CUSIP No. 051629103 Page 1 of 47 Pages
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No. 4)
Under the Securities Exchange Act of 1934
Aurora Electronics, Inc.
___________________________________________________________________________
(Name of Issuer)
Common Stock, $.03 par value
___________________________________________________________________________
(Title of Class of Securities)
051629103
___________________________________________________________________________
(CUSIP Number)
Welsh, Carson, Anderson William J. Hewitt, Esq.
& Stowe Reboul, MacMurray, Hewitt,
320 Park Avenue, Suite 2500 Maynard & Kristol
New York, New York 10022 45 Rockefeller Plaza
Attention: Laura VanBuren New York, New York 10111
Tel. (212) 893-9500 Tel. (212) 841-5700
___________________________________________________________________________
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 2, 1997
__________________________________
(Date of Event Which Requires
Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box [ ].
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CUSIP No. 051629103 Page 2 of 47 Pages
1) Name of Reporting Person Welsh, Carson, Ander-
S.S. or I.R.S. Identification son & Stowe VII, L.P.
No. of Above Person
_________________________________________________________________
2) Check the Appropriate Box (a) [X]
if a Member of a Group (b) [ ]
_________________________________________________________________
3) SEC Use Only
_________________________________________________________________
4) Source of Funds OO
_________________________________________________________________
5) Check if Disclosure of
Legal Proceedings Is Not Applicable
Required Pursuant to
Items 2(d) or 2(e)
_________________________________________________________________
6) Citizenship or Place
of Organization Delaware
_________________________________________________________________
Number of 7) Sole Voting 24,887,681 shares
Shares Beneficially Power of Common Stock
Owned by Each (issuable upon
Reporting Person: conversion of
convertible pre-
ferred stock and
exercise of
warrants)
________________________________________
8) Shared Voting
Power -0-
________________________________________
9) Sole Disposi- 24,887,681 shares
tive Power of Common Stock
(issuable upon
conversion of
convertible pre-
ferred stock and
exercise of
warrants)
________________________________________
10) Shared Dis-
positive Power -0-
________________________________________
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CUSIP No. 051629103 Page 3 of 47 Pages
11) Aggregate Amount Beneficially 24,887,681 shares
Owned by Each Reporting Person of Common Stock
(issuable upon
conversion of
convertible pre-
ferred stock and
exercise
of warrants)
_________________________________________________
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
_________________________________________________________________
13) Percent of Class
Represented by 78.4%
Amount in Row (11)
_________________________________________________________________
14) Type of Reporting
Person PN
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CUSIP No. 051629103 Page 4 of 47 Pages
1) Name of Reporting Person WCAS Information
S.S. or I.R.S. Identification Partners, L.P.
No. of Above Person
_________________________________________________________________
2) Check the Appropriate Box (a) [X]
if a Member of a Group (b) [ ]
_________________________________________________________________
3) SEC Use Only
_________________________________________________________________
4) Source of Funds OO
_________________________________________________________________
5) Check if Disclosure of
Legal Proceedings Is Not Applicable
Required Pursuant to
Items 2(d) or 2(e)
_________________________________________________________________
6) Citizenship or Place
of Organization Delaware
_________________________________________________________________
Number of 7) Sole Voting 309,936 shares of
Shares Beneficially Power Common Stock
Owned by Each (issuable upon
Reporting Person: conversion of
convertible pre-
ferred stock)
________________________________________
8) Shared Voting
Power -0-
________________________________________
9) Sole Disposi- 309,936 shares of
tive Power Common Stock
(issuable upon
conversion of
convertible pre-
ferred stock)
________________________________________
10) Shared Dis-
positive Power -0-
________________________________________
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CUSIP No. 051629103 Page 5 of 47 Pages
11) Aggregate Amount Beneficially 309,936 shares of
Owned by Each Reporting Person Common Stock
(issuable upon
conversion of
convertible pre-
ferred stock
________________________________________________________________
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
_________________________________________________________________
13) Percent of Class
Represented by 4.3%
Amount in Row (11)
_________________________________________________________________
14) Type of Reporting
Person PN
<PAGE>
CUSIP No. 051629103 Page 6 of 47 Pages
1) Name of Reporting Person WCAS Capital
S.S. or I.R.S. Identification Partners II, L.P.
No. of Above Person
_________________________________________________________________
2) Check the Appropriate Box (a) [X]
if a Member of a Group (b) [ ]
_________________________________________________________________
3) SEC Use Only
_________________________________________________________________
4) Source of Funds OO
_________________________________________________________________
5) Check if Disclosure of
Legal Proceedings Is Not Applicable
Required Pursuant to
Items 2(d) or 2(e)
_________________________________________________________________
6) Citizenship or Place
of Organization Delaware
_________________________________________________________________
Number of 7) Sole Voting 682,960 shares of
Shares Beneficially Power Common Stock
Owned by Each (including shares
Reporting Person: issuable upon
exercise of
warrants)
_________________________________________
8) Shared Voting
Power -0-
_________________________________________
9) Sole Disposi- 682,960 shares of
tive Power Common Stock
(including shares
issuable upon
exercise of
warrants)
_________________________________________
10) Shared Dis-
positive Power -0-
_________________________________________
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CUSIP No. 051629103 Page 7 of 47 Pages
11) Aggregate Amount Beneficially 682,960 shares of
Owned by Each Reporting Person Common Stock
(including shares
issuable upon
exercise of
warrants)
_________________________________________________________________
12) Check if the Aggregate
Amount in Row (11)
Excludes Certain Shares
_________________________________________________________________
13) Percent of Class
Represented by 9.9%
Amount in Row (11)
_________________________________________________________________
14) Type of Reporting
Person PN
<PAGE>
CUSIP No. 051629103 Page 8 of 47 Pages
Amendment No. 4 to Schedule 13D
_______________________________
Reference is hereby made to the statement on Schedule 13D
originally filed with the Securities and Exchange Commission on April 12,
1996, Amendment No. 1 thereto filed on October 16, 1996, Amendment No. 2
thereto filed on July 9, 1997 and Amendment No. 3 thereto filed on
September 3, 1997 (as so amended, the "Schedule 13D"). Terms defined in
the Schedule 13D are used herein as so defined.
The Schedule 13D is hereby amended as follows:
Item 3. Source and Amount of Funds and Other Consideration.
__________________________________________________
Item 3 is hereby amended by adding the following thereto:
WCAS VII, WCAS IP and the individual general partners of the
respective sole general partners thereof purchased an aggregate 25,000
shares of Series C Convertible Preferred Stock, $.01 par value ("Series C
Preferred Stock"), from the Issuer pursuant to a Series C Preferred Stock
Purchase Agreement dated as of October 2, 1997 among the Issuer, WCAS II,
WCAS IP and the additional purchasers named therein (the "Series C Purchase
Agreement"). The Series C Purchase Agreement is attached hereto as Exhibit
A, and any description thereof is qualified in its entirety by reference
thereto. The purchase price was $100 per share. The Series C Preferred
Stock is convertible into Common Stock at a conversion price of $1.09 per
share, according to the following formula: the number of shares of Series
C Preferred Stock is multiplied by $100 and then divided by $1.09 to arrive
at the equivalent number of shares of Common Stock. The source of funds
for such purchase by WCAS VII and WCAS IP was their respective working
capital available for investment.
WCAS VII, WCAS IP and the individual general partners of the
respective sole general partners thereof purchased an aggregate 20,000
shares of Series D Convertible Preferred Stock, $.01 par value ("Series D
Preferred Stock"), from the Issuer pursuant to a Series D Preferred Stock
Purchase Agreement dated as of October 24, 1997 among the Issuer, WCAS II,
WCAS IP and the additional purchasers named therein (the "Series D Purchase
Agreement"). The Series D Purchase Agreement is attached hereto as Exhibit
B, and any description thereof is qualified in its entirety by reference
thereto. The purchase price was $100 per share. The Series D Preferred
Stock is convertible into Common Stock at a conversion price of $1.05 per
share, according to the following formula: the number of shares of Series
D Preferred Stock is multiplied by $100 and then divided by $1.05 to arrive
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CUSIP No. 051629103 Page 9 of 47 Pages
at the equivalent number of shares of Common Stock. The source of funds
for such purchase by WCAS VII and WCAS IP was their respective working
capital available for investment.
On October 28, 1997 WCAS VII and WCAS CP II acquired additional
Warrants, exercisable immediately and expiring on January 27, 2002, which
entitle WCAS VII and WCAS CP II to purchase 942,439 and 33,171 shares,
respectively, of Common Stock, at an exercise price of $1.025 per share.
The Warrants were issued to WCAS VII and WCAS CP II as consideration for
the issuance by WCAS VII and WCAS CP II of certain guarantees to secure
certain indebtedness of a wholly-owned subsidiary of the Issuer.
Item 5. Interest in Securities of the Issuer.
____________________________________
Item 5 is hereby amended and restated in its entirety as follows:
The following information is based on a total of 6,847,563 shares
of Common Stock outstanding as of October 24, 1997, and gives effect to the
conversion of all shares of Convertible Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and the exercise
of all presently-exercisable Warrants held by the Reporting Persons and the
individuals named below:
(a)
WCAS VII and VII Partners
_________________________
WCAS VII owns 24,887,681 shares of Common Stock (issuable upon
conversion of 366,800 shares of Convertible Preferred Stock, 23,757
shares of Series B Preferred Stock, 23,757 shares of Series C
Preferred Stock, 19,005 shares of Series D Preferred Stock and
exercise of Warrants to purchase 2,152,152 shares of Common Stock), or
approximately 78.4% of the Common Stock outstanding. VII Partners, as
the general partner of WCAS VII, may be deemed to beneficially own the
securities owned by WCAS VII.
WCAS CP II and CP II Partners
_____________________________
WCAS CP II owns 682,960 shares of Common Stock (including 75,749
shares issuable upon exercise of Warrants), or approximately 9.9% of
the Common Stock outstanding. CP II Partners, as the general partner
of WCAS CP II, may be deemed to beneficially own the securities owned
by WCAS CP II.
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CUSIP No. 051629103 Page 10 of 47 Pages
WCAS IP and INFO Partners
_________________________
WCAS IP owns 309,936 shares of Common Stock (issuable upon
conversion of 5,000 shares of Convertible Preferred Stock, 324 shares
of Series B Preferred Stock, 324 shares of Series C Preferred Stock
and 259 shares of Series D Preferred Stock), or approximately 4.3% of
the Common Stock outstanding. INFO Partners, as the general partner
of WCAS IP, may be deemed to beneficially own the securities owned by
WCAS IP.
