<PAGE> 1
As filed with the Securities and Exchange Commission on June 27, 1997.
Registration No. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AURORA ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1539534
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9477 WAPLES DRIVE, SUITE 150
SAN DIEGO, CALIFORNIA 92121
(619) 552-1213
(Address, including zip code, and telephone number,
including area code, of Registrant's principal
executive offices)
---------------
Jim C. Cowart
Chairman and Chief Executive Officer
9477 Waples Drive, Suite 150
San Diego, California 92121
(619) 552-1213
(Name, address, and telephone number,
including area code, of agent for service)
---------------
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [X]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.03 par value 235,116 $1.625(2) $382,064(2) $116
======================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Calculated pursuant to Rule 457(c) of the Securities Act of 1933, as
amended, based upon the closing sales price per share of Aurora
Electronics, Inc. common stock, $.03 par value per share, on June 23, 1997,
as reported by the American Stock Exchange.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BE COME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
AURORA ELECTRONICS, INC.
235,116 SHARES OF COMMON STOCK
------------------------------------
This Prospectus relates to an offering of up to 235,116 shares of
common stock, $.03 par value per share (the "Common Stock"), of Aurora
Electronics, Inc., a Delaware corporation (the "Company" or "Aurora"), acquired
pursuant to that certain Agreement and Plan of Merger dated March 31, 1997 by
and among the Company, Aurora Electronics Group, Inc., a California corporation
and wholly-owned subsidiary of the Company ("AEG"), MicroLine, Inc., a New
Jersey corporation ("MicroLine"), and the stockholders of MicroLine (namely,
Thomas M. Peck, Anthony Duca, and David and Adrienne Peck, who are collectively
referred to herein as the "Selling Stockholders").
The Common Stock being registered is being offered for the account of
the Selling Stockholders. See "Selling Stockholders." The Company will not
receive any proceeds from the sale of shares of Common Stock offered hereby. The
shares may be offered in transactions on the American Stock Exchange, in
negotiated transactions, or through a combination of such methods of
distribution, at prices relating to the prevailing market prices or at
negotiated prices. See "Plan of Distribution."
The Common Stock is quoted on the American Stock Exchange under the
symbol "AUR". The shares of Common Stock offered hereby have been approved for
listing on the American Stock Exchange. On June 23, 1997 the last sale price of
the Common Stock, as reported on the American Stock Exchange, was $1.625 per
share.
------------------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 4 HEREOF.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE
------------------------------------
No dealer, salesman, or any other person has been authorized to give
any information or to make any representations in connection with this offering
other than those contained in this Prospectus and, if given or made, such other
information and representations must not be relied upon as having been
authorized by the Company or the Selling Stockholders. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of the
Company since the date hereof or that the information contained herein is
correct as of any time subsequent to its date. This Prospectus does not
constitute an offer to sell, or a solicitation of any offer to by, any
securities other than the registered securities to which it relates. This
Prospectus does not constitute an offer to sell, or a solicitation of any offer
to buy, such securities in any circumstances in which such offer or solicitation
is unlawful.
------------------------------------
The date of this Prospectus is June 27, 1997.
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<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements, information statements,
and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements, information statements, and other
information filed by the Company with the Commission pursuant to the
requirements of the Exchange Act may be inspected and copied at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549-1004 and at the
following regional offices of the Commission: New York Regional Office, Seven
World Trade Center, Suite 1300, New York, New York 10048; and Los Angeles
Regional Office, 5670 Wilshire Blvd., Los Angeles, California 90036. Copies of
such material may be obtained from the Public Reference Room of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Company is a publicly held corporation and its Common Stock is traded on the
American Stock Exchange under the symbol "AUR". Reports, proxy statements,
information statements, and other information can also be inspected at the
offices of the American Stock Exchange, 86 Trinity Place, New York, New York
10006-1881. The Commission maintains a Web site that contains reports, proxy
statements, information statements, and other information regarding the Company.
The Commission's Web site address is http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and such other periodic reports as it
may determine to furnish or as may be required by law.
The Company has filed with the Commission a Registration Statement on
Form S-3 (referred to herein, together with all exhibits, as the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares of Common Stock offered hereby. This Prospectus does
not contain all information set forth in the Registration Statement. Certain
parts of the Registration Statement have been omitted in accordance with the
rules and regulations of the Commission. For further information, reference is
made to the Registration Statement which can be inspected at the public
reference rooms at the offices of the Commission.
-2-
<PAGE> 4
DOCUMENTS INCORPORATED BY REFERENCE
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, including any beneficial owner, upon the
written or oral request of such person, a copy of any or all of the documents
incorporated by reference herein (other than exhibit to such documents, unless
such exhibits are specifically incorporated by reference into the information
that this Prospectus incorporates). Requests should be directed to:
Aurora Electronics, Inc.
9477 Waples Drive, Suite 150
San Diego, California 92121
(619) 552-1213
Attn: Deborah A. Nicholls
The Company's (i) Annual Report on Form 10-K, as amended, which
contains audited financial statements for the fiscal year ended September 30,
1996, (ii) all reports filed pursuant to Section 13(a) or 15(d) of the Exchange
Act since the Form 10-K, and (iii) a description of the Common Stock contained
in the Company's registration statement on Form 8-A, including any amendment or
reports filed for the purpose of updating such description, are hereby
incorporated by reference into this Prospectus.
All documents filed with the Commission by the Company pursuant to
Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering relating to this
Prospectus will be deemed to be incorporated by reference into this Prospectus
and to be a part hereof from the date of filing of such documents. Any statement
incorporated or deemed to be incorporated by reference herein will be deemed to
be modified, replaced, or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded will be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
-3-
<PAGE> 5
THE COMPANY
Aurora Electronics, Inc. ("Aurora" or the "Company") provides spare
parts distribution and electronics recycling services to major personal computer
manufacturers and computer service organizations. Aurora operates worldwide
through its wholly-owned subsidiary, Aurora Electronics Group, Inc. ("AEG") with
facilities in the United States, Canada, and Europe. AEG distributes new and
refurbished computer spare parts, primarily to the field service departments of
computer OEMs, third-party maintenance and multivendor service organizations
("TPMOs" and "MVSOs"), computer resellers and dealers, and large corporate
self-maintainers. AEG distributes spare parts from over 500 manufacturers, with
particular emphasis on products from Apple Computer, AT&T, AST Computer, Compaq,
Dell Computer, Digital Equipment Corporation, IBM, and Toshiba. In addition, AEG
provides a broad range of materials management services, such as repair and
repair logistics, advance exchange, returned materials management, inventory
management, and electronic materials recycling and remarketing.
In March 1996, the Company completed its comprehensive plan to
recapitalize the Company (the "Recapitalization"). The Recapitalization
included: (1) a tender offer pursuant to which the Company repurchase
approximately 4,268,000 shares of common stock at $2.875 per share; (2) the
Company's sale of $40 million of convertible preferred stock, $.01 par value per
share (the "Preferred Stock"), and $10 million in subordinated debt (with
approximately 607,000 shares of common stock attached) to Welsh, Carson,
Anderson & Stowe ("WCAS") and certain other purchasers; (3) establishment of a
new $35 million senior credit facility with The Chase Manhattan Bank (formerly
Chemical Bank, N.A.) (the "Credit Agreement"); (4) the repayment in full of
AEG's existing senior bank indebtedness of approximately $26 million; and (5)
the redemption of the Company's 9-1/4% Senior Subordinated Notes (approximately
$9.3 million). The Preferred Stock is convertible into common stock at the ratio
of $2.125 per share and votes on an as-converted basis. As a result, WCAS and
its affiliates control about 76.4% of the voting power of the Company.
The Company is a Delaware corporation formed, as it exists today, in
December 1992. The Company's principle executive offices are located at 9477
Waples Drive, Suite 150, San Diego, California 92121, and its telephone number
is (619) 552-1213.
RISK FACTORS
A discussion of "Risk Factors" relating to the Company is located in
the Company's Annual Report on Form 10-K under the caption "Outlook and
Uncertainties", which is incorporated by reference in this Prospectus.
-4-
<PAGE> 6
SELLING STOCKHOLDERS
The Selling Stockholders have informed the Company that they reasonably
expect to sell the number of shares of Common Stock set forth in the following
table within eighteen months after the date of this prospectus. The table below
sets forth information with respect to the beneficial ownership of the Company's
Common Stock by each Selling Stockholder immediately prior to this offering and
as adjusted to reflect the sale of shares of Common Stock pursuant to the
offering. All information with respect to the beneficial ownership has been
furnished by the respective Selling Stockholder:
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to Offering After Offering(1)
------------------------------------ -----------------------
Number of Percent of Shares to Number of Percent of
Name of Beneficial Owner Shares Class be Sold Shares Class
- ------------------------ --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Thomas M. Peck 108,153 1.8% 108,153 -0- -0-
Anthony Duca 103,451 1.7% 103,451 -0- -0-
David and Adrienne Peck 23,512 0.0% 23,512 -0- -0-
</TABLE>
- ---------------
(1) Assumes all the shares of Common Stock that may be offered are sold.
PLAN OF DISTRIBUTION
The sale of the Common Stock offered hereby may be effected from time to
time directly, or by one or more broker-dealers or agents, in one or more
transactions (which may involve crosses and block transactions) on the American
Stock Exchange, in negotiated transactions, or through a combination of such
methods of distribution, at prices related to prevailing market prices or at
negotiated prices.
In the event one or more broker-dealers or agents agree to sell the
Common Stock, they may do so by purchasing the Common Stock as principals or by
selling the Common Stock as agent for the Selling Stockholders. Any such
broker-dealers may receive compensation in the form of discounts, concessions,
or commissions from the Selling Stockholders or the purchasers of the shares of
Common Stock for which such broker-dealer may act as agent or to whom they sell
as principal, or both (which compensation as to a particular broker-dealer may
be in excess of customary compensation).
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Common Stock may not simultaneously
engage in market-making activities with respect to the Company's Common Stock
for a period of two business days prior to the commencement of such
distribution. In addition and without limiting the foregoing, the Selling
Stockholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Rule 10b-6.
-5-
<PAGE> 7
In order to comply with certain states' securities laws, if applicable,
the Common Stock will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states, the Common Stock may not be sold
unless the Common Stock has been registered or qualified for sale in such state
or an exemption from registration or qualification is available and is complied
with.
USE OF PROCEEDS
The Company will not receive any proceeds from the offering.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Hughes & Luce, L.L.P., Dallas, Texas.
EXPERTS
The financial statements and schedule of the Company included in the
Annual Report on Form 10-K referred to under "Documents Incorporated by
Reference" have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein by reference in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
INDEMNIFICATION
Under Section 145 of the Delaware General Corporation Law, a corporation
may indemnify directors, officers and controlling persons of the corporation who
are parties to or are threatened to be made parties to actions, suits, or
proceedings, whether civil, criminal, administrative, or investigative, by
reason of such status. The Company's Certificate of Incorporation provides that
the Company shall indemnify directors, officers, and employees to the full
extent permitted by Section 145, and the Company's bylaws similarly provide for
such indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Company under Delaware law, the Company's Certificate of Incorporation or
bylaws, or otherwise, the Company has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer, or controlling person of the Company in the successful
defense of any action, suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
-6-
<PAGE> 8
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
-7-
<PAGE> 9
PART II
Item 14. Other Expenses of Issuance and Distribution.
<TABLE>
<S> <C>
Registration fee $ 116*
Accounting fees and expenses 500*
Legal fees and expenses 1,000*
Blue Sky fees and expenses (including counsel fees) 0*
Miscellaneous expenses 384*
------
Total $2,000
</TABLE>
- ---------------
* Estimated
All of the above expenses will be paid by the Company.
Item 15. Indemnification of Directors and Officers.
