<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1999.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to .
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Commission File Number: 016441
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CODE - ALARM, INC.
------------------
(Exact name of registrant as specified in its charter)
MICHIGAN
--------
(State or other jurisdiction of
incorporation or organization)
38-2334698
----------
(I.R.S. Employer
Identification No.)
950 EAST WHITCOMB, MADISON HEIGHTS, MICHIGAN 48071
--------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): 248-583-9620
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of the registrants common stock, without
par value, as of May 28, 1999 is 2,320,861.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. - Financial Information
Condensed Consolidated Balance Sheets
As of March 31, 1999 (Unaudited) and December 31, 1998 3
Condensed Consolidated Statements of Operations (Unaudited) -
Three months ended March 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Three months ended March 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. - Other Information 8
</TABLE>
2
<PAGE> 3
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CODE-ALARM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31,
1999 December 31,
ASSETS (Unaudited) 1998
--------------- ----------------
<S> <C> <C>
Cash $ 753 $ 62
Accounts receivable, less allowance of $555 and $486 as of
March 31, 1999 and December 31, 1998, respectively 4,514 3,793
Inventories 2,575 2,727
Other 340 474
-------- --------
Total current assets 8,182 7,056
Property and equipment, net of accumulated depreciation 1,817 1,908
Other assets, net of amortization:
Goodwill 287 293
Other intangibles 92 105
Financing costs 2,552 2,802
Other 181 187
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Total assets $ 13,111 $ 12,351
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Accounts payable $ 3,806 $ 4,176
Accrued expenses 2,224 1,775
Current portion of long-term debt 416 451
-------- --------
Total current liabilities 6,446 6,402
Long-term debt 20,084 18,006
Commitments and contingencies (Note 4)
Series A 10% redeemable preferred stock 7,351 7,351
Shareholders' equity (deficit):
Preferred stock
Series B redeemable preferred stock
Common stock 12,213 12,213
Other equity 7,179 7,179
Accumulated deficit (40,162) (38,800)
-------- --------
Total shareholders' equity (deficit) (20,770) (19,408)
-------- --------
Total liabilities and shareholders' equity (deficit) $ 13,111 $ 12,351
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
CODE-ALARM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales $ 8,362 $13,826
Cost of sales 5,429 8,816
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Gross profit 2,933 5,010
Operating expenses:
Sales and marketing 1,809 1,836
Engineering 465 396
General and administrative 1,028 1,496
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3,302 3,728
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Income (loss) from operations (369) 1,282
Other expense:
Interest expense 424 347
Amortization of financing costs 385 206
Other 79
------- -------
809 632
------- -------
Income (loss) before income taxes (1,178) 650
Income taxes
------- -------
Net income (loss) (1,178) 650
Preferred stock dividends 184 175
------- -------
Net income (loss) applicable to common stock $(1,362) $ 475
======= =======
Basic earnings (loss) per share $ (0.59) $ 0.20
======= =======
Weighted average common shares outstanding 2,321 2,321
======= =======
Diluted earnings (loss) per share $ (0.59) $ 0.14
======= =======
Weighted average common and dilutive shares outstanding 2,321 3,493
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
CODE-ALARM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities $(1,143) $ 777
Cash flows from investing activities:
Capital expenditures (74) (251)
Cash flows from financing activities:
Net advances (payments) on credit agreements 2,078 (46)
Payments on term notes and capitalized lease obligations (35) (476)
Financing issue costs (135)
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Net increase in cash 691 480
Cash, beginning of period 62 36
------- -------
Cash, end of period $ 753 $ 516
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the three month period for interest $ 245 $ 256
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
CODE-ALARM, INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited condensed consolidated financial statements have been
prepared on the same basis as the audited condensed consolidated financial
statements and, in the opinion of management, reflect all adjustments
(consisting of normal recurring adjustments) necessary for a fair
presentation for each of the periods presented. The results of operations
for the interim periods are not necessarily indicative of results to be
expected for the fiscal years.
The accompanying condensed consolidated financial statements and related
footnotes have been prepared in accordance with instructions under Rule
10-01 of Regulation S-X and do not contain all information for complete
financial statements. For further information, refer to the consolidated
financial statements and related footnotes for the year ended December 31,
1998 included in the Company's Annual Report on Form 10-K.
On January 1, 1998, the Company adopted Financial Accounting Standards
Board Statement No. 130, "Reporting Comprehensive Income." During the
interim periods presented, the Company had no elements of comprehensive
income, other than net loss. Accordingly, a Statement of Comprehensive
Income has not been provided as comprehensive income (loss) equals net
income (loss) for the interim periods presented.
2. The financial statements include the accounts of the Company and its wholly
owned subsidiaries. All significant intercompany accounts and transactions
have been eliminated.
3. Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, 1999 December 31
(Unaudited) 1998
-------------- --------------
(In thousands)
<S> <C> <C>
Raw materials $1,980 $2,234
Work in process 394 310
Finished goods 201 183
------ ------
$2,575 $2,727
====== ======
</TABLE>
4. In 1995, the Company was named as a defendant in an action filed in August
1990 in the United States District Court for Puerto Rico to enforce a
patent infringement default judgment rendered against certain predecessors
in title to assets now owned by the Company which were purchased by the
Company from a bank in Illinois in January 1990. The amount of the judgment
was $19.4 million, which with accumulated interest had reached
approximately $30 million. The Puerto Rico court dismissed the action and
held that any action to collect from the Company and its subsidiary as
successors in interest to the judgment debtor must be raised before the
Illinois court. On March 20, 1997, the case was refiled by the judgment
creditors in Illinois. The bank is providing for up to 50% of the defense
of the Company subject to reservation of rights against the Company. The
Company, through its counsel, filed a Motion to Dismiss, which resulted in
a limitation of the claims the plaintiffs could pursue. After the close of
discovery, the Company filed a Motion for Summary Judgment, on which the
court has not yet ruled. While the Company believes that it has meritorious
defenses to the claims asserted in this lawsuit, the ultimate outcome of
this lawsuit cannot be determined at this time, and the Company is unable
to estimate the range of possible loss, if any.
In March 1999, the Company was named as a defendant in a motion to reopen a
case enforcing terms of a settlement agreement, granting partial summary
judgment. The motion alleged that the plaintiff is entitled to at least
$1.3 million, and asked for a partial judgment in that amount, attorney
fees and costs, and the production of certain documents. The Company
intends to vigorously defend the motion, but there can be no assurance that
the Company will prevail or of the amount of damages to which it may be
subject if it does not prevail.
Various other legal actions and claims are pending or could be asserted
against the Company. Litigation is subject to many uncertainties; the
outcome of individual litigation matters is not predictable with assurance,
and it is reasonably possible that some of these matters may be decided
unfavorably to the Company. Based on information currently available and
established reserves, it is the opinion of management that the ultimate
liability, if any, with respect to these matters will not materially affect
the financial position, and the results of operations of the Company.
5. As reported in the Company's 1998 Annual Report on Form 10-K, on March 29,
1999, the Company entered into agreements amending the warrants previously
issued by the Company to the holders of its Series A-1 Preferred Stock and
senior lender. The agreements provide, among other things, for a reduction
in exercise price of certain warrants from a $1.04 and $1.88 to $.52 per
share. The Company is currently reviewing the appropriate valuation and
accounting treatment of the reduction in warrant exercise price, and
expects to determine and record any necessary amount by the end of the
quarter ending June 30, 1999.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
The Company's sales were down $5.5 million, or 39.5%, to $8.4 million for
the three months ended March 31, 1999, as compared to $13.8 million for the
three months ended March 31, 1998. Quarter to quarter sales to
international distributors in several of the Company's key overseas
markets, GM dealer sales, port-of-entry, and expediter sales all decreased,
contributing to the decline. The Company anticipates that near term sales
will approximate the first quarter 1999 levels.
For the three months ended March 31, 1999, consolidated gross profit
decreased $2.1 million, or 41.5%, to $2.9 million as compared to $5 million
for the three month period ended March 31, 1998. Gross profit as a
percentage of consolidated net sales decreased to 35.1% for the period
ended March 31, 1999, from 36.2% for the comparable period in 1998.
Although lower volumes had an adverse impact on the gross profit
percentage, the Company was able to partially offset the gross profit
percent decrease with reduced product costs.
Consolidated operating expenses for the first three months of 1999
decreased $426,000, or 11.4%, to $3.3 million as compared to $3.7 million
for the first three months of 1998. The decrease was due to lower general
and administrative expenses, resulting from cost reduction efforts and
lower reserves for trade receivable allowances.
As a result, the Company reported an operating loss for the three months
ended March 31, 1999, of $369,000 as compared to operating income of
$1,282,000 for the comparable period in 1998.
Interest expense was up 22.2% for the three months ended March 31, 1999, as
compared to the three month period ended March 31, 1998. The increase was
primarily due to additional borrowings, offset by lower average interest
rates during the current period.
The Company has determined that any income tax benefit, and related asset,
resulting from current and prior period operating losses is not currently
recognizable, and therefore no related amounts have been recorded for the
three month periods ended March 31, 1999 and 1998.
As a result of the foregoing, the Company recorded a net loss for the three
months ended March 31, 1999, of $1,178,000, compared to net income of
$650,000 for the three months ended March 31, 1998.
Liquidity and Capital Resources
The Company's consolidated working capital was $1,736,000 at March 31, 1999
as compared to $654,000 at December 31, 1998. In addition, the current
ratio (current assets divided by current liabilities) was 1.27 to 1 at
March 31, 1999, as compared to 1.10 to 1 at December 31, 1998. The increase
in working capital and current ratio as of March 31, 1999, as compared to
December 31, 1998, was due to proceeds received on March 31, 1999, from the
new credit agreement and higher end of period sales.
The Company's net loss for the quarter ended March 31, 1999, and increased
working capital requirements were financed with additional borrowings. As
of March 31, 1999, the Company had outstanding $8.1 million on its $12
million revolving credit line, and $1 million on the $1.5 million credit
agreement. As of March 31, 1999, the Company had $753,000 in cash on hand,
and $846,000 available for borrowing under these facilities.
Year 2000 Readiness Disclosure
The "Year 2000 issue" is generally used to describe various problems that
may result from the improper processing of dates related to the year 2000
and beyond by computers and other types of equipment, including embedded
technology in production machinery and equipment, due to some systems
storing the year as two digits versus four digits. This generally means
that affected computer hardware and software will not properly distinguish
dates in 2000 from dates in 1900.
See the Company's Annual Report on Form 10-K as filed on May 20, 1999, for
a current discussion on this matter.
7
<PAGE> 8
PART II. - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit
Number Description
10.1.9 Amendment No. 5 and Waiver No. 8 to Credit Agreement dated as of March
29, 1999, by and among the Company, the other Credit Parties from time
to time party to the Credit Agreement, General Electric Capital
Corporation ("GECC") in its capacity and the other financial
institutions from time to time party to the Credit Agreement (the
"Lenders"), and GECC in its separate capacity as agent for the Lenders.
10.42 Credit Agreement dated as of March 29, 1999 among the Company, Pegasus
Partners, L.P., Pegasus Related Partners, L.P., and General Electric
Capital Corporation.
10.43 Amendment Agreement dated as of March 29, 1999 between the Company and
General Electric Capital Corporation.
10.44 Amendment Agreement dated as of March 29, 1999 among the Company and
Pegasus Partners, L.P. and Pegasus Related Partners, L.P.
11 Statement regarding Computation of Per Share Earnings.
27 Financial Data Schedule.
(b) During the quarter ended March 31, 1999, there were no reports on Form
8-K filed.
8
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CODE-ALARM, INC.
----------------
(Registrant)
Date: May 28, 1999 /s/ Rand W. Mueller
------------ --------------------
Rand W. Mueller
President, Chief
Executive Officer
And Director
Date: May 28, 1999 /s/ Craig S. Camalo
------------ --------------------
Craig S. Camalo
Vice President of
Finance, Chief
Financial Officer
9
<PAGE> 10
EXHIBIT INDEX
10.1.9 Amendment No. 5 and Waiver No. 8 to Credit Agreement dated as of March
29, 1999, by and among the Company, the other Credit Parties from time
to time party to the Credit Agreement, General Electric Capital
Corporation ("GECC") in its capacity and the other financial
institutions from time to time party to the Credit Agreement (the
"Lenders"), and GECC in its separate capacity as agent for the Lenders.
10.42 Credit Agreement dated as of March 29, 1999 among the Company, Pegasus
Partners, L.P., Pegasus Related Partners, L.P., and General Electric
Capital Corporation.
10.43 Amendment Agreement dated as of March 29, 1999 between the Company and
General Electric Capital Corporation.
10.44 Amendment Agreement dated as of March 29, 1999 among the Company and
Pegasus Partners, L.P. and Pegasus Related Partners, L.P.