General Partners of VI Partners, CP II Partners and INFO Partners
_________________________________________________________________
(i) Patrick J. Welsh owns 124,075 shares of Common Stock
(issuable upon conversion of 2,000 shares of Convertible Preferred
Stock, 130 shares of Series B Preferred Stock, 130 shares of Series C
Preferred Stock and 104 shares of Series D Preferred Stock), or
approximately 1.8% of the Common Stock outstanding.
(ii) Russell L. Carson owns 185,682 shares of Common Stock
(issuable upon conversion of 3,000 shares of Convertible Preferred
Stock, 194 shares of Series B Preferred Stock, 194 shares of Series C
Preferred Stock and 155 shares of Series D Preferred Stock), or
approximately 2.6% of the Common Stock outstanding.
(iii) Bruce K. Anderson owns 185,682 shares of Common Stock
(issuable upon conversion of 3,000 shares of Convertible Preferred
Stock, 194 shares of Series B Preferred Stock, 194 shares of Series C
Preferred Stock and 155 shares of Series D Preferred Stock), or
approximately 2.6% of the Common Stock outstanding.
(iv) Richard H. Stowe owns 92,978 shares of Common Stock
(issuable upon conversion of 1,500 shares of Convertible Preferred
Stock, 97 shares of Series B Preferred Stock, 97 shares of Series C
Preferred Stock and 78 shares of Series D Preferred Stock), or
approximately 1.3% of the Common Stock outstanding.
(v) Andrew M. Paul owns 62,036 shares of Common Stock (issuable
upon conversion of 1,000 shares of Convertible Preferred Stock, 65
shares of Series B Preferred Stock, 65 shares of Series C Preferred
Stock and 52 shares of Series D Preferred Stock), or approximately
0.9% of the Common Stock outstanding.
(vi) Thomas E. McInerney owns 108,449 shares of Common
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CUSIP No. 051629103 Page 11 of 47 Pages
Stock (issuable upon conversion of 1,750 shares of Convertible
Preferred Stock, 113 shares of Series B Preferred Stock, 113 shares of
Series C Preferred Stock and 91 shares of Series D Preferred Stock),
or approximately 1.8% of the Common Stock outstanding.
(vii) Laura VanBuren owns 6,107 shares of Common Stock (issuable
upon conversion of 100 shares of Convertible Preferred Stock, 6 shares
of Series B Preferred Stock, 6 shares of Series C Preferred Stock and
5 shares of Series D Preferred Stock), or less than 0.1% of the Common
Stock outstanding.
(vii) James B. Hoover owns 30,941 shares of Common Stock
(issuable upon conversion of 500 shares of Convertible Preferred
Stock, 32 shares of Series B Preferred Stock, 32 shares of Series C
Preferred Stock and 26 shares of Series D Preferred Stock), or
approximately 0.4% of the Common Stock outstanding.
(ix) Robert A. Minicucci owns 49,573 shares of Common Stock
(issuable upon conversion of 800 shares of Convertible Preferred
Stock, 52 shares of Series B Preferred Stock, 52 shares of Series C
Preferred Stock and 41 shares of Series D Preferred Stock), or
approximately 0.7% of the Common Stock outstanding.
(x) Anthony J. deNicola owns 24,834 shares of Common Stock
(issuable upon conversion of 400 shares of Convertible Preferred
Stock, 26 shares of Series B Preferred Stock, 26 shares of Series C
Preferred Stock and 21 shares of Series D Preferred Stock), or
approximately 0.4% of the Common Stock outstanding.
(xi) Paul B. Queally owns 9,363 shares of Common Stock (issuable
upon conversion of 150 shares of Convertible Preferred Stock, 10
shares of Series B Preferred Stock, 10 shares of Series C Preferred
Stock and 8 shares of Series D Preferred Stock), or approximately 0.1%
of the Common Stock outstanding.
(b) The general partners of each of VII Partners, CP II Partners
and INFO Partners may be deemed to share the power to vote or direct the
voting of and to dispose or direct the disposition of the shares owned by
WCAS VII, WCAS CP II and WCAS IP, respectively. Each of the general
partners of VII Partners, CP II Partners and INFO Partners disclaims
beneficial ownership of all shares other than the shares he or she owns
directly or by virtue of his or her indirect pro rata interest, as a
partner of VII Partners, CP II Partners and/or INFO Partners, as the case
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CUSIP No. 051629103 Page 12 of 47 Pages
may be, in the shares owned by WCAS VII, WCAS CP II and/or WCAS IP.
(c) Except as described in this statement, none of the entities
or persons named in Item 2 has effected any transaction in the Issuer's
securities since the most recent filing on Schedule 13D.
(d) Except as described in this statement, no person has the
power to direct the receipt of dividends on or the proceeds of sales of the
shares owned by WCAS VII, WCAS CP II or WCAS IP.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities
of the Issuer.
__________________________________________
Item 6 is hereby amended by adding the following thereto:
Pursuant to the Series C Purchase Agreement, the Issuer affirmed
and agreed that the registration rights granted to the Reporting Persons as
set forth in the Registration Rights Agreement dated as of March 29, 1996
entered into in connection with the Purchase Agreement dated as of March
29, 1996 (the "Registration Rights Agreement") shall continue in full force
and effect and that the terms "Convertible Preferred Stock" and "Preferred
Shares", as defined in the Registration Rights Agreement, shall be deemed
to refer to and include, respectively, the "Series C Preferred Stock" and
"Series C Preferred Shares", as such terms are defined in the Series C
Purchase Agreement.
Pursuant to the Series D Purchase Agreement, the Issuer affirmed
and agreed that the registration rights granted to the Reporting Persons as
set forth in the Registration Rights Agreement dated as of March 29, 1996
entered into in connection with the Purchase Agreement dated as of March
29, 1996 (the "Registration Rights Agreement") shall continue in full force
and effect and that the terms "Convertible Preferred Stock" and "Preferred
Shares", as defined in the Registration Rights Agreement, shall be deemed
to refer to and include, respectively, the "Series D Preferred Stock" and
"Series D Preferred Shares", as such terms are defined in the Series D
Purchase Agreement.
Item 7. Material to Be Filed as Exhibits.
_________________________________
Exhibit A - Series C Purchase Agreement (Appears at Page 14)
Exhibit B - Series D Purchase Agreement (Appears at Page 32)
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CUSIP No. 051629103 Page 13 of 47 Pages
Signature
_________
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: October 31, 1997
WELSH, CARSON, ANDERSON &
STOWE VII, L.P.
By: WCAS VII Partners, L.P.,
General Partner
By: /s/ Laura VanBuren
__________________________
General Partner
WCAS INFORMATION PARTNERS, L.P.
By: WCAS INFO Partners,
General Partner
By: /s/ Laura VanBuren
____________________________
Attorney-in-Fact
WCAS CAPITAL PARTNERS II, L.P.
By: WCAS CP II Partners,
General Partner
By: /s/ Laura VanBuren
____________________________
General Partner
<PAGE>
CUSIP No. 051629103 Page 14 of 47 Pages
EXHIBIT A
SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated as
of October 2, 1997, among AURORA ELECTRONICS, INC., a Delaware corporation
(the "Company"), WELSH, CARSON, ANDERSON & STOWE VII, L.P., a Delaware
limited partnership ("WCAS VII") and the several other persons named in
Schedule I hereto (such persons, together with WCAS VII, being hereinafter
called individually a "Purchaser" and collectively the "Purchasers").
WHEREAS, the Company desires to sell to the Purchasers, and the
Purchasers desire to purchase from the Company, on the terms and subject to
the conditions set forth herein, an aggregate 25,000 shares of Series C
Convertible Preferred Stock, $.01 par value ("Series C Preferred Stock"),
of the Company at a purchase price of $100 per share; and
WHEREAS, in order to induce the Purchasers to consummate the
transactions contemplated by this Agreement, the Company has agreed to
grant to the Purchasers certain registration rights with respect to the
shares of Common Stock, $.03 par value ("Common Stock"), of the Company
that will be issuable upon the conversion of the Series C Preferred Stock
being purchased hereunder;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
I.
PURCHASE AND SALE OF
THE SERIES C PREFERRED SHARES
SECTION 1.01. Issuance and Sale of the Series C Preferred
___________________________________________
Shares.
______
(a) Subject to the terms and conditions set forth herein, on the
Closing Date (as hereinafter defined) the Company shall issue, sell and
deliver to each Purchaser, and each Purchaser shall purchase from the
Company, the number of shares of Series C Preferred Stock set forth
opposite the name of such Purchaser on Schedule I hereto under the caption
"Series C Preferred Shares" (the aggregate number of shares of Series C
Preferred Stock so purchased are referred to herein as the "Series C
Preferred Shares"), for a purchase price of $100 per share. On the Closing
Date, the Company shall issue a certificate or certificates in definitive
form, registered in the
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CUSIP No. 051629103 Page 15 of 47 Pages
name of each Purchaser, representing the number of Series C Preferred
Shares being purchased by it hereunder.
(b) As payment in full for the Series C Preferred Shares being
purchased by it hereunder, and against delivery of the certificate or
certificates therefor as aforesaid, on the Closing Date each Purchaser
shall transfer immediately available funds by wire transfer to an account
designated by the Company, an amount equal to $100 multiplied by the number
of Series C Preferred Shares to be purchased by such Purchaser in
accordance with paragraph (a) above.
SECTION 1.02. Closing Date. The transfer, sale and delivery of
____________
the Series C Preferred Shares (the "Closing") shall take place at the
offices of Reboul, MacMurray, Hewitt, Maynard & Kristol, 45 Rockefeller
Plaza, New York, New York, on October 2, 1997 (such date and time of the
Closing being herein called the "Closing Date").
II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers as follows:
SECTION 2.01. Organization and Qualification. The Company is a
______________________________
corporation validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to
own or lease and operate its properties and assets and to carry on its
business as it is now being conducted. The Company is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction in which the character of its properties owned or leased or
the nature of its activities makes such qualification necessary, except
where the failure to be so qualified would not have a material adverse
effect on the properties, assets, financial condition, prospects, operating
results or business of the Company and its subsidiaries, taken as a whole
(a "Material Adverse Effect").