The Company's Certificate of Incorporation provides that the Company
shall indemnify any director, officer, or employee, or former director, officer,
or employee, of the Company, against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement to the fullest extent permitted
by Section 145 of the General Delaware Corporation Law (the "GDCL"). GDCL
Section 145 provides, among other things, that the Company may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding (other than an
action by or in the right of the Company) by reason of the fact that he is or
was a director, officer, agent, or employee of the Company or who serves or
served at the Company's request as a director, officer, agent, employee,
partner, or trustee of another corporation or of a partnership, joint venture,
trust, or other enterprise, against expenses, including attorneys' fees,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding. The power to
indemnify applies (a) if such person is successful on the merits or otherwise in
defense of any action, suit, or proceeding, or (b) if such person acted in good
faith and in a manner he reasonably believed to be in the best interest, or not
opposed to the best interest, of the Company or corporation and with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The power to indemnify applies to actions brought by or in
the right of the corporation as well, but only to the extent of defense expenses
(including attorneys' fees but excluding amounts paid in settlement) actually
and reasonably incurred and not to any satisfaction of a judgment or settlement
of the claim itself, and with the further limitation that in such actions no
indemnification shall be made in the event of any adjudication of negligence or
misconduct in the performance of his duties to the Company, unless the court
believes that in light of all the circumstances indemnification should apply.
The Company's Bylaws further provide that a determination of the
minimum standard required for indemnification may be made by either (a) a
majority of the directors of the Company (whether or not a quorum) who were not
parties to the action, (b) independent legal counsel in a written opinion, or
(c) the Company's stockholders. The Company may advance expenses to the
II-1
<PAGE> 10
potential indemnitee only if the Company's Board of Directors so authorizes and
if the potential indemnitee undertakes in writing to repay the expenses if it is
subsequently determined that he is not entitled to indemnification. The
indemnification provisions contained in the Company's Certificate of
Incorporation and Bylaws are not exclusive of any other rights to which a person
may be entitled by law, agreement, vote of stockholders or disinterested
directors or otherwise.
Item 16. Exhibits.
The Exhibits to this Registration Statement are listed in the Index to
Exhibits on page II-7 of this Registration Statement, which Index is
incorporated herein by reference.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the registration statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
II-2
<PAGE> 11
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) and 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on June 26, 1997.
AURORA ELECTRONICS, INC.
By: /s/ Jim C. Cowart
----------------------------------
Jim C. Cowart
Chairman of the Board
and Chief Executive Officer
By: /s/ Eric Augusta
----------------------------------
Eric Augusta
Vice President Finance
II-4
<PAGE> 13
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Jim C. Cowart his true and lawful attorney-in-fact and agent with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and hereby grants to such attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he or she might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or amendment thereto has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Date
--------- ----
<S> <C>
/s/ Jim C. Cowart June 26, 1997
- ---------------------------------------
Jim C. Cowart
Chairman of the Board and
Chief Executive Officer
/s/ David A. Lahar June 26, 1997
- ---------------------------------------
David A. Lahar, Director
/s/ Thomas E. McInerney June 26, 1997
- ---------------------------------------
Thomas E. McInerney, Director
/s/ Richard H. Stowe June 26, 1997
- ---------------------------------------
Richard H. Stowe, Director
/s/ William H. Watkins, Jr. June 26, 1997
- ---------------------------------------
William H. Watkins, Jr., Director
/s/ Harvey B. Cash June 26, 1997
- ---------------------------------------
Harvey B. Cash, Director
</TABLE>
II-5
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------ -----------------------
<S> <C>
2.1* Agreement and Plan of Merger dated March 31, 1997 by and among
Aurora Electronics, Inc., Aurora Electronics Group, Inc.,
MicroLine, Inc., and the stockholders of MicroLine, Inc.
5.1* Opinion of Hughes & Luce, L.L.P.
23.1* Consent of Hughes & Luce, L.L.P. (included in Exhibit 5.1)
23.2* Consent of Arthur Andersen LLP
24.1* Power of Attorney (included in Part II of this Registration
Statement)
</TABLE>
- ---------------
* Filed Herewith.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 31, 1997 (this
"Agreement"), by and among Aurora Electronics, Inc., a Delaware corporation
("Aurora"), Aurora Electronics Group, Inc., a California corporation and
wholly-owned subsidiary of Aurora ("AEG"), MicroLine, Inc., a New Jersey
corporation ("MicroLine"), and the stockholders of MicroLine named on the
signature pages of this Agreement (the "Stockholders"). Aurora and AEG are
sometimes referred to in this Agreement as the "Aurora Companies."
BACKGROUND
MicroLine, on the terms and subject to the conditions of this Agreement
and in accordance with the California General Corporation Law ("California Law")
and the New Jersey Business Corporation Act ("New Jersey Law"), will merge with
and into AEG (the "Merger"), and pursuant thereto, the issued and outstanding
shares of MicroLine common stock, no par value per share ("MicroLine Common
Stock"), will be converted into the right to receive shares of Aurora common
stock, $0.03 par value per share ("Aurora Common Stock").
Articles I and II will constitute a "plan of merger" for the purposes
of California Law and New Jersey Law.
THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which all parties mutually acknowledge, the parties, intending to be legally
bound, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. On the terms and subject to the conditions
set forth in this Agreement, and in accordance with California Law and New
Jersey Law, at the Effective Time (as defined in Section 1.02), MicroLine will
be merged with and into AEG. As a result of the Merger, the separate corporate
existence of MicroLine will cease and AEG will continue as the surviving
corporation of the Merger (the "Surviving Corporation"), with MicroLine
operating as a division of AEG.
SECTION 1.02. Closing; Closing Date; Effective Time. Unless this
Agreement has been terminated pursuant to Section 8.01, and subject to the
satisfaction or waiver of the conditions set forth in Article VII, the
consummation of the Merger and the closing of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of MicroLine,
Inc., 89 Park Avenue, Flemington, New Jersey 08822 on April 1, 1997 (provided,
that the conditions set forth in Article VII have been satisfied or waived at or
prior to such time) or as soon as practicable (but in any event within two
business days) after the satisfaction or waiver of the conditions as set forth
in Article VII, or at such other date, time, and place as Aurora and MicroLine
agree. The date on which the Closing takes place is referred to as the "Closing
Date." As promptly as practicable on the Closing Date, the parties will cause
the Merger to be consummated by filing articles or a certificate of merger
(together, the "Certificate of Merger") with the Secretary of State of the
States of California and New Jersey, in such form as required by, and executed
in accordance with the relevant provisions of, California Law and New Jersey
Law,
<PAGE> 2
respectively, (the date and time of the last such filing, or such later date or
time agreed upon by the Aurora and MicroLine and set forth in the Certificate of
Merger, being the "Effective Time").
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect
of the Merger will be as provided in the applicable provisions of California Law
and New Jersey Law.
SECTION 1.04. Certificate of Incorporation; Bylaws. At the Effective
Time, the certificate of incorporation of AEG, as in effect immediately prior to
the Effective Time, will be the certificate of incorporation of the Surviving
Corporation and thereafter will continue to be its certificate of incorporation
until amended as provided in such certificate of incorporation and pursuant to
California Law. At the Effective Time, the bylaws of AEG, as in effect
immediately prior to the Effective Time, will be the bylaws of the Surviving
Corporation and thereafter will continue to be its bylaws until amended as
provided in such bylaws and pursuant to California Law.
SECTION 1.05. Directors and Officers. The directors of AEG immediately
prior to the Effective Time will be the directors of the Surviving Corporation,
each to hold office in accordance with the certificate of incorporation and
bylaws of the Surviving Corporation, and the officers of AEG immediately prior
to the Effective Time will be the officers of the Surviving Corporation, each to
hold office in accordance with the bylaws of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed and
qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Merger Consideration; Conversion and Cancellation of
MicroLine Common Stock. At the Effective Time, by virtue of the Merger and
without any action on the part of the Aurora Companies, MicroLine, or their
respective stockholders:
(a) Subject to the other provisions of this Article II, the
issued and outstanding shares of MicroLine Common Stock immediately
prior to the Effective Time will be converted into the right to receive
the Merger Shares (as defined in Section 2.01(b)), and each share of
MicroLine Common Stock issued and outstanding immediately prior to the
Effective Time (excluding any MicroLine Common Stock described in
Section 2.01(d)) will be converted into the right to receive [Merger
Shares/100] shares of Aurora Common Stock (the "Merger Consideration").
(b) The Merger Shares will be equal to the number of shares of
Aurora Common Stock with a Fair Market Value (as defined below) equal
to $560,000 less the liabilities of MicroLine set forth on Schedule
2.01(b) to the Disclosure Schedule. The "Fair Market Value" of Aurora
Common Stock means the average closing sales price of Aurora Common
Stock as reported by the American Stock Exchange for the thirty trading
days immediately preceding the date that is two days before the
Closing.
(c) Notwithstanding the foregoing, if, between the date of
this Agreement and the Effective Time, the outstanding shares of Aurora
Common Stock or MicroLine Common Stock have been changed into a
different number of shares or a different class by reason of any stock
dividend, subdivision, reclassification, recapitalization, split,
combination, exchange of shares,
<PAGE> 3
or similar occurrence, the Merger Consideration will be correspondingly
adjusted to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination, exchange of shares, or similar
occurrence.
(d) Notwithstanding any provision of this Agreement to the
contrary, each share of MicroLine Common Stock held in the treasury of
MicroLine immediately prior to the Effective Time will be canceled and
extinguished without any conversion thereof and no payment will be made
with respect thereto.
(e) All shares of MicroLine Common Stock will cease to be
outstanding and will automatically be canceled and retired, and each
certificate previously evidencing MicroLine Common Stock outstanding
immediately prior to the Effective Time (other than MicroLine stock
described in Section 2.01(d)) (the "Converted Shares") will thereafter
represent the right to receive the applicable portion of the Merger
Consideration. The holders of certificates previously evidencing
Converted Shares will cease to have any rights with respect to such
Converted Shares, except as otherwise provided in this Agreement or by
applicable law. Such certificates previously evidencing Converted
Shares will be exchanged for certificates evidencing whole shares of
Aurora Common Stock upon the surrender of such certificates in
accordance with the provisions of Section 2.02. No fractional shares of
Aurora Common Stock will be issued in connection with the Merger;
instead, on each occasion that shares of Aurora Common Stock are
issuable to a Stockholder pursuant to this Section 2.01, such number of
shares will be rounded up to the nearest whole share.
SECTION 2.02. Exchange and Surrender of Certificates.
(a) As soon as practicable at or after the Effective Time,
each holder of a certificate previously evidencing Converted Shares
will be entitled, upon surrender of such certificate to Aurora, to
receive in exchange for such certificate a certificate or certificates
representing the Merger Consideration into which the Converted Shares
so surrendered have been converted as described in Section 2.01, in
such denominations and registered in such names as such holder may
request. Until so surrendered and exchanged, each certificate
previously evidencing Converted Shares will represent solely the right
to receive the Merger Consideration.
(b) All shares of Aurora Common Stock issued upon the
surrender for exchange of certificates previously representing
Converted Shares in accordance with the terms of this Agreement will be
deemed to have been issued in full satisfaction of all rights
pertaining to such Converted Shares. At and after the Effective Time,
there will be no further registration of transfers on the stock
transfer books of the Surviving Corporation of MicroLine Common Stock
that was outstanding immediately prior to the Effective Time. If, after
the Effective Time, certificates that previously evidenced Converted
Shares are presented to the Surviving Corporation for any reason, they
will be canceled and exchanged as provided in this Article II.
(c) At the Closing, Aurora will deliver to each record holder
of MicroLine Common Stock who does not surrender certificates
representing such stock at the Closing a letter of transmittal,
substantially in the form of Exhibit A, and other appropriate materials
for use in surrendering certificates as contemplated by this Agreement.
Certificates representing shares of Aurora Common Stock will be issued
only to the holders of record of MicroLine Common Stock at the
Effective Time.