11 Statement regarding Computation of Per Share Earnings.
27 Financial Data Schedule.
<PAGE> 1
EXHIBIT 10.1.9
EXECUTION COPY
AMENDMENT NO. 5 AND WAIVER NO. 8
TO
CREDIT AGREEMENT
THIS AMENDMENT NO. 5 AND WAIVER NO. 8 TO CREDIT AGREEMENT
("Agreement") is being executed and delivered as of March 29, 1999 by and among
Code-Alarm, Inc., a Michigan corporation (the "Borrower"), the other "Credit
Parties" from time to time party to the Credit Agreement referred to below
(together with the Borrower, collectively, the "Credit Parties"), General
Electric Capital Corporation, in its individual capacity as a "Lender" and the
other financial institutions from time to time party to such Credit Agreement
(collectively, the "Lenders", and each individually, a "Lender"), and General
Electric Capital Corporation, in its separate capacity as the "Agent" for the
Lenders (the "Agent"). Undefined capitalized terms which are used herein shall
have the meanings ascribed to such terms in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the other Credit Parties, the Lenders
and the Agent are parties to that certain Credit Agreement dated as of October
24, 1997, as heretofore amended (the "Credit Agreement"), pursuant to which the
Lenders have agreed to provide, subject to the terms and conditions contained
therein, certain loans and other financial accommodations to the Borrower;
WHEREAS, the Borrower has requested that the Lenders permit it
to enter into a subordinated, multiple-draw term loan facility of up to
$1,500,000 with the Pegasus Funds and General Electric Capital Corporation to
assist in financing the Borrower's working capital requirements (the "Pegasus
Term Facility");
WHEREAS, the Borrower has failed to comply with the Minimum
EBITDA covenant set forth in paragraph (b) of Annex G of the Credit Agreement
with respect to the period ended November 30, 1998 (hereinafter the "Covenant
Default");
WHEREAS, the Borrower has failed to comply with the monthly
financial reporting covenants set forth in paragraph (a) of Annex E of the
Credit Agreement, and paragraph (c) of Annex F, with respect to its Fiscal Month
of January, 1999 (hereinafter, collectively, the "Reporting Defaults");
WHEREAS, the Borrower has requested that the Lenders waive the
Covenant Default and Reporting Defaults (collectively, the "Existing Defaults"),
and modify the financial covenants set forth in Annex G;
WHEREAS, subject to the terms and conditions of this
Agreement, the Lenders are willing to (i) amend the Credit Agreement to permit
the Borrower to obtain the Pegasus Term
<PAGE> 2
Facility, (ii) waive the Existing Defaults, and (iii) amend the financial
covenants set forth in Annex G;
NOW, THEREFORE, in consideration of the foregoing premises,
the terms and conditions stated herein and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the Borrower, the
Lenders and the Agent, such parties hereby agree as follows:
1. Amendment. Subject to Paragraph 3 of this Agreement, and
effective as of the date of this Agreement, the Credit Agreement is hereby
amended as follows:
(a) Section 1.9 is amended to add the following provision to
the end of such section:
(d) As additional compensation for the Lenders, on
September 1, 1999, Borrower shall pay to the Agent for the ratable benefit
of the Lenders an administrative fee in the amount of $50,000, which fee
shall be fully earned and nonrefundable upon the effectiveness of that
certain Amendment No. 5 and Waiver No. 8 to this Agreement.
(b) Section 6.3 is amended to delete the word "and" at the end
of clause (vii) of such section and to add the following provision immediately
following clause (viii) of such section:
and (ix) Subordinated Indebtedness in an aggregate principal amount not to
exceed $1,500,000 evidenced by and arising under the Pegasus Term Loan
Agreement.
(c) Section 6.4 is amended to add the following clause
immediately following the phrase "with respect to Affiliates" in the first
sentence of such section:
and except for the transactions contemplated by the Pegasus Loan Agreement
(d) Section 6.14 is amended to add the following phrase
immediately following the phrase "scheduled payments of" in clause (f) of such
section:
principal and
(e) Section 6.14 is further amended to add the following
phrase at the beginning of existing clause (ii) of such section:
except with respect to payments made in accordance with the Pegasus Term
Loan Agreement,
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<PAGE> 3
(f) Section 6.18 is amended to delete the phrase "or any
Subordinated Debt" and to replace such phrase with the following phrase:
or the Pegasus Term Loan Agreement or any other Subordinated Debt
(g) Section 8.1(d) is amended to add the following phrase to
such section immediately following the parenthetical therein:
, or the Pegasus Assignment Agreement (in the case of either Pegasus Fund),
(h) Annex A is amended to insert the following provision to
the definition of "Capital Expenditures" immediately following the existing
phrase "fixed assets or improvements" set forth therein:
, or intellectual property consisting of patents, trademarks, copyrights,
service marks or applications or licenses with respect thereto (in each case
other than such property developed by such Person)
(i) Annex A is further amended to insert the following phrase
immediately after the comma in clause (a) of the definition of "Indebtedness":
or for the deferred payment of a litigation (or threatened litigation)
settlement,
(j) Annex A is further amended to add the following
definitions to such annex in the appropriate alphabetical locations:
"Pegasus Assignment Agreement" means that certain
Assignment and Acceptance dated as of March 29, 1999 among the Pegasus Funds
and GE Capital with respect to the Pegasus Funds' purchase of GE Capital's
interests in the Pegasus Term Loan Agreement and related Indebtedness.
"Pegasus Term Loan Agreement" means that certain Credit
Agreement dated as of March 29, 1999 among Borrower, the Pegasus Funds and
GE Capital, without giving effect to any amendments or modifications thereto
which have not been approved in writing by the Requisite Lenders.
(k) Annex A is further amended to delete in their entirety
each of the definitions of the terms "EBITDA", "Minimum EBITDA Period" and "Net
Worth".
(l) Annex A is further amended to add the following phrase to
the definition of "Obligations" at the end of the first sentence thereof:
(including, without limitation, the Pegasus Term Loan Agreement).
-3-
<PAGE> 4
(m) Annex E is amended to delete in its entirety paragraph (n)
thereof and to replace such paragraph with the following:
[intentionally omitted].
(n) Annex F is amended to delete paragraph (a)(2) in its
entirety and to replace such paragraph with the following paragraph:
(2) To Agent, on each Business Day, a Borrowing Base
Certificate providing information as of the immediately preceding Business Day,
in each case accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion.
(o) Annex G is amended to delete paragraph (b) thereof in its
entirety and to replace such paragraph with the following:
[intentionally omitted].
2. Waiver. Subject to Paragraph 3 of this Agreement and
effective as of the date of this Agreement, each of the Lenders and the Agent
hereby waive the Existing Defaults.
3. Effectiveness of this Agreement; Conditions Precedent. The
provisions of Paragraphs 1 and 2 shall be deemed to have become effective as of
the date of this Agreement, but such effectiveness shall be expressly
conditioned upon the Agent's receipt of each of the following:
(a) an originally-executed counterpart of this Agreement
executed by a duly authorized officer of the Borrower, each such other Credit
Party, and each of the Lenders;
(b) originally-executed counterparts to a Reaffirmation of
Guaranties duly executed by the Pegasus Funds in substantially the form attached
hereto;
(c) originally-executed modification agreements with respect
to the Series A Warrants and GECC Warrants respectively in the forms attached
hereto as Exhibits A-1 and A-2.
(d) copies or originals of all fully-executed documentation
with respect to the Pegasus Term Facility, including, without limitation, the
"Pegasus Term Loan Agreement" (as defined in Paragraph 1 hereof) and all
promissory notes executed in connection therewith, in each case in form and
substance acceptable to the Agent, together with evidence satisfactory to the
Agent that and all conditions precedent to the effectiveness of the Pegasus Term
Loan Agreement and to the making of an initial advance thereunder have been
satisfied;
(e) evidence satisfactory to the Agent that the Borrower shall
have requested the initial advance under the Pegasus Term Loan Agreement, which
request shall be in an amount at
-4-
<PAGE> 5
least equal to the then outstanding principal balance of all Overadvances and
shall be accompanied by instructions from the Borrower to apply a portion of
such advance to the repayment in full of such Overadvances as provided in
Paragraph 4(d) hereof;
(f) an assignment agreement in the form attached hereto as
Exhibit B, executed and delivered by the Pegasus Funds; and
(g) a copy, certified as true and correct by an officer of
Borrower, of the fully-executed "TSI Settlement Agreement" and "TSI Option"
referred to and defined in that certain Amendment No. 4, Waiver No. 7 and
Consent No. 2 to Credit Agreement and Other Loan Documents dated as of October
1, 1998 among the parties hereto.
4. Representations, Warranties and Covenants. (a) Each of the
Borrower and the other Credit Parties hereby represents and warrants that this
Agreement constitutes the legal, valid and binding obligation of the Borrower
and such other Credit Party enforceable against the Borrower and each other
Credit Party in accordance with its terms.
(b) Each of the Borrower and the other Credit Parties hereby
represents and warrants that its execution and delivery of this Agreement, and
its performance hereafter of the Credit Agreement as modified by this Agreement,
have been duly authorized by all necessary corporate action, do not violate any
provision of its articles of incorporation, bylaws or other charter documents,
will not violate any law, regulation, court order or writ applicable to it, will
not require the approval or consent of any governmental agency, and (except as
have been previously obtained) do not require the approval or consent of any
third party under the terms of any contract or agreement to which the Borrower,
any other Credit Party, Parent or any Subsidiary of the Borrower or any other
Credit Party is bound.
(c) The Borrower hereby represents and warrants that, as of
the date hereof, (i) no Default or Event of Default (other than the Existing
Defaults) has occurred and is continuing or will have occurred and be
continuing, and (ii) all of the representations and warranties of the Borrower
and each other Credit Party contained in the Credit Agreement (other than
representations and warranties which, in accordance with their express terms,
are made only as of a specified date) are, and will be, true and correct.
(d) The Borrower hereby agrees to repay, and the Agent hereby
demands the repayment of, all outstanding Overadvances, on the first Business
Day on which the Pegasus Term Loan Agreement shall have become effective and all
conditions precedent to the initial advance shall have been satisfied.
5. Reference to and Effect on Credit Agreement; Overadvances.
(a) The Credit Agreement shall remain in full force and effect and is hereby
ratified and confirmed. Except as is expressly set forth in Paragraph 2 of this
Agreement, the execution, delivery and effectiveness of this Agreement shall not
operate as a waiver of any right, power or remedy of the Agent or any Lender
with respect to any Default or Event of Default under the Credit Agreement,
-5-
<PAGE> 6
all of which the Agent and the Lenders hereby expressly reserve. The Borrower,
each other Credit Party, the Lenders and the Agent agree and acknowledge that
this Agreement constitutes a "Loan Document" under and as defined in the Credit
Agreement.
(b) Without limiting the provisions of the immediately
preceding subparagraph, the Borrower confirms its understanding that all
Overadvances heretofore and hereafter made by the Agent to or for the benefit of
the Borrower were and continue to be discretionary in nature, and payable on
demand, in each case as provided in Section 1.1(a)(iii) of the Credit Agreement.
The Borrower hereby acknowledges that the basis upon which the Agent was willing
prior to the date hereof to make Overadvances to the Borrower may no longer
exist. The Agent and the Lenders hereby reserve all rights under the Credit
Agreement to (a) refuse making any additional Overadvances, regardless of the
amount requested and regardless of the circumstances, (b) demand immediate
repayment of any outstanding Overadvances whether now or hereafter outstanding
and regardless of whether or not there shall then exist any Default or Event of
Default and (c) require the Borrower to pay interest on any Overadvances
hereafter made at the Default Rate regardless of whether such rate was assessed
with respect to previous Overadvances made by the Agent.
6. Security for GE Capital Loans Under the Pegasus Term Loan
Agreement. The Borrower hereby agrees and acknowledges that, notwithstanding
anything in any Loan Document to the contrary, for so long as GE Capital is a
lender under the Pegasus Term Loan Agreement or is otherwise owed loans or other
amounts thereunder, all such amounts shall constitute Obligations secured by
Liens in favor of the Agent, for the benefit of GE Capital, in all of the
Collateral pursuant to the Collateral Documents. At such time as GE Capital no
longer is a lender under the Pegasus Term Loan Agreement and is otherwise not
owed loans or other amounts thereunder, such loans and other amounts (if still
outstanding) shall no longer constitute Obligations or be secured by the
Collateral. In any event, at no time shall any loans or other amounts owing to
the Pegasus Funds be secured by any Collateral or other property of the Credit
Parties, as provided by Section 6.7 of the Credit Agreement.
7. Reaffirmation. Each of the Borrower and the other Credit
Parties hereby (a) ratifies and reaffirms all of its payment and performance
obligations, contingent or otherwise, under each Loan Document to which it is a
party, (b) agrees and acknowledges that such ratification and reaffirmation is
not a condition to the continued effectiveness of such Loan Documents and (c)
agrees that neither such ratification and reaffirmation, nor the Agent's and the
Lenders' solicitation of such ratification and reaffirmation, constitutes a
course of dealing giving rise to any obligation or condition requiring a
ratification or reaffirmation of the Borrower's or the other Credit Parties'
obligations under the Loan Documents with respect to any subsequent
modifications to the Credit Agreement or other Loan Documents.
8. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws and decisions of the State of Illinois
(including S.H.A. 735 ILCS 105/5-1, et. seq., but without giving effect to any
other conflicts of law provisions).
-6-
<PAGE> 7
9. Agent's Expenses. The Borrower hereby agrees to promptly
reimburse the Agent for all of the reasonable out-of-pocket expenses, including,
without limitation, attorneys' and paralegals' fees, it has heretofore or
hereafter incurred or incurs in connection with the preparation, negotiation and
execution of this Agreement.
10. Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original and all of which together shall
constitute one and the same agreement among the parties.
* * * *
-7-
<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the day and year first above written.
CODE-ALARM, INC.
By:
------------------------------------------
Name: Craig S. Camalo
------------------------------------
Title: Vice President
------------------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent for the Lenders and
Agent For the Term Lenders, and as Lender and
Term Lender
By:
------------------------------------------
Name:
------------------------------------
Title: Duly Authorized Signatory
------------------------------------
TESSCO GROUP, INC.
By:
------------------------------------------
Name: Craig S. Camalo
------------------------------------
Title: Secretary
------------------------------------
CHAPMAN SECURITY SYSTEMS, INC.
By:
------------------------------------------
Name: Craig S. Camalo
------------------------------------
Title: Secretary
------------------------------------
-8-
<PAGE> 9
INTERCEPT SYSTEMS, INC.
By:
------------------------------------------
Name: Craig S. Camalo
------------------------------------
Title: Secretary
------------------------------------
ANES, INC.
By:
------------------------------------------
Name: Craig S. Camalo
------------------------------------
Title: Secretary
------------------------------------
-9-
<PAGE> 10
REAFFIRMATION OF GUARANTIES
Reference is hereby made to (i) that certain Limited
Supplemental Guaranty dated as of October 24, 1997 (the "Supplemental Guaranty")
among Pegasus Partners, L.P., a Delaware limited partnership, and Pegasus
Related Partners, L.P., a Delaware limited partnership (collectively, the
"Guarantors"), and General Electric Capital Corporation, a New York corporation,
individually and as agent (the "Agent"), (ii) that certain Limited Litigation
Guaranty dated as of October 24, 1997 (the "Litigation Guaranty" and, together
with the Supplemental Guaranty, collectively, the "Guaranties") among the
Guarantors and the Agent, (iii) that certain Credit Agreement dated as of
October 24, 1997, as heretofore amended (the "Credit Agreement"), among
Code-Alarm, Inc., a Michigan corporation (the "Borrower"), certain other "Credit
Parties" referred to and as defined therein (the "Credit Parties"), certain
"Lenders" from time to time party thereto (the "Lenders"), and the Agent, and
(iv) that certain Amendment No. 5 and Waiver No. 8 to Credit Agreement of even
date herewith (the "Amendment") among the Borrower, the Credit Parties, the
Lenders and the Agent.