SECTION 2.02. Subsidiaries. (a) Except as set forth on Sched-
____________
ule 2.02 hereto, neither the Company nor any of its subsidiaries owns of
record or beneficially, directly or indirectly, (i) any shares of outstand-
ing capital stock or securities convertible into capital stock of any other
corporation or (ii) any participating interest in any partnership, joint
venture or other non-corporate business enterprise. Each subsidiary of the
Company is a corporation validly existing and in good standing
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CUSIP No. 051629103 Page 16 of 47 Pages
under the laws of its jurisdiction of incorporation and has all requisite
corporate power and authority to own or lease and operate its properties
and assets and to carry on its business as it is now being conducted. Each
subsidiary of the Company is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the
character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect. All the outstanding
shares of capital stock of the Company's subsidiaries are duly authorized,
validly issued, fully paid and nonassessable and, except as set forth on
Schedule 2.02, are owned by the Company or by a wholly-owned subsidiary of
the Company, free and clear of any liens, claims, charges, restrictions,
rights of others, security interests, prior assignments or other encum-
brances (collectively, "Claims"), and there are no proxies, voting or
transfer agreements or understandings outstanding with respect to any such
shares.
(b) Schedule 2.02 includes a complete and accurate list of each
subsidiary of the Company, indicating the jurisdiction of incorporation,
each jurisdiction in which such subsidiary is qualified as a foreign
corporation, its capital structure (including all authorized and
outstanding shares), and the nature and level of ownership in such
subsidiary by the Company, any subsidiary of the Company and any other
person (for purposes of this Agreement, "person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, or an
unincorporated organization). Complete and correct copies of the
Certificate of Incorporation and By-laws of the Company and of each
subsidiary of the Company have previously been delivered to the Purchasers.
(c) For purposes of this Agreement, the term "subsidiary", when
used with respect to the Company, shall mean any corporation or other
business entity, a majority of whose outstanding equity securities is at
the time owned, directly or indirectly, by the Company and/or one or more
other subsidiaries of the Company.
SECTION 2.03. Capitalization.
______________
(a) The authorized capital stock of the Company consists of (i)
50,000,000 shares of Common Stock and (ii) 1,000,000 shares of Preferred
Stock, $.01 par value ("Preferred Stock"), of the Company of which 400,000
shares have been designated Convertible Preferred Stock and 25,000 shares
have been designated Series B Convertible Preferred Stock. As of the date
hereof, 6,847,563 shares of Common Stock, 400,000 shares of Convertible
Preferred Stock and 25,000 shares of Series B
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CUSIP No. 051629103 Page 17 of 47 Pages
Convertible Preferred Stock are issued and outstanding, all of which were
duly authorized and validly issued and are fully paid and nonassessable.
(b) Upon the filing with the Secretary of State of the State of
Delaware of a Certificate of Designations of the Company in the form
attached hereto as Exhibit A (the "Certificate of Designations"), 25,000
shares of Preferred Stock shall be designated as authorized Series C
Preferred Stock.
(c) Except as set forth in the Company SEC Filings or on
Schedule 2.03 hereof, as of the date hereof, no subscription, warrant,
option, convertible security, stock appreciation or other right (contingent
or other) to purchase or acquire any shares of any class of capital stock
of the Company or any of its subsidiaries is authorized or outstanding and
(except as otherwise expressly contemplated by this Agreement) there is not
any commitment of the Company or any of its subsidiaries to issue any
shares, warrants, options or other such rights or to distribute to holders
of any class of its capital stock any evidences of indebtedness or assets.
Schedule 2.03 sets forth a complete and correct list of the number of
warrants or options, including a listing of the vesting schedules thereof,
held by each person with respect to the outstanding capital stock of the
Company.
(d) Except as set forth on Schedule 2.03, neither the Company
nor any of its subsidiaries has any obligation (contingent or other) to
purchase, redeem or otherwise acquire any shares of its capital stock or
any interest therein or to pay any dividend or make any other distribution
in respect thereof.
SECTION 2.04. Authorization of Agreements, Etc. (a) Each of
________________________________
(i) the execution and delivery by the Company of this Agreement, (ii) the
performance by the Company of its obligations hereunder, (iii) the
issuance, sale and delivery by the Company of the Series C Preferred
Shares, and (iv) the issuance and delivery of the shares of Common Stock
issuable upon the conversion of the Series C Preferred Shares
(collectively, the "Conversion Shares") have been duly authorized by all
requisite corporate action and will not violate any provision of law, any
order of any court or other agency of government, the Certificate of
Incorporation or By-laws of the Company, or any provision of any indenture,
agreement or other instrument to which the Company or any of its properties
or assets is bound, or conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any Claim in favor of any third person upon any of the assets
of the Company or any of its subsidiaries.
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CUSIP No. 051629103 Page 18 of 47 Pages
(b) The Series C Preferred Shares have been duly authorized by
the Company and, when sold and paid for in accordance with this Agreement,
will be validly issued, fully paid and nonassessable shares of Series C
Preferred Stock. The Conversion Shares, when issued and delivered upon the
conversion of the Series C Preferred Shares, will be duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock.
Neither the issuance, sale and delivery of the Series C Preferred Shares to
the Purchasers hereunder, nor the issuance and delivery of the Conversion
Shares, is subject to any preemptive rights of stockholders of the Company
or to any right of first refusal or other similar right in favor of any
person.
SECTION 2.05. Validity. This Agreement has been duly executed
________
and delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms.
SECTION 2.06. Governmental Approvals. Subject to the accuracy
______________________
of the representations and warranties of the Purchasers set forth in
Article III hereof, no registration or filing with, or consent or approval
of, or other action by, any Federal, state or other governmental agency or
instrumentality is or will be necessary for the valid execution, delivery
and performance of this Agreement, the issuance, sale and delivery of the
Series C Preferred Shares or the issuance and delivery of the Conversion
Shares upon the conversion of the Series C Preferred Shares, other than (i)
the filing of the Certificate of Designations with the Secretary of State
of the State of Delaware in accordance with the Delaware General
Corporation Law (the "Delaware GCL") with respect to the designation of the
Series C Preferred Stock, and (ii) such filings with and approvals of the
Securities and Exchange Commission ("SEC") or any state securities
commission or similar regulatory body as may be necessary in connection
with the commencement or consummation of the transactions contemplated
herein.
SECTION 2.07. Financial Statements, Etc. (a) The Company has
_________________________
furnished to the Purchasers: (i) the audited consolidated balance sheet of
the Company and its subsidiaries as of September 30, 1996 and the related
consolidated statements of operations, stockholders' equity and cash flows
for the fiscal year then ended certified by Arthur Andersen LLP, the
independent certified public accountants retained by the Company, and (ii)
the unaudited consolidated balance sheet of the Company and its subsidiar-
ies as of June 30, 1997 and the related consolidated statements of opera-
tions and cash flows for the nine months then ended, certified by the
principal financial officer of the Company. All such financial statements
(including any related schedules and/or notes) have been prepared in
accordance with
<PAGE>
CUSIP No. 051629103 Page 19 of 47 Pages
generally accepted accounting principles in the United States ("GAAP")
consistently applied and consistent with prior periods, (i) except that
such interim statements are subject to year-end and audit adjustments
(which consist of normal recurring accruals) and do not contain certain
footnote disclosures, and (ii) except as otherwise disclosed in such
financial statements or in the Company SEC Filings (as defined below).
Such balance sheets fairly present in all material respects the financial
position of the Company and its subsidiaries as of their respective dates,
and such statements of operations, stockholders' equity and cash flows
fairly present in all material respects the results of operations of the
Company and its subsidiaries for the respective periods then ended,
subject, in the case of unaudited financial statements, to normal year-end
and audit adjustments and the absence of certain footnote disclosures.
(b) Except as and to the extent (i) reflected on the
consolidated balance sheet of the Company and its subsidiaries as of
September 30, 1996 (the "September 30, 1996 Balance Sheet"), (ii) incurred
since September 30, 1996 in the ordinary course of business consistent with
past practice, or (iii) set forth on Schedule 2.07 hereto, neither the
Company nor any of its subsidiaries has any material liabilities or
obligations of any kind or nature, whether known or unknown, secured or
unsecured, absolute, accrued, contingent or otherwise, and whether due or
to become due, that would be required to be reflected on a balance sheet,
or the notes thereto, prepared in accordance with GAAP. Since September
30, 1996, neither the Company nor any of its subsidiaries has suffered any
Material Adverse Effect.
SECTION 2.08. SEC Filings. The Company has filed all forms,
___________
reports and documents required to be filed with the SEC since September 30,
1992, and the Company has made available to the Purchasers, as filed with
the SEC, complete and accurate copies of (i) the Annual Report of the
Company on Form 10-K for the year ended September 30, 1996, and (ii) all
other reports, statements and registration statements (including Current
Reports on Form 8-K) filed by the Company with the SEC since September 30,
1992, in each case including all amendments and supplements (collectively,
the "Company SEC Filings"). The Company SEC Filings (including, without
limitation, any financial statements or schedules included therein) (i)
were prepared in compliance with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, and the rules
and regulations thereunder, as the case may be, and (ii) did not at the
time of filing (or if amended, supplemented or superseded by a filing prior
to the date hereof, on the date of that filing) contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circum-
<PAGE>
CUSIP No. 051629103 Page 20 of 47 Pages
stances under which they were made, not misleading.
SECTION 2.09. Absence of Certain Changes or Events. Except as
____________________________________
set forth on Schedule 2.09 hereto or as otherwise disclosed in the Company
SEC Filings or the financial statements of the Company and its subsidiaries
as of and for the nine months ended June 30, 1997 referred to above, and
except as otherwise expressly contemplated by this Agreement, since
September 30, 1996, neither the Company nor any of its subsidiaries has
(i) issued any stock, bonds or other corporate securities; (ii) borrowed or
refinanced any amount or incurred any material liabilities (absolute or
contingent), other than revolving credit facility borrowings and trade
payables incurred in the ordinary course of business consistent with past
practice; (iii) discharged or satisfied any material Claim or incurred or
paid any obligation or liability (absolute or contingent) other than
current liabilities shown on the September 30, 1996 Balance Sheet and
current liabilities incurred since the date of such balance sheet in the
ordinary course of business consistent with past practice; (iv) declared or
made any payment or distribution to stockholders, or purchased or redeemed
any shares of its capital stock or other securities; (v) mortgaged, pledged
or subjected to lien any of its assets, tangible or intangible, other than
liens for current real property taxes not yet due and payable; (vi) sold,
assigned or transferred any of its tangible assets, or cancelled any debts
or Claims, except in the ordinary course of business consistent with past
practice; (vii) sold, assigned or transferred any patents, trademarks and
trade names, trademark and trade name registrations, servicemark, brandmark
and brand name registrations and copyrights, the applications therefor and
the licenses with respect thereto or other intangible assets; (viii) waived
any rights of substantial value, whether or not in the ordinary course of
business; (ix) made any material increase in the compensation (including,
without limitation, the rate of commissions) payable to, or any payment of
a material cash bonus to any director, officer, employee of, or consultant
or agent to, the Company or any of its subsidiaries or any other material
change in the terms or conditions of any employment relationship; (x)
announced any plan or legally binding commitment to create any employee
benefit plan, program or arrangement or to amend or modify in any material
respect any existing employee benefit plan, program or arrangement; (xi)
eliminated the vesting conditions or otherwise accelerated the payment of
any compensation, including any stock options; or (xii) except in
connection with this Agreement and the transactions contemplated hereby,
entered into any agreement, letter of intent or similar undertaking to take
any of the actions listed in clauses (i) through (xi) above.
SECTION 2.10. Actions Pending. Except (i) for any
_______________
<PAGE>
CUSIP No. 051629103 Page 21 of 47 Pages
actions, suits, investigations or proceedings which individually do not
involve claims against the Company or any of its subsidiaries for more than
$25,000, (ii) as set forth on Schedule 2.10 hereto, or (iii) as set forth
in the Company SEC Filings, there is no action, suit, investigation or pro-
ceeding pending or, to the best knowledge of the Company, threatened
against or affecting the Company, or any of its properties or rights,
before any court or by or before any governmental body or arbitration board
or tribunal. Except as set forth on Schedule 2.10 hereto, there is no
judgment, decree, injunction or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against the Company.
SECTION 2.11. Compliance with Law. Neither the Company nor any
___________________
of its subsidiaries is in default in any respect under any order or decree
of any court, governmental authority, arbitrator or arbitration board or
tribunal or under any laws, ordinances, governmental rules or regulations
to which the Company or any of such subsidiaries or any of their respective
properties or assets is subject, except where such default would not have a
Material Adverse Effect.
SECTION 2.12. Offering of the Securities. Neither the Company
__________________________
nor any person authorized or employed by the Company as agent, broker,
dealer or otherwise in connection with the offering or sale of the Series C
Preferred Shares or any similar securities of the Company has offered any
such securities for sale to, or solicited any offers to buy any such
securities from, or otherwise approached or negotiated with respect thereto
with, any person or persons, under circumstances that involved the use of
any form of general advertising or solicitation as such terms are defined
in Regulation D of the Securities Act; and, assuming the accuracy of the
representations and warranties of the Purchasers set forth in Article III
hereof, neither the Company nor any person acting on the Company's behalf
has taken or will take any action (including, without limitation, any
offer, issuance or sale of any securities of the Company under
circumstances which might require the integration of such transactions with
the sale of the Series C Preferred Shares under the Securities Act or the
rules and regulations of the SEC thereunder) which would subject the
offering, issuance or sale of the Series C Preferred Shares to the
Purchasers to the registration provisions of the Securities Act.
SECTION 2.13. Brokers. All negotiations relative to this
_______
Agreement and the transactions contemplated hereby have been carried on by
the Company directly with the Purchasers, without the intervention of any
other person on behalf of the Company in such manner as to give rise to any
valid claim by any other person against the Purchasers for a finder's fee,
brokerage
<PAGE>
CUSIP No. 051629103 Page 22 of 47 Pages
commission or similar payment.
III.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally and not jointly, represents and
warrants to the Company as follows:
SECTION 3.01. Authorization. The execution, delivery and
_____________
performance by such Purchaser of this Agreement and the purchase and
receipt by such Purchaser of the Series C Preferred Shares being acquired
by it hereunder, have been duly authorized by all requisite action on the
part of such Purchaser, and will not violate any provision of law, any
order of any court or other agency of government, the charter or other
governing documents of such Purchaser, or any provision of any indenture,
agreement or other instrument by which such Purchaser or any of such
Purchaser's properties or assets are bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or result
in any Claim upon any of the properties or assets of such Purchaser.
SECTION 3.02. Validity. This Agreement has been duly executed
________
and delivered by such Purchaser and constitutes the legal, valid and
binding obligation of such Purchaser, enforceable against such Purchaser in
accordance with its terms.
SECTION 3.03. Investment Representations.
__________________________
(a) Such Purchaser is acquiring the Series C Preferred Shares
being purchased by such Purchaser hereunder for such Purchaser's own
account, for investment, and not with a view toward the resale or
distribution thereof.
(b) Such Purchaser understands that he, she or it, as the case
may be, must bear the economic risk of such Purchaser's investment for an
indefinite period of time because the Series C Preferred Shares are not
registered under the Securities Act or any applicable state securities
laws, and may not be resold unless subsequently registered under the
Securities Act and such other laws or unless an exemption from such
registration is available. Such Purchaser also understands that, except as
provided in the Registration Rights Agreement (as defined below), as
amended herein, it is not contemplated that any registration will be made
under the Securities Act or that the Company will take steps which will
make the provisions of Rule 144 under the Securities Act available to
permit resale of the Series C
<PAGE>
CUSIP No. 051629103 Page 23 of 47 Pages
Preferred Shares.
(c) Such Purchaser is able to fend for itself in the
transactions contemplated by this Agreement and such Purchaser has the
ability to bear the economic risks of the investment in the Series C
Preferred Shares being purchased hereunder for an indefinite period of
time. Such Purchaser further acknowledges that he, she or it, as the case
may be, has received copies of the Company SEC Filings and has had the
opportunity to ask questions of, and receive answers from, officers of the
Company with respect to the business and financial condition of the Company
and the terms and conditions of the offering of the Series C Preferred
Shares and to obtain additional information necessary to verify such
information or can acquire it without unreasonable effort or expense.
(d) Such Purchaser has such knowledge and experience in
financial and business matters that such Purchaser is capable of evaluating
the merits and risks of its investment in the Series C Preferred Shares.
Such Purchaser further represents that he, she or it, as the case may be,
is an "accredited investor" as such term is defined in Rule 501 of
Regulation D of the SEC under the Securities Act with respect to its
purchase of the Series C Preferred Shares, and that any such Purchaser that
is a limited partnership has not been formed solely for the purpose of
purchasing the Series C Preferred Shares.
(e) If such Purchaser is a limited partnership, such Purchaser
represents that it has been organized and is existing as a limited
partnership under the laws of the State of Delaware.
SECTION 3.04. Governmental Approvals. No registration or filing
______________________
with, or consent or approval of, or other action by, any Federal, state or
other governmental agency or instrumentality is or will be necessary by
such Purchaser for the valid execution, delivery and performance of this
Agreement.
IV.
CONDITIONS PRECEDENT
SECTION 4.01. Conditions Precedent to the Obligations of the
______________________________________________
Purchasers. The obligations of the Purchasers hereunder are, at their
__________
option, subject to the satisfaction, on or before the Closing Date, of the
following conditions:
(a) Certificate of Designations. The Certificate of
___________________________
Designations shall have been duly filed with the Secretary of State of the
State of Delaware and shall have become legally
<PAGE>
CUSIP No. 051629103 Page 24 of 47 Pages
effective.
(b) Opinion of Counsel. The Purchasers shall have received from
__________________
Hughes & Luce L.L.P., counsel for the Company, an opinion dated the Closing
Date, satisfactory in form and substance to the Purchasers and their
counsel.
(c) All Proceedings to Be Satisfactory. All corporate and other
__________________________________
proceedings to be taken by the Company and all waivers and consents to be
obtained by the Company in connection with the transactions contemplated
hereby shall have been taken or obtained by the Company and all documents
incident thereto shall be satisfactory in form and substance to the
Purchasers and their counsel.
(d) Supporting Documents. On or prior to the Closing Date the
____________________
Purchasers and their counsel shall have received copies of the following
supporting documents:
(i) copies of (1) the Certificate of Incorporation of the
Company and the charter documents of each of its subsidiaries,
including all amendments thereto, certified as of a recent date by the
Secretary of State or the appropriate official of the relevant state
of incorporation, (2) certificates of said Secretary or official,
dated as of a recent date, as to the due incorporation and good
standing of the Company and each such subsidiary, and listing all
documents on file with said official, and (3) a telegram or facsimile
from said Secretary or official as of the close of business on the
next business day preceding the Closing Date as to the continued due
incorporation and good standing of the Company and each such
subsidiary and to the effect that no amendment to the respective
charter documents of such corporations has been filed since the date
of the certificate referred to in clause (2) above; and
(ii) a certificate of the Secretary or an Assistant Secretary of
the Company, dated the Closing Date and certifying (1) that attached
thereto is a true and complete copy of the By-laws of the Company as
in effect on the date of such certification and at all times since May
20, 1993; (2) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement,
the designation, issuance, sale and delivery of the Series C Preferred
Shares, the reservation, issuance and delivery of the Conversion
Shares and that all such resolutions are still in full force and
effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement; (3) that the Certificate
of
<PAGE>
CUSIP No. 051629103 Page 25 of 47 Pages
Incorporation of the Company has not been amended since the date of
the last amendment referred to in the certificate delivered pursuant
to clause (i)(2) above; and (4) as to the incumbency and specimen
signature of each officer of the Company executing this Agreement, the
stock certificates representing the Series C Preferred Shares and any
certificate or instrument furnished pursuant hereto, and a certifi-
cation by another officer of said corporation as to the incumbency and
signature of the officer signing the certificate referred to in this
paragraph (ii).
All such documents shall be satisfactory in form and substance to the
Purchasers and their counsel.
SECTION 4.02. Condition Precedent to the Obligations of the
_____________________________________________
Company. The obligations of the Company hereunder are subject to the due
_______
filing with the Secretary of State of the State of Delaware and the legal
effectiveness of the Certificate of Designations on or prior to the Closing
Date.
V.
SURVIVAL OF REPRESENTATIONS; INDEMNITY
SECTION 5.01. Survival of Representations. Subject as set forth
___________________________
below, all representations and warranties made by any party hereto in this
Agreement or pursuant hereto shall survive for a period of one year after
the Closing Date.
SECTION 5.02. General Indemnity.
_________________
(a) Subject to the terms and conditions of this Article V, the
Company hereby agrees to indemnify, defend and hold the Purchasers harmless
from and against all demands, claims, actions or causes of action, assess-
ments, losses (including diminution in value of the Series C Preferred
Shares), damages, liabilities, costs and expenses, including, without
limitation, interest, penalties and reasonable attorneys' fees and expenses
(collectively, "Damages"), asserted against, resulting to, imposed upon or
incurred by the Purchasers by reason of or resulting from a breach of any
representation, warranty or covenant of the Company contained in or made
pursuant to this Agreement.
(b) Subject to the terms and conditions of this Article V, the
Purchasers hereby agree to indemnify, defend and hold the Company harmless
from and against all Damages asserted against, resulting to, imposed upon
or incurred by the Company by reason of or resulting from a breach of any
representation,
<PAGE>
CUSIP No. 051629103 Page 26 of 47 Pages
warranty or covenant of the Purchasers contained in or made pursuant to
this Agreement.
SECTION 5.03. Conditions of Indemnification. The respective
_____________________________
obligations and liabilities of the Purchasers, on the one hand, and the
Company, on the other hand (the "indemnifying party"), to the other (the
"party to be indemnified") under Section 5.02 hereof with respect to claims
resulting from the assertion of liability by third parties shall be subject
to the following terms and conditions:
(a) within 20 days after receipt of notice of commencement of
any action or the assertion in writing of any claim by a third party, the
party to be indemnified shall give the indemnifying party written notice
thereof together with a copy of such claim, process or other legal
pleading, and the indemnifying party shall have the right to undertake the
defense thereof by representatives of its own choosing;
(b) in the event that the indemnifying party, by the 30th day
after receipt of notice of any such claim (or, if earlier, by the tenth day
preceding the day on which an answer or other pleading must be served in
order to prevent judgment by default in favor of the person asserting such
claim), does not elect to defend against such claim, the party to be
indemnified will (upon further notice to the indemnifying party) have the
right to undertake the defense, compromise or settlement of such claim on
behalf of and for the account and risk of the indemnifying party, subject
to the right of the indemnifying party to assume the defense of such claim
at any time prior to settlement, compromise or final determination thereof,
provided that the indemnifying party shall be given at least 15 days prior
written notice of the effectiveness of any such proposed settlement or com-
promise;
(c) anything in this Section 5.03 to the contrary
notwithstanding (i) if there is a reasonable probability that a claim may
materially and adversely affect the indemnifying party other than as a
result of money damages or other money payments, the indemnifying party
shall have the right, at its own cost and expense, to compromise or settle
such claim, but (ii) the indemnifying party shall not, without the prior
written consent of the party to be indemnified, settle or compromise any
claim or consent to the entry of any judgment which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to
the party to be indemnified a release from all liability in respect of such
claim; and
(d) in connection with any such indemnification, the indemnified
party will cooperate in all reasonable requests of
<PAGE>
CUSIP No. 051629103 Page 27 of 47 Pages
the indemnifying party.
VI.
CERTAIN REGISTRATION RIGHTS
The Company hereby affirms and agrees that the registration
rights granted to the Purchasers and certain other stockholders of the
Company as set forth in the Registration Rights Agreement, dated as of
March 29, 1996 (said agreement, as previously amended, the "Registration
Rights Agreement"), among the Company, the Purchasers and the other parties
named therein, shall continue in full force and effect, provided, however,
________ _______
that the Company and the Purchasers acknowledge and agree that the
Registration Rights Agreement is hereby amended such that (i) the term
"Convertible Preferred Stock" shall hereinafter refer to and include the
Series C Preferred Stock and (ii) the term "Preferred Shares" shall
hereinafter refer to and include the Series C Preferred Shares.
VII.
MISCELLANEOUS
SECTION 7.01. Expenses, Etc. The Company shall reimburse WCAS
_____________
VII or pay on its behalf any reasonable fees and expenses incurred by WCAS
VII in connection with the negotiation and preparation of this Agreement
and the related documents contemplated hereby. For purposes hereof, the
"fees and expenses incurred by WCAS VII" shall include, without limitation,
the fees, disbursements and expenses of counsel, accountants, financial
advisors and other experts retained by WCAS VII in connection with this
Agreement and the transactions contemplated hereby.
SECTION 7.02. Survival of Agreements. All covenants,
______________________
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement and the issuance, sale and
delivery of the Series C Preferred Shares pursuant hereto, notwithstanding
any investigation made at any time by or on behalf of any party hereto.
All statements contained in any certificate or other instrument delivered
by the Company hereunder shall be deemed to constitute representations and
warranties made by the Company.
SECTION 7.03. Parties in Interest. All covenants and agreements
___________________
contained in this Agreement by or on behalf of any party hereto shall bind
and inure to the benefit of the
<PAGE>
CUSIP No. 051629103 Page 28 of 47 Pages
respective successors and assigns of such party hereto whether so expressed
or not.
SECTION 7.04. Notices. Any notice or other communications
_______
required or permitted hereunder shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by first
class certified mail, postage prepaid, by nationally recognized overnight
courier, or by telecopy addressed to such party at the address or telecopy
number set forth below or such other address or telecopy number as may
hereafter be designated in writing by the addressee to the addressor
listing all parties:
if to the Company, to:
Aurora Electronics, Inc.
9477 Waples Street, Suite 150
San Diego, California 92121
Telecopy Number: (619) 552-8942
Attention: President
with a copy to:
Hughes & Luce, L.L.P.
1717 Main Street
Dallas, Texas 75201
Telecopy Number: (214) 939-6100
Attention: Alan J. Bogdanow, Esq.
Kenneth G. Hawari, Esq.
if to any Purchaser, to:
Welsh, Carson, Anderson & Stowe
320 Park Avenue, Suite 2500
New York, New York 10022-6815
Telecopy Number: (212) 893-9575
Attention: Richard H. Stowe
Thomas E. McInerney
with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Telecopy Number: (212) 841-5725
Attention: William J. Hewitt, Esq.
or, in any case, at such other address or addresses as shall have been
furnished in writing by such party to the other parties
<PAGE>
CUSIP No. 051629103 Page 29 of 47 Pages
hereto. All such notices, requests, consents and other communications
shall be deemed to have been received (a) in the case of personal delivery,
on the date of such delivery, (b) in the case of mailing, on the fifth
business day following the date of such mailing, (c) in the case of
delivery by overnight courier, on the business day following the date of
delivery to such courier, and (d) in the case of telecopy, when received.
SECTION 7.05. Entire Agreement; Assignment. This Agreement
____________________________
(including the Schedules and Exhibits hereto) and the Registration Rights
Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and may not be amended or modified nor any
provisions waived except in a writing signed by the Company and the
Purchasers. This Agreement shall not be assigned by operation of law of
otherwise without the consent of the other parties hereto.
SECTION 7.06. Counterparts. This Agreement may be executed in
____________
two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
SECTION 7.07. Governing Law. This Agreement shall be governed
_____________
by and construed in accordance with the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchasers have executed
this Agreement as of the day and year first above written.
AURORA ELECTRONICS, INC.
By
______________________________________
Jim C. Cowart
Chairman and
Chief Executive Officer
WELSH, CARSON, ANDERSON & STOWE VII, L.P.
By WCAS VII Partners, L.P.,
General Partner
By
______________________________________
General Partner
WCAS INFORMATION PARTNERS, L.P.
By WCAS Info Partners,
General Partner
By
______________________________________
General Partner
Bruce K. Anderson
Russell L. Carson
Anthony J. de Nicola
Thomas E. McInerney
James B. Hoover
Robert A. Minicucci
Andrew M. Paul
Paul B. Queally
Richard H. Stowe
Laura M. VanBuren
Patrick J. Welsh
By
___________________________________
Laura M. VanBuren
Individually and
as Attorney-in-Fact
<PAGE>
CUSIP No. 051629103 Page 31 of 47 Pages
Schedule I
__________
Name of Purchaser Series C Preferred Shares
_________________ _________________________
Welsh, Carson, Anderson &
Stowe VII, L.P. 23,757
WCAS Information Partners, L.P. 324
Patrick J. Welsh 130
Russell L. Carson 194
Bruce K. Anderson 194
Richard H. Stowe 97
Andrew M. Paul 65
Thomas E. McInerney 113
Laura VanBuren 6
James B. Hoover 32
Robert A. Minicucci 52
Anthony J. de Nicola 26
Paul B. Queally 10
______
Total 25,000
______
______
<PAGE>
CUSIP No. 051629103 Page 32 of 47 Pages
EXHIBIT B
SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated as
of October 24, 1997, among AURORA ELECTRONICS, INC., a Delaware corporation
(the "Company"), WELSH, CARSON, ANDERSON & STOWE VII, L.P., a Delaware
limited partnership ("WCAS VII") and the several other persons named in
Schedule I hereto (such persons, together with WCAS VII, being hereinafter
called individually a "Purchaser" and collectively the "Purchasers").
WHEREAS, the Company desires to sell to the Purchasers, and the
Purchasers desire to purchase from the Company, on the terms and subject to
the conditions set forth herein, an aggregate 20,000 shares of Series D
Convertible Preferred Stock, $.01 par value ("Series D Preferred Stock"),
of the Company at a purchase price of $100 per share; and
WHEREAS, in order to induce the Purchasers to consummate the
transactions contemplated by this Agreement, the Company has agreed to
grant to the Purchasers certain registration rights with respect to the
shares of Common Stock, $.03 par value ("Common Stock"), of the Company
that will be issuable upon the conversion of the Series D Preferred Stock
being purchased hereunder;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
I.
PURCHASE AND SALE OF
THE SERIES D PREFERRED SHARES
SECTION 1.01. Issuance and Sale of the Series D
_________________________________
Preferred Shares.
________________
(a) Subject to the terms and conditions set forth herein, on the
Closing Date (as hereinafter defined) the Company shall issue, sell and
deliver to each Purchaser, and each Purchaser shall purchase from the
Company, the number of shares of Series D Preferred Stock set forth
opposite the name of such Purchaser on Schedule I hereto under the caption
"Series D Preferred Shares" (the aggregate number of shares of Series D
Preferred Stock so purchased are referred to herein as the "Series D
Preferred Shares"), for a purchase price of $100 per share. On the Closing
Date, the Company shall issue a certificate or certificates in definitive
form, registered in the name of each Purchaser, representing the number of
Series D Preferred Shares being purchased by it hereunder.
(b) As payment in full for the Series D Preferred Shares being
purchased by it hereunder, and against delivery of the certificate or
certificates therefor as aforesaid, on the Closing Date each Pur-
<PAGE>
CUSIP No. 051629103 Page 33 of 47 Pages
chaser shall transfer immediately available funds by wire transfer to an
account designated by the Company, an amount equal to $100 multiplied by
the number of Series D Preferred Shares to be purchased by such Purchaser
in accordance with paragraph (a) above.
SECTION 1.02. Closing Date. The transfer, sale and
____________
delivery of the Series D Preferred Shares (the "Closing") shall take place
at the offices of Reboul, MacMurray, Hewitt, Maynard & Kristol, 45
Rockefeller Plaza, New York, New York, on October
24, 1997 (such date and time of the Closing being herein called the
"Closing Date").
II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers as follows:
SECTION 2.01. Organization and Qualification. The
______________________________
Company is a corporation validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own or lease and operate its properties and assets and to
carry on its business as it is now being conducted. The Company is duly
qualified as a foreign corporation to do business, and is in good standing,
in each jurisdiction in which the character of its properties owned or
leased or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified would not have a material
adverse effect on the properties, assets, financial condition, prospects,
operating results or business of the Company and its subsidiaries, taken as
a whole (a "Material Adverse Effect").
SECTION 2.02. Subsidiaries. (a) Except as set forth
____________
on Schedule 2.02 hereto, neither the Company nor any of its subsidiaries
owns of record or beneficially, directly or indirectly, (i) any shares of
outstanding capital stock or securities convertible into capital stock of
any other corporation or (ii) any participating interest in any
partnership, joint venture or other non-corporate business enterprise.
Each subsidiary of the Company is a corporation validly existing and in
good standing under the laws of its jurisdiction of incorporation and has
all requisite corporate power and authority to own or lease and operate its
properties and assets and to carry on its business as it is now being
conducted. Each subsidiary of the Company is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction
in which the character of its properties owned or leased or the nature of
its activities makes such qualification necessary, except where the failure
to be so qualified would not have a Material Adverse Effect. All the
outstanding shares of capital stock of the Company's subsidiaries are duly
authorized, validly issued, fully paid and nonassessable and, except as set
forth on Schedule 2.02, are owned by the Company or by a wholly-owned
subsidiary of the Company, free and clear of any liens, claims, charges,
restrictions, rights of others, security interests, prior assignments or
other encum-
<PAGE>
CUSIP No. 051629103 Page 34 of 47 Pages
brances (collectively, "Claims"), and there are no proxies, voting or
transfer agreements or understandings outstanding with respect to any such
shares.
(b) Schedule 2.02 includes a complete and accurate list of each
subsidiary of the Company, indicating the jurisdiction of incorporation,
each jurisdiction in which such subsidiary is qualified as a foreign
corporation, its capital structure (including all authorized and
outstanding shares), and the nature and level of ownership in such
subsidiary by the Company, any subsidiary of the Company and any other
person (for purposes of this Agreement, "person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, or an
unincorporated organization). Complete and correct copies of the
Certificate of Incorporation and By-laws of the Company and of each
subsidiary of the Company have previously been delivered to the Purchasers.
(c) For purposes of this Agreement, the term "subsidiary", when
used with respect to the Company, shall mean any corporation or other
business entity, a majority of whose outstanding equity securities is at
the time owned, directly or indirectly, by the Company and/or one or more
other subsidiaries of the Company.
SECTION 2.03. Capitalization.
______________
(a) The authorized capital stock of the Company consists of (i)
50,000,000 shares of Common Stock and (ii) 1,000,000 shares of Preferred
Stock, $.01 par value ("Preferred Stock"), of the Company of which 400,000
shares have been designated Convertible Preferred Stock, 25,000 shares have
been designated Series B Convertible Preferred Stock and 25,000 shares have
been designated Series C Convertible Preferred Stock. As of the date
hereof, 6,847,563 shares of Common Stock, 400,000 shares of Convertible
Preferred Stock, 25,000 shares of Series B Convertible Preferred Stock and
25,000 shares of Series C Convertible Preferred Stock are issued and
outstanding, all of which were duly authorized and validly issued and are
fully paid and nonassessable.
(b) Upon the filing with the Secretary of State of the State of
Delaware of a Certificate of Designations of the Company in the form
attached hereto as Exhibit A (the "Certificate of Designations"), 20,000
shares of Preferred Stock shall be designated as authorized Series D
Preferred Stock.
(c) Except as set forth in the Company SEC Filings or on
Schedule 2.03 hereof, as of the date hereof, no subscription, warrant,
option, convertible security, stock appreciation or other right (contingent
or other) to purchase or acquire any shares of any class of capital stock
of the Company or any of its subsidiaries is authorized or outstanding and
(except as otherwise expressly contemplated by this Agreement) there is not
any commitment of the Company or any of its subsidiaries to issue any
shares, warrants, options or other such rights or to distribute to holders
of any class of its capital stock any evidences of indebtedness or assets.
Schedule 2.03 sets forth a
<PAGE>
CUSIP No. 051629103 Page 35 of 47 Pages
complete and correct list of the number of warrants or options, including a
listing of the vesting schedules thereof, held by each person with respect
to the outstanding capital stock of the Company.
(d) Except as set forth on Schedule 2.03, neither the Company
nor any of its subsidiaries has any obligation (contingent or other) to
purchase, redeem or otherwise acquire any shares of its capital stock or
any interest therein or to pay any dividend or make any other distribution
in respect thereof.
SECTION 2.04. Authorization of Agreements, Etc. (a)
________________________________
Each of (i) the execution and delivery by the Company of this Agreement,
(ii) the performance by the Company of its obligations hereunder, (iii) the
issuance, sale and delivery by the Company of the Series D Preferred
Shares, and (iv) the issuance and delivery of the shares of Common Stock
issuable upon the conversion of the Series D Preferred Shares
(collectively, the "Conversion Shares") have been duly authorized by all
requisite corporate action and will not violate any provision of law, any
order of any court or other agency of government, the Certificate of
Incorporation or By-laws of the Company, or any provision of any indenture,
agreement or other instrument to which the Company or any of its properties
or assets is bound, or conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any Claim in favor of any third person upon any of the assets
of the Company or any of its subsidiaries.
(b) The Series D Preferred Shares have been duly authorized by
the Company and, when sold and paid for in accordance with this Agreement,
will be validly issued, fully paid and nonassessable shares of Series D
Preferred Stock. The Conversion Shares, when issued and delivered upon the
conversion of the Series D Preferred Shares, will be duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock.
Neither the issuance, sale and delivery of the Series D Preferred Shares to
the Purchasers hereunder, nor the issuance and delivery of the Conversion
Shares, is subject to any preemptive rights of stockholders of the Company
or to any right of first refusal or other similar right in favor of any
person.
SECTION 2.05. Validity. This Agreement has been duly
________
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms.
SECTION 2.06. Governmental Approvals. Subject to the
______________________
accuracy of the representations and warranties of the Purchasers set forth
in Article III hereof, no registration or filing with, or consent or
approval of, or other action by, any Federal, state or other governmental
agency or instrumentality is or will be necessary for the valid execution,
delivery and performance of this Agreement, the issuance, sale and delivery
of the Series D Preferred Shares or the issuance and delivery of the
Conversion Shares upon the conversion of the Series D Preferred Shares,
other than (i) the filing of the Certificate of Designations with the
Secretary of State of the State of Delaware in accordance
<PAGE>
CUSIP No. 051629103 Page 36 of 47 Pages
with the Delaware General Corporation Law (the "Delaware GCL") with respect
to the designation of the Series D Preferred Stock, and (ii) such filings
with and approvals of the Securities and Exchange Commission ("SEC") or any
state securities commission or similar regulatory body as may be necessary
in connection with the commencement or consummation of the transactions
contemplated herein.
SECTION 2.07. Financial Statements, Etc. (a) The
_________________________
Company has furnished to the Purchasers: (i) the audited consolidated
balance sheet of the Company and its subsidiaries as of September 30, 1996
and the related consolidated statements of operations, stockholders' equity
and cash flows for the fiscal year then ended certified by Arthur Andersen
LLP, the independent certified public accountants retained by the Company,
and (ii) the unaudited consolidated balance sheet of the Company and its
subsidiaries as of June 30, 1997 and the related consolidated statements of
operations and cash flows for the nine months then ended, certified by the
principal financial officer of the Company. All such financial statements
(including any related schedules and/or notes) have been prepared in
accordance with generally accepted accounting principles in the United
States ("GAAP") consistently applied and consistent with prior periods, (i)
except that such interim statements are subject to year-end and audit
adjustments (which consist of normal recurring accruals) and do not contain
certain footnote disclosures, and (ii) except as otherwise disclosed in
such financial statements or in the Company SEC Filings (as defined below).
Such balance sheets fairly present in all material respects the financial
position of the Company and its subsidiaries as of their respective dates,
and such statements of operations, stockholders' equity and cash flows
fairly present in all material respects the results of operations of the
Company and its subsidiaries for the respective periods then ended,
subject, in the case of unaudited financial statements, to normal year-end
and audit adjustments and the absence of certain footnote disclosures.
(b) Except as and to the extent (i) reflected on the
consolidated balance sheet of the Company and its subsidiaries as of
September 30, 1996 (the "September 30, 1996 Balance Sheet"), (ii) incurred
since September 30, 1996 in the ordinary course of business consistent with
past practice, or (iii) set forth on Schedule 2.07 hereto, neither the
Company nor any of its subsidiaries has any material liabilities or
obligations of any kind or nature, whether known or unknown, secured or
unsecured, absolute, accrued, contingent or otherwise, and whether due or
to become due, that would be required to be reflected on a balance sheet,
or the notes thereto, prepared in accordance with GAAP. Since September
30, 1996, neither the Company nor any of its subsidiaries has suffered any
Material Adverse Effect.