<PAGE> 4
SECTION 2.03. Legend on Stock. Each certificate representing shares of
Aurora Common Stock to be issued in the Merger will bear substantially the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE, AND MAY NOT
BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED
OF EXCEPT IN COMPLIANCE WITH THE REQUIREMENTS OF ALL SUCH
LAWS.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MICROLINE
AND THE STOCKHOLDERS
MicroLine, Thomas M. Peck and Anthony Duca hereby jointly and
severally, and the remaining Stockholders hereby severally and solely with
respect to their capital ownership interests, represent and warrant to the
Aurora Companies as follows:
SECTION 3.01. Organization and Qualification; Stockholders. MicroLine
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of New Jersey, has all requisite power and authority to
own, lease, and operate its properties and to carry on its business as it is now
being conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary, other
than where the failure to be so duly qualified and in good standing would not
have a MicroLine Material Adverse Effect. "MicroLine Material Adverse Effect"
means any change, effect, or condition that, individually or when taken together
with all other such changes, effects, or conditions, would be materially adverse
to the business, operations, assets, financial condition, results of operations,
or prospects of MicroLine. The Stockholders beneficially and of record own the
number of shares of MicroLine Common Stock set forth opposite their names on
Schedule 3.01 of the Disclosure Schedule attached to this Agreement and made a
part of this Agreement (the "Disclosure Schedule"), free and clear of all
security interests, liens, claims, pledges, agreements, limitations on voting
rights, charges, and all other adverse claims.
SECTION 3.02. Charter and Bylaws. MicroLine has furnished to Aurora
true, complete, and correct copies of the certificate of incorporation and
bylaws of MicroLine, as amended or restated to the date of this Agreement.
MicroLine is not in violation of any of the provisions of its certificate of
incorporation or bylaws and such certificates and bylaws remain in full force
and effect.
SECTION 3.03. Capitalization.
(a) The authorized capital stock of MicroLine consists of (i)
1,000 shares of MicroLine Common Stock, of which 100 shares are issued
and outstanding. No shares of capital stock of MicroLine are reserved
for any purpose. Each of the outstanding shares of capital stock of
MicroLine is duly authorized, validly issued, and fully paid and
nonassessable, and has not been issued in violation of (nor are any of
the authorized shares of capital stock of MicroLine subject to) any
preemptive or similar rights under the certificate of incorporation or
bylaws of
<PAGE> 5
MicroLine, federal or state securities laws, or any agreement to which
MicroLine is a party or by which it is bound.
(b) MicroLine does not (i) directly or indirectly own, (ii)
have any agreement to purchase or otherwise acquire, or (iii) hold any
interest convertible into or exchangeable or exercisable for, any
equity interest in any Person.
(c) Except as set forth on Schedule 3.03(c) to the Disclosure
Schedule, there are no options, warrants, or other rights, agreements,
arrangements, or commitments of any character to which MicroLine is a
party or by which it is bound relating to the issued or unissued
capital stock or other securities of MicroLine or obligating MicroLine
to grant, issue, or sell any shares of its capital stock or other
securities. Except as set forth in Schedule 3.03(c) to the Disclosure
Schedule, there are no agreements, arrangements, or commitments of any
character (contingent or otherwise) pursuant to which any Person is or
may be entitled to receive any payment based on the revenues or
earnings, or calculated in accordance therewith, of MicroLine. There
are no voting trusts, proxies, or other agreements or understandings to
which MicroLine is a party or by which MicroLine is bound with respect
to the voting of any shares of capital stock of MicroLine.
(d) There are no obligations, contingent or otherwise, of
MicroLine to (i) repurchase, redeem, or otherwise acquire any shares of
MicroLine Common Stock or other capital stock or other securities of
MicroLine; or (ii) provide material funds to, or make any material
investment in (in the form of a loan, capital contribution, or
otherwise), or provide any guarantee with respect to the obligations of
any Person.
SECTION 3.04. Authority. MicroLine has all requisite corporate power
and authority to execute and deliver this Agreement and the other documents
contemplated by this Agreement (the "Ancillary Agreements") to which it is a
party, to perform its obligations thereunder, and to consummate the transactions
contemplated thereby. Each Stockholder has full legal authority and capacity to
execute and deliver this Agreement and the Ancillary Agreements to which he or
she is a party, to perform his or her obligations hereunder and thereunder, and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Ancillary Agreements to which MicroLine
is a party by MicroLine and the consummation by MicroLine of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action and no other corporate proceedings on the part of MicroLine or
its stockholders are necessary to authorize this Agreement or the Ancillary
Agreements to which MicroLine is a party or to consummate the transactions
contemplated hereby or thereby. This Agreement and the Ancillary Agreements have
been duly executed and delivered by MicroLine and the Stockholders that are
parties thereto and, assuming the due authorization, execution, and delivery of
this Agreement by the Aurora Companies, constitute the legal, valid, and binding
obligations of MicroLine and the Stockholders, as the case may be, enforceable
in accordance with their respective terms.
SECTION 3.05. No Conflict; Required Filings and Consents.
(a) Except as set forth in Schedule 3.05(a) to the Disclosure
Schedule, the execution and delivery of this Agreement and the
Ancillary Agreements by MicroLine and the Stockholders do not, and the
consummation of the transactions contemplated thereby will not, (i)
conflict with or violate the certificate of incorporation or bylaws, as
amended or restated to the date of this Agreement, of MicroLine; (ii)
to the knowledge of MicroLine and the Stockholders, conflict with or
violate in any material respect any federal, state, foreign, or local
law, statute,
<PAGE> 6
ordinance, rule, regulation, order, judgment, or decree, including,
without limitation, laws relating to employment discrimination, fair
employment practices, fair labor standards, equal employment
opportunity, individual or collective employee rights, and occupational
health and safety (collectively, "Laws") applicable to the Stockholders
or MicroLine or by which any of their respective properties is bound or
subject; or (iii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a
default) under, or give to any other Person any rights of termination,
amendment, acceleration, or cancellation of, or require payment under,
or result in the creation of a lien or encumbrance on any of the
properties or assets of MicroLine pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise, or other instrument or obligation to which MicroLine is a
party or by or to which MicroLine or any of their respective properties
is bound or subject.
(b) The execution and delivery of this Agreement and the
Ancillary Agreements by MicroLine or the Stockholders do not, and
consummation of the transactions contemplated hereby and thereby will
not, require MicroLine or any Stockholder to obtain any consent,
license, permit, approval, waiver, authorization, or order of, or to
make any filing with or notification to, any governmental or regulatory
authority, domestic or foreign (collectively, "Governmental Entities"),
except the filing and recordation of the Articles of Merger as required
by California Law and New Jersey Law.
SECTION 3.06. Permits; Compliance. MicroLine is in possession of all
material franchises, grants, authorizations, licenses, permits, easements,
variances, exemptions, consents, certificates, approvals, and orders necessary
to own, lease, and operate its properties and to carry on its business as it is
now being conducted and currently proposed to be conducted (collectively, the
"MicroLine Permits"), and there is no action, proceeding, or investigation
pending or, to the knowledge of MicroLine or any Stockholder, threatened
regarding suspension or cancellation of any of the MicroLine Permits. Except for
instances that would not have a MicroLine Material Adverse Effect, MicroLine is
not in material conflict with or in material default or material violation of
(a) any Law applicable to MicroLine or by or to which any of its properties is
bound or to which they may be subject or (b) any of MicroLine Permits. MicroLine
has not received any written notice with respect to possible conflicts,
defaults, or violations of Laws from any Governmental Entity.
SECTION 3.07. Financial Statements. Attached as Schedule 3.07(a) of the
Disclosure Schedule are true, correct, and complete copies of (a) the reviewed
consolidated financial statements of MicroLine as of and for the years ended
March 31, 1996 (the "Balance Sheet Date") and March 31, 1995, including balance
sheets and statements of income, cash flows, and changes in stockholders'
equity, for such periods and (b) the interim consolidated financial statements
of MicroLine as of and for the period ended February 28, 1997, including a
balance sheet as of such date and statements of income, cash flow, and
stockholders' equity (collectively, the "Financial Statements"). The Financial
Statements present fairly, in all material respects, the financial position of
MicroLine at the dates shown and the results of operations and cash flows for
the periods covered in accordance with generally accepted accounting principles
applied on a consistent basis (except with respect to the recordation of
recurring items of income). Except for (i) liabilities reflected in the latest
balance sheet; (ii) current liabilities of the same type and relative amount as
those reflected in the latest balance sheet (that would be disclosed under the
same captions in a balance sheet prepared in accordance with generally accepted
accounting principles, consistently applied, except for the recordation of
recurring items of income) incurred in the ordinary course of business,
consistent with past practice, since the Balance Sheet Date; and (iii)
liabilities disclosed in Schedule 3.07(b) of the Disclosure Schedule, MicroLine
has no material liabilities of any
<PAGE> 7
sort, whether absolute or contingent, due or to become due, known or
unknown, asserted or unasserted (collectively, "Liabilities").
SECTION 3.08. Absence of Certain Changes or Events. Except as
contemplated by this Agreement or as set forth in Schedule 3.08 to the
Disclosure Schedule, since the Balance Sheet Date, MicroLine has conducted its
business only in the ordinary course and in a manner consistent with past
practice, and there has not been (a) any material damage, destruction, or loss
(whether or not covered by insurance) with respect to any assets of MicroLine;
(b) any change by MicroLine in its accounting or tax reporting methods,
principles, or practices; (c) any declaration, setting aside, or payment of any
dividends or distributions in respect of shares of MicroLine Common Stock, or
any redemption, repurchase, or other acquisition by MicroLine of any of
MicroLine's securities; (d) any increase in the benefits under, or the
establishment or amendment of, any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase, or other
employee benefit plan, or any increase in the compensation payable or to become
payable to directors, officers, or employees of MicroLine; (e) any entry by
MicroLine into any material commitment or transaction not in the ordinary course
of business and consistent with past practice (other than this Agreement and the
transactions contemplated by this Agreement); (f) any increase in indebtedness
for borrowed money; or (g) any MicroLine Material Adverse Effect.
SECTION 3.09. Absence of Litigation. There is no claim, action, suit,
litigation, proceeding, arbitration, or investigation of any kind, at law or in
equity (including actions or proceedings seeking injunctive relief), pending or,
to the knowledge of MicroLine or any Stockholder, threatened against MicroLine
or any properties or rights of MicroLine, or relating to this Agreement or the
transactions contemplated by this Agreement, and MicroLine is not subject to any
continuing order of, consent decree, settlement agreement, or other similar
written agreement with, or continuing investigation by, any Governmental Entity,
or any judgment, order, writ, injunction, decree, or award of any Governmental
Entity or arbitrator, including, without limitation, cease-and-desist or other
orders.
SECTION 3.10. Employee Benefit Plans; Labor Matters.
(a) Set forth in Schedule 3.10(a) to the Disclosure Schedule
is a complete and correct list of all "employee benefit plans" (as
defined in the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), all plans or policies providing for "fringe
benefits" (including but not limited to vacation, paid holidays,
personal leave, employee discount, educational benefit, or similar
programs), and each other bonus, incentive, compensation, deferred
compensation, profit sharing, stock, severance, retirement, health,
life, disability, group insurance, employment, stock option, stock
purchase, stock appreciation right, supplemental unemployment, layoff,
consulting, or any other similar plan, agreement, policy, or
understanding (whether written or oral, qualified or nonqualified,
currently effective or terminated), and any trust, escrow, or other
agreement related thereto that (i) is or has been established,
maintained, or contributed to by MicroLine or any ERISA Affiliate (as
defined below) or with respect to which MicroLine or any ERISA
Affiliate has any liability, or (ii) provides benefits, or describes
policies or procedures applicable, to any officer, employee, director,
former officer, former employee, or former director of MicroLine or any
ERISA Affiliate, or any dependent thereof, regardless of whether funded
(each, an "Employee Plan," and collectively, the "Employee Plans"). For
purposes of this Agreement, "ERISA Affiliate" means MicroLine and each
Person or other trade or business, whether or not incorporated, that is
or has
<PAGE> 8
been treated as a single employer or controlled group member with
MicroLine pursuant to Code section 414 or ERISA section 4001.
(b) No written or oral representations have been made to any
employee or officer or former employee or officer of MicroLine
promising or guaranteeing any coverage under any employee welfare plan
for any period of time beyond the end of the current plan year (except
to the extent of coverage required under Code section 4980B), and no
Employee Plan provides benefits to any employee of MicroLine or any
ERISA Affiliate or any employee's dependents after the employee
terminates employment other than as required by law. The consummation
of the transactions contemplated by this Agreement will not accelerate
the time of payment or vesting, or increase the amount of compensation
(including amounts due under Employee Plans) due to any employee,
officer, former employee, or former officer of MicroLine.
(c) With respect to each Employee Plan, MicroLine has
furnished to Aurora true, correct, and complete copies of (i) the plan
documents and summary plan description; (ii) the most recent
determination letter received from the Internal Revenue Service; (iii)
the annual reports required to be filed for the two most recent plan
years of each such Employee Plan; (iv) all related trust agreements,
insurance contracts; or other funding agreements that implement such
Employee Plan; and (v) all other documents, records, or other materials
related thereto requested by the Aurora Companies.
(d) To the knowledge of MicroLine and the Stockholders,
neither MicroLine, nor any ERISA Affiliate, nor any plan fiduciary of
any Employee Plan has engaged in any transaction in violation of
section 406(a) or (b) of ERISA or any "prohibited transaction" (as
defined in section 4975(c)(1) of the Code), that could subject
MicroLine, any ERISA Affiliate, or the Aurora to any taxes, penalties,
or other liabilities resulting from such prohibited transaction. To the
knowledge of MicroLine and the Stockholders, no condition exists that
would subject MicroLine, any ERISA Affiliate, or the Aurora to any
excise tax, penalty tax, or fine related to any Employee Plan.
(e) There are no agreements that will or may provide payments
to any officer, employee, stockholder, or highly compensated individual
that will be "parachute payments" under Code section 280G that are
nondeductible to MicroLine or subject to tax under Code section 4999
for which MicroLine or any ERISA Affiliate would have withholding
liability.
(f) There is no Employee Plan that is or was subject to Part 3
of Title I of ERISA or Title IV of ERISA; each Employee Plan has been
operated in all material respects in compliance with ERISA, the Code,
and all other applicable laws; none of the Employee Plans is or was a
"multiple employer plan" or "multiemployer plan" (as described or
defined in ERISA or the Code), nor has MicroLine or any ERISA Affiliate
ever contributed or been required to contribute to any such plan; there
are no material unfunded liabilities existing under any Employee Plans;
and each Employee Plan that has not been terminated could be terminated
as of the Closing Date without any material liability to the Aurora
Companies, MicroLine, or any ERISA Affiliate. All contributions
required to be made to the Employee Plans have been made timely.
(g) Except as set forth on Schedule 3.10(g) to the Disclosure
Schedule, MicroLine is not a party to or bound by any severance
agreements, programs, policies, plans, or arrangements, whether or not
written. Schedule 3.10(g) to the Disclosure Schedule sets forth, and
MicroLine has provided to Aurora true and correct copies of, (i) all
employment agreements with officers or
<PAGE> 9
employees of MicroLine; (ii) all agreements with consultants of
MicroLine obligating MicroLine to make annual cash payments in an
amount exceeding $10,000; and (iii) all noncompetition agreements with
MicroLine.
(h) MicroLine has not amended or taken any other action with
respect to any of the Employee Plans or any of the plans, programs,
agreements, policies, or other arrangements described in this Section
3.10 since the Balance Sheet Date.
SECTION 3.11. Taxes.
(a) All returns and reports (the "Tax Returns") of or with
respect to any Tax that are required to be filed by or with respect to
MicroLine or its business or activities have, to the knowledge of
MicroLine and the Stockholders, been duly and timely filed. All items
of income, gain, loss, deduction, and credit or other items required to
be included in each such Tax Return have, to the knowledge of MicroLine
and the Stockholders, been included, and all information provided in
each such Tax Return is true, correct, and complete. All Taxes that
have been or are due have been timely paid in full. MicroLine is not
subject to taxation by any jurisdiction where MicroLine does not file
Tax Returns. All withholding Tax requirements imposed on or with
respect to MicroLine have been satisfied in full in all respects. No
penalty, interest, or other charge is due with respect to the late
filing of any such Tax Return or late payment of any such Tax.
MicroLine has disclosed on its federal income Tax Returns all positions
taken that could give rise to a substantial understatement of federal
income Tax within the meaning of Code section 6662.
(b) Except as set forth on Schedule 3.11(b) to the Disclosure
Schedule, there is not in force any extension of time with respect to
the due date for the filing of any Tax Return of or with respect to
MicroLine nor any waiver or agreement for any extension of time for the
assessment, collection, or payment of any Tax of or with respect to
MicroLine.
(c) There are no pending audits, actions, proceedings,
investigations, disputes, or claims with respect to or against
MicroLine for or with respect to any Taxes; no assessment, deficiency,
or adjustment has been assessed or proposed with respect to any Tax
Return of or with respect to MicroLine; and there is no reasonable
basis on which any claim for material Taxes can be asserted against
MicroLine. MicroLine has delivered to the Aurora correct and complete
copies of all Tax Returns, examination reports, and statements of any
deficiencies assessed against or agreed to by MicroLine since
MicroLine's inception.
(d) The total amounts set up as liabilities for current and
deferred Taxes in the latest Balance Sheet are sufficient to cover the
payment of all Taxes, whether or not assessed or disputed, that are or
will be due by or with respect to MicroLine up to and through the
Closing Date.
(e) Except for inchoate statutory liens for current Taxes not
yet due, no liens for Taxes exist upon the assets of MicroLine.
(f) MicroLine will not be required to include any amount in
income for any taxable period beginning after the Balance Sheet Date as
a result of a change in accounting method for any taxable period ending
on or before the Balance Sheet Date or pursuant to any agreement with
any Tax authority with respect to any such taxable period.
<PAGE> 10
(g) No property of MicroLine is held in an arrangement for
which partnership Tax Returns are being filed, and MicroLine does not
own any interest in any controlled foreign corporation (as defined in
section 957 of the Code), passive foreign investment company (as
defined in section 1296 of the Code), foreign trust, or other Person
the income of which is required to be included in the income of
MicroLine.
(h) No property of MicroLine is subject to a safe-harbor lease
(pursuant to section 168(f) (8) of the Internal Revenue Code of 1954 as
in effect after the Economic Recovery Tax Act of 1981 and before the
Tax Reform Act of 1986) or is "tax-exempt use property" (within the
meaning of section 168(h) of the Code) or "tax-exempt bond financed
property" (within the meaning of section 168(g) (5) of the Code).
(i) None of the transactions contemplated by this Agreement
will result in any Tax liability or the recognition of any item of
income or gain to MicroLine.
(j) MicroLine has not made an election under section 341(f) of
the Code. MicroLine is not a United States real property holding
corporation within the meaning of Code section 897(c)(2) during the
applicable period specified in Code section 897(c)(1)(A)(ii).
SECTION 3.12. Certain Business Practices. To the knowledge of MicroLine
and the Stockholders, neither MicroLine nor any director, officer, agent, or
employee of MicroLine has (a) used any funds on behalf of MicroLine for unlawful
contributions, gifts, entertainment, or other unlawful expenses relating to
political activity; (b) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended; or (c) made any other unlawful payment.
SECTION 3.13. Environmental Matters. (a) To the knowledge of MicroLine
and the Stockholders, the properties, operations, and activities of MicroLine
comply currently with, and have at all times complied with, all applicable
Environmental Laws (as defined below); (b) MicroLine (or its properties or
operations) is not subject to any existing, pending, or, to the knowledge of
MicroLine or any Stockholder, threatened action, suit, claim, investigation,
inquiry, or proceeding by or before any Governmental Entity under any
Environmental Law; (c) to the knowledge of MicroLine and the Stockholders, there
are no physical or environmental conditions existing on any property used by
MicroLine or resulting from MicroLine's operations or activities, past or
present, at any location, that would give rise to any on-site or off-site
remedial obligations or other liabilities imposed under any Environmental Laws
or that would affect the soil, groundwater, surface water, or human health; (d)
to the knowledge of MicroLine and the Stockholders, there has been no exposure
of any Person or property to hazardous substances or any pollutant or
contaminant, nor has there been any release of hazardous substances or any
pollutant or contaminant into the environment, by MicroLine or in connection
with its properties or operations; and (e) MicroLine has made available to the
Aurora all internal and external environmental audits and studies and all
correspondence on environmental matters in the possession of MicroLine relating
to any of the current or former properties or operations of MicroLine.
For purposes of this Agreement, the term "Environmental Laws" means any
and all Laws, statutes, ordinances, rules, regulations, or orders of any
Governmental Entity pertaining to health or the environment currently in effect
in any and all jurisdictions in which MicroLine owns property or conducts
business, including without limitation, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended; the
Resource Conservation and
<PAGE> 11
Recovery Act of 1976 ("RCRA"), as amended; any state Laws implementing the
foregoing federal laws; and all other environmental conservation or protection
Laws. For purposes of this Agreement, the terms "hazardous substance" and
"release" have the meanings specified in CERCLA and RCRA, and the term
"disposal" has the meaning specified in RCRA; provided, however, that to the
extent the laws of the state in which the property is located establish a
meaning for "hazardous substance," "release," or "disposal" that is broader than
that specified in either CERCLA or RCRA, such broader meaning will apply.
SECTION 3.14. Brokers; Other Transactions. No broker, finder, or
investment banker is entitled to any brokerage, finder's, or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of MicroLine or any Stockholder.
MicroLine and the Stockholders represent and warrant to Aurora that they are not
party or subject to any actual or prospective agreement, arrangement, or
understanding, written or oral, express or implied, involving any transaction
that is inconsistent with their execution and delivery of this Agreement.
SECTION 3.15. Insurance. Schedule 3.15 to the Disclosure Statement
lists all insurance policies currently in effect under which MicroLine is a
beneficiary or an insured. Such insurance coverage will remain in effect (or
will be replaced by similar policies) with respect to MicroLine and its
properties as to all events occurring on or prior to the Effective Time. As of
the date of this Agreement, MicroLine has not received any notice that any of
the policies listed on Schedule 3.15 to the Disclosure Statement have been or
will be canceled prior to its scheduled termination date, or would not be
renewed substantially on the same terms now in effect if the insured party
requested renewal or has received notice from any of its insurance carriers that
any insurance premiums will be subject to increase in an amount materially
disproportionate to the amount of the increases with respect thereto (or with
respect to similar insurance) in prior years. MicroLine is not in material
default under any such policy and all premiums due and payable with respect to
such coverage have been paid or accrued.
SECTION 3.16. Properties. MicroLine does not own any real estate.
Except for liens arising in the ordinary course of business after the date of
this Agreement and properties and assets disposed of in the ordinary course of
business after the Balance Sheet Date, MicroLine has good and marketable title,
free and clear of all liens and adverse claims, to all of its properties and
assets, whether tangible or intangible, reflected in the latest Balance Sheet as
being owned by MicroLine as of such date or purported to be owned on the date of
this Agreement. All buildings and all fixtures, equipment, and other property
and assets that are material to the business of MicroLine and are held under
leases by MicroLine are held under valid instruments enforceable by MicroLine in
accordance with their respective terms. The properties and equipment of
MicroLine, including without limitation their information systems, (i) have been
well maintained and are in good and serviceable condition, reasonable wear and
tear excepted, and (ii) are adequate for the uses to which they are being put
and, following the Merger and the consummation of the other transactions
contemplated hereby, will have sufficient capacity to conduct MicroLine's
business in the same manner and with the same degree of profitability as such
business is presently conducted.
SECTION 3.17 Intellectual Property. Schedule 3.17 to the Disclosure
Schedule sets forth a complete and correct list of each patent application,
trademark (whether or not registered), trademark application, trade name,
service mark, copyright and other proprietary intellectual property (including,
without limitation, proprietary computer software, whether in object or source
form) (the "Intellectual Property") owned or used by MicroLine. To the best of
MicroLine's and the Stockholders' knowledge, the Intellectual Property is valid
and enforceable, and MicroLine has the exclusive right to use such Intellectual
Property. To the knowledge of MicroLine and the Stockholders, the current use by
<PAGE> 12
MicroLine of such Intellectual Property does not infringe the rights of any
other Person, and no other Person is infringing the rights of MicroLine in any
such Intellectual Property.
SECTION 3.18. Certain Contracts; Licenses; Etc.
(a) Schedule 3.18(a) to the Disclosure Schedule lists, as of
the date of this Agreement, each agreement, contract, or commitment to
which MicroLine is a party or by which MicroLine is bound (i) involving
a lease for real property or consideration during the previous twelve
months in excess of $10,000 or that could reasonably be expected to
involve consideration in the twelve month period following the date of
this Agreement in excess of $10,000, or (ii) that is otherwise material
to the financial condition, results of operations, or current or future
business or operations of MicroLine and that is not otherwise listed
pursuant to this Section 3.18.
(b) Except as set forth on Schedule 3.18(b) to the Disclosure
Schedule, none of the items required to be disclosed on Schedule 3.18
to the Disclosure Schedule is terminable as the result of, has
increased rights or obligations as a result of, or becomes vested or
accelerated by, or otherwise requires the consent or other approval of
any other Person with respect to or as a result of, the transactions
contemplated by this Agreement. MicroLine is in compliance in all
material respects under all leases, licenses, agreements, contracts,
permits, plans, and commitments by which any of its properties or
assets is bound and, to the knowledge of MicroLine or the Stockholders,
no event has occurred that constitutes a violation or breach of or a
default (with the passage of time or the giving of notice or both) in
respect of any thereof, and each of the other parties thereto or bound
thereby has performed all the obligations required to be performed by
it to date and is not in material default thereunder. Each of the items
required to be disclosed in Schedule 3.18 to the Disclosure Schedule is
in full force and constitutes a legal, valid, and binding obligation of
MicroLine and the other parties thereto, enforceable in accordance with
its terms. Neither MicroLine nor any Stockholder knows or has reason to
know that any material client or customer intends to terminate its
relationship with MicroLine as a result of the Merger or any of the
related transactions. True and complete copies of all items required to
be disclosed on Schedule 3.18 to the Disclosure Schedule have been
delivered to the Aurora.
SECTION 3.19. Contracts to Acquire an Interest in MicroLine. There are
no contracts, agreements, understandings, or other rights, whether written or
oral, granted by MicroLine to any Person pursuant to which such Person may be
entitled to receive an equity interest in MicroLine or any payment with respect
thereto.
Section 3.20. Employees. Schedule 3.20(a) to the Disclosure Schedule
sets forth an accurate, correct, and complete list of all employees of MicroLine
as of the Closing Date, including name, title or position, the present annual
compensation or wage rate, any interests in any bonus or incentive compensation
plan, and any other perquisite or form of non-cash compensation. To the best of
MicroLine's and Stockholders' knowledge, no employee of MicroLine is subject to
a non-competition or any other form of agreement, whether written or oral, that
would prevent such employee from continuing as an employee of AEG, Aurora, and
their respective affiliates upon consummation of the Merger or devoting his full
talents, knowledge, and efforts to AEG, Aurora, and their respective affiliates
upon consummation of the Merger. Schedule 3.20(b) to the Disclosure Schedule
sets forth an accurate and complete list of all loans, debts, and other
obligations (collectively, "Employee Loans") owed by any employee of MicroLine
to MicroLine.
<PAGE> 13
SECTION 3.21. Securities Law Matters.
(a) Each Stockholder, by reason of his or her business and
financial experience, has the capacity to protect his or her interests
in investments in unregistered securities such as the Aurora Common
Stock to be received pursuant to this Agreement. Each Stockholder has
carefully evaluated his or her financial resources and investment
position and the risks associated with an investment in the Aurora
Common Stock and is able to bear the economic risk of such investment.
Each Stockholder's overall commitment to investments that are not
readily marketable is not disproportionate to his or her net worth and
such Stockholder's investment in the Aurora Common Stock will not cause
such overall commitment to become excessive.
(b) Each Stockholder has reviewed the merits of an investment
in the Aurora Common Stock with tax and legal counsel and an investment
advisor to the extent deemed advisable by such Stockholder. Each
Stockholder acknowledges that he or she has been given a full
opportunity to ask questions of and to receive answers from the
officers, agents and representatives of Aurora concerning the terms and
conditions of the investment and the business of Aurora and to obtain
such other information as desired in order to evaluate an investment in
the Aurora Common Stock. Each Stockholder further acknowledges that he
or she has relied solely upon his or her own independent
investigations, and has received no representation or warranty from
Aurora or any of its affiliates, employees or agents. Each Stockholder
further acknowledges and understands that no federal or state agency
has made any finding or determination as to the fairness of an
investment in, or any recommendation or endorsement of, the Aurora
Common Stock.
(c) Each Stockholder understands that the Aurora Common Stock
to be issued pursuant to the Merger will constitute "restricted
securities" within the meaning of Rule 144 under the Securities Act and
may not be sold, pledged, or otherwise transferred in the absence of an
effective registration statement pertaining thereto under the
Securities Act and under any applicable state securities laws or an
exemption from the registration requirements thereof. Each Stockholder
further understands that each certificate representing the Aurora
Common Stock to be issued in the Merger will bear substantially the
legend set forth in Section 2.03.
SECTION 3.22. Information Supplied. Without limiting any of the
representations and warranties contained in this Agreement, no representation or
warranty of MicroLine and no statement by MicroLine or other information
contained in the Disclosure Schedule, as of the date of such representation,
warranty, statement, or document, contains any untrue statement of material
fact, or omits to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which such
statements were made, not misleading.
<PAGE> 14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE AURORA COMPANIES
The Aurora Companies hereby jointly and severally represent and warrant
to MicroLine and the Stockholders as follows:
SECTION 4.01. Organization. Each of the Aurora Companies is a
corporation duly organized, validly existing, and in good standing under the
laws of the state of its incorporation, and is duly qualified to do business as
a foreign corporation in each jurisdiction in which the failure to be so
qualified would affect the validity or enforceability of this Agreement or would
have a Aurora Material Adverse Effect. The term "Aurora Material Adverse Effect"
means any change, effect, or condition that, individually or when taken together
with all other such changes, effects, or conditions, would be materially adverse
to the business, operations, assets, financial condition, results of operations,
or prospects of the Aurora Companies.
SECTION 4.02. Capitalization.
(a) The authorized capital stock of Aurora, as of February 28,
1997, consists of (i) 50,000,000 shares of common stock, $.03 par value
per share, of which 5,742,523 shares were issued and outstanding, and
(ii) 1,000,000 shares of preferred stock, of which 400,000 shares have
been designated as convertible preferred, all 400,000 of which were
issued and outstanding (and convertible into 18,823,529 shares of
common stock). Each of the outstanding shares of capital stock of
Aurora is duly authorized, validly issued, and fully paid and
nonassessable, and has not been issued in violation of any preemptive
or similar rights under the certificate of incorporation or bylaws of
Aurora, federal or state securities laws, or any agreement to which
Aurora is a party or by which it is bound.
(b) Except as set forth in Schedule 4.02(b) to the Disclosure
Schedule, there are no options, warrants, or other rights, agreements,
arrangements, or commitments of any character to which Aurora is a
party or by which it is bound relating to the issued or unissued
capital stock or other securities of Aurora or obligating Aurora to
grant, issue, or sell any shares of its capital stock or other
securities.
SECTION 4.03. Aurora Common Stock. The shares of the Aurora Common
Stock to be issued pursuant to the Merger will, when issued and delivered at the
Closing in accordance with this Agreement, be duly authorized, validly issued,
fully paid, and nonassessable and not subject to statutory preemptive rights.
SECTION 4.04. Authority. Each of the Aurora Companies has all requisite
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to perform its obligations
hereunder and thereunder, and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Ancillary
Agreements to which it is a party by each of the Aurora Companies and the
consummation by each of the Aurora Companies of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
and no other corporate proceedings on the part of any of the Aurora Companies
are necessary to authorize this Agreement and the Ancillary Agreements to which
it is a party or to consummate the transactions contemplated hereby and thereby.
This Agreement and the Ancillary Agreements have been duly executed and
delivered by each of the Aurora Companies that is a party
<PAGE> 15
thereto and, assuming the due authorization, execution, and delivery of this
Agreement and the Ancillary Agreements by MicroLine and the Stockholders,
constitute the legal, valid, and binding obligations of each of the Aurora
Companies that is a party thereto, enforceable in accordance with their
respective terms.
SECTION 4.05. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement and the
Ancillary Agreements by each of the Aurora Companies that is a party
thereto do not, and the consummation of the transactions contemplated
thereby will not, (i) conflict with or violate the certificate of
incorporation or bylaws, in each case as amended or restated as of the
date of this Agreement, of each Aurora Company; (ii) conflict with or
violate any Laws applicable to any Aurora Company or by which any of
its properties is bound or subject; or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, accelerations or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or
assets of any Aurora Company pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise, or
other instrument or obligation to which any Aurora Company is a party
or by or to which any Aurora Company or any of its respective
properties is bound or subject.
(b) The execution and delivery of this Agreement and the
Ancillary Agreements by each of the Aurora Companies that is a party
thereto do not, and the consummation of the transactions contemplated
by this Agreement and the Ancillary Agreements will not, require any
Aurora Company to obtain any consent, license, permit, approval,
waiver, authorization, or order of, or to make any filing with or
notification to, any Governmental Entity, except for the filing and
recordation of the Certificate of Merger as required by California Law
and New Jersey Law.
SECTION 4.06. Absence of Certain Changes or Events. Except as
contemplated by this Agreement, since the date of Aurora's most recent quarterly
report on Form 10-Q filed with the Securities and Exchange Commission, there has
not been a Aurora Material Adverse Effect.
SECTION 4.07. Brokers. No broker, finder, or investment banker is
entitled to any brokerage, finder's, or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Aurora or any Affiliate of the Aurora for which any
Stockholder or MicroLine will have any liability.
SECTION 4.08. Information Supplied. Without limiting any of the
representations and warranties contained in this Agreement, no representation or
warranty of Aurora, as of the date of such representation, warranty, or
statement contains any untrue statement of material fact, or omits to state a
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which such statements were made, not
misleading.
<PAGE> 16
ARTICLE V
COVENANTS
SECTION 5.01. Affirmative Covenants of MicroLine and the Stockholders.
MicroLine and the Stockholders hereby covenant and agree that, prior to the
Effective Time, unless otherwise expressly contemplated by this Agreement or
consented to in writing by Aurora, MicroLine will, and the Stockholders will
cause MicroLine, (a) to operate in the ordinary course of business and
consistent with past practices and use their best efforts to preserve the
goodwill of MicroLine and of its employees, customers, suppliers, and others
having business dealings with MicroLine; (b) except as contemplated by this
Agreement, not to engage in any transaction outside the ordinary course of
business, including, without limitation, by making any material expenditure,
investment, or commitment or entering into any material agreement or arrangement
of any kind; (c) to maintain all insurance policies and all Company Permits that
are required for MicroLine to carry on its business; (d) not to take or permit
any action that would cause the conditions on the obligations of the parties to
effect the transactions contemplated by this Agreement not to be fulfilled,
including, without limitation, by taking or causing to be taken any action that
would cause the representations and warranties made by the Stockholders in this
Agreement not to be true and correct; (e) declare or pay any dividend on, or
make any other distribution in respect of, outstanding shares of capital stock;
(f) split, combine, or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock; (g) not to sell, lease, exchange,
mortgage, pledge, transfer, or otherwise dispose of, or agree to sell, lease,
exchange, mortgage, pledge, transfer, or otherwise dispose of, any of its
material assets or any interest therein, except for dispositions of inventories
and of assets in the ordinary course of business and consistent with past
practice; and (h) to take all reasonable steps to cause to be fulfilled the
conditions precedent to the Aurora Companies' obligations to consummate the
transactions contemplated by this Agreement that are dependent on the actions of
the Stockholders or MicroLine.
SECTION 5.02. No-Shop Provisions. Until the earlier of the Closing Date
or June 30, 1997, the Stockholders will each comply and cause MicroLine to
comply with the following no-shop provisions: (a) MicroLine and the Stockholders
will each negotiate exclusively and in good faith with Aurora with respect to
the sale of MicroLine; (b) neither MicroLine nor any Stockholder will, directly
or indirectly (through agents or otherwise), encourage or solicit any inquiries
or accept any proposals by, or engage in any discussions or negotiations with or
furnish any information to, any other Person concerning a sale of a substantial
portion of the assets or business of MicroLine (whether through an asset sale,
stock sale, merger or otherwise); and (c) MicroLine and the Stockholders will
promptly communicate to Aurora the material substance of any inquiry or proposal
concerning any such transaction that may be received by any of them.
SECTION 5.03. Access and Information. The Stockholders have caused and
will, until the Closing Date, continue to cause Aurora and its representatives
to have reasonable access to MicroLine's directors, officers, employees, agents,
assets, and properties and all relevant books, records and documents of or
relating to the business and assets of MicroLine during normal business hours
and will furnish to Aurora such information, financial records and other
documents relating to MicroLine and its operations and business as Aurora may
reasonably request. The Stockholders will permit Aurora and its representatives
reasonable access to MicroLine's accountants, auditors, customers, and suppliers
having dealings with MicroLine for consultation or verification of any
information obtained by Aurora and will use their respective best efforts to
cause such Persons to cooperate with Aurora and its representatives in such
consultation and in verifying such information.
<PAGE> 17
SECTION 5.04. Supplemental Disclosure. The Stockholders will promptly
supplement or amend each of the Disclosure Schedules with respect to any matter
that arises or is discovered after the date of this Agreement that, if existing
or known at the date of this Agreement, would have been required to be set forth
or listed in the Disclosure Schedule; provided that, for purposes of determining
the rights and obligations of the parties under this Agreement (other than the
obligations of the Stockholders under this Section 5.04), any such supplemental
or amended disclosure will not be deemed to have been disclosed to Aurora unless
Aurora otherwise expressly consents in writing.
SECTION 5.05. Consent and Release of the Stockholders. For purposes of
the state corporation law governing MicroLine, this Agreement constitutes a
written consent of the all Stockholders with respect to the Merger, approving
the execution and delivery of this Agreement by MicroLine and the consummation
of the Merger and the other transactions contemplated by this Agreement and the
Ancillary Agreements. Effective upon the Closing, each Stockholder, for himself
and his heirs, executors, administrators, successors, and assigns, hereby,
subject to Section 5.09, fully and unconditionally releases and forever
discharges and holds harmless MicroLine and its employees, officers, directors,
successors, and assigns from any and all Claims of every kind and nature
whatsoever, whether or not now existing or known, relating in any way, directly
or indirectly, to MicroLine, that such Stockholder may now have or may hereafter
claim to have against MicroLine or any of its employees, officers, directors,
successors, or assigns.
SECTION 5.06. Publicity. The Aurora Companies and the Stockholders will
cooperate with each other in the development and distribution of all news
releases and other public disclosures relating to the transactions contemplated
by this Agreement. Neither the Aurora Companies, on the one hand, nor MicroLine
or the Stockholders, on the other hand, will issue or make, or allow to have
issued or made, any press release or public announcement concerning the
transactions contemplated by this Agreement without the advance approval in
writing of the form and substance thereof by the other parties, unless otherwise
required by applicable legal or stock exchange requirements.
SECTION 5.07. Transaction Costs. Each party will pay prior to the
Closing all attorneys', accountants', finders', brokers', investment banking and
other fees, costs and expenses incurred by such party in connection with the
preparation, negotiation, execution, and performance of this Agreement or any of
the transactions contemplated by this Agreement, provided that (in addition to
any other remedies that the Aurora Companies may have under this Agreement), the
Stockholders, jointly and severally, agree to reimburse Aurora for all of
MicroLine's expenses incurred in connection with the transactions contemplated
by this Agreement and to reimburse the Aurora for all of its expenses incurred
in connection with this Agreement if Aurora terminates this Agreement as a
result of any breach by MicroLine or the Stockholders. Aurora agrees to
reimburse the Stockholders for all of MicroLine's and Stockholders' expenses
incurred in connection with this Agreement if MicroLine and the Stockholders
terminate this Agreement as a result of any breach by Aurora.
SECTION 5.08. Registration of Merger Shares; Listing on AMEX. Within
thirty (30) days after the Effective Time, Aurora covenants and agrees that it
will use commercially reasonable efforts to cause the preparation and filing of
a registration statement on Form S-3 with the Securities and Exchange Commission
(the "SEC") for the purpose of registering the Merger Shares; provided that,
notwithstanding the foregoing, Aurora may postpone the preparation of such
registration statement for thirty (30) days after which time Aurora will use
commercially reasonable efforts to prepare and file such registration statement.
Promptly after the registration of the Merger Shares with the SEC, Aurora
covenants and agrees to prepare and file with the American Stock Exchange
("AMEX") an additional
<PAGE> 18
listing application for the purpose of listing the Merger Shares on the AMEX.
All costs of preparing and filing the registration statement with the SEC and
listing the Merger Shares on the AMEX will be borne by Aurora.
SECTION 5.09. Payment of MicroLine and Stockholder Liabilities. Aurora
covenants and agrees to pay (a) the credit card charges payable of Thomas M.
Peck and Anthony Duca set forth on Schedule 2.01(b) to the Disclosure Schedule
within thirty (30) days after the receipt by Aurora of MicroLine financial
statements dated as of March 31, 1997, (b) the outstanding balance of the
officer loans payable set forth on Schedule 2.01(b) to the Disclosure Schedule
within thirty (30) days after the receipt by Aurora of MicroLine financial
statements dated as of March 31, 1997, and (c) the credit card charges payable
of MicroLine set forth on Schedule 2.01(b) in a timely manner in Aurora's sole
discretion, but in any event not later than December 31, 1997.
ARTICLE VI
INDEMNIFICATION
SECTION 6.01. Indemnification of Aurora. The Stockholders will jointly
and severally indemnify and hold Aurora, its subsidiaries (including AEG), and
their respective directors, officers, employees, and agents (collectively, the
"Aurora Parties") harmless from any and all Claims that any Aurora Party may
suffer or incur as a result of or relating to the breach or inaccuracy, or any
alleged breach or inaccuracy (except that in determining the dollar amount of
Claims resulting from the breach or inaccuracy of any representation or warranty
that is qualified by the concept of materiality, such qualification will not be
taken into account), of any of the representations, warranties, covenants, or
agreements made by the Stockholders or MicroLine in this Agreement or pursuant
to the Ancillary Agreements; provided, however, that Aurora will not be entitled
to indemnification under this Section 6.01 unless the aggregate amount of all
Claims exceeds $10,000, in which case Aurora will be entitled to indemnification
for amounts only in excess of $10,000, and further provided that Aurora will not
be entitled to indemnification under this Section 6.01 if and to the extent that
Claims aggregate more than $560,000.
SECTION 6.02. Indemnification of the Stockholders. Aurora will
indemnify and hold the Stockholders and their heirs and agents (collectively,
the "Stockholder Parties") harmless from any and all Claims that any Stockholder
Party may suffer or incur as a result of or relating to the breach or
inaccuracy, or any alleged breach or inaccuracy (except that in determining the
dollar amount of Claims resulting from the breach or inaccuracy of any
representation or warranty that is qualified by the concept of materiality, such
qualification will not be taken into account), of any of the representations,
warranties, covenants, or agreements made by the Aurora Companies in this
Agreement or pursuant to the Ancillary Agreements; provided, however, that the
Stockholders will not be entitled to indemnification under this Section 6.02
unless the aggregate amount of all Claims exceeds $10,000, in which case the
Stockholders will be entitled to indemnification for amounts only in excess of
$10,000, and further provided that the Stockholders will not be entitled to
indemnification under this Section 6.02 if and to the extent that Claims
aggregate more than $560,000.
SECTION 6.03. Notice. Any party entitled to receive indemnification
under this Article VI (the "Indemnified Party") agrees to give prompt written
notice to the party or parties required to provide such indemnification (the
"Indemnifying Parties") upon the occurrence of any indemnifiable claim or the
assertion of any claim or the commencement of any action or proceeding in
respect of which such a claim may reasonably be expected to occur (a "Loss
Claim"), but the Indemnified Party's failure to give
<PAGE> 19
such notice will not affect the obligations of the Indemnifying Party under this
Article VI except to the extent that the Indemnifying Party is materially
prejudiced thereby and will not affect the Indemnifying Party's obligations or
liabilities otherwise than under this Article VI. Such written notice will set
forth a reference to the event or events forming the basis of such Loss or Loss
Claim and the estimated amount involved, unless such amount is uncertain or
contingent, in which event the Indemnified Party will give a later written
notice when the amount becomes fixed.
SECTION 6.04. Defense of Claims. The Indemnifying Party may elect to
assume and control the defense of any Loss Claim, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of
expenses related thereto, if (a) the Indemnifying Party provides reasonable
evidence to the Indemnified Party of its financial ability to satisfy such
indemnification obligation; (b) the Loss Claim does not seek to impose any
liability or obligation on the Indemnified Party other than for money damages;
and (c) the Loss Claim does not relate to the Indemnified Party's relationship
with its customers or employees. If such conditions are satisfied and the
Indemnifying Party elects to assume and control the defense of a Loss Claim,
then (i) the Indemnifying Party will not be liable for any settlement of such
Loss Claim effected without its consent; (ii) the Indemnifying Party may settle
such Loss Claim without the consent of the Indemnified Party; and (iii) the
Indemnified Party may employ separate counsel and participate in the defense
thereof, but the Indemnified Party will be responsible for the fees and expenses
of such counsel unless the Indemnifying Party has failed to adequately assume
the defense of such Loss Claim or to employ counsel with respect thereto. If
such conditions are not satisfied, the Indemnified Party may assume and control
the defense of the Loss Claim; provided that the Indemnified Party may not
settle any such Loss Claim without the consent of the Indemnifying Party, which
consent will not be unreasonably withheld (and the Indemnifying Party will not
be liable for any Claims resulting from a settlement effected in violation of
this clause).
SECTION 6.05. Survival; Remedies. All representations and warranties
made in or pursuant to this Agreement will survive until the second anniversary
of the Closing. All statements contained in any schedule, certificate, or other
writing delivered in connection with this Agreement or the Ancillary Agreements
or the transactions contemplated by this Agreement or the Ancillary Agreements
will constitute representations and warranties under this Agreement. Each party
agrees that no other party to this Agreement will be under any duty, express or
implied, to make any investigation of any representation or warranty made by any
other party to this Agreement, and that no failure to so investigate will be
considered negligent or unreasonable. All remedies under this Agreement will be
cumulative and not exclusive.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of the Aurora Companies. The
obligations of the Aurora Companies to effect the Merger and the other
transactions contemplated by this Agreement are subject to the satisfaction at
or prior to the Closing Date of the following conditions, any or all of which
may be waived in writing in the absolute discretion of the Aurora, in whole or
in part:
(a) Each of the representations and warranties of MicroLine
and the Stockholders contained in this Agreement must be true and
correct in all material respects as of the Closing Date as though made
on and as of the Closing Date.
<PAGE> 20
(b) MicroLine and the Stockholders must have performed or
complied with all agreements and covenants required by this Agreement
to be performed or complied with by them on or prior to the Closing
Date.
(c) There must be no pending or threatened litigation in any
court or any proceeding before or by any Governmental Entity against
the Stockholders, MicroLine, or Aurora to restrain or prohibit or
obtain damages or other relief with respect to this Agreement or the
Ancillary Agreements or the consummation of the transactions
contemplated by this Agreement or the Ancillary Agreement.
(d) All contractual and governmental consents, approvals, and
notifications required must have been obtained or given.
(e) Thomas M. Peck and Anthony Duca must have entered into an
employment agreement, substantially in the form of Exhibit B-1 and
Exhibit B-2, respectively.
(f) Aurora must have received the opinion of counsel to
MicroLine, dated the Effective Date, addressed to Aurora and AEG,
substantially in the form of Exhibit C.
(g) MicroLine and the Stockholders must have delivered to
Aurora a closing certificate, substantially in the form of Exhibit D-1
and Exhibit D-2, respectively.
(h) MicroLine must have delivered to Aurora a certificate of
the secretary of MicroLine, substantially in the form of Exhibit E.
SECTION 7.02. Conditions to Obligations of MicroLine and the
Stockholders. The obligations of MicroLine and the Stockholders to effect the
Merger and the other transactions contemplated by this Agreement are subject to
the satisfaction at or prior to the Closing Date of the following conditions,
any or all of which may be waived in writing in the absolute discretion of
MicroLine, in whole or in part:
(a) Each of the representations and warranties of the Aurora
Companies contained in this Agreement must be true and correct in all
material respects as of the Closing Date as though made on and as of
the Closing Date.
(b) The Aurora Companies must have performed or complied with
all agreements and covenants required by this Agreement to be performed
or complied with by them on or prior to the Closing Date.
(c) There must be no pending or threatened litigation in any
court or any proceeding before or by any Governmental Entity against
the Stockholders, MicroLine, or Aurora to restrain or prohibit or
obtain damages or other relief with respect to this Agreement or the
Ancillary Agreements or the consummation of the transactions
contemplated by this Agreement or the Ancillary Agreement.
(d) All contractual and governmental consents, approvals, and
notifications must have been obtained or given.
<PAGE> 21
(f) Aurora must have executed and delivered the employment
agreements substantially in the form of Exhibit B-1 and Exhibit B-2.
(g) MicroLine shall have received the opinion of counsel to
Aurora and AEG, dated the Effective Date, addressed to MicroLine,
substantially in the form of Exhibit F.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Termination. This Agreement and the transactions
contemplated by this Agreement may be terminated and abandoned (a) at any time
prior to the Closing by mutual written consent of Aurora, MicroLine, and the
Stockholders; or (b) by either Aurora, on the one hand, or MicroLine of the
Stockholders, on the other hand, if a condition to performance by the
terminating party or parties under this Agreement has not been satisfied or
waived prior to June 30, 1997. Notwithstanding the foregoing clause (b), (i)
Aurora may not terminate this Agreement if the event giving rise to its
termination right results from Aurora's willful failure to perform or observe
any of its covenants or agreements set forth herein or if Aurora is, at such
time, in breach of this Agreement, and (ii) MicroLine or the Stockholders may
not terminate this Agreement if the event giving rise to its termination right
results from the willful failure of MicroLine or any Stockholder to perform or
observe any of its covenants or agreements set forth in this Agreement or if any
Stockholder is, at such time, in breach of this Agreement. The right of any
party to terminate this Agreement pursuant to this Section 8.01 will remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any party, any Person controlling any such party, or any of
their respective officers, directors, representatives, or agents, whether before
or after the execution of this Agreement. Upon termination of this Agreement
pursuant to Section 8.01, this Agreement will become void, there will be no
liability on the part of the Aurora Companies, on the one hand, or MicroLine or
the Stockholders, on the other hand, to the other and all rights and obligations
of each party to this Agreement will cease, except that nothing in this
Agreement will relieve any party of any liability for (a) any breach of such
party's covenants or agreements contained in this Agreement, or (b) any knowing
or willful breach of such party's representations or warranties contained in
this Agreement.
SECTION 8.02. Notices. All notices that are required or may be given
pursuant to this Agreement must be in writing and delivered personally, by a
recognized courier service, by a recognized overnight delivery service, by
telecopy or by registered or certified mail, postage prepaid, to the parties at
the following addresses (or to the attention of such other person or such other
address as any party may provide to the other parties by notice in accordance
with this Section 8.02):
If to Aurora:
Aurora Electronics, Inc.
9477 Waples Drive, Suite 150
San Diego, California 92121
Attention: Chief Executive Officer
Telecopy: (619) 552-8942
<PAGE> 22
with a copy to:
H. Lynn Moore, Jr.
Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Telecopy: (214) 939-5849
If to MicroLine or the Stockholders:
MicroLine, Inc.
89 Park Avenue
Flemington, New Jersey 08822
Attention: President
Telecopy: (908) 782-5877
with a copy to:
Larry Wiseman
Blank Rome Comisky & McCauley
11th Floor
4 Penn Center
Philadelphia, Pennsylvania 19103
Telecopy: (215) 988-6910
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy or, if mailed, when actually received.
SECTION 8.03. Attorneys' Fees and Costs. If attorneys' fees or other
costs are incurred to secure performance of any obligations under this
Agreement, or to establish damages for the breach thereof or to obtain any other
appropriate relief, whether by way of prosecution or defense, the prevailing
party will be entitled to recover reasonable attorneys' fees and costs incurred
in connection therewith.
SECTION 8.04. Further Assurances. Each party agrees to execute any and
all documents and to perform such other acts as may be necessary or expedient to
further the purposes of this Agreement and the transactions contemplated by this
Agreement.
SECTION 8.05. Counterparts. This Agreement may be executed in one or
more counterparts for the convenience of the parties to this Agreement, all of
which together will constitute one and the same instrument.
SECTION 8.06. Certain Definitions. For the purposes of this Agreement,
the following terms have the meanings specified:
(a) "Affiliate" means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is
under common control with, the first mentioned Person.
<PAGE> 23
(b) "Control" (including the terms "controlling,"
"controlled," "controlled by," and "under common control with") means
the possession, directly or indirectly, or as trustee or executor, of
the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of securities, or
as trustee or executor, by contract or credit arrangement or otherwise.
(c) "Knowledge" or "to the knowledge of" and other phrases of
like substance are to be broadly construed (i) to include the knowledge
of the Person making the representation and (ii) to represent that the
Person making the representations has made or caused such inquiry and
investigation to be made into the matter represented to be true as such
Person in good faith believes to be reasonable and sufficient.
(d) "Person" will be broadly construed to include to mean an
individual, corporation, partnership, association, trust,
unincorporated organization, Governmental Entity, other entity or group
(as used in Section l3(d) of the Exchange Act).
(e) "Tax" or "taxes" means any and all taxes, charges, fees,
levies, assessments, duties, or other amounts payable to any federal,
state, local, or foreign taxing government, authority, or agency,
including, without limitation, (i) income, franchise, profits, gross
receipts, minimum, alternative minimum, estimated, ad valorem, value
added, sales, use, service, real or personal property, capital stock,
license, payroll, withholding, disability, employment, social security,
workers compensation, unemployment compensation, utility, severance,
excise, stamp, windfall profits, transfer, and gains taxes; (ii)
customs, duties, imposts, charges, levies, or other similar assessments
of any kind; and (iii) interest, penalties, and additions to tax
imposed with respect thereto.
SECTION 8.07. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement will be assigned or delegated by
any Stockholders or Aurora, without the prior written consent of the other
parties; except that Aurora may assign its rights and obligations under this
Agreement to any direct or indirect subsidiary of Aurora. This Agreement is not
intended to confer any rights or benefits to any Person (including, without
limitation, any employees of MicroLine) other than the parties to this
Agreement.
SECTION 8.08. Entire Agreement. This Agreement and the related
documents contained as Exhibits and Schedules to this Agreement or expressly
contemplated by this Agreement contain the entire understanding of the parties
relating to the subject matter hereof and supersede all prior written or oral
and all contemporaneous oral agreements and understandings relating to the
subject matter hereof. This Agreement cannot be modified or amended except in
writing signed by the party against whom enforcement is sought. The Exhibits and
Schedules to this Agreement are hereby incorporated by reference into and made a
part of this Agreement for all purposes.
SECTION 8.9. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
under this Agreement, including, without limitation, failure to take all actions
as are necessary on its part to the consummation of the Merger or any violation
of the covenants set forth in Article V, will cause irreparable injury to the
other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents, notwithstanding Section 8.11,
to the issuance of injunctive relief by any court of competent jurisdiction to
compel performance of such party's obligations and to the granting by any court
of the remedy of specific performance of its obligations under this Agreement or
any Ancillary Agreement.
<PAGE> 24
SECTION 8.10. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE SUBSTANTIVE LAWS OF THE STATE OF CALIFORNIA,
WITHOUT GIVING EFFECT TO ANY CONFLICTS-OF-LAW, RULE, OR PRINCIPLE THAT MIGHT
REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
SECTION 8.11 Arbitration. Any controversy, dispute, or claim arising
under this Agreement will be finally settled by arbitration conducted in
accordance with the American Arbitration Association Rules in effect on the date
of this Agreement. Notwithstanding any provision of the American Arbitration
Association Rules, any such arbitration will be conducted before and decided by
a three-person panel of arbitrators. Each party will be entitled to select one
individual to serve on the panel, and the two individuals so selected will
select the third individual to serve on the panel. Any such arbitration will
take place in the City of San Diego, California. The arbitrators in any such
arbitration will apply the laws of the State of California and the United States
of America. In any arbitration under this Agreement, this Agreement will be
deemed to have been made in, and shall be governed by and construed under the
laws of, the State of California and the United States of America. Any decision
rendered by the arbitrators will be final and binding and judgment thereon may
be entered in any court having jurisdiction or application may be made to such
court for an order of enforcement as the case may require. The parties intend
that this agreement to arbitrate be irrevocable. If arbitration is invoked in
accordance with the provisions of this Agreement, the prevailing party in the
arbitration will be entitled to recover from the other all costs, fees, and
expenses pertaining or attributable to such arbitration, including reasonable
attorneys' fees.
[remainder of page intentionally left blank]
<PAGE> 25
IN WITNESS WHEREOF, each of the parties to this Agreement has caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
AURORA ELECTRONICS, INC.,
a Delaware corporation
By:__________________________________________
Name: _____________________________________
Title: _____________________________________
AURORA ELECTRONICS GROUP, INC.,
a California corporation and wholly-owned
subsidiary of Aurora Electronics, Inc.
By:__________________________________________
Name: _____________________________________
Title: _____________________________________
MICROLINE, INC.,
a New Jersey corporation
By:__________________________________________
Name: _____________________________________
Title: _____________________________________
<PAGE> 26
STOCKHOLDERS
---------------------------------------------
Thomas M. Peck
---------------------------------------------
Anthony Duca
---------------------------------------------
David Peck
---------------------------------------------
Adrienne Peck
<PAGE> 27
Exhibits
Exhibit A Form of Letter of Transmittal
Exhibit B-1 Form of Employment Agreement for Thomas M. Peck
Exhibit B-2 Form of Employment Agreement for Anthony Duca
Exhibit C Legal Opinion of Counsel for MicroLine
Exhibit D Closing Certificate of MicroLine
Exhibit E Secretary Certificate of MicroLine
Exhibit F Legal Opinion of Counsel for the Aurora Companies
Disclosure Schedules
Schedule 2.01(b) Liabilities Reducing Purchase Price
Schedule 3.01 Stockholders
Schedule 3.03(c) Agreements to Issue MicroLine Stock
Schedule 3.05(a) Conflicts
Schedule 3.07(a) Financial Statements
Schedule 3.07(b) Liabilities
Schedule 3.08 Material Changes Since the Balance Sheet Date
Schedule 3.10(a) Employee Benefit Plans
Schedule 3.10(g) Employment Contracts
Schedule 3.11(b) Unexpired or Extended Statute of Limitation on Tax Return
Schedule 3.11(k) Basis in Assets; Net Operating Loss
Schedule 3.15 Insurance
Schedule 3.17 Intellectual Property
Schedule 3.18(a) Material Contracts
Schedule 3.18(b) Contracts/Permits Terminable Because of Merger Agreement
Schedule 3.20(a) Employees
Schedule 3.20(b) Employee Loans
Schedule 4.02(b) Agreement to Issue Aurora Stock
<PAGE> 28
EXHIBIT A
LETTER OF TRANSMITTAL
<PAGE> 29
LETTER OF TRANSMITTAL
To Surrender Shares of Common Stock
No Par Value Per Share
of
MICROLINE, INC.
for Shares of Aurora Electronics, Inc. Common Stock
Pursuant to the Agreement and Plan of Merger
Dated as of March 31, 1997
MAIL TO:
Aurora Electronics, Inc.
9477 Waples Street, Suite 150
San Diego, California 92121
Attention: Debbie Nicholls
For Information Call: (619) 555-1213
Delivery of this instrument to an address other than
as set forth above does not constitute a valid delivery.