Each Guarantor hereby (a) acknowledges having received and
reviewed a copy of the Amendment, (b) ratifies and reaffirms all of its payment
and performance obligations, contingent or otherwise, under the Guaranties, (c)
confirms and agrees that such ratification and reaffirmation is not a condition
to the continued effectiveness of such Guaranties, (d) agrees that neither such
ratification and reaffirmation, nor the Agent's and the Lenders' solicitation of
such ratification and reaffirmation, constitutes a course of dealing giving rise
to any obligation or condition requiring a ratification or reaffirmation of the
Guarantors' obligations under the Guaranties with respect to any subsequent
modifications to the Credit Agreement or other Loan Documents.
IN WITNESS WHEREOF, this instrument has been executed and
delivered as of this 29 day of March, 1999.
PEGASUS PARTNERS, L.P. PEGASUS RELATED PARTNERS, L.P.
By: PEGASUS INVESTORS, L.P., By: PEGASUS INVESTORS, L.P.,
as Managing General Partner as Managing General Partner
By: PEGASUS INVESTORS GP, INC., By: PEGASUS INVESTORS GP, INC.,
as General Partner as General Partner
By: By:
------------------------------- --------------------------------
Name: Richard Cion Name: Richard Cion
--------------------- --------------------------
Title: Vice President Title: Vice President
--------------------- --------------------------
-10-
<PAGE> 11
EXHIBITS A-1 and A-2
FORMS OF WARRANT MODIFICATIONS
Attached.
-11-
<PAGE> 12
EXHIBIT B
FORM OF PEGASUS ASSIGNMENT AGREEMENT
Attached.
-12-
<PAGE> 1
EXHIBIT 10.42
==========================================
CREDIT AGREEMENT
Dated as of March 29, 1999
Among
CODE-ALARM, INC.
and
THE LENDERS NAMED HEREIN
==========================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
Page
<S> <C> <C>
I. DEFINITIONS........................................................................................1
II. THE LOANS..........................................................................................5
SECTION 2.01 Commitments..............................................................5
SECTION 2.02 Loans; Use of Proceeds...................................................6
SECTION 2.03 Notice of Loans..........................................................6
SECTION 2.04 Notes; Repayment of Loans................................................6
SECTION 2.05 Interest on Loans........................................................7
SECTION 2.06 Fees.....................................................................7
SECTION 2.07 Termination and Reduction of Commitments.................................7
SECTION 2.08 Interest on Overdue Amounts..............................................7
SECTION 2.09 Prepayment of Loans......................................................7
SECTION 2.10 Pro Rata Treatment.......................................................8
SECTION 2.11 Payments and Computations................................................8
III. [INTENTIONALLY OMITTED]............................................................................8
IV. REPRESENTATIONS AND WARRANTIES.....................................................................8
SECTION 4.01 Organization.............................................................8
SECTION 4.02 Capitalization...........................................................9
SECTION 4.03 Authorization; Validity of Agreement; etc................................9
SECTION 4.04 Consents and Approvals, etc..............................................9
SECTION 4.05 Use of Proceeds.........................................................10
V. CONDITIONS OF LOANS...............................................................................10
SECTION 5.01 All Loans...............................................................10
SECTION 5.02 First Borrowing.........................................................10
VI. AFFIRMATIVE COVENANTS.............................................................................12
SECTION 6.01 Legal Existence.........................................................12
SECTION 6.02 Businesses and Properties...............................................12
SECTION 6.03 Insurance...............................................................12
SECTION 6.04 Taxes...................................................................13
SECTION 6.05 Financial Statements, Reports, etc......................................13
SECTION 6.06 Litigation and Other Notices............................................13
SECTION 6.07 Maintaining Records; Access to Properties and Inspections;
Right to Audit..............................................................14
VII. NEGATIVE COVENANTS................................................................................14
SECTION 7.01 Dividends, Distributions and Payments...................................14
SECTION 7.02 Business................................................................14
SECTION 7.03 Use of Proceeds.........................................................14
SECTION 7.04 Prepayment of Subordinated Indebtedness.................................14
SECTION 7.05 Negative Pledges, Etc...................................................14
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
VIII. EVENTS OF DEFAULT.................................................................................15
IX. MISCELLANEOUS.....................................................................................16
SECTION 9.01 Notices.................................................................16
SECTION 9.02 Survival of Agreement...................................................17
SECTION 9.03 Successors and Assigns; Participations..................................17
SECTION 9.04 Expenses; Indemnity.....................................................18
SECTION 9.05 Applicable Law..........................................................19
SECTION 9.06 Payments on Business Days...............................................19
SECTION 9.07 Waivers; Amendments.....................................................19
SECTION 9.08 Severability............................................................20
SECTION 9.09 Entire Agreement; Waiver of Jury Trial, etc.............................20
SECTION 9.10 Confidentiality.........................................................20
SECTION 9.11 Submission to Jurisdiction..............................................21
SECTION 9.12 Counterparts; Facsimile Signature.......................................21
SECTION 9.13 Interest Rate Limitation................................................21
SECTION 9.14 Headings................................................................22
X. SUBORDINATION.....................................................................................22
SECTION 10.01 General................................................................22
SECTION 10.02 Limitation on Payment and Remedies.....................................22
SECTION 10.03 Subordination Upon Certain Events......................................23
SECTION 10.04 Payments and Distributions Received....................................23
SECTION 10.05 No Prejudice or Impairment.............................................23
SECTION 10.06 Subrogation............................................................23
SECTION 10.07 Relative Rights........................................................23
SECTION 10.08 Section Not to Prevent Events of Default...............................24
</TABLE>
ii
<PAGE> 4
Page
----
EXHIBITS
EXHIBIT A Form of Note
EXHIBIT B Form of Amendment to Warrants
SCHEDULES
SCHEDULE 2.01 Commitments
SCHEDULE 4.02 Capitalization
iii
<PAGE> 5
CREDIT AGREEMENT dated as of March 29, 1999, among CODE-
ALARM, INC., a Michigan corporation (the "Borrower"), PEGASUS
PARTNERS, L.P., a Delaware limited partnership, PEGASUS
RELATED PARTNERS, L.P., a Delaware limited partnership and
GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation
(together with their respective successors and assigns,
collectively, the "Lenders").
The Borrower has applied to the Lenders for Loans (such term
and all other capitalized terms used in this paragraph having the respective
meanings ascribed to such terms above or hereinafter) up to an aggregate
principal amount not in excess of $1,500,000 at any time outstanding prior to
the Termination Date. The proceeds of the Loans shall be used for working
capital needs of the Borrower. The Lenders are severally, and not jointly,
willing to extend such Loans to the Borrower subject to the terms and conditions
hereinafter set forth. Accordingly, the Borrower and the Lenders hereby agree as
follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have
the meanings specified below:
"Affiliate" of any person shall mean any other person (i)
which directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Borrower or (ii) who is a
director or executive officer (as such term is defined in Rule 3b-7 under the
Exchange Act) of the Borrower. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of securities, by
contract or otherwise.
"Blockage Notice" shall mean a notice that a Senior Default
has occurred and is continuing, given to the Borrower and the Lenders by the
holders of a majority in principal amount of the Senior Indebtedness then
outstanding (or their authorized agent); provided, however, that no such notice
shall be effective as a Blockage Notice with respect to a non-monetary Senior
Default (A) if an effective Blockage Notice with respect to any non-monetary
Senior Default shall have been given within 270 days prior thereto or (B) if
based upon a non-monetary Senior Default that was the basis of a prior effective
Blockage Notice and such non-monetary Senior Default has not been cured or
waived for a period of at least 90 days.
"Blockage Period" with respect to a Blockage Notice is the
period commencing upon the Company's receipt of such Blockage Notice and
expiring (i) in the case of a non-monetary Senior Default, after the earlier of
(A) 90 days and (B) the date that all Senior Defaults that gave rise to the
Blockage Notice shall have been remedied or waived in writing or shall have
ceased to exist and (ii) in the case of a monetary Senior Default, upon the date
that all Senior Defaults that gave rise to the Blockage Notice shall have been
remedied or waived in writing or shall have ceased to exist.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"Borrower" shall have the meaning assigned to such term in the
preamble to this Agreement.
<PAGE> 6
"Business Day" shall mean any day, other than a Saturday,
Sunday or legal holiday in the State of New York, on which banks are open for
substantially all their banking business in New York City.
"Closing Date" shall mean the date of the first borrowing
under this Agreement, but in no event later than April 2, 1999.
"Commitment" shall mean, with respect to any Lender, the
commitment of such Lender as set forth in Schedule 2.01 annexed hereto, as the
same may be reduced from time to time pursuant to this Agreement including,
without limitation, Section 2.07 hereof.
"Default" shall mean any condition, act or event which, with
notice or lapse of time or both, would constitute an Event of Default.
"dollars" or the symbol "$" shall mean lawful currency of the
United States of America.
"Environmental Laws" shall mean the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et
seq.), the Hazardous Material Transportation Act (49 U.S.C. ss. 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Oil
Pollution Act of 1990 (33 U.S.C. ss.2701 et. seq.), the Safe Drinking Water Act
(42 U.S.C. ss. 300f, et seq.), the Clear Air Act (42 U.S.C. ss. 7401 et seq.),
the Toxic Substances Control Act, as amended (15 U.S.C. ss. 2601 et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.),
and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.), as such
laws have been and hereafter may be amended or supplemented, and any related or
analogous present or future Federal, state or local statutes, rules,
regulations, ordinances, licenses, permits and interpretations and orders of
regulatory and administrative bodies.
"Event of Default" shall have the meaning assigned to such
term in Article VIII hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect from time to time.
"Financial Officer" shall mean, with respect to any person,
the chief financial officer of such person.
"GE Credit Agreement" shall mean the Credit Agreement dated as
of October 24, 1997 among the Borrower, the credit parties specified therein,
the lenders specified therein and General Electric Capital Corporation as agent
for said lenders, as amended, modified, restated, extended, refinanced or
replaced from time to time.
"Guarantee" shall mean any obligation, contingent or
otherwise, of any person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or obligation of any other person in any manner,
whether directly or indirectly, and shall include, without limitation, any
obligation of such person, direct or indirect, to (i) purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
obligation or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Indebtedness or obligation, (ii) purchase
property, securities or services for the purpose of assuring the owner of such
Indebtedness or obligation of the payment of such Indebtedness or obligation,
2
<PAGE> 7
or (iii) maintain working capital, equity capital, available cash or other
financial condition of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or obligation; provided, however, that the term
Guarantee shall not include endorsements for collection or collections for
deposit, in either case in the ordinary course of business.
"Guarantor" shall mean, collectively, any person that becomes
a guarantor of the Obligations after the date hereof.
"Indebtedness" shall mean, with respect to any person, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments or upon which interest charges
are customarily paid, (c) all obligations of such person for the deferred
purchase price of property or services, except current accounts payable arising
in the ordinary course of business and not overdue beyond such period as is
commercially reasonable for such person's business, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property purchased by such person and all obligations under or in respect of
capital leases, (e) all payment obligations of such person with respect to
interest rate or currency protection agreements, (f) all obligations of such
person as an account party under any letter of credit or in respect of bankers'
acceptances, (g) all obligations of any third party secured by property or
assets of such person (regardless of whether or not such person is liable for
repayment of such obligations), (h) all Guarantees of such person and (i) the
redemption price of all redeemable preferred stock of such person, but only to
the extent that such stock is redeemable at the option of the holder or requires
sinking fund or similar payments at any time prior to the Termination Date.
"Indemnitees" shall have the meaning assigned to such term in
Section 9.04(c) hereof.
"Information" shall have the meaning assigned to such term in
Section 9.10 hereof.
"Lenders" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Lien" shall mean, with respect to any asset, (i) any
mortgage, lien, pledge, encumbrance, charge or security interest in or on such
asset, (ii) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset, (iii) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities or (iv) any other right
of or arrangement with any creditor to have such creditor's claim satisfied out
of such assets, or the proceeds therefrom, prior to the general creditors of the
owner thereof.
"Loan" shall mean a loan made pursuant to Section 2.01 hereof.
"Loan Documents" shall mean this Agreement, the Notes and each
other document, instrument or agreement now or hereafter delivered to any Lender
in connection herewith or therewith.
"Loan Party" shall mean the Borrower, each Guarantor (if any)
and each subsidiary of any thereof.
"Margin Stock" shall have the meaning assigned to such term in
Regulation U.
"Material Adverse Effect" shall mean a material adverse effect
on (i) the business, assets, prospects, operations or financial or other
condition of the Borrower and its subsidiaries, taken as a whole,
3
<PAGE> 8
measured in each case since December 31, 1998, (ii) the ability of any Loan
Party to perform or pay the Obligations in accordance with the terms hereof or
of any other Loan Document or (iii) the rights of, or benefits available to, any
Lender under any Loan Document.
"Net Borrowing Availability" shall have the meaning set forth
in the GE Credit Agreement as defined on the date hereof.
"Notes" shall mean the revolving credit notes of the Borrower,
executed and delivered as provided in Section 2.04 hereof, in substantially the
form of Exhibit A annexed hereto, as amended, modified or supplemented from time
to time.
"Obligations" shall mean all obligations, liabilities and
Indebtedness of the Borrower to the Lenders, whether now existing or hereafter
created, direct or indirect, due or not, whether created directly or acquired by
assignment, participation or otherwise, with respect to the principal of and
interest on the Loans and the payment or performance of all other obligations,
liabilities and Indebtedness of the Borrower to the Lenders hereunder or under
any one or more of the other Loan Documents (including, without limitation, the
payment of amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, and interest that, but for the
filing of a petition in bankruptcy with respect to the Borrower, would accrue on
such obligations, whether or not a claim is allowed against the Borrower for
such interest in the related bankruptcy proceeding), including without
limitation all fees, costs, expenses and indemnity obligations hereunder and
thereunder.