SECTION 2.08. SEC Filings. The Company has filed all
___________
forms, reports and documents required to be filed with the SEC since
September 30, 1992, and the Company has made available to the Purchasers,
as filed with the SEC, complete and accurate copies of (i) the Annual
Report of the Company on Form 10-K for the year ended September 30, 1996,
and (ii) all other reports, statements and registration statements (in-
cluding Current Reports
<PAGE>
CUSIP No. 051629103 Page 37 of 47 Pages
on Form 8-K) filed by the Company with the SEC since September 30, 1992, in
each case including all amendments and supplements (collectively, the
"Company SEC Filings"). The Company SEC Filings (including, without
limitation, any financial statements or schedules included therein) (i)
were prepared in compliance with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, and the rules
and regulations thereunder, as the case may be, and (ii) did not at the
time of filing (or if amended, supplemented or superseded by a filing prior
to the date hereof, on the date of that filing) contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
SECTION 2.09. Absence of Certain Changes or Events.
____________________________________
Except as set forth on Schedule 2.09 hereto or as otherwise disclosed in
the Company SEC Filings or the financial statements of the Company and its
subsidiaries as of and for the nine months ended June 30, 1997 referred to
above, and except as otherwise expressly contemplated by this Agreement,
since September 30, 1996, neither the Company nor any of its subsidiaries
has (i) issued any stock, bonds or other corporate securities;
(ii) borrowed or refinanced any amount or incurred any material liabilities
(absolute or contingent), other than revolving credit facility borrowings
and trade payables incurred in the ordinary course of business consistent
with past practice; (iii) discharged or satisfied any material Claim or
incurred or paid any obligation or liability (absolute or contingent) other
than current liabilities shown on the September 30, 1996 Balance Sheet and
current liabilities incurred since the date of such balance sheet in the
ordinary course of business consistent with past practice; (iv) declared or
made any payment or distribution to stockholders, or purchased or redeemed
any shares of its capital stock or other securities; (v) mortgaged, pledged
or subjected to lien any of its assets, tangible or intangible, other than
liens for current real property taxes not yet due and payable; (vi) sold,
assigned or transferred any of its tangible assets, or cancelled any debts
or Claims, except in the ordinary course of business consistent with past
practice; (vii) sold, assigned or transferred any patents, trademarks and
trade names, trademark and trade name registrations, servicemark, brandmark
and brand name registrations and copyrights, the applications therefor and
the licenses with respect thereto or other intangible assets; (viii) waived
any rights of substantial value, whether or not in the ordinary course of
business; (ix) made any material increase in the compensation (including,
without limitation, the rate of commissions) payable to, or any payment of
a material cash bonus to any director, officer, employee of, or consultant
or agent to, the Company or any of its subsidiaries or any other material
change in the terms or conditions of any employment relationship; (x)
announced any plan or legally binding commitment to create any employee
benefit plan, program or arrangement or to amend or modify in any material
respect any existing employee benefit plan, program or arrangement; (xi)
eliminated the vesting conditions or otherwise accelerated the payment of
any compensation, including any stock options; or (xii) except in
connection with this Agreement and the transactions contemplated hereby,
entered into any agreement, letter of intent or similar
<PAGE>
CUSIP No. 051629103 Page 38 of 47 Pages
undertaking to take any of the actions listed in clauses (i) through (xi)
above.
SECTION 2.10. Actions Pending. Except (i) for any
_______________
actions, suits, investigations or proceedings which individually do not
involve claims against the Company or any of its subsidiaries for more than
$25,000, (ii) as set forth on Schedule 2.10 hereto, or (iii) as set forth
in the Company SEC Filings, there is no action, suit, investigation or pro-
ceeding pending or, to the best knowledge of the Company, threatened
against or affecting the Company, or any of its properties or rights,
before any court or by or before any governmental body or arbitration board
or tribunal. Except as set forth on Schedule 2.10 hereto, there is no
judgment, decree, injunction or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against the Company.
SECTION 2.11. Compliance with Law. Neither the
___________________
Company nor any of its subsidiaries is in default in any respect under any
order or decree of any court, governmental authority, arbitrator or
arbitration board or tribunal or under any laws, ordinances, governmental
rules or regulations to which the Company or any of such subsidiaries or
any of their respective properties or assets is subject, except where such
default would not have a Material Adverse Effect.
SECTION 2.12. Offering of the Securities. Neither the
__________________________
Company nor any person authorized or employed by the Company as agent,
broker, dealer or otherwise in connection with the offering or sale of the
Series D Preferred Shares or any similar securities of the Company has
offered any such securities for sale to, or solicited any offers to buy any
such securities from, or otherwise approached or negotiated with respect
thereto with, any person or persons, under circumstances that involved the
use of any form of general advertising or solicitation as such terms are
defined in Regulation D of the Securities Act; and, assuming the accuracy
of the representations and warranties of the Purchasers set forth in
Article III hereof, neither the Company nor any person acting on the
Company's behalf has taken or will take any action (including, without
limitation, any offer, issuance or sale of any securities of the Company
under circumstances which might require the integration of such
transactions with the sale of the Series D Preferred Shares under the
Securities Act or the rules and regulations of the SEC thereunder) which
would subject the offering, issuance or sale of the Series D Preferred
Shares to the Purchasers to the registration provisions of the Securities
Act.
SECTION 2.13. Brokers. All negotiations relative to
_______
this Agreement and the transactions contemplated hereby have been carried
on by the Company directly with the Purchasers, without the intervention of
any other person on behalf of the Company in such manner as to give rise to
any valid claim by any other person against the Purchasers for a finder's
fee, brokerage commission or similar payment.
<PAGE>
CUSIP No. 051629103 Page 39 of 47 Pages
III.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally and not jointly, represents and
warrants to the Company as follows:
SECTION 3.01. Authorization. The execution, delivery
_____________
and performance by such Purchaser of this Agreement and the purchase and
receipt by such Purchaser of the Series D Preferred Shares being acquired
by it hereunder, have been duly authorized by all requisite action on the
part of such Purchaser, and will not violate any provision of law, any
order of any court or other agency of government, the charter or other
governing documents of such Purchaser, or any provision of any indenture,
agreement or other instrument by which such Purchaser or any of such
Purchaser's properties or assets are bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or result
in any Claim upon any of the properties or assets of such Purchaser.
SECTION 3.02. Validity. This Agreement has been duly
________
executed and delivered by such Purchaser and constitutes the legal, valid
and binding obligation of such Purchaser, enforceable against such
Purchaser in accordance with its terms.
SECTION 3.03. Investment Representations.
__________________________
(a) Such Purchaser is acquiring the Series D Preferred Shares
being purchased by such Purchaser hereunder for such Purchaser's own
account, for investment, and not with a view toward the resale or
distribution thereof.
(b) Such Purchaser understands that he, she or it, as the case
may be, must bear the economic risk of such Purchaser's investment for an
indefinite period of time because the Series D Preferred Shares are not
registered under the Securities Act or any applicable state securities
laws, and may not be resold unless subsequently registered under the
Securities Act and such other laws or unless an exemption from such
registration is available. Such Purchaser also understands that, except as
provided in the Registration Rights Agreement (as defined below), as
amended herein, it is not contemplated that any registration will be made
under the Securities Act or that the Company will take steps which will
make the provisions of Rule 144 under the Securities Act available to
permit resale of the Series D Preferred Shares.
(c) Such Purchaser is able to fend for itself in the
transactions contemplated by this Agreement and such Purchaser has the
ability to bear the economic risks of the investment in the Series D
Preferred Shares being purchased hereunder for an indefinite period of
time. Such Purchaser further acknowledges that he, she or it, as the case
may be, has received copies of the Company SEC Filings and has had the
opportunity to ask questions of, and receive answers from, officers of the
Company with respect to the business and financial condition of the Company
and the terms and
<PAGE>
CUSIP No. 051629103 Page 40 of 47 Pages
conditions of the offering of the Series D Preferred Shares and to obtain
additional information necessary to verify such information or can acquire
it without unreasonable effort or expense.
(d) Such Purchaser has such knowledge and experience in
financial and business matters that such Purchaser is capable of evaluating
the merits and risks of its investment in the Series D Preferred Shares.
Such Purchaser further represents that he, she or it, as the case may be,
is an "accredited investor" as such term is defined in Rule 501 of
Regulation D of the SEC under the Securities Act with respect to its
purchase of the Series D Preferred Shares, and that any such Purchaser that
is a limited partnership has not been formed solely for the purpose of
purchasing the Series D Preferred Shares.
(e) If such Purchaser is a limited partnership, such Purchaser
represents that it has been organized and is existing as a limited
partnership under the laws of the State of Delaware.
SECTION 3.04. Governmental Approvals. No registration
______________________
or filing with, or consent or approval of, or other action by, any Federal,
state or other governmental agency or instrumentality is or will be
necessary by such Purchaser for the valid execution, delivery and
performance of this Agreement.
IV.
CONDITIONS PRECEDENT
SECTION 4.01. Conditions Precedent to the Obligations
_______________________________________
of the Purchasers. The obligations of the Purchasers hereunder
_________________
are, at their option, subject to the satisfaction, on or before the Closing
Date, of the following conditions:
(a) Certificate of Designations. The Certificate of
___________________________
Designations shall have been duly filed with the Secretary of State of the
State of Delaware and shall have become legally effective.
(b) Opinion of Counsel. The Purchasers shall have re-
__________________
ceived from Hughes & Luce L.L.P., counsel for the Company, an opinion dated
the Closing Date, satisfactory in form and substance to the Purchasers and
their counsel.
(c) All Proceedings to Be Satisfactory. All corporate
__________________________________
and other proceedings to be taken by the Company and all waivers and
consents to be obtained by the Company in connection with the transactions
contemplated hereby shall have been taken or obtained by the Company and
all documents incident thereto shall be satisfactory in form and substance
to the Purchasers and their counsel.