PLEASE READ AND FOLLOW THE ACCOMPANYING INSTRUCTIONS
Ladies and Gentlemen:
In connection with the Agreement and Plan of Merger (the "Merger
Agreement") dated as of March 31, 1997 by and among Aurora Electronics, Inc., a
Delaware corporation ("Aurora"), Aurora Electronics Group, Inc., a California
corporation and wholly-owned subsidiary of Aurora, MicroLine, Inc., a New Jersey
corporation ("MicroLine"), and the stockholders of MicroLine named therein, and
in compliance with the instructions set forth below in this Letter of
Transmittal, the undersigned surrenders to you for cancellation and exchange for
______ shares of Aurora Common Stock, $0.03 par value ("Aurora Common Stock")
for each share of MicroLine Common Stock, no par value ("MicroLine Common
Stock"), the following shares of MicroLine Common Stock:
<TABLE>
- --------------------------------------------------------------------------------------
DESCRIPTION OF SHARES OF MICROLINE COMMON STOCK ENCLOSED
- --------------------------------------------------------------------------------------
MICROLINE STOCK CERTIFICATE(S)
NAME, ADDRESS, AND EMPLOYER IDENTIFICATION ENCLOSED (PLEASE LIST BELOW -
NUMBER OR SOCIAL SECURITY NUMBER OF, AND ATTACH ADDITIONAL SHEETS IF
NUMBER OF SHARES HELD BY, REGISTERED HOLDER(S) NECESSARY)
- --------------------------------------------------------------------------------------
Certificate Number of
Number(s) Shares
<S> <C> <C>
-----------------------------
-----------------------------
-----------------------------
-----------------------------
-----------------------------
Total Shares:
- --------------------------------------------------------------------------------------
</TABLE>
NOTE: DO NOT SIGN CERTIFICATE(S) UNLESS YOU ARE COMPLETING SPECIAL ISSUANCE OR
DELIVERY INSTRUCTIONS BELOW
<PAGE> 30
The undersigned represents and warrants that the undersigned has full
power and authority to surrender the certificate(s) for the shares of MicroLine
Common Stock surrendered herewith, free and clear of any liens, claims, charges
or encumbrances whatsoever.
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 3)
Fill in ONLY if Aurora Common Stock is to be delivered to someone other
than the undersigned or to the undersigned at an address other than that shown
above. Deliver certificate(s) and check(s) to:
Name___________________________________________________________________________
(Please Print: First, Middle & Last Name)
Address________________________________________________________________________
(Number and Street)
_______________________________________________________________________________
(City, State and Zip Code)
- --------------------------------------------------------------------------------
Certificate(s) must be endorsed and signatures guaranteed if the new
certificates representing shares of Aurora Common Stock are to be mailed to any
person(s) other than the person(s) signing this Letter of Transmittal.
You are instructed to issue to the undersigned as instructed below a
new certificate or certificates representing the number of whole shares of
Aurora Common Stock to which I am entitled.
Aurora hereby reserves the absolute right to reject any and all
certificates representing MicroLine Common Stock or Letters of Transmittal not
in proper form or to waive any irregularities or defects in the surrender of any
certificates representing MicroLine Common Stock delivered in connection
herewith, and Aurora's interpretation of the terms and conditions of the Merger
Agreement and this Letter of Transmittal with respect to such irregularities and
defects shall be final and binding. All authority herein conferred shall survive
the death or incapacity of the undersigned and all obligations of the
undersigned hereunder shall be binding on the heirs, personal representatives,
successors or assigns of the undersigned.
PLEASE SIGN HERE
X Dated: , 199
- --------------------------------------------------------------------------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s). If signing is by a trustee, executor, administrator, guardian,
officer of a corporation, attorney-in-fact or other person acting in a fiduciary
or representative capacity, please set forth full title and endorse proper
evidence of authority to so act.) (See Instruction 2)
- --------------------------------------------------------------------------------
(Area Code and Telephone Number)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
<PAGE> 31
INSTRUCTIONS FOR SURRENDERING SHARES OF MICROLINE
COMMON STOCK FOR SHARES OF AURORA COMMON STOCK
1. Letter of Transmittal. This Letter of Transmittal must be properly
completed, duly executed, dated, and delivered or mailed to Aurora at the
appropriate address set forth on the first page of this Letter of Transmittal
together with (a) the MicroLine Common Stock certificate(s) you are surrendering
in order to exchange whole shares of MicroLine Common Stock for shares of Aurora
Common Stock, on the basis of _____ shares of Aurora Common Stock for each share
of MicroLine Common Stock (the "Payment") and (b) any other required documents.
The method of delivery is at the option and the risk of the holder. MicroLine
Common Stock may be surrendered in person or by mail. IF SENT BY MAIL,
REGISTERED MAIL PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, IS RECOMMENDED.
UNTIL A SHAREHOLDER HAS SURRENDERED HIS OR HER MICROLINE COMMON STOCK
CERTIFICATE(S), OR A SATISFACTORY BOND, AFFIDAVIT, AND OTHER DOCUMENTATION
RELATING TO THE LOSS OF THE MICROLINE COMMON STOCK CERTIFICATE(S) TO AURORA, HE
OR SHE WILL NOT RECEIVE THE PAYMENT. NO INTEREST WILL BE PAYABLE WITH RESPECT TO
THE PAYMENT ON SURRENDER OF MICROLINE COMMON STOCK CERTIFICATE(S).
2. Signatures. The signature (or signatures, in the case of
certificates owned by two or more joint holders) on this Letter of Transmittal
should correspond exactly with the name(s) as written on the face of the
MicroLine Common Stock certificate(s) surrendered.
If this Letter of Transmittal is signed by a trustee, executor,
administrator, guardian, officer of a corporation, attorney-in-fact or other
person acting in a fiduciary or representative capacity, the person signing must
give his or her full title in such capacity and enclose appropriate evidence or
his or her authority to so act. If additional documents are required by Aurora,
you will be so advised by letter.
3. Special Issuance and Delivery Instructions. Indicate in Special
Delivery Instructions the name and address to which the new certificate is to be
sent if they are to be sent (i) to someone other than the person(s) signing this
Letter of Transmittal, or (ii) to the person(s) signing this Letter of
Transmittal at an address other than that appearing on the label on the face of
this Letter of Transmittal.
4. Miscellaneous. Aurora is under no duty to give notification of
defects in any Letter of Transmittal or facsimile or in any other required
documents and shall not incur any liability for failure to give such
notification. Any and all Letters of Transmittal or facsimiles (including any
other required documents) not in proper form are subject to rejection. The terms
and conditions of the Merger Agreement are incorporated herein by reference and
are deemed to form part of the terms and conditions of this Letter of
Transmittal.
<PAGE> 32
EXHIBIT B-1 AND EXHIBIT B-2
EMPLOYMENT AGREEMENTS FOR THOMAS M. PECK AND ANTHONY DUCA
<PAGE> 33
EXHIBIT C
LEGAL OPINION OF COUNSEL FOR MICROLINE, INC.
<PAGE> 34
EXHIBIT D-1 AND EXHIBIT D-2
CLOSING CERTIFICATE OF MICROLINE, INC. AND THE STOCKHOLDERS
<PAGE> 35
MICROLINE, INC.
CLOSING CERTIFICATE
The undersigned hereby certifies on behalf of MicroLine, Inc., a New
Jersey corporation (the "Company"), pursuant to Article VII of the Agreement and
Plan of Merger, dated as of March 31, 1997 (the "Merger Agreement"), by and
between Aurora Electronics, Inc., a Delaware corporation ("Aurora"), Aurora
Electronics Group, Inc., a California corporation and wholly-owned subsidiary of
Aurora, the Company, and the stockholders of the Company named therein, that:
1. All representations and warranties of the Company contained in the
Merger Agreement are true and correct at and as of the Closing with the same
effect as though such representations and warranties were made at and as of the
Closing.
2. The Company has performed and complied with all the covenants and
agreements and satisfied the conditions required by the Merger Agreement to be
performed, complied with, or satisfied by them at or prior to the Closing.
All capitalized terms not otherwise defined have the meanings ascribed
to them in the Merger Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of March 31, 1997.
MICROLINE, INC.
By: ___________________________
Its: ___________________________
<PAGE> 36
CLOSING CERTIFICATE
OF THE STOCKHOLDERS OF
MICROLINE, INC.
The undersigned hereby certify, pursuant to Article VII of the
Agreement and Plan of Merger, dated as of March 31, 1997 (the "Merger
Agreement"), by and between Aurora Electronics, Inc., a Delaware corporation
("Aurora"), Aurora Electronics Group, Inc., a California corporation and
wholly-owned subsidiary of Aurora, MicroLine, Inc., a New Jersey corporation
(the "Company"), and the stockholders of the Company named therein, that:
1. All representations and warranties of the Stockholders contained in
the Merger Agreement are true and correct at and as of the Closing with the same
effect as though such representations and warranties were made at and as of the
Closing.
2. The Stockholders have performed and complied with all the covenants
and agreements and satisfied the conditions required by the Merger Agreement to
be performed, complied with, or satisfied by them at or prior to the Closing.
All capitalized terms not otherwise defined have the meanings ascribed
to them in the Merger Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of March 31, 1997.
STOCKHOLDERS:
------------------------------
Thomas M. Peck
------------------------------
Anthony Duca
------------------------------
David Peck
------------------------------
Adrienne Peck
<PAGE> 37
EXHIBIT E
CERTIFICATE OF SECRETARY OF MICROLINE, INC.
<PAGE> 38
CERTIFICATE OF SECRETARY OF
MICROLINE, INC.
The undersigned, being the duly elected and qualified Secretary of
MicroLine, Inc., a New Jersey corporation ("MicroLine"), hereby certifies, on
behalf of MicroLine, pursuant to Article VII of the Agreement and Plan of
Merger, dated as of March 31, 1997 (the "Merger Agreement"), by and between
Aurora Electronics, Inc., a Delaware corporation ("Aurora"), Aurora Electronics
Group, Inc., a California corporation and wholly-owned subsidiary of Aurora,
MicroLine, and the stockholders of MicroLine named therein, that:
1. Attached as Exhibit A are true, correct, and complete
copies of the articled of incorporation and bylaws of MicroLine, and
such articles and bylaws are in full force and effect on the date of
this Certificate. No action has been taken for the purpose of amending
or modifying any of such articles and bylaws.
2. Attached as Exhibit B are true, correct, and complete
copies of resolutions duly adopted by unanimous written consent of the
Board of Directors of MicroLine relating to the Merger Agreement and
the transactions contemplated thereby. Such resolutions are the only
resolutions relating to the Merger Agreement and they have not been
amended, modified, or rescinded since their adoption and are still in
full force and effect as of the date of this Certificate.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Secretary on behalf of MicroLine as of March 31, 1997.
MICROLINE, INC.
By: ___________________________________
Name: _________________________________
<PAGE> 39
EXHIBIT F
LEGAL OPINION OF COUNSEL FOR AURORA ELECTRONICS, INC.
AND AURORA ELECTRONICS GROUP, INC.
<PAGE> 1
EXHIBIT 5.1
June 26, 1997
214/939-5500
Aurora Electronics, Inc.
9477 Waples Drive, Suite 150
San Diego, California 92121
Ladies and Gentlemen:
We have acted as counsel to Aurora Electronics, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of 235,116 shares
(the "Shares") of the Company's common stock, par value $.03 per share (the
"Common Stock"), acquired pursuant to that certain Agreement and Plan of Merger
dated March 31, 1997 by and among Aurora Electronics Group, Inc., a Delaware
corporation and wholly-owned subsidiary of the Company, MicroLine, Inc., a New
Jersey corporation, and the stockholders of MicroLine, Inc. as described in the
Registration Statement of the Company on Form S-3 (the "Registration Statement")
filed with the Securities and Exchange Commission.
In rendering this opinion, we have examined and relied upon executed
originals, counterparts or copies of such documents, records, and certificates
(including certificates of public officials and officers of the Company) as we
considered necessary or appropriate for enabling us to express the opinions set
forth herein. In all such examinations, we have assumed the authenticity and
completeness of all documents submitted to us as originals and the conformity to
originals and completeness of all documents submitted to us as photostatic,
conformed, notarized, or certified copies.
Based on the foregoing, we are of the opinion that the Shares of Common
Stock have been duly authorized, validly issued, fully paid, and nonassessable.
This opinion may be filed as an exhibit to the Registration Statement.
We also consent to the reference to this firm as having passed on the validity
of such shares of Common Stock under the caption "Legal Matters" in the
prospectus that constitutes a part of the Registration Statement. In giving this
consent, we do not admit that we are included in the category of persons whose
consent is required under Section 7 of the Act or the rules and regulations of
the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
HUGHES & LUCE, L.L.P.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1996, as amended, and any
subsequent reports filed pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 since the Form 10-K, into the Company's Registration
Statement on Form S-3.
Orange County, California
June 26, 1997
ARTHUR ANDERSEN LLP