"person" shall mean any natural person, corporation, business
trust, limited liability company, association, company, joint venture, limited
liability partnership, partnership or government or any agency or political
subdivision thereof.
"Regulation T" shall mean Regulation T of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Remedy Notice" shall have the meaning set forth in Section
10.02 hereof.
"Remedy Standstill Period" shall have the meaning set forth in
Section 10.02 hereof.
"Required Lenders" shall mean Lenders having 51% of the Total
Commitment.
"Responsible Officer" shall mean, with respect to any person,
any vice president or president, or the chief financial officer or controller,
of such person.
"Senior Default" shall mean an event of default that occurs
and is continuing with respect to Senior Indebtedness that permits the holders
thereof to accelerate the maturity of such Senior Indebtedness.
4
<PAGE> 9
"Senior Indebtedness" shall mean (i) the principal of and
interest on (including without limitation any interest, fees, charges and other
amounts that accrue after the commencement of any case, proceeding or other
legal action relating to the bankruptcy, insolvency or reorganization of the
Borrower whether or not such interest constitutes an allowed claim) the loans
made to the Borrower pursuant to the GE Credit Agreement and (ii) any other
monetary obligations of the Borrower arising out of or in connection with the GE
Credit Agreement or any related instruments or agreements, including, without
limitation, expenses, fees, reimbursements and indemnities.
"subsidiary" shall mean, with respect to any person, any
corporation, association or other business entity of which securities or other
ownership interests representing more than 50% of the ordinary voting power are,
at the time as of which any determination is being made, owned or controlled,
directly or indirectly, by the parent of such person or one or more subsidiaries
of the parent of such person.
"Termination Date" shall mean October 24, 2000 or such earlier
date as the Loans shall otherwise be payable in full and the Total Commitment
shall terminate, expire or be canceled in accordance with the terms of this
Agreement.
"Total Commitment" shall mean the sum of the Commitments, as
the same may be reduced from time to time pursuant to this Agreement, including,
without limitation, pursuant to Section 2.07 hereof.
2. THE LOANS
SECTION 2.1 Commitments. (a) Subject to the terms and
conditions and relying upon the representations and warranties made herein, each
Lender, severally and not jointly, agrees to make Loans to the Borrower, at any
time and from time to time from the date hereof to the Termination Date;
provided, that no Loan by any Lender shall exceed the Commitment of such Lender
at the time such Loan is to be made and the aggregate principal amount of all
Loans made by any Lender at any time outstanding shall not exceed the amount of
such Lender's initial Commitment set forth opposite its name in Schedule 2.01
annexed hereto.
(b) Subject to the foregoing and within the foregoing limits,
the Borrower may borrow and repay (or, subject to the provisions of Section 2.09
hereof, prepay), Loans on and after the date hereof and prior to the Termination
Date, subject to the terms, provisions and limitations set forth herein,
including, without limitation, the requirement that no Loan shall be made
hereunder if the amount thereof would exceed the Total Commitment. In addition,
without limiting the foregoing, no Loan shall be made hereunder unless after
giving effect to such Loan and any contemporaneous borrowing made under the GE
Credit Agreement the Net Borrowing Availability under the GE Credit Agreement is
less than $100,000. No Loan or portion thereof that is repaid or prepaid may be
reborrowed.
SECTION 2.2 Loans; Use of Proceeds. (a) The Loans made by the
Lenders on any date shall be in integral multiples of $500,000.
5
<PAGE> 10
(1) Loans shall be made ratably by the Lenders in accordance
with their respective Commitments; provided, however, that the failure of any
Lender to make any Loan shall not in itself relieve any other Lender of its
obligation to lend hereunder. The initial Loans shall be made by the Lenders
against delivery of Notes, payable to the order of the Lenders, as referred to
in Section 2.04 hereof.
(2) Each Lender shall make its Loans on the proposed dates
thereof by wire transfer to the Borrower in accordance with the Borrower's
written instructions.
(3) The proceeds of each Loan shall be used solely for working
capital requirements of the Borrower.
SECTION 2.3 Notice of Loans. The Borrower shall, through a
Responsible Officer of the Borrower, give the Lenders irrevocable written, telex
or facsimile notice (promptly confirmed in writing) of each borrowing not later
than 11:00 A.M., New York City time, two (2) Business Days before a proposed
borrowing. Such notice shall specify the date of such borrowing (which shall be
a Business Day) and the amount thereof.
SECTION 2.4 Notes; Repayment of Loans. (a) All Loans made by a
Lender to the Borrower shall be evidenced by a single Note, duly executed on
behalf of the Borrower, dated the Closing Date, in substantially the form of
Exhibit A annexed hereto, delivered and payable to such Lender in a principal
amount equal to its Commitment on such date. The outstanding balance of each
Loan, as evidenced by any such Note, shall mature and be due and payable on the
Termination Date.
(b) Each Note shall bear interest from its date on the
outstanding principal balance thereof, as provided in Section 2.05 hereof.
(c) Each Lender is hereby authorized by the Borrower to
endorse on the schedule attached to the Note, as applicable, of such Lender (or
on a continuation of such schedule attached to such Note and made a part
thereof) an appropriate notation evidencing the date and amount of each Loan to
the Borrower from such Lender, as well as the date and amount of each payment
and prepayment with respect thereto; provided, however, that no Lender shall be
required to make such a notation and the failure of any person to make such a
notation on a Note shall not affect any obligations of the Borrower under such
Note. Any such notation shall be conclusive and binding as to the date and
amount of such Loan or portion thereof, or payment or prepayment of principal or
interest thereon, absent manifest error.
(d) The Borrower shall repay the principal amount of the Loans
in consecutive monthly installments commencing on June 3, 1999, and continuing
on the third (3rd) Business Day of each calendar month thereafter until repaid
in full. Each such installment shall be in an amount equal to the lesser of: (A)
the lowest daily Net
6
<PAGE> 11
Borrowing Availability as of the close of business for each Business Day of the
then immediately preceding calendar month (and if Net Borrowing Availability was
less than $100,000 or was negative as of the close of business on any such day,
the amount determined for purposes of this clause (A), and therefore the
proposed principal installment amount due for such month, shall be zero) and (B)
the amount, if any, by which the Net Borrowing Availability as of the close of
business on the Business Day immediately preceding the proposed date of such
installment payment exceeds $350,000. To the extent that as of any installment
date, the amount required to be repaid, as determined pursuant to the
immediately preceding sentence, exceeds the then outstanding principal balance
of the Loans, then the Total Commitment shall thereupon be reduced permanently
by the amount of such excess, which reduction shall be allocated ratably among
the Lenders in the proportions that their Commitments bear to the Total
Commitment.
SECTION 2.5 Interest on Loans. (a) Subject to the provisions
of Section 2.08 hereof, each Loan shall bear interest at a rate per annum equal
to fifteen percent (15%).
(1) Interest on each Loan shall be payable in arrears on the
first Business Day of each calendar month and on the Termination Date. Interest
on each Loan shall be computed based on the number of days elapsed in a year of
360 days.
SECTION 2.6 Fees. On or before September 1, 1999, the Borrower
shall pay to Pegasus Partners, L.P. and Pegasus Related Partners, L.P. (for
their ratable benefit based on the proportions that their initial Commitments
bear to $1,150,000) a nonrefundable fee of $15,000, it being understood and
agreed that such fee is fully earned as of the date that the initial Loans are
made hereunder.
SECTION 2.7 Termination and Reduction of Commitments. (a)
Notwithstanding any reductions in the Commitment pursuant to any other
subsection of this Section 2.07, the Total Commitment shall be reduced
automatically and permanently (pro rata among the Lenders in the proportions
that their Commitments bear to the Total Commitment) by the original principal
amount of each Loan made by such Lender upon the making of such Loan. In any
event, the Total Commitment and the Commitment of each Lender shall
automatically and permanently terminate on the Termination Date, and all Loans
still outstanding on such date shall be due and payable in full together with
accrued interest thereon.
(b) Upon at least one (1) Business Day's prior irrevocable
written notice (or facsimile notice promptly confirmed in writing) to the
Lenders, the Borrower may at any time in whole permanently terminate, or from
time to time in part permanently reduce, the Total Commitment, ratably among the
Lenders in accordance with the amounts of their Commitments. Each partial
reduction of the Total Commitment shall be in an integral multiple of $100,000.
SECTION 2.8 Interest on Overdue Amounts. (a) If the Borrower
shall default in the payment of the principal of or interest on any Loan or any
other
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amount becoming due hereunder, by acceleration or otherwise, the Borrower
shall on demand from time to time pay interest, to the extent permitted by law,
on all Obligations outstanding up to the date of actual payment of such
defaulted amount (after as well as before judgment) at a rate per annum equal to
eighteen percent (18%).
SECTION 2.9 Prepayment of Loans. (a) Subject to the terms and
conditions contained in this Section 2.09 and elsewhere in this Agreement,
following repayment in full in cash of all Senior Indebtedness and termination
of all commitments of the lenders under the GE Credit Agreement the Borrower
shall have the right to prepay the Loans at any time in whole or from time to
time in part without penalty. Each prepayment of the Loans shall be in an
integral multiple of $100,000 (or if less, the outstanding balance of the
Loans).
(1) When making a prepayment of the Loans, the Borrower shall
furnish to the Lenders, not later than 11:00 A.M. (New York City time) (i) one
Business Day prior to the date of such prepayment, written, telex or facsimile
notice (promptly confirmed in writing) of prepayment which shall specify the
prepayment date and the principal amount of the Loans to be prepaid, which
notice shall be irrevocable and shall commit the Borrower to prepay the Loans by
the amount stated therein on the date stated therein. All prepayments shall be
accompanied by accrued interest on the principal amount being prepaid to the
date of prepayment.
SECTION 2.10 Pro Rata Treatment. Except as otherwise expressly
stated herein, each borrowing, each payment or prepayment of principal of the
Notes, each payment of interest on the Notes, each payment of any fee or other
amount payable hereunder and each reduction of the Total Commitment shall be
made pro rata among the Lenders in the proportions that their initial
Commitments bear to the Total Commitment; provided, however, that to the extent
that General Electric Capital Corporation applies the proceeds of Collateral (as
defined in the GE Credit agreement) to its outstanding Loans hereunder, General
Electric Capital Corporation shall not be required to share such "payments" with
the other Lenders hereunder.
SECTION 2.11 Payments and Computations. The Borrower shall
make each payment hereunder and under any instrument delivered hereunder not
later than 1:00 p.m. (New York City time) on the day when due in lawful money of
the United States (in freely transferable dollars) to the Lenders in immediately
available funds, without set-off or counterclaim. Any amounts received after
such time on any date may, in the discretion of the Lenders, be deemed to have
been received on the next succeeding Business Day for purposes of calculating
interest thereon.
3. [INTENTIONALLY OMITTED]
4. REPRESENTATIONS AND WARRANTIES
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Each Loan Party makes the following representations and
warranties to the Lenders as of the Closing Date and each date thereafter that a
Loan is requested by or made to the Borrower.
SECTION 4.1 Organization. (a) The Borrower and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its business as now
being conducted, except where the failure to have such governmental approvals
could not reasonably be expected to have a Material Adverse Effect. The Borrower
and each of its subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect or prevent
the Borrower from consummating any of the transactions contemplated by this
Agreement.
(b) The Borrower has heretofore made available to the
Lenders a complete and correct copy of its articles of incorporation, as
amended, and its by-laws and the organizational documents of each of its
subsidiaries, as currently in effect. Each such document is in full force and
effect and no other organizational documents are applicable to or binding upon
the Borrower or any subsidiary thereof.
SECTION 4.2 Capitalization. (a) The authorized capital stock
of the Borrower consists of 20,000,000 shares of common stock and 500,000 shares
of preferred stock, no par value, 400,000 shares of which are designated Series
A preferred stock, of which 200,000 are designated Series A-1 preferred shares
and 200,000 are designated Series A-2 preferred shares and one share of which is
designated Series B preferred stock. Schedule 4.02 sets forth as of the Closing
Date each subsidiary of the Borrower and the (i) the number of issued and
outstanding shares of common stock and preferred stock as of the date hereof;
(ii) a description of all unexpired options to purchase common stock ("Borrower
Options"), including number of shares, exercise price, date of vesting and
exercise date as well as a statement describing outstanding Borrower Options;
and (iii) all other shares of common stock issuable to any person pursuant to
any existing options, warrants, calls, preemptive (or similar) rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character. None of the Borrower or any of its subsidiaries is required to
redeem, repurchase or otherwise acquire shares of capital stock of the Borrower
or any of its subsidiaries, respectively, as a result of the transactions
contemplated by this Agreement.
(b) All of the outstanding shares of capital stock of
each of the Borrower's subsidiaries are beneficially owned by the Borrower,
directly or indirectly, free and clear of all security interests, liens, claims,
pledges, agreements, limitations on voting rights, charges or other encumbrances
of any nature whatsoever, except for liens securing Indebtedness under the GE
Credit Agreement.
SECTION 4.3 Authorization; Validity of Agreement; etc. The
Borrower has full corporate power and authority to execute and deliver the Loan
Documents and to issue the Notes and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by the Borrower of
the Loan Documents and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors of the
Borrower and no other corporate or shareholder action on the part of the
Borrower is necessary to authorize the execution, delivery or performance by the
Borrower of any Loan Document, the issuance of any Notes or the consummation by
it of the transactions contemplated hereby and thereby. Each Loan Document has
been duly executed and delivered by the Borrower and constitutes a valid and
binding obligation of the Borrower enforceable against
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the Borrower in accordance with its terms, except that (i) such enforcement may
be subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
SECTION 4.4 Consents and Approvals, etc. Neither execution,
delivery or performance of any Loan Document, issuance of any Note, consummation
by the Borrower of the transactions contemplated hereby or thereby, nor
compliance by the Borrower with any of the provisions hereof or thereof will (i)
conflict with or result in any breach of any provision of the Borrower's
articles of incorporation, as amended, or the by-laws or other organizational
documents of the Borrower or of any of its subsidiaries, (ii) require on the
part of the Borrower any filing with, or permit, authorization, consent or
approval of, any court, arbitral tribunal, administrative agency or other
governmental or regulatory authority or agency, including, without limitation,
any consent or approval of any federal, state, local or foreign insurance
industry agency, commission or other governing body, except where the failure to
obtain such permits, authorizations, consents or approvals or to make such
filings, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect or prevent the Borrower from consummating the
transactions contemplated hereby or thereby, (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any material note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which the Borrower or any of its subsidiaries is a party or by
which any of them or any of their properties or assets may be bound or (iv)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Borrower, any of its subsidiaries or any of their properties
or assets.
SECTION 4.5 Use of Proceeds. No proceeds of any Loan will be
used for any purpose which entails a violation of, or is inconsistent with,
Regulation T, U or X of the Board of Governors of the Federal Reserve System, or
for any purpose other than the working capital requirements of the Borrower.
5. CONDITIONS OF LOANS
The right of the Borrower to request any Loan hereunder and
the obligation of each Lender to make any Loan hereunder shall be subject to the
following conditions precedent:
SECTION 5.1 All Loans.
(1) The Lenders shall have received a notice of borrowing with
respect to such Loan as required by Section 2.03 hereof.
(2) On the date that such Loan is requested by the Borrower
and the date that such Loan is made by the Lenders (immediately before
and after giving effect to such request or Loan, as the case may be),
the representations and warranties set forth in Article IV hereof and
in any document delivered herewith, including, without limitation, the
Loan Documents, shall be true and correct in all material respects with
the same effect as though made on and as of such date (except insofar
as such
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representations and warranties relate expressly to an earlier date, in
which case they shall have been true on and as of such date).
(3) No Default or Event of Default shall have occurred and be
continuing, immediately before and after giving effect to such request
or Loan, as the case may be.
(4) No event or condition exists or has occurred or has failed
to occur if the effect thereof, individually or in the aggregate, has
had or could reasonably be expected to have a Material Adverse Effect.
(5) The Lenders shall have received a certificate signed by
the Financial Officer of the Borrower (i) as to the compliance with
(b), (c) and (d) above and (ii) confirming that as of the Business Day
prior to the date such Loan is to be made Net Borrowing Availability
under the GE Credit Agreement (giving effect on a pro forma basis to
any proposed borrowing to be made under the GE Credit Agreement on the
date of such proposed Loan) was less than $100,000.
SECTION 5.2 First Borrowing. The obligations of the Lenders in
respect of the initial Loans hereunder is subject to the following additional
conditions precedent:
(1) The Lenders shall have received one or more favorable
written opinions of counsel for the Borrower dated the Closing Date,
addressed to the Lenders and satisfactory to them in form and
substance.
(2) The Lenders shall have received (i) a copy of the
certificate or articles of incorporation or constitutive documents, in
each case as amended to date, of the Borrower, certified as of a recent
date by the Secretary of State or other appropriate official of the
state of its organization, and a certificate as to the good standing of
each from such Secretary of State or other official, in each case dated
as of a recent date; (ii) a certificate of the Secretary of the
Borrower dated the Closing Date and certifying (A) that attached
thereto is a true and complete copy of such person's bylaws as in
effect on the date of such certificate and at all times since a date
prior to the date of the resolution described in item (B) below, (B)
that attached thereto is a true and complete copy of a resolution
adopted by such person's Board of Directors authorizing the execution,
delivery and performance of this Agreement, the Notes, the other Loan
Documents and the borrowings made and to be made hereunder, as
applicable, and that such resolution has not been modified, rescinded
or amended and is in full force and effect, (C) that such person's
certificate or articles of incorporation or constitutive documents has
not been amended since the date of the last amendment thereto shown on
the certificate of good standing furnished pursuant to (i) above, and
(D) as to the incumbency and specimen
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signature of each of such person's officers executing this Agreement,
the Notes or any other Loan Document delivered in connection herewith
or therewith, as applicable; (iii) a certificate of another of such
person's officers as to incumbency and signature of its Secretary; and
(iv) such other documents as any Lender may reasonably request.
(3) The Lenders shall have received a certificate, dated the
Closing Date and signed by the Financial Officer of the Borrower,
confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 5.01 hereof and the conditions set
forth in this Section 5.02.
(4) Each Lender shall have received its Note duly executed by
the Borrower, payable to its order and otherwise complying with the
provisions of Section 2.04 hereof.
(5) [Intentionally omitted]
(6) The Lenders shall have received fully executed copies of
the Amendment to Warrants in the form annexed hereto as Exhibit C, and
such amendment agreement shall be in full force and effect.
(7) The Lenders shall have received fully executed copies of
an agreement in form and substance satisfactory to them modifying
various provisions of the GE Credit Agreement, and such amendment
agreement shall be in full force and effect.
(8) The Lenders shall have received evidence in form and
substance satisfactory to them that all requisite third party consents
(including, without limitation, the consent of the agent and the
lenders under the GE Credit Agreement) to the transactions herein
contemplated have been received.
(9) Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel to
the Lenders, shall have received payment in full for all legal fees
charged, and all costs and expenses incurred, by such counsel through
the Closing Date in connection with the transactions contemplated under
this Agreement and the other Loan Documents and instruments in
connection herewith and therewith.
(10) All legal matters in connection with the Loan Documents
and the Loans shall be satisfactory to the Lenders and their counsel in
their sole discretion.
(11) The Borrower shall have executed and delivered to the
Lenders a disbursement authorization letter with respect to the
disbursement of the
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proceeds of the Loans to be made on the Closing Date, in form and
substance satisfactory to the Lenders.
(12) The Lenders shall have received such other documents as
the Lenders or their counsel shall reasonably deem necessary or
desirable.
6. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with each Lender that, so
long as this Agreement shall remain in effect or the principal of or interest on
any Note, or any fee, expense or other Obligation payable hereunder or any other
Loan Document shall be unpaid, it will, and will cause each of its subsidiaries,
to:
SECTION 6.1 Legal Existence. Do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence.
SECTION 6.2 Businesses and Properties. At all times do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect the rights, licenses, Permits, franchises, patents, copyrights,
trademarks and trade names material to the conduct of its businesses; maintain
and operate such businesses in the same general manner in which they are
presently conducted and operated; comply with all laws, rules, regulations and
governmental orders (whether Federal, state or local) applicable to the
operation of such businesses whether now in effect or hereafter enacted
(including, without limitation, all applicable laws, rules, regulations and
governmental orders relating to public and employee health and safety and all
Environmental Laws) and with any and all other applicable laws, rules,
regulations and governmental orders, the lack of compliance with which would
have a Material Adverse Effect; take all actions which may be required to
obtain, preserve, renew and extend all Permits and other authorizations which
are material to the operation of such businesses; and at all times maintain,
preserve and protect all property material to the conduct of such businesses and
keep such property in good repair, working order and condition and from time to
time make, or cause to be made, all needful and proper repairs, renewals,
additions, improvements and replacements thereto necessary in order that the
business carried on in connection therewith may be properly conducted at all
times.
SECTION 6.3 Insurance. (a) Keep its insurable properties
adequately insured at all times by financially sound and reputable insurers, (b)
maintain such other insurance, to such extent and against such risks, including
fire and other risks insured against by extended coverage, as is customary with
companies similarly situated and in the same or similar businesses, (c) maintain
in full force and effect public liability insurance against claims for personal
injury or death or property damage occurring upon, in, about or in connection
with the use of any properties owned, occupied or controlled by the Borrower or
any of its subsidiaries, in such amount as the Lenders shall reasonably deem
necessary, (d) maintain business interruption
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insurance to such extent as is customary with companies similarly situated and
in the same or similar businesses, and (e) maintain such other insurance as may
be required by law or as may be reasonably requested by the Lenders for purposes
of assuring compliance with this Section 6.03.
SECTION 6.4 Taxes. Pay and discharge promptly when due all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or in respect of its property before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise, which, if unpaid, might give rise to Liens upon its
properties or any part thereof.
SECTION 6.5 Financial Statements, Reports, etc. Furnish to the
Lenders:
(1) copies of all financial statements, notices, reports,
certifications, projections, management letters and other written
communications provided to the agent and/or the lenders under the GE
Credit Agreement, as and when same is furnished pursuant thereto.
(2) copies of all notices received from the agent and/or the
lenders under the GE Credit Agreement or any other material agreement
to which any Loan Party is a party;
(3) immediately upon becoming aware thereof, notice of the
breach by any party of any material agreement with any Loan Party; and
(4) such other information as any Lender may from time to time
reasonably request.
SECTION 6.6 Litigation and Other Notices. Give the Lenders
prompt written notice of the following:
(1) the issuance by any court or governmental agency or
authority of any injunction, order, decision or other restraint
prohibiting, or having the effect of prohibiting, the making of the
Loans, or invalidating, or having the effect of invalidating, any
provision of this Agreement, the Notes or the other Loan Documents, or
the initiation of any litigation or similar proceeding seeking any such
injunction, order, decision or other restraint;
(2) the filing or commencement of any action, suit or
proceeding against any Loan Party, whether at law or in equity or by or
before any court or any federal, state, municipal or other governmental
agency or authority, (i) which is material and is brought by or on
behalf of any governmental agency or authority, or in which injunctive
or other equitable relief is sought or (ii) as to
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which it is probable (within the meaning of Statement of Financial
Accounting Standards No. 5) that there will be an adverse determination
and which, if adversely determined, would (A) reasonably be expected to
result in liability of one or more Loan Parties in an aggregate amount
of $50,000 or more, not reimbursable by insurance, or (B) materially
impair the right of any Loan Party to perform its obligations under
this Agreement, any Note or any other Loan Document to which it is a
party;
(3) any Default or Event of Default, specifying the nature and
extent thereof and the action (if any) which is proposed to be taken
with respect thereto; and
(4) any development in the business or affairs of any Loan
Party which has had or which is likely to have, in the reasonable
judgment of any Responsible Officer of the Borrower, a Material Adverse
Effect.
SECTION 6.7 Maintaining Records; Access to Properties and
Inspections; Right to Audit. Maintain financial records in accordance with
accepted financial practices and, upon reasonable notice (which may be
telephonic), at all reasonable times and as often as any Lender may request,
permit any authorized representative designated by such Lender to visit and
inspect the properties and financial records of the Borrower and its
subsidiaries and to make extracts from such financial records at the Borrower's
expense, and permit any authorized representative designated by such Lender to
discuss the affairs, finances and condition of the Borrower and its subsidiaries
with the appropriate Financial Officer and such other officers as the Borrower
shall deem appropriate and the Borrower's independent public accountants, as
applicable. At the Borrower's expense, the Lenders shall have the right to
audit, as often as it may request, the existence and condition of the accounts
receivables, inventory, books and records of the Borrower and its subsidiaries
and to review their compliance with the terms and conditions of this Agreement
and the other Loan Documents.
7. NEGATIVE COVENANTS
The Borrower covenants and agrees with each Lender that, so
long as this Agreement shall remain in effect or the principal of or interest on
any Note, or any fee, expense or other Obligation payable hereunder or in
connection with any Loan Document shall be unpaid, it will not and will not
cause or permit any of its subsidiaries, either directly or indirectly, to:
SECTION 7.1 Dividends, Distributions and Payments. Except as
permitted under the GE Credit Agreement, declare or pay, directly and
indirectly, any cash dividends or make any other distribution, whether in cash,
property, securities or a combination thereof, with respect to (whether by
reduction of capital or otherwise) any
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shares of its capital stock or directly or indirectly redeem, purchase, retire
or otherwise acquire for value (or permit any subsidiary to purchase or acquire)
any shares of any class of its capital stock or set aside any amount for any
such purpose.
SECTION 7.2 Business. Alter the nature of its business as
operated on the Closing Date in any material respect.
SECTION 7.3 Use of Proceeds. Permit the proceeds of any Loan
to be used for any purpose which entails a violation of, or is inconsistent
with, Regulation T, U or X of the Board, or for any purpose other than the
working capital requirements of the Borrower.
SECTION 7.4 Prepayment of Subordinated Indebtedness. Directly
or indirectly make a voluntary prepayment, redemption, repurchase, or otherwise
retire, any Subordinated Indebtedness.
SECTION 7.5 Negative Pledges, Etc. Enter into any agreement
(other than this Agreement, any other Loan Document and the GE Credit Agreement)
which (a) prohibits the creation or assumption of any Lien upon any property or
asset of any Loan Party, including, without limitation, any hereafter acquired
property, or (b) specifically prohibits the amendment or other modification of
this Agreement or any other Loan Document.
