, stock or obligations, which may be payable or deliverable to the
holders of Senior Indebtedness, until the principal of, and interest on, the
Notes shall be paid in full in cash, and, as between the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the Notes, no
such payment or distribution made to the holders of Senior Indebtedness by
virtue of this Section 14 which otherwise would have been made to the holder of
the Notes shall be deemed a payment by the Company on account of the Senior
Indebtedness, it being understood that the provisions of this Section 14 are
and are intended solely for the purposes of defining the relative rights of the
holders of the Notes, on the one hand, and the holder of the Senior
Indebtedness, on the other hand. Subject to the rights, if any, under this
Section 14 of holders of Senior Indebtedness to receive cash, property, stock
or obligations otherwise payable or deliverable to the holders of the Notes,
nothing herein shall either impair, as between the Company and the holder of
the Notes, the obligation of the Company, which is unconditional and absolute,
to pay to the holder thereof the principal thereof and interest thereon in
accordance with its terms or prevent (except as otherwise specified therein)
the holders of the Notes from exercising all remedies otherwise permitted by
applicable law or hereunder upon default hereunder.
(c) If any payment or distribution of any character or any
security, whether in cash, securities or other property, shall be received by
any holders of the Notes in contravention of any of the terms hereof or before
all the Senior Indebtedness obligations have been paid in full in cash and all
obligations to provide financial accommodations under the Credit Agreement have
terminated, such payment or distribution or security shall be received in trust
for the benefit of, and shall be paid over or delivered and transferred to, the
holders of the Senior Indebtedness at the time outstanding in accordance with
the priorities then existing among such holders for application to the payment
of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all
such Senior Indebtedness in full in cash. In the event of the failure of any
such holder to endorse or assign any such payment, distribution or security,
each holder of any Senior Indebtedness is hereby irrevocably authorized to
endorse or assign the name.
(d) The rights under these subordination provisions of the
holders of any Senior Indebtedness as against any holders of the Notes shall
remain in full force and effect without regard to, and shall not be impaired or
affected by:
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(i) any act or failure to act on the part of the Company; or
(ii) any extension or indulgence in respect of any payment or
prepayment of any Senior Indebtedness or any part thereof or in
respect of any other amount payable to any holder of any Senior
Indebtedness; or
(iii) any amendment, modification or waiver of, or addition or
supplement to, or deletion from, or compromise, release, consent or
other action in respect of, any of the terms of any Senior
Indebtedness or any other agreement which may be made relating to any
Senior Indebtedness; or
(iv) any exercise or non-exercise by the holder of any Senior
Indebtedness of any right, power, privilege or remedy under or in
respect of such Senior Indebtedness or these subordination provisions
or any waiver of any such right, power, privilege or remedy or of any
default in respect of such Senior Indebtedness or these subordination
provisions or any receipt by the holder of any Senior Indebtedness of
any security, or any failure by such holder to perfect a security
interest in, or any release by such holder of, any security for the
payment of such Senior Indebtedness; or
(v) any merger or consolidation of the Company or any of its
subsidiaries into or with any other person, or any sale, lease or
transfer of any or all of the assets of the Company or any of its
subsidiaries to any other person; or
(vi) absence of any notice to, or knowledge by, any holder of
any claim hereunder of the existence or occurrence of any of the
matters or events set forth in the foregoing clauses (i) through (v);
or
(vii) any other circumstance.
(e) The holders of the Notes unconditionally waive (i) notice
of any of the matters referred to in Section 14(d); (ii) all notices which may
be required, whether by statute, rule of law or otherwise, to preserve intact
any rights of any holder of any Senior Indebtedness, including, without
limitation, any demand, presentment and protest, proof of notice of nonpayment
under any Senior Indebtedness or the Credit Agreement, and notice of any
failure on the part of the Company to perform and comply with any covenant,
agreement, term or condition of any Senior Indebtedness, (iii) any right to the
enforcement, assertion or exercise by any holder of any Senior Indebtedness of
any right, power, privilege or remedy conferred in such Senior Indebtedness or
otherwise, (iv) any requirements of diligence on the part of any holder of any
of the Senior Indebtedness, (v) any requirement on the part of any holder of
any Senior Indebtedness to mitigate damages resulting from any
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default under such Senior Indebtedness and (vi) any notice of any sale,
transfer or other disposition of any Senior Indebtedness by any holder thereof.
(f) The obligations of the holder under these subordination
provisions shall continue to be effective, or be reinstated, as the case may
be, if at any time any payment in respect of any Senior Indebtedness, or any
other payment to any holder of any Senior Indebtedness in its capacity as such,
is rescinded or must otherwise be restored or returned by the holder of such
Senior Indebtedness upon the occurrence of any proceeding referred to in
paragraph 14(a)(A) or upon or as a result of the appoint of a receiver,
intervenor or conservator of, or trustee or similar officer for, the Company or
any substantial part of its property or otherwise, all as though such payment
had not been made.
(g) Notwithstanding anything to the contrary herein, the
Company shall not at any time offer (and the holder hereof shall not at any
time accept) (i) any pledge of collateral or (ii) any guaranty by any parent or
subsidiary of the Company, in each case with respect to the obligations of the
Company under this Note.
15. Covenants Bind Successors and Assigns. All the covenants,
stipulations, promises and agreements in this Note contained by or on behalf of
the Company shall bind its successors and assigns, whether so expressed or not.
16. Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of New York.
17. Headings. The headings of the sections and paragraphs of
this Note are inserted for convenience only and do not constitute a part of
this Note.
18. Third Party Beneficiaries. The provisions of Section 14
are intended to be for the benefit of, and shall be enforceable directly by
each holder of, the Senior Indebtedness.
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IN WITNESS WHEREOF, Aurora Electronics, Inc. has caused this
Note to be signed in its corporate name by one of its officers thereunto duly
authorized and to be dated as of the day and year first above written.
AURORA ELECTRONICS, INC.
By:
--------------------------------
Name:
Title:
