<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
March 29, 1996
Aurora Electronics, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-9725 75-1539534
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(State or other (Commission (IRS employer
jurisdiction of file number) identification no.)
incorporation)
2030 Main Street, Suite 1120, Irvine, California 92714-7241
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(714) 660-1232
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
On March 29, 1996, Aurora Electronics, Inc. (the "Company") completed
its comprehensive plan to recapitalize (the "Recapitalization") the Company,
which included a tender offer for up to 6,500,000 shares of the Company's Common
Stock, $.03 par value (the "Common Stock"). The Company purchased in the tender
offer 4,268,334 shares of its Common Stock at $2.875 per share in cash. In
addition to the tender offer and in connection with the Recapitalization, on
March 29, 1996, the Company also (a) sold (i) 400,000 shares of Convertible
Preferred Stock, $.01 par value (the "Convertible Preferred Stock"), to Welsh,
Carson, Anderson & Stowe VII, L.P. ("WCAS VII") and certain other investors for
an aggregate purchase price of $40,000,000 (or $100 per share) and (ii) 607,211
shares of Common Stock, along with a $10,000,000 10% Senior Subordinated Note
due September 2001, to WCAS Capital Partners II, L.P. ("WCAS CP II") for an
aggregate purchase price of $10,000,000, and (b) established a new $35,000,000
senior credit facility with Chemical Bank, N.A. pursuant to a Credit Agreement
dated March 29, 1996. The proceeds from the Recapitalization were used to
provide financing for the tender offer, to repay in full the Company's existing
senior bank indebtedness of approximately $26,000,000 and to redeem its 9-1/4%
Senior Subordinated Notes of approximately $9,300,000.
WCAS VII and its affiliates purchased all but 14,000 shares of the
Convertible Preferred Stock in the Recapitalization. Jim C. Cowart, Chief
Executive Officer and Chairman of the Board of Directors, and Harvey B. Cash, a
director, each purchased 2,000 shares of Convertible Preferred Stock in the
Recapitalization, and an affiliate of Chemical Bank, N.A. purchased the
remaining 10,000 shares. The Convertible Preferred Stock is convertible into
Common Stock at the rate of $2.125 per share, which represents a 21% premium
over $1.75, the closing price of the Company's Common Stock on February 21,
1996, the date the Company entered into the Securities Purchase Agreement with
WCAS VII, WCAS CP II and the other investors in the Recapitalization (the
"Securities Purchase Agreement"). Accordingly, on an "as-converted" basis, each
share of Convertible Preferred Stock is currently convertible into approximately
47.06 shares of Common Stock.
The Convertible Preferred Stock votes on an "as-converted" basis with
the Common Stock, and votes as a class on any proposals which would (i) effect,
validate or permit (A) a sale, lease or transfer, whether direct or indirect, of
all or substantially all of the assets of the Company and its subsidiaries,
other than to WCAS VII, WCAS CP II or any of their general partners or (B) the
acquisition of beneficial ownership 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, consolidation or otherwise, other than by WCAS
VII, WCAS CP II or any of their general partners; (ii) amend or repeal the
dividend, voting, conversion, redemption or liquidation rights (collectively,
the "Rights") of the Convertible Preferred Stock; (iii) amend, alter or repeal
the Company's Restated Certificate of Incorporation or Bylaws; or (iv) (A)
create any class or series of stock ranking senior to or on a parity with the
Convertible Preferred Stock as to such Rights or (B) increase the authorized
number of shares of Convertible Preferred Stock or of any other class or series
of capital stock ranking senior to or on a parity with the Convertible Preferred
Stock as to such Rights.
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The number of shares of Common Stock into which the Convertible
Preferred Stock is convertible and the conversion price of the Convertible
Preferred Stock are subject to adjustment from time to time upon the occurrence
of certain changes with respect to the Common Stock, including (i) for certain
stock splits and combinations and stock dividends and (ii) on a weighted average
formula basis in the event of certain issuances of Common Stock (or securities
convertible or exchangeable for Common Stock), excluding shares issued pursuant
to employee stock options and previously issued convertible securities, at a
price per share less than the conversion price in effect at the time.
After giving effect to the Recapitalization transactions, including the
tender offer, and assuming conversion of the Convertible Preferred Stock, as of
March 29, 1996, the Company would have had 24,460,891 shares of Common Stock
outstanding, 17,496,470 of which is beneficially owned by WCAS VII and WCAS
Information Partners on an "as-converted" basis and 607,211 of which is
beneficially owned by WCAS CP II. In the aggregate, WCAS VII, WCAS Information
Partners, WCAS CP II and their affiliates beneficially own approximately 74% of
the Company's issued and outstanding Common Stock.
In connection with the Recapitalization and under the terms of the
Securities Purchase Agreement, the Company is required to nominate up to four
candidates for the Company's Board of Directors selected by WCAS VII, and the
number of directors on the Board will be restricted to no more than seven
directors. On March 29, 1996, Richard H. Stowe and Thomas E. McInerney, the
designees of WCAS VII, were appointed to the Company's Board of Directors,
thereby increasing the size of the Board of Directors to seven members. The
Company has also been advised by WCAS VII that, at this time, it intends to
nominate only Messrs. Stowe and McInerney for election to the Board of Directors
at the Company's next annual meeting of stockholders.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(C) EXHIBITS.
10.19 Securities Purchase Agreement among Aurora
Electronics, Inc., Welsh, Carson, Anderson & Stowe
VII, L.P., WCAS Capital Partners II, L.P. and the
Several Purchasers Named Therein, dated February 21,
1996, incorporated by reference from Exhibit (b)(2)
of the Company's Issuer Tender Offer Statement on
Schedule 13E-4, which was filed with the Securities
and Exchange Commission on February 23, 1996.
10.20 Aurora Electronics, Inc. Offer to Purchase for
Cash up to 6,500,000 Shares of Its Common Stock at
$2.875 Per Share, dated February 23, 1996,
incorporated by reference from Exhibit (a)(1) of the
Company's Issuer Tender Offer Statement on Schedule
13E-4, which was filed with the Securities and
Exchange Commission on February 23, 1996.
10.21 Credit Agreement among Aurora Electronics Group,
Inc., as Borrower, the Guarantors Named Therein, the
Lenders Named therein and Chemical Bank, N.A., as
Agent, dated March 29, 1996.
<PAGE> 4
10.22 $15,000,000 Tranche A Note between Aurora
Electronics Group, Inc., as Maker, and Chemical Bank,
N.A., as Lender, dated March 29, 1996.
10.23 $20,000,000 Tranche B Note between Aurora
Electronics Group, Inc., as Maker, and Chemical Bank,
N.A., as Lender, dated March 29, 1996.
10.24 Pledge Agreement among Aurora Electronics Group,
Inc., Aurora Electronics, Inc. and Chemical Bank,
N.A., dated March 29, 1996.
10.25 Security Agreement among Aurora Electronics Group,
Inc., Aurora Electronics, Inc. and Chemical Bank,
N.A., dated March 29, 1996.
10.26 Security Agreement and Mortgage -- Patents and
Trademarks among Aurora Electronics Group, Inc.,
Aurora Electronics, Inc. and Chemical Bank, N.A.,
dated March 29, 1996.
10.27 Assignment for Security (Patents) among Aurora
Electronics Group, Inc., as Assignor, and Chemical
Bank, as Assignee, dated March 29, 1996.
10.28 Assignment for Security (Patents) among Aurora
Electronics, Inc., as Assignor, and Chemical Bank, as
Assignee, dated March 29, 1996.
10.29 Assignment for Security (Trademarks) among Aurora
Electronics Group, Inc., as Assignor, and Chemical
Bank, as Assignee, dated March 29, 1996.
10.30 Assignment for Security (Trademarks) among Aurora
Electronics, Inc., as Assignor, and Chemical Bank, as
Assignee, dated March 29, 1996.
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AURORA ELECTRONICS, INC.
Date: April 15, 1996 By: /s/ Jim C. Cowart
----------------------
Jim C. Cowart
Chief Executive Officer
<PAGE> 6
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.19 Securities Purchase Agreement among Aurora Electronics, Inc.,
Welsh, Carson, Anderson & Stowe VII, L.P., WCAS Capital
Partners II, L.P. and the Several Purchasers Named Therein,
dated February 21, 1996, incorporated by reference from
Exhibit (b)(2) of the Company's Issuer Tender Offer Statement
on Schedule 13E-4, which was filed with the Securities and
Exchange Commission on February 23, 1996.
10.20 Aurora Electronics, Inc. Offer to Purchase for Cash up to
6,500,000 Shares of Its Common Stock at $2.875 Per Share,
dated February 23, 1996, incorporated by reference from
Exhibit (a)(1) of the Company's Issuer Tender Offer Statement
on Schedule 13E-4, which was filed with the Securities and
Exchange Commission on February 23, 1996.
10.21 Credit Agreement among Aurora Electronics Group, Inc., as
Borrower, the Guarantors Named Therein, the Lenders Named
therein and Chemical Bank, N.A., as Agent, dated March 29,
1996.
10.22 $15,000,000 Tranche A Note between Aurora Electronics Group,
Inc., as Maker, and Chemical Bank, N.A., as Lender, dated
March 29, 1996.
10.23 $20,000,000 Tranche B Note between Aurora Electronics Group,
Inc., as Maker, and Chemical Bank, N.A., as Lender, dated
March 29, 1996.
10.24 Pledge Agreement among Aurora Electronics Group, Inc., Aurora
Electronics, Inc. and Chemical Bank, N.A., dated March 29,
1996.
10.25 Security Agreement among Aurora Electronics Group, Inc.,
Aurora Electronics, Inc. and Chemical Bank, N.A., dated March
29, 1996.
10.26 Security Agreement and Mortgage -- Patents and Trademarks
among Aurora Electronics Group, Inc., Aurora Electronics, Inc.
and Chemical Bank, N.A., dated March 29, 1996.
10.27 Assignment for Security (Patents) among Aurora Electronics
Group, Inc., as Assignor, and Chemical Bank, as Assignee,
dated March 29, 1996.
10.28 Assignment for Security (Patents) among Aurora Electronics,
Inc., as Assignor, and Chemical Bank, as Assignee, dated March
29, 1996.
10.29 Assignment for Security (Trademarks) among Aurora Electronics
Group, Inc., as Assignor, and Chemical Bank, as Assignee,
dated March 29, 1996.
10.30 Assignment for Security (Trademarks) among Aurora Electronics,
Inc., as Assignor, and Chemical Bank, as Assignee, dated March
29, 1996.
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EXHIBIT 10.21
========================================
CREDIT AGREEMENT
Dated as of March 29, 1996
Among
AURORA ELECTRONICS GROUP, INC.,
as Borrower,
THE GUARANTORS NAMED HEREIN,
THE LENDERS NAMED HEREIN,
and
CHEMICAL BANK, AS AGENT
========================================
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TABLE OF CONTENTS
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I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
II. THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.01. Tranche A Commitments and Tranche B Commitments . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.02. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.03. Notice of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.04. Notes; Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.05. Interest on Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.06. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.07. Termination and Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.08. Interest on Overdue Amounts; Alternate Rate
of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.09. Prepayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.10. Reserve Requirements; Change in Circumstances. . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.11. Change in Legality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.12. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.13. Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.14. Sharing of Setoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.16. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 2.17. Issuance of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 2.18. Payment of Letters of Credit; Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 2.19. Agent's Actions with respect to Letters of Credit . . . . . . . . . . . . . . . . . . . . . 45
SECTION 2.20. Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
III. COLLATERAL SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 3.01. Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 3.02. Filing and Recording . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
IV. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.01. Organization, Legal Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.02. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.03. Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.04. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.05. Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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SECTION 4.06. Litigation; Compliance with Laws; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.07. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.08. Federal Reserve Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.09. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.10. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.11. No Material Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.12. Investment Company Act; Public Utility Holding
Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.13. Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.14. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.15. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 4.16. Title to Properties; Possession Under Leases;
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 4.17. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 4.18. Permits, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.19. Compliance with Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.20. No Change in Credit Criteria or Collection Policies . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.21. Securities Purchase Agreement; Tender Offer . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.22. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.23. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
V. CONDITIONS OF CREDIT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.01. All Credit Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.02. First Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
VI. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.01. Legal Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.02. Businesses and Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.03. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.04. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.05. Financial Statements, Reports, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.06. Litigation and Other Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 6.07. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 6.08. Maintaining Records; Access to Properties and
Inspections; Right to Audit . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 6.09. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 6.10. Fiscal Year-End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 6.11. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 6.12. Additional Grantors and Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 6.13. Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
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SECTION 6.14. Pay Obligations to Lenders and Perform Other
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 6.15. Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 6.16. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 6.17. Blocked Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
VII. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 7.01. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 7.02. Sale and Lease-Back Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 7.03. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 7.04. Dividends, Distributions and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 7.05. Consolidations, Mergers and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 7.06. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 7.07. Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 7.08. Debt Service Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 7.09. Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 7.09A. EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 7.10. Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 7.11. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 7.12. Consulting Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 7.13. Negative Pledges, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 7.14. Accounting Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 7.15. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 7.16. Sales of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 7.17. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 7.18. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 7.19. Prepayment or Modification of Indebtedness; Modification
of Charter Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
VIII. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
IX. AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
X. MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND OTHER COLLATERAL . . . . . . . . . . . . . . . . . . . 91
SECTION 10.01. Collection of Receivables; Management of Collateral . . . . . . . . . . . . . . . . . . . . 91
SECTION 10.02. Receivables Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 10.03. Status of Receivables and Other Collateral . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 10.04. Monthly Statement of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 10.05. Collateral Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
</TABLE>
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<TABLE>
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<S> <C> <C>
XI. GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
XII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 12.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 12.02. Survival of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 12.03. Successors and Assigns; Participations . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 12.04. Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 12.05. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 12.06. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 12.07. Payments on Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 12.08. Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 12.09. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
SECTION 12.10. Entire Agreement; Waiver of Jury Trial, etc . . . . . . . . . . . . . . . . . . . . 104
SECTION 12.11. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
SECTION 12.12. Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 12.13. Counterparts; Facsimile Signature . . . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 12.14. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
</TABLE>
EXHIBITS
EXHIBIT A Form of Tranche A Note
EXHIBIT B Form of Tranche B Note
EXHIBIT C Form of Opinion of Counsel
EXHIBIT D Form of Pledge Agreement
EXHIBIT E Form of Security Agreement
EXHIBIT F Form of Assignment and Acceptance
EXHIBIT G Form of Security Agreement - Patents and Trademarks
EXHIBIT H Form of Notice of Borrowing
EXHIBIT I Form of Blocked Account Agreement
SCHEDULES
SCHEDULE A Welsh, Carson Affiliates
SCHEDULE B Foreign Customers
SCHEDULE 2.01(a) Tranche A Commitments
SCHEDULE 2.01(b) Tranche B Commitments
SCHEDULE 2.02 Domestic Lending Offices
SCHEDULE 2.03 Eurodollar Lending Offices
SCHEDULE 2.20 Letter of Credit Fees
iv
<PAGE> 6
<TABLE>
<S> <C>
SCHEDULE 4.01 Qualified Jurisdictions
SCHEDULE 4.05 Material Adverse Change
SCHEDULE 4.06(a) Litigation
SCHEDULE 4.09 Taxes
SCHEDULE 4.15 Subsidiaries
SCHEDULE 4.16(d) Assets of Foreign Subsidiaries
SCHEDULE 4.19 Environmental Law Compliance
SCHEDULE 4.23 Bank Accounts
SCHEDULE 6.05(g) Inventory Designations/Borrowing Base Certificate
SCHEDULE 6.13 Hazardous Materials
SCHEDULE 7.01 Existing Liens
SCHEDULE 7.03 Existing Indebtedness
SCHEDULE 7.09A Projections
</TABLE>
v
<PAGE> 7
CREDIT AGREEMENT dated as of March 29, 1996, among AURORA
ELECTRONICS GROUP, INC., a California corporation (the
"Borrower"), the Guarantors named herein and signatories
hereto, the lenders named in Schedules 2.01(a) and 2.01(b)
annexed hereto (collectively, the "Lenders"), and CHEMICAL
BANK, as agent for the Lenders (in such capacity, the
"Agent").
The Borrower has applied to the Lenders for Loans (such term
and all other capitalized terms used in this paragraph having the respective
meanings ascribed to such terms above or hereinafter) up to an aggregate
principal amount of $35,000,000 in the form of (a) Tranche A Loans to the
Borrower at any time and from time to time prior to the Termination Date in an
aggregate principal amount not in excess of $15,000,000 at any time outstanding
and (b) Tranche B Loans to the Borrower at any time and from time to time prior
to the Termination Date in an aggregate principal amount not in excess of
$20,000,000 at any time outstanding, in each case as such amount may be reduced
in accordance with the provisions of this Agreement. The proceeds of the
Tranche A Loans shall be used for general working capital purposes. The
proceeds of the Tranche B Loans shall be used to (a) refinance existing
Indebtedness of the Borrower, (b) finance Permitted Acquisitions, (c) pay fees
and expenses related to this Agreement and the other Loan Documents and (d)
finance Permitted Distributions. The Grantors will provide Collateral in
accordance with the provisions of this Agreement and the Security Documents.
The Lenders are severally, and not jointly, willing to extend such Loans to the
Borrower subject to the terms and conditions hereinafter set forth.
Accordingly, the Borrower, the Guarantors, the Lenders and the Agent hereby
agree as follows:
I. DEFINITIONS
SECTION 1.01. Certain Defined Terms. For purposes hereof,
the following terms shall have the meanings specified below:
"Adjusted LIBO Rate" shall mean, with respect to any
Eurodollar Loan for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the product of (i) the
LIBO Rate in effect for such Interest Period and (ii) Statutory Reserves. For
purposes hereof, "Statutory Reserves" shall mean a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including, without limitation, any marginal, special, emergency, or
supplemental reserves) expressed as a decimal established by the Board and any
other banking authority to which any Lender is subject with respect to the
Adjusted LIBO Rate for Eurocurrency Liabilities (as defined in Regulation D).
Such reserve percentages shall include, without limitation, those imposed under
Regulation D.
<PAGE> 8
Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities and as
such shall be deemed to be subject to such reserve requirements without benefit
of or credit for proration, exceptions or offsets which may be available from
time to time to any Lender under Regulation D. Statutory Reserves shall be
adjusted automatically on and as of the effective date of any change in any
reserve percentage.
"Affiliate" of any person shall mean any other person which,
directly or indirectly, controls or is controlled by or is under common control
with such person and, without limiting the generality of the foregoing,
includes (i) any person which beneficially owns or holds 7 1/2% or more of any
class of voting securities of such person or 5% or more of the equity interest
in such person, (ii) any person of which such person beneficially owns or holds
7 1/2% or more of any class of voting securities or in which such person
beneficially owns or holds 7 1/2% or more of the equity interest in such person
and (iii) any director, officer or partner of such person (other than limited
partners of Welsh, Carson, Anderson & Stowe). For the purposes of this
definition, the term "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person, whether
through the ownership of voting securities or by contract or otherwise.
"Agent" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Allowed Distributions" shall mean cash dividends or
distributions actually made by the Borrower to Holdings, but only to the extent
same were permitted under clause (i) or (ii) of Section 7.04 hereof.
"Alternate Base Loan" shall mean a Loan based on the Alternate
Base Rate in accordance with Article II hereof.
"Alternate Base Rate" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. "Prime Rate" shall mean
the rate of interest per annum publicly announced from time to time by the
Agent at its principal office in New York City as its prime rate in effect at
such time. "Federal Funds Effective Rate" shall mean, for any day, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day which is a Business
Day, the average of the quotations for the day of such transactions received by
the Agent from
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<PAGE> 9
three Federal funds brokers of recognized standing selected by it. If for any
reason the Agent shall have determined (which determination shall be conclusive
absent manifest error) that it is unable to ascertain the Federal Funds
Effective Rate for any reason, including, the inability or failure of the Agent
to obtain sufficient quotations in accordance with the terms hereof, the
Alternate Base Rate shall be determined without regard to clause (b) of the
first sentence of this definition until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a
change in the Prime Rate or the Federal Funds Effective Rate shall be effective
on the effective date of such change in the Prime Rate or the Federal Funds
Effective Rate, respectively.
"Applicable Lending Office" shall mean, with respect to each
Lender, such Lender's Domestic Lending Office in the case of an Alternate Base
Loan and such Lender's Eurodollar Lending Office in the case of a Eurodollar
Loan.
"Approved Repair Unit Charges" shall mean non-cash charges to
earnings of the Borrower approved by the Required Lenders which result from the
Borrower discontinuing or otherwise disposing of its "repair unit."
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and an assignee and accepted by the Agent,
in substantially the form of Exhibit F annexed hereto.
"Availability" shall mean at any time (i) the lesser at such
time of (x) the Total Tranche A Commitment and (y) the Borrowing Base, minus
(ii) the sum at such time of (u) the unpaid principal balance of the Tranche A
Loans, (v) reserves from time to time required by reason of Section 7.01(c)
hereof and (w) the Letter of Credit Usage.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"Borrower" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Borrowing Base" shall have the meaning assigned to such term
in Section 2.01(a) hereof.
"Business Day" shall mean any day, other than a Saturday,
Sunday or legal holiday in the State of New York, on which banks are open for
substantially all their banking business in New York City except that, if any
determination of a "Business Day" shall relate to a Eurodollar Loan, the term
"Business Day" shall in addition exclude
3
<PAGE> 10
any day on which banks are not open for dealings in dollar deposits in the
London interbank market.
"Capitalized Lease Obligation" shall mean an obligation to pay
rent or other amounts under any lease of (or other arrangement conveying the
right to use) real and/or personal property which obligation is required to be
classified and accounted for as a capital lease on a balance sheet prepared in
accordance with GAAP, and for purposes hereof the amount of such obligation
shall be the capitalized amount thereof determined in accordance with GAAP.
"Cash Interest Expense" shall mean, with respect to any person
for any period, the Interest Expense of such person for such period less all
noncash items constituting Interest Expense during such period (including,
without limitation, amortization of debt discounts and payments of interest on
indebtedness by issuance of Indebtedness).
"Change of Control" shall mean (i) WCAS CP II, WCAS VII and
the persons identified on Schedule A annexed hereto shall cease to collectively
own stock of Holdings entitling them, at the time a determination is made
hereunder, to cast the votes required to elect a majority of members of the
Board of Directors of Holdings, (ii) WCAS CP II, WCAS VII and the persons
identified on Schedule A annexed hereto shall cease to collectively own a
majority (on a fully diluted basis) of all classes of stock of Holdings, or
(iii) Holdings shall cease to own 100% of all classes of stock of the Borrower.
"Closing Date" shall mean the date of the first borrowing
under this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall mean all collateral and security as
described in the Security Documents.
"Commitment" shall mean, with respect to each Lender, the sum
of the Tranche A Commitment of such Lender as set forth in Schedule 2.01(a) and
the Tranche B Commitment of such Lender as set forth in Schedule 2.01(b), as
each may be reduced from time to time in accordance with the provisions of this
Agreement.
"Commitment Fee" shall have the meaning set forth in Section
2.06(a) hereof.
4
<PAGE> 11
"Commitment Letter" shall mean the commitment letter dated
February 21, 1996 issued by the Agent and accepted by the Borrower and
Holdings, together with the related outline of terms.
"Consolidated" shall mean, in respect of any person, as
applied to any financial or accounting term, such term determined on a
consolidated basis in accordance with GAAP (except as otherwise required
herein) for the person and all consolidated subsidiaries thereof.
"Contaminant" shall mean all Hazardous Materials and all those
substances which are regulated by or form the basis of liability under Federal,
state or local environmental, health and safety statutes or regulations, or any
other material or substance which constitutes a material health, safety or
environmental hazard to any person or property.
"Convertible Preferred Stock" shall mean the convertible
preferred stock of Holdings, $0.01 par value per share, issued pursuant to
Holdings' Certificate of Incorporation as in effect on the Closing Date.
"Credit Event" shall mean each borrowing and each issuance of
a Letter of Credit hereunder.
"Credits" shall mean the Loans and the Letters of Credit.
"Customer" shall mean and include the account debtor or
obligor with respect to any Receivable.
"Debt Service Coverage Ratio" shall mean, with respect to any
person for the four quarter period (or such lesser number of full fiscal
quarters as shall have elapsed from the Closing Date prior to the date of
determination) ending on the date of determination, the ratio of (i) Net Cash
Flow of such person for such four quarter (or such shorter) period, to (ii)
Debt Service Expense of such person for such four quarter (or such shorter)
period.
"Debt Service Expense" shall mean, with respect to any person
for the four fiscal quarter period (or such lesser number of full fiscal
quarters as shall have elapsed from the Closing Date prior to the date of
determination) ending on the date of determination, an amount equal to the
product of (A) (i) the outstanding principal balance of Tranche B Loans
divided by (ii) the remaining number of scheduled automatic reductions of the
Total Tranche B Commitment pursuant to Section 2.07(c) hereof (including,
without limitation, the reduction scheduled on the Final Maturity Date),
multiplied by (B) one (in the case of a determination made for the fiscal
quarter ending
5
<PAGE> 12
June 30, 1996), two (in the case of a determination made for the fiscal quarter
ending September 30, 1996), three (in the case of a determination made for the
fiscal quarter ending December 31, 1996) or four (in the case of a
determination made for any other period).
"Default" shall mean any condition, act or event which, with
notice or lapse of time or both, would constitute an Event of Default.
"Defeasance" shall mean Holdings' irrevocable defeasance of
all of its obligations under the Indenture by virtue of Holdings depositing
with the trustee under the Indenture an amount equal to the Redemption Amount
and otherwise complying with all applicable requirements under the Indenture.
"Dilution" shall mean any reduction in the aggregate value of
Receivables at any time caused by: returns, sales allowances, discounts,
rebills, credits and/or any other non-cash offsets asserted or assertable by
Customers.
"Dilution Percentage" shall mean, at any time, a quotient,
expressed as a percentage, the numerator of which equals Dilution at such time
and the denominator of which equals the Borrower's gross sales at such time.
"Dividend Conditions" shall mean, at any time, the following
conditions to the payment of Permitted Distributions by the Borrower:
(a) no Default or Event of Default shall have occurred
and be continuing at such time or shall occur as a result of such
payment;
(b) each such payment shall be made only on the
applicable Dividend Payment Date; and
(c) the Agent shall have received a certificate in the
form, scope and substance acceptable to the Agent and in such detail
as the Agent shall have required, of a Responsible Officer of Holdings
confirming that the proceeds of each such payment shall have been
applied contemporaneously by Holdings to make the payments or
settlements, as the case may be, permitted by Section 7.04 hereof.
"Dividend Payment Date" shall mean (i) with respect to the
payments described in clauses (i) and (ii) of Section 7.04 hereof, the date
such payments are scheduled pursuant to the applicable agreements or
instruments and (ii) with respect to the payments described in clauses (iii),
(iv) and (v) of Section 7.04 hereof, the date such settlements or termination
occurs.
6
<PAGE> 13
"dollars" or the symbol "$" shall mean dollars in lawful
currency of the United States of America.
"Domestic Lending Office" shall mean, with respect to any
Lender, the office of such Lender specified as its "Domestic Lending Office"
opposite its name in Schedule 2.02 annexed hereto, or such other office of such
Lender as such Lender may from time to time specify to the Borrower and the
Agent.
"EBITDA" shall mean with respect to any person for any period
the sum of (i) Net Income, (ii) Interest Expense, (iii) depreciation,
amortization and other similar noncash charges (including, without limitation,
Approved Repair Unit Charges) and (iv) federal, state, local and foreign income
taxes, in each case of such person for such period, computed and calculated in
accordance with GAAP.
"Eligible Inventory" shall mean inventory of the Borrower
comprised solely of raw materials and finished goods which is, in the
reasonable opinion of the Agent, not obsolete, slow-moving or unmerchantable
and is and at all times shall continue to be acceptable to the Agent in all
respects in the exercise of the reasonable credit judgment of the Agent's
credit managers; provided, however, that Eligible Inventory shall in no event
include inventory which (i) is not located at one of the addresses for
locations of Collateral set forth on Schedule I to the Security Agreement or is
located at a location not owned by the Borrower as to which the Agent has not
received a waiver, in form and substance satisfactory to the Agent, executed
and delivered by the landlord or bailee (as the case may be), (ii) has been
returned or rejected by a Customer, provided that inventory which has been
returned or rejected by a Customer of the Borrower's Asset Recovery Services
Division shall be Eligible Inventory if it is held by the Borrower for resale
and otherwise meets all of the standards of eligibility set forth herein, (iii)
is not subject to a valid, perfected first priority security interest in favor
of the Agent as security for payment of the Obligations or (iv) is subject to
any Lien that is not permitted under Section 7.01 hereof. Standards of
eligibility may be fixed and revised from time to time solely by the Agent in
the exercise of the reasonable credit judgment of the Agent's credit managers.
In determining eligibility, the Agent may, but need not, rely on reports and
schedules furnished by the Borrower, but reliance by the Agent thereon from
time to time shall not be deemed to limit the right of the Agent to revise
standards of eligibility at any time as to both present and future inventory of
the Borrower.
"Eligible Receivables" shall mean Receivables created by the
Borrower in the ordinary course of business arising out of the sale or lease of
goods or rendition of services by the Borrower, which are and at all times
shall continue to be acceptable to the Agent in all respects in the exercise of
the reasonable credit judgment of the Agent's credit managers. Standards of
eligibility may be fixed and revised from time to
7
<PAGE> 14
time solely by the Agent in the exercise of the reasonable credit judgment of
the Agent's credit managers. In general, without limiting the foregoing, a
Receivable shall in no event be deemed to be an Eligible Receivable unless:
(a) all payments due on the Receivable have been invoiced and the underlying
goods shipped or the services performed, as the case may be; (b) the payment
due on the Receivable is not more than 90 days past the invoice date; (c) the
payments due on more than 25% of all Receivables from the same Customer are
less than 90 days past the invoice date; (d) the Receivable arose from a
completed and bona fide transaction (and with respect to a sale of goods, a
transaction in which title to such goods has passed to the Customer) which
requires no further act under any circumstances on the part of the Borrower to
make such Receivable payable by the Customer; (e) the Receivable is in full
conformity with the representations and warranties made by the Borrower to the
Agent and the Lenders with respect thereto and is free and clear of all
security interests and Liens of any nature whatsoever other than any security
interest deemed to be held by the Borrower or any security interest created
pursuant to the Security Documents or permitted by Section 7.01 hereof; (f) the
Receivable constitutes an "account" or "chattel paper" within the meaning of
the Uniform Commercial Code of the state in which the Receivable is located;
(g) (i) the Customer has not asserted that the Receivable, and the Borrower is
not aware that the Receivable, (x) arises out of a bill and hold, consignment
or progress billing arrangement or (y) is subject to any setoff, contras,
net-out contract, offset, deduction, dispute, credit, counterclaim or other
defense arising out of the transactions represented by the Receivables or
independently thereof (provided, that any Receivable deemed ineligible pursuant
to this clause (g)(i)(y) shall only be ineligible to the extent of the
applicable setoff, contra, offset, deduction, dispute, credit, counterclaim or
other defense) and (ii) the Customer has finally accepted the goods from the
sale out of which the Receivable arose and has not objected to its liability
thereon or returned, rejected or repossessed any of such goods, except for
complaints made or goods returned in the ordinary course of business for which,
in the case of goods returned, goods of equal or greater value have been
shipped in return (provided, that any Receivable deemed ineligible pursuant to
this clause (g)(ii) shall only be ineligible to the extent of the value of the
goods returned, rejected or repossessed); (h) the Customer is not (x) the
United States government or the government of any state or political
subdivision thereof or therein, or any agency or department of any thereof
unless the Borrower complies with the Federal Assignment of Claims Act or other
similar state statutes or (y) an Affiliate of Holdings, the Borrower or any
subsidiary of any thereof; (i) (x) the Customer is a United States or Canadian
person or an obligor in the United States or the Canadian Provinces of Ontario,
Manitoba, Saskatchewan, Alberta or the Yukon Territories, (y) the Customer is
one of the Customers identified on Schedule B annexed hereto, or (z) if the
Customer is not a person or obligor described in clause (i)(x) and (i)(y)
hereof, the Borrower has purchased credit insurance in form and amounts
satisfactory to the Agent with respect to such Receivable; (j) the Receivable
complies with all material requirements of all applicable laws and
8
<PAGE> 15
regulations, whether Federal, state or local (including, without limitation,
usury laws and laws, rules and regulations relating to truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy); (k) to the best knowledge of the Borrower,
the Receivable is in full force and effect and constitutes a legal, valid and
binding obligation of the Customer enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors'
rights generally and by general equity principles; (l) the Receivable is
denominated in and provides for payment by the Customer in dollars; (m) the
Receivable has not been and is not required to be charged off or written off as
uncollectible in accordance with GAAP or the customary business practices of
the Borrower; (n) the Agent on behalf of the Lenders possesses a valid,
perfected first priority security interest in such Receivable as security for
payment of the Obligations; and (o) the Agent is satisfied with the credit
standing of the Customer in relation to the amount of credit extended.
Notwithstanding the foregoing, all Receivables of any single Customer which, in
the aggregate, exceed 30%, with respect to IBM Corporation (Endicott, New
York), or 15%, with respect to any other Customer, of the total Eligible
Receivables at the time of any such determination shall be deemed not to be
Eligible Receivables to the extent of such excess. References to percentages
of Receivables are based on dollar amount of Receivables, and not number of
Receivables.
"Environmental Claim" shall mean any written notice of
violation, claim, demand, abatement or other order by any governmental
authority or any person for personal injury (including sickness, disease or
death), tangible or intangible property damage, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the environment,
or for fines, penalties or deed or use restrictions, resulting from or based
upon (i) the existence, or the continuation of the existence, of a Release
(including, without limitation, sudden or non-sudden, accidental or
nonaccidental Releases), of, or exposure to, any Contaminant at, in, by or from
any of the properties of the Borrower or its subsidiaries, (ii) the
environmental aspects of the transportation, storage, treatment or disposal of
Contaminants in connection with the operation of any of the properties of the
Borrower or its subsidiaries or (iii) the violation, or alleged violation by
the Borrower or any of its subsidiaries, of any statutes, ordinances, orders,
rules, regulations, Permits or licenses of or from any governmental authority,
agency or court relating to environmental matters connected with any of the
properties of the Borrower or its subsidiaries, under any applicable
Environmental Law.
"Environmental Laws" shall mean the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Section
9601 et seq.), the Hazardous Material Transportation Act (49 U.S.C. Section
1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section
6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251
et seq.), the Oil Pollution Act of 1990 (P.L. 101-380), the Safe Drinking
9
<PAGE> 16
Water Act (42 U.S.C. Section 300(f), et seq.), the Clear Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act, as amended (15 U.S.C.
Section 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. Section 136 et seq.), and the Occupational Safety and Health Act (29
U.S.C. Section 651 et seq.), as such laws have been and hereafter may be
amended or supplemented, and any related or analogous present or future
Federal, state or local, statutes, rules, regulations, ordinances, licenses,
permits and interpretations and orders of regulatory and administrative bodies.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated thereunder, as
in effect from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) which together with any Loan Party would be treated as a
single employer under the provisions of Title I or Title IV of ERISA.
"Eurodollar Lending Office" shall mean, with respect to any
Lender, the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name in Schedule 2.03 annexed hereto (or, if no such office is
specified, its Domestic Lending Office), or such other office of such Lender as
such Lender may from time to time specify to the Borrower and the Agent.
"Eurodollar Loan" shall mean a Loan based on the Adjusted LIBO
Rate in accordance with Article II hereof.
"Event of Default" shall have the meaning assigned to such
term in Article VIII hereof.
"Final Maturity Date" shall mean the fifth anniversary of the
Closing Date.
"Financial Officer" shall mean, with respect to any person,
the chief financial officer of such person.
"FIRREA" shall mean the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended from time to time.
"Fiscal Year" shall mean the fiscal year of each Loan Party
for accounting purposes which ends on September 30 of each year.
"Funded Debt" shall mean with respect to any person as of the
date of determination thereof, all Indebtedness of such person and its
subsidiaries on a Consolidated basis outstanding at such time which matures
more than one year after
10
<PAGE> 17
the date of calculation, and any such Indebtedness maturing within one year
from such date of calculation which is renewable or extendable at the option of
the obligor to a date more than one year from such date and shall in any event
include all Subordinated Indebtedness of the Borrower and the unpaid principal
balance of all Loans.
"GAAP" shall have the meaning assigned to such term in Section
1.02 hereof.
"Grantor" shall mean any Grantor, Pledgor or Debtor, as such
terms are as defined in any of the Security Documents.
"Guarantee" shall mean any obligation, contingent or
otherwise, of any person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or obligation of any other person in any manner,
whether directly or indirectly, and shall include, without limitation, any
obligation of such person, direct or indirect, to (i) purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
obligation or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Indebtedness or obligation, (ii) purchase
property, securities or services for the purpose of assuring the owner of such
Indebtedness or obligation of the payment of such Indebtedness or obligation,
or (iii) maintain working capital, equity capital, available cash or other
financial condition of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or obligation; provided, however, that the term
Guarantee shall not include endorsements for collection or collections for
deposit, in either case in the ordinary course of business.
"Guarantor" shall mean, collectively, Holdings and each
subsidiary thereof other than the Borrower and any foreign subsidiary of the
Borrower, together with any other person that becomes a guarantor of the
Obligations after the date hereof.
"Hazardous Material" shall mean any pollutant, contaminant,
chemical, or industrial or hazardous, toxic or dangerous waste, substance or
material, defined or regulated as such in (or for purposes of) any
Environmental Law and any other toxic, reactive, or flammable chemicals,
including (without limitation) any asbestos, any petroleum (including crude oil
or any fraction), any radioactive substance and any polychlorinated biphenyls;
provided, in the event that any Environmental Law is amended so as to broaden
the meaning of any term defined thereby, such broader meaning shall apply
subsequent to the effective date of such amendment; and provided, further, to
the extent that the applicable laws of any state establish a meaning for
"hazardous material," "hazardous substance," "hazardous waste," "solid waste"
or "toxic substance" which is broader than that specified in any Environmental
Law, such broader meaning shall apply.
11
<PAGE> 18
"Holdings" shall mean Aurora Electronics, Inc., a Delaware
corporation, together with its successors and assigns.
"Holdings Transactions" shall mean, collectively, the issuance
by Holdings to the Investor Group of the Convertible Preferred Stock, the
Tender Offer, the sale to WCAS CP II of the WCAS Subordinated Note and related
shares of Holdings' common stock pursuant to the Securities Purchase Agreement
and the Redemption.
"HSR" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indebtedness" shall mean, with respect to any person, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments or upon which interest charges
are customarily paid, (c) all obligations of such person for the deferred
purchase price of property or services, except current accounts payable arising
in the ordinary course of business and not overdue beyond such period as is
commercially reasonable for such person's business, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property purchased by such person and all Capitalized Lease Obligations, (e)
all payment obligations of such person with respect to interest rate or
currency protection agreements, (f) all obligations of such person as an
account party under any letter of credit or in respect of bankers' acceptances,
(g) all obligations of any third party secured by property or assets of such
person (regardless of whether or not such person is liable for repayment of
such obligations), (h) all Guarantees of such person and (i) the redemption
price of all redeemable preferred stock of such person, but only to the extent
that such stock is redeemable at the option of the holder at any time prior to
the Final Maturity Date or requires sinking fund or similar payments at any
time prior to the Final Maturity Date.
"Indemnitees" shall have the meaning assigned to such term in
Section 11.04(c) hereof.
"Indenture" shall mean the Indenture, dated as of November 15,
1989, between Holdings and Ameritrust Texas N.A., relating to Holdings' 9 1/4%
Senior Subordinated Notes due 1996, as supplemented by the First Supplemental
Indenture, dated as of June 29, 1990 and the Second Supplemental Indenture,
dated to be effective as of November 30, 1992.
"Information" shall have the meaning assigned to such term in
Sec-tion 11.11 hereof.
12
<PAGE> 19
"Interest Coverage Ratio" shall mean, with respect to any
person for the four quarter period (or such lesser number of full fiscal
quarters as shall have elapsed from the Closing Date) ending on the date of
determination, the ratio of (A) (i) the sum for such person for such period of
(x) EBITDA and (y) MIS Related Capital Expenditures minus (ii) the sum of the
cash capital expenditures and the principal component of Capitalized Lease
Obligations and Allowed Distributions, to (B) Cash Interest Expense.
"Interest Expense" shall mean, with respect to any person for
any period, the interest expense of such person during such period determined
on a consolidated basis in accordance with GAAP, and shall in any event
include, without limitation, (i) the amortization of debt discounts, (ii) the
amortization of all fees payable in connection with the incurrence of
Indebtedness to the extent included in interest expense, (iii) the portion of
any Capitalized Lease Obligation allocable to interest expense, (iv) all
dividend payments on preferred stock actually paid in cash, and (v) payments of
interest expense in kind.
"Interest Margin" shall mean, with respect to any Alternate
Base Loan or Eurodollar Loan, as applicable, the amount set forth below as
corresponds to the ratio of Funded Debt to EBITDA set forth below determined on
the Closing Date and adjusted thereafter (to the extent necessary based on a
change in said ratio) (i) with respect to Alternate Base Loans, the day, or
(ii) with respect to Eurodollar Loans, the tenth Business Day following the
day, the Agent receives the financial statements required to be delivered
pursuant to Section 6.05(b) hereof (in the case of the first three fiscal
quarters of each Fiscal Year) or Section 6.05(a) hereof (in the case of the
fourth fiscal quarter of each Fiscal Year), in each case together with the
corresponding compliance certificates required pursuant to Section 6.05(e), or
if the Borrower shall fail to timely deliver such statements and certificates
for any such period, then at the highest Interest Margin provided for herein
until such time as the Borrower shall deliver such statements and certificate:
<TABLE>
<CAPTION>
Ratio of Adjusted Alternate Base
Funded Debt LIBO Rate Rate Interest
to EBITDA Interest Margin Margin
-------------- --------------- -------------------
<S> <C> <C>
Greater than 3.50 2.75% 1.25%
to 1.00
3.00 or greater to 2.50% 1.00%
3.50 to 1.00
2.50 or greater to 2.25% 0.75%
3.00 to 1.00
</TABLE>
13
<PAGE> 20
<TABLE>
<S> <C> <C>
2.00 or greater to 2.00% 0.50%
2.50 to 1.00
Less than 2.00 1.75% 0.25%
to 1.00
</TABLE>
Notwithstanding the foregoing, on the Closing Date and until
(x) with respect to Alternate Base Loans, the day, or (y) with respect to
Eurodollar Loans, the tenth Business Day following the day, the Agent receives
the financial statements required under Section 6.05(a) for the Fiscal Year
ending September 30, 1996 and the related compliance certificates, the Adjusted
LIBO Rate Interest Margin shall be 2.75% and the Alternate Base Rate Interest
Margin shall be 1.25%. Thereafter, the Interest Margin shall be adjusted (or
not adjusted) in accordance with the provisions hereof.
"Interest Payment Date" shall mean (i) with respect to each
Loan, the first Business Day of each March, June, September and December,
commencing June 3, 1996, and (ii) in addition, with respect to each Eurodollar
Loan, the last day of the Interest Period applicable thereto.
"Interest Period" shall mean, as to any Eurodollar Loan, the
period commencing on the date of such Eurodollar Loan and ending on the
numerically corresponding day (or, if there is no numerically corresponding
day, on the last day) in the calendar month that is one (1), two (2), three (3)
or six (6) months thereafter, as the Borrower may elect with respect to its
Eurodollar Loans; provided, however, that (x) if an Interest Period would end
on a day that is not a Business Day, such Interest Period shall be extended to
the next succeeding Business Day unless, with respect to Eurodollar Loans, such
next succeeding Business Day would fall in the next calendar month, in which
case such Interest Period shall end on the next preceding Business Day, (y) no
Interest Period shall end later than the Final Maturity Date and (z) interest
shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.
"Investor Group" shall mean WCAS VII and the other investors
party to the Securities Purchase Agreement as of the Closing Date.
"Lender" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Letter of Credit" shall have the meaning assigned such term
in Section 2.17 hereof.
"Letter of Credit Cash Collateral" shall mean cash collateral
deposited in an account with the Agent on terms and conditions satisfactory to
the Agent.
14
<PAGE> 21
"Letter of Credit Usage" shall mean at any time, (i) the
aggregate undrawn amount of all outstanding Letters of Credit at such time plus
(ii) the unreimbursed drawings at such time under all such Letters of Credit.
"Leverage Ratio" shall mean, with respect to any person for
the four quarter period ending on the date of determination, the ratio of (i)
Funded Debt of such person as at the date of determination to (ii) Net Cash
Flow of such person for the such four quarter period.
"LIBO Rate" shall mean, with respect to any Eurodollar Loan
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the rate at which dollar deposits
approximately equal in principal amount to the Eurodollar Loan of the Agent and
for a maturity equal to the applicable Interest Period are offered in
immediately available funds to the London branch of the Agent by leading banks
in the London interbank market for Eurodollars at approximately 11:00 a.m.,
London time, two (2) Business Days prior to the first day of such Interest
Period.
"Lien" shall mean, with respect to any asset, (i) any
mortgage, lien, pledge, encumbrance, charge or security interest in or on such
asset, (ii) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset, (iii) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities or (iv) any other right
of or arrangement with any creditor to have such creditor's claim satisfied out
of such assets, or the proceeds therefrom, prior to the general creditors of
the owner thereof.
"Loan" shall mean any Tranche A Loan or any Tranche B Loan.
"Loan Documents" shall mean this Agreement, each Security
Document, each Guarantee executed and delivered at any time with respect to the
Obligations, each Notice of Borrowing, the Notes and each other document,
instrument, or agreement now or hereafter delivered to the Agent or any Lender
in connection herewith or therewith.
"Loan Party" shall mean the Borrower, each Grantor, each
Guarantor, and each subsidiary thereof other than a foreign subsidiary.
"Margin Stock" shall have the meaning assigned to such term in
Regulation U.
15
<PAGE> 22
"Material Adverse Effect" shall mean a material adverse effect
on (i) the business, assets, prospects, operations or financial or other
condition of (x) the Borrower or (y) any Loan Party and its subsidiaries taken
as a whole, (ii) the ability of any Loan Party to perform or pay any of its
Obligations in accordance with the terms hereof or of any other Loan Document,
(iii) the rights of, or benefits available to, the Lenders or the Agent under
any Loan Document or (iv) the Agent's Lien on any material portion of the
Collateral or the priority of such Lien.
"MIS Related Capital Expenditures" shall mean at any time the
amount of capital expenditures actually made or incurred at or prior to such
time in connection with the Century Division MIS Upgrade Program, which amount
shall not in any event exceed $1,920,000 in the aggregate.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
"Net Amount of Eligible Inventory" shall mean, at any time,
the aggregate value, computed at the lower of cost (on a FIFO basis) and
current market value, of Eligible Inventory of the Borrower.
"Net Amount of Eligible Receivables" shall mean and include at
any time, without duplication, the gross amount of Eligible Receivables at such
time less (i) sales, excise or similar taxes and (ii) returns, discounts,
claims, credits and allowances of any nature at any time issued, owing,
granted, outstanding, available or claimed, in each case, with respect to such
Eligible Receivables.
"Net Cash Flow" shall mean, with respect to any person for any
period, without duplication of addition or subtraction of items, (A) the sum
for such person for such period of (i) the aggregate pre-tax income (or loss)
from continuing operations, (ii) depreciation and amortization, (iii) other
noncash items properly deducted in arriving at pre-tax income (including,
without limitation, Approved Repair Unit Charges) and (iv) MIS Related Capital
Expenditures minus (B) the sum for such person for such period of (i) the
principal component of all capital expenditures, (ii) Allowed Distributions and
(iii) all income taxes paid in cash.
"Net Income" shall mean, with respect to any person for any
period, the aggregate income (or loss) of such person for such period which
shall be an amount equal to net revenues and other proper items of income for
such person less the aggregate for such person of any and all items that are
treated as expenses under GAAP, and less Federal, state and local income taxes,
but excluding any extraordinary gains or losses or any gains or losses from the
sale or disposition of assets other than
16
<PAGE> 23
in the ordinary course of business, all computed and calculated in accordance
with GAAP.
"Notes" shall mean the Tranche A Notes and the Tranche B
Notes.
"Notice of Borrowing" shall have the meaning assigned to such
term in Section 2.03 hereof.
"Obligations" shall mean all obligations, liabilities and
Indebtedness of the Borrower to the Lenders and the Agent, whether now existing
or hereafter created, direct or indirect, due or not, whether created directly
or acquired by assignment, participation or otherwise, including without
limitation all obligations, the Security Documents and other Loan Documents,
the principal of and interest on the Loans and the payment or performance of
all other obligations, liabilities, and Indebtedness of the Borrower to the
Lenders and the Agent hereunder, under the Letters of Credit or under any one
or more of the other Loan Documents, including without limitation all fees,
costs, expenses and indemnity obligations hereunder and thereunder.
"Other Taxes" shall have the meaning assigned to such term in
Section 2.15(b) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean any Plan which is subject to the
provisions of Title IV of ERISA.
"Permits" shall have the meaning assigned to such term in
Section 4.18 hereof.
"Permitted Acquisition" shall have the meaning assigned to
such term in Section 7.05 hereof.
"Permitted Distribution" shall have the meaning assigned to
such term in Section 7.04 hereof.
"person" shall mean any natural person, corporation, business
trust, association, company, joint venture, partnership or government or any
agency or political subdivision thereof.
"Plan" shall mean any employee benefit plan within the meaning
of Section 3(3) of ERISA and which is maintained (in whole or in part) for
employees of the Borrower, any subsidiary or any ERISA Affiliate.
17
<PAGE> 24
"Pledge Agreement" shall mean the Pledge Agreement dated as of
the date hereof, between the Grantor(s) and the Agent, for the benefit of the
Lenders, in substantially the form of Exhibit D annexed hereto, as amended,
modified or supplemented from time to time.
"Pledged Stock" shall have the meaning assigned to such term
in the Pledge Agreement.
"Receivables" shall mean and include all of the Borrower's
accounts, instruments, documents, chattel paper and general intangibles,
whether secured or unsecured, whether now existing or hereafter created or
arising, and whether or not specifically assigned to the Agent for the ratable
benefit of the Lenders.
"Redemption" shall mean, collectively, the Redemption Offer
and the Defeasance.
"Redemption Amount" shall mean an amount equal to $9,029,000
plus accrued and unpaid interest on Holdings' 9 1/4% Senior Subordinated Notes
due 1996 to the date of redemption, as set forth in the Redemption Offer.
"Redemption Offer" shall mean the thirty (30) days'
irrevocable written notice dated April 1, 1996 given by Holdings to all holders
of its outstanding 9 1/4% Senior Subordinated Notes of Holdings' intention to
redeem 100% of such notes for the Redemption Amount.
"Register" shall have the meaning assigned to such term in
Section 11.03(e) hereof.
"Regulation D" shall mean Regulation D of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation G" shall mean Regulation G of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation T" shall mean Regulation T of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
18
<PAGE> 25
"Release" shall mean any releasing, spilling, leaking,
seepage, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing or dumping, in each case as defined in
Environmental Law, and shall include any "Threatened Release," as defined in
Environmental Law.
"Remedial Work" shall mean any investigation, site monitoring,
containment, cleanup, removal, restoration or other remedial work of any kind
or nature with respect to any property of the Loan Parties (whether such
property is owned, leased, subleased or used), including, without limitation,
with respect to Contaminants and the Release thereof.
"Reportable Event" shall mean a Reportable Event as defined in
Sec-tion 4043(c) of ERISA.
"Required Lenders" shall mean Lenders having 66 2/3% of the
Total Commitment.
"Responsible Officer" shall mean, with respect to any person,
any vice president or the president, the chief executive officer, the chief
financial officer or controller, of such person.
"Securities Purchase Agreement" shall mean the Securities
Purchase Agreement dated February 21, 1996 among the Investor Group, WCAS CP II
and Holdings, as amended, modified or supplemented from time to time in
accordance with its terms and the limitations set forth in Section 7.19 hereof.
"Security Agreement" shall mean the Security Agreement dated
as of the date hereof, between the Grantor(s) and the Agent, for the benefit of
the Lenders, substantially in the form of Exhibit E annexed hereto, as amended,
modified or supplemented from time to time.
"Security Agreement - Patents and Trademarks" shall mean the
Security Agreement and Mortgage - Patents and Trademarks, dated as of the date
hereof, between the Debtor(s), as such term is defined therein, and the Agent,
for the benefit of the Lenders, substantially in the form of Exhibit G annexed
hereto, as amended, modified or supplemented from time to time.
"Security Documents" shall mean the Pledge Agreement, the
Security Agreement, the Security Agreement - Patents and Trademarks and each
other agreement now existing or hereafter created providing collateral security
for the payment or performance of any Obligations.
19
<PAGE> 26
"Subordinated Indebtedness" shall mean, with respect to any
Loan Party, Indebtedness subordinated in right of payment to such person's
monetary obligations under this Agreement upon terms satisfactory to and
approved in writing by the Agent, to the extent it does not by its terms mature
or become subject to any mandatory prepayment or amortization of principal
prior to the Final Maturity Date, and, with respect to Holdings, shall in any
event include the Indebtedness of Holdings pursuant to the Subordinated Notes.
"Subordinated Notes" shall mean, collectively, the WCAS
Subordinated Note, Holdings' 7 3/4% Convertible Subordinated Debentures due
April 15, 2001, Holdings' 7% Subordinated Convertible Promissory Note due
September 30, 1997 in the original principal amount of $304,447.94, Holdings'
7% Subordinated Convertible Promissory Note due September 30, 1997 in the
original principal amount of $578,066.82, Holdings' 7% Subordinated Convertible
Promissory Note due September 30, 1996 in the original principal amount of
$578,066.82 and Holdings' 7% Subordinated Convertible Promissory Note due
September 30, 1996 in the original principal amount of $304,447.94, and all
instruments or other documents relating thereto, in each case as amended,
modified or supplemented from time to time in accordance with their respective
terms and the limitations set forth in Section 7.19 hereof.
"subsidiary" shall mean, with respect to any person, any
corporation, association or other business entity of which securities or other
ownership interests representing more than 50% of the ordinary voting power
are, at the time as of which any determination is being made, owned or
controlled, directly or indirectly, by the parent of such person or one or more
subsidiaries of the parent of such person.
"Target" shall have the meaning assigned to such term is
Section 7.05 hereof.
"Taxes" shall have the meaning assigned to such term in
Section 2.15(a) hereof.
"Tender Offer" shall mean the offer by Holdings to purchase
for cash up to 6,500,000 issued and outstanding shares of capital stock of
Holdings pursuant to the Tender Offer Documents.
"Tender Offer Documents" shall mean the Offer to Purchase
dated February 23, 1996 and the related letter of transmittal concerning the
offer by Holdings to purchase up to 6,500,000 issued and outstanding shares of
capital stock of Holdings, as amended, modified or supplemented from time to
time in accordance with its terms and the limitations set forth in Section 7.19
hereof.
20
<PAGE> 27
"Termination Date" shall mean the earlier to occur of (i) the
Final Maturity Date and (ii) such date as the Loans shall otherwise be payable
in full and the Commitments shall terminate, expire or be canceled in
accordance with the terms of this Agreement.
"Total Commitment" shall mean the sum of the Lenders'
Commitments, as the same shall be reduced from time to time pursuant to Section
2.07 hereof.
"Total Tranche A Commitment" shall mean the sum of the
Lenders' Tranche A Commitments, as the same may be reduced from time to time
pursuant to Section 2.07 hereof.
"Total Tranche B Commitment" shall mean the sum of the
Lenders' Tranche B Commitments, as the same shall be reduced from time to time
pursuant to Section 2.07 hereof.
"Tranche A Alternate Base Loan" shall mean a Tranche A Loan
that is an Alternate Base Loan.
"Tranche A Commitment" shall mean, with respect to any Lender,
the Tranche A Commitment of such Lender as set forth in Schedule 2.01(a).
"Tranche A Eurodollar Loan" shall mean a Tranche A Loan that
is a Eurodollar Loan.
"Tranche A Loan" shall mean a Tranche A Loan made pursuant to
Sections 2.01 and 2.02 hereof.
"Tranche A Notes" shall mean the Tranche A Notes of the
Borrower, executed and delivered as provided in Section 2.04 hereof, in
substantially the form of Exhibit A annexed hereto, as amended, modified or
supplemented from time to time.
"Tranche B Alternate Base Loan" shall mean a Tranche B Loan
that is an Alternate Base Loan.
"Tranche B Commitment" shall mean, with respect to any Lender,
the Tranche B Commitment of such Lender as set forth in Schedule 2.01(b), as
the same shall be reduced from time to time pursuant to Section 2.07 hereof.
"Tranche B Eurodollar Loan" shall mean a Tranche B Loan that is
a Eurodollar Loan.
21
<PAGE> 28
"Tranche B Loan" shall mean a Tranche B Loan made pursuant to
Sections 2.01 and 2.02 hereof.
"Tranche B Notes" shall mean the Tranche B Notes of the
Borrower, executed and delivered as provided in Section 2.04 hereof, in
substantially the form of Exhibit B annexed hereto, as amended, modified or
supplemented from time to time.
"Transactions" shall have the meaning assigned to such term in
Sec-tion 4.02 hereof.
"WCAS VII" shall mean Welsh, Carson, Anderson & Stowe VII,
L.P.
"WCAS CP II" shall mean WCAS Capital Partners II, L.P.
"WCAS Subordinated Note" shall mean the 10% Senior
Subordinated Note due September 2001 made by Holdings in favor of WCAS CP II in
the original principal amount of $10,000,000, as amended, modified or
supplemented from time to time in accordance with its terms and the limitations
set forth in Section 7.19 hereof.
SECTION 1.02. Accounting Terms. Unless otherwise expressly
provided herein, each accounting term used herein shall have the meaning given
it under generally accepted accounting principles in effect from time to time
in the United States applied on a basis consistent with those used in preparing
the financial statements referred to in Section 6.05 hereof ("GAAP"); provided,
however, that each reference in Article VII hereof, or in the definition of any
term used in Article VII hereof, to GAAP shall mean GAAP as in effect on the
date hereof.
II. THE LOANS
SECTION 2.01. Tranche A Commitments and Tranche B
Commitments. (a) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, each Lender, severally and not
jointly, agrees to make Tranche A Loans to the Borrower, at any time and from
time to time after the Closing Date and prior to the Termination Date, in an
aggregate principal amount at any time outstanding not to exceed the amount of
such Lender's Tranche A Commitment set forth opposite its name in Schedule
2.01(a) annexed hereto, as such Tranche A Commitment may be reduced from time
to time in accordance with the provisions of this Agreement. Notwithstanding
the foregoing, the aggregate principal amount of Tranche A Loans outstanding at
any time shall not exceed the lesser of (A) the Total Tranche A Commitment (as
such amount may be reduced in accordance with the provisions of this Agreement)
and (B) an amount equal to the sum of (i) up to
22
<PAGE> 29
eighty-five percent (85%) of the Net Amount of Eligible Receivables, plus (ii)
the lesser of (a) $4,500,000 and (b) up to thirty percent (30%) of the Net
Amount of Eligible Inventory (this clause (B) referred to herein as the
"Borrowing Base") minus (2) the sum at such time of (x) reserves from time to
time required by reason of Section 7.01(c) hereof and (y) the Letter of Credit
Usage at such time (not to exceed $1,500,000 at any time. The Borrowing Base
will be computed monthly and a compliance certificate from a Responsible
Officer of the Borrower presenting its computation will be delivered to the
Agent in accordance with Section 6.05 hereof. The percentage referred to in
clause (B)(i) of this Section 2.01(a) may be increased or decreased by the
Agent at any time and from time to time in the exercise of its reasonable
discretion; provided, that the Agent shall have the unconditional right to
decrease such percentage if the Agent believes the Dilution Percentage equals
or will equal 5% or more. The Borrower consents to any such increases or
decreases and acknowledges that decreasing such percentage may limit or
restrict Tranche A Loans requested by the Borrower and/or require prepayments
of Tranche A Loans pursuant to Section 2.09(b) hereof.
Subject to the foregoing and within the foregoing limits, the
Borrower may borrow, repay (or, subject to the provisions of Section 2.09
hereof, prepay) and reborrow Tranche A Loans, on and after the date hereof and
prior to the Termination Date, subject to the terms, provisions and limitations
set forth herein, including, without limitation, the requirement that no
Tranche A Loan shall be made hereunder if the amount thereof exceeds the
Availability outstanding at such time.
(b) Subject to the terms and conditions and relying upon
the representations and warranties herein set forth, each Lender, severally and
not jointly, agrees to make Tranche B Loans to the Borrower, at any time and
from time to time from the date hereof to the Termination Date, in an aggregate
principal amount at any time outstanding not to exceed the amount of such
Lender's Tranche B Commitment set forth opposite its name in Schedule 2.01(b)
annexed hereto, as such Tranche B Commitment shall be reduced from time to time
in accordance with the provisions of this Agreement.
Subject to the foregoing and within the foregoing limits, the
Borrower may borrow, repay (or, subject to the provisions of Section 2.09
hereof, prepay) and reborrow Tranche B Loans, on and after the date hereof and
prior to the Termination Date, subject to the terms, provisions and limitations
set forth herein, including, without limitation, the requirement that no
Tranche B Loan shall be made hereunder if after giving effect thereto the sum
of the aggregate principal amount of the Tranche B Loans outstanding hereunder
would exceed the Total Tranche B Commitment (as such amount shall be reduced
pursuant to the provisions of this Agreement); provided, however, that in no
event shall the aggregate Tranche B Loans made on the Closing Date exceed
$12,000,000.
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SECTION 2.02. Loans. (a) The Loans made by the Lenders on
any date shall be in integral multiples of $50,000; provided, however, that the
Eurodollar Loans made on any date shall be in a minimum aggregate amount equal
to the product of $500,000 times the number of Lenders at such date.
(b) Loans shall be made ratably by the Lenders in
accordance with their respective Tranche A Commitments or Tranche B
Commitments, as the case may be; provided, however, that the failure of any
Lender to make any Loan shall not in itself relieve any other Lender of its
obligation to lend hereunder. The initial Tranche A Loans shall be made by
the Lenders against delivery of Tranche A Notes, payable to the order of the
Lenders, as referred to in Section 2.04 hereof. The initial Tranche B Loans
shall be made by the Lenders against delivery of Tranche B Notes, payable to
the order of the Lenders, as referred to in Section 2.04 hereof.
(c) Each Loan shall be either an Alternate Base Loan or a
Eurodollar Loan as the Borrower may request pursuant to Section 2.03 hereof.
Each Lender may fulfill its obligations under this Agreement by causing its
Applicable Lending Office to make such Loan; provided, however, that the
exercise of such option shall not affect the obligation of the Borrower to
repay such Loan in accordance with the term of the applicable Note. Not more
than five (5) Eurodollar Loans may be outstanding at any one time.
(d) Subject to the provisions of paragraph (e) below,
each Lender shall make its Tranche A Loans or Tranche B Loans, as the case may
be, on the proposed dates thereof by paying the amount required to the Agent in
New York, New York in immediately available funds not later than 12:00 noon,
New York City time, and the Agent shall as soon as practicable, but in no event
later than 3:00 p.m., New York City time, credit the amounts so received to the
general deposit account of the Borrower with the Agent in immediately available
funds or, if Loans are not to be made on such date because any condition
precedent to a borrowing herein specified is not met, return the amounts so
received to the respective Lenders.
(e) The Borrower shall have the right at any time upon
prior irrevocable written, telex or facsimile notice (promptly confirmed in
writing) to the Agent given in the manner and at the times specified in Section
2.03 with respect to the Loans into which conversion or continuation is to be
made, to convert all or any portion of Eurodollar Loans into Alternate Base
Loans, to convert all or any portion of Alternate Base Loans into Eurodollar
Loans (specifying the Interest Period to be applicable thereto), to convert the
Interest Period with respect to all or any portion of any Eurodollar Loans to
another permissible Interest Period, and to continue all or any portion of any
Loans into a subsequent Interest Period of the same duration, subject to the
terms and conditions
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of this Agreement (including the last sentence of Section 2.02(c) hereof) and
to the following:
(i) in the case of a conversion or continuation of
fewer than all the Loans, the aggregate principal amount of
Loans converted or continued shall not be less than $50,000 in
the case of Alternate Base Loans or $500,000 times the number
of Lenders at such time in the case of Eurodollar Loans;
(ii) accrued interest on a Eurodollar Loan (or portion
thereof) being converted or continued shall be paid by the
Borrower at the time of conversion or continuation;
(iii) if any Eurodollar Loan is converted at any time
other than the end of an Interest Period applicable thereto,
the Borrower shall make such payments associated therewith as
are required pursuant to Section 2.12;
(iv) any portion of a Loan which is subject to an
Interest Period ending on a date that is less than one (1)
month prior to the Termination Date may not be converted into,
or continued as, a Eurodollar Loan and shall be automatically
converted at the end of such Interest Period into an Alternate
Base Loan; and
(v) no Default or Event of Default shall have
occurred and be continuing.
The Interest Period applicable to any Eurodollar Loan
resulting from a conversion shall be specified by the Borrower in the
irrevocable notice of conversion delivered pursuant to this Section; provided,
that with respect to Tranche B Eurodollar Loans no Interest Period which
extends beyond the date of the next scheduled automatic reduction of the Total
Tranche B Commitment pursuant to Section 2.07(c) hereof shall be selected if as
a result of such selection the aggregate principal amount of all Tranche B
Eurodollar Loans that have Interest Periods which would expire after such date
would be in excess of the Total Tranche B Commitment then in effect less
$1,000,000; provided, however, that if no such Interest Period shall be
specified, the Borrower shall be deemed to have selected an Interest Period of
one (1) months' duration; provided, further, that no such Interest Period may
be for more than one (1) month's duration for the period commencing on the
Closing Date and ending on the earlier of (A) the 120th day following the
Closing Date and (B) the satisfactory completion by Chemical Bank of the
syndication of its Commitment and Loans (as determined by Chemical Bank). If
the Borrower shall not have given timely notice to continue any Eurodollar Loan
into a subsequent Interest Period (and shall not otherwise
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have given notice to convert such Loan), such Loan (unless repaid or required
to be repaid pursuant to the terms hereof) shall, subject to (iv) and (v)
above, automatically be converted into an Alternate Base Loan. The Agent shall
promptly advise the Lenders of any notice given pursuant to this Section and of
each Lender's portion of the continuation or conversion hereunder.
SECTION 2.03. Notice of Loans. The Borrower shall, through
a Responsible Officer of the Borrower, give the Agent irrevocable written,
telex or facsimile notice (promptly confirmed in writing) of each borrowing
(including, without limitation, a conversion as permitted by Section 2.02(e)
hereof) not later than 12:00 noon, New York City time, (i) three (3) Business
Days before a proposed Eurodollar Loan borrowing or conversion and (ii) one
Business Day before an Alternate Base Loan borrowing or conversion. Each such
notice under this Section 2.03 shall be substantially in the form of Exhibit H
annexed hereto (each a "Notice of Borrowing") and shall specify (v) whether the
Loans then being requested are to be Tranche A Loans or Tranche B Loans, (w)
whether the Loans then being requested are to be Alternate Base Loans or
Eurodollar Loans, (x) the date of such borrowing (which shall be a Business
Day) and amount thereof, (y) if such Loans are to be Eurodollar Loans, the
Interest Period with respect thereto and (z) if such Loans are to be Tranche B
Loans, the purpose(s) for which such Loans will be used. If no election as to
the type of Loan is specified in any such notice, all such Loans shall be
Tranche A Alternate Base Loans. If no Interest Period with respect to any
Eurodollar Loan is specified in any such notice, then an Interest Period of
three (3) months' duration shall be deemed to have been selected; provided,
however, that no such Interest Period may be for more than one (1) month's
duration for the period commencing on the Closing Date and ending on the
earlier of (i) the 120th day following the Closing Date and (ii) the
satisfactory completion by Chemical Bank of the syndication of its Commitment
and Loans (as determined by Chemical Bank). The Agent shall promptly advise
the Lenders of any notice given pursuant to this Section 2.03 and of each
Lender's portion of the requested borrowing.
SECTION 2.04. Notes; Repayment of Loans. (a) All Tranche
A Loans made by a Lender to the Borrower shall be evidenced by a single Tranche
A Note, duly executed on behalf of the Borrower, dated the Closing Date, in
substantially the form of Exhibit A annexed hereto, delivered and payable to
such Lender in a principal amount equal to its Tranche A Commitment to the
Borrower on such date. All Tranche B Loans made by a Lender to the Borrower
shall be evidenced by a single Tranche B Note, duly executed on behalf of the
Borrower, dated the Closing Date, in substantially the form of Exhibit B
annexed hereto, delivered and payable to such Lender in a principal amount
equal to its Tranche B Commitment in respect of the Borrower on such date. The
outstanding balance of each Loan, as evidenced by any such Note, shall mature
and be due and payable on the Termination Date.
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(b) Each Note shall bear interest from its date on the
outstanding principal balance thereof, as provided in Section 2.05 hereof.
(c) Each Lender, or the Agent on its behalf, shall, and
is hereby authorized by the Borrower to, endorse on the schedule attached to
the Tranche A Note or Tranche B Note, as applicable, of such Lender (or on a
continuation of such schedule attached to such Note and made a part thereof) an
appropriate notation evidencing the date and amount of each Loan to the
Borrower from such Lender, as well as the date and amount of each payment and
prepayment with respect thereto; provided, however, that the failure of any
person to make such a notation on a Note shall not affect any obligations of
the Borrower under such Note. Any such notation shall be conclusive and
binding as to the date and amount of such Loan or portion thereof, or payment
or prepayment of principal or interest thereon, absent manifest error.
SECTION 2.05. Interest on Loans. (a) Subject to the
provisions of Section 2.05(c) and Section 2.08 hereof, each Alternate Base Loan
shall bear interest at a rate per annum equal to the Alternate Base Rate plus
the applicable Interest Margin.
(b) Subject to the provisions of Section 2.05(c) and
Section 2.08 hereof, each Eurodollar Loan shall bear interest at a rate per
annum equal to the Adjusted LIBO Rate plus the applicable Interest Margin.
(c) Interest on each Loan shall be payable in arrears on
each applicable Interest Payment Date and on the Final Maturity Date. Interest
on each Alternate Base Loan and Eurodollar Loan shall be computed based on the
number of days elapsed in a year of 360 days. The Agent shall determine each
interest rate applicable to the Loans and shall promptly advise the Borrower
and the Lenders of the interest rate so determined.
SECTION 2.06. Fees. (a) The Borrower shall pay each
Lender, through the Agent, (i) on the first Business Day of each March, June,
September and December commencing June 3, 1996, (ii) on the date of any
reduction of the Commitments in accordance with the provisions of this
Agreement and (iii) on the Termination Date, in immediately available funds, a
commitment fee (the "Commitment Fee") of 0.375% per annum on the average daily
unused amount of the Commitment of such Lender, during the quarter (or shorter
period) ending on such date. The Commitment Fee due to each Lender under this
Section 2.06 shall commence to accrue on the date hereof and cease to accrue on
the earlier of (i) the Termination Date and (ii) the termination of the
Commitment of such Lender in accordance with the
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provisions of this Agreement. The Commitment Fee shall be calculated on the
basis of the actual number of days elapsed in a year of 360 days.
(b) Until such time as all Obligations (excluding
indemnity obligations surviving the payment in full of the Notes and the
termination of the Total Commitment) shall have been paid in full and all
commitments to lend hereunder shall have terminated, the Borrower shall pay to
the Agent for its own account an administration fee equal to $35,000 per annum
payable in full in cash on the Closing Date and in equal quarterly installments
of $8,750 commencing one year after the Closing Date. Such administration fee
shall be in addition to any reimbursement obligation of the Borrower to the
Agent under the provisions of this Agreement.
SECTION 2.07. Termination and Reduction of Commitments.
(a) Upon at least three (3) Business Days' prior irrevocable written notice
(or facsimile notice promptly confirmed in writing) to the Agent, the Borrower
may at any time in whole permanently terminate, or from time to time in part
permanently reduce, the Total Tranche A Commitment, ratably among the Lenders
in accordance with the amounts of their Tranche A Commitments; provided,
however, that the Total Tranche A Commitment shall not be reduced at any time
to an amount less than the Tranche A Loans outstanding under the Tranche A
Commitments and the Letter of Credit Usage at such time. Each partial
reduction of the Total Tranche A Commitment shall be in a minimum of $500,000
or an integral multiple of $100,000.
(b) Simultaneously with any termination or reduction of
the Total Tranche A Commitment pursuant to paragraph (a) of this Section 2.07
or otherwise, the Borrower shall pay to each Lender, through the Agent, the
Commitment Fee due and owing through and including the date of such termination
or reduction on the amount of the Tranche A Commitment of such Lender so
terminated or reduced.
(c) Upon at least three (3) Business Days' prior
irrevocable written notice (or facsimile notice promptly confirmed in writing)
to the Agent, the Borrower may at any time in whole permanently terminate, or
from time to time in part permanently reduce, the Total Tranche B Commitment,
ratably among the Lenders in accordance with the amounts of their Tranche B
Commitments; provided, however, that the Total Tranche B Commitment shall not
be reduced at any time to an amount less than the Tranche B Loans outstanding
under the Tranche B Commitments at such time. Each partial reduction of the
Total Tranche B Commitment shall be in a minimum of $500,000 or an integral
multiple of $100,000. The Total Tranche B Commitment shall be reduced
permanently and automatically by $1,000,000 on June 30, 1996 and on the last
Business Day of each September, December, March and June occurring thereafter
through and including the Final Maturity Date, such reductions to be applied
ratably among the Lenders in accordance with the amounts of their Tranche B
Commitments.
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(d) Simultaneously with any termination or reduction of
the Total Tranche B Commitment pursuant to paragraph (c) of this Section 2.07
or otherwise, the Borrower shall pay to each Lender, through the Agent, the
Commitment Fee due and owing through and including the date of such termination
or reduction on the amount of the Tranche B Commitment of such Lender so
terminated or reduced.
(e) The Total Tranche B Commitment shall be permanently
reduced on each date that a prepayment of principal of the Loans is required
pursuant to Section 2.09(d) or 2.09(e) hereof by the amount of each such
required prepayment until it is equal to zero. In any event, the Commitment of
each Lender shall automatically and permanently terminate on the Termination
Date, and all Loans still outstanding on such date shall be due and payable in
full together with accrued interest thereon.
SECTION 2.08. Interest on Overdue Amounts; Alternate Rate
of Interest. (a) If the Borrower shall default in the payment of the
principal of or interest on any Loan or any other amount becoming due
hereunder, by acceleration or otherwise, the Borrower shall on demand by the
Agent or the Required Lenders from time to time pay interest, to the extent
permitted by law, on all Obligations outstanding up to the date of actual
payment of such defaulted amount (after as well as before judgment) at a rate
per annum equal to two percent (2%) in excess of the rates otherwise applicable
thereto.
(b) In the event, and on each occasion, that on the day
two (2) Business Days prior to the commencement of any Interest Period for a
Eurodollar Loan the Agent shall have determined that dollar deposits in the
amount of each Eurodollar Loan are not generally available in the London
interbank market, or that the rate at which dollar deposits are being offered
will not reflect adequately and fairly the cost to any Lender of making or
maintaining such Eurodollar Loan during such Interest Period, or that
reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the
Agent shall as soon as practicable thereafter give written notice (or facsimile
notice promptly confirmed in writing) of such determination to the Borrower and
the Lenders, and any request by the Borrower for the making of a Eurodollar
Loan pursuant to Section 2.03 hereof or conversion or continuation of any Loan
into a Eurodollar Loan pursuant to Section 2.02 hereof shall, until the
circumstances giving rise to such notice no longer exist, be deemed to be a
request for an Alternate Base Loan. Each determination by the Agent made
hereunder shall be conclusive absent manifest error.
SECTION 2.09. Prepayment of Loans. (a) Subject to the
terms and conditions contained in this Section 2.09 and elsewhere in this
Agreement, the Borrower shall have the right to prepay any Loan at any time in
whole or from time to time in part (except in the case of a Eurodollar Loan
only on the last day of an Interest
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Period) without penalty (except as otherwise provided for herein); provided,
however, that each such partial prepayment of a Loan shall be in an integral
multiple of $50,000.
(b) The Borrower shall make prepayments of the Tranche A
Loans from time to time such that the Availability equals or exceeds zero at
all times. Any prepayments required by this paragraph (b) shall be applied as
follows: (i) first, to outstanding Tranche A Alternate Base Loans up to the
full amount thereof and then to outstanding Tranche A Eurodollar Loans up to
the full amount thereof; provided, however, that so long as no Default or Event
of Default has occurred and is continuing, the Borrower shall not be required
to make any prepayment of any Eurodollar Loan pursuant to this Section until
the last day of the Interest Period with respect thereto so long as an amount
equal to such prepayment is deposited by the Borrower in a cash collateral
account with the Agent to be held in such account on terms satisfactory to the
Agent, and (ii) second, if at such time there are undrawn Letters of Credit
outstanding, to provide Letter of Credit Cash Collateral up to the aggregate
undrawn amount of all such outstanding Letters of Credit, to be held by the
Agent for the benefit of the Lenders for application by the Agent to the
payment of any drawing made under any such Letters of Credit.
(c) The Borrower shall make prepayments of the Tranche B
Loans from time to time such that the outstanding balance of such Tranche B
Loans does not at any time exceed the Total Tranche B Commitment. Any
prepayments required by this paragraph (c) shall be applied to outstanding
Tranche B Alternate Base Loans up to the full amount thereof before they are
applied to outstanding Tranche B Eurodollar Loans; provided, however, that so
long as no Default or Event of Default has occurred and is continuing, the
Borrower shall not be required to make any prepayment of any Eurodollar Loan
pursuant to this Section (other than a prepayment resulting from a scheduled
automatic reduction in the Total Tranche B Commitment pursuant to Section
2.07(c) hereof) until the last day of the Interest Period with respect thereto
so long as an amount equal to such prepayment is deposited by the Borrower in a
cash collateral account with the Agent to be held in such account on terms
satisfactory to the Agent.
(d) Within three (3) days of (i) the sale of any assets
of the Borrower or any of its subsidiaries (excluding sales of inventory in the
ordinary course of business) or of the capital stock of the Borrower or any of
its subsidiaries (subject to Section 7.05 hereof) or (ii) the consummation of
the issuance of any debt securities of the Borrower or Holdings or any of their
respective subsidiaries, the Borrower shall make a mandatory prepayment of the
Loans in an amount equal to 100% of the proceeds received (net of taxes due and
any reasonable expenses of sale); provided, that notwithstanding the foregoing,
no payment shall be due under the foregoing provision in respect of any sale of
assets of the Borrower or any of its subsidiaries in any Fiscal
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Year until the fair market value of all assets of the Borrower and its
subsidiaries sold in such Fiscal Year equals or exceeds $250,000, at which time
100% of the proceeds received (net of taxes due and any reasonable expenses of
sale) in excess of such $250,000 shall be due and payable hereunder. Any
prepayments required by this paragraph (d) shall be applied as follows: (A)
first, to outstanding Tranche B Alternate Base Loans up to the full amount
thereof and then to outstanding Tranche B Eurodollar Loans up to the full
amount thereof, (B) second, to outstanding Tranche A Alternate Base Loans up to
the full amount thereof and then to Tranche A Eurodollar Loans up to the full
amount thereof; provided, however, that so long as no Default or Event of
Default has occurred and is continuing, the Borrower shall not be required to
make any prepayment of any Eurodollar Loan required pursuant to this Section
until the last day of the Interest Period with respect thereto so long as an
amount equal to such prepayment is deposited by the Borrower into a cash
collateral account with the Agent to be held in such account pursuant to terms
satisfactory to the Agent, (C) third, if at such time there are undrawn Letters
of Credit outstanding and Availability is less than zero, to provide Letter of
Credit Cash Collateral up to the aggregate undrawn amount of such Letters of
Credit, to be held by the Agent for the benefit of the Lenders for application
by the Agent to the payment of any drawing made under any such Letters of
Credit, and (D) fourth, to the Borrower. Nothing contained in this paragraph
(d) shall be or be deemed to be a consent to the sale of any assets or stock or
the issuance of any stock or debt securities.
(e) (i) Except as provided in clause (ii) below,
promptly and in any event not more than three (3) Business Days following the
receipt by the Agent or any Loan Party of any net proceeds of (x) any casualty
insurance on account of each separate loss, damage or injury (each, a "Casualty
Event") in excess of $500,000 (or, if there shall be continuing a Default or an
Event of Default, of the full amount of net proceeds) to any asset of such Loan
Party (including, without limitation, any Collateral), or (y) any business
interruption insurance on account of any business interruption event (each, a
"BI Event") in excess of $500,000 (or, if there shall be continuing a Default
or Event of Default, of the full amount of net proceeds), such Loan Party shall
notify the Agent of such receipt in writing or by telephone promptly confirmed
in writing, and not later than three (3) Business Days following receipt by the
Agent or such Loan Party of any such proceeds, there shall become due and
payable a prepayment of the Loans in an amount equal to 100% of such proceeds.
Prepayments from such net proceeds shall be applied as follows: (A) first, to
outstanding Tranche B Alternate Base Loans up to the full amount thereof and
then to outstanding Tranche B Eurodollar Loans up to the full amount thereof,
(B) second, to outstanding Tranche A Alternate Base Loans up to the full amount
thereof and then to Tranche A Eurodollar Loans up to the full amount thereof;
provided, however, that so long as no Default or Event of Default has occurred
and is continuing, the Borrower shall not be required to make any prepayment of
any Eurodollar Loan required pursuant to this Section until the last day of the
Interest Period
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with respect thereto so long as an amount equal to such prepayment is deposited
by the Borrower into a cash collateral account with the Agent to be held in
such account pursuant to terms satisfactory to the Agent, (C) third, if at such
time there are undrawn Letters of Credit outstanding and Availability is less
than zero, to provide Letter of Credit Cash Collateral up to the aggregate
undrawn amount of all such outstanding Letters of Credit, to be held by the
Agent for the benefit of the Lenders for application by the Agent to the
payment of any drawing made under any such Letters of Credit, and (D) fourth,
to the Borrower.
(ii) In the case of the receipt of net proceeds
described in clause (i) above with respect to a Casualty Event or BI Event, the
Borrower may elect, by written notice delivered to the Agent not later than the
third day prior to the day on which a prepayment would otherwise be required
under clause (i), (x) in the case of proceeds received with respect to a BI
Event, to use such proceeds in the ordinary course of Borrower's business and
(y) in the case of proceeds received with respect to any Casualty Event, to
apply all or a portion of such net proceeds for the purpose of replacing,
repairing, restoring or rebuilding (referred to herein as a "Rebuilding") the
relevant tangible property, and, in any such event, any required prepayment
under clause (i) above shall be reduced dollar for dollar by the amount of such
election under clause (x) or clause (y) of this sentence. An election under
this clause (ii) shall not be effective unless: (x) at the time of such
election there is continuing no Default or Event of Default; (y) the Borrower
shall have certified to the Agent that: (i) the net proceeds of the insurance
adjustment with respect to a Casualty Event, together with other funds
available to the Borrower, shall be sufficient to complete such proposed
Rebuilding in accordance with all applicable laws, regulations and ordinances;
and (ii) no Default or Event of Default has arisen or will arise as a result of
such BI Event, Casualty Event or Rebuilding; and (z) if the amount of net
proceeds in question exceeds $500,000, the Borrower shall have obtained the
written consent of the Required Lenders to such election.
(iii) In the event of an election under clause (ii)
above, pending application of the net proceeds to business operations with
respect to a BI Event or to Rebuilding with respect to a Casualty Event, the
Borrower shall not later than the time at which prepayment would have been, in
the absence of such election, required under clause (i) above, apply such net
proceeds to the prepayment of the outstanding principal balance, if any, of the
Tranche A Loans (not in permanent reduction of the Total Tranche A Commitment),
and the Borrower may elect, in the written notice delivered pursuant to clause
(ii) above, either to (i) deposit (the "Special Deposit") with the Agent, the
balance, if any, of such net proceeds remaining after such application,
pursuant to agreements in form, scope and substance reasonably satisfactory to
the Agent or (ii) apply such balance to the prepayment of the outstanding
principal balance, if any, of the Tranche B Loans (not in permanent reduction
of the Total Tranche B
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Commitment). The Special Deposit, if any, together with all earnings on such
Special Deposit, shall be available to the Borrower solely for the applicable
Rebuilding or ordinary course business operations, as the case may be;
provided, however, that at such time as a Default or Event of Default shall
occur, the balance of the Special Deposit and earnings thereon may be applied
by the Agent to repay the Obligations in such order as the Agent shall elect.
The Agent shall be entitled to require proof, as a condition to the making of
any withdrawal from the Special Deposit, that the proceeds of such withdrawal
are being applied for the purposes permitted hereunder.
(f) When making a prepayment, whether mandatory or
otherwise, pursuant to paragraph (a), (b), (c), (d) or (e) above, the Borrower
shall furnish to the Agent, not later than 11:00 a.m. (New York City time) (i)
on the date of such prepayment of Alternate Base Loans and (ii) three (3)
Business Days prior to the date of such prepayment of Eurodollar Loans,
written, telex or facsimile notice (promptly confirmed in writing) of
prepayment which shall specify the prepayment date and the principal amount of
each Loan (or portion thereof) to be prepaid, which notice shall be irrevocable
and shall commit the Borrower to prepay such Loan by the amount stated therein
on the date stated therein. All prepayments shall be accompanied by accrued
interest on the principal amount being prepaid to the date of prepayment.
(g) All prepayments under this Section 2.09 shall be
subject to Section 2.12 hereof.
(h) Except as otherwise expressly provided in this
Section 2.09, payments with respect to any paragraph of this Section 2.09 are
in addition to payments made or required to be made under any other paragraph
of this Section 2.09.
SECTION 2.10. Reserve Requirements; Change in
Circumstances. (a) Notwithstanding any other provision herein, if after the
date of this Agreement (or in the case of any assignee of any Lender, the date
of assignment) any change in applicable law or regulation or in the
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof (whether or not having the
force of law), or any change in GAAP or regulatory accounting principles
applicable to the Agent or any Lender shall: (i) subject the Agent or any
Lender (which shall for the purpose of this Section 2.10 include any assignee
or lending office of the Agent or any Lender) to any charge, fee deduction or
withholding of any kind or to any tax with respect to any amount paid or to be
paid by either the Agent or any Lender with respect to any Eurodollar Loans
made by a Lender to the Borrower or with respect to the obligations of any
Lender under Sections 2.17 through 2.20 hereof or under any Letter of Credit
(other than (x) taxes imposed on the overall net income of the Agent or such
Lender and (y) franchise taxes imposed on the Agent or such Lender, in either
case by the jurisdiction in which such Lender or the Agent has its
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principal office or its lending office with respect to such Eurodollar Loan or
any political subdivision or taxing authority of either thereof); (ii) change
the basis of taxation of payments to any Lender or the Agent of the principal
of or interest on any Eurodollar Loan or any other fees or amounts payable with
respect to any Letter of Credit or otherwise hereunder (other than franchise
taxes or taxes imposed on the overall net income of such Lender or the Agent by
the jurisdiction in which such Lender or the Agent has its principal office or
by any political subdivision or taxing authority therein); (iii) impose, modify
or deem applicable any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of, or loans or loan commitments
extended by, or Letters of Credit issued and maintained by, such Lender; or
(iv) impose on any Lender or, with respect to Eurodollar Loans, the London
interbank market, any other condition affecting this Agreement, Letters of
Credit issued and maintained by or Eurodollar Loans made by such Lender; and
the result of any of the foregoing shall be to increase the cost to any such
Lender of making or maintaining any Eurodollar Loan or Letter of Credit, or to
reduce the amount of any payment (whether of principal, interest, fee,
compensation or otherwise) receivable by such Lender or to require such Lender
to make any payment in respect of any Eurodollar Loan or Letter of Credit, then
the Borrower shall pay to such Lender or the Agent, as the case may be, upon
such Lender's or the Agent's demand, such additional amount or amounts as will
compensate such Lender or the Agent for such additional costs or reduction.
The Agent and each Lender agree to give notice to the Borrower of any such
change in law, regulation, interpretation or administration with reasonable
promptness after becoming actually aware thereof and of the applicability
thereof to the Transactions. Notwithstanding anything contained herein to the
contrary, nothing in clause (i) or (ii) of this Section 2.10(a) shall be deemed
to (x) permit the Agent or any Lender to recover any amount thereunder which
would not be recoverable under Section 2.15 hereof or (y) require the Borrower
to make any payment of any amount to the extent that such payment would
duplicate any payment made by the Borrower pursuant to Section 2.15 hereof.
(b) If at any time and from time to time after the date
of this Agreement, any Lender shall determine that the adoption of any
applicable law, rule, regulation or guideline regarding capital adequacy, or
any change in any applicable law, rule, regulation or guideline regarding
capital adequacy, including, without limitation, the July 1988 report of the
Basle Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards", or
any change in the interpretation or administration of any thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Lender (or its
lending office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or will have the effect of reducing the rate of return
on such Lender's capital or on the capital
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of such Lender's holding company, if any, as a consequence of its obligations
hereunder to a level below that which such Lender could have achieved but for
such adoption, change or compliance (taking into consideration such Lender's
policies and the policies of such Lender's holding company with respect to
capital adequacy), then from time to time the Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender for such
reduction. Each Lender agrees to give notice to the Borrower of any adoption
of, change in, or change in interpretation or administration of, any such law,
rule, regulation or guideline with reasonable promptness after becoming
actually aware thereof and of the applicability thereof to the Transactions.
(c) A statement of any Lender or the Agent setting forth
such amount or amounts, supported by calculations in reasonable detail, as
shall be necessary to compensate such Lender (or the Agent) as specified in
paragraphs (a) and (b) above shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay each Lender or the
Agent the amount shown as due on any such statement within ten (10) days after
its receipt of the same.
(d) Failure on the part of any Lender or the Agent to
demand compensation for any increased costs, reduction in amounts received or
receivable with respect to any Interest Period or any Letter of Credit or
reduction in the rate of return earned on such Lender's capital, shall not
constitute a waiver of such Lender's or the Agent's rights to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in rate of return in such Interest Period or in any
other Interest Period or with respect to such Letter of Credit. The protection
under this Section 2.10 shall be available to each Lender and the Agent
regardless of any possible contention of the invalidity or inapplicability of
any law, regulation or other condition which shall give rise to any demand by
such Lender or the Agent for compensation.
(e) Any Lender claiming any additional amounts payable
pursuant to this Section 2.10 agrees to use reasonable efforts (consistent with
legal and regulatory restrictions) to designate a different Applicable Lending
Office if the making of such a designation would avoid the need for, or reduce
the amount of, any such additional amounts and would not, in the reasonable
judgment of such Lender, be otherwise disadvantageous to such Lender.
SECTION 2.11. Change in Legality. (a) Notwithstanding
anything to the contrary herein contained, if any change in any law or
regulation or in the interpretation thereof by any governmental authority
charged with the administration or interpretation thereof shall make it
unlawful for any Lender to make or maintain any
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Eurodollar Loan or to give effect to its obligations to make Eurodollar Loans
as contemplated hereby, then, by written notice to Borrower and to the Agent,
such Lender may:
(i) declare that Eurodollar Loans will not thereafter
be made by such Lender hereunder, whereupon the Borrower shall
be prohibited from requesting Eurodollar Loans from such
Lender hereunder unless such declaration is subsequently
withdrawn; and
(ii) require that all outstanding Eurodollar Loans
made by such Lender be converted to Alternate Base Loans, in
which event (A) all such Eurodollar Loans shall be
automatically converted to Alternate Base Loans as of the
effective date of such notice as provided in paragraph (b)
below and (B) all payments of principal which would otherwise
have been applied to repay the converted Eurodollar Loans
shall instead be applied to repay the Alternate Base Loans
resulting from the conversion of such Eurodollar Loans.
(b) For purposes of Section 2.11(a) hereof, a notice to
the Borrower by any Lender shall be effective, if lawful, on the last day of
the then current Interest Period or, if there are then two or more current
Interest Periods, on the last day of each such Interest Period, respectively;
otherwise, such notice shall be effective with respect to the Borrower on the
date of receipt by the Borrower.
(c) In the event that any Lender shall have delivered to
the Borrower a notice pursuant to Section 2.11(b) hereof, the Borrower may,
provided that no Default or Event of Default shall have occurred and be
continuing, upon at least sixty (60) Business Days' prior written notice to
such Lender and the Agent (such notice to be made within 30 Business Days after
the receipt of notice from such Lender), substitute for such Lender (a
"Replaced Lender") another financial institution (a "Proposed Lender") which is
otherwise reasonably acceptable to the Agent, to assume the Commitment of such
Lender and to purchase the Notes of such Lender hereunder if: (i) such Proposed
Lender agrees to assume all of the obligations of such Replaced Lender for
consideration equal to the outstanding principal amount of the Notes payable to
such Replaced Lender plus any accrued but unpaid interest on such Notes and
accrued but unpaid fees, and other amounts in respect of the Replaced Lender's
Commitment and Loans, and (ii) the conditions to an assignment of such Replaced
Lender's Commitment and Loans set forth in Section 12.03(c) hereof have been
met. Any Proposed Lender which has met the conditions of the foregoing
sentence shall be a "Lender" for all purposes hereunder. Upon such purchase
the Replaced Lender shall no longer be a party hereto or have any rights or
benefits hereunder (except for rights or benefits that such Lender would retain
hereunder and under the other Loan
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<PAGE> 43
Documents upon payment in full of all of the Obligations) and the Proposed
Lender shall succeed to the rights and benefits, and shall assume the
obligations, of the Replaced Lender hereunder and thereunder (it being
understood that any such replacement shall not release the Replaced Lender from
any liabilities to the Borrower for any breach by the Replaced Lender of any of
its obligations hereunder nor shall any such replacement impair in any manner
any rights or remedies the Borrower may have against the Replaced Lender for
any such breach). The Agent and the Lenders shall cooperate with the Borrower
to amend the Loan Documents to reflect such substitution.
SECTION 2.12. Indemnity. The Borrower shall indemnify the
Agent and each Lender against any loss or reasonable expense (including, but
not limited to, any loss or reasonable expense sustained or incurred or to be
sustained or incurred by reason of or in connection with the execution and
delivery or assignment of, or payment under, any Letter of Credit, or in
liquidating or employing deposits from third parties acquired to affect or
maintain any Loan or part thereof as a Eurodollar Loan) which the Agent or such
Lender may sustain or incur as a consequence of the following events
(regardless of whether such events occur as a result of the occurrence of an
Event of Default or the exercise of any right or remedy of the Agent or the
Lenders under this Agreement or any other agreement, or at law): any failure of
the Borrower to fulfill on the date of any Credit Event the applicable
conditions set forth in Article V hereof applicable to it; any failure of the
Borrower to borrow hereunder after irrevocable notice of borrowing pursuant to
Section 2.03 hereof has been given, unless such failure to borrow results from
the Lenders' failure to fund such borrowing when they are otherwise required to
do so by the terms of this Agreement; any payment, prepayment or conversion of
a Eurodollar Loan on a date other than the last day of the relevant Interest
Period; any default in payment or prepayment of the principal amount of any
Loan or any part thereof or interest accrued thereon, or with respect to any
Letter of Credit, in each case as and when due and payable (at the due date
thereof, by irrevocable notice of prepayment or otherwise); or the occurrence
of an Event of Default. Without limiting the foregoing, the Borrower further
agrees to indemnify and hold harmless the Agent, each Lender as well as their
respective officers and directors, each person who controls the Agent or Lender
within the meaning of Section 15 of the Securities Act of 1933 or any
applicable state securities law and their respective successors, from and
against any and all claims, damages, losses, liabilities, costs or expenses,
joint or several, to which they or any of them may become subject under any
Federal or state securities law, rule or regulation, at common law or
otherwise, insofar as such claims, damages, losses, liabilities, costs or
expenses arise out of or are based upon the execution and delivery by the Agent
or any Lender of any Letter of Credit or the execution and delivery of any
other document in connection therewith; provided, however, that such indemnity
shall not, as to the Agent or any Lender, apply to any such claims, damages,
losses, liabilities, costs or expenses to the extent that they result from the
gross negligence or willful misconduct of the Agent or any Lender as finally
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determined by a court of competent jurisdiction after the exhaustion of all
possible appeals in respect of such determination (including by reason of lapse
of time). Such loss or reasonable expense shall include, without limitation,
an amount equal to the excess, if any, of (i) the amount of interest which
would have accrued on the principal or other amount so paid, prepaid or
converted or not borrowed for the period from the date of such payment,
prepayment or conversion or failure to borrow to, in the case of a Loan, the
last day of the Interest Period for such Loan (or, in the case of a failure to
borrow, the Interest Period for such Loan which would have commenced on the
date of such failure to borrow), at the applicable rate of interest for such
Loan provided for herein over (ii) the amount of interest (as reasonably
determined by such Lender) that would be realized by such Lender in reemploying
the funds so paid, prepaid or converted or not borrowed in United States
Treasury obligations with comparable maturities for comparable periods. Any
such Lender shall provide to the Borrower a statement, signed by an officer of
such Lender, explaining any loss or expense and setting forth, if applicable,
the computation pursuant to the preceding sentence, and such statement shall be
conclusive absent manifest error. The Borrower shall pay such Lender the
amount shown as due on any such statement within ten (10) days after the
receipt of the same. The indemnities contained herein shall survive the
expiration or termination of this Agreement and of the Letters of Credit.
SECTION 2.13. Pro Rata Treatment. (a) Except as permitted
under Sections 2.10, 2.11 and 2.15 hereof, each borrowing, each payment or
prepayment of principal of the Notes, each payment of interest on the Notes,
each reduction of the Total Commitment, the Total Tranche A Commitment or the
Total Tranche B Commitment and each payment of any fee or other amount payable
hereunder shall be made pro rata among the Lenders in the proportions that
their Commitments bear to the Total Commitment.
(b) Unless the Agent shall have been notified in writing
by any Lender prior to the date of a proposed borrowing that such Lender will
not make the amount that would constitute its pro rata share of the borrowing
on such date available to the Agent, the Agent may assume that such Lender has
made such amount available to the Agent on such date, and the Agent may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. If such amount is made available to the Agent on a date after such
borrowing date, such Lender shall pay to the Agent on demand an amount equal to
the product of (i) the daily average Federal funds rate during such period as
quoted by the Agent, times (ii) the amount of such Lender's pro rata share of
such borrowing, times (iii) a fraction the numerator of which is the number of
days that elapse from and including such borrowing date to the date on which
such Lender's pro rata share of such borrowing shall have become immediately
available to the Agent and the denominator of which is 360. A certificate of
the Agent submitted to any Lender with respect to any amounts owing under this
subsection shall be
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conclusive in the absence of manifest error. If such Lender's pro rata share
of such borrowing is not in fact made available to the Agent by such Lender
within three Business Days of such borrowing date, the Agent shall be entitled
to recover such amount with interest thereon at the rate per annum applicable
to the Loans hereunder, on demand, from the Borrower.
SECTION 2.14. Sharing of Setoffs. Each Lender agrees that
if it shall, through the exercise of a right of banker's lien, setoff or
counterclaim against the Borrower, including, but not limited to, a secured
claim under Section 506 of Title 11 of the United States Code or other security
or interest arising from, or in lieu of, such secured claim, received by such
Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, obtain payment (voluntary or involuntary) in respect of a Note held
by it as a result of which the unpaid principal portion of the Notes held by it
shall be proportionately less than the unpaid principal portion of the Notes
held by any other Lender, it shall be deemed to have simultaneously purchased
from such other Lender a participation in the Notes held by such other Lender,
so that the aggregate unpaid principal amount of the Notes and participations
in Notes held by it shall be in the same proportion to the aggregate unpaid
principal amount of all Notes then outstanding as the principal amount of the
Notes held by it prior to such exercise of banker's lien, setoff or
counterclaim was to the principal amount of all Notes outstanding prior to such
exercise of banker's lien, setoff or counterclaim; provided, however, that if
any such purchase or purchases or adjustments shall be made pursuant to this
Section 2.14 and the payment giving rise thereto shall thereafter be recovered,
such purchase or purchases or adjustments shall be rescinded to the extent of
such recovery and the purchase price or prices or adjustments restored without
interest. The Borrower expressly consents to the foregoing arrangements and
agrees that any Lender holding a participation in a Note deemed to have been so
purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by the Borrower to such
Lender as fully as if such Lender held a Note in the amount of such
participation.
SECTION 2.15. Taxes. (a) Any and all payments by the
Borrower hereunder shall be made, in accordance with Section 2.16 hereof, free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings in any such case imposed
by the United States or any political subdivision thereof, excluding:
(i) in the case of the Agent and each Lender, taxes
imposed or based on its net income, and franchise or capital
taxes imposed on it, (A) if the Agent or such Lender is
organized under the laws of the United States or any political
subdivision thereof and (B) if the Agent or such Lender is not
organized under the laws of the United States or any
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political subdivision thereof, and its principal office or
Applicable Lending Office is located in the United States, and
in the case of both (A) and (B), withholding taxes payable
with respect to payments to the Agent or such Lender at its
principal office or Applicable Lending Office under laws
(including, without limitation, any treaty, ruling,
determination or regulation) in effect on the date hereof, but
not any increase in withholding tax resulting from any
subsequent change in such laws (other than withholding with
respect to taxes imposed or based on its net income or with
respect to franchise or capital taxes), and
(ii) taxes (including withholding taxes) imposed by
reason of the failure of the Agent or any Lender, in either
case that is organized outside the United States, to comply
with Section 2.15(f) hereof (or the inaccuracy at any time of
the certificates, documents and other evidence delivered
thereunder)
(all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Taxes"). If the Borrower
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to the Lenders or the Agent, (x) the sum payable shall be
increased by the amount necessary so that after making all required deductions
(including without limitation deductions applicable to additional sums payable
under this Section 2.15) such Lender or the Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (y) the Borrower shall make such deductions and (z) the Borrower shall
pay the full amount deducted to the relevant tax authority or other authority
in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present
or future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made hereunder or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender and the Agent
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction (except as specified in
clauses (a)(i) and (ii)) on amounts payable under this Section 2.15) paid by
such Lender or the Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
This indemnification shall be made within 30 days from the date such Lender or
the Agent (as the case may be) makes written demand therefor. If any Lender
receives a refund in respect of any Taxes or Other Taxes for which such Lender
has received payment from the Borrower hereunder, such Lender
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shall promptly notify the Borrower of such refund and such Lender shall, within
30 days of receipt of a request by the Borrower, repay such refund to the
Borrower, provided that the Borrower, upon the request of such Lender, agrees
to return such refund (plus any penalties, interest or other charges) to such
Lender in the event such Lender is required to repay such refund.
(d) Within 30 days after the date of any payment of Taxes
or Other Taxes withheld by the Borrower in respect of any payment to any
Lender, the Borrower will furnish to the Agent, at its address referred to in
Section 12.01 hereof, such certificates, receipts and other documents as may be
reasonably required to evidence payment thereof.
(e) Without prejudice to the survival of any other
agreement hereunder, the agreements and obligations contained in this Section
2.15 shall survive the payment in full of principal and interest hereunder.
(f) Each Lender that is organized outside of the United
States shall deliver to the Borrower on the date hereof (or, in the case of an
assignee, on the date of the assignment) and from time to time as required for
renewal under applicable law duly completed copies of United States Internal
Revenue Service Form 1001 or 4224 (or any successor or additional forms), as
appropriate, indicating in each case that such Lender is entitled to receive
payments under this Agreement without any deduction or withholding of any
United States federal income taxes. The Agent (if the Agent is an entity
organized outside the United States) and each Lender that is organized outside
the United States shall promptly notify the Borrower and the Agent of any
change in its Applicable Lending Office and upon written request of the
Borrower such Lender shall, prior to the immediately following due date of any
payment by the Borrower or any Guarantor hereunder or under any other Loan
Document, deliver to the Borrower or such Guarantor, as the case may be (with
copies to the Agent), such certificates, documents or other evidence, as
required by the Code or Treasury Regulations issued pursuant thereto, including
without limitation Internal Revenue Service Form 4224, Form 1001 and any other
certificate or statement of exemption required by Treasury Regulation Section
1.1441-4(a) or Section 1.1441-6(c) or any subsequent version thereof, properly
completed and duly executed by such Lender establishing that such payment is
(i) not subject to withholding under the Code because such payment is
effectively connected with the conduct by such Lender of a trade or business in
the United States or (ii) totally exempt from United States tax under a
provision of an applicable tax treaty. The Borrower shall be entitled to rely
on such forms in their possession until receipt of any revised or successor
form pursuant to this Section 2.15(f). If the Agent or a Lender fails to
provide a certificate, document or other evidence required pursuant to this
Section 2.15(f), then (i) the Borrower shall be entitled to deduct or withhold
on payments to the Agent or such Lender as a result of such
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failure, as required by law, and (ii) the Borrower shall not be required to
make payments of additional amounts with respect to such withheld Taxes
pursuant to clause (x) of Section 2.15(a) to the extent such withholding is
required solely by reason of the failure of the Agent or such Lender to provide
the necessary certificate, document or other evidence.
(g) Each Lender and the Agent shall use reasonable
efforts to avoid or minimize any amounts which might otherwise be payable
pursuant to this subsection 2.15 (including seeking refunds of any amounts that
are reasonably believed not to have been correctly or legally asserted);
provided, however, that such efforts shall not include the taking of any
actions by such Lender or the Agent that would result in any tax, costs or
other expense to such Lender or the Agent (other than a tax, cost or other
expense for which such Lender or the Agent shall have been reimbursed or
indemnified by the Borrower pursuant to this Agreement or otherwise) or any
action which would or might in the reasonable opinion of such Lender or the
Agent have an adverse effect upon its business, operations or financial
condition or otherwise be disadvantageous to such Lender or the Agent.
(h) In the event that any Lender requests compensation
pursuant to Section 2.15 hereof, the Borrower may, provided that no Default or
Event of Default shall have occurred and be continuing, upon at least sixty
(60) Business Days' prior written notice to such Lender and the Agent (such
notice to be made within 30 Business Days after the request for such
compensation), substitute for such Lender (a "Replaced Lender") another
financial institution (a "Proposed Lender") which is otherwise reasonably
acceptable to the Agent, to assume the Commitment of such Lender and to
purchase the Notes of such Lender hereunder if: (i) such Proposed Lender agrees
to assume all of the obligations of such Replaced Lender for consideration
equal to the outstanding principal amount of the Notes payable to such Replaced
Lender plus any accrued but unpaid interest on such Notes and accrued but
unpaid fees, and other amounts in respect of the Replaced Lender's Commitment
and Loans, (ii) the conditions to an assignment of such Replaced Lender's
Commitment and Loans set forth in Section 12.03(c) hereof have been met and
(iii) such Proposed Lender's aggregate requested compensation, if any, pursuant
to Section 2.15 hereof with respect to such Replaced Lender's Loans and
Commitment is lower than that of the Replaced Lender. Any Proposed Lender
which has met the conditions of the foregoing sentence shall be a "Lender" for
all purposes hereunder. Upon such purchase the Replaced Lender shall no longer
be a party hereto or have any rights or benefits hereunder (except for rights
or benefits that such Lender would retain hereunder and under the other Loan
Documents upon payment in full of all of the Obligations) and the Proposed
Lender shall succeed to the rights and benefits, and shall assume the
obligations, of the Replaced Lender hereunder and thereunder (it being
understood that any such replacement shall not release the Replaced Lender from
any liabilities to the Borrower
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<PAGE> 49
for any breach by the Replaced Lender of any of its obligations hereunder nor
shall any such replacement impair in any manner any rights or remedies the
Borrower may have against the Replaced Lender for any such breach). The Agent
and the Lenders shall cooperate with the Borrower to amend the Loan Documents
to reflect such substitution.
SECTION 2.16. Payments and Computations. The Borrower
shall make each payment hereunder and under any instrument delivered hereunder
not later than 12:00 noon (New York City time) on the day when due in lawful
money of the United States (in freely transferable dollars) to the Agent at its
offices at 633 Third Avenue, New York, New York 10017-6764 for the account of
the Lenders, in immediately available funds. The Agent may charge, when due and
payable, the Borrower's account with the Agent for all interest, principal and
Commitment Fees and other fees or expenses owing to the Agent or the Lenders on
or with respect to this Agreement and/or the Loans and other Loan Documents.
If at any time there is not sufficient availability to cover any of the
payments referred to in the prior sentence, and in any event upon the
occurrence of any Default, the Borrower shall make any such payments upon
demand.
SECTION 2.17. Issuance of Letters of Credit. Upon the
request of the Borrower, and subject to the conditions set forth in Article V
hereof and such other conditions to the opening of Letters of Credit as the
Agent requires of its customers generally, the Agent shall from time to time
open standby letters of credit (each, a "Letter of Credit") for the account of
the Borrower, the aggregate undrawn amount of all outstanding Letters of Credit
not at any time to exceed $1,500,000; provided, however, that the face amount
of any Letter of Credit that the Borrower may request the Agent to open at any
time shall not exceed the Availability existing at such time. The issuance of
each Letter of Credit shall be made on at least three (3) Business Days' prior
written notice from the Borrower to the Agent, at its Domestic Lending Office,
which written notice shall be an application for a Letter of Credit on the
Agent's customary form completed to the satisfaction of the Agent, together
with the proposed form of the Letter of Credit (which shall be satisfactory to
the Agent) and such other certificates, documents and other papers and
information as the Agent may reasonably request. The Agent shall not at any
time be obligated to issue any Letter of Credit if such issuance would conflict
with, or cause the Agent or any Lender to exceed any limits imposed by, any
applicable requirements of law. The expiration date of any Letter of Credit
shall not be later than 360 days from the date of issuance thereof, and, in any
event, no Letter of Credit shall have an expiration date later than the
Termination Date. The Letters of Credit shall be issued with respect of
transactions occurring in the ordinary course of business of the Borrower.
SECTION 2.18. Payment of Letters of Credit; Reimbursement.
Upon the issuance of any Letter of Credit, the Agent shall notify each Lender
of
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the principal amount, the number, and the expiration date thereof and the
amount of such Lender's participation therein. By the issuance of a Letter of
Credit hereunder and without further action on the part of the Agent or the
Lenders, each Lender hereby accepts from the Agent a participation (which
participation shall be nonrecourse to the Agent) in such Letter of Credit equal
to such Lender's pro rata (based on its Commitment) share of such Letter of
Credit, effective upon the issuance of such Letter of Credit. Each Lender
hereby absolutely and unconditionally assumes, as primary obligor and not as a
surety, and agrees to pay and discharge, and to indemnify and hold the Agent
harmless from liability in respect of, such Lender's pro rata share of the
amount of any drawing under a Letter of Credit. Each Lender acknowledges and
agrees that its obligation to acquire participations in each Letter of Credit
issued by the Agent and its obligation to make the payments specified herein,
and the right of the Agent to receive the same, in the manner specified herein,
are absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, the occurrence and continuance of a
Default or an Event of Default hereunder, and that each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever. The
Agent shall review, on behalf of the Lenders, each draft and any accompanying
documents presented under a Letter of Credit and shall notify each Lender of
any such presentment. Promptly after it shall have ascertained that any draft
and any accompanying documents presented under such Letter of Credit appear on
their face to be in substantial conformity with the terms and conditions of the
Letter of Credit, the Agent shall give telephonic or facsimile notice to the
Lenders and the Borrower of the receipt and amount of such draft and the date
on which payment thereon will be made, and the Lenders shall, by 11:00 a.m.,
New York City time on the date such payment is to be made, pay the amounts
required to the Agent in New York, New York in immediately available funds, and
the Agent, not later than 3:00 p.m. on such day, shall make the appropriate
payment to the beneficiary of such Letter of Credit. If in accordance with
the prior sentence the Lenders shall pay any draft presented under a Letter of
Credit, then the Agent, on behalf of the Lenders, shall charge the general
deposit account of the Borrower with the Agent for the amount thereof, together
with the Agent's customary overdraft fee in the event the funds available in
such account shall not be sufficient to reimburse the Lenders for such payment
and the Borrower shall not otherwise have discharged such reimbursement
obligation by 11:00 a.m., New York City time, on the date of such payment. If
the Lenders have not been reimbursed with respect to such drawing as provided
above, the Borrower shall pay to the Agent, for the account of the Lenders, the
amount of the drawing together with interest on such amount at a rate per annum
(computed on the basis of the actual number of days elapsed over a year of 360
days) equal to the rate applicable to Alternate Rate Loans hereunder plus two
percent (2%), payable on demand. The obligations of the Borrower under this
Section 2.18 to reimburse the Lenders and the Agent for all drawings under
Letters of Credit shall be absolute, unconditional and irrevocable and shall be
satisfied strictly in accordance with their terms, irrespective of:
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(a) any lack of validity or enforceability of any Letter
of Credit;
(b) the existence of any claim, setoff, defense or other
right which the Borrower or any other person may at any time have
against the beneficiary under any Letter of Credit, the Agent or any
Lender (other than the defense of payment in accordance with the terms
of this Agreement or a defense based on the gross negligence or
willful misconduct of the Agent or any Lender) or any other person in
connection with this Agreement or any other transaction;
(c) any draft or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(d) payment by the Agent or any Lender under any Letter
of Credit against presentation of a draft or other document which does
not comply with the terms of such Letter of Credit; and
(e) any other circumstance or event whatsoever, whether
or not similar to any of the foregoing.
It is understood that in making any payment under any Letter
of Credit (x) the Agent's and any Lender's exclusive reliance on the documents
presented to it under such Letter of Credit as to any and all matters set forth
therein, including, without limitation, reliance on the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary equals the amount of such draft and whether or not any document
presented pursuant to such Letter of Credit proves to be insufficient in any
respect, if such document on its face appears to be in order, and whether or
not any other statement or any other document presented pursuant to such Letter
of Credit proves to be forged or invalid or any statement therein proves to be
inaccurate or untrue in any respect whatsoever and (y) any noncompliance in any
immaterial respect of the documents presented under such Letter of Credit with
the terms thereof shall, in each case, not be deemed willful misconduct or
gross negligence of the Agent or any Lender.
SECTION 2.19. Agent's Actions with respect to Letters of
Credit. Any Letter of Credit may, in the discretion of the Agent or its
correspondents, be interpreted by them (to the extent not inconsistent with
such Letter of Credit) in accordance with the Uniform Customs and Practice for
Documentary Credits of the International Chamber of Commerce, as adopted or
amended from time to time, or any other rules, regulations and customs
prevailing at the place where any Letter of Credit is available or the drafts
are drawn or negotiated. The Agent and its correspondents may accept and act
upon the name, signature, or act of any party purporting to be the executor,
administrator,
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receiver, trustee in bankruptcy, or other legal representative of any party
designated in any Letter of Credit in the place of the name, signature, or act
of such party.
SECTION 2.20. Letter of Credit Fees. The Borrower agrees
to pay to the Agent with respect to each Letter of Credit, (i) for the ratable
benefit of the Lenders, a letter of credit fee equal to the Interest Margin
applicable to Eurodollar Loans from time to time multiplied by the face amount
of such Letter of Credit, which fee shall be payable to the Agent at its
Domestic Lending Office quarterly in advance in immediately available funds,
plus (ii) an issuance fee and other related fees charged by the Agent for
transactions of this nature as set forth on Schedule 2.20 payable to the Agent
for its own account at its Domestic Lending Office on the date of issuance of
such Letter of Credit in immediately available funds. The Agent shall disburse
to each Lender such Lender's pro rata share of any payment of the Letter of
Credit fees referred to in clause (i) of the first sentence of this paragraph
in immediately available funds within two (2) Business Days of the Agent's
receipt of such payment.
III. COLLATERAL SECURITY
SECTION 3.1. Security Documents. The Obligations shall be
secured by the Collateral described in the Security Documents and are entitled
to the benefits thereof. Each Loan Party shall duly execute and deliver the
Security Documents, all consents of third parties necessary to permit the
effective granting of the Liens created in such agreements, financing
statements pursuant to the Uniform Commercial Code and other documents, all in
form and substance reasonably satisfactory to the Agent, as may be reasonably
required by the Agent to grant to the Lenders a valid, perfected and
enforceable first priority Lien on and security interest in the Collateral.
SECTION 3.02. Filing and Recording. The Borrower shall, at
its sole cost and expense, cause all instruments and documents given as
evidence of security pursuant to this Agreement to be duly recorded and/or
filed or otherwise perfected in all places necessary, in the opinion of the
Agent, and take such other actions as the Agent may reasonably request, in
order to perfect and protect the Liens of the Agent and Lenders in the
Collateral. Each Loan Party, to the extent permitted by law, hereby authorizes
the Agent to file any financing statement in respect of any Lien created
pursuant to the Security Documents which may at any time be required or which,
in the opinion of the Agent, may at any time be desirable although the same may
have been executed only by the Agent or, at the option of the Agent, to sign
such financing statement on behalf of such Loan Party and file the same, and
each Loan Party hereby irrevocably designates the Agent, its agents,
representatives and designees as its agent and attorney-in-fact for this
purpose. In the event that any re-recording or refiling thereof (or the filing
of any statements of continuation or assignment of any financing
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statement) is required to protect and preserve such Lien, each Loan Party
shall, at the Borrower's cost and expense, cause the same to be re-recorded
and/or refiled at the time and in the manner requested by the Agent.
IV. REPRESENTATIONS AND WARRANTIES
Each Loan Party jointly and severally represents and warrants
to each of the Lenders that both before and after giving effect to the
consummation of the Transactions:
SECTION 4.01. Organization, Legal Existence. Each Loan
Party is a legal entity with perpetual existence and is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, has the requisite power and authority to own its property and
assets and to carry on its business as now conducted and as currently proposed
to be conducted and is qualified to do business in every jurisdiction where the
failure to so qualify has or could reasonably be expected to have a Material
Adverse Effect on such Loan Party (all such jurisdictions being listed in
Schedule 4.01 annexed hereto). Each Loan Party has the corporate power to
execute, deliver and perform its obligations under this Agreement and the other
Loan Documents to which it is a party, and the Borrower has the corporate power
to borrow hereunder and to execute and deliver the Notes.
SECTION 4.02. Authorization. The execution, delivery and
performance by each of the Loan Parties of this Agreement and each of the other
Loan Documents to which it is a party, the borrowings hereunder by the
Borrower, the execution and delivery by the Borrower of the Notes, the grant of
security interests in the Collateral created by the Security Documents and the
transactions contemplated to occur under or in connection with the Holdings
Transactions (collectively, the "Transactions") (a) have been duly authorized
by all requisite corporate and, if required, stockholder action and (b) will
not (i) violate (A) any provision of law, statute, rule or regulation or the
certificate or articles of incorporation or other applicable constitutive
documents or the by-laws of any Loan Party, (B) any order of any court, or any
rule, regulation or order of any other agency of government binding upon any
Loan Party, or (C) any provisions of any indenture, agreement or other
instrument to which any Loan Party or any of their respective properties or
assets are or may be bound, (ii) be in conflict with, result in a breach of or
constitute (alone or with notice or lapse of time or both) a default under any
indenture, agreement or other instrument referred to in (b)(i)(C) above or
(iii) result in the creation or imposition of any Lien of any nature whatsoever
(other than in favor of the Agent, for the benefit of the Lenders, as
contemplated by this Agreement and the Security Documents) upon any property or
assets of any Loan Party.
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SECTION 4.03. Governmental Approvals. No registration or
filing (other than the filings necessary to perfect the Liens created by the
Security Documents, the filing of the Tender Offer Documents with the
Securities and Exchange Commission in connection with the Tender Offer, the
filing of a certificate of designation by Holdings with the Secretary of State
of the State of Delaware in connection with the issuance of the Convertible
Preferred Stock and filings made under HSR in connection with the Transactions
contemplated to occur under the Securities Purchase Agreement) with consent or
approval of, or other action by, any Federal, state or other governmental
agency, authority or regulatory body is or will be required in connection with
the Transactions, other than any which have been made or obtained and all
applicable waiting periods under HSR have expired.
SECTION 4.04. Binding Effect. This Agreement and each of
the other Loan Documents executed and delivered by any of the Loan Parties
constitute a legal, valid and binding obligation of such person, and is
enforceable in accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally.
SECTION 4.05. Material Adverse Change. Except as set forth
in Schedule 4.05 annexed hereto, there has been no material adverse change in
the business, assets, prospects, operations or financial condition of any Loan
Party since December 31, 1995.
SECTION 4.06. Litigation; Compliance with Laws; etc. (a)
Except as set forth in Schedule 4.06(a) annexed hereto, there are not any
actions, suits or proceedings at law or in equity or by or before any
governmental instrumentality or other agency or regulatory authority now
pending or, to the knowledge of any Responsible Officer of any Loan Party,
threatened against or affecting any of the Loan Parties or the businesses,
assets or rights of the any of the Loan Parties (i) which challenge any of the
Transactions or (ii) as to which it is probable (within the meaning of
Statement of Financial Accounting Standards No. 5) that there will be an
adverse determination and which, if adversely determined, could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
(b) No Loan Party is in violation of any material law, or
in default with respect to any judgment, writ, injunction, decree, rule or
regulation of any court or governmental agency or instrumentality.
SECTION 4.07. Financial Statements. (a) The Loan Parties
have heretofore furnished to the Agent Consolidated balance sheets and
statements of income and cash flows of Holdings dated as of September 30, 1995
audited by and accompanied by the opinion of independent public accountants.
Such balance sheets
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and statements of income and cash flows present fairly the Consolidated
financial condition and results of operations of Holdings and its subsidiaries
as of the dates and for the periods indicated, and such balance sheets and the
notes thereto disclose all material liabilities, direct or contingent, of
Holdings and its subsidiaries, as of the dates thereof.
(b) The Loan Parties have heretofore furnished to the
Agent quarterly projected income statements, balance sheets and cash flows of
the Borrower on a Consolidated basis through September 30, 1997 and annual
projected income statements, balance sheets and cash flows of the Borrower on a
Consolidated basis thereafter through the Final Maturity Date, together with a
schedule confirming the ability of the Borrower to consummate the Transactions
and demonstrating prospective compliance with all financial covenants contained
in this Agreement, such projections disclosing all material assumptions made by
the Borrower in formulating such projections and giving effect to the
Transactions. The projections are based upon reasonable estimates and
assumptions, all of which are reasonable in light of the conditions which
existed at the time the projections were made, have been prepared on the basis
of the assumptions stated therein, and reflect as of the Closing Date the
reasonable estimate of the Borrower of the information projected therein.
(c) The Borrower has heretofore furnished to the Agent a
Consolidated pro forma balance sheet of Holdings which sets forth information
before and after giving effect to the Transactions. Upon giving effect to the
Transactions, none of the Loan Parties will have any material liabilities,
contingent or otherwise, which are not referred to in such balance sheet or in
the notes thereto.
(d) The financial statements referred to in this Section
4.07 have been prepared in accordance with GAAP.
SECTION 4.08. Federal Reserve Regulations. (a) No Loan
Party is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying Margin
Stock.
(b) No part of the proceeds of the Loans will be used,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, (i) to purchase or carry Margin Stock or to extend credit to others
for the purpose of purchasing or carrying Margin Stock or to refund
indebtedness originally incurred for such purpose, or (ii) for any purpose
which entails a violation of, or which is inconsistent with, the provisions of
the Regulations of the Board, including, without limitation, Regulation G, T, U
or X thereof. If requested by any Lender, Holdings or any of its subsidiaries
shall furnish to such Lender a statement on Federal Reserve Form U-1 referred
to in said Regulation U.
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SECTION 4.09. Taxes. Each Loan Party has filed or caused
to be filed all Federal, state, local and foreign tax returns which are
required to be filed by it, on or prior to the date hereof, other than tax
returns in respect of taxes that (x) are not franchise, capital or income
taxes, (y) in the aggregate are not material and (z) would not, if unpaid,
result in the imposition of any material Lien on any property or assets of any
Loan Party. Except as set forth on Schedule 4.09 annexed hereto, each Loan
Party has paid or caused to be paid all taxes shown to be due and payable on
such filed returns or on any assessments received by it, other than (i) any
taxes or assessments the validity of which such Loan Party is contesting in
good faith by appropriate proceedings, and with respect to which such Loan
Party shall, to the extent required by GAAP, have set aside on its books
adequate reserves and (ii) taxes other than income, capital or franchise taxes
that in the aggregate are not material and which would not, if unpaid, result
in the imposition of any material Lien on any property or assets of any Loan
Party. Except as set forth on Schedule 4.09 annexed hereto, no Federal income
tax return of any Loan Party has been audited by the United States Internal
Revenue Service prior to the Closing Date and no Loan Party has as of the date
hereof requested or been granted any extension of time to file any Federal,
state, local or foreign tax return. No Loan Party is party to or has any
obligation under any tax sharing agreement.
SECTION 4.10. Employee Benefit Plans. With respect to the
provisions of ERISA:
(i) No Reportable Event has occurred or is continuing with
respect to any Pension Plan.
(ii) No prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) has occurred with respect to any Plan
subject to Part 4 of Subtitle B of Title I of ERISA.
(iii) None of the Loan Parties or any ERISA Affiliate is now,
or has been during the preceding five years, obligated to contribute to a
Pension Plan or a Multiemployer Plan. None of the Loan Parties or any ERISA
Affiliate has (A) ceased operations at a facility so as to become subject to
the provisions of Section 4062(e) of ERISA, (B) withdrawn as a substantial
employer so as to become subject to the provisions of Section 4063 of ERISA,
(C) ceased making contributions to any Pension Plan subject to the provisions
of Section 4064(a) of ERISA to which any Loan Party or any ERISA Affiliate made
contributions, (D) incurred or caused to occur a "complete withdrawal" (within
the meaning of Section 4203 of ERISA) or a "partial withdrawal" (within the
meaning of Section 4205 of ERISA) from a Multiemployer Plan that is a Pension
Plan so as to incur withdrawal liability under Section 4201 of ERISA (without
regard to subsequent reduction or waiver of such liability under Section 4207
or 4208 of
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ERISA), or (E) been a party to any transaction or agreement under which the
provisions of Section 4204 of ERISA were applicable.
(iv) No notice of intent to terminate a Pension Plan has been
filed, nor has any Plan been terminated pursuant to the provisions of Section
4041(e) of ERISA.
(v) The PBGC has not instituted proceedings to terminate (or
appoint a trustee to administer) a Pension Plan and no event has occurred or
condition exists which might constitute grounds under the provisions of Section
4042 of ERISA for the termination of (or the appointment of a trustee to
administer) any such Plan.
(vi) With respect to each Pension Plan that is subject to the
provisions of Title I, Subtitle B, Part 3 of ERISA, the funding method used in
connection with such Plan is acceptable under ERISA, and the actuarial
assumptions and methods used in connection with funding such Pension Plan
satisfy the requirements of Section 302 of ERISA. The assets of each such
Pension Plan (other than the Multiemployer Plans) are at least equal to the
present value of the greater of (i) accrued benefits (both vested and
non-vested) under such Plan, or (ii) "benefit liabilities" (within the meaning
of Section 4001(a)(16) of ERISA) under such Plan, in each case as of the latest
actuarial valuation date for such Plan (determined in accordance with the same
actuarial assumptions and methods as those used by the Plan's actuary in its
valuation of such Plan as of such valuation date). No such Pension Plan has
incurred any "accumulated funding deficiency" (as defined in Section 412 of the
Code), whether or not waived.
(vii) There are no actions, suits or claims pending (other
than routine claims for benefits) or, to the knowledge of any Loan Party or any
ERISA Affiliate, which could reasonably be expected to be asserted, against any
Plan or the assets of any such Plan. No civil or criminal action brought
pursuant to the provisions of Title I, Subtitle B, Part 5 of ERISA is pending
or, to the knowledge of any Loan Party, threatened against any fiduciary or any
Plan. None of the Plans or any fiduciary thereof (in its capacity as such) has
been the direct subject of any audit, investigation or examination by any
governmental or quasi-governmental agency.
(viii) All of the Plans comply currently, and have complied in
the past, both as to form and operation in all material respects, with their
terms and with the provisions of ERISA and the Code, and all other applicable
laws, rules and regulations; all necessary governmental approvals for the Plans
have been obtained and a favorable determination as to the qualification under
Section 401(a) of the Code of each of the Plans which is an employee pension
benefit plan (within the meaning of Section 3(2) of ERISA) has been made by the
Internal Revenue Service and a recognition of exemption from federal income
taxation under Section 501(c) of the Code of each of the funded employee
welfare benefit plans (within the meaning of Section 3(1) of
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ERISA) has been made by the Internal Revenue Service, and nothing has occurred
since the date of each such determination or recognition letter that would
adversely affect such qualification.
SECTION 4.11. No Material Misstatements. No information,
report, financial statement, exhibit or schedule prepared or furnished by or on
behalf of any Loan Party to the Agent or any Lender in connection with any of
the Transactions or this Agreement, the Security Documents, the Notes or any
other Loan Documents or included therein contained or contains any material
misstatement of fact or omitted or omits to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
SECTION 4.12. Investment Company Act; Public Utility
Holding Company Act. No Loan Party is an "investment company" as defined in,
or is otherwise subject to regulation under, the Investment Company Act of
1940. No Loan Party is a "holding company" as that term is defined in or is
otherwise subject to regulation under, the Public Utility Holding Company Act
of 1935.
SECTION 4.13. Security Interest. Each of the Security
Documents creates and grants to the Agent, for the benefit of the Lenders, a
legal, valid and perfected first priority security interest in the collateral
identified therein (other than collateral located in jurisdictions outside the
United States or the Canadian provinces of Ontario, Manitoba, Saskatchewan,
Nova Scotia, British Columbia or Alberta and collateral consisting of stock of
issuers not incorporated in the United States, as to which no representation or
warranty is made) except as priority may be limited by bankruptcy, insolvency
or other laws affecting the enforcement of creditors' rights generally. Such
collateral or property is not subject to any other Liens whatsoever, except
Liens permitted by Section 7.01 hereof.
SECTION 4.14. Use of Proceeds. (a) All proceeds of each
borrowing under the Tranche A Commitment after the Closing Date shall be used
to provide for working capital requirements of the Borrower.
(b) All proceeds of each borrowing under the Tranche B
Commitment on the Closing Date, if any, shall be used to refinance all
outstanding Indebtedness of the Borrower to Banque Paribas, Union Bank and
Banque Indosuez, and to pay costs in connection with this Agreement and the
other Loan Documents. All proceeds of each subsequent borrowing under the
Tranche B Commitment after the Closing Date shall be used to finance Permitted
Distributions and Permitted Acquisitions.
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SECTION 4.15. Subsidiaries. As of the Closing Date,
Schedule 4.15 annexed hereto sets forth each subsidiary of each Loan Party, its
jurisdiction of incorporation, its capitalization and ownership of capital
stock of each such subsidiary.
SECTION 4.16. Title to Properties; Possession Under Leases;
Trademarks. (a) Each Loan Party has good title to, or valid leasehold
interest in, all of its respective properties and assets shown on the most
recent balance sheet referred to in Section 4.07(a) hereof and all assets and
properties acquired since the date of such balance sheet, except for such
properties as are no longer used or useful in the conduct of its business or as
have been disposed of in the ordinary course of business, and except for minor
defects in title that do not interfere with the ability of any Loan Party to
conduct its business as now conducted. All such assets and properties are free
and clear of all Liens other than those permitted by Section 7.01 hereof.
(b) Each Loan Party has complied with all material
obligations under all leases to which it is a party and under which it is in
occupancy, and all such leases are in full force and effect and each Loan Party
enjoys peaceful and undisturbed possession under all such leases.
(c) Each Loan Party owns or has the right to use to the
extent required all material trademarks, trademark rights, trade names, trade
name rights, copyrights, patents, patent rights and licenses which are
necessary for the conduct of the business of such Loan Party. To the best
knowledge of any Loan Party no Loan Party is infringing upon or otherwise
acting adversely to any of such trademarks, trademark rights, trade names,
trade name rights, copyrights, patent rights or licenses owned by any other
person or persons. There is no claim or action by any such other person
pending, or to the knowledge of any Responsible Officer of any Loan Party,
threatened, against any Loan Party with respect to any of the rights or
property referred to in this Section 4.16(c).
(d) (i) As of the December 31, 1995, Schedule 4.16(d)
annexed hereto sets forth all of the assets of each foreign subsidiary of the
Borrower and all assets of each Loan Party located in jurisdictions outside the
United States and the Canadian provinces of Ontario, Manitoba, Saskatchewan,
Nova Scotia, British Columbia or Alberta, and (ii) as of the Closing Date, the
value of such assets does not exceed $4,350,000.
SECTION 4.17. Solvency. (a) The fair salable value of the
assets of Holdings and its Consolidated subsidiaries is not less than the
amount that will be required to be paid on or in respect of the probable
liability on the existing debts and other liabilities (including contingent
liabilities) of Holdings and its Consolidated subsidiaries, as they become
absolute and mature.
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(b) The assets of Holdings and its Consolidated
subsidiaries do not constitute unreasonably small capital for Holdings and its
Consolidated subsidiaries to carry out their business as now conducted and as
proposed to be conducted including the capital needs of Holdings and its
Consolidated subsidiaries, taking into account the particular capital
requirements of the business conducted by Holdings and its Consolidated
subsidiaries and projected capital requirements and capital availability
thereof.
(c) No Loan Party intends to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be received by such Loan Party, and of amounts to be payable
on or in respect of debt of such Loan Party). The cash flow of Holdings and
its Consolidated subsidiaries, after taking into account all anticipated uses
of the cash of Holdings and its Consolidated subsidiaries, will at all times be
sufficient to pay all such amounts on or in respect of debt of Holdings and its
Consolidated subsidiaries when such amounts are required to be paid.
(d) No Loan Party believes that final judgments against
it in actions for money damages presently pending will be rendered at a time
when, or in an amount such that, it will be unable to satisfy any such
judgments promptly in accordance with their terms (taking into account the
maximum reasonable amount of such judgments in any such actions and the
earliest reasonable time at which such judgments might be rendered). The cash
flow of Holdings and its Consolidated subsidiaries, after taking into account
all other anticipated uses of the cash of Holdings and its Consolidated
subsidiaries (including the payments on or in respect of debt referred to in
paragraph (c) of this Section), will at all times be sufficient to pay all such
judgments promptly in accordance with their terms.
SECTION 4.18. Permits, etc. Each Loan Party possesses all
licenses, permits, approvals and consents, including, without limitation, all
environmental, health and safety licenses, permits, approvals and consents
(collectively, "Permits") of all Federal, state and local governmental
authorities as required to conduct properly its business, each such Permit is
and will be in full force and effect, each Loan Party is in compliance in all
material respects with all such Permits, and no event (including, without
limitation, any violation of any law, rule or regulation) has occurred which
allows the revocation or termination of any such Permit or any restriction
thereon.
SECTION 4.19. Compliance with Environmental Laws. Except
as disclosed in Schedule 4.19 hereto: (i) the operations of the Loan Parties
comply in all material respects with all applicable Environmental Laws; (ii)
the Loan Parties and all of their present facilities or operations, as well as
to the knowledge of the Loan Parties,
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their past facilities or operations, are not subject to any judicial proceeding
or administrative proceeding or any outstanding written order or agreement with
any governmental authority or private party respecting (a) any Environmental
Law, (b) any Remedial Work, or (c) any material Environmental Claims arising
from the Release of a Contaminant into the environment; (iii) to the best of
the knowledge of the Loan Parties, none of their operations is the subject of
any Federal or state investigation evaluating whether any Remedial Work is
needed to respond to a Release of any Contaminant into the environment in
violation of any Environmental Law; (iv) no Loan Party has filed any notice
under any Environmental Law indicating past or present treatment, storage, or
disposal of a Hazardous Material or reporting a spill or Release of a
Contaminant into the environment; (v) to the best of the knowledge of the
Borrower and its subsidiaries, no Loan Party has any material contingent
liability in connection with any Release of any Contaminant into the
environment; (vi) none of the operations of any Loan Party involves the
generation, transportation, treatment or disposal of Hazardous Materials except
for Hazardous Materials used in the ordinary course of business of the Loan
Parties in accordance with Environmental Laws; (vii) no Loan Party has disposed
of any Contaminant by placing it in or on the ground or waters of any premises
owned, leased or used by any of them and to the knowledge of the Loan Parties
neither has any lessee, prior owner, or other person, in either case where such
disposal could reasonably be expected to have a Material Adverse Effect; (viii)
no underground storage tanks or surface impoundments are on any property of any
Loan Party; and (ix) no Lien in favor of any governmental authority for (A) any
liability under any Environmental Law or regulation, or (B) damages arising
from or costs incurred by such governmental authority in response to a Release
of a Contaminant into the environment, has been filed or attached to the
property of any Loan Party.
SECTION 4.20. No Change in Credit Criteria or Collection
Policies. There has been no material change in credit criteria or collection
policies concerning account receivables of the Borrower since December 31,
1995. Without duplication, to the best knowledge of the Borrower, no Eligible
Receivables of the Borrower are subject to any claims, defenses or setoffs. To
the best knowledge of the Borrower, all account receivables (including Eligible
Receivables) are valid, binding and enforceable obligations of account debtors,
subject to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally.
SECTION 4.21. Securities Purchase Agreement; Tender Offer.
(a) (i) The execution, delivery and performance by Holdings of the Securities
Purchase Agreement has been duly authorized by all necessary action on the part
of Holdings, (ii) the Securities Purchase Agreement constitutes the valid,
binding and enforceable obligation of each party thereto, subject to the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights
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generally, and are in full force and effect without default or waiver of any of
the conditions thereunder, (iii) there are no governmental consents, filings,
approvals or notices required to be made or obtained in connection with the
execution, delivery and performance of the Securities Purchase Agreement
except such as have been duly made, obtained or delivered and (iv) the
representations and warranties made by Holdings in the Securities Purchase
Agreement are hereby incorporated herein by reference with the same effect as
though made by Holdings hereunder and set forth herein in their entirety.
(b) (i) There are no governmental consents, filings,
approvals or notices required to be made or obtained in connection with the
Tender Offer except such as have been duly made, obtained or delivered, (ii)
pursuant to the Tender Offer Holdings has acquired not more than 6,500,000
shares of its issued and outstanding stock for a total purchase price of not
more than $19,500,000 pursuant to the Tender Offer, (iii) such stock has been
acquired by Holdings free and clear of any and all liens, security interests,
claims and encumbrances and (iv) none of the terms and conditions set forth in
the Tender Offer Documents have been waived or modified, except such waivers or
modifications as may have been approved in writing by the Agent or the minimum
tender requirement.
SECTION 4.22. Real Property. No real property is owned in
fee by any Loan Party.
SECTION 4.23. Bank Accounts. As of the Closing Date,
Schedule 4.23 annexed hereto sets forth a list of all bank accounts of each
Loan Party.
V. CONDITIONS OF CREDIT EVENTS
The obligation of each Lender to make Loans and extend other
Credits hereunder shall be subject to the following conditions precedent:
SECTION 5.01. All Credit Events. On each date on which a
Credit Event is to occur:
(a) The Agent shall have received a Notice of Borrowing
as required by Section 2.03 hereof or a request for the issuance of a
Letter of Credit pursuant to Section 2.17 hereof.
(b) The representations and warranties set forth in
Article IV hereof and in any documents delivered herewith, including,
without limitation, the Loan Documents, shall be true and correct in
all material respects with the same effect
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as though made on and as of such date (except insofar as such representations
and warranties relate expressly to an earlier date).
(c) The Borrower shall be in compliance with all the
terms and provisions contained herein on its part to be observed or
performed, and at the time of and immediately after giving effect to
such Credit Event no Default or Event of Default shall have occurred
and be continuing.
(d) The Agent shall have received a certificate signed by
the Financial Officer of the Borrower (i) as to the compliance with
(b) and (c) above and (ii) with respect to each Tranche A Loan and
each Letter of Credit, demonstrating that after giving effect thereto
Availability is zero or greater.
SECTION 5.02. First Borrowing. The obligations of the
Lenders in respect of the first Credit Event hereunder are subject to the
following additional conditions precedent:
(a) The Lenders shall have received the favorable written
opinion of counsel for each Loan Party, substantially in the form of
Exhibit C hereto, dated the Closing Date, addressed to the Lenders and
satisfactory to the Agent.
(b) The Lenders shall have received (i) a copy of the
certificate or articles of incorporation or constitutive documents, in
each case as amended to date, of each Loan Party, certified as of a
recent date by the Secretary of State or other appropriate official of
the state of its organization, and a certificate as to the good
standing of each from such Secretary of State or other official, in
each case dated as of a recent date; (ii) a certificate of the
Secretary of each Loan Party, dated the Closing Date and certifying
(A) that attached thereto is a true and complete copy of such person's
By-laws as in effect on the date of such certificate and at all times
since a date prior to the date of the resolution described in item (B)
below, (B) that attached thereto is a true and complete copy of a
resolution adopted by such person's Board of Directors authorizing the
execution, delivery and performance of this Agreement, the Security
Documents, the Notes, the other Loan Documents and the Credit Events
hereunder, as applicable, and that such resolution has not been
modified, rescinded or amended and is in full force and effect, (C)
that such person's certificate or articles of incorporation or
constitutive documents has not been amended since the date of the last
amendment thereto shown on the certificate of good standing furnished
pursuant to (i) above, and (D) as to the incumbency and specimen
signature of each of such person's officers executing this Agreement,
the Notes, each Security Document or any other Loan Document delivered
in connection herewith or therewith, as applicable; (iii) a
certificate of another of such person's
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officers as to incumbency and signature of its Secretary; and (iv) such other
documents as the Agent or any Lender may reasonably request.
(c) The Agent shall have received a certificate, dated
the Closing Date and signed by the Financial Officer of the Borrower,
confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 5.01 hereof (including, without
limitation, a financial model with computations demonstrating
prospective compliance with all financial covenants contained in this
Agreement) and the conditions set forth in this Section 5.02.
(d) Each Lender shall have received its Tranche A Note
and Tranche B Note duly executed by the Borrower, payable to its order
and otherwise complying with the provisions of Section 2.04 hereof.
(e) The Agent shall have received the Security Documents
and certificates evidencing the Pledged Stock, together with undated
stock powers executed in blank, each duly executed by the applicable
Grantors.
(f) The Agent shall have received certified copies of
requests for copies or information on Form UCC-11 or certificates
satisfactory to the Lenders of a UCC Reporter Service, listing all
effective financing statements which name as debtor any Loan Party and
which are filed in the appropriate offices in the States in which are
located the chief executive office and other operating offices of such
person, together with copies of such financing statements. With
respect to any Liens not permitted pursuant to Section 7.01 hereof,
the Agent shall have received termination statements in form and
substance satisfactory to it.
(g) Each document (including, without limitation, each
Uniform Commercial Code financing statement) required by law or
requested by the Agent to be filed, registered or recorded in order to
create in favor of the Agent for the benefit of the Lenders a first
priority perfected security interest in the Collateral shall have been
properly filed, registered or recorded in each jurisdiction in which
the filing, registration or recordation thereof is so required or
requested. The Agent shall have received an acknowledgment copy, or
other evidence satisfactory to it, of each such filing, registration
or recordation.
(h) The Agent shall have received the results of a search
of tax and other Liens, and judgments and of the Uniform Commercial
Code filings made with respect to each Loan Party in the jurisdictions
in which each Loan Party is doing business and/or in which any
Collateral is located, and in which Uniform Commercial Code filings
have been made against each Loan Party pursuant to paragraph (g)
above.
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(i) The Lenders and the Agent shall have received and
determined to be in form and substance satisfactory to them, or, as
applicable, concluded that:
(i) the most recent (dated within thirty (30) days of
the Closing Date) schedule and aging of accounts receivable
and inventory designations of the Borrower;
(ii) a copy of a field examination of the Borrower's
books and records;
(iii) evidence of the compliance by the Borrower with
Section 6.03 hereof;
(iv) the financial statements described in Section
4.07 hereof;
(v) the Transactions are in compliance with all
applicable laws and regulations;
(vi) the results of an environmental audit with
respect to the Borrower's and its subsidiaries' properties and
operations conducted by a firm satisfactory to the Agent and
the Lenders, and the scope, methodology and results of such
environmental audit shall be satisfactory to the Agent in all
respects;
(vii) evidence of payment of all fees owed to the Agent
and the Lenders by the Borrower under this Agreement, the
Commitment Letter or otherwise;
(viii) evidence that all requisite third party consents
(including, without limitation, consents with respect to each
of the Loan Parties to the Transactions) have been received;
(ix) copies of all major customer and supplier
contracts with respect to the Borrower;
(x) there has been no material adverse change in the
business, assets, prospects, operations or financial condition
of Holdings and its subsidiaries since December 31, 1995;
(xi) evidence of the repayment of all amounts owing
under or in connection with, and the termination of, all
security interest filings relating to, existing credit
facilities; and
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(xii) there are no actions, suits or proceedings at law
or in equity or by or before any governmental instrumentality
or other agency or regulatory authority now pending or
threatened against or affecting the Borrower or any of its
subsidiaries or any of their respective businesses, assets or
rights which challenge any of the Transactions.
(j) The Agent and the Lenders shall have had the
opportunity, if they so choose, to examine the books of account and
other records and files of each of the Loan Parties and to make copies
thereof, and to conduct a pre-closing audit which shall include,
without limitation, verification of Eligible Receivables, payment of
payroll taxes and accounts payable and formulation of an opening
Borrowing Base, and the results of such examination and audit shall
have been satisfactory to the Agent and Lenders in all respects.
(k) The Agent shall have received and had the opportunity
to review and determine to be in form and substance satisfactory to
it:
(i) copies of all lease agreements to which Holdings
or any of its subsidiaries is a party; and
(ii) copies of all loan agreements, notes and other
documentation evidencing Indebtedness for borrowed money of
each of the Loan Parties.
(l) Messrs. Kaye, Scholer, Fierman, Hays & Handler, LLP,
counsel to the Agent, shall have received payment in full for all
reasonable legal fees charged, and all reasonable costs and expenses
incurred, by such counsel through the Closing Date in connection with
the transactions contemplated under this Agreement, the Security
Documents and the other Loan Documents and instruments in connection
herewith and therewith.
(m) The Agent and the Lenders shall have received
evidence satisfactory to the Agent and Lenders in all respects that:
(i) Holdings shall have received not less than (x)
$35,000,000 as gross cash proceeds from the Investor Group in
consideration for the issuance to the Investor Group of
Convertible Preferred Stock and (y) $10,000,000 as gross cash
proceeds from the sale to WCAS CP II of the WCAS Subordinated
Note and related shares of Holdings' common stock pursuant to
the Securities Purchase Agreement; Holdings shall have applied
the cash proceeds from the issuance of the Convertible
Preferred Stock and the sale of the WCAS Subordinated Note and
shares of Holdings' common stock to fund the purchase of
shares pursuant to the
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Tender Offer and to the redemption of Holdings' 9 1/4% Senior
Subordinated Notes pursuant to the Redemption and to pay fees
and expenses associated therewith and with the issuance of the
WCAS Subordinated Note;
(ii) the Redemption shall have occurred and the
aggregate amount paid on or prior to the Closing Date pursuant
to the Redemption shall be equal to the Redemption Amount;
(iii) all regulatory approvals necessary to consummate
the Tender Offer have been obtained and any applicable waiting
period under HSR shall have expired;
(iv) pursuant to the Tender Offer Holdings shall have
acquired not more than 6,500,000 shares of its issued and
outstanding stock for a total cash purchase price of not more
than $19,500,000;
(v) Holdings shall have contributed cash to the
equity of the Borrower in an amount equal to (A) the gross
cash proceeds received from the issuance of Convertible
Preferred Stock and the sale of the WCAS Subordinated Note and
the shares of Holdings' common stock minus (B) an amount equal
to the sum of (w) the aggregate purchase price paid by
Holdings for shares acquired pursuant to the Tender Offer, (x)
the Redemption Amount, (y) the aggregate amount of fees and
expenses incurred by Holdings in connection with the Holdings
Transactions and (z) $50,000;
(vi) WCAS CP II and WCAS VII collectively own not less
than a majority (on a fully diluted basis) of all classes of
the issued and outstanding capital stock and are entitled to
cast the votes required to elect a majority of the Board of
Directors of Holdings; and
(vii) Holdings owns 100% of all classes of the issued
and outstanding capital stock of the Borrower.
(n) The Agent shall have determined that the terms and
provisions of all agreements and documents in connection with each of
the Holdings Transactions, including, without limitation, the WCAS
Subordinated Note, the Securities Purchase Agreement and the Tender
Offer Documents, are satisfactory in form and substance and the Agent
shall have received such legal opinions, certificates and copies of
necessary governmental filings and consents as the Agent shall have
requested in connection therewith, and shall have
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determined to its satisfaction that the consummation of the Tender
Offer and other transactions contemplated by the Holdings Transactions
are in compliance with all applicable laws and regulations.
(o) The corporate structure and capitalization of each of
the Loan Parties shall be satisfactory to the Lenders in all respects
and the Lenders shall have received evidence reasonably satisfactory
to them in all respects that, after giving effect to the Transactions,
the stockholders equity of the Borrower shall be at least $50,000,000.
(p) All legal matters in connection with the Transactions
shall be satisfactory to the Agent, the Lenders and the Agent's
counsel.
(q) The Borrower shall have executed and delivered to the
Agent a disbursement authorization letter with respect to the
disbursement of the proceeds of the Credit Events made on the Closing
Date, in form and substance satisfactory to the Agent.
(r) The Agent shall have received such other documents as
the Lenders or the Agent or Agent's counsel shall reasonably deem
necessary.
VI. AFFIRMATIVE COVENANTS
Each Loan Party covenants and agrees with each Lender that, so
long as this Agreement shall remain in effect or the principal of or interest
on any Note, any amount under any Letter of Credit or any fee, expense or other
Obligation payable hereunder or in connection with any of the Transactions
shall be unpaid (excluding indemnity obligations surviving the payment in full
of the Notes and the termination of the Total Commitment), it will, and will
cause each of its subsidiaries and, with respect to Section 6.07 hereof, each
ERISA Affiliate, to:
SECTION 6.01. Legal Existence. Do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence.
SECTION 6.02. Businesses and Properties. At all times do
or cause to be done all things necessary to preserve, renew and keep in full
force and effect the material rights, licenses, Permits, franchises, patents,
copyrights, trademarks and trade names material to the conduct of its
businesses; maintain and operate such businesses in the same general manner in
which they are presently conducted and operated; comply with all material laws,
rules, regulations and governmental orders (whether Federal, state or local)
applicable to the operation of such businesses whether now in
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effect or hereafter enacted (including, without limitation, all applicable
laws, rules, regulations and governmental orders relating to public and
employee health and safety and all Environmental Laws) and with any and all
other applicable laws, rules, regulations and governmental orders, the lack of
compliance with which could reasonably be expected to have a Material Adverse
Effect; take all actions which may be required to obtain, preserve, renew and
extend all Permits and other authorizations which are material to the operation
of such businesses; and at all times maintain, preserve and protect all
property material to the conduct of such businesses and keep such property in
good repair, working order and condition, reasonable wear and tear excluded,
and from time to time make, or cause to be made, all needful and proper
repairs, renewals, additions, improvements and replacements thereto necessary
in order that the business carried on in connection therewith may be properly
conducted at all times.
SECTION 6.03. Insurance. (a) Keep its insurable
properties adequately insured at all times by financially sound and reputable
insurers, (b) maintain such other insurance, to such extent and against such
risks, including fire and other risks insured against by extended coverage, as
is customary with companies similarly situated and in the same or similar
businesses, provided, however, that such insurance shall insure the property of
the Loan Parties against all risk of physical damage, including, without
limitation, loss by fire, explosion, theft, fraud and such other casualties as
may be reasonably satisfactory to the Agent, but in no event at any time in an
amount less than the replacement value of the Collateral, (c) maintain in full
force and effect public liability insurance against claims for personal injury
or death or property damage occurring upon, in, about or in connection with the
use of any properties owned, occupied or controlled by any Loan Party, in such
amount as the Agent shall reasonably deem necessary, (d) maintain business
interruption insurance to such extent as is customary with companies similarly
situated and in the same or similar businesses, and (e) maintain such other
insurance as may be required by law or as may be reasonably requested by the
Agent for purposes of assuring compliance with this Section 6.03. All
insurance covering tangible personal property subject to a Lien in favor of the
Agent for the benefit of the Lenders granted pursuant to the Security Documents
shall provide that, in the case of each separate loss the full amount of
insurance proceeds shall be payable to the Agent and shall further provide for
at least 30 days' prior written notice to the Agent of the cancellation or
substantial modification thereof.
SECTION 6.04. Taxes. Pay and discharge promptly when due
all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits or in respect of its property before the same shall
become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise,
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which, if unpaid, might give rise to Liens upon such properties or any part
thereof except as the same may be contested in good faith by appropriate
proceedings.
SECTION 6.05. Financial Statements, Reports, etc. Furnish
to the Agent, with copies for each of the Lenders:
(a) within 90 days after the end of each Fiscal Year, (i)
Consolidated and consolidating balance sheets and Consolidated and
consolidating income statements showing the financial condition of
Holdings and its subsidiaries as of the close of such Fiscal Year and
the results of their operations during such year, (ii) a Consolidated
and consolidating statement of shareholders' equity and a Consolidated
and consolidating statement of cash flow of Holdings and its
subsidiaries, as of the close of such Fiscal Year, comparing such
financial condition and results of operations to such financial
condition and results of operations for the comparable period during
the immediately preceding Fiscal Year, all the foregoing Consolidated
financial statements to be audited by independent public accountants
acceptable to the Agent (which report shall not contain any
qualification except with respect to new accounting principles
mandated by the Financial Accounting Standards Board), and to be in
form and substance acceptable to the Agent, (iii) unaudited
Consolidated and consolidating income statements showing the financial
condition of the Borrower and its subsidiaries as of the close of such
Fiscal Year and the results of their operation during such year, and
(iv) a Consolidated and consolidating statement of shareholders'
equity and a Consolidated and consolidating statement of cash flow of
the Borrower and its subsidiaries, as of the close of such Fiscal
Year, comparing such financial condition and results of operations to
such financial condition and results of operations for the comparable
period during the immediately preceding Fiscal Year, the financial
statements referred to in (iii) and (iv) above to be prepared and
certified by the Financial Officer of the Borrower as presenting
fairly the financial condition and results of operations of the
Borrower and its subsidiaries and as having been prepared in
accordance with GAAP; provided, however, that if at any time the
Borrower's assets and revenues cease to constitute at least 90% of the
Consolidated total revenues and Consolidated total assets of Holdings,
the Loan Parties shall deliver to the Agent (with copies for each of
the Lenders), in lieu of the foregoing financial statements, the
Consolidated and consolidating balance sheets and Consolidated and
consolidating income statements showing the financial condition of
each of Holdings and the Borrower and their respective subsidiaries as
of the close of such Fiscal Year and the results of their operations
during such year, and (ii) a Consolidated and consolidating statement
of shareholders' equity and a Consolidated and consolidating statement
of cash flow of each of Holdings and the Borrower and their respective
subsidiaries, as of the close of such Fiscal Year, comparing such
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financial condition and results of operations to such financial
condition and results of operations for the comparable period during
the immediately preceding Fiscal Year, all the foregoing financial
statements to be audited by independent public accountants acceptable
to the Agent (which report shall not contain any qualification except
with respect to new accounting principles mandated by the Financial
Accounting Standards Board), and to be in form and substance
acceptable to the Agent;
(b) within 45 days after the end of each of the first
three (3) fiscal quarters of the Borrower and Holdings, (i) unaudited
Consolidated and consolidating balance sheets and Consolidated and
consolidating income statements showing the financial condition and
results of operations of each of Holdings and the Borrower and their
respective subsidiaries as of the end of each such quarter, (ii) a
Consolidated and consolidating statement of shareholders' equity and
(iii) a Consolidated and consolidating statement of cash flow, in each
case for the fiscal quarter just ended and for the period commencing
at the end of the immediately preceding Fiscal Year and ending with
the last day of such quarter, and comparing such financial condition
and results of operations to the projections for the applicable period
provided under paragraph (h) below and to the results for the
comparable period during the immediately preceding Fiscal Year, in
each case prepared and certified by the Financial Officer of the
Borrower and Holdings as presenting fairly the financial condition and
results of operations of Holdings and its subsidiaries and as having
been prepared in accordance with GAAP, in each case subject to normal
year-end audit adjustments;
(c) within 30 days after the end of each month, (i)
unaudited Consolidated and consolidating balance sheets and income
statements showing the financial condition and results of operations
of each of Holdings and the Borrower and their respective subsidiaries
as of the end of each such month, (ii) a Consolidated and
consolidating statement of shareholders' equity and (iii) a
Consolidated and consolidating statement of cash flow, in each case
for the month just ended and for the period commencing at the end of
the immediately preceding Fiscal Year and ending with the last day of
such month, and comparing such financial condition and results of
operations to the projections for the applicable period provided under
paragraph (h) below and to the results for the comparable period
during the immediately preceding Fiscal Year, prepared and certified
by the Financial Officer of the Borrower and Holdings as presenting
fairly the financial condition and results of operations of Holdings
and its subsidiaries and as having been prepared in accordance with
GAAP, in each case subject to normal year-end audit adjustments;
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(d) promptly after the same become publicly available,
copies of such registration statements, annual, periodic and other
reports, and such proxy statements and other information, if any, as
shall be filed by Holdings or any of its subsidiaries with the
Securities and Exchange Commission pursuant to the requirements of the
Securities Act of 1933 or the Securities Exchange Act of 1934;
(e) (i) concurrently with any delivery under (a) or (b)
above, a certificate of the firm or person referred to therein (x)
which certificate shall, in the case of the certificate of the
Financial Officer of the Borrower and Holdings, certify that to the
best of their knowledge no Default or Event of Default has occurred
(including calculations demonstrating compliance, as of the dates of
the financial statements being furnished, with the covenants set forth
in Sections 7.07, 7.08, 7.09, 7.09A and 7.10 hereof) and, if such a
Default or Event of Default has occurred, specifying the nature and
extent thereof and any corrective action taken or proposed to be taken
with respect thereto and (y) which certificate, in the case of the
certificate furnished by the independent public accountants referred
in paragraph (a) above, may be limited to accounting matters and
disclaim responsibility for legal interpretations, but shall in any
event certify that to the best of such accountants' knowledge, as of
the dates of the financial statements being furnished no Default or
Event of Default has occurred under any of the covenants set forth in
Sections 7.07, 7.08, 7.09, 7.09A and 7.10 hereof (such certificate to
include calculations demonstrating compliance with such covenants)
and, if such a Default or Event of Default has occurred, specifying
the nature and extent thereof and shall in addition certify that in
the course of preparing the audit and the certificate referred to
herein, such accountants have not become aware of the occurrence of
any other Default or Event of Default and, if such a Default or Event
of Default has occurred, specifying the nature thereof; provided,
however, that any certificate furnished by the independent public
accountants referred to in paragraph (a) above shall be signed by the
Financial Officer of the Borrower and Holdings;
(f) concurrently with any delivery under (a) above, a
management letter prepared by the independent public accountants who
reported on the financial statements delivered under (a) above, with
respect to the internal audit and financial controls of Holdings and
its subsidiaries;
(g) within 15 days of the end of each fiscal month, an
aging schedule of the Receivables in the form of the aging schedule of
Receivables dated March 3, 1996 previously furnished to the Agent and
a certificate substantially in the form of Schedule 6.05(g) hereto
executed by the Financial Officer of the
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Borrower (x) with respect to inventory designations and (y)
demonstrating Availability as at the end of such month equalled or
exceeded zero;
(h) within 30 days prior to the beginning of each Fiscal
Year, a summary of business plans and financial operation projections
(including, without limitation, with respect to capital expenditures)
for Holdings and its subsidiaries for such Fiscal Year (including
monthly balance sheets, statements of income and of cash flow) and
annual projections through the Final Maturity Date prepared by
management and in form, substance and detail (including, without
limitation, principal assumptions) reasonably satisfactory to the
Agent;
(i) as soon as practicable, copies of all reports, forms,
filings, loan documents and financial information submitted to
governmental agencies, the holders of any Subordinated Indebtedness
and/or its shareholders generally;
(j) immediately upon becoming aware thereof, notice to
the Agent of the breach by any party of any material agreement with
any Loan Party;
(k) promptly upon the opening or closing of any bank
account, a schedule updating the information set forth on Schedule
4.23 annexed hereto; and
(l) such other information as the Agent or any Lender may
reasonably request.
SECTION 6.06. Litigation and Other Notices. Give the Agent
prompt written notice of the following:
(a) the issuance by any court or governmental agency or
authority of any injunction, order, decision or other restraint
prohibiting, or having the effect of prohibiting, the making of the
Loans or occurrence of other Credit Events, or invalidating, or having
the effect of invalidating, any provision of this Agreement, the Notes
or the other Loan Documents, or the initiation of any litigation or
similar proceeding seeking any such injunction, order, decision or
other restraint;
(b) the filing or commencement of any action, suit or
proceeding against any Loan Party, whether at law or in equity or by
or before any court or any Federal, state, municipal or other
governmental agency or authority, (i) which is material and is brought
by or on behalf of any governmental agency or authority, or in which
injunctive or other equitable relief is sought or (ii) as to which it
is probable (within the meaning of Statement of Financial Accounting
Standards No. 5) that there will be an adverse determination and
which, if
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adversely determined, could reasonably be expected to (A) result in
liability of one or more Loan Parties in an aggregate amount of
$500,000 or more, not reimbursable by insurance, or (B) have a
Material Adverse Effect;
(c) any Default or Event of Default, specifying the
nature and extent thereof and the action (if any) which is proposed to
be taken with respect thereto; and
(d) any other development in the business or affairs of
any Loan Party which has had or could reasonably be expected to have a
Material Adverse Effect.
SECTION 6.07. ERISA. (a) Pay and discharge promptly any
liability imposed upon it pursuant to the provisions of Title IV of ERISA;
provided, however, that none of the Loan Parties or any ERISA Affiliate shall
be required to pay any such liability if (1) the amount, applicability or
validity thereof shall be diligently contested in good faith by appropriate
proceedings, and (2) such person shall, to the extent required by GAAP, have
set aside on its books reserves which, in the opinion of the independent
certified public accountants of such person, are adequate with respect thereto.
(b) Deliver to the Agent, promptly, and in any event
within 30 days, after (i) the occurrence of any Reportable Event, a copy of the
materials that are filed with the PBGC, or the materials that would have been
required to be filed if the 30-day notice requirement to the PBGC was not
waived, (ii) any Loan Party or any ERISA Affiliate or an administrator of any
Pension Plan files with participants, beneficiaries or the PBGC a notice of
intent to terminate any such Plan, a copy of any such notice, (iii) the receipt
of notice by any Loan Party or any ERISA Affiliate or an administrator of any
Pension Plan from the PBGC of the PBGC's intention to terminate any Pension
Plan or to appoint a trustee to administer any such Plan, a copy of such
notice, (iv) the filing thereof with the Internal Revenue Service, copies of
each annual report that is filed on Treasury Form 5500 with respect to any
Plan, together with certified financial statements (if any) for the Plan and
any actuarial statements on Schedule B to such Form 5500, (v) any Loan Party or
any ERISA Affiliate knows of any event or condition which might constitute
grounds under the provisions of Section 4042 of ERISA for the termination of
(or the appointment of a trustee to administer) any Pension Plan, an
explanation of such event or condition, (vi) the receipt by any Loan Party or
any ERISA Affiliate of an assessment of withdrawal liability under Section 4201
of ERISA from a Multiemployer Plan, a copy of such assessment, (vii) the
Borrower or any ERISA Affiliate knows of any event or condition which might
cause any one of them to incur a liability under Section 4062, 4063, 4064 or
4069 of ERISA or Section 412(n) or 4971 of the Code, an explanation of such
event or condition, and (viii) any Loan Party or any
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ERISA Affiliate knows that an application is to be, or has been, made to the
Secretary of the Treasury for a waiver of the minimum funding standard under
the provisions of Section 412 of the Code, a copy of such application, and in
each case described in clauses (i) through (iii) and (v) through (vii) together
with a statement signed by the Financial Officer setting forth details as to
such Reportable Event, notice, event or condition and the action such Loan
Party or such ERISA Affiliate proposes to take with respect thereto.
SECTION 6.08. Maintaining Records; Access to Properties and
Inspections; Right to Audit. Maintain financial records in accordance with
accepted financial practices and, upon reasonable notice (which may be
telephonic), at all reasonable times and as often as any Lender may request,
but not more than once a fiscal quarter (unless a Default or Event of Default
shall have occurred and be continuing in which case such limitation shall not
apply), permit any authorized representative designated by such Lender to visit
and inspect the properties and financial records of any Loan Party and to make
extracts from such financial records at such Lender's expense, and permit any
authorized representative designated by such Lender to discuss the affairs,
finances and condition of such Loan Party with the appropriate Financial
Officer and such other officers as such Loan Party shall deem appropriate and
such Loan Party's independent public accountants, as applicable. The Agent
agrees that it shall schedule any meeting with any such independent public
accountant through such Loan Party and a Responsible Officer of such Loan Party
shall have the right to be present at any such meeting. At the Borrower's
expense, the Agent shall have the right to audit, as often as it may request,
but not more than once a fiscal quarter (unless a Default or Event of Default
shall have occurred and be continuing in which case such limitation shall not
apply), the existence and condition of the accounts receivables, inventory,
accounts payable, books and records of the Loan Parties and to review their
compliance with the terms and conditions of this Agreement and the other Loan
Documents.
SECTION 6.09. Use of Proceeds. Use the proceeds of the
Credit Events only for the purposes set forth in Section 4.14 hereof.
SECTION 6.10. Fiscal Year-End. Cause its Fiscal Year to
end on September 30 in each year.
SECTION 6.11. Further Assurances. Execute any and all
further documents and take all further actions which may be required under
applicable law, or which the Agent may reasonably request, to grant, preserve,
protect and perfect the first priority security interest created by the
Security Documents in the Collateral.
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SECTION 6.12. Additional Grantors and Guarantors. Promptly
inform the Agent of the creation or acquisition of any direct or indirect
subsidiary (subject to the provisions of Section 7.06 hereof) and cause each
direct or indirect subsidiary thereof not in existence on the date hereof to
enter into a Guarantee in form and substance reasonably satisfactory to the
Agent, and to execute the Security Documents, as applicable, as a Grantor, and
cause the direct parent of each such subsidiary to pledge all of the capital
stock of such subsidiary pursuant to the Pledge Agreement and cause each such
subsidiary to pledge its accounts receivable and all other assets pursuant to
the Security Agreement.
SECTION 6.13. Environmental Laws. (a) Comply, and cause
each of its subsidiaries to comply, in all material respects with the
provisions of all Environmental Laws, and shall keep its properties and the
properties of its subsidiaries free of any Lien imposed pursuant to any
Environmental Law. No Loan Party shall cause or suffer or permit, and shall
not suffer or permit any of its subsidiaries to cause or suffer or permit, the
property of any Loan Party to be used for the generation, production,
processing, handling, storage, transporting or disposal of any Hazardous
Material, except for Hazardous Materials used in the ordinary course of
business of the Loan Parties and disclosed in Schedule 6.13 hereto, in which
case such Hazardous Materials shall be used, stored, generated, treated and
disposed of only in material compliance with Environmental Law.
(b) Supply to the Agent copies of all submissions by any
Loan Party to any governmental body and of the reports of all environmental
audits and of all other environmental tests, studies or assessments (including
the data derived from any sampling or survey of asbestos, soil, or subsurface
or other materials or conditions) that may be conducted or performed (by or on
behalf of any Loan Party) on or regarding the properties owned, operated,
leased or occupied by any Loan Party or regarding any conditions that might
have been affected by Hazardous Materials on or Released or removed from such
properties. Each Loan Party shall also permit and authorize the consultants,
attorneys or other persons that prepare such submissions or reports or perform
such audits, tests, studies or assessments to discuss such submissions, reports
or audits with the Agent and the Lenders.
(c) Promptly (and in no event more than two (2) Business
Days after any officer of any Loan Party becomes aware or is otherwise informed
of such event) provide oral and written notice to the Agent upon the happening
of any of the following:
(i) any Loan Party or any tenant or other
occupant of any property of such Loan Party receives notice of
any claim, complaint, charge or notice of a violation or
potential violation of any Environmental Law;
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(ii) there has been a material spill or other
Release of Hazardous Materials upon, under or affecting any of
the properties owned, operated, leased or occupied by any Loan
Party, or Hazardous Materials at levels or in amounts that
have to be reported, remedied or responded to under
Environmental Law are detected on or in the soil or
groundwater;
(iii) any Loan Party is liable for any material
costs of cleaning up or otherwise responding to a material
Release of Hazardous Materials;
(iv) any part of the properties owned, operated,
leased or occupied by any Loan Party is or may be subject to a
Lien under any Environmental Law; or
(v) any Loan Party undertakes any material
Remedial Work with respect to any Hazardous Materials.
(d) Without in any way limiting the scope of Section
12.04(c) and in addition to any obligations thereunder, the Borrower hereby
indemnifies and agrees to hold the Agent and the Lenders harmless from and
against any liability, loss, damage, suit, action or proceeding arising out of
its business or the business of its subsidiaries pertaining to Hazardous
Materials, including, but not limited to, claims of any governmental body or
any third person arising under any Environmental Law or under tort, contract or
common law. To the extent laws of the United States or any applicable state or
local law in which property owned, operated, leased or occupied by any Loan
Party is located provide that a Lien upon such property of such Loan Party may
be obtained for the removal of Hazardous Materials which have been or may be
Released, upon reasonable belief by the Agent that a Release has occurred which
could reasonably be expected to have a Material Adverse Effect, no later than
sixty days after notice is given by the Agent to such Loan Party, such Loan
Party shall deliver to the Agent a report issued by a qualified third party
engineer with respect to such suspected release at the specified property. To
the extent any Hazardous Materials located therein or thereunder either subject
the property to Lien or require removal to safeguard the health of any persons,
the removal thereof shall be an affirmative covenant of such Loan Party
hereunder.
(e) In the event that any material Remedial Work is
required to be performed by any Loan Party under any applicable Environmental
Law, any judicial order, or by any governmental entity, such Loan Party shall
commence all such Remedial Work at or prior to the time required therefor under
such Environmental Law or applicable judicial orders and thereafter diligently
prosecute to completion all such
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Remedial Work in accordance with and within the time allowed under such
applicable Environmental Laws or judicial orders.
SECTION 6.14. Pay Obligations to Lenders and Perform Other
Covenants. (a) Make full and timely payment of the Obligations, whether now
existing or hereafter arising, (b) duly comply with all the terms and covenants
contained in this Agreement (including, without limitation, the borrowing
limitations and mandatory prepayments in accordance with Article II hereof) in
each of the other Loan Documents, all at the times and places and in the manner
set forth therein, and (c) except for the filing of continuation statements and
the making of other filings by the Agent as secured party or assignee, at all
times take all actions necessary to maintain the Liens and security interests
provided for under or pursuant to this Agreement and the Security Documents as
valid and perfected first Liens on the property intended to be covered thereby
and supply all information to the Agent necessary for such maintenance.
SECTION 6.15. Redemption. Redeem 100% of the outstanding 9
1/4% Senior Subordinated Notes of Holdings pursuant to the terms of the
Redemption Offer within thirty-five (35) days following the Closing Date for no
consideration other than the Redemption Amount deposited with the trustee under
the Indenture pursuant to the Defeasance.
SECTION 6.16. Amendments. Promptly supply to the Agent
certified copies of any amendments to the Securities Purchase Agreement or the
Tender Offer Documents (subject to Section 7.19 hereof).
SECTION 6.17. Blocked Accounts. (a) Within 60 days of
the Closing Date, enter into a blocked account arrangement with respect to each
of the bank accounts identified on Schedule 4.23 annexed hereto pursuant to a
blocked account agreement in substantially the form of Exhibit I annexed
hereto.
(b) Within 60 days of the opening of any bank account by
any Loan Party, enter into a blocked account arrangement with respect to each
such bank account pursuant to a blocked account agreement substantially in the
form of Exhibit I annexed hereto.
VII. NEGATIVE COVENANTS
Each Loan Party covenants and agrees with each Lender that, so
long as this Agreement shall remain in effect or the principal of or interest
on any Note, any amount under any Letter of Credit, or any fee, expense or
other Obligation payable hereunder or in connection with any of the
Transactions shall be unpaid (excluding indemnity obligations surviving the
payment in full of the Notes and the termination of
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the Total Commitment), it will not and will not cause or permit any of its
subsidiaries and, in the case of Section 7.18 hereof, any ERISA Affiliate to,
either directly or indirectly:
SECTION 7.01. Liens. Incur, create, assume or permit to
exist any Lien on any of its property or assets (including the stock of any
direct or indirect subsidiary), whether owned at the date hereof or hereafter
acquired, or assign or convey any rights to or security interests in any future
revenues, except:
(a) Liens incurred and pledges and deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance, old-age pensions and other social security
benefits (not including any lien described in Section 412(m) of the
Code);
(b) Liens imposed by law, such as carriers',
warehousemen's, mechanics', materialmen's and vendors' liens and other
similar liens, incurred in good faith in the ordinary course of
business and securing obligations which are not overdue for a period
of more than 30 days or which are being contested in good faith by
appropriate proceedings as to which any Loan Party shall, to the
extent required by GAAP, have set aside on its books adequate
reserves;
(c) Liens securing the payment of taxes, assessments and
governmental charges or levies, that are not delinquent or are being
diligently contested in good faith by appropriate proceedings and as
to which adequate reserves have been established in accordance with
GAAP; provided, however, that in no event shall the aggregate amount
of such reserves be less than the aggregate amount of the taxes,
assessments, governmental charges or levies secured by such Liens;
(d) zoning restrictions, easements, licenses,
reservations, provisions, covenants, conditions, waivers, restrictions
on the use of property or minor irregularities of title (and with
respect to leasehold interests, mortgages, obligations, liens and
other encumbrances incurred, created, assumed or permitted to exist
and arising by, through or under a landlord or owner of the leased
property, with or without consent of the lessee) which do not in the
aggregate materially detract from the value of its property or assets
or materially impair the use thereof in the operation of its business;
(e) Liens upon any equipment acquired through the
purchase or lease by any Loan Party which are created or incurred
contemporaneously with such acquisition to secure or provide for the
payment of any part of the purchase price of, or lease payments on,
such equipment (but no other amounts and not in
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excess of the purchase price or lease payments); provided, however,
that any such Lien shall not apply to any other property of any Loan
Party; and provided, further, that after giving effect to such
purchase or lease, no Default exists under Section 7.07 hereof;
(f) Liens existing on the date of this Agreement and set
forth in Schedule 7.01 annexed hereto but not the extension, renewal
or refunding of the Indebtedness secured thereby;
(g) Liens created in favor of the Agent for the benefit
of the Lenders;
(h) Liens securing the performance of bids, tenders,
leases, contracts (other than for the repayment of borrowed money),
statutory obligations, surety, customs and appeal bonds and other
obligations of like nature, incurred as an incident to and in the
ordinary course of business;
(i) Liens arising by virtue of any statutory or common
law provision relating to banker's liens, rights of setoff or similar
rights with respect to deposit accounts of the Loan Parties; or
(j) subordinated Liens on inventory of the Borrower
incurred in the ordinary course of business in connection with any
reseller arrangement or other similar arrangement entered into by the
Borrower, provided that prior to the incurrence of such Lien the
secured party with respect thereto enters into an intercreditor and/or
lien subordination agreement with the Agent in form and substance
satisfactory to the Agent.
SECTION 7.02. Sale and Lease-Back Transactions. Enter into
any arrangement, directly or indirectly, with any person whereby any Loan Party
shall sell or transfer any property, real or personal, and used or useful in
its business, whether now owned or hereafter acquired, and thereafter rent or
lease such property or other property which such Loan Party intends to use for
substantially the same purpose or purposes as the property being sold or
transferred, except for sale and leaseback transactions in the ordinary course
of business not to exceed $100,000 in the aggregate during any Fiscal Year.
SECTION 7.03. Indebtedness. Incur, create, assume or
permit to exist any Indebtedness other than (i) Indebtedness secured by Liens
permitted under Section 7.01, (ii) Indebtedness (including, without limitation,
Guarantees) existing on the date hereof and listed in Schedule 7.03 annexed
hereto, but not the extension, renewal or refunding thereof, (iii) Indebtedness
incurred hereunder, (iv) Indebtedness to trade creditors incurred in the
ordinary course of business, (v) Guarantees constituting
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the endorsement of negotiable instruments for deposit or collection in the
ordinary course of business, (vi) Guarantees of the Obligations, (vii) purchase
money Indebtedness to the extent permitted by Sections 7.01(e) and 7.07 hereof,
(viii) Subordinated Indebtedness, (ix) Indebtedness of the Borrower in the form
of seller notes issued to finance (in whole or part) a Permitted Acquisition,
provided each such seller note is in form and substance satisfactory to the
Agent and (x) other unsecured Indebtedness not otherwise permitted by other
subsections of this Section 7.03 and arising in the ordinary course of business
not in excess of $250,000 at any time outstanding.
SECTION 7.04. Dividends, Distributions and Payments.
Declare or pay, directly and indirectly, any cash dividends or make any other
distribution, whether in cash, property, securities or a combination thereof,
with respect to (whether by reduction of capital or otherwise) any shares of
its capital stock or directly or indirectly redeem, purchase, retire or
otherwise acquire for value (or permit any subsidiary to purchase or acquire)
any shares of any class of its capital stock or set aside any amount for any
such purpose other than cash dividends paid or distributed by the Borrower to
Holdings (each a "Permitted Distribution") for the purpose of enabling Holdings
to:
(i) make regularly scheduled payments of
principal and interest under each of the Subordinated Notes of
Holdings permitted to exist under this Agreement; provided,
that in no event shall the amount distributed to Holdings
pursuant to this clause exceed the amount of such scheduled
payment of principal or interest, as the case may be, as of
the applicable Dividend Payment Date; provided, further, that
(x) until Fiscal Year 1999, no dividends or distributions may
be paid by the Borrower to Holdings for the purpose of
enabling Holdings to make payments of principal with respect
to Holdings' 7 3/4% Convertible Subordinated Debentures due
April 15, 2001 and (y) in no event shall the amount
distributed to Holdings in 1999 in respect thereof exceed
$118,000;
(ii) make regularly scheduled lease payments with
respect to Holdings' existing lease of 5800 W. Bloomingdale,
Chicago, Illinois (which property relates to a discontinued
operation of Holdings) and to pay Holdings' expenses in
connection with the operation of such facility; provided,
however, in no event shall the aggregate amount distributed to
Holdings pursuant to this clause exceed $600,000 in the
aggregate in any Fiscal Year; provided, further, however, that
in no event shall any amount be paid as a dividend or
distribution by the Borrower to Holdings pursuant to this
clause (ii) at any time following payment of a dividend or
distribution to Holdings for the purpose described in clause
(iv) below;
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(iii) fund a settlement of the class action lawsuit
claiming violations of the Federal securities laws in which
Holdings is named as a defendant, which settlement was
approved by the court on September 5, 1995; provided, however,
in no event shall the aggregate amount distributed to Holdings
pursuant to this clause exceed $1,250,000;
(iv) pay expenses incurred in connection with
Holdings' early termination of its 5800 W. Bloomingdale,
Chicago, Illinois (which property relates to a discontinued
operation of Holdings); provided, however, in no event shall
the aggregate amount distributed to Holdings pursuant to this
clause exceed $2,500,000; and
(v) fund a settlement with the Internal Revenue
Service of tax liabilities of Holdings for periods prior to
the Closing Date; provided, however, in no event shall the
amount distributed to Holdings pursuant to this clause exceed
$100,000;
provided, however, that notwithstanding the foregoing, the Borrower shall be
entitled to make such distributions on the applicable Dividend Payment Date
only so long as each of the Dividend Conditions have been fulfilled to the
satisfaction of the Agent at the time such distribution is made.
SECTION 7.05. Consolidations, Mergers and Sales of Assets.
Consolidate with or merge into any other person, or sell, lease, transfer or
assign to any persons or otherwise dispose of (whether in one transaction or a
series of transactions) any portion of its assets (whether now owned or
hereafter acquired), or permit another person to merge into it, or acquire all
or substantially all the capital stock or assets of any other person, except
that (a) each Loan Party may sell any of its inventory in the ordinary course
of its business, (b) each Loan Party may sell other assets, provided that the
aggregate fair market value of all such assets of all such persons permitted to
be sold under this subparagraph (b) shall not in the aggregate exceed $250,000
in any Fiscal Year and (c) the Borrower may make acquisitions (each a
"Permitted Acquisition") of the assets or capital stock of another person so
long as all terms and conditions of the proposed acquisition are in form and
substance satisfactory to the Required Lenders in all respects, including,
without limitation, the fulfillment of each of the following conditions
precedent to the satisfaction of the Agent:
(i) no Default or Event of Default shall have
occurred and be continuing at the time of such acquisition or
would occur as a result thereof;
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(ii) the person or assets being acquired (the
"Target") is engaged primarily in, or related to, as the case
may be, computer spare parts distribution, electronics
recycling or asset recovery services;
(iii) the Agent shall have received a certificate
of a Responsible Officer of the Borrower stating that in the
opinion of management of the Borrower, the acquisition of the
Target will not impair the Borrower's ability to meet any of
its obligations (including, without limitation, financial
covenants) under any Capitalized Lease Obligation or under
this Agreement or any other Loan Document;
(iv) the Agent shall have received a certified
copy of resolutions of the Board of Directors of the Borrower
approving the acquisition of the Target; and
(v) the Agent shall have received such financial
statements, projections and other documents relating to the
proposed acquisition as the Agent or the Agent's counsel shall
deem necessary.
SECTION 7.06. Investments. Own, purchase or acquire any
stock, obligations, assets (not in the ordinary course of business) or
securities of, or any interest in, or make any capital contribution or loan or
advance to, any other person, or make any other investments, except:
(a) certificates of deposit in dollars of any commercial
banks registered to do business in any state of the United States (i)
having capital and surplus in excess of $1,000,000,000 and (ii) whose
long-term debt rating is at least investment grade as determined by
either Standard & Poor's Ratings Group or Moody's Investors Service,
Inc.;
(b) readily marketable direct obligations of the United
States government or any agency thereof which are backed by the full
faith and credit of the United States;
(c) investments in money market mutual funds having
assets in excess of $2,500,000,000;
(d) commercial paper at the time of acquisition having
the highest rating obtainable from either Standard & Poor's Ratings
Group or Moody's Investors Service, Inc.;
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(e) federally tax exempt securities rated A or better by
either Standard & Poor's Ratings Group or Moody's Investors Service,
Inc.;
(f) investments in the stock of any subsidiary existing
on the Closing Date, but not any additional investments therein;
(g) Permitted Acquisitions;
(h) loans or advances of money to any officer or employee
of any Loan Party consisting of reimbursable advances incurred in the
ordinary course of such Loan Party's business not exceeding $150,000
at any one time outstanding for all Loan Parties; and
(i) other loans, advances and investments in the ordinary
course of business in addition to those permitted by the other
subsections of this Section 7.06 not exceeding $100,000 at any one
time outstanding;
provided that, in each case mentioned in (a), (b), (d) and (e) above, such
obligations shall mature not more than one year from the date of acquisition
thereof.
SECTION 7.07. Capital Expenditures. Permit the aggregate
amount of payments made for capital expenditures, including, without
limitation, Capitalized Lease Obligations and Indebtedness secured by Liens
permitted under Section 7.01(e) hereof, in each of the periods indicated below
to exceed the following amounts for the Borrower and its subsidiaries on a
Consolidated basis:
<TABLE>
<CAPTION>
Period Maximum Amount
------ --------------
<S> <C>
Two fiscal quarters ending $1,325,000
September 30, 1996
Fiscal Year ending September 30, 1997 $2,500,000
Fiscal Year ending September 30, 1998 $3,000,000
Fiscal Year ending September 30, 1999 $3,500,000
Fiscal Year ending September 30, 2000 $4,000,000
Fiscal Year ending September 30, 2001 $4,500,000;
</TABLE>
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provided, however, that amounts expended in connection with Permitted
Acquisitions which would otherwise constitute "capital expenditures" shall not
constitute "capital expenditures" for purposes of the limitations contained in
this Section 7.07.
SECTION 7.08. Debt Service Coverage Ratio. Permit the Debt
Service Coverage Ratio of the Borrower and its subsidiaries on a Consolidated
basis at the end of any fiscal quarter to be less than the respective amounts
set forth below for the periods indicated:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date through
September 30, 1996 1.00:1.00
October 1, 1996 through 1.20:1.00
last day of first fiscal quarter
of Fiscal Year ending
September 30, 1997
First fiscal day of second fiscal 1.30:1.00
quarter of Fiscal Year ending
September 30, 1997 and
thereafter
</TABLE>
SECTION 7.09. Leverage Ratio. Permit the Leverage Ratio of
the Borrower and its subsidiaries on a Consolidated basis at the end of any
fiscal quarter to be greater than the respective amounts set forth below for
the periods indicated:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
First day of second fiscal 7.00:1.00
quarter of Fiscal Year ending
September 30, 1997 through
last day of third fiscal
quarter of Fiscal Year ending
September 30, 1997
</TABLE>
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<TABLE>
<S> <C>
First day of fourth fiscal 6.00:1.00
quarter of Fiscal Year ending
September 30, 1997 through
last day of second fiscal quarter
of Fiscal Year ending
September 30, 1998
First day of third fiscal quarter 5.00:1.00
of Fiscal Year ending
September 30, 1998
and thereafter
</TABLE>
Section 7.09A. EBITDA. Permit EBITDA of the Borrower and
its Consolidated subsidiaries for the four fiscal quarter period (or such
lesser number of full fiscal quarters as shall have elapsed from the Closing
Date prior to the date of determination) ending on the dates set forth below to
be less than the respective amounts set forth below opposite such dates.
<TABLE>
<CAPTION>
Quarter Ending Minimum EBITDA
-------------- --------------
<S> <C>
Last day of third fiscal $1,880,000
quarter of Fiscal Year
ending September 30, 1996
September 30, 1996 $4,100,000
Last day of first fiscal $6,600,000
quarter of Fiscal Year
ending September 30, 1997
Last day of second fiscal $9,800,000
quarter of Fiscal Year
ending September 30, 1997
Last day of third fiscal quarter $11,350,000
of Fiscal Year ending
September 30, 1997
September 30, 1997 $12,900,000
</TABLE>
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SECTION 7.10. Interest Coverage Ratio. Permit the Interest
Coverage Ratio of the Borrower and its subsidiaries on a Consolidated basis at
the end of any fiscal quarter to be less than the respective amounts set forth
below for the periods indicated.
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date through
last day of first fiscal quarter 2.75:1.00
of Fiscal Year ending
September 30, 1997
First day of second fiscal quarter 3.00:1.00
of Fiscal Year ending
September 30, 1997 and
thereafter
</TABLE>
SECTION 7.11. Transactions with Affiliates. Except as
otherwise specifically set forth in this Agreement, directly or indirectly
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or enter into any other transaction with, any stockholder,
Affiliate or agent of any Loan Party, except at prices and on terms not less
favorable to it than that which would have been obtained in an arm's-length
transaction with a non-affiliated third party.
SECTION 7.12. Consulting Fees. Pay any management,
consulting or other fees of any kind to any Loan Party or to any Affiliate of
any Loan Party except for (i) the fee paid to Welsh, Carson, Anderson & Stowe
at the closing of the Tender Offer equal to 1% of the aggregate liquidation
value of the Convertible Preferred Stock and the principal amount of the WCAS
Subordinated Note, (ii) directors' fees paid to independent directors of
Holdings (including directors appointed by WCAS CP II or WCAS VII) in an amount
not to exceed $10,000 per such director for any Fiscal Year and (iii) bonuses
to be paid to Messrs. Cowart, Lahar and Grazer in connection with the
Transactions in an amount not to exceed $331,000 in the aggregate.
SECTION 7.13. Negative Pledges, etc. Except for the WCAS
Subordinated Note and the Securities Purchase Agreement, enter into or become
subject to, directly or indirectly, including, without limitation, as a non-
party subsidiary of a party, any agreement (a) prohibiting or restricting, in
any manner (including, without limitation, by way of covenant, representation
or event of default), (i) the incurrence, creation or assumption of any
Indebtedness, or any lien upon any property of any Loan Party, except
restrictions in a capital lease or other purchase money financing agreement
permitted hereunder relating to the asset financed thereunder, (ii) the sale,
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disposition or pledge of any asset of any Loan Party, except restrictions in a
capital lease or other purchase money financing agreement permitted hereunder
relating to the asset financed thereunder, (iii) the incurrence or existence of
any contingent obligations of any Loan Party, (iv) any investments of any Loan
Party, (v) any capital expenditures by any Loan Party, (vi) any acquisition,
merger or consolidation involving any Loan Party, (vii) any change in control
of any Loan Party, or (viii) any amendment or supplement to or waiver under
this Agreement or any other Loan Document or other document relating to the
Obligations, or (b) which provides that any default by any Loan Party which is
not a party to such agreement of any obligation not arising under such
agreement is a default under such agreement.
SECTION 7.14. Accounting Changes. Make, or permit any
subsidiary to make any change in their accounting treatment or financial
reporting practices except as required by GAAP.
SECTION 7.15. Business. Alter the nature of its business as
operated on the date of this Agreement in any material respect and, in the case
of Holdings, engage in any business activities, have significant assets other
than its ownership interest in the Borrower and activities directly in
connection therewith and have significant liabilities other than those in
connection with this Agreement and the other Loan Documents (including, without
limitation, its Guarantee of the Obligations) and the Subordinated Notes and
other than in respect of judgments which do not cause an Event of Default
hereunder.
SECTION 7.16. Sales of Receivables. Sell, assign, discount,
transfer, or otherwise dispose of any accounts receivable, promissory notes,
drafts or trade acceptances or other rights to receive payment held by it, with
or without recourse, except (i) for the purpose of collection or settlement in
the ordinary course of business or (ii) the sale of any such accounts to
Chemical Bank.
SECTION 7.17. Use of Proceeds. Permit the proceeds of any
Credit Event to be used for the Tender Offer, the Redemption or any other
Holdings Transaction or any purpose which entails a violation of, or is
inconsistent with, Regulation G, T, U or X of the Board, or for any purpose
other than those set forth in Section 4.14 hereof.
SECTION 7.18. ERISA. (a) Engage in any transaction in
connection with which any Loan Party or any ERISA Affiliate could be subject to
either a material civil penalty assessed pursuant to the provisions of Section
502 of ERISA or a material tax imposed under the provisions of Section 4975 of
the Code.
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(b) Terminate any Pension Plan in a "distress
termination" under Section 4041 of ERISA, or take any other action which could
result in a material liability of any Loan Party or any ERISA Affiliate to the
PBGC.
(c) Fail to make payment when due of all amounts which,
under the provisions of any Plan, any Loan Party or any ERISA Affiliate is
required to pay as contributions thereto, or, with respect to any Pension Plan,
permit to exist any material "accumulated funding deficiency" (within the
meaning of Section 302 of ERISA and Section 412 of the Code), whether or not
waived, with respect thereto.
(d) Adopt an amendment to any Pension Plan requiring the
provision of security under Section 307 of ERISA or Section 401(a)(29) of the
Code.
SECTION 7.19. Prepayment or Modification of Indebtedness;
Modification of Charter Documents. (a) Directly or indirectly prepay, redeem,
purchase or retire in advance of its scheduled maturity any Indebtedness,
including, without limitation, any Subordinated Indebtedness, other than the
Obligations.
(b) Modify, amend or otherwise alter the terms and
provisions of (i) any Subordinated Note or any Subordinated Indebtedness, (ii)
the Tender Offer Documents or (iii) the Securities Purchase Agreement.
(c) Modify, amend or alter their certificates or articles
of incorporation or preferred stock/certificates of designations except for the
amendment, in connection with the issuance of the Convertible Preferred Stock,
to Holdings' certificate of incorporation to increase the number of shares
authorized to be issued by Holdings.
VIII. EVENTS OF DEFAULT
In case of the happening of any of the following events
(herein called "Events of Default"):
(a) any representation or warranty made or deemed made in
or in connection with this Agreement, any of the Security Documents,
the Notes or other Loan Documents or any Credit Events hereunder,
shall prove to have been incorrect in any material respect when made
or deemed to be made;
(b) default shall be made in the payment of any principal
of any Note when and as the same shall become due and payable, whether
at the due date
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thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise;
(c) default shall be made in the payment of any interest
on any Note, or any fee or any other amount payable hereunder, or
under the Notes, Letters of Credit, or any other Loan Document or in
connection with any other Credit Event or the Transactions when and as
the same shall become due and payable;
(d) (i) default shall be made in the due observance or
performance of any covenant, condition or agreement to be observed or
performed on the part of any Loan Party pursuant to Sections 6.02,
6.06, 6.11, 6.12 and 6.13 of this Agreement and the continuance of
such default shall remain unremedied for a period of ten (10)
consecutive days or (ii) default shall be made in the due observance
or performance of any other covenant, condition or agreement to be
observed or performed on the part of any Loan Party pursuant to the
terms of this Agreement, any of the Notes, any of the Security
Documents or any other Loan Document;
(e) any Loan Party shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the
United States Code or any other Federal, state or foreign bankruptcy,
insolvency, liquidation or similar law, (ii) consent to the
institution of, or fail to contravene in a timely and appropriate
manner, any such proceeding or the filing of any such petition, (iii)
apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator or similar official for any Loan Party or for
a substantial part of its property or assets, (iv) file an answer
admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of
creditors, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take corporate
action for the purpose of effecting any of the foregoing;
(f) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of any Loan Party, or of a
substantial part of the property or assets of any Loan Party, under
Title 11 of the United States Code or any other Federal state or
foreign bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator or similar
official for any Loan Party or for a substantial part of the property
of any Loan Party or (iii) the winding-up or liquidation of any Loan
Party; and such proceeding or petition shall continue undismissed for
30 days or an order or decree approving
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or ordering any of the foregoing shall continue unstayed and in effect
for 30 days;
(g) default shall be made with respect to any of (x) the
Subordinated Notes or (y) any Indebtedness or obligations under a
capitalized lease of any Loan Party (excluding any Obligations) in
excess, individually or in the aggregate, of $250,000, if the effect
of any such default shall be to accelerate, or to permit the holder or
obligee of any such Indebtedness or obligations under a capitalized
lease (or any trustee on behalf of such holder or obligee) at its
option to accelerate, the maturity of the Subordinated Notes or such
Indebtedness or obligations under a capitalized lease, as the case may
be;
(h) (i) a Reportable Event shall have occurred with
respect to a Pension Plan, (ii) the filing by any Loan Party, any
ERISA Affiliate, or an administrator of any Plan of a notice of intent
to terminate such a Plan in a "distress termination" under the
provisions of Section 4041 of ERISA, (iii) the receipt of notice by
any Loan Party, any ERISA Affiliate, or an administrator of a Plan
that the PBGC has instituted proceedings to terminate (or appoint a
trustee to administer) such a Pension Plan, (iv) any other event or
condition exists which might, in the opinion of the Agent, constitute
grounds under the provisions of Section 4042 of ERISA for the
termination of (or the appointment of a trustee to administer) any
Pension Plan by the PBGC, (v) a Pension Plan shall fail to maintain
the minimum funding standard required by Section 412 of the Code for
any plan year or a waiver of such standard is sought or granted under
the provisions of Section 412(d) of the Code, (vi) any Loan Party or
any ERISA Affiliate has incurred, or is likely to incur, a liability
under the provisions of Section 4062, 4063, 4064 or 4201 of ERISA,
(vii) any Loan Party or any ERISA Affiliate fails to pay the full
amount of an installment required under Section 412(m) of the Code,
(viii) the occurrence of any other event or condition with respect to
any Plan which would constitute an event of default under any other
agreement entered into by any Loan Party or any ERISA Affiliate, and
in each case in clauses (i) through (viii) of this subsection (h),
such event or condition, together with all other such events or
conditions, if any, could subject any Loan Party or any ERISA
Affiliate to any taxes, penalties or other liabilities which, in the
opinion of the Agent, could have a Material Adverse Effect on the
financial condition of any Loan Party or any ERISA Affiliate;
(i) any Loan Party or any ERISA Affiliate (i) shall have
been notified by the sponsor of a Multiemployer Plan that it has
incurred any material withdrawal liability to such Multiemployer Plan,
and (ii) does not have reasonable grounds for contesting such
withdrawal liability and is not in fact contesting such withdrawal
liability in a timely and appropriate manner;
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(j) a judgment (not reimbursed by insurance policies of
any Loan Party) or decree for the payment of money, a fine or penalty
which when taken together with all other such judgments, decrees,
fines and penalties shall exceed $250,000 shall be rendered by a court
or other tribunal against any Loan Party and (i) shall remain
undischarged or unbonded for a period of 30 consecutive days during
which the execution of such judgment, decree, fine or penalty shall
not have been stayed effectively or (ii) any judgment creditor or
other person shall legally commence actions to collect on or enforce
such judgment, decree, fine or penalty;
(k) this Agreement, any Note, any of the Security
Documents, any Guarantee or other Loan Documents shall for any reason
cease to be, or shall be asserted by any Loan Party not to be, a
legal, valid and binding obligation of any Loan Party, enforceable in
accordance with its terms, or the security interest or Lien purported
to be created by any of the Security Documents shall for any reason
cease to be, or be asserted by any Loan Party not to be, a valid,
first priority perfected security interest in any Collateral (except
(i) with respect to Collateral that is located in jurisdictions
outside the United States or the Canadian provinces of Ontario,
Manitoba, Saskatchewan, Nova Scotia, British Columbia or Alberta or
that consists of stock of issuers not incorporated in the United
States or (ii) to the extent otherwise permitted under this Agreement
or any of the Security Documents); or
(l) a Change of Control shall occur;
then, and in any such event (other than an event described in paragraph (e) or
(f) above), and at any time thereafter during the continuance of such event,
the Agent may, and upon the written request of the Required Lenders shall, by
written notice (or facsimile notice promptly confirmed in writing) to the
Borrower, take any or all of the following actions at the same or different
times: (i) terminate forthwith all or any portion of the Total Commitment and
the obligations of the Lenders to issue Letters of Credit hereunder; (ii)
demand that the Borrower provide to the Lenders, and the Borrower upon such
demand agrees to provide, cash collateral in an amount equal to the aggregate
undrawn amount of all outstanding Letters of Credit then existing, such cash
collateral to be deposited in a special cash collateral account to be held by
the Agent for the benefit of the Lenders; and (iii) declare the Notes and any
amounts then owing to the Lenders on account of drawings under any Letters of
Credit to be forthwith due and payable, whereupon the principal of such Notes,
together with accrued interest and fees thereon and any amounts then owing to
the Lenders on account of drawings under any Letters of Credit and other
liabilities of the Borrower accrued hereunder, shall become forthwith due and
payable both as to principal and interest, without presentment, demand, protest
or any other notice of any kind, all of which are hereby
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expressly waived by the Borrower, anything contained herein or in the Notes to
the contrary notwithstanding; provided, however, that with respect to a default
described in paragraph (e) or (f) above, the Total Commitment and the
obligation of the Lenders to issue Letters of Credit shall terminate
automatically and the principal of the Notes, together with accrued interest
and fees thereon and any amounts then owing to the Lenders on account of
drawings under any Letters of Credit and any other liabilities of the Borrower
accrued hereunder shall automatically become due and payable, both as to
principal and interest, without presentment, demand, protest or other notice of
any kind, all of which are hereby expressly waived by the Borrower, anything
contained herein or in the Notes to the contrary notwithstanding.
IX. AGENT
In order to expedite the transactions contemplated by this
Agreement, Chemical Bank is hereby appointed to act as Agent on behalf of the
Lenders. Each of the Lenders and each subsequent holder of any Note or issuer
of any Letter of Credit by its acceptance thereof, irrevocably authorizes the
Agent to take such action on its behalf and to exercise such powers hereunder
and under the Security Documents and other Loan Documents as are specifically
delegated to or required of the Agent by the terms hereof and the terms thereof
together with such powers as are reasonably incidental thereto. Neither the
Agent nor any of its directors, officers, employees or agents shall be liable
as such for any action taken or omitted to be taken by it or them hereunder or
under any of the Security Documents and other Loan Documents or in connection
herewith or therewith (a) at the request or with the approval of the Required
Lenders (or, if otherwise specifically required hereunder or thereunder, the
consent of all the Lenders) or (b) in the absence of a final determination by a
court of competent jurisdiction after the exhaustion of all possible appeals in
respect of such determination (including by reason of lapse of time) of its or
their own gross negligence or willful misconduct.
The Agent is hereby expressly authorized on behalf of the
Lenders, without hereby limiting any implied authority, (a) to receive on
behalf of each of the Lenders any payment of principal of or interest on the
Notes outstanding hereunder and all other amounts accrued hereunder paid to the
Agent, and promptly to distribute to each Lender its proper share of all
payments so received, (b) to distribute to each Lender copies of all notices,
agreements and other material as provided for in this Agreement or in the
Security Documents and other Loan Documents as received by such Agent and (c)
to take all actions with respect to this Agreement and the Security Documents
and other Loan Documents as are specifically delegated to the Agent.
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In the event that (a) the Borrower fails to pay when due the
principal of or interest on any Note, any amount payable under any Letter of
Credit, or any fee payable hereunder or (b) the Agent receives written notice
of the occurrence of a Default or an Event of Default, the Agent within a
reasonable time shall give written notice thereof to the Lenders, and shall
take such action with respect to such Event of Default or other condition or
event as it shall be directed to take by the Required Lenders; provided,
however, that, unless and until the Agent shall have received such directions,
the Agent may take such action or refrain from taking such action hereunder or
under the Security Documents or other Loan Documents with respect to a Default
or Event of Default as it shall deem advisable in the best interests of the
Lenders.
The Agent shall not be responsible in any manner to any of the
Lenders for the effectiveness, enforceability, perfection, value, genuineness,
validity or due execution of this Agreement, the Notes or any of the other Loan
Documents or Collateral or any other agreements or certificates, requests,
financial statements, notices or opinions of counsel or for any recitals,
statements, warranties or representations contained herein or in any such
instrument or be under any obligation to ascertain or inquire as to the
performance or observance of any of the terms, provisions, covenants,
conditions, agreements or obligations of this Agreement or any of the other
Loan Documents or any other agreements on the part of the Borrower and, without
limiting the generality of the foregoing, the Agent shall, in the absence of
knowledge to the contrary, be entitled to accept any certificate furnished
pursuant to this Agreement or any of the other Loan Documents as conclusive
evidence of the facts stated therein and shall be entitled to rely on any note,
notice, consent, certificate, affidavit, letter, telegram, teletype message,
statement, order or other document which it believes in good faith to be
genuine and correct and to have been signed or sent by the proper person or
persons. It is understood and agreed that the Agent may exercise its rights
and powers under other agreements and instruments to which it is or may be a
party, and engage in other transactions with the Borrower, as though it were
not Agent of the Lenders hereunder.
The Agent shall promptly give notice to the Lenders of the
receipt or sending of any notice, schedule, report, projection, financial
statement or other document or information pursuant to this Agreement or any of
the other Loan Documents and shall promptly forward a copy thereof to each
Lender.
Neither the Agent nor any of its directors, officers,
employees or agents shall have any responsibility to the Borrower on account of
the failure or delay in performance or breach by any Lender other than the
Agent of any of its obligations hereunder or to any Lender on account of the
failure of or delay in performance or breach by any other Lender or the
Borrower of any of their respective obligations hereunder or in connection
herewith.
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The Agent may consult with legal counsel selected by it in
connection with matters arising under this Agreement or any of the other Loan
Documents and any action taken or suffered in good faith by it in accordance
with the opinion of such counsel shall be full justification and protection to
it. The Agent may exercise any of its powers and rights and perform any duty
under this Agreement or any of the other Loan Documents through agents or
attorneys.
The Agent and the Borrower may deem and treat the payee of any
Note as the holder thereof until written notice of transfer shall have been
delivered as provided herein by such payee to the Agent and the Borrower.
With respect to the Loans made hereunder, the Notes issued to
it and any other Credit Event applicable to it, the Agent in its individual
capacity and not as an Agent shall have the same rights, powers and duties
hereunder and under any other agreement executed in connection herewith as any
other Lender and may exercise the same as though it were not the Agent, and the
Agent and its affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Borrower or other affiliate thereof as
if it were not the Agent. Each of the Lenders hereby acknowledges that the
Agent and/or one or more of its Affiliates may be a holder of equity in
Holdings.
Each Lender agrees (i) to reimburse the Agent in the amount of
such Lender's pro rata share (based on its Commitment hereunder) of any
expenses incurred for the benefit of the Lenders by the Agent, including
counsel fees and compensation of agents and employees paid for services
rendered on behalf of the Lenders, not reimbursed by the Borrower and (ii) to
indemnify and hold harmless the Agent and any of its directors, officers,
employees or agents, on demand, in the amount of its pro rata share, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against it
in its capacity as the Agent or any of them in any way relating to or arising
out of this Agreement or any of the other Loan Documents or any action taken or
omitted by it or any of them under this Agreement or any of the other Loan
Documents, to the extent not reimbursed by the Borrower; provided, however,
that no Lender shall be liable to the Agent for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgment, suits,
costs, expenses or disbursements resulting from the gross negligence or willful
misconduct of the Agent or any of its directors, officers, employees or agents
as finally determined by a court of competent jurisdiction after the exhaustion
of all possible appeals in respect of such determination (including by reason
of lapse of time).
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Each Lender acknowledges that it has, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and any other Loan Document to which such
Lender is party. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own decisions in taking or not taking action under or based upon this
Agreement, any other Loan Document, any related agreement or any document
furnished hereunder.
The Agent may resign at any time prior to the occurrence of a
Default or Event of Default by giving at least 30 days' prior notice to the
Lenders and the Borrower. Upon any such resignation, the Lenders shall have
the right to appoint a successor Agent. If no successor Agent shall have been
so appointed by such Lenders and shall have accepted such appointment within 30
days after the retiring Agent gives notice of its resignation, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent which
shall be a bank with an office (or an affiliate with an office) in New York,
New York, having a combined capital and surplus of at least $500,000,000. Upon
the acceptance of any appointment as Agent hereunder by a successor bank, such
successor shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent and the retiring Agent
shall be discharged from its duties and obligations hereunder and under each of
the other Loan Documents. Upon the occurrence of a Default or Event of
Default, the Agent may resign at any time by notifying the Lenders and the
Borrower and be discharged from its duties and obligations hereunder and under
each of the other Loan Documents effective upon such resignation. Upon any
such resignation, the Lenders shall promptly appoint a successor Agent, and
such successor Agent, upon its acceptance of such appointment, shall thereupon
become vested with all of the rights, powers, privileges and duties of the
resigning Agent. After any Agent's resignation hereunder, the provisions of
this Article shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
The Lenders hereby acknowledge that the Agent shall be under
no duty to take any discretionary action permitted to be taken by the Agent
pursuant to the provisions of this Agreement or any of the other Loan Documents
unless it shall be requested in writing to do so by the Required Lenders. The
Lenders hereby further acknowledge that the Agent is not acting as the
fiduciary of, or the trustee for, any of the Lenders.
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X. MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND OTHER COLLATERAL
SECTION 10.01. Collection of Receivables; Management of
Collateral. (a) Upon the occurrence of an Event of Default, the Borrower
shall, at its own cost and expense, take all actions requested by the Agent to
(i) arrange for remittances on Receivables to be made directly to lockboxes
designated by the Agent or in such other manner as the Agent may direct, and
(ii) promptly deposit all payments received by the Borrower on account of
Receivables, whether in the form of cash, checks, notes, drafts, bills of
exchange, money orders or otherwise, in one or more accounts designated by the
Agent in precisely the form received (but with any endorsements of the Borrower
necessary for deposit or collection), subject to withdrawal by the Agent only,
as hereinafter provided, and until such payments are deposited, such payments
shall be deemed to be held in trust by the Borrower for and as the Lenders'
property and shall not be commingled with the Borrower's other funds. All
remittances and payments that are deposited in accordance with the foregoing
will, after two Business Days (or three Business Days in the case of deposits
that are made after 12:00 p.m. (New York time)), be applied by the Agent to
reduce the outstanding balance of the Loans, subject to final collection in
cash of the item deposited.
Upon the occurrence and continuance of an Event of Default,
the Agent may send a notice of assignment and/or notice of the Agent's security
interest to any and all Customers or any third party holding or otherwise
concerned with any of the Collateral, and thereafter the Agent shall have the
sole right to collect the Receivables and/or take possession of the Collateral
and the books and records relating thereto. The Borrower shall not, without
the Agent's prior written consent, grant any extension of the time of payment
of any Receivable, compromise or settle any Receivable for less than the full
amount thereof, release, in whole or in part, any person or property liable for
the payment thereof, or allow any credit or discount whatsoever thereon except,
prior to the occurrence and continuance of an Event of Default, as permitted by
Sections 10.03(c) and 10.03(l) hereof.
(b) (i) The Borrower hereby constitutes the Agent or
the Agent's designee as the Borrower's attorney-in-fact with power (x) to send
verifications of Receivables and (y) upon the occurrence and during the
continuance of an Event of Default, (A) to endorse the Borrower's name upon any
notes, acceptances, checks, drafts, money orders or other evidences of payment
or Collateral that may come into its possession; (B) to sign the Borrower's
name on any invoice or bill of lading relating to any Receivables, drafts
against Customers, assignments and verifications of Receivables and notices to
Customers; (C) to notify the Postal Service authorities to change the address
for delivery of mail addressed to the Borrower to such address as the Agent may
designate; and (D) to do all other acts and things necessary to carry out
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this Agreement. All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designee shall not be liable for any acts of
omission or commission, for any error of judgment or for any mistake of fact or
law, provided that the Agent or its designee shall not be relieved of liability
to the extent that its act, error or mistake constituted gross negligence or
willful misconduct as finally determined by a court of competent jurisdiction
after the exhaustion of all possible appeals in respect of such determination
(including by reason of lapse of time). This power of attorney being coupled
with an interest is irrevocable until all of the Obligations are paid in full
and this Agreement and the Total Commitment is terminated.
(ii) The Agent, without notice to or consent of
the Borrower, upon the occurrence and during the continuance of an Event of
Default, (A) may sue upon or otherwise collect, extend the time of payment of,
or compromise or settle for cash, credit or otherwise upon any terms, any of
the Receivables or any securities, instruments or insurance applicable thereto
and/or release the obligor thereon; (B) is authorized and empowered to accept
the return of the goods represented by any of the Receivables; and (C) shall
have the right to receive, endorse, assign and/or deliver in its name or the
name of the Borrower any and all checks, drafts and other instruments for the
payment of money relating to the Receivables, and the Borrower hereby waives
notice of presentment, protest and non-payment of any instrument so endorsed.
(c) Nothing herein contained shall be construed to
constitute the Borrower as agent of the Agent for any purpose whatsoever, and
the Agent shall not be responsible or liable for any shortage, discrepancy,
damage, loss or destruction of any part of the Collateral wherever the same may
be located and regardless of the cause thereof (except to the extent the
Agent's or a Lender's act or omission constituted gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction after the
exhaustion of all possible appeals in respect of such determination (including
by reason of lapse of time)). The Agent and the Lenders shall not, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or
payment of any of the Receivables or any instrument received in payment thereof
or for any damage resulting therefrom (except to the extent the Agent's or such
Lender's error, omission or delay constituted gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction after the
exhaustion of all possible appeals in respect of such determination (including
by reason of lapse of time)). The Agent and the Lenders do not, by anything
herein or in any assignment or otherwise, assume the Borrower's obligations
under any contract or agreement assigned to the Agent or the Lenders, and the
Agent and the Lenders shall not be responsible in any way for the performance
by the Borrower of any of the terms and conditions thereof.
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(d) If any of the Receivables includes a charge for any
tax payable to any governmental tax authority, the Agent is hereby authorized
(but in no event obligated) in its discretion to pay the amount thereof to the
proper taxing authority for the account of the Borrower and to charge the
Borrower's account therefor. The Borrower shall notify the Agent if any
Receivables include any tax due to any such taxing authority and, in the
absence of such notice, the Agent shall have the right to retain the full
proceeds of such Receivables and shall not be liable for any taxes that may be
due from the Borrower by reason of the sale and delivery creating such
Receivables.
SECTION 10.02. Receivables Documentation. The Borrower
will, in addition to the monthly Receivables agings delivered pursuant to this
Agreement, at such intervals as the Agent may require, furnish such further
schedules and/or information as the Agent may reasonably require relating to
the Receivables, including, without limitation, copies of sales invoices. In
addition, the Borrower shall notify the Agent of any non-compliance in respect
of the representations, warranties and covenants contained in Section 10.03
hereof. The items to be provided under this Section 10.02 are to be in form
reasonably satisfactory to the Agent and are to be executed and delivered to
the Agent from time to time solely for its convenience in maintaining records
of the Collateral; the Borrower's failure to give any of such items to the
Agent shall not affect, terminate, modify or otherwise limit the Agent's Lien
or security interest in the Collateral.
SECTION 10.03. Status of Receivables and Other
Collateral. The Borrower covenants, represents and warrants that: (a) it
shall be the sole owner, free and clear of all Liens except in favor of the
Agent or otherwise permitted hereunder, of and fully authorized to sell,
transfer, pledge and/or grant a security interest in each and every item of
said Collateral owned by it; (b) each Receivable constituting an account shall
be a good and valid account representing (as of the time of its creation) an
undisputed bona fide indebtedness incurred or an amount indisputably owed by
the Customer therein named, for a fixed sum as set forth in the invoice
relating thereto with respect to an absolute sale and delivery upon the
specified terms of goods sold by the Borrower, or work, labor and/or services
theretofore rendered by the Borrower; (c) no Receivable is or shall be subject
to any defense, offset, counterclaim, discount or allowance (as of the time of
its creation) except as may be stated in the invoice relating thereto or
discounts and allowances as may be customary in the Borrower's business; (d)
none of the transactions underlying or giving rise to any Receivable shall
violate any applicable state or federal laws or regulations, and all documents
relating to any Receivable shall be legally sufficient under such laws or
regulations and shall be legally enforceable in accordance with their terms,
subject to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally; (e) to the
best of its knowledge, each Customer, guarantor or endorser
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with respect to any Receivable is solvent and will continue to be fully able to
pay all Receivables on which it is obligated in full when due; (f) all
documents and agreements relating to Receivables shall be true and correct and
in all respects what they purport to be; (g) to the best of its knowledge, all
signatures and endorsements that appear on all documents and agreements
relating to Receivables shall be genuine and all signatories and endorsers with
respect thereto shall have full capacity to contract; (h) it shall maintain
books and records pertaining to the Collateral in such detail, form and scope
as the Agent shall require; (i) it will immediately notify the Agent if any
accounts arise out of contracts with the United States or any department,
agency or instrumentality thereof, and will execute any instruments and take
any steps required by the Agent in order that all monies due or to become due
under any such contract shall be assigned to the Agent and notice thereof given
to the United States Government under the Federal Assignment of Claims Act; (j)
it will, immediately upon learning thereof, report to the Agent any loss or
destruction of, or substantial damage to, any material portion of the
Collateral, and any other matters affecting the value, enforceability or
collectability of any material portion of the Collateral; (k) if any amount
payable under or in connection with any Receivable equal to or greater than
$10,000 is evidenced by a promissory note or other instrument, as such terms
are defined in the Uniform Commercial Code, such promissory note or instrument
shall be immediately pledged, endorsed, assigned and delivered to the Agent as
additional collateral; (l) it shall not re-date any invoice or sale or make
sales on extended dating beyond that customary in the industry; (m) it shall
conduct a physical count of its inventory at such intervals as the Agent may
request and promptly supply the Agent with a copy of such counts accompanied by
a report of the value (based on the lower of cost (on a FIFO basis) or market
value) of such inventory; and (n) it is not nor shall it be entitled to pledge
the Lenders' credit on any purchases or for any purpose whatsoever.
SECTION 10.04. Monthly Statement of Account. The Agent
shall render to the Borrower each month a statement of the Borrower's account,
which shall constitute an account stated and shall be deemed to be correct and
accepted by and be binding upon the Borrower unless the Agent receives a
written statement of the Borrower's exceptions within 30 days after such
statement was rendered to the Borrower.
SECTION 10.05. Collateral Custodian. Upon the occurrence
and during the continuance of an Event of Default, the Agent may at any time
and from time to time employ and maintain in the premises of the Borrower a
custodian selected by the Agent who shall have full authority to do all acts
necessary to protect the Agent's and Lenders' interests and to report to the
Agent thereon. The Borrower hereby agrees to cooperate with any such custodian
and to do whatever the Agent may reasonably request to preserve the Collateral.
All reasonable costs and expenses incurred by the
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Agent by reason of the employment of the custodian shall be charged to the
Borrower's account and added to the Obligations.
XI. GUARANTEES
Each Guarantor unconditionally guarantees, as a primary
obligor and not merely as a surety, jointly and severally with each other
Guarantor, the due and punctual payment of the principal of and interest on
each of the Notes, when and as due, whether at maturity, by acceleration, by
notice of prepayment or otherwise, and the due and punctual performance of all
other Obligations. Each Guarantor further agrees that the Obligations may be
extended and renewed, in whole or in part, without notice to or further assent
from it, and that it will remain bound upon its guarantee notwithstanding any
extension or renewal of any Obligations.
Each Guarantor waives presentment to, demand of payment from
and protest to the Borrower of any of the Obligations, and also waives notice
of acceptance of its guarantee and notice of protest for nonpayment. The
obligations of a Guarantor hereunder shall not be affected by (a) the failure
of any Lender or the Agent to assert any claim or demand or to enforce any
right or remedy against the Borrower or any other Guarantor under the
provisions of this Agreement, the Notes or any of the other Loan Documents or
otherwise; (b) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Agreement, the Notes, any of the other Loan
Documents, any guarantee or any other agreement; (c) the release of any
security held by the Agent for the Obligations or any of them; or (d) the
failure of any Lender to exercise any right or remedy against any other
Guarantor of the Obligations.
Each Guarantor further agrees that its guarantee constitutes a
guarantee of payment when due and not of collection, and waives any right to
require that any resort be had by any Lender to any security (including,
without limitation, any Collateral) held for payment of the Obligations or to
any balance of any deposit account or credit on the books of any Lender in
favor of the Borrower or any other person.
The obligations of each Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including, without limitation, any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Obligations or otherwise. Without
limiting the generality of the foregoing, the obligations of each Guarantor
hereunder shall not be discharged or impaired or otherwise affected by the
failure of the Agent or any Lender to assert any claim or demand or to enforce
any remedy under this Agreement, the Notes or under any other Loan Document,
any
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guarantee or any other agreement, by any waiver or modification of any
provision thereof, by any default, failure or delay, willful or otherwise, in
the performance of the Obligations, or by any other act or omission which may
or might in any manner or to any extent vary the risk of such Guarantor or
otherwise operate as a discharge of such Guarantor as a matter of law or
equity.
Each Guarantor further agrees that its guarantee shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Obligation is
rescinded or must otherwise be returned by the Agent or any Lender upon the
bankruptcy or reorganization of the Borrower or otherwise.
Each Guarantor hereby waives and releases all rights of
subrogation against the Borrower and its property and all rights of
indemnification, contribution and reimbursement from the Borrower and its
property, in each case in connection with this guarantee and any payments made
hereunder, and regardless of whether such rights arise by operation of law,
pursuant to contract or otherwise until such time as the Obligations are paid
in full in cash and the Total Commitment has been terminated.
XII. MISCELLANEOUS
SECTION 12.01. Notices. Notices, consents and other
communications provided for herein shall be in writing and shall be delivered
or mailed (or in the case of telex or facsimile communication, delivered by
telex, graphic scanning, telecopier or other telecommunications equipment, with
receipt confirmed) addressed,
(a) if to the Borrower, Guarantors, or Grantors, at
Aurora Electronics, Inc., 2030 Main Street, Suite 1120, Irvine,
California 92714-7241, Attention: John P. Grazer, Chief Financial
Officer, with a copy to Hughes & Luce, L.L.P., 1717 Main Street, Suite
2800, Dallas, Texas 75201, Attention: Alan J. Bogdanow, Esq.;
(b) if to the Agent, at Chemical Bank, 633 Third Avenue,
New York, New York 10017, Attention: Credit Deputy, with a copy to
Kaye, Scholer, et al., LLP, at 425 Park Avenue, New York, New York
10022, Attention: Jeffrey M. Epstein, Esq.; and
(c) if to any Lender, at the address set forth below its
name in Schedule 2.01 annexed hereto.
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All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if hand delivered or three days after being sent by registered
or certified mail, postage prepaid, return receipt requested, if by mail, or
upon receipt if by any telex, facsimile or other telecommunications equipment,
in each case addressed to such party as provided in this Section 12.01 or in
accordance with the latest unrevoked direction from such party.
SECTION 12.02. Survival of Agreement. All covenants,
agreements, representations and warranties made by the Borrower or any of its
subsidiaries herein and in the certificates or other instruments prepared or
delivered in connection with this Agreement, any of the Security Documents, any
Guarantee or any other Loan Document, shall be considered to have been relied
upon by the Lenders and shall survive the making by the Lenders of the Loans
and the execution and delivery to the Lenders of the Notes and occurrence of
any other Credit Event and shall continue in full force and effect as long as
the principal of or any accrued interest on the Notes or any other fee or
amount payable under the Notes or this Agreement or any other Loan Document is
outstanding and unpaid and so long as the Total Commitment has not been
terminated.
SECTION 12.03. Successors and Assigns; Participations. (a)
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such party;
and all covenants, promises and agreements by or on behalf of any Loan Party,
any ERISA Affiliate, any subsidiary of any thereof, the Agent or the Lenders,
that are contained in this Agreement shall bind and inure to the benefit of
their respective successors and assigns. Without limiting the generality of
the foregoing, the Borrower specifically confirms that any Lender may at any
time and from time to time pledge or otherwise grant a security interest in any
Loan or any Note (or any part thereof) to any Federal Reserve Bank. The
Borrower may not assign or transfer any of its rights or obligations hereunder
without the written consent of all the Lenders.
(b) Each Lender, at its sole cost and expense, without
the consent of the Borrower, may sell participations to one or more banks or
other persons in all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Tranche A
Commitment or Tranche B Commitment) and the Loans owing to it and undrawn
Letters of Credit and the Notes held by it); provided, however, that (i) such
Lender's obligations under this Agreement (including, without limitation, its
Tranche A Commitment or Tranche B Commitment) shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the banks or other persons buying
participations shall be entitled to the cost protection provisions contained in
Sections 2.10(a) (except to the
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extent that application of such Section 2.10(a) to such banks and persons would
cause the Borrower to make duplicate payments thereunder), 2.11 and 2.12
hereof, but only to the extent any of such Sections would be available to the
Lender which sold such participation, and (iv) the Borrower, the Agent and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement;
provided, further, however, that each Lender shall retain the sole right and
responsibility to enforce the obligations of the Borrower, Grantors and the
Guarantors relating to the Loans, including, without limitation, the right to
approve any amendment, modification or waiver of any provision of this
Agreement (including, without limitation, any modification or waiver of the
provisions of Section 2.09(f) or (g) hereof), other than amendments,
modifications or waivers with respect to any fees payable hereunder or the
amount of principal or the rate of interest payable on (other than any demand
for interest at the default rate set forth in Section 2.08 hereof), or the
dates fixed for any payment of principal of or interest on, the Loans or the
release of all Collateral.
(c) Each Lender may assign by novation, to any one or
more banks or other entities without the prior written consent of the Borrower
but with the prior written consent of the Agent (which shall not be withheld
unreasonably), all or a portion of its interests, rights and obligations under
this Agreement and the other Loan Documents (including, without limitation, all
or a portion of its Tranche A Commitment or Tranche B Commitment and the same
portion of the Loans and undrawn Letters of Credit at the time owing to it and
the Note or Notes held by it), provided, however, that (i) each such assignment
shall be of a constant, and not a varying, percentage of all of the assigning
Lender's rights and obligations under this Agreement, which shall include the
same percentage interest in the Loans, Letters of Credit, Notes, Tranche A
Commitment and Tranche B Commitment, (ii) the amount of the Tranche A
Commitment or Tranche B Commitment of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Agent) shall be
in a minimum principal amount of $5,000,000 in the aggregate for the Tranche A
Commitment and Tranche B Commitment of such Lender and (iii) the parties to
each such assignment shall execute and deliver to the Agent, for its acceptance
and recording in the Register (as defined below), an Assignment and Acceptance,
together with any Note subject to such assignment and a processing and
recordation fee of $5,000. Upon such execution, delivery, acceptance and
recording and after receipt of the written consent of the Agent, from and after
the effective date specified in each Assignment and Acceptance, which effective
date shall be at least five (5) Business Days after the execution thereof, (x)
the assignee thereunder shall be a party hereto and, to the extent provided in
such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and under the other Loan Documents and (y) the Lender which is
assignor thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its
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obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto). Each assignment made by a Lender pursuant to this Section
12.03(c) shall be at such Lender's cost and expense except that the Borrower
shall pay all costs and expenses incurred by Chemical Bank in connection with
the initial syndication by Chemical Bank of its Commitment and Loans during the
120 day period following the Closing Date.
(d) By executing and delivering an Assignment and
Acceptance, the Lender which is assignor thereunder and the assignee thereunder
confirm to, and agree with, each other and the other parties hereto as follows:
(i) other than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned thereunder free and clear of
any adverse claim, such Lender makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, perfection, genuineness, sufficiency or value of this
Agreement, the other Loan Documents or any Collateral with respect thereto or
any other instrument or document furnished pursuant hereto or thereto; (ii)
such Lender makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrower, Holdings or any other
Loan Party or the performance or observance by the Borrower, Holdings or any
other Loan Party of any of their respective obligations under this Agreement,
any Guarantees or any of the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; (iii) such assignee confirms
that it has received a copy of this Agreement, any Guarantees and of the other
Loan Documents, together with copies of financial statements and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent, such Lender
or any other Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee appoints
and authorizes the Agent to take such action as the Agent on its behalf and to
exercise such powers under this Agreement as are delegated to the Agent by the
terms hereof, together with such powers as are reasonably incidental thereto;
and (vi) such assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement are required
to be performed by it as a Lender.
(e) The Agent shall maintain at its address referred to
in Section 12.01 hereof a copy of each Assignment and Acceptance delivered to
it and a register for the recordation of the names and addresses of the Lenders
and the Tranche A Commitment and Tranche B Commitment of, and principal amount
of the Loans owing to, each Lender from time to time (the "Register"). The
entries in the Register shall be
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conclusive, in the absence of manifest error, and the Borrower, the Agent and
the Lenders may treat each person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an assignee together with any Note or Notes
subject to such assignment and the written consent to such assignment, the
Agent shall, if such Assignment and Acceptance has been completed and is
precisely in the form of Exhibit F annexed hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register
and (iii) give prompt notice thereof to the Lenders and the Borrower. Within
five (5) Business Days after receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Agent in exchange for each
surrendered Note or Notes a new Note or Notes to the order of such assignee in
an amount equal to its portion of the Tranche A Commitment and Tranche B
Commitment, as the case may be, assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained any Tranche A Commitment
or Tranche B Commitment hereunder, a new Note or Notes to the order of the
assigning Lender in an amount equal to the Tranche A Commitment and Tranche B
Commitment, as the case may be, retained by it hereunder. Such new Note or
Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note or Notes and shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of Exhibit A or Exhibit B, as the case may be. Notes
surrendered to the Borrower shall be canceled by the Borrower.
(g) Notwithstanding any other provision herein, any
Lender may, in connection with any assignment or participation or proposed
assignment or participation pursuant to this Section 12.03, disclose to the
assignee or participant or proposed assignee or participant, any information,
including, without limitation, any Information, relating to the Borrower
furnished to such Lender by or on behalf of the Borrower in connection with
this Agreement; provided, however, that prior to any such disclosure, each such
assignee or participant or proposed assignee or participant shall agree to
preserve the confidentiality of any confidential Information relating to the
Borrower received from such Lender.
SECTION 12.04. Expenses; Indemnity. (a) The Borrower
agrees to pay all reasonable out-of-pocket expenses incurred by the Agent in
connection with the preparation of this Agreement and the other Loan Documents
or with any amendments, modifications, waivers, extensions, renewals,
renegotiations or "workouts" of the provisions hereof or thereof (whether or
not the transactions hereby contemplated shall
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be consummated) or incurred by the Agent or any of the Lenders in connection
with the enforcement or protection of its rights in connection with this
Agreement or any of the other Loan Documents or with the Loans made or the
Notes or Letters of Credit issued hereunder, or in connection with any pending
or threatened action, proceeding, or investigation relating to the foregoing,
including but not limited to the reasonable fees and disbursements of counsel
for the Agent and ongoing field examination expenses and charges, and, in
connection with such enforcement or protection, the reasonable fees and
disbursements of counsel for the Lenders. The Borrower further indemnifies the
Lenders from and agrees to hold them harmless against any documentary taxes,
assessments or charges made by any governmental authority by reason of the
execution and delivery of this Agreement or the Notes.
(b) The Borrower indemnifies the Agent and each Lender
and their respective directors, officers, employees and agents against, and
agrees to hold the Agent, each Lender and each such person harmless from, any
and all losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees and expenses (excluding amounts that are reimbursable
under (a) above), incurred by or asserted against the Lender or any such person
arising out of, in any way connected with, or as a result of (i) the use of any
of the proceeds of the Loans, (ii) this Agreement, any of the Security
Documents, Tender Offer Documents, any of the Transactions or the other
documents contemplated hereby or thereby, (iii) the performance by the parties
hereto and thereto of their respective obligations hereunder and thereunder
(including but not limited to the making of the Total Commitment) and
consummation of the transactions contemplated hereby and thereby, (iv) breach
of any representation or warranty, or (v) any claim, litigation, investigation
or proceedings relating to any of the foregoing, whether or not the Agent, any
Lender or any such person is a party thereto; provided, however, that such
indemnity shall not, as to the Agent or any Lender, apply to any such losses,
claims, damages, liabilities or related expenses to the extent that they result
from the gross negligence or willful misconduct of the Agent or any Lender as
finally determined by a court of competent jurisdiction after the exhaustion of
all possible appeals in respect of such determination (including by reason of
lapse of time).
(c) The Borrower indemnifies, and agrees to defend and
hold harmless the Agent and the Lenders and their respective officers,
directors, shareholders, agents and employees (collectively, the "Indemnitees")
from and against any loss, cost, damage, liability, lien, deficiency, fine,
penalty or expense (including, without limitation, reasonable attorneys' fees
and reasonable expenses for investigation, removal, cleanup and remedial costs
and modification costs incurred to permit, continue or resume normal operations
of any property or assets or business of the Borrower or any subsidiary
thereof) arising from a violation of, or failure to comply with any
Environmental Law and to remove any Lien arising therefrom except to the extent
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caused by the gross negligence or willful misconduct of any Indemnitee as
finally determined by a court of competent jurisdiction after all possible
appeals have been exhausted, which any of the Indemnitees may incur or which
may be claimed or recorded against any of the Indemnitees by any person.
(d) The provisions of this Section 12.04 shall remain
operative and in full force and effect regardless of the expiration of the term
of this Agreement, the consummation of the transactions contemplated hereby,
the repayment of any of the Loans, the invalidity or unenforceability of any
term or provision of this Agreement or the Notes, or any investigation made by
or on behalf of the Agent or any Lender. All amounts due under this Section
12.04 shall be payable on written demand therefor.
SECTION 12.05. APPLICABLE LAW. THIS AGREEMENT AND THE NOTES
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK (OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES THEREOF).
SECTION 12.06. Right of Setoff. If an Event of Default
shall have occurred and be continuing, upon the request of the Agent or the
Required Lenders each Lender shall and is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender to or
for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement and
the Notes held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement or the Notes and although such
obligations may be unmatured. Each Lender agrees to notify promptly the Agent
and the Borrower after any such setoff and application made by such Lender, but
the failure to give such notice shall not affect the validity of such setoff
and application. The rights of each Lender under this Section are in addition
to other rights and remedies (including, without limitation, other rights of
setoff) which may be available to such Lender.
SECTION 12.07. Payments on Business Days. (a) Should the
principal of or interest on the Notes or any fee or other amount payable
hereunder become due and payable on other than a Business Day, payment in
respect thereof may be made on the next succeeding Business Day (except as
otherwise specified in the definition of "Interest Period"), and such extension
of time shall in such case be included in computing interest, if any, in
connection with such payment.
(b) All payments by the Borrower hereunder and all Loans
made by the Lenders hereunder shall be made in lawful money of the United
States of America
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in immediately available funds at the office of the Agent set forth in Section
12.01 hereof.
SECTION 12.08. Waivers; Amendments. (a) No failure or
delay of any Lender in exercising any power or right hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Lenders hereunder are
cumulative and not exclusive of any rights or remedies which they may otherwise
have. No waiver of any provision of this Agreement or the Notes nor consent to
any departure by the Borrower therefrom shall in any event be effective unless
the same shall be authorized as provided in paragraph (b) below, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on the Borrower in any case
shall entitle it to any other or further notice or demand in similar or other
circumstances. Each holder of any of the Notes shall be bound by any
amendment, modification, waiver or consent authorized as provided herein,
whether or not such Note shall have been marked to indicate such amendment,
modification, waiver or consent.
(b) Neither this Agreement nor any provision hereof may
be waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and the Required Lenders; provided,
however, that no such agreement shall (i) change the principal amount of, or
extend or advance the maturity of or the dates for the payment of principal of
or interest on, any Note or reduce the rate of interest on any Note (other than
in connection with any demand for interest at the default rate set forth in
Section 2.08 hereof or waiver and amendments to Section 2.09(f) or (g)
hereof), (ii) change the Tranche A Commitment or Tranche B Commitment of any
Lender or amend or modify the provisions of this Section, Section 2.06, Section
2.13, Section 4.14, Section 6.09 or Section 11.04 hereof or the definition of
"Required Lenders," or (iii) release any material portion of Collateral
(excluding, in any event, sales of assets approved by the Required Lenders), in
each case without the prior written consent of each Lender affected thereby and
provided, further, however, that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Agent under this Agreement or the
other Loan Documents without the written consent of the Agent. Each Lender and
holder of any Note shall be bound by any modification or amendment authorized
by this Section regardless of whether its Notes shall be marked to make
reference thereto, and any consent by any Lender or holder of a Note pursuant
to this Section shall bind any person subsequently acquiring a Note from it,
whether or not such Note shall be so marked.
(c) In the event that the Borrower requests, with respect
to this Agreement or any other Loan Document, an amendment, modification or
waiver and
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such amendment, modification or waiver would require the unanimous consent of
all of the Lenders in accordance with Section 12.08(b) above, and such
amendment, modification or waiver is agreed to in writing by the Borrower and
the Required Lenders but not by all of the Lenders, then notwithstanding
anything to the contrary in Section 12.08(b) above, with the written consent of
the Borrower and such Required Lenders, the Borrower and Required Lenders may,
but shall not be obligated to, amend this Agreement without the consent of the
Lender or Lenders who did not agree to the proposed amendment, modification or
waiver (the "Minority Lenders") solely to provide for (i) the termination of
the Tranche A Commitment or Tranche B Commitment of each Minority Lender, (ii)
the assignment in accordance with Section 12.03 hereof to one or more persons
of each Minority Lender's interests, rights and obligations under this
Agreement (including, without limitation, all of such Minority Lender's Tranche
A Commitment or Tranche B Commitment as well as its portion of all outstanding
Loans and the Note or Notes held by such Minority Lender) and the other Loan
Documents and/or an increase in the Tranche A Commitment or Tranche B
Commitment of one or more Required Lenders, in each case so that after giving
effect thereto the Total Tranche A Commitment and Total Tranche B Commitment
shall be in the same amounts as prior to the events described in this
paragraph, (iii) the repayment to the Minority Lenders in full of all Loans
outstanding and accrued interest thereon at the time of the assignment and/or
increase in Commitments described in clause (ii) above with the proceeds of
Loans made by such persons who are to become Lenders by assignment or with the
proceeds of Loans made by Required Lenders who have agreed to increase their
Tranche A Commitment and/or Tranche B Commitment, (iv) the payment to the
Minority Lenders by the Borrower of all fees and other compensation due and
owing such Minority Lenders under the terms of this Agreement and the other
Loan Documents and (v) such other modifications as the Required Lenders and
Borrower shall deem necessary in order to effect to changes specified in
clauses (i) through (iv) hereof.
SECTION 12.09. Severability. In the event any one or more
of the provisions contained in this Agreement or in the Notes should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall
not in any way be affected or impaired thereby.
SECTION 12.10. Entire Agreement; Waiver of Jury Trial, etc.
(a) This Agreement, the Notes and the other Loan Documents constitute the
entire contract between the parties hereto relative to the subject matter
hereof. Any previous agreement among the parties hereto with respect to the
Transactions is superseded by this Agreement, the Notes and the other Loan
Documents. Except as expressly provided herein or in the Notes or the Loan
Documents (other than this Agreement), nothing in this Agreement, the Notes or
in the other Loan Documents, expressed or
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implied, is intended to confer upon any party, other than the parties hereto,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement, the Notes or the other Loan Documents.
(b) Except as prohibited by law, each party hereto hereby
waives any right it may have to a trial by jury in respect of any litigation
directly or indirectly arising out of, under or in connection with this
Agreement, the Notes, any of the other Loan Documents or the Transactions.
(c) Except as prohibited by law, each party hereto hereby
waives any right it may have to claim or recover in any litigation referred to
in paragraph (b) of this Section 12.10 any special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages.
(d) Each party hereto (i) certifies that no
representative, agent or attorney of any Lender has represented, expressly or
otherwise, that such Lender would not, in the event of litigation, seek to
enforce the foregoing waivers and (ii) acknowledges that it has been induced to
enter into this Agreement, the Notes or the other Loan Documents, as
applicable, by, among other things, the mutual waivers and certifications
herein.
SECTION 12.11. Confidentiality. The Agent and the Lenders
agree to keep confidential (and to cause their respective officers, directors,
employees, agents and representatives to keep confidential) all information,
materials and documents furnished to the Agent or any Lender (the
"Information"). Notwithstanding the foregoing, the Agent and each Lender shall
be permitted to disclose Information (i) to such of its officers, directors,
employees, agents and representatives as need to know such Information in
connection with its participation in any of the Transactions or the
administration of this Agreement or the other Loan Documents; (ii) to the
extent required by applicable laws and regulations or by any subpoena or
similar legal process, or requested by any governmental agency or authority;
(iii) to the extent such Information (A) becomes publicly available other than
as a result of a breach of this Agreement, (B) becomes available to the Agent
or such Lender on a non-confidential basis from a source other than the
Borrower, any Guarantor, any Grantor or any of their respective subsidiaries or
(C) was available to the Agent or such Lender on a non-confidential basis prior
to its disclosure to the Agent or such Lender by the Borrower, any Guarantor,
any Grantor or any of their respective subsidiaries; (iv) to the extent the
Borrower, any Guarantor or any of their respective subsidiaries shall have
consented to such disclosure in writing; (v) in connection with the sale of any
Collateral pursuant to the provisions of any of the other Loan Documents; or
(vi) pursuant to Section 12.03(g) hereof.
105
<PAGE> 112
SECTION 12.12. Submission to Jurisdiction. (a) Any legal
action or proceeding with respect to this Agreement or the Notes or any other
Loan Document may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, the Borrower and each of the
Guarantors hereby accept for themselves and in respect of their property,
generally and unconditionally, the jurisdiction of the aforesaid courts.
(b) The Borrower and each of the Guarantors hereby
irrevocably waive, in connection with any such action or proceeding, any
objection, including, without limitation, any objection to the laying of venue
or based on the grounds of forum non conveniens, which they may now or
hereafter have to the bringing of any such action or proceeding in such
respective jurisdictions.
(c) The Borrower and each of the Guarantors hereby
irrevocably consent to the service of process of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to each such person, as the case
may be, at its address set forth in Section 12.01 hereof.
(d) Nothing herein shall affect the right of the Agent or
any Lender to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Borrower or any Guarantor in
any other jurisdiction.
SECTION 12.13. Counterparts; Facsimile Signature. This
Agreement may be executed in counterparts, each of which shall constitute an
original but all of which when taken together shall constitute but one
contract, and shall become effective when copies hereof which, when taken
together, bear the signatures of each of the parties hereto shall be delivered
to the Agent. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
signature page hereto.
SECTION 12.14. Headings. Article and Section headings and
the Table of Contents used herein are for convenience of reference only and are
not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
106
<PAGE> 113
IN WITNESS WHEREOF, the Borrower, Guarantors, the Agent and
the Lenders have caused this Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.
<TABLE>
<S> <C>
AURORA ELECTRONICS GROUP, INC.,
as Borrower
By:_____________________________
Name:
Title:
AURORA ELECTRONICS, INC.,
as Guarantor
By:_____________________________
Name:
Title:
CHEMICAL BANK, as Lender
By:_____________________________
Name:
Title:
CHEMICAL BANK, as Agent
By:_____________________________
Name:
Title:
</TABLE>
107
<PAGE> 114
SCHEDULE 2.01(a)
TRANCHE A COMMITMENTS
<TABLE>
<CAPTION>
Approximate
Percentage of
Tranche A Total Tranche A
Lender Commitment Commitment
------ ---------- ---------------
<S> <C> <C>
Chemical Bank $15,000,000 100%
633 Third Avenue
New York, New York 10017
Attention: Credit Deputy
</TABLE>
<PAGE> 115
SCHEDULE 2.01(b)
TRANCHE B COMMITMENTS
<TABLE>
<CAPTION>
Approximate
Percentage of
Tranche B Total Tranche B
Lender Commitment Commitment
------ ---------- ---------------
<S> <C> <C>
Chemical Bank $20,000,000 100%
633 Third Avenue
New York, New York 10017
Attention: Credit Deputy
</TABLE>
<PAGE> 116
SCHEDULE 2.02
DOMESTIC LENDING OFFICES
<TABLE>
<CAPTION>
Lender Domestic Lending Office
- ------ -----------------------
<S> <C>
Chemical Bank Chemical Bank
633 Third Avenue
New York, NY 10017
Attn: Credit Deputy
</TABLE>
<PAGE> 117
SCHEDULE 2.03
EURODOLLAR LENDING OFFICES
<TABLE>
<CAPTION>
Lender Eurodollar Lending Office
- ------ -----------------------
<S> <C>
Chemical Bank Chemical Bank
633 Third Avenue
New York, NY 10017
Attn: Credit Deputy
</TABLE>
<PAGE> 1
EXHIBIT 10.22
TRANCHE A NOTE
$15,000,000.00 March 29, 1996
FOR VALUE RECEIVED, the undersigned, AURORA ELECTRONICS GROUP,
INC., a California corporation (the "Maker"), hereby promises to pay to the
order of CHEMICAL BANK (the "Lender"), at the office of CHEMICAL BANK (the
"Agent"), at 633 Third Avenue, New York, New York on the Termination Date as
defined in the Credit Agreement dated as of March 29, 1996, among the Maker,
the Guarantors named therein, the Lenders named therein and the Agent (as the
same may be amended, modified or supplemented from time to time in accordance
with its terms, the "Credit Agreement") or earlier as provided for in the
Credit Agreement, the lesser of the principal sum of FIFTEEN MILLION DOLLARS
AND ZERO CENTS ($15,000,000.00) or the aggregate unpaid principal amount of all
Tranche A Loans to the Maker from the Lender pursuant to the terms of the
Credit Agreement, in lawful money of the United States of America in
immediately available funds, and to pay interest from the date thereof on the
principal amount hereof from time to time outstanding, in like funds, at said
office, at a rate or rates per annum and, in each case, payable on such dates
as determined pursuant to the terms of the Credit Agreement.
The Maker promises to pay interest, on demand, on any overdue
principal and fees and, to the extent permitted by law, overdue interest from
their due dates at a rate or rates determined as set forth in the Credit
Agreement.
The Maker hereby waives diligence, presentment, demand,
protest and notice of any kind whatsoever. The non-exercise by the holder of
any of its rights hereunder in any particular instance shall not constitute a
waiver thereof in that or any subsequent instance.
All borrowings evidenced by this Note and all payments and
prepayments of the principal hereof and interest hereon and the respective
dates thereof shall be endorsed by the holder hereof on the schedule attached
hereto and made a part hereof, or on a continuation thereof which shall be
attached hereto and made a part hereof, or otherwise recorded by such holder in
its internal records; provided, however, that the failure of the holder hereof
to make such a notation or any error in such a notation shall not in any manner
affect the obligation of the Maker to make payments of principal and interest
in accordance with the terms of this Note and the Credit Agreement.
<PAGE> 2
This Note is one of the Notes referred to in the Credit
Agreement, which, among other things, contains provisions for the acceleration
of the maturity hereof upon the happening of certain events, for optional and
mandatory prepayment of the principal hereof prior to the maturity hereof and
for the amendment or waiver of certain provisions of the Credit Agreement, all
upon the terms and conditions therein specified. THIS NOTE SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CHOICE OF LAW DOCTRINE, AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA.
AURORA ELECTRONICS GROUP, INC.
By:___________________________
Name:
Title:
2
<PAGE> 3
Loans and Payment
<TABLE>
<S> <C> <C> <C> <C>
Unpaid
Principal Name of
Amount and Payments Balance of Person Making
Date Type of Loan Principal Interest Note Notation
- ---- ------------ ------------------ ---------- -------------
</TABLE>
3
<PAGE> 1
EXHIBIT 10.23
TRANCHE B NOTE
$20,000,000.00 March 29, 1996
FOR VALUE RECEIVED, the undersigned, AURORA ELECTRONICS GROUP,
INC., a California corporation (the "Maker"), hereby promises to pay to the
order of CHEMICAL BANK (the "Lender"), at the office of CHEMICAL BANK (the
"Agent"), at 633 Third Avenue, New York, New York on the Termination Date as
defined in the Credit Agreement dated as of March 29, 1996, among the Maker,
the Guarantors named therein, the Lenders named therein and the Agent (as the
same may be amended, modified or supplemented from time to time in accordance
with its terms, the "Credit Agreement") or earlier as provided for in the
Credit Agreement, the lesser of the principal sum of TWENTY MILLION DOLLARS AND
ZERO CENTS ($20,000,000.00) or the aggregate unpaid principal amount of all
Tranche B Loans to the Maker from the Lender pursuant to the terms of the
Credit Agreement, in lawful money of the United States of America in
immediately available funds, and to pay interest from the date thereof on the
principal amount hereof from time to time outstanding, in like funds, at said
office, at a rate or rates per annum and, in each case, payable on such dates
as determined pursuant to the terms of the Credit Agreement.
The Maker promises to pay interest, on demand, on any overdue
principal and fees and, to the extent permitted by law, overdue interest from
their due dates at a rate or rates determined as set forth in the Credit
Agreement.
The Maker hereby waives diligence, presentment, demand,
protest and notice of any kind whatsoever. The non-exercise by the holder of
any of its rights hereunder in any particular instance shall not constitute a
waiver thereof in that or any subsequent instance.
All borrowings evidenced by this Note and all payments and
prepayments of the principal hereof and interest hereon and the respective
dates thereof shall be endorsed by the holder hereof on the schedule attached
hereto and made a part hereof, or on a continuation thereof which shall be
attached hereto and made a part hereof, or otherwise recorded by such holder in
its internal records; provided, however, that the failure of the holder hereof
to make such a notation or any error in such a notation shall not in any manner
affect the obligation of the Maker to make payments of principal and interest
in accordance with the terms of this Note and the Credit Agreement.
<PAGE> 2
This Note is one of the Notes referred to in the Credit
Agreement, which, among other things, contains provisions for the acceleration
of the maturity hereof upon the happening of certain events, for optional and
mandatory prepayment of the principal hereof prior to the maturity hereof and
for the amendment or waiver of certain provisions of the Credit Agreement, all
upon the terms and conditions therein specified. THIS NOTE SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CHOICE OF LAW DOCTRINE, AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA.
AURORA ELECTRONICS GROUP, INC.
By:___________________________
Name:
Title:
<PAGE> 3
Loans and Payment
<TABLE>
<S> <C> <C> <C> <C>
Unpaid PrincipalName of
Amount and Payments Balance of Person Making
Date Type of Loan Principal Interest Note Notation
- ---- ------------ ------------------ ---------- -------------
</TABLE>
<PAGE> 1
EXHIBIT 10.24
EXECUTION COPY
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of March 29, 1996 among AURORA
ELECTRONICS GROUP, INC., a California corporation (the "Borrower"), AURORA
ELECTRONICS, INC., a Delaware corporation ("Holdings"; Borrower and Holdings
are each sometimes referred to herein as a "Grantor" and collectively as the
"Grantors") and CHEMICAL BANK, a New York banking corporation, as agent (the
"Agent") for (i) the lenders (the "Lenders") named in Schedules 2.01(a) and
2.01(b) of the Credit Agreement dated as of the date hereof, among the
Grantors, the guarantors named therein (the "Guarantors"), the Lenders and the
Agent (as amended, modified or supplemented from time to time in accordance
with its terms, the "Credit Agreement") and (ii) for itself as issuer of the
Letters of Credit.
A. The Agent and the Lenders have agreed to extend Loans
and certain other financial accommodations including, without limitation, the
issuance of Letters of Credit to the Borrower pursuant to, and subject to the
terms and conditions of, the Credit Agreement. The obligation of the Lenders
to extend such Loans and of the Agent to issue Letters of Credit under the
Credit Agreement is conditioned on the execution and delivery by the Grantors
of a pledge agreement in the form hereof to secure the following: (i) the
Obligations (including, without limitation, the due and punctual payment and
performance of (a) the principal of and interest on the Loans, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise and (b) Indebtedness at any time and from time to time under the
Letters of Credit), (ii) all obligations of the Grantors at any time and from
time to time under this Pledge Agreement and (iii) all other obligations of the
Grantors and the Guarantors at any time and from time to time under the Credit
Agreement and the other Loan Documents (the foregoing being herein referred to
as the "Secured Obligations").
B. Capitalized terms used herein and not defined herein
shall have the respective meanings assigned to such terms in the Credit
Agreement.
Accordingly, the Grantors and the Agent hereby agree as
follows:
1. Pledge. As security for the payment and performance
in full of the Secured Obligations, each Grantor hereby transfers, grants,
bargains, sells, conveys, hypothecates, pledges, sets over, endorses over, and
delivers unto the Agent, and grants to the Agent, for its own benefit and for
the benefit of the Lenders, a security interest in, (a) the shares of capital
stock listed in Schedule I annexed hereto next to such Grantor's name (the
"Initial Pledged Stock") and any additional shares of issued
<PAGE> 2
and outstanding common stock of the issuers listed in Schedule I annexed hereto
obtained in the future by the Grantors (collectively, the Initial Pledged Stock
together with all such additional shares pledged in the future, the "Pledged
Stock"), provided, however, in no event shall the Grantors pledge and deliver
to the Secured Party additional shares of stock of any issuer not incorporated
in the United States if, after giving effect to such pledge and delivery, the
Pledged Stock consisting of stock of such issuer will constitute more than 65%
of the issued and outstanding stock of such issuer, (b) all instruments of
indebtedness (whether now existing or hereinafter arising) by any of the
issuers listed in Schedule I annexed hereto which name any Grantor as payee
thereunder (the "Pledged Debt") and (c) subject to Section 5 below, all
proceeds of the Pledged Stock and Pledged Debt, including, without limitation,
all cash, securities or other property at any time and from time to time
receivable or otherwise distributed in respect of or in exchange for any of or
all such Pledged Stock or Pledged Debt (the items referred to in clauses (a)
through (c) being collectively called the "Collateral"). Upon delivery to the
Agent, any securities now or hereafter included in the Collateral including,
without limitation, the Pledged Stock (the "Pledged Securities") shall be
accompanied by undated stock powers duly executed in blank or other instruments
of transfer satisfactory to the Agent and by such other instruments and
documents as the Agent may reasonably request. Each delivery of Pledged
Securities shall be accompanied by a schedule showing a description of the
securities theretofore and then being pledged hereunder, which schedule shall
be attached hereto as Schedule I and made a part hereof. Each schedule so
delivered shall supersede any prior schedules so delivered.
2. Delivery of Collateral. Each Grantor agrees to
deliver promptly or cause to be delivered to the Agent any and all Pledged
Securities, and any and all certificates or other instruments or documents
representing any of the Collateral (together with any necessary stock power or
note power, as the case may be).