8. EVENTS OF DEFAULT
In case of the happening of any of the following events
(herein called "Events of Default"):
(1) any representation or warranty made or deemed made or
incorporated into this Agreement, the Notes or any other Loan Document,
or in connection with any of the foregoing, shall prove to have been
incorrect in any material respect when made or deemed to be made;
(2) default shall be made in the payment of any principal of
any Note when and as the same shall become due and payable, whether at
the due date thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise;
(3) default shall be made in the payment of any interest on
any Note, or any fee or any other amount payable hereunder, or under
the Notes or any other Loan Document when and as the same shall become
due and payable and such default shall continue unremedied for ten days
or more;
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(4) default shall be made in the due observance or performance
of any covenant, condition or agreement to be observed or performed on
the part of any Loan Party pursuant to the terms of this Agreement, any
of the Notes or any other Loan Document (other than any default of the
sort described in clause (a) or (b) above), and such default shall
continue unremedied for fifteen days or more;
(5) any Loan Party shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the
United States Code or any other Federal, state or foreign bankruptcy,
insolvency, liquidation or similar law, (ii) consent to the institution
of, or fail to contravene in a timely and appropriate manner, any such
proceeding or the filing of any such petition, (iii) apply for or
consent to the appointment of a receiver, trustee, custodian,
sequestrator or similar official for any Loan Party or for a
substantial part of its property or assets, (iv) file an answer
admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of
creditors, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take corporate
action for the purpose of effecting any of the foregoing;
(6) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of any Loan Party, or of a
substantial part of the property or assets of any Loan Party, under
Title 11 of the United States Code or any other Federal state or
foreign bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator or similar
official for any Loan Party or for a substantial part of the property
of any Loan Party or (iii) the winding-up or liquidation of any Loan
Party; and such proceeding or petition shall continue undismissed for
60 days or an order or decree approving or ordering any of the
foregoing shall continue unstayed and in effect for 60 days;
(7) (i) the maturity of any Indebtedness under the GE Credit
Agreement shall have been accelerated or (ii) a default shall be made
with respect to any Indebtedness or obligations under a capitalized
lease of any Loan Party (excluding the Obligations and Indebtedness
under the GE Credit Agreement) which either individually or taken
together with other such Indebtedness as to which a default has
occurred shall exceed $250,000 if the effect of any such default shall
be to accelerate, or to permit the holder or obligee of any such
Indebtedness or obligations under a capitalized lease (or any trustee
on behalf of such holder or obligee) at its option to accelerate, the
maturity of such Indebtedness or obligations under a capitalized lease;
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(8) a judgment (not reimbursed by insurance policies of any
Loan Party) or decree for the payment of money, a fine or penalty which
when taken together with all other such judgments, decrees, fines and
penalties shall exceed $250,000 shall be rendered by a court or other
tribunal against any Loan Party and (i) shall remain undischarged or
unbonded for a period of 30 consecutive days during which the execution
of such judgment, decree, fine or penalty shall not have been stayed
effectively or (ii) any judgment creditor or other person shall legally
commence actions to collect on or enforce such judgment, decree, fine
or penalty;
(9) this Agreement, any Note or any other Loan Documents shall
for any reason cease to be, or shall be asserted by any Loan Party not
to be, a legal, valid and binding obligation of any Loan Party,
enforceable in accordance with its terms;
then, and in any such event (other than an event described in paragraph (e) or
(f) above), and at any time thereafter during the continuance of such event, the
Required Lenders may, by written notice (or facsimile notice promptly confirmed
in writing) to the Borrower, take any or all of the following actions at the
same or different times: (i) terminate forthwith all or any portion of the Total
Commitment and (ii) declare the Notes and all Obligations to be forthwith due
and payable, whereupon the principal of such Notes, together with accrued
interest and fees thereon and other liabilities of the Borrower accrued
hereunder, shall become forthwith due and payable both as to principal and
interest, without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived by the Borrower, anything contained
herein or in the Notes to the contrary notwithstanding; provided, however, that
with respect to a default described in paragraph (e) or (f) above, the Total
Commitment shall automatically terminate and the principal of the Notes,
together with accrued interest and fees thereon and all other Obligations shall
automatically become due and payable, both as to principal and interest, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower, anything contained herein or in the
Notes to the contrary notwithstanding.
9. MISCELLANEOUS
SECTION 9.1 Notices. Notices, consents and other
communications provided for herein shall be in writing and shall be delivered or
mailed (or in the case of telex or facsimile communication, delivered by telex,
graphic scanning, telecopier or other telecommunications equipment, with receipt
confirmed) addressed,
(1) if to the Borrower or any other Loan Party, to Code-Alarm,
Inc. at 950 East Whitcomb, Madison Heights, Michigan 48071, Attention:
Craig S. Camalo
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Telecopier No.: (248) 585-4799, Telephone No.: (248) 583-9620, with a
copy to Pepper Hamilton, LLP, 100 Renaissance Center, 36th Floor,
Detroit, Michigan 48243-1157, Attention: Dennis S. Kayes, Telecopier
No.: (313) 259-7926, Telephone No.: (313) 393-7450;
(2) if to Pegasus Partners, L.P. or Pegasus Related Partners,
L.P., c/o Pegasus Investors, L.P. at 99 River Road, Cos Cob,
Connecticut 06807, Attention: Richard Cion, with a copy to Kaye,
Scholer, Fierman, Hays & Handler, LLP, at 425 Park Avenue, New York,
New York 10022, Attention: Edmond Gabbay, Esq.; and
(c) If to General Electric Capital Corporation, at 10 South
LaSalle Street
Suite 2800, Chicago, Illinois 60603, Attention: Account Manager,
Telecopier No.: (312) 419-5957, Telephone No.: (312) 419-0985, with
copies to Sidley & Austin, One First National Plaza, Chicago, Illinois
60603, Attention: H. Bruce Bernstein, Telecopier No.: (312) 853-7000,
Telephone No.: (312) 853-7036 and General Electric Capital Corporation,
201 High Ridge Road, Stamford, Connecticut 06927-5100, Attention:
Corporate Counsel, Telecopier No.: (203) 316-7889, Telephone No.: (203)
316-7552.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if hand delivered or three days after being sent by registered
or certified mail, postage prepaid, return receipt requested, if by mail, or
upon receipt if by any telex, facsimile or other telecommunications equipment,
in each case addressed to such party as provided in this Section 9.01 or in
accordance with the latest unrevoked direction from such party.
SECTION 9.2 Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower or any of its subsidiaries
herein and in the certificates or other instruments prepared or delivered in
connection with this Agreement or any other Loan Document, shall be considered
to have been relied upon by the Lenders and shall survive the making by the
Lenders of the Loans and the execution and delivery to the Lenders of the Notes
and shall continue in full force and effect as long as the principal of or any
accrued interest on the Notes or any other fee or amount payable under the Notes
or this Agreement or any other Loan Document is outstanding and unpaid and so
long as the Total Commitment has not been terminated.
SECTION 9.3 Successors and Assigns; Participations. (a)
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such party;
and all covenants, promises and agreements by or on behalf of the Borrower or
any other Loan Party, or the Lenders, that are contained in this Agreement shall
bind and inure to the
19
<PAGE> 24
benefit of their respective successors and assigns. The Borrower may not assign
or transfer any of its rights or obligations hereunder without the written
consent of all the Lenders.
(1) Each Lender, without the consent of the Borrower, may sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Agreement and the Loans owing to it and the
Notes held by it); provided, however, that (i) such Lender's obligations under
this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Borrower and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement; provided, further, however, that such Lender
shall retain the sole right and responsibility to enforce the obligations of the
Borrower and the other Loan Parties relating to the Loans, including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement, other than amendments, modifications or waivers
with respect to decreasing any fees payable hereunder or the amount of principal
or the rate of interest payable on the Loans, or extending the dates fixed for
any payment of principal of or interest on, the Loans or increasing or extending
the Commitments or the release of all Collateral.
(2) Each Lender may assign by novation, to any one or more
banks or other entities without the prior written consent of the Borrower, all
or a portion of its interests, rights and obligations under this Agreement and
the other Loan Documents. Each of Pegasus Partners, L.P. and Pegasus Related
Partners, L.P. agrees that it shall not make any such assignment without the
prior written consent of General Electric Capital Corporation (which shall not
be withheld unreasonably) unless all Indebtedness owing to General Electric
Capital Corporation under the GE Credit Agreement has been repaid in full and
the commitments of the lenders under the GE Credit Agreement have been
terminated. Upon effectiveness of any such assignment, (x) the assignee
thereunder shall be a party hereto and, to the extent provided in the agreement
governing such assignment, have the rights and obligations of a Lender hereunder
and under the other Loan Documents and (y) the Lender which is assignor
thereunder shall, to the extent of such assignment, be released from its
obligations under this Agreement (but shall continue to be entitled to the
benefits of those Sections under the Loan Documents that by their terms survive
termination of this Agreement, including, without limitation, Section 9.04 of
this Agreement).
(3) Notwithstanding any other provision herein, any Lender
may, in connection with any assignment or participation or proposed assignment
or participation pursuant to this Section 9.03, disclose to the assignee or
participant or proposed assignee or participant, any information, including,
without limitation, any Information, relating to the Borrower furnished to such
Lender by or on behalf of the Borrower in connection with this Agreement;
provided, however, that prior to any such
20
<PAGE> 25
disclosure, each such assignee or participant or proposed assignee or
participant shall agree to preserve the confidentiality of any confidential
Information relating to the Borrower received from such Lender.
SECTION 9.4 Expenses; Indemnity. (a) The Borrower agrees to
pay all reasonable out-of-pocket expenses incurred by any Lender in connection
with the preparation of this Agreement and the other Loan Documents or with any
amendments, modifications, waivers, extensions, renewals, renegotiations or
"workouts" of the provisions hereof or thereof (whether or not the transactions
hereby contemplated shall be consummated) or incurred by any Lender in
connection with the enforcement or protection of its rights in connection with
this Agreement or any of the other Loan Documents or with the Loans made or the
Notes issued hereunder, or in connection with any pending or threatened action,
proceeding, or investigation relating to the foregoing and, in connection with
such enforcement or protection, the reasonable fees and disbursements of counsel
for the Lenders. The Borrower further indemnifies each Lender from and agrees to
hold them harmless against any documentary taxes, assessments or charges made by
any governmental authority by reason of the execution and delivery of this
Agreement or the Notes.
(1) The Borrower indemnifies each Lender and its respective
directors, officers, employees and agents against, and agrees to hold each
Lender and each such person harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees and
expenses, incurred by or asserted against the Lender or any such person arising
out of, in any way connected with, or as a result of (i) the use of any of the
proceeds of the Loans, (ii) this Agreement or the other Loan Documents, (iii)
the performance by the parties hereto and thereto of their respective
obligations hereunder and thereunder (including but not limited to the making of
the Total Commitment) and consummation of the transactions contemplated hereby
and thereby, (iv) breach of any representation or warranty, or (v) any claim,
litigation, investigation or proceedings relating to any of the foregoing,
whether or not any Lender or any such person is a party thereto; provided,
however, that such indemnity shall not, as to any Lender, apply to any such
losses, claims, damages, liabilities or related expenses to the extent that they
result from the gross negligence or willful misconduct of such Lender.
(2) The Borrower indemnifies, and agrees to defend and hold
harmless the Lenders and their respective officers, directors, shareholders,
agents and employees (collectively, the "Indemnitees") from and against any
loss, cost, damage, liability, lien, deficiency, fine, penalty or expense
(including, without limitation, reasonable attorneys' fees and reasonable
expenses for investigation, removal, cleanup and remedial costs and modification
costs incurred to permit, continue or resume normal operations of any property
or assets or business of the Borrower or any subsidiary thereof) arising from a
violation of, or failure to comply with any Environmental Law and to remove any
Lien arising therefrom except to the extent
21
<PAGE> 26
caused by the gross negligence or willful misconduct of any Indemnitee, which
any of the Indemnitees may incur or which may be claimed or recorded against any
of the Indemnitees by any person.
(3) The provisions of this Section 9.04 shall remain operative
and in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or the Notes, or any investigation made by or on
behalf of any Lender. All amounts due under this Section 9.04 shall be payable
on written demand therefor.
SECTION 9.5 Applicable Law. THIS AGREEMENT AND THE NOTES SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK
(OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES THEREOF).
SECTION 9.6 Payments on Business Days. (a) Should the
principal of or interest on the Notes or any fee or other amount payable
hereunder become due and payable on other than a Business Day, payment in
respect thereof may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in computing interest, if any,
in connection with such payment.
(1) All payments by the Borrower hereunder and all Loans made
by each Lender hereunder shall be made in lawful money of the United States of
America in immediately available funds at the address of such Lender set forth
in Section 9.01 hereof (or otherwise in accordance with the written instruction
of such Lender).
SECTION 9.7 Waivers; Amendments. (a) No failure or delay of
any Lender in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Lenders hereunder are cumulative
and not exclusive of any rights or remedies which they may otherwise have. No
waiver of any provision of this Agreement or the Notes nor consent to any
departure by the Borrower therefrom shall in any event be effective unless the
same shall be authorized as provided in paragraph (b) below, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on the Borrower in any case
shall entitle it to any other or further notice or demand in similar or other
circumstances. Each holder of any of the Notes shall be bound by any amendment,
modification, waiver or consent authorized as provided herein, whether or not
such Note shall have been marked to indicate such amendment, modification,
waiver or consent.
22
<PAGE> 27
(1) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and the Required Lenders; provided,
however, that no such agreement shall (i) change the principal amount of, or
extend or advance the maturity of or the dates for the payment of principal of
or interest on, any Note or reduce the rate of interest on any Note, (ii) change
the Commitment of any Lender or amend or modify the provisions of this Section,
Section 2.10, Section 7.03, Section 9.04 or Article X hereof, or the definition
of "Required Lenders." Each Lender and holder of any Note shall be bound by any
modification or amendment authorized by this Section regardless of whether its
Notes shall be marked to make reference thereto, and any consent by any Lender
or holder of a Note pursuant to this Section shall bind any person subsequently
acquiring a Note from it, whether or not such Note shall be so marked.
(c) Notwithstanding anything to the contrary contained herein
or elsewhere, no amendment or modification of Article X hereof or this Section
9.07(c) shall be effective without the prior written consent of the holders of a
majority in principal amount of the Senior Indebtedness then outstanding (or
their authorized representative).
SECTION 9.8 Severability. In the event any one or more of the
provisions contained in this Agreement or in the Notes should be held invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall not
in any way be affected or impaired thereby.
SECTION 9.9 Entire Agreement; Waiver of Jury Trial, etc. (a)
This Agreement, the Notes and the other Loan Documents constitute the entire
contract between the parties hereto relative to the subject matter hereof. Any
previous agreement among the parties hereto with respect to the Transactions is
superseded by this Agreement, the Notes and the other Loan Documents. Except as
expressly provided herein or in the Notes or the Loan Documents (other than this
Agreement), nothing in this Agreement, the Notes or in the other Loan Documents,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, the Notes or the other Loan Documents.
(1) Except as prohibited by law, each party hereto hereby
waives any right it may have to a trial by jury in respect of any litigation
directly or indirectly arising out of, under or in connection with this
Agreement, the Notes, any of the other Loan Documents or the Transactions.
23
<PAGE> 28
(2) Except as prohibited by law, each party hereto hereby
waives any right it may have to claim or recover in any litigation referred to
in paragraph (b) of this Section 9.09 any special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages.
(3) Each party hereto (i) certifies that no representative,
agent or attorney of any Lender has represented, expressly or otherwise, that
such Lender would not, in the event of litigation, seek to enforce the foregoing
waivers and (ii) acknowledges that it has been induced to enter into this
Agreement, the Notes or the other Loan Documents, as applicable, by, among other
things, the mutual waivers and certifications herein.