(d) Supporting Documents. On or prior to the Closing
____________________
Date the Purchasers and their counsel shall have received copies of the
following
<PAGE>
CUSIP No. 051629103 Page 41 of 47 Pages
supporting documents:
(i) copies of (1) the Certificate of Incorporation of the
Company and the charter documents of each of its subsidiaries,
including all amendments thereto, certified as of a recent date by the
Secretary of State or the appropriate official of the relevant state
of incorporation, (2) certificates of said Secretary or official,
dated as of a recent date, as to the due incorporation and good
standing of the Company and each such subsidiary, and listing all
documents on file with said official, and (3) a telegram or facsimile
from said Secretary or official as of the close of business on the
next business day preceding the Closing Date as to the continued due
incorporation and good standing of the Company and each such
subsidiary and to the effect that no amendment to the respective
charter documents of such corporations has been filed since the date
of the certificate referred to in clause (2) above; and
(ii) a certificate of the Secretary or an Assistant Secretary of
the Company, dated the Closing Date and certifying (1) that attached
thereto is a true and complete copy of the By-laws of the Company as
in effect on the date of such certification and at all times since May
20, 1993; (2) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement,
the designation, issuance, sale and delivery of the Series D Preferred
Shares, the reservation, issuance and delivery of the Conversion
Shares and that all such resolutions are still in full force and
effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement; (3) that the Certificate
of Incorporation of the Company has not been amended since the date of
the last amendment referred to in the certificate delivered pursuant
to clause (i)(2) above; and (4) as to the incumbency and specimen
signature of each officer of the Company executing this Agreement, the
stock certificates representing the Series D Preferred Shares and any
certificate or instrument furnished pursuant hereto, and a certifi-
cation by another officer of said corporation as to the incumbency and
signature of the officer signing the certificate referred to in this
paragraph (ii).
All such documents shall be satisfactory in form and substance to the
Purchasers and their counsel.
SECTION 4.02. Condition Precedent to the Obligations
______________________________________
of the Company. The obligations of the Company hereunder are
______________
subject to the due filing with the Secretary of State of the State of
Delaware and the legal effectiveness of the Certificate of Designations on
or prior to the Closing Date.
V.
SURVIVAL OF REPRESENTATIONS; INDEMNITY
SECTION 5.01. Survival of Representations. Subject as
___________________________
<PAGE>
CUSIP No. 051629103 Page 42 of 47 Pages
set forth below, all representations and warranties made by any party
hereto in this Agreement or pursuant hereto shall survive for a period of
one year after the Closing Date.
SECTION 5.02. General Indemnity.
_________________
(a) Subject to the terms and conditions of this Article V, the
Company hereby agrees to indemnify, defend and hold the Purchasers harmless
from and against all demands, claims, actions or causes of action, assess-
ments, losses (including diminution in value of the Series D Preferred
Shares), damages, liabilities, costs and expenses, including, without
limitation, interest, penalties and reasonable attorneys' fees and expenses
(collectively, "Damages"), asserted against, resulting to, imposed upon or
incurred by the Purchasers by reason of or resulting from a breach of any
representation, warranty or covenant of the Company contained in or made
pursuant to this Agreement.
(b) Subject to the terms and conditions of this Article V, the
Purchasers hereby agree to indemnify, defend and hold the Company harmless
from and against all Damages asserted against, resulting to, imposed upon
or incurred by the Company by reason of or resulting from a breach of any
representation, warranty or covenant of the Purchasers contained in or made
pursuant to this Agreement.
SECTION 5.03. Conditions of Indemnification. The
_____________________________
respective obligations and liabilities of the Purchasers, on the one hand,
and the Company, on the other hand (the "indemnifying party"), to the other
(the "party to be indemnified") under Section 5.02 hereof with respect to
claims resulting from the assertion of liability by third parties shall be
subject to the following terms and conditions:
(a) within 20 days after receipt of notice of commencement of
any action or the assertion in writing of any claim by a third party, the
party to be indemnified shall give the indemnifying party written notice
thereof together with a copy of such claim, process or other legal
pleading, and the indemnifying party shall have the right to undertake the
defense thereof by representatives of its own choosing;
(b) in the event that the indemnifying party, by the 30th day
after receipt of notice of any such claim (or, if earlier, by the tenth day
preceding the day on which an answer or other pleading must be served in
order to prevent judgment by default in favor of the person asserting such
claim), does not elect to defend against such claim, the party to be
indemnified will (upon further notice to the indemnifying party) have the
right to undertake the defense, compromise or settlement of such claim on
behalf of and for the account and risk of the indemnifying party, subject
to the right of the indemnifying party to assume the defense of such claim
at any time prior to settlement, compromise or final determination thereof,
provided that the indemnifying party shall be given at least 15 days prior
written notice of the effectiveness of any such proposed settlement or com-
promise;
<PAGE>
CUSIP No. 051629103 Page 43 of 47 Pages
(c) anything in this Section 5.03 to the contrary
notwithstanding (i) if there is a reasonable probability that a claim may
materially and adversely affect the indemnifying party other than as a
result of money damages or other money payments, the indemnifying party
shall have the right, at its own cost and expense, to compromise or settle
such claim, but (ii) the indemnifying party shall not, without the prior
written consent of the party to be indemnified, settle or compromise any
claim or consent to the entry of any judgment which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to
the party to be indemnified a release from all liability in respect of such
claim; and
(d) in connection with any such indemnification, the indemnified
party will cooperate in all reasonable requests of the indemnifying party.
VI.
CERTAIN REGISTRATION RIGHTS
The Company hereby affirms and agrees that the registration
rights granted to the Purchasers and certain other stockholders of the
Company as set forth in the Registration Rights Agreement, dated as of
March 29, 1996 (said agreement, as previously amended, the "Registration
Rights Agreement"), among the Company, the Purchasers and the other parties
named therein, shall continue in full force and effect, provided, however,
________ _______
that the Company and the Purchasers acknowledge and agree that the
Registration Rights Agreement is hereby amended such that (i) the term
"Convertible Preferred Stock" shall hereinafter refer to and include the
Series D Preferred Stock and (ii) the term "Preferred Shares" shall
hereinafter refer to and include the Series D Preferred Shares.
VII.
MISCELLANEOUS
SECTION 7.01. Expenses, Etc. The Company shall
_____________
reimburse WCAS VII or pay on its behalf any reasonable fees and expenses
incurred by WCAS VII in connection with the negotiation and preparation of
this Agreement and the related documents contemplated hereby. For purposes
hereof, the "fees and expenses incurred by WCAS VII" shall include, without
limitation, the fees, disbursements and expenses of counsel, accountants,
financial advisors and other experts retained by WCAS VII in connection
with this Agreement and the transactions contemplated hereby.
SECTION 7.02. Survival of Agreements. All covenants,
______________________
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement and the issuance, sale and
delivery of the Series D Preferred Shares pursuant hereto, notwithstanding
any investigation made at any
<PAGE>
CUSIP No. 051629103 Page 44 of 47 Pages
time by or on behalf of any party hereto. All statements contained in any
certificate or other instrument delivered by the Company hereunder shall be
deemed to constitute representations and warranties made by the Company.
SECTION 7.03. Parties in Interest. All covenants and
___________________
agreements contained in this Agreement by or on behalf of any party hereto
shall bind and inure to the benefit of the respective successors and
assigns of such party hereto whether so expressed or not.
SECTION 7.04. Notices. Any notice or other communica-
_______
tions required or permitted hereunder shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by first
class certified mail, postage prepaid, by nationally recognized overnight
courier, or by telecopy addressed to such party at the address or telecopy
number set forth below or such other address or telecopy number as may
hereafter be designated in writing by the addressee to the addressor
listing all parties:
if to the Company, to:
Aurora Electronics, Inc.
9477 Waples Street, Suite 150
San Diego, California 92121
Telecopy Number: (619) 552-8942
Attention: President
with a copy to:
Hughes & Luce, L.L.P.
1717 Main Street
Dallas, Texas 75201
Telecopy Number: (214) 939-6100
Attention: Alan J. Bogdanow, Esq.
Kenneth G. Hawari, Esq.
if to any Purchaser, to:
Welsh, Carson, Anderson & Stowe
320 Park Avenue, Suite 2500
New York, New York 10022-6815
Telecopy Number: (212) 893-9575
Attention: Richard H. Stowe
Thomas E. McInerney
with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Telecopy Number: (212) 841-5725
Attention: William J. Hewitt, Esq.
or, in any case, at such other address or addresses as shall have been
furnished in writing by such party to the other parties hereto. All such
notices, requests, consents and other communications shall be deemed to
have been received (a) in the case of personal delivery, on the date of
such delivery, (b) in the case
<PAGE>
CUSIP No. 051629103 Page 45 of 47 Pages
of mailing, on the fifth business day following the date of such mailing,
(c) in the case of delivery by overnight courier, on the business day
following the date of delivery to such courier, and (d) in the case of
telecopy, when received.
SECTION 7.05. Entire Agreement; Assignment. This
____________________________
Agreement (including the Schedules and Exhibits hereto) and the
Registration Rights Agreement constitute the entire agreement of the
parties with respect to the subject matter hereof and may not be amended or
modified nor any provisions waived except in a writing signed by the
Company and the Purchasers. This Agreement shall not be assigned by
operation of law of otherwise without the consent of the other parties
hereto.
SECTION 7.06. Counterparts. This Agreement may be
____________
executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
SECTION 7.07. Governing Law. This Agreement shall be
_____________
governed by and construed in accordance with the laws of the State of New
York.
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchasers have executed
this Agreement as of the day and year first above written.
AURORA ELECTRONICS, INC.
By
______________________________________
Jim C. Cowart
Chairman and
Chief Executive Officer
WELSH, CARSON, ANDERSON & STOWE VII, L.P.
By WCAS VII Partners, L.P.,
General Partner
By
______________________________________
General Partner
WCAS INFORMATION PARTNERS, L.P.
By WCAS Info Partners,
General Partner
By
______________________________________
General Partner
Bruce K. Anderson
Russell L. Carson
Anthony J. de Nicola
Thomas E. McInerney
James B. Hoover
Robert A. Minicucci
Andrew M. Paul
Paul B. Queally
Richard H. Stowe
Laura M. VanBuren
Patrick J. Welsh
By
_____________________________________
Laura M. VanBuren
Individually and
as Attorney-in-Fact
<PAGE>
CUSIP No. 051629103 Page 47 of 47 Pages
Schedule I
__________
Name of Purchaser Series D Preferred Shares
_________________ _________________________
Welsh, Carson, Anderson &
Stowe VII, L.P. 19,005
WCAS Information Partners, L.P. 259
Patrick J. Welsh 104
Russell L. Carson 155
Bruce K. Anderson 155
Richard H. Stowe 78
Andrew M. Paul 52
Thomas E. McInerney 91
Laura VanBuren 5
James B. Hoover 26
Robert A. Minicucci 41
Anthony J. de Nicola 21
Paul B. Queally 8
______
Total 20,000
______
______