3. Representations, Warranties and Covenants. Each
Grantor hereby represents, warrants and covenants to and with the Agent that,
excluding the effect of the laws of the jurisdiction of incorporation or
formation of issuers not incorporated in the United States:
(a) except for (x) the security interest granted to the
Agent hereunder and (y) Liens of a type described in Section 7.01(c) of the
Credit Agreement, each Grantor (i) is and, subject to the provisions of the
Credit Agreement, will at all times continue to be the direct owner,
beneficially and of record, of the Pledged Securities that it is pledging
hereunder and is and will continue to be the holder of the Pledged Debt that it
is pledging (subject to the payment in full of all amounts owed thereunder)
hereunder except for the delivery and endorsement over of such Pledged Debt to
the Agent as contemplated hereunder, (ii) holds the Collateral that it is
pledging hereunder
2
<PAGE> 3
free and clear of all Liens, charges, encumbrances and security interests of
every kind and nature, and the Pledged Stock is subject to no options to
purchase or any similar or other rights of any person, (iii) will make no
assignment, pledge, hypothecation or, subject to the provisions of the Credit
Agreement, transfer of, or create any security interest in, the Collateral that
it is pledging hereunder including, without limitation, by virtue of becoming
bound by any agreement which restricts in any manner the rights of any present
or future holder of any Pledged Stock with respect thereto, and (iv) subject to
Section 5 below, will cause any and all Collateral, whether for value paid by a
Grantor or otherwise, to be forthwith deposited with the Agent and pledged or
assigned hereunder;
(b) each Grantor (i) has good right and legal authority
to pledge the Collateral it is pledging hereunder in the manner hereby done or
contemplated, (ii) will not amend, modify or supplement any Pledged Security
(including, without limitation, any Pledged Debt) without the prior written
consent of the Agent, nor forgive any Indebtedness evidenced by any Pledged
Security, except to the extent permitted by Section 7.16 of the Credit
Agreement and (iii) will take all actions reasonably necessary to defend its
title or interest thereto or therein against any Liens or other impediments of
any nature, however arising, of all persons whomsoever;
(c) no consent or approval of any domestic governmental
body or regulatory authority or any securities exchange was or is necessary to
the validity of the pledge effected hereby;
(d) by virtue of the execution and delivery by each
Grantor of this Agreement, when the certificates, instruments or other
documents representing or evidencing the Collateral are delivered to the Agent
in accordance with this Agreement, the Agent will obtain a valid and perfected
first Lien upon and security interest in such Collateral as security for the
repayment of the Secured Obligations, prior to all other Liens and encumbrances
thereon and security interests therein, subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally;
(e) the pledge effected hereby is effective to vest in
the Agent the rights of the Agent in the Collateral as set forth herein; and
(f) all of the Pledged Stock has been duly authorized and
validly issued and as at the date hereof, the Initial Pledged Stock consisting
of stock of the Borrower constitutes all of the issued and outstanding shares
of capital stock of the Borrower and the Initial Pledged Stock consisting of
stock of issuers not incorporated in the United States constitutes 65% of the
issued and outstanding shares of capital stock of such issuers.
3
<PAGE> 4
All representations, warranties and covenants of the Grantors contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement until the termination of this Agreement pursuant to Section 15
hereof.
4. Registration in Nominee Name; Denominations. Upon
the occurrence and during the continuance of an Event of Default, the Agent
shall have the right (in its sole and absolute discretion with subsequent
notice to the Grantors) to transfer to or to register the Pledged Securities in
its own name or the name of its nominee. In addition, the Agent shall at all
times have the right to exchange the certificates representing Pledged
Securities for certificates of smaller or larger denominations for any purpose
consistent with this Agreement.
5. Voting Rights; Dividends; etc. (a) Unless and until
an Event of Default hereunder shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise
any and all voting and/or consensual rights and powers accruing to an owner of
Pledged Securities or any part thereof for any purpose not inconsistent with
the terms of this Agreement and the Credit Agreement provided that such action
would not materially adversely affect the rights inuring to the Agent or the
Lenders under this Agreement or the Credit Agreement or materially adversely
affect the rights and remedies of the Agent or the Lenders under this Agreement
or the Credit Agreement or the ability of the Agent or the Lenders to exercise
the same.
(ii) The Agent shall execute and deliver to the
Grantors, or cause to be executed and delivered to the Grantors, all such
proxies, powers of attorney, and other instruments as the Grantors may
reasonably request for the purpose of enabling the Grantors to exercise the
voting and/or consensual rights and powers which they are entitled to exercise
pursuant to subparagraph (i) above.
(iii) The Grantors shall be entitled to receive and
retain any and all (a) cash dividends paid on the Pledged Stock only to the
extent that such cash dividends are permitted by, and otherwise paid in
accordance with the terms and conditions of, the Credit Agreement and
applicable laws and (b) payments of any kind whatsoever on the Pledged Debt.
Any and all
a. noncash dividends,
b. stock or dividends paid or payable
in cash or otherwise in connection with a partial or total liquidation or
dissolution, and
4
<PAGE> 5
c. instruments, securities, other
distributions in property, return of capital, capital surplus or paid-in
surplus or other distributions made on or in respect of Pledged Securities
(other than dividends permitted by this Section 5(a)(iii)), whether paid or
payable in cash or otherwise, whether resulting from a subdivision, combination
or reclassification of the outstanding capital stock of the issuer of any
Pledged Securities or received in exchange for Pledged Securities or any part
thereof, or in redemption thereof, as a result of any merger, consolidation,
acquisition or other exchange of assets to which such issuer may be a party or
otherwise, shall be and become part of the Collateral, and, if received by the
Grantor, shall not be commingled by any Grantor with any of its other funds or
property but shall be held separate and apart therefrom, shall be held in trust
for the benefit of the Agent and the Lenders and shall be forthwith delivered
to the Agent in the same form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an
Event of Default, all rights of any Grantor to receive any dividends or
payments of any kind in respect of the Pledged Debt which such Grantor is
authorized to receive pursuant to paragraph (a)(iii) of this Section 5 shall
cease, and all such rights shall thereupon become vested in the Agent, which
shall have the sole and exclusive right and authority to receive and retain
such dividends or such payments. All dividends and payments with respect to
the Pledged Debt which are received by any Grantor contrary to the provisions
of this Section 5(b) shall be received in trust for the benefit of the Agent,
shall be segregated from other property or funds of such Grantor and shall be
forthwith delivered to the Agent as Collateral in the same form as so received
(with any necessary endorsement). Any and all money and other property paid
over to or received by the Agent pursuant to the provisions of this Section 5
shall be retained by the Agent in an account to be established by the Agent
upon receipt of such money or other property and shall be applied in accordance
with the provisions of Section 9 hereof.
(c) Upon the occurrence and during the continuance of an
Event of Default, all rights of any Grantor to exercise the voting and
consensual rights and powers which it is entitled to exercise pursuant to
Section 5(a)(i) shall cease, and all such rights shall thereupon become vested
in the Agent, which shall have the sole and exclusive right and authority to
exercise such voting and consensual rights and powers.
6. Issuance of Additional Stock. Each Grantor agrees
that it will cause each of its subsidiaries not to issue any stock or other
securities, whether in addition to, by stock dividend or other distribution
upon, or in substitution for, the Pledged Securities or otherwise.
5
<PAGE> 6
7. Supplemental Documentation. In connection with the
execution and delivery of this Agreement each Grantor shall furnish or cause to
be furnished to the Agent on or prior to the Closing Date a certificate signed
by a Responsible Officer of such Grantor dated the Closing Date, certifying
that, as of the date of such certificate, all representations and warranties of
such Grantor in Section 3 hereof are true and correct in all material respects
and that such Grantor is in compliance with all conditions, agreements and
covenants to be observed or performed hereunder.
8. Remedies upon Event of Default. If an Event of
Default shall have occurred and be continuing, the Agent may sell or otherwise
dispose of all or any part of the Collateral, at public or private sale or at
any broker's board or on any securities exchange, for cash, upon credit or for
future delivery as the Agent shall deem appropriate. Each such purchaser at
any such sale shall hold the property sold absolutely, free from any claim or
right on the part of any Grantor, and each Grantor hereby waives (to the extent
permitted by law) all rights of redemption, stay and appraisal which such
Grantor now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.
The Agent shall give the applicable Grantor 10 days' written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in New York) of
the Agent's intention to make any sale of Collateral. Such notice, in the case
of a public sale, shall state the time and place for such sale and, in the case
of a sale at a broker's board or on a securities exchange, shall state the
board or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Agent may fix and
state in the notice (if any) of such sale. At any such sale, the Collateral,
or portion thereof, to be sold may be sold in one lot as an entirety or in
separate parcels, as the Agent may (in its sole and absolute discretion)
determine. The Agent shall not be obligated to make any sale of any Collateral
if it shall determine not to do so, regardless of the fact that notice of sale
of such Collateral shall have been given. The Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Agent until the sale price is paid by the purchaser or
purchasers thereof, but the Agent shall not incur any liability in case any
such purchaser or purchasers shall fail to take up and pay for the Collateral
so sold and, in case of any such failure, such Collateral may be sold again
upon like notice. At any public sale made pursuant to this Section 8, Chemical
Bank or any Lender may bid for or purchase, free (to the extent permitted by
law) from any right of redemption, stay
6
<PAGE> 7
or appraisal on the part of any Grantor (all said rights being also hereby
waived and released to the extent permitted by law), with respect to the
Collateral or any part thereof offered for sale and Chemical Bank or any such
Lender may make payment on account thereof by using any claim then due and
payable to Chemical Bank or any such Lender from such Grantor as a credit
against the purchase price, and Chemical Bank or any such Lender may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to such Grantor therefor. For purposes hereof,
a written agreement to purchase the Collateral or any portion thereof shall be
treated as a sale thereof; the Agent shall be free to carry out such sale and
purchase pursuant to such agreement, and no Grantor shall be entitled to the
return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Agent shall have entered into such an
agreement all Events of Default shall have been remedied and the Secured
Obligations paid in full. As an alternative to exercising the power of sale
herein conferred upon it, the Agent may proceed by a suit or suits at law or in
equity to foreclose this Agreement and to sell the Collateral or any portion
thereof pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.
9. Application of Proceeds of Sale. The proceeds of any
sale of Collateral, as well as any Collateral consisting of cash received by
the Agent after the occurrence and during the continuance of an Event of
Default, shall be applied by the Agent as follows:
FIRST, to the Agent to reimburse the Agent for that portion of
the payments, if any, made by it with respect to Letters of Credit for which a
Lender, as a participant in such Letter of Credit pursuant to Section 2.18 of
the Credit Agreement, failed to pay its pro rata share thereof as required
pursuant to such Section 2.18;
SECOND, to the payment of all reasonable costs and expenses
incurred by the Agent in connection with such sale or otherwise in connection
with this Agreement or any of the Secured Obligations, including, but not
limited to, all court costs and the reasonable fees and expenses of its agents
and legal counsel, the repayment of all advances made by the Agent hereunder on
behalf of the Grantors and any other reasonable costs or expenses incurred in
connection with the exercise of any right or remedy hereunder;
THIRD, to the Agent to be held as cash collateral to the
extent of undrawn amounts, if any, of outstanding Letters of Credit;
FOURTH, pro rata to the payment in full of principal and
interest in respect of any Loans outstanding (pro rata as among the Lenders in
accordance with the amounts of the Loans made by them pursuant to the Credit
Agreement);
7
<PAGE> 8
FIFTH, pro rata to the payment in full of all Secured
Obligations (other than those referred to above) owed to the Lenders (pro rata
as among the Lenders in accordance with their respective Commitments); and
SIXTH, to the Grantors, their successors or assigns, or as a
court of competent jurisdiction may otherwise direct.
10. Agent Appointed Attorney-in-Fact. Each Grantor
hereby appoints the Agent its attorney-in-fact, upon the occurrence and during
the continuance of an Event of Default, for the purpose of carrying out the
provisions of this Agreement and taking any action and executing any instrument
which the Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment is irrevocable and coupled with an interest. Without
limiting the generality of the foregoing, the Agent shall have the right, upon
the occurrence and during the continuance of an Event of Default, with full
power of substitution either in the Agent's name or in the name of such
Grantor, to ask for, demand, sue for, collect, receive receipt and give
acquittance for any and all moneys due or to become due and under and by virtue
of any Collateral, to endorse checks, drafts, orders and other instruments for
the payment of money payable to the applicable Grantor representing any
interest or dividend, or other distribution payable in respect of the
Collateral or any part thereof or on account thereof and to give full discharge
for the same, to settle, compromise, prosecute or defend any action, claim or
proceeding with respect thereto, and to sell, assign, endorse, pledge, transfer
and make any agreement respecting, or otherwise deal with, the same; provided,
however, that nothing herein contained shall be construed as requiring or
obligating the Agent, Chemical Bank or the Lenders to make any commitment or to
make any inquiry as to the nature or sufficiency of any payment received by the
Agent, Chemical Bank or the Lenders, or to present or file any claim or notice,
or to take any action with respect to the Collateral or any part thereof or the
moneys due or to become due in respect thereof or any property covered thereby,
and no action taken by the Agent, Chemical Bank or the Lenders or omitted to be
taken with respect to the Collateral or any part thereof shall give rise to any
defense, counterclaim or offset in favor of any Grantor or to any claim or
action against the Agent or the Lenders in the absence of a final determination
by a court of competent jurisdiction after the exhaustion of all possible
appeals in respect of such determination (including by reason of lapse of time)
of the gross negligence or wilful misconduct of the Agent or the Lenders.
11. No Waiver. No failure on the part of the Agent to
exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy by the Agent preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. All
remedies hereunder are cumulative and are not exclusive of any other remedies
provided by law. The Agent and the Lenders shall not be deemed
8
<PAGE> 9
to have waived any rights hereunder or under any other agreement or instrument
unless such waiver shall be in writing and signed by such parties.
12. Registration, etc. Each Grantor agrees that, upon
the occurrence and during the continuance of an Event of Default, if for any
reason the Agent desires to sell any of the Pledged Securities at a public
sale, it will, at any time and from time to time, upon the written request of
the Agent, take or to cause the issuer of such Pledged Securities to take such
action and to prepare, distribute and/or file such documents, as are required
or advisable in the opinion of counsel for the Agent to permit the public sale
of such Pledged Securities. Each Grantor further agrees to indemnify, defend
and hold harmless the Agent and the Lenders and any underwriter and their
respective officers, directors, affiliates and controlling persons (within the
meaning of Section 20 of the Securities Exchange Act of 1934) from and against
all loss, liability, reasonable expenses, costs, fees and disbursements of
counsel (including, without limitation, a reasonable estimate of the cost to
the Agent of legal counsel), and claims (including the reasonable costs of
investigation) which they may incur insofar as such loss, liability, reasonable
expense or claim arises out of or is based upon any untrue statement of a
material fact contained in any prospectus (or any amendment or supplement
thereto) or in any notification or offering circular, or arises out of or is
based upon any omission to state a material fact required to be stated therein
or necessary to make the statements in any thereof not misleading, except
insofar as the same arises out of any untrue statement or omission based upon
information furnished in writing to the applicable Grantor or the issuer of
such Pledged Securities by the Agent, any Lender or the underwriter expressly
for use therein. The Agent (with respect to such information furnished by it)
or such Lender (with respect to such information furnished by it) shall
indemnify, defend and hold harmless the Grantor or the issuer of such Pledged
Securities and their respective officers, directors, affiliates and controlling
persons (within the meaning of Section 20 of the Securities Exchange Act of
1934) upon the same terms as are applicable to the Grantor pursuant hereto.
Each Grantor further agrees that, in connection with the public sale of any of
the Pledged Securities pursuant to this Section 12, it shall use its best
efforts to qualify, file or register, or cause the issuer of such Pledged
Securities to qualify, file or register, any of the Pledged Securities under
the Blue Sky or other securities laws of such states as may be requested by the
Agent and keep effective, or cause to be kept effective, all such
qualifications, filings or registrations. Each Grantor will bear all
reasonable costs and expenses of carrying out its obligations under this
Section 12. Each Grantor acknowledges that there is no adequate remedy at law
for failure by it to comply with the provisions of this Section 12 and that
such failure would not be adequately compensable in damages, and therefore
agrees that its agreements contained in this Section 12 may be specifically
enforced.
9
<PAGE> 10
13. Security Interest Absolute. All rights of the Agent
hereunder, the grant of a security interest in the Collateral and all
obligations of the Grantors hereunder, shall be absolute and unconditional
irrespective of (i) any lack of validity or enforceability of the Credit
Agreement, any agreement with respect to any of the Secured Obligations or any
other agreement or instrument relating to any of the foregoing, (ii) any change
in time, manner or place of payment of, or in any other term of, all or any of
the Secured Obligations, or any other amendment or waiver of or any consent to
any departure from the Credit Agreement or any other agreement or instrument,
(iii) any exchange, release or nonperfection of any other collateral, or any
release or amendment or waiver of or consent to or departure from any
guarantee, for all or any of the Secured Obligations or (iv) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Secured Obligations or in respect
of this Agreement.
14. Agent's Fees and Expenses. The Grantors shall be
jointly and severally obligated to, upon demand, pay to the Agent the amount of
any and all reasonable expenses, including the reasonable fees and expenses of
its counsel and of any experts or agents which the Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon,
any of the Collateral, (iii) the exercise or enforcement of any of the rights
of the Agent hereunder or (iv) the failure by any Grantor to perform or observe
any of the provisions hereof. In addition, the Grantors indemnify, jointly and
severally, and hold the Agent and the Lenders harmless from and against any and
all liability incurred by the Agent or the Lenders hereunder or in connection
herewith, unless such liability shall be due to the gross negligence or wilful
misconduct of the Agent or the Lenders, as the case may be, as finally
determined by a court of competent jurisdiction after the exhaustion of all
possible appeals in respect of such determination (including by reason of lapse
of time). Any such amounts payable as provided hereunder or thereunder shall
be additional Secured Obligations secured hereby and by the other Security
Documents.
15. Termination. This Agreement shall terminate when (a)
all the Secured Obligations have been fully and indefeasibly paid in cash, (b)
the Lenders have no further commitment to make any Loans under the Credit
Agreement, and (c) the Agent shall have no further obligation to issue any
Letters of Credit, at which time the Agent shall reassign and deliver to the
Grantors, or to such person or persons as the Grantors shall designate, against
receipt, such of the Collateral (if any) as shall not have been sold or
otherwise still be held by it hereunder, together with appropriate instruments
of reassignment and release; provided, however, that all indemnities of the
Grantors contained in this Agreement shall survive, and remain operative and in
full force and effect regardless of, the termination of this Agreement. Any
such
10
<PAGE> 11
reassignment shall be without recourse to or warranty by the Agent and at the
expense of the Grantors.
16. Notices. All communications and notices hereunder
shall be in writing and given as provided in the Credit Agreement.
17. Further Assurances. Each Grantor agrees to do such
further acts and things, and to execute and deliver such additional
conveyances, assignments, agreements and instruments, as the Agent may at any
time reasonably request in connection with the administration and enforcement
of this Agreement or with respect to the Collateral or any part thereof or in
order better to assure and confirm unto the Agent its rights and remedies
hereunder.
18. Binding Agreement; Assignments. This Agreement, and
the terms, covenants and conditions hereof, shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
except that no Grantor shall be permitted to assign this Agreement or any
interest herein or in the Collateral, or any part thereof, or otherwise pledge,
encumber or grant any option with respect to the Collateral, or any part
thereof, or any cash or property held by the Agent as Collateral under this
Agreement.
19. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (EXCEPT
CONFLICTS OF LAWS PRINCIPLES THEREOF), EXCEPT AS REQUIRED BY MANDATORY
PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
20. Severability. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired.
21. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument. This
Agreement shall be effective when a counterpart which bears the signature of
the Grantors shall have been delivered to the Agent.
11
<PAGE> 12
22. Section Headings. Section headings used herein are
for convenience only and are not to affect the construction of, or be taken
into consideration in interpreting, this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Pledge Agreement as of the day and year first above written.
AURORA ELECTRONICS GROUP, INC.
By____________________________
Name:
Title:
AURORA ELECTRONICS, INC.
By____________________________
Name:
Title:
CHEMICAL BANK, as Agent
By_____________________________
Name:
Title:
12
<PAGE> 13
SCHEDULE I
to Pledge Agreement
<TABLE>
<CAPTION>
Percentage
Stock of
Certificate Number Outstanding
Grantor Stock Issuer Class of Stock No(s). Par Value of Shares Shares
- ------- ------------ -------------- ----------- ---------- ------- ------------
<S> <C> <C> <C>
Aurora Aurora Common 2 million 100%
Electronics, Electronics shares
Inc. Group, Inc.
Aurora Aurora Common L.2 65%
Electronics Electronics
Group, Inc. Limited
Micro-C 100 65%
(Barbados)
Ltd.
</TABLE>
Description of Pledged Debt:
<TABLE>
<CAPTION> Original
Description of Maturity Principal
Obligation Issuer Obligation Date Amount
- ----------------- -------------- -------- --------
<S> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 10.25
EXECUTION COPY
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of March 29, 1996, among AURORA
ELECTRONICS GROUP, INC., a California corporation (the "Borrower"), AURORA
ELECTRONICS, INC., a Delaware corporation ("Holdings"; Holdings and the
Borrower are each sometimes referred to herein as a "Grantor" and collectively
as the "Grantors"), and CHEMICAL BANK, a New York banking corporation, as agent
("Agent") for (i) the lenders (the "Lenders") named in Schedules 2.01(a) and
2.01(b) of the Credit Agreement dated as of the date hereof, among the
Grantors, the guarantors named therein (the "Guarantors"), the Agent and the
Lenders (as amended, modified or supplemented from time to time in accordance
with its terms, the "Credit Agreement") and (ii) itself as issuer of the
Letters of Credit.
The Agent and the Lenders have agreed to extend Loans and
certain other financial accommodations, including, without limitation, the
issuance of the Letters of Credit to the Borrower pursuant to, and subject to
the terms and conditions of, the Credit Agreement. The obligation of the
Lenders to extend such Loans and of the Agent to issue the Letters of Credit
under the Credit Agreement is conditioned on the execution and delivery by the
Grantors of a security agreement in the form hereof to secure the following:
(i) the Obligations (including, without limitation, the due and punctual
payment and performance of (a) the principal of and interest on the Loans, when
and as due, whether at maturity, by acceleration, upon one or more dates set
for prepayment or otherwise and (b) Indebtedness at any time and from time to
time under the Letters of Credit), (ii) all obligations of the Grantors at any
time and from time to time under this Agreement and (iii) all other obligations
of the Grantors and Guarantors at any time and from time to time under the
Credit Agreement and the other Loan Documents (the foregoing being herein
referred to as the "Secured Obligations").
Accordingly, each Grantor and the Agent hereby agree as
follows:
1. Definitions of Terms Used Herein. All capitalized
terms used herein but not defined herein shall have the meanings set forth in
the Credit Agreement. As used herein, the following terms shall have the
following meanings:
(a) "Accounts Receivable" shall mean (i) all of
the Grantors' present and future accounts, general intangibles, chattel paper
and instruments, as such terms are defined in the Uniform Commercial Code as in
effect in the State of New York ("NYUCC") or in any PPSA, as applicable, (ii)
all moneys, securities and other property and the proceeds thereof, now or
hereafter held or received by, or in transit to, the Agent from or for any
Grantor, whether for safekeeping, pledge, custody,
<PAGE> 2
transmission, collection or otherwise, and all of the deposits (general or
special) of any Grantor, balances, sums and credits with, and all of the
Grantors' claims against the Agent at any time existing, (iii) all of the
Grantors' right, title and interest, and all of the Grantors' rights, remedies,
security and Liens, in, to and in respect of any accounts receivable,
including, without limitation, rights of stoppage in transit, replevin,
repossession and reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, guaranties or other contracts of suretyship with
respect to accounts receivable, deposits or other security for the obligation
of any account debtor, and credit and other insurance, (iv) all of the
Grantors' right, title and interest in, to and in respect of all goods relating
to, or which by sale have resulted in, accounts receivable, including, without
limitation, all goods described in invoices or other documents or instruments
with respect to, or otherwise representing or evidencing, any account
receivable, and all returned, reclaimed or repossessed goods.
(b) "Collateral" shall mean all (i) Accounts
Receivable, (ii) Documents, (iii) Equipment, (iv) General Intangibles, (v)
Inventory, and (vi) Proceeds.
(c) "Documents" shall mean all instruments,
files, records, ledger sheets and documents covering or relating to any of the
Collateral.
(d) "Equipment" shall mean all of the Grantors'
machinery, equipment, vehicles, furniture and fixtures and all attachments,
accessories and equipment now or hereafter owned or acquired in the Grantors'
business or used in connection therewith, and all substitutions and
replacements thereof, wherever located, whether now owned or hereafter acquired
by any Grantor.
(e) "General Intangibles" shall mean all of the
Grantors' present and future general intangibles of every kind and description,
including (without limitation) patents, patent applications, trade names and
trademarks and the goodwill of the business symbolized thereby, and Federal,
State and local tax refund claims of all kinds.
(f) "Inventory" shall mean all of the Grantors'
raw materials, work in process, finished goods and all other inventory (as such
term is defined in the NYUCC), whether now owned or hereafter acquired, and all
wrapping, packaging, advertising and shipping materials, and any documents
relating thereto.
(g) "PPSA" shall mean, as the case may be, the
Personal Property Security Act (Ontario), the Personal Property Security Act
(Nova Scotia), the Personal Property Security Act (British Columbia), the
Personal Property Security Act (Alberta), the Personal Property Security Act
(Saskatchewan) and/or the Personal
2
<PAGE> 3
Property Security Act (Manitoba), or any successor statutes to be applied in
connection with the issue of perfection of the Security Interest granted under
this Agreement.
(h) "Proceeds" shall mean any consideration
received from the sale, exchange, lease or other disposition of any asset or
property which constitutes Collateral, any other value received as a
consequence of the possession of any Collateral and any payment received from
any insurer or other person or entity as a result of the destruction, loss,
theft or other involuntary conversion of whatever nature of any asset or
property that constitutes Collateral, and shall include, without limitation,
all cash and negotiable instruments received or held by any of the Lenders
pursuant to any lockbox or similar arrangement relating to the payment of
Accounts Receivable.
2. Security Interests. As security for the payment or
performance, as the case may be, of the Secured Obligations, the Grantors
hereby create and grant to the Agent, its successors and its assigns, for its
own benefit and for the pro rata benefit of the Lenders, their successors and
their assigns, a security interest in the Collateral (the "Security Interest").
Without limiting the foregoing, the Agent is hereby authorized to file one or
more financing statements, continuation statements or other documents for the
purpose of perfecting, confirming, continuing, enforcing or protecting the
Security Interest, naming the Grantors as debtors and the Agent as secured
party.
The Grantors agree at all times to keep in all material
respects accurate and complete accounting records with respect to the
Collateral, including, but not limited to, a record of all payments and
Proceeds received.
3. Further Assurances. Each Grantor agrees, at its
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the Agent may
from time to time reasonably request for the assuring and preserving of the
Security Interest and the rights and remedies created hereby, including,
without limitation, the payment of any fees and taxes required in connection
with the execution and delivery of this Agreement, the granting of the Security
Interest and the filing of any financing statements or other documents in
connection herewith. If any amount payable under or in connection with any of
the Collateral equal to or greater than $10,000 shall be or become evidenced by
any promissory note or other instrument, such note or instrument shall be
promptly pledged and delivered to the Agent, duly endorsed in a manner
satisfactory to the Agent. Each Grantor agrees to notify promptly the Agent of
any change in its corporate name or in the location of its chief executive
office, its chief place of business or the office where it keeps its records
relating to the Accounts Receivable owned by it and, except for
goods-in-transit in the ordinary course of business, the location of any
Collateral. Each Grantor agrees promptly to notify the Agent if any material
portion of the Collateral is damaged or destroyed.
3
<PAGE> 4
4. Inspection and Verification. The Agent and such
persons as the Agent may designate shall have the right, once a fiscal quarter
(unless an Event of Default shall have occurred and be continuing in which case
such limitation shall not apply) at any reasonable time or times during a
Grantor's usual business hours, and upon reasonable notice (which may be
telephonic), to inspect the Collateral owned by such Grantor, all records
related thereto (and to make extracts and copies from such records), and the
premises upon which any such Collateral is located, to discuss such Grantor's
affairs with the officers of such Grantor and its independent accountants and
to verify under reasonable procedures the validity, amount, quality, quantity,
value, and condition of or any other matter relating to, such Collateral,
including, in the case of Accounts Receivable or Collateral in the possession
of a third person, contacting account debtors and upon the occurrence and
during the continuance of an Event of Default or a third person possessing such
Collateral for the purpose of making such a verification. Subject to the
provisions of Section 12.11 of the Credit Agreement, the Agent shall have the
absolute right to share any information it gains from such inspection or
verification with any or all of the Lenders.
5. Taxes; Encumbrances. At its option, the Agent may
discharge past due taxes, liens, security interests or other encumbrances at
any time levied or placed on the Collateral and not permitted under the Credit
Agreement, and may pay for the maintenance and preservation of the Collateral
to the extent a Grantor fails to do so as required by the Credit Agreement, and
each Grantor agrees to reimburse the Agent on demand for any payment made or
any expense incurred by it pursuant to the foregoing authorization; provided,
however, that nothing in this Section 5 shall be interpreted as excusing a
Grantor from the performance of any covenants or other promises with respect to
taxes, liens, security interests or other encumbrances and maintenances as set
forth herein or in the Credit Agreement.
6. Assignment of Security Interest. If at any time a
Grantor shall take and perfect a security interest in any property of an
account debtor or any other person to secure payment and performance of an
Account Receivable in an amount equal to or greater than $10,000, such Grantor
shall promptly assign such security interest to the Agent. Such assignment
need not be filed of public record unless necessary to continue the perfected
status of the security interest against creditors of and transferees from the
account debtor or other person granting the security interest.
7. Representations and Warranties. Each Grantor
represents and warrants to the Agent that:
(a) Title and Authority. It has (i) rights in
and good title to the Collateral in which it is granting a security interest
hereunder and (ii) the requisite power and authority to grant to the Agent the
Security Interest in such Collateral pursuant
4
<PAGE> 5
hereto and to execute, deliver and perform its obligations in accordance with
the terms of this Agreement, without the consent or approval of any other
person other than any consent or approval which has been obtained.
(b) Filing. Fully executed Uniform Commercial
Code and PPSA financing statements containing a description of the Collateral
shall have been, or shall be delivered to the Agent in a form such that they
can be, filed of record in every governmental, municipal or other office in
every jurisdiction in which any portion of the Collateral is located necessary
to publish notice of and protect the validity of and to establish a valid,
legal and perfected security interest in favor of the Agent in respect of the
Collateral in which a security interest may be perfected by filing in the
United States, its territories and possessions and Canada, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of Uniform Commercial Code or PPSA,
as the case may be, continuation statements.
(c) Validity of Security Interest. The Security
Interest constitutes a valid, legal and perfected first priority security
interest in all of the Collateral for payment and performance of the Secured
Obligations, except as otherwise permitted under the Credit Agreement and
except as may be affected by the law of foreign jurisdictions.
(d) Information Regarding Names. It has
disclosed in writing to the Agent any trade names used to identify it in its
business or in the ownership of its properties.
(e) Absence of Other Liens. The Collateral is
owned by it free and clear of any Lien of any nature whatsoever, except as
granted pursuant to this Agreement and as permitted by the Credit Agreement,
and, except as provided by paragraph (b) of this Section 7, no financing
statement has been filed, under the Uniform Commercial Code or PPSA as in
effect in any state, province or otherwise, covering any Collateral except as
indicated on Schedule 7.01 to the Credit Agreement.
(f) Additional Representations for Accounts
Receivable. The representations and warranties with respect to Receivables
contained in Article X of the Credit Agreement are hereby incorporated herein
in their entirety and shall be deemed made by the Grantors hereunder with
respect to the Accounts Receivable and shall be true and correct in all
material respects on each date on which a Credit Event is to occur with the
same effect as though made on and as of such date (except insofar as such
representations and warranties relate expressly to an earlier date).
5
<PAGE> 6
(g) Survival of Representations and Warranties.
All representations and warranties of the Grantors contained in this Agreement
shall survive the execution, delivery and performance of this Agreement until
the termination of this Agreement pursuant to Section 28.
8. Records of Accounts Receivable. Each Grantor shall
keep or cause to be kept records of its Accounts Receivable which are accurate
in all material respects. In addition, each Grantor will provide the Agent
with such further schedules and/or information respecting each Account
Receivable as the Agent may reasonably require.
9. Supplemental Documentation. In connection with the
execution and delivery of this Agreement, each Grantor shall furnish or cause
to be furnished to the Agent on or prior to the Closing Date a certificate,
signed by a Responsible Officer of such Grantor dated the Closing Date,
certifying that, as of the date of such certificate, all representations and
warranties of such Grantor in Section 7 are true and correct in all material
respects and that such Grantor is in compliance with all conditions, agreements
and covenants to be observed or performed hereunder.
10. Protection of Security. Each Grantor shall, at its
own cost and expense, take any and all actions reasonably necessary to defend
title to the Collateral owned by it against all persons and to defend the
Security Interest of the Agent in such Collateral, and the priority thereof,
against any adverse Lien or other impediment of any nature whatsoever except
for Liens permitted pursuant to Section 7.01 of the Credit Agreement.
11. Continuing Obligations of the Grantors. Each Grantor
shall remain liable to observe and perform all the conditions and obligations
to be observed and performed by it under each contract, agreement, interest or
obligation relating to the Collateral, all in accordance with the terms and
conditions thereof, and shall indemnify and hold harmless the Agent, and the
Lenders from any and all such liabilities.
12. Use and Disposition of Collateral. Except as set
forth in Sections 7.01 and 7.16 of the Credit Agreement, no Grantor shall make
or permit to be made any assignment, pledge or hypothecation of the Collateral,
or grant any security interest in the Collateral except for the Security
Interest. No Grantor shall make or permit to be made any transfer of any
Collateral, except Inventory in the ordinary course of business and as
otherwise permitted by the Credit Agreement, and, except with respect to
goods-in-transit in the ordinary course of business, each Grantor shall remain
at all times in possession of the Collateral owned by it other than transfers
to the Agent pursuant to the provisions hereof and as otherwise provided in
this Agreement or the Credit Agreement.
6
<PAGE> 7
13. Limitation on Modifications of Accounts Receivable.
No Grantor will, without the Agent's prior written consent, grant any extension
of the time of payment of any of its Accounts Receivable, compromise, compound
or settle the same for less than the full amount thereof, release, wholly or
partly, any person liable for the payment thereof, or allow any credit or
discount whatsoever thereon other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business.
14. Collections. The provisions of Article X of the
Credit Agreement with respect to the collection of Receivables and the
management of Collateral are hereby deemed incorporated herein in their
entirety and shall be binding upon the Grantors with respect to Accounts
Receivable as if set forth herein.
15. Remedies upon Default. Upon the occurrence and
during the continuance of an Event of Default, each Grantor agrees to deliver
each item of Collateral to the Agent on demand, and it is agreed that the Agent
shall have the right to take any or all of the following actions at the same or
different times: with or without legal process and with or without previous
notice or demand for performance, to take possession of the Collateral and
without liability for trespass (except for actual damage caused by the Agent's
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction after the exhaustion of all possible appeals in respect
of such determination (including by reason of lapse of time)) to enter any
premises where the Collateral may be located for the purpose of taking
possession of or removing the Collateral and, generally, to exercise any and
all rights afforded to a secured party under, and subject to its obligations
contained in, the Uniform Commercial Code or PPSA as in effect in any state or
province or other applicable law. Without limiting the generality of the
foregoing, each Grantor agrees that the Agent shall have the right, subject to
the mandatory requirements of applicable law, to sell or otherwise dispose of
all or any part of the Collateral, at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery as the Agent shall deem appropriate. Each such purchaser at any such
sale shall hold the property sold absolutely free from any claim or right on
the part of the applicable Grantor, and such Grantor hereby waives (to the
extent permitted by law) all rights of redemption, stay and appraisal which
such Grantor now has or may at any time in the future have under any rule of
law or statute now existing or hereafter enacted.
The Agent shall give the applicable Grantor 15 days' written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the NYUCC and under each PPSA) of the Agent's intention to
make any sale of Collateral. Such notice, in the case of a public sale, shall
state the time and place for such sale and, in the case of a sale at a broker's
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the
7
<PAGE> 8
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Agent may fix and
state in the notice (if any) of such sale. At any such sale, the Collateral,
or portion thereof, to be sold may be sold in one lot as an entirety or in
separate parcels, as the Agent may (in its sole and absolute discretion)
determine. The Agent shall not be obligated to make any sale of any Collateral
if it shall determine not to do so, regardless of the fact that notice of sale
of such Collateral shall have been given. The Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Agent until the sale price is paid by the purchaser or
purchasers thereof, but the Agent shall not incur any liability in case any
such purchaser or purchasers shall fail to take up and pay for the Collateral
so sold and, in case of any such failure, such Collateral may be sold again
upon like notice. At any public sale made pursuant to this Section 15,
Chemical Bank or any Lender may bid for or purchase, free (to the extent
permitted by law) from any right of redemption, stay or appraisal on the part
of any Grantor (all said rights being also hereby waived and released to the
extent permitted by law), with respect to the Collateral or any part thereof
offered for sale and Chemical Bank or any such Lender may make payment on
account thereof by using any claim then due and payable to Chemical Bank or any
such Lender from such Grantor as a credit against the purchase price, and
Chemical Bank or any such Lender may, upon compliance with the terms of sale,
hold, retain and dispose of such property without further accountability to
such Grantor therefor. For purposes hereof, a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale thereof; the
Agent shall be free to carry out such sale and purchase pursuant to such
agreement, and no Grantor shall be entitled to the return of the Collateral or
any portion thereof subject thereto, notwithstanding the fact that after the
Agent shall have entered into such an agreement all Events of Default shall
have been remedied and the Secured Obligations paid in full. As an alternative
to exercising the power of sale herein conferred upon it, the Agent may proceed
by a suit or suits at law or in equity to foreclose this Agreement and to sell
the Collateral or any portion thereof pursuant to a judgment or decree of a
court or courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.
16. Application of Proceeds. The proceeds of any
collection or sale of Collateral, as well as any Collateral consisting of cash,
shall be applied by the Agent as follows:
FIRST, to the Agent to reimburse the Agent for that
portion of the payments, if any, made by it with respect to Letters of Credit
for which a Lender, as a
8
<PAGE> 9
participant in such Letter of Credit pursuant to Section 2.18 of the Credit
Agreement, failed to pay its pro rata share thereof as required pursuant to
such Section 2.18;
SECOND, to the payment of all reasonable costs and
expenses incurred by the Agent in connection with such collection or sale or
otherwise in connection with this Agreement or any of the Secured Obligations,
including, but not limited to, all court costs and the reasonable fees and
expenses of its agents and legal counsel, the repayment of all advances made by
the Agent hereunder on behalf of the Grantors and any other reasonable costs or
expenses incurred in connection with the exercise of any right or remedy
hereunder;
THIRD, to the Agent to be held as cash collateral to
the extent of the undrawn amounts, if any, of outstanding Letters of Credit;
FOURTH, pro rata to the payment in full of principal
and interest in respect of any Loans outstanding (pro rata as among the Lenders
in accordance with the amounts of the Loans made by them pursuant to the Credit
Agreement);
FIFTH, pro rata to the payment in full of all Secured
Obligations (other than those referred to above) owed to the Lenders (pro rata
as among the Lenders in accordance with their respective Commitments); and
SIXTH, to the Grantors, their successors and assigns,
or as a court of competent jurisdiction may otherwise direct.
Upon any sale of the Collateral by the Agent (including, without limitation,
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Agent or such
officer or be answerable in any way for the misapplication thereof.
17. Locations of Collateral; Place of Business. (a)
Each Grantor hereby represents and warrants that all the Collateral is located
at the locations listed on Schedule I hereto. The Grantors agree not to
establish, or permit to be established, any other location for Collateral in
the United States or Canada unless all filings under the Uniform Commercial
Code or PPSA as in effect in any state or province or otherwise which are
required by this Agreement or the Credit Agreement to be made with respect to
the Collateral have been made and the Agent has a valid, legal and perfected
first priority security interest in the Collateral. The Grantors shall give
the Agent 10 Business Days' prior written notice of the establishment of
locations for Collateral in jurisdictions other than the United States or
Canada.
9
<PAGE> 10
(b) Each Grantor confirms that its chief
executive office is located as indicated on Schedule I hereto. Each Grantor
agrees not to change, or permit to be changed, the location of its chief
executive office unless all filings under the Uniform Commercial Code or PPSA
as in effect in any state or province or otherwise which are required by this
Agreement or the Credit Agreement to be made with respect to the Collateral
have been made and the Agent has a valid, legal and perfected first priority
security interest in the Collateral.
18. Security Interest Absolute. All rights of the Agent
hereunder, the Security Interest, and all obligations of the Grantors
hereunder, shall be absolute and unconditional irrespective of (i) any lack of
validity or enforceability of the Credit Agreement, any other agreement with
respect to any of the Secured Obligations or any other agreement or instrument
relating to any of the foregoing, (ii) any change in the time, manner or place
of payment of, or in any other term of, all or any of the Secured Obligations,
or any other amendment or waiver of or consent to any departure from the Credit
Agreement, or any other agreement or instrument, (iii) any exchange, release or
nonperfection of any other collateral, or any release or amendment or waiver of
or consent to or departure from any guarantee, for all or any of the Secured
Obligations, or (iv) any other circumstance which might otherwise constitute a
defense available to, or discharge of, the Grantors, any of the Guarantors or
any other obligor in respect of the Secured Obligations or in respect of this
Agreement.
19. No Waiver. No failure on the part of the Agent to
exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy by the Agent preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. All
remedies hereunder are cumulative and are not exclusive of any other remedies
provided by law. The Agent and the Lenders shall not be deemed to have waived
any rights hereunder or under any other agreement or instrument unless such
waiver shall be in writing and signed by such parties.