SECTION 9.10 Confidentiality. Each Lender agrees to keep
confidential (and to cause its officers, directors, employees, agents and
representatives to keep confidential) all information, materials and documents
furnished to such Lender (the "Information"). Notwithstanding the foregoing,
each Lender shall be permitted to disclose Information (i) to such of its
officers, directors, employees, agents and representatives as need to know such
Information in connection with its participation in any of the Transactions or
the administration of this Agreement or the other Loan Documents; (ii) to the
extent required by applicable laws and regulations or by any subpoena or similar
legal process, or requested by any governmental agency or authority; (iii) to
the extent such Information (A) becomes publicly available other than as a
result of a breach of this Agreement, (B) becomes available to such Lender on a
non-confidential basis from a source other than the Borrower or another Loan
Party or (C) was available to such Lender on a non-confidential basis prior to
its disclosure to such Lender by the Borrower or another Loan Party; (iv) to the
extent the Borrower or another Loan Party shall have consented to such
disclosure in writing; or (vi) to any assignee or participant or any proposed
assignee or participant.
SECTION 9.11 Submission to Jurisdiction. (a) Any legal action
or proceeding with respect to this Agreement or the Notes or any other Loan
Document may be brought in the courts of the State of New York or of the United
States of America for the Southern District of New York, and, by execution and
delivery of this Agreement, the Borrower and each of the other Loan Parties
hereby accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts.
(1) The Borrower and each other Loan Party hereby irrevocably
waives, in connection with any such action or proceeding, any objection,
including, without limitation, any objection to the laying of venue or based on
the grounds of forum non conveniens, which they may now or hereafter have to the
bringing of any such action or proceeding in such respective jurisdictions.
24
<PAGE> 29
(2) The Borrower and each other Loan Party hereby irrevocably
consents to the service of process of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to each such person, as the case may be, at its
address set forth in Section 9.01 hereof.
(3) Nothing herein shall affect the right of the Agent or any
Lender to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Borrower or any other Loan
Party in any other jurisdiction.
SECTION 9.12 Counterparts; Facsimile Signature. This Agreement
may be executed in counterparts, each of which shall constitute an original but
all of which when taken together shall constitute but one contract, and shall
become effective when copies hereof which, when taken together, bear the
signatures of each of the parties hereto shall be delivered to the Lenders.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed signature page
hereto.
SECTION 9.13 Interest Rate Limitation. Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
any Loan, together with all fees, charges and other amounts which are treated as
interest on such Loan under applicable law (collectively, the "Charges"), shall
exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the interest and
Charges payable to such Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon, at the rate determined in accordance with in
Sections 2.05 and 2.08 hereof , to the date of repayment, shall have been
received by such Lender.
SECTION 9.14 Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only and are not
to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
10. SUBORDINATION
SECTION 10.1 General. Notwithstanding anything to the contrary
contained elsewhere in this Agreement or any other Loan Document, subject to the
25
<PAGE> 30
terms and conditions of this Article, the Senior Indebtedness shall first be
paid in full in cash, before any payment is made or provided for on account of
the Obligations other than any mandatory repayment of the Loans required under
Section 2.04(d) hereof.
SECTION 10.2 Limitation on Payment and Remedies.
(1) Upon receipt by the Borrower and the Lenders of a Blockage
Notice, then unless and until (i) all Senior Defaults that gave rise to the
Blockage Notice shall have been remedied or waived in writing or shall have
ceased to exist or (ii) the Senior Indebtedness in respect of which such Senior
Defaults shall have occurred shall have been paid in full in cash, no direct or
indirect payment (in cash, property or securities, by set-off or otherwise) of
or on account of the principal of or interest on the Notes or as a sinking fund
for the Notes or in respect of any redemption, retirement, purchase or other
acquisition of the Notes shall be made prior to the expiration of the resulting
Blockage Period.
(2) As long as any Senior Indebtedness remains outstanding,
the Lenders shall not declare the Obligations to be due and payable, or bring
suit or commence any proceeding or other enforcement action against the Borrower
or any other Loan Party, by reason of any Event of Default prior to the
expiration of 10 Business Days (a "Remedy Standstill Period") after the written
notice of intention to accelerate or exercise such other remedies on account of
the occurrence of such Event of Default, specifying same (the "Remedy Notice")
shall have been given by the Required Lenders to the Borrower and the holders of
the Senior Indebtedness (or their authorized agent), unless the holders of any
Senior Indebtedness shall have caused such Senior Indebtedness to become due
prior to its stated maturity or any Event of Default described in clause (e) or
(f) of Article VIII hereof shall have occurred; provided, however, that if at
the time the Remedy Standstill Period would otherwise expire a Blockage Period
is in effect, then such Remedy Standstill Period shall be extended to the
earlier to occur of (i) 90 days from the date of the Remedy Notice or (ii) such
earlier date as the Blockage Period shall have terminated or expired. Upon the
expiration or termination of any Remedy Standstill Period, the Lenders shall be
entitled to exercise any of their rights with respect to the Notes other than
any right to accelerate the maturity date of the Notes based upon the occurrence
of any Event of Default which has been cured or otherwise remedied during the
Remedy Standstill Period.
26
<PAGE> 31
(3) Notwithstanding the foregoing, any Blockage Period or
Remedy Standstill Period shall be inapplicable or cease to be effective if an
Event of Default described in clause (e) or (f) of Article VIII hereof shall
have occurred. In addition, any Blockage Period or Remedy Standstill Period
shall cease to be effective if at any time during such period: (i) substantial
assets of the Borrower are sold or otherwise disposed of outside of the ordinary
course of business for less than fair value; (ii) payment or any distribution of
any character, whether in cash, securities or other property of the Borrower
shall be made to or received by any creditor on any Indebtedness which is on the
same level of priority with or junior and subordinate in right of payment to the
Obligations or (iii) a notice of acceleration of the maturity of the Senior
Indebtedness shall have been transmitted to the Borrower.
SECTION 10.3 Subordination Upon Certain Events. Upon the
occurrence of any Event of Default described in clause (e) or (f) of Article
VIII hereof:
(1) Upon any payment or distribution of assets of the Borrower
to creditors of the Borrower, holders of Senior Indebtedness shall be entitled
to receive payment in full in cash before the Lenders shall be entitled to
receive any payment in respect of the Obligations.
(2) Until all Senior Indebtedness is paid in full in cash, any
distribution to which the Lenders would be entitled but for this Article X shall
be made to holders of Senior Indebtedness, as their interests may appear.
SECTION 10.4 Payments and Distributions Received. If the
Lenders shall have received any payment from or distribution of assets of the
Borrower in respect of the Obligations in contravention of the terms of this
Article X or in contravention of Section 2.09(a) hereof, then and in such event
payment or distribution shall be received and held in trust for and shall be
paid over or delivered to the holders of Senior Indebtedness (or their
authorized agent) to the extent necessary to pay all such Senior Indebtedness in
full.
SECTION 10.5 No Prejudice or Impairment. The rights of the
holders of Senior Indebtedness under this Article shall remain in full force and
effect without regard to, and shall not be impaired or affected by, (a) any
amendment, modification, restatement, waiver, compromise, release or consent
with respect to the GE Credit Agreement or other instrument evidencing or
governing any Senior Indebtedness, (b) any loss, release, subordination or
depreciation of any collateral or guaranty for the Senior Indebtedness, (c) any
failure to collect or receive payment of any Senior Indebtedness or (d) any
invalidity, unenforceability or subordination of any Senior Indebtedness in any
insolvency, bankruptcy or similar proceeding.
SECTION 10.6 Subrogation. After all amounts payable under or
in respect of Senior Indebtedness are paid in full in cash and all commitments
of the
27
<PAGE> 32
lenders under the GE Credit Agreement have been terminated, the Lenders
shall be subrogated to the rights of holders of Senior Indebtedness to receive
payments or distributions applicable to Senior Indebtedness to the extent that
distributions otherwise payable to the Lenders have been applied to the payment
of Senior Indebtedness. A distribution made under this Article X to a holder of
Senior Indebtedness which otherwise would have been made to the Lenders is not,
as between the Borrower and the Lenders, a payment by the Borrower in respect of
Senior Indebtedness.
SECTION 10.7 Relative Rights. The provisions of this Article X
are for the benefit of, and shall be enforceable directly by, the holders of
Senior Indebtedness and are solely for the purpose of defining the relative
rights of the Lenders, on the one hand, and the holders of Senior Indebtedness,
on the other hand. The parties hereto expressly intend that the holders of the
Senior Indebtedness are third party beneficiaries of the provisions of this
Article X to the same extent and effect as if they were signatories hereto.
Nothing in this Agreement shall: (i) impair, as between the Borrower and the
Lenders, the obligation of the Borrower, which is absolute and unconditional, to
pay principal of and interest (including default interest) on the Notes and all
other Obligations in accordance with its terms; (ii) affect the relative rights
of Lenders and creditors of the Borrower other than holders of Senior
Indebtedness; or (iii) except as provided in Section 10.02(b), prevent the
Lenders from exercising their available remedies upon a Default or Event of
Default, subject to the rights, if any, under this Article X of holders of
Senior Indebtedness to receive distributions otherwise payable to the Lenders.
No right of any holder of any Senior Indebtedness to enforce the subordination
of the Obligations shall be impaired by any failure by the Borrower to comply
with this Article X.
SECTION 10.8 Section Not to Prevent Events of Default. The
failure to make a payment on account of principal of or interest on the Notes or
other Obligations by reason of any provision of this Article X shall not be
construed as preventing the occurrence of a Default or an Event of Default.
* * *
28
<PAGE> 33
IN WITNESS WHEREOF, the Borrower and the Lenders have caused
this Agreement to be duly executed by their respective authorized officers as of
the day and year first above written.
CODE-ALARM, INC.
By:
---------------------------------------
Name:
Title:
PEGASUS PARTNERS, L.P.
By: Pegasus Investors, L.P., its general
partner
By: Pegasus Investors GP, Inc., its general
partner
By:
---------------------------------------
Name:
Title:
PEGASUS RELATED PARTNERS, L.P.
By: Pegasus Investors, L.P., its general
partner
By: Pegasus Investors GP, Inc., its general
partner
By: ---------------------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION
By: ---------------------------------------
Name:
Title:
29
<PAGE> 34
SCHEDULE 2.01
COMMITMENTS
<TABLE>
<CAPTION>
Approximate Percentage
Lender Commitment of Total Commitment
<S> <C> <C>
Pegasus Partners, L.P. $ 319,386.36 21.292424%
Pegasus Related Partners, L.P. $ 830,613.64 55.374243%
General Electric Capital
Corporation $ 350,000.00 23.333333%
-------------- ----------
$ 1,500,000.00 100.00%
</TABLE>
30
<PAGE> 1
EXHIBIT 10.43
EXECUTION COPY
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT ("Agreement"), dated as of March 29,
1999, is entered into between Code-Alarm, Inc., a Michigan corporation (the
"Company") and General Electric Capital Corporation, a Delaware corporation (the
"Holder").
R E C I T A L S:
WHEREAS, on October 24, 1997, the Company issued to the Holder
that certain Warrant to Purchase Common Stock of Code-Alarm, Inc. (Warrant No.
A-1) (the "Warrant") pursuant to that certain Warrant Purchase Agreement of even
date therewith between the Company and the Holder;
WHEREAS, pursuant to that certain Credit Agreement of even
date herewith by and among Pegasus Partners, L.P., Pegasus Related Partners, L.
P. (collectively, the "Pegasus Funds"), the Holder and the Company (the "Pegasus
Credit Agreement"), the Pegasus Funds and the Holder have agreed to make certain
term loans to the Company to assist in financing the Company's working capital
requirements;
WHEREAS, pursuant to that certain Amendment No. 5 and Waiver
No. 8 to Credit Agreement of even date herewith (the "GECC Amendment"), the
Holder has agreed to certain concessions favorable to the Company, including,
without limitation, waivers of certain defaults by the Company, with respect to
that certain Credit Agreement dated as of October 24, 1997 among the Company,
the other "Credit Parties" from time to time party thereto, the "Lenders" from
time to time party thereto (including the Holder in its capacity as a Lender),
and General Electric Capital Corporation as "Agent" for the Lenders (as amended
from time to time, the "GECC Credit Agreement"), the Holder has provided and
continues to provide the Company with loans and other financial accommodations
subject to the terms and conditions thereof;
WHEREAS, in order to induce the Holder to enter into the
Pegasus Credit Agreement and the GECC Amendment, the Company has agreed to enter
into this Agreement.
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Undefined capitalized terms which are
used herein shall have the meanings ascribed to such terms the Warrant or, if
not defined therein, in the GECC Credit Agreement.
<PAGE> 2
2. AMENDMENT OF THE WARRANT. The Warrant is hereby
amended to change the Exercise Price from $1.0350702 per share of Common Stock
to the following:
(a) From and after the date hereof, Exercise Price under the
Warrant shall be $0.523505 per share of Common Stock, subject to
adjustment as provided below.
(b) If, on October 31, 1999, any "Obligations" (as defined in
the Pegasus Credit Agreement) remain outstanding, then from and after
such date, the Exercise Price under the Warrant shall be $.423505,
subject to adjustment as provided below.
(c) If, on January 31, 2000, any Obligations remain
outstanding, then from and after such date, the Exercise Price under
the Warrant shall be $.323505, subject to adjustment as provided below.
(d) If, on April 30, 2000, any Obligations remain outstanding,
then from and after such date, the Exercise Price under the Warrant
shall be $.223505, subject to adjustment as provided below.
(e) If, on July 31, 2000, any Obligations remain outstanding,
then from and after such date, the Exercise Price under the Warrant
shall be $.123505, subject to adjustment as provided below.
(f) If, on October 31, 2000, any Obligations remain
outstanding, then from and after such date, the Exercise Price under
the Warrant shall be $.023505, subject to adjustment as provided below.
(g) If, on January 31, 2001, any Obligations remain
outstanding, then from and after such date, the Exercise Price under
the Warrant shall be $.0001.
3. AMENDED EXERCISE PRICE SUBJECT TO ANTI-DILUTION; NO
INCREASE IN EXERCISE PRICE. The Exercise Price of the Warrant as specified in
paragraphs (a) through (g) of Section 2 hereof shall be equitably further
adjusted to the extent provided in Section 4 of the Warrant; provided, however,
that (a) no such adjustment shall reduce the Exercise Price of the Warrant to an
amount less than $.0001 per share of Common Stock and (b) the Exercise Price
shall not be adjusted under Section 4 of the Warrant as a result of the
modifications to the Pegasus Funds' warrants pursuant to that certain Amendment
Agreement of even date herewith among the Pegasus Funds and the Company. No
adjustment described in Section 2 hereof to the Exercise Price shall result in
an increase in the Exercise Price of the Warrant at any time.