20. Agent Appointed Attorney-in-Fact. Each Grantor
hereby constitutes the Agent or the Agent's designee as the attorney-in-fact of
such Grantor (a) to send verifications of Accounts Receivable to any Customer
and (b) upon the occurrence and during the continuance of an Event of Default,
(i) to endorse the applicable Grantor's name upon any notes, acceptances,
checks, drafts, money orders or other evidences of payment or Collateral that
may come into its possession; (ii) to sign the name of the applicable Grantor
on any invoice or bill of lading relating to any of the Collateral, drafts
against Customers, assignments and verifications of Accounts Receivable and
notices to Customers; (iii) to receive, endorse, assign and/or deliver any and
all notes, acceptances, checks, drafts, money orders or other evidences or
instruments of payment relating to the Collateral or any part thereof, and each
Grantor
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<PAGE> 11
hereby waives notice of presentment, protest and non-payment of any instrument
so endorsed; (iv) to demand, collect, receive payment of, give receipt for,
extend the time of payment of and give discharges and releases of all or any of
the Collateral and/or release the obligor thereon; (v) to commence and
prosecute any and all suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect or otherwise realize on all or any
of the Collateral or to enforce any rights in respect of any Collateral; (vi)
to settle, compromise, compound, adjust or defend any actions, suits or
proceedings relating to or pertaining to all or any of the Collateral; (vii) to
notify, or to require the applicable Grantor to notify, the account debtors
obligated on any or all of the Accounts Receivable to make payment thereof
directly to the Agent; (viii) to notify the Postal Service authorities to
change the address for delivery of mail addressed to any Grantor to such
address as the Agent may designate; (ix) to accept the return of goods
represented by any of the Accounts Receivable; and (x) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with all
or any of the Collateral, and to do all other acts and things necessary to
carry out the purposes of this Agreement, as fully and completely as though the
Agent were the absolute owner of the Collateral for all purposes; provided,
however, that nothing herein contained shall be construed as requiring or
obligating the Agent or any Lender to make any commitment or to make any
inquiry as to the nature or sufficiency of any payment received by the Agent or
such Lender or to present or file any claim or notice, or to take any action
with respect to the Collateral or any part thereof or the moneys due or to
become due in respect thereof or any property covered thereby, and no action
taken by the Agent or any Lender or omitted to be taken with respect to the
Collateral or any part thereof shall give rise to any defense, counterclaim or
offset in favor of any Grantor or to any claim or action against the Agent or
any Lender in the absence of a final determination by a court of competent
jurisdiction after the exhaustion of all possible appeals in respect of such
determination (including by reason of lapse of time) of the gross negligence or
willful misconduct of the Agent or such Lender. It is understood and agreed
that the appointment of the Agent as the agent of the Grantors for the purposes
set forth above in this Section 20 is coupled with an interest and is
irrevocable. The provisions of this Section 20 shall in no event relieve any
Grantor of any of its obligations hereunder or under the Credit Agreement with
respect to the Collateral or any part thereof or impose any obligation on the
Agent or any Lender to proceed in any particular manner with respect to the
Collateral or any part thereof, or in any way limit the exercise by the Agent
or any Lender of any other or further right which it may have on the date of
this Agreement or hereafter, whether hereunder or by law or otherwise.
21. Agent's Fees and Expenses. The Grantors shall be
jointly and severally obligated to, upon demand, pay to the Agent the amount of
any and all reasonable expenses, including the reasonable fees and expenses of
its counsel and of any experts or agents which the Agent may incur in
connection with (i) the
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<PAGE> 12
administration of this Agreement, (ii) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the Agent hereunder,
or (iv) the failure by any Grantor to perform or observe any of the provisions
hereof. In addition, the Grantors jointly and severally indemnify and hold the
Agent and the Lenders harmless from and against any and all liability incurred
by the Agent or the Lenders hereunder or in connection herewith, unless such
liability shall be due to the gross negligence or willful misconduct of the
Agent or the Lenders, as the case may be, as finally determined by a court of
competent jurisdiction after the exhaustion of all possible appeals in respect
of such determination (including by reason of lapse of time). Any such amounts
payable as provided hereunder or thereunder shall be additional Secured
Obligations secured hereby and by the other Security Documents.
22. Binding Agreement; Assignments. This Agreement, and
the terms, covenants and conditions hereof, shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
except that the Grantors shall not be permitted to assign this Agreement or any
interest herein or in the Collateral, or any part thereof, or otherwise pledge
or encumber the Collateral, or any part thereof, or any cash or property held
by the Agent as Collateral under this Agreement, except as contemplated by this
Agreement or the Credit Agreement.
23. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
24. Notices. All communications and notices hereunder
shall be in writing and given as provided in the Credit Agreement.
25. Severability. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable the remaining provisions contained herein shall not in any way be
affected or impaired.
26. Section Headings. Section headings used herein are
for convenience only and are not to affect the construction of, or to be taken
into consideration in interpreting, this Agreement.
27. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument. This
Agreement shall be effective when a
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<PAGE> 13
counterpart which bears the signature of the Grantors shall have been delivered
to the Agent.
28. Termination. This Agreement and the Security
Interest shall terminate when (a) all the Secured Obligations have been fully
and indefeasibly paid in cash, (b) the Lenders have no further commitment to
make any Loans under the Credit Agreement, and (c) the Agent shall have no
further obligation to issue any Letters of Credit, at which time the Agent
shall execute and deliver to the Grantors all Uniform Commercial Code and PPSA
termination statements and similar documents which the Grantors shall
reasonably request to evidence such termination; provided, however, that all
indemnities of the Grantors contained in this Agreement shall survive, and
remain operative and in full force and effect regardless of, the termination of
this Agreement.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have duly executed this
Security Agreement as of the day and year first above written.
AURORA ELECTRONICS GROUP, INC.
By:_____________________________________
Name:
Title:
AURORA ELECTRONICS, INC.
By:_____________________________________
Name:
Title:
CHEMICAL BANK, as Agent
By:_____________________________________
Name:
Title:
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<PAGE> 15
Schedule I to the
Security Agreement
Locations of Collateral
Chief Executive Office of each Grantor
Trade names of each Grantor
<PAGE> 1
EXHIBIT 10.26
EXECUTION COPY
SECURITY AGREEMENT AND MORTGAGE -
TRADEMARKS AND PATENTS
AGREEMENT made this 29th day of March, 1996 among AURORA
ELECTRONICS GROUP, INC., a California corporation (the "Borrower"), AURORA
ELECTRONICS, INC., a Delaware corporation ("Holdings"; Holdings and the
Borrower are each sometimes referred to herein as a "Debtor" and collectively
as the "Debtors"), each having an office at 2030 Main Street, Suite 1120,
Irvine, California 92714, and CHEMICAL BANK, a New York banking corporation
having an office at 633 Third Avenue, New York, New York 10017, as agent
(referred to herein as the "Secured Party") for (i) the lenders (the "Lenders")
named in Schedules 2.01(a) and 2.01(b) of the Credit Agreement dated as of the
date hereof, among the Debtors, the guarantors named therein (the
"Guarantors"), the Lenders and the Secured Party (as amended, modified or
supplemented from time to time in accordance with its terms, the "Credit
Agreement") and (ii) for itself as issuer of the Letters of Credit.
A. The Debtors have adopted the terms and designs
described in Schedule A annexed hereto and made a part hereof.
B. The Debtors are the owners and holders of the patents
listed on Schedule B hereto.
C. The Secured Party and the Lenders have agreed to
extend Loans and certain other financial accommodations including, without
limitation, the issuance of Letters of Credit to the Borrower pursuant to, and
subject to the terms and conditions of, the Credit Agreement. The obligation
of the Lenders to extend such Loans and of the Secured Party to issue Letters
of Credit under the Credit Agreement is conditioned on the execution and
delivery by the Debtors of a security agreement in the form hereof to secure
the following: (i) the Obligations (including, without limitation, the due and
punctual payment and performance of (a) the principal of and interest on the
Loans, when and as due, whether at maturity, by acceleration, upon one or more
dates set for prepayment or otherwise and (b) Indebtedness at any time and from
time to time under the Letters of Credit), (ii) all obligations of the Debtors
at any time and from time to time under this Agreement and (iii) all
obligations of the Debtors and the Guarantors at any time and from time to time
under the Credit Agreement and the other Loan Documents (the foregoing being
herein referred to as the "Secured Obligations").
NOW, THEREFORE, IT IS AGREED that, for and in consideration of
the Loans and other financial accommodations to be made under the Credit
Agreement, and other good and valuable consideration, the receipt of which is
hereby acknowl-
<PAGE> 2
edged, and as collateral security for the full and prompt payment and
performance of all Secured Obligations, as hereinafter defined, the Debtors do
hereby mortgage to and pledge with the Secured Party for its own benefit and
the benefit of the Lenders, and grant to the Secured Party a security interest
in, all of its right, title and interest in and to (i) each of the Trademarks
(as hereinafter defined), and the goodwill of the business symbolized by each
of the Trademarks, all customer lists and other records of the Debtors relating
to the distribution of products bearing the Trademarks and each of the
registrations described in Schedule A; (ii) each of the Patents (as hereinafter
defined) and each of the registrations listed on Schedule B hereto; and (iii)
any and all proceeds of the foregoing, including, without limitation, any
claims by the Debtors against third parties for infringement of the Trademarks
or the Patents (collectively, the "Collateral").
1. Terms defined in the Credit Agreement and not
otherwise defined herein, shall have the meaning set forth in the Credit
Agreement. As used in this Agreement, unless the context otherwise requires:
"Patents" shall mean (i) all letters patent of the United
States or any other country, all right, title and interest therein and thereto,
and all registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, all
whether now owned or hereafter acquired by a Debtor, including, but not limited
to, those described in Schedule B annexed hereto and made a part hereof, and
(ii) all reissues, continuations, continuations-in-part, extensions or
divisional thereof and all licenses thereof.
"Trademarks" shall mean (i) all trademarks, trade names, trade
styles, service marks, prints and labels on which said trademarks, trade names,
trade styles and service marks have appeared or appear, designs and general
intangibles of like nature, now existing or hereafter adopted or acquired, all
right, title and interest therein and thereto, and all registrations and
recordings thereof, including, without limitation, applications, registrations
and recordings in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof, or any other
country or any political subdivision thereof, all whether now owned or
hereafter acquired by a Debtor, including, but not limited to, those described
in Schedule A annexed hereto and made a part hereof, and (ii) all reissues,
extensions or renewals thereof and all licenses thereof.
2
<PAGE> 3
2. Each Debtor hereby represents, warrants, covenants
and agrees as follows:
(a) Such Debtor has the sole, full and clear title to the
registered U.S. Trademarks in which it is granting a security interest
hereunder for the goods and services covered by the registrations thereof and
such registrations are valid and subsisting and in full force and effect.
(b) Each Debtor will perform all acts and execute all
documents, including, without limitation, assignments for security in form
suitable for filing with the United States Patent and Trademark Office,
substantially in the forms of Exhibits 1 and 2 hereof, respectively, reasonably
requested by the Secured Party at any time to evidence, perfect, maintain,
record and enforce the Secured Party's interest in the Collateral or otherwise
in furtherance of the provisions of this Agreement, and each Debtor hereby
authorizes the Secured Party to execute and file one or more financing
statements (and similar documents) or copies thereof or of this Agreement with
respect to the Collateral signed only by the Secured Party.
(c) Each Debtor (either itself or through licensees) will
continue to use its Trademarks on each and every trademark class of goods
applicable to its current line as reflected in its current catalogs, brochures
and price lists in order to maintain such Trademarks in full force free from
any claim of abandonment for nonuse and no Debtor will (nor will it permit any
licensee thereof to) do any act or knowingly omit to do any act whereby any
Trademark may become invalidated, except to the extent that such Debtor, in the
exercise in good faith of its commercially reasonable business judgment,
decides in the ordinary course of business to discontinue the sale and/or
production of particular products bearing any such Trademark.
(d) Such Debtor has the sole, full and clear title to
each of the Patents shown on Schedule B hereto and the registrations thereof
are valid and subsisting and in full force and effect. None of the Patents has
been abandoned or dedicated, and, except to the extent that a Debtor, in the
exercise in good faith of its commercially reasonable business judgment,
decides that such Patent is no longer useful with respect to the business of
such Debtor, no Debtor will do any act, or omit to do any act, whereby its
Patents may become abandoned or dedicated and shall notify the Secured Party
immediately if it knows of any reason or has reason to know that any
application or registration may become abandoned or dedicated.
(e) The Debtors will promptly pay the Secured Party for
any and all reasonable sums, costs, and expenses which the Secured Party may
pay or incur pursuant to the provisions of this Agreement or in enforcing the
Secured Obligations, the Collateral or the security interest granted hereunder,
including, but not limited to, all
3
<PAGE> 4
filing or recording fees, court costs, collection charges, travel, and
reasonable attorneys' fees, all of which together with interest at the highest
rate then payable on the Secured Obligations shall be part of the Secured
Obligations and be payable on demand.
(f) In no event shall any Debtor, either itself or
through any agent, employee, licensee or designee, (i) file an application for
the registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency of the United States, any
State thereof, any other country or any political subdivision thereof or (ii)
file any assignment of any patent or trademark, which such Debtor may acquire
from a third party, with the United States Patent and Trademark Office or any
similar office or agency of the United States, any State thereof, any other
country or any political subdivision thereof, unless such Debtor shall, on or
prior to the date of such filing, notify the Secured Party thereof, and, upon
request of the Secured Party, execute and deliver any and all assignments,
agreements, instruments, documents and papers as the Secured Party may
reasonably request to evidence the Secured Party's interest in such Patent or
Trademark and the goodwill and general intangibles of such Debtor relating
thereto or represented thereby, and each Debtor hereby constitutes the Secured
Party its attorney-in- fact to execute and file all such writings for the
foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest is irrevocable until the
Secured Obligations are paid in full.
(g) Each Debtor has the right and power to make the
assignment and to grant the security interest herein granted; and the
Collateral is not now, and at all times hereafter will not be, subject to any
Liens, mortgages, assignments, security interests or encumbrances of any nature
whatsoever, except (x) Liens in favor of the Secured Party and (y) Liens of a
type described in Section 7.01(c) of the Credit Agreement, and to the best
knowledge of the Debtors none of the Collateral is subject to any claim.
(h) Except to the extent that the Secured Party, upon
prior written notice from any Debtor, shall consent, no Debtor will assign,
sell, mortgage, lease, transfer, pledge, hypothecate, grant a security interest
in or lien upon, encumber, grant an exclusive or non-exclusive license, or
otherwise dispose of any of the Collateral, and nothing in this Agreement shall
be deemed a consent by the Secured Party to any such action except as expressly
permitted herein or in the Credit Agreement.
(i) As of the date hereof no Debtor nor any affiliate or
subsidiary thereof owns any Patents or Trademarks or has any Patents or
Trademarks registered in, or the subject of pending applications in, the United
States Patent and Trademark Office or any similar office or agency of the
United States, any State thereof, any other
4
<PAGE> 5
country or any political subdivision thereof, other than those described in
Schedules A and B hereto.
(j) Each Debtor will take all necessary steps in any
proceeding before the United States Patent and Trademark Office or any similar
office or agency of the United States, any State thereof, any other country or
any political subdivision thereof, to maintain each application and
registration of the Trademarks and Patents, including, without limitation,
filing of renewals, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings (except to the extent
that dedication, abandonment or invalidation is permitted under paragraphs 2(c)
and 2(d) hereof).
(k) Each Debtor assumes all responsibility and liability
arising from the use of the Trademarks, and the Debtors hereby jointly and
severally indemnify and hold the Secured Party harmless from and against any
claim, suit, loss, damage or expense (including reasonable attorneys' fees)
arising out of any alleged defect in any product manufactured, promoted or sold
by any Debtor (or any affiliate or subsidiary thereof) in connection with any
Trademark or out of the manufacture, promotion, labeling, sale or advertisement
of any such product by such Debtor (or any affiliate or subsidiary thereof).
Each Debtor agrees that the Secured Party does not assume, and shall have no
responsibility for, the payment of any sums due or to become due under any
agreement or contract included in the Collateral or the performance of any
obligations to be performed under or with respect to any such agreement or
contract by any Debtor, and the Debtors hereby jointly and severally agree to
indemnify and hold the Secured Party harmless with respect to any and all
claims by any person relating thereto unless such claims shall be due to the
gross negligence or wilful misconduct of the Secured Party as finally
determined by a court of competent jurisdiction after the exhaustion of all
possible appeals in respect of such determination (including by reason of lapse
of time).
(l) The Secured Party may, in its sole discretion, pay
any amount or do any act required of Debtor hereunder or requested by Secured
Party to preserve, defend, protect, maintain, record or enforce Debtor's
obligations contained herein, the Secured Obligations, the Collateral, or the
right, title and interest granted Secured Party herein, and which any Debtor
fails to do or pay, and any such payment shall be deemed an advance by the
Secured Party to the Debtors and shall be payable on demand together with
interest at the highest rate then payable on the Secured Obligations.
(m) Each Debtor agrees that if it, or any subsidiary
thereof, learns of any use by any person of any term or design reasonably
likely to cause confusion with any Trademark, it shall promptly notify the
Secured Party of such use and, if requested
5
<PAGE> 6
by Secured Party, shall join with the Secured Party, at the Debtors' expense,
in such action as the Secured Party, in its reasonable discretion may deem
advisable for the protection of the Secured Party's interest in and to such
Trademarks.
(n) All licenses of its Trademarks and Patents which the
Debtors have granted to third parties are set forth in Schedule C hereto.
3. Upon the occurrence and during the continuance of an
Event of Default, in addition to all other rights and remedies of the Secured
Party, whether under law, the Credit Agreement or otherwise, all such rights
and remedies being cumulative, not exclusive and enforceable alternatively,
successively or concurrently, without (except as provided herein) notice to, or
consent by, any Debtor, the Secured Party shall have the following rights and
remedies: (a) the applicable Debtor shall not make any further use of the
Patents or the Trademarks or any mark similar thereto for any purpose;
provided, however, the applicable Debtor may use its Patents or Trademarks or
other marks similar thereto for purposes related to the marketing, distributing
or sale of inventory in the ordinary course of business (and under no
circumstances shall any Debtor license, assign or otherwise dispose of any of
its Patents or Trademarks) until notified by the Secured Party not to use such
Patents, Trademarks or other marks similar thereto; (b) the Secured Party may,
at any time and from time to time, upon 10 days' prior notice to the applicable
Debtor, license, whether general, special or otherwise, and whether on an
exclusive or nonexclusive basis, any of the Patents or Trademarks, throughout
the world for such term or terms, on such conditions, and in such manner, as
the Secured Party shall in its sole discretion determine unless such license
would violate existing licensing arrangements affecting such Patents and
Trademarks; (c) the Secured Party may (without assuming any obligations or
liability thereunder), at any time, enforce (and shall have the exclusive right
to enforce) against any licensee or sublicensee all rights and remedies of any
Debtor in, to and under any one or more license agreements with respect to the
Collateral, and take or refrain from taking any action under any thereof, and
each Debtor hereby releases the Secured Party from, and agrees to hold the
Secured Party free and harmless from and against any claims arising out of, any
action taken or omitted to be taken with respect to any such license agreement;
(d) the Secured Party may, at any time and from time to time, upon 10 days'
prior notice to the applicable Debtor, assign, sell, or otherwise dispose of,
the Collateral or any of it, either with or without special or other conditions
or stipulations, with power to buy the Collateral or any part of it, and with
power also to execute assurances, and do all other acts and things for
completing the assignment, sale or disposition which the Secured Party shall,
in its sole discretion, deem appropriate or proper; and (e) in addition to the
foregoing, in order to implement the assignment, sale or other disposal of any
of the Collateral pursuant to subparagraph 3(d) hereof, the Secured Party may,
at any time, pursuant to the authority granted in the Powers of Attorney
described in paragraph 4 hereof (such authority becoming effective on the
6
<PAGE> 7
occurrence or continuation as hereinabove provided of an Event of Default),
execute and deliver on behalf of the applicable Debtor, one or more instruments
of assignment of the Patents or Trademarks (or any application or registration
thereof), in form suitable for filing, recording or registration in any
country. Each Debtor agrees to pay when due all reasonable costs incurred in
any such transfer of the Patents or Trademarks, including any taxes, fees and
reasonable attorneys' fees, and all such costs shall be added to the Secured
Obligations. The Secured Party may apply the proceeds actually received from
any such license, assignment, sale or other disposition to the reasonable costs
and expenses thereof, including, without limitation, reasonable attorneys' fees
and all reasonable legal, travel and other expenses which may be incurred by
the Secured Party, and then to the Secured Obligations, in such order as to
principal or interest as the Secured Party may desire; and the Debtors shall
remain jointly and severally liable and will pay the Secured Party on demand
any deficiency remaining, together with interest thereon at a rate equal to the
highest rate then payable on the Secured Obligations and the balance of any
expenses unpaid. Nothing herein contained shall be construed as requiring the
Secured Party to take any such action at any time. In the event of any such
license, assignment, sale or other disposition of the Collateral, or any of it,
after the occurrence or continuation as hereinabove provided of an Event of
Default, each Debtor shall supply its know-how and expertise relating to the
manufacture and sale of the products bearing or in connection with the
Trademarks or Patents, and its customer lists and other records relating to the
Trademarks or Patents and to the distribution of said products, to the Secured
Party or its designee.
The proceeds of any sale of Collateral, as well as any
Collateral consisting of cash, shall be applied by the Secured Party as
follows:
FIRST, to the Secured Party to reimburse the Secured Party for
that portion of the payments, if any, made by it with respect to Letters of
Credit for which a Lender, as a participant in such Letter of Credit pursuant
to Section 2.18 of the Credit Agreement, failed to pay its pro rata share
thereof as required pursuant to such Section 2.18;
SECOND, to the payment of all reasonable costs and expenses
incurred by the Secured Party in connection with such sale or otherwise in
connection with this Agreement or any of the Secured Obligations, including,
but not limited to, all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the Secured
Party hereunder on behalf of the Debtors and any other reasonable costs or
expenses incurred in connection with the exercise of any right or remedy
hereunder;
THIRD, to the Secured Party to be held as cash collateral to
the extent of the undrawn amount, if any, or outstanding Letters of Credit;
7
<PAGE> 8
FOURTH, pro rata to the payment in full of principal and
interest in respect of any Loans outstanding (pro rata as among the Lenders in
accordance with the amounts of the Loans made by them pursuant to the Credit
Agreement);
FIFTH, pro rata to the payment in full of all Secured
Obligations (other than those referred to above) owed to the Lenders (pro rata
as among the Lenders in accordance with their respective Commitments); and
SIXTH, to the Debtors, their successors or assigns, or as a
court of competent jurisdiction may otherwise direct.
4. Concurrently with the execution and delivery hereof,
each Debtor is executing and delivering to the Secured Party, in the form of
Exhibit 3 hereto, five originals of a Power of Attorney for the implementation
of the assignment, sale or other disposal of the Trademarks and Patents
pursuant to paragraphs 3(d) and (e) hereof and each Debtor hereby releases the
Secured Party from any claims, causes of action and demands at any time arising
out of or with respect to any actions taken or omitted to be taken by the
Secured Party under the powers of attorney granted herein, other than actions
taken or omitted to be taken through the gross negligence or willful misconduct
of the Secured Party as finally determined by a court of competent jurisdiction
after the exhaustion of all possible appeals in respect of such determination
(including by reason of lapse of time).
5. In connection with the execution and delivery of this
Agreement, each Debtor shall furnish or cause to be furnished to the Secured
Party on or prior to the Closing Date a certificate, signed by a Responsible
Officer of such Debtor dated the Closing Date, certifying that, as of the date
of such certificate, all representations and warranties of such Debtor in
paragraph 2 hereof are true and correct in all material respects and that such
Debtor is in compliance with all conditions, agreements and covenants to be
observed or performed hereunder.
6. No failure on the part of the Secured Party to
exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy by the Secured Party preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law. The Secured Party and the Lenders shall not be
deemed to have waived any rights hereunder or under any other agreement or
instrument unless such waiver shall be in writing and signed by such parties.
8
<PAGE> 9
7. All rights of the Secured Party hereunder, the grant
of a security interest in the Collateral and all obligations of the Debtors
hereunder, shall be absolute and unconditional irrespective of (i) any lack of
validity or enforceability of the Credit Agreement, any agreement with respect
to any of the Secured Obligations or any other agreement or instrument relating
to any of the foregoing, (ii) any change in time, manner or place of payment
of, or in any other term of, all or any of the Secured Obligations, or any
other amendment or waiver of or any consent to any departure from the Credit
Agreement or any other agreement or instrument, (iii) any exchange, release or
nonperfection of any other collateral, or any release or amendment or waiver of
or consent to or departure from any guarantee, for all or any of the Secured
Obligations or (iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any Debtor in respect of the Secured
Obligations or in respect of this Agreement.
8. This Agreement shall terminate when (a) all the
Secured Obligations have been fully and indefeasibly paid in cash, (b) the
Lenders have no further commitment to make any Loans under the Credit
Agreement, and (c) the Secured Party shall have no further obligation to issue
any Letters of Credit, at which time the Agent shall reassign such of the
Collateral (if any) as shall not have been sold hereunder, together with
appropriate instruments of reassignment and release; provided, however, that
all indemnities of the Debtors contained in this Agreement shall survive, and
remain operative and in full force and effect regardless of, the termination of
this Agreement. Any such reassignment shall be without recourse to or warranty
by the Agent and at the expense of the Debtors.
9. Each Debtor agrees to do such further acts and
things, and to execute and deliver such additional conveyances, assignments,
agreements and instruments, as the Secured Party may at any time reasonably
request in connection with the administration and enforcement of this Agreement
or with respect to the Collateral or any part thereof or in order better to
assure and confirm unto the Secured Party its rights and remedies hereunder.
10. This Agreement, and the terms, covenants and
conditions hereof, shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that no
Debtor shall be permitted to assign this Agreement or any interest herein or in
the Collateral, or any part thereof, or otherwise pledge or encumber the
Collateral, or any part thereof, or any cash or property held by the Secured
Party as Collateral under this Agreement, except as contemplated by this
Agreement or the Credit Agreement.
11. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (EXCEPT
9
<PAGE> 10
CONFLICTS OF LAWS PRINCIPLES THEREOF), EXCEPT AS REQUIRED BY MANDATORY
PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
12. All communications and notices hereunder shall be in
writing and given as provided in the Credit Agreement.
13. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable the remaining
provisions contained herein shall not in any way be affected or impaired.
14. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument. This Agreement shall
be effective when a counterpart which bears the signature of the Debtors shall
have been delivered to the Secured Party.
IN WITNESS WHEREOF, each Debtor and the Secured Party have
caused this Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
AURORA ELECTRONICS GROUP, INC.
By _____________________________________
Name: ________________________________
Title: _______________________________
AURORA ELECTRONICS, INC.
By _____________________________________
Name: ________________________________
Title: _______________________________
10
<PAGE> 11
CHEMICAL BANK
By _____________________________________
Name: ________________________________
Title: _______________________________
11
<PAGE> 12
Schedule A to Security Agreement
TRADEMARKS
<TABLE>
<CAPTION>
Trademark Reg. Date Reg. No.
- --------- --------- --------
<S> <C> <C>
</TABLE>
12
<PAGE> 13
Schedule B to Security Agreement
PATENTS
<TABLE>
<CAPTION>
Date
Title Issued Patent No.
- ----- ------ ----------
<S> <C> <C>
</TABLE>
13
<PAGE> 14
Schedule C to Security Agreement
LICENSES
14
<PAGE> 15
Exhibit 1 to
Security Agreement
ASSIGNMENT FOR SECURITY
(PATENTS)
WHEREAS, AURORA ELECTRONICS [GROUP], INC., a Delaware
[California] corporation (herein referred to as "Assignor"), owns the letters
patent, and/or applications for letters patent, of the United States, more
particularly described on Schedule 1-A annexed hereto as part hereof (the
"Patents");
WHEREAS, Assignor is obligated to CHEMICAL BANK, a
New York banking corporation, as agent (referred to herein as the "Assignee")
for (i) the lenders (the "Lenders") named in Schedules 2.01(a) and 2.01(b) of
the Credit Agreement dated as of the date hereof, among the Assignor, [Aurora
Electronics Group, Inc.,] the guarantors named therein (the "Guarantors"), the
Lenders and the Assignee (as amended, modified or supplemented from time to
time in accordance with its terms, the "Credit Agreement") and (ii) for itself
as issuer of the Letters of Credit, and Assignor has entered into a Security
Agreement and Mortgage-Trademarks and Patents dated the date hereof (the
"Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee, and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Patents, together with any
reissue, continuation, continuation-in-part or extension thereof, and all
proceeds thereof, including, without limitation, any and all causes of action
which may exist by reason of infringement thereof for the full term of the
Patents (the "Collateral"), to secure the prompt payment, performance and
observance of the Secured Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor does hereby further assign unto
Assignee and grant to Assignee a security interest in, and mortgage on, the
Collateral to secure the prompt payment, performance and observance of the
Secured Obligations.
Assignor does hereby further acknowledge and affirm that the
rights and remedies of Assignee with respect to the assignment of, security
interest in and mortgage on the Collateral made and granted hereby are more
fully set forth in the Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
Assignee's address is 633 Third Avenue, New York, New York
10017.
<PAGE> 16
IN WITNESS WHEREOF, Assignor has caused this Assignment to be
duly executed by its officer thereunto duly authorized as of the ____ day of
[ ], 19__.
AURORA ELECTRONICS [GROUP], INC.
By _____________________________________
Name: ________________________________
Title: _______________________________
2
<PAGE> 17
SCHEDULE 1-A TO ASSIGNMENT FOR SECURITY
PATENTS
<TABLE>
<CAPTION>
Title Date Issued Patent No.
- ----- ----------- ----------
<S> <C> <C>
</TABLE>
3
<PAGE> 18
Exhibit 2 to
Security Agreement
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
WHEREAS, AURORA ELECTRONICS [GROUP], INC., a Delaware
[California] corporation (herein referred to as "Assignor"), has adopted, used
and is using the trademarks listed on the annexed Schedule 2-A, which
trademarks are registered in the United States Patent and Trademark Office (the
"Trademarks");
WHEREAS, Assignor is obligated to CHEMICAL BANK, a
New York banking corporation, as agent (referred to herein as the "Assignee")
for (i) the lenders (the "Lenders") named in Schedules 2.01(a) and 2.01(b) of
the Credit Agreement dated as of the date hereof, among [the Assignor], [Aurora
Electronics Group, Inc.,] the guarantors named therein (the "Guarantors"), the
Lenders and the Assignee (as amended, modified or supplemented from time to
time in accordance with its terms, the "Credit Agreement") and (ii) for itself
as issuer of the Letters of Credit, and Assignor has entered into a Security
Agreement and Mortgage-Trademarks and Patents dated the date hereof (the
"Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Trademarks, together with
the goodwill of the business symbolized by the Trademarks and the applications
and registrations thereof, and all proceeds thereof, including, without
limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the payment, performance and
observance of the Secured Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor does hereby further assign unto
Assignee and grant to Assignee a security interest in, and mortgage on, the
Collateral to secure the prompt payment, performance and observance of the
Secured Obligations.
Assignor does hereby further acknowledge and affirm that the
rights and remedies of Assignee with respect to the assignment of, security
interest in and mortgage on the Collateral made and granted hereby are more
fully set forth in the Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
<PAGE> 19
Assignee's address is 633 Third Avenue, New York, New York
10017.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be
duly executed by its officer thereunto duly authorized as of the ____ day of [
], 19__.
AURORA ELECTRONICS [GROUP], INC.
By _____________________________________
Name: ________________________________
Title: _______________________________
2
<PAGE> 20
SCHEDULE 2-A TO ASSIGNMENT FOR SECURITY
TRADEMARKS
<TABLE>
<CAPTION>
Trademark Reg. Date Reg. No.
- --------- --------- --------
<S> <C> <C>
</TABLE>
3
<PAGE> 21
Exhibit 3 to
Security Agreement
SPECIAL POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, THAT AURORA ELECTRONICS
[GROUP], INC., a Delaware [California] corporation with its principal office at
[ ] (hereinafter called "Assignor") hereby appoints and
constitutes CHEMICAL BANK, a New York banking corporation, as agent (referred
to herein as the "Assignee") for (i) the lenders (the "Lenders") named in
Schedules 2.01(a) and 2.01(b) of the Credit Agreement dated as of the date
hereof, among the Assignor, the guarantors named therein (the "Guarantors"),
the Lenders and the Assignee (as amended, modified or supplemented from time to
time in accordance with its terms, the "Credit Agreement") and (ii) for itself
as issuer of the Letters of Credit, its true and lawful attorney, with full
power of substitution, and with full power and authority to perform the
following acts on behalf of Assignor:
1. For the purpose of assigning, selling, licensing
or otherwise disposing of all right, title and interest of
Assignor in and to any letters patent of the United States or
any other country or political subdivision thereof, and all
registrations, recordings, reissues, continuations,
continuations-in-part and extensions thereof, and all pending
applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other
formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of
assignment or other papers necessary or advisable to effect
such purpose;
2. For the purpose of assigning, selling, licensing
or otherwise disposing of all right, title and interest of
Assignor in and to any trademarks, trade names, trade styles
and service marks, and all registrations, recordings,
reissues, extensions and renewals thereof, and all pending
applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other
formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of
assignment or other papers necessary or advisable to effect
such purpose;
<PAGE> 22
3. To execute any and all documents, statements,
certificates or other papers necessary or advisable in order
to obtain the purposes described above as Assignee may in its
sole discretion determine.
This power of attorney is made pursuant to a Security
Agreement and Mortgage - Trademarks and Patents, dated the date hereof, between
Assignor and Assignee and takes effect solely for the purposes of paragraphs
3(d) and (e) thereof and is subject to the conditions thereof and may not be
revoked until the payment in full of all "Secured Obligations" as defined in
such Security Agreement and Mortgage - Trademarks and Patents.
Dated: __________, 19__
[Corporate Seal]
AURORA ELECTRONICS [GROUP], INC.
By _____________________________________
Name: ________________________________
Title: _______________________________
2
<PAGE> 23
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this day of [ ], 19___, before me personally
appeared [ ], to me known, who, being by me duly sworn, did
depose and say that he resides at
and that he is [ ] of [ ], the [Delaware] [California]
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was affixed pursuant to authority of the Board of
Directors of said corporation, and that he signed his name thereto pursuant to
such authority.
_______________________________
Notary Public
3
<PAGE> 1
EXHIBIT 10.27
EXECUTION COPY
ASSIGNMENT FOR SECURITY
(PATENTS)
WHEREAS, AURORA ELECTRONICS GROUP, INC., a California
corporation (herein referred to as "Assignor"), owns the letters patent, and/or
applications for letters patent, of the United States, more particularly
described on Schedule 1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Assignor is obligated to CHEMICAL BANK, a
New York banking corporation, as agent (referred to herein as the "Assignee")
for (i) the lenders (the "Lenders") named in Schedules 2.01(a) and 2.01(b) of
the Credit Agreement dated as of the date hereof, among the Assignor, the
guarantors named therein (the "Guarantors"), the Lenders and the Assignee (as
amended, modified or supplemented from time to time in accordance with its
terms, the "Credit Agreement") and (ii) for itself as issuer of the Letters of
Credit, and Assignor has entered into a Security Agreement and
Mortgage-Trademarks and Patents dated the date hereof (the "Agreement") in
favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee, and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Patents, together with any
reissue, continuation, continuation-in-part or extension thereof, and all
proceeds thereof, including, without limitation, any and all causes of action
which may exist by reason of infringement thereof for the full term of the
Patents (the "Collateral"), to secure the prompt payment, performance and
observance of the Secured Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor does hereby further assign unto
Assignee and grant to Assignee a security interest in, and mortgage on, the
Collateral to secure the prompt payment, performance and observance of the
Secured Obligations.
Assignor does hereby further acknowledge and affirm that the
rights and remedies of Assignee with respect to the assignment of, security
interest in and mortgage on the Collateral made and granted hereby are more
fully set forth in the Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
Assignee's address is 633 Third Avenue, New York, New York
10017.
<PAGE> 2
IN WITNESS WHEREOF, Assignor has caused this Assignment to be
duly executed by its officer thereunto duly authorized as of the 29th day of
March, 1996.
AURORA ELECTRONICS GROUP, INC.
By _______________________________
Name: _______________________
Title: _____________________
2
<PAGE> 3
SCHEDULE 1-A TO ASSIGNMENT FOR SECURITY
PATENTS
<TABLE>
<CAPTION>
Title Date Issued Patent No.
- ----- ----------- ----------
<S> <C> <C>
</TABLE>
3
<PAGE> 1
EXHIBIT 10.28
EXECUTION COPY
ASSIGNMENT FOR SECURITY
(PATENTS)
WHEREAS, AURORA ELECTRONICS, INC., a Delaware corporation
(herein referred to as "Assignor"), owns the letters patent, and/or
applications for letters patent, of the United States, more particularly
described on Schedule 1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Assignor is obligated to CHEMICAL BANK, a
New York banking corporation, as agent (referred to herein as the "Assignee")
for (i) the lenders (the "Lenders") named in Schedules 2.01(a) and 2.01(b) of
the Credit Agreement dated as of the date hereof, among the Assignor, the other
guarantors named therein (the "Guarantors"), the Lenders, Aurora Electronics
Group, Inc. and the Assignee (as amended, modified or supplemented from time to
time in accordance with its terms, the "Credit Agreement") and (ii) for itself
as issuer of the Letters of Credit, and Assignor has entered into a Security
Agreement and Mortgage-Trademarks and Patents dated the date hereof (the
"Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee, and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Patents, together with any
reissue, continuation, continuation-in-part or extension thereof, and all
proceeds thereof, including, without limitation, any and all causes of action
which may exist by reason of infringement thereof for the full term of the
Patents (the "Collateral"), to secure the prompt payment, performance and
observance of the Secured Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor does hereby further assign unto
Assignee and grant to Assignee a security interest in, and mortgage on, the
Collateral to secure the prompt payment, performance and observance of the
Secured Obligations.
Assignor does hereby further acknowledge and affirm that the
rights and remedies of Assignee with respect to the assignment of, security
interest in and mortgage on the Collateral made and granted hereby are more
fully set forth in the Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
Assignee's address is 633 Third Avenue, New York, New York
10017.
<PAGE> 2
IN WITNESS WHEREOF, Assignor has caused this Assignment to be
duly executed by its officer thereunto duly authorized as of the 29th day of
March, 1996.
AURORA ELECTRONICS, INC.
By _______________________________
Name: _______________________
Title: _____________________
2
<PAGE> 3
SCHEDULE 1-A TO ASSIGNMENT FOR SECURITY
PATENTS
<TABLE>
<CAPTION>
Title Date Issued Patent No.
- ----- ----------- ----------
<S> <C> <C>
</TABLE>
3
<PAGE> 1
EXHIBIT 10.29
EXECUTION COPY
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
WHEREAS, AURORA ELECTRONICS GROUP, INC., a California
corporation (herein referred to as "Assignor"), has adopted, used and is using
the trademarks listed on the annexed Schedule 2-A, which trademarks are
registered in the United States Patent and Trademark Office (the "Trademarks");
WHEREAS, Assignor is obligated to CHEMICAL BANK, a
New York banking corporation, as agent (referred to herein as the "Assignee")
for (i) the lenders (the "Lenders") named in Schedules 2.01(a) and 2.01(b) of
the Credit Agreement dated as of the date hereof, among the Assignor, the
guarantors named therein (the "Guarantors"), the Lenders and the Assignee (as
amended, modified or supplemented from time to time in accordance with its
terms, the "Credit Agreement") and (ii) for itself as issuer of the Letters of
Credit, and Assignor has entered into a Security Agreement and
Mortgage-Trademarks and Patents dated the date hereof (the "Agreement") in
favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Trademarks, together with
the goodwill of the business symbolized by the Trademarks and the applications
and registrations thereof, and all proceeds thereof, including, without
limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the payment, performance and
observance of the Secured Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor does hereby further assign unto
Assignee and grant to Assignee a security interest in, and mortgage on, the
Collateral to secure the prompt payment, performance and observance of the
Secured Obligations.
Assignor does hereby further acknowledge and affirm that the
rights and remedies of Assignee with respect to the assignment of, security
interest in and mortgage on the Collateral made and granted hereby are more
fully set forth in the Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
Assignee's address is 633 Third Avenue, New York, New York
10017.
<PAGE> 2
IN WITNESS WHEREOF, Assignor has caused this Assignment to be
duly executed by its officer thereunto duly authorized as of the 29th day of
March, 1996.
AURORA ELECTRONICS GROUP, INC.
By_______________________________
Name:_________________________
Title:________________________
2
<PAGE> 3
SCHEDULE 2-A TO ASSIGNMENT FOR SECURITY
TRADEMARKS
<TABLE>
<CAPTION>
Trademark Reg. Date Reg. No.
- --------- --------- --------
<S> <C> <C>
</TABLE>
3
<PAGE> 1
EXHIBIT 10.30
EXECUTION COPY
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
WHEREAS, AURORA ELECTRONICS, INC., a Delaware corporation
(herein referred to as "Assignor"), has adopted, used and is using the
trademarks listed on the annexed Schedule 2-A, which trademarks are registered
in the United States Patent and Trademark Office (the "Trademarks");
WHEREAS, Assignor is obligated to CHEMICAL BANK, a
New York banking corporation, as agent (referred to herein as the "Assignee")
for (i) the lenders (the "Lenders") named in Schedules 2.01(a) and 2.01(b) of
the Credit Agreement dated as of the date hereof, among the Assignor, the other
guarantors named therein (the "Guarantors"), the Lenders, Aurora Electronics
Group, Inc. and the Assignee (as amended, modified or supplemented from time to
time in accordance with its terms, the "Credit Agreement") and (ii) for itself
as issuer of the Letters of Credit, and Assignor has entered into a Security
Agreement and Mortgage-Trademarks and Patents dated the date hereof (the
"Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Trademarks, together with
the goodwill of the business symbolized by the Trademarks and the applications
and registrations thereof, and all proceeds thereof, including, without
limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the payment, performance and
observance of the Secured Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor does hereby further assign unto
Assignee and grant to Assignee a security interest in, and mortgage on, the
Collateral to secure the prompt payment, performance and observance of the
Secured Obligations.
Assignor does hereby further acknowledge and affirm that the
rights and remedies of Assignee with respect to the assignment of, security
interest in and mortgage on the Collateral made and granted hereby are more
fully set forth in the Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
Assignee's address is 633 Third Avenue, New York, New York
10017.
<PAGE> 2
IN WITNESS WHEREOF, Assignor has caused this Assignment to be
duly executed by its officer thereunto duly authorized as of the 29th day of
March, 1996.
AURORA ELECTRONICS, INC.
By________________________________
Name:__________________________
Title:_________________________
2
<PAGE> 3
SCHEDULE 2-A TO ASSIGNMENT FOR SECURITY
TRADEMARKS
<TABLE>
<CAPTION>
Trademark Reg. Date Reg. No.
- --------- --------- --------
<S> <C> <C>
</TABLE>
3