4. LEGEND. Concurrently with the execution hereof, the
following legend shall be placed on the face of the Warrant:
"This Warrant has been amended pursuant to the Amendment
Agreement dated as of March 29, 1999 among Code Alarm Inc.
2
<PAGE> 3
and General Electric Capital Corporation, a copy of which is
available for inspection at the offices of Code-Alarm Inc."
5. WARRANT TO REMAIN IN FULL FORCE AND EFFECT. Except as
set forth herein, the Warrant shall continue in full force and effect in
accordance with its terms and the Warrant, as amended hereby, is hereby ratified
and confirmed by the Company and accepted by the Holder.
6. REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants to the Holder as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan and has
all requisite corporate power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to have such governmental
approvals could not reasonably be expected to have a Material Adverse Effect.
The Company is duly qualified or licensed to do business and in good standing in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or prevent the Company from
consummating the transactions contemplated by this Agreement.
(b) The Company has heretofore made available to the Holder a
complete and correct copy of its articles of incorporation, as amended, and its
by-laws, as currently in effect. Each such document is in full force and effect
and no other organizational documents are applicable to or binding upon the
Company.
(c) The Company has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by the Company of
this Agreement and the consummation by it of the transactions contemplated
hereby have been duly authorized by the Board of Directors of the Company and no
other corporate or shareholder action on the part of the Company is necessary to
authorize the execution, delivery or performance by the Company of this
Agreement or the consummation by it of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Company and (assuming
due and valid authorization, execution and delivery hereof by the other parties
hereto and thereto) is a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except that such enforcement
may be subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws, now or hereafter in effect, affecting creditors' rights
generally.
(d) None of the execution, delivery or performance of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby, nor compliance by the Company with any of the provisions
hereof will (i) conflict with or result in any breach of any provision of the
Company's articles of incorporation, as amended, or the by-laws or
3
<PAGE> 4
other organizational documents of the Company, (ii) require on the part of the
Company any filing with, or permit, authorization, consent or approval of, any
court, arbitral tribunal, administrative agency or other governmental or
regulatory authority or agency, including, without limitation, any consent or
approval of any federal, state, local or foreign insurance industry agency,
commission or other governing body, except for in the case of this clause (ii),
(A) filings, permits, authorizations, consents and approvals as may be required
under federal and state securities laws, and the laws of other states in which
the Company is qualified to do or is doing business, and (B) where the failure
to obtain such permits, authorizations, consents or approvals or to make such
filings, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect or prevent the Company from consummating the
transactions contemplated hereby, (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any material indenture, mortgage, deed
of trust, credit agreement, note or other evidence of indebtedness or other
material agreement, instrument or obligation to which the Company is a party or
by which it or any of its properties or assets may be bound or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its properties or assets.
7. DELIVERIES. Concurrently with the execution and
delivery of this Agreement, the Company shall deliver to the Holder the
following documents:
(a) a certificate dated the date hereof, signed by the
appropriate authorized officers of the Company with respect to the certification
of the articles of incorporation of the Company, its By-Laws, resolutions
authorizing the transactions contemplated hereby, incumbency and such other
matters as the Holder shall reasonably request; and
(b) a legal opinion of Pepper Hamilton LLP, counsel for the
Company, in form acceptable to the Holder, opining that (i) the Company has been
duly incorporated and is validly existing and in good standing under the laws of
the State of Michigan, and has all requisite corporate power and authority to
own its properties and assets and conduct its business as currently conducted,
(ii) this Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except that such enforcement may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (iii) the execution, delivery and performance of this Agreement,
and the issuance of Common Stock upon exercise of the Warrant, as amended by
this Agreement, will not (A) result in a breach of any of the terms, conditions
or provisions of, or constitute a default under, any material indenture,
mortgage, deed of trust, credit agreement, note or other evidence of
indebtedness or other material agreement, instrument or obligation to which the
Company is a party and which is known to such counsel, (B) contravene the
articles of incorporation, as amended, or by-laws of the Company, or (C) to the
knowledge of such counsel, contravene any order binding on or judgment against
the Company or its properties or businesses.
8. PAYMENT OF FEES AND EXPENSES. Concurrently with the
execution and delivery of this Agreement, the Company shall pay all fees,
expenses and disbursements of the
4
<PAGE> 5
Holder in connection with the transactions contemplated by this Agreement and
all outstanding fees, expenses and disbursements of the Holder payable by the
Company pursuant to the GECC Credit Agreement, including in each case the
outstanding fees and expenses of Sidley & Austin, counsel to the Holder.
9. GOVERNING LAW. In all respects, including all matters
of construction, validity and performance, this Agreement and the obligations
arising hereunder shall be governed by, and construed and enforced in accordance
with, the laws of the State of Michigan applicable to contracts made and
performed in such state, without regard to the principles thereof regarding
conflict of laws, and any applicable laws of the United States of America.
10. COUNTERPARTS. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by any one or more
parties hereto, and each such executed counterpart shall be, and shall be deemed
to be, an original, but all of which shall constitute, and shall be deemed to
constitute, in the aggregate, but one and the same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the day and year first written above.
CODE ALARM, INC.
By:
-----------------------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
-----------------------------------------
Name:
Title:
5
<PAGE> 1
EXHIBIT 10.44
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT ("Agreement"), dated as of March 31, 1999,
to the various warrants (collectively, the "Warrants") to purchase common stock
of Code Alarm Inc., a Michigan corporation (the "Company"), issued by the
Company to Pegasus Partners, L.P. and Pegasus Related Partners, L.P., each a
Delaware limited partnership (collectively, the "Holders"), on October 27, 1997
and from time to time thereafter, pursuant to the Unit Purchase Agreement (the
"Purchase Agreement") dated as of October 27, 1997 among the Company and the
Holders.
WHEREAS, pursuant to that certain Credit Agreement of even
date herewith by and among the Holders, General Electric Capital Corporation
("GECC") and the Company (the "Credit Agreement"), the Holders are making
commitments to make loans to the Company.
WHEREAS, in order to induce the Holders to enter into the
Credit Agreement, the Company has agreed to enter into this Agreement.
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. The terms hereinafter set forth when used
herein shall have the following meanings, and any terms not otherwise defined
herein that are defined in the Purchase Agreement shall have the respective
meanings specified in the Purchase Agreement:
"Current Warrant Price" shall have the meaning specified in
the Attached Warrants, the Shortfall Warrants or the Litigation Warrants, as the
context may require.
"Material Adverse Effect" shall mean a material adverse effect
on (i) the business, properties, assets, prospects, goodwill or condition,
financial or otherwise, of the Company or (ii) the ability of the Company to
perform or the Holders to enforce the obligations of the Company under this
Agreement.
2. AMENDMENT OF ATTACHED WARRANTS AND SHORTFALL WARRANTS.
Each of the Attached Warrants and the Shortfall Warrants is hereby amended to
change the Current Warrant Price thereunder from $1.8759559 per share of Common
Stock to the following:
(a) From and after the date hereof, the Current Warrant Price
under each Attached Warrant and Shortfall Warrant shall be $0.523505
per share of Common Stock, subject to adjustment as provided below.
(b) If, on October 31, 1999, any Obligations (as defined in
the Credit Agreement) remain outstanding, then from and after such
date, the Current Warrant Price under each Attached Warrant and
Shortfall Warrant shall be $.423505, subject to adjustment as provided
below.
<PAGE> 2
(c) If, on January 31, 2000, any Obligations remain
outstanding, then from and after such date, the Current Warrant Price
under each Attached Warrant and Shortfall Warrant shall be $.323505,
subject to adjustment as provided below.
(d) If, on April 30, 2000, any Obligations remain outstanding,
then from and after such date, the Current Warrant Price under each
Attached Warrant and Shortfall Warrant shall be $.223505, subject to
adjustment as provided below.
(e) If, on July 31, 2000, any Obligations remain outstanding,
then from and after such date, the Current Warrant Price under each
Attached Warrant and Shortfall Warrant shall be $.123505, subject to
adjustment as provided below.
(f) If, on October 31, 2000, any Obligations remain
outstanding, then from and after such date, the Current Warrant Price
under each Attached Warrant and Shortfall Warrant shall be $.023505,
subject to adjustment as provided below.
(g) If, on January 31, 2001, any Obligations remain
outstanding, then from and after such date, the Current Warrant Price
under each Attached Warrant and Shortfall Warrant shall be $.0001.
3. AMENDMENT OF LITIGATION WARRANTS. Each of the
Litigation Warrants is hereby amended to change the Current Warrant Price under
such Litigation Warrant to the following:
(a) If, on October 31, 1999, any Obligations remain
outstanding, then from and after such date, the Current Warrant Price
under each Litigation Warrant shall be the lesser of (i) the Current
Warrant Price under such Litigation Warrant immediately prior to such
date and (ii) $.423505, subject to adjustment as provided below.
(b) If, on January 31, 2000, any Obligations remain
outstanding, then from and after such date, the Current Warrant Price
under each Litigation Warrant shall be the lesser of (i) the Current
Warrant Price under such Litigation Warrant immediately prior to such
date and (ii) $.323505, subject to adjustment as provided below.
(c) If, on April 30, 2000, any Obligations remain outstanding,
then from and after such date, the Current Warrant Price under each
Litigation Warrant shall be $.223505, subject to adjustment as provided
below.
(d) If, on July 31, 2000, any Obligations remain outstanding,
then from and after such date, the Current Warrant Price under each
Litigation Warrant shall be $.123505, subject to adjustment as provided
below.
(e) If, on October 31, 2000, any Obligations remain
outstanding, then from and after such date, the Current Warrant Price
under each Litigation Warrant shall be $.023505, subject to adjustment
as provided below.
2
<PAGE> 3
(f) If, on January 31, 2001, any Obligations remain
outstanding, then from and after such date, the Current Warrant Price
under each Litigation Warrant shall be $.0001.
4. AMENDED CURRENT WARRANT PRICE SUBJECT TO
ANTI-DILUTION; NO INCREASE IN CURRENT WARRANT PRICE. The Current Warrant Price
of any of the Attached Warrants, Shortfall Warrants or Litigation Warrants as
specified in paragraphs (a) through (g) of Section 2 hereof and/or paragraphs
(a) through (f) of Section 3 hereof shall be equitably further adjusted in
accordance with the anti-dilution provisions contained in such Warrants;
provided, however, that (a) no such adjustment shall reduce the Current Warrant
Price of any such Warrant to an amount less than $.0001 per share of Common
Stock and (b) no adjustment shall be made to the Current Warrant Price of any
such Warrant as a result of the modifications to the warrants held by GECC
pursuant to that certain Amendment Agreement of even date herewith between the
Company and GECC. No adjustment described in Section 2 or 3 hereof to the
Current Warrant Price of any Warrant shall result in an increase in the Current
Warrant Price of any Warrant at any time.
5. LEGEND. Concurrently with the execution hereof, the
following legend shall be placed on the face of each of the Attached Warrants,
Shortfall Warrants and Litigation Warrants:
"This Warrant has been amended pursuant to the Amendment
Agreement dated as of March 31, 1999 among Code Alarm Inc.,
Pegasus Partners, L.P. and Pegasus Related Partners, L.P., a
copy of which is available for inspection at the offices of
Code Alarm Inc."
6. WARRANTS TO REMAIN IN FULL FORCE AND EFFECT. Except as
set forth herein, the Warrants shall continue in full force and effect in
accordance with their terms and the Warrants, as amended hereby, are hereby
ratified and confirmed by the Company and accepted by the Holders.
7. REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants to the Holders as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan and has
all requisite corporate power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to have such governmental
approvals could not reasonably be expected to have a Material Adverse Effect.
The Company is duly qualified or licensed to do business and in good standing in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or prevent the Company from
consummating any of the transactions contemplated by the Agreement.
3
<PAGE> 4
(b) The Company has heretofore made available to the Holders a
complete and correct copy of its articles of incorporation, as amended, and its
by-laws, as currently in effect. Each such document is in full force and effect
and no other organizational documents are applicable to or binding upon the
Company.
(c) The Company has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by the Company of
this Agreement and the consummation by it of the transactions contemplated
hereby have been duly authorized by the Board of Directors of the Company and no
other corporate or shareholder action on the part of the Company is necessary to
authorize the execution, delivery or performance by the Company of this
Agreement or the consummation by it of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Company and (assuming
due and valid authorization, execution and delivery hereof by the other parties
hereto and thereto) is a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except that such enforcement
may be subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws, now or hereafter in effect, affecting creditors' rights
generally.
(d) None of the execution, delivery or performance of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby, nor compliance by the Company with any of the provisions
hereof will (i) conflict with or result in any breach of any provision of the
Company's articles of incorporation, as amended, or the by-laws or other
organizational documents of the Company, (ii) require on the part of the Company
any filing with, or permit, authorization, consent or approval of, any court,
arbitral tribunal, administrative agency or other governmental or regulatory
authority or agency, including, without limitation, any consent or approval of
any federal, state, local or foreign insurance industry agency, commission or
other governing body, except for in the case of clause (ii) (A) filings,
permits, authorizations, consents and approvals as may be required under federal
and state securities laws, and the laws of other states in which the Company is
qualified to do or is doing business, and (B) where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect or prevent the Company from consummating the
transactions contemplated hereby, (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any material indenture, mortgage, deed
of trust, credit agreement, note or other evidence of indebtedness or other
material agreement, instrument or obligation to which the Company is a party or
by which it or any of its properties or assets may be bound or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its properties or assets.
8. DELIVERIES. Concurrently with the execution and
delivery of this Agreement, the Company shall deliver to the Holders the
following documents:
(a) a certificate dated the date hereof, signed by the
appropriate authorized officers of the Company with respect to the certification
of the articles of incorporation of the
4
<PAGE> 5
Company, its By-Laws, resolutions authorizing the transactions contemplated
hereby, incumbency and such other matters as the Holders shall reasonably
request; and
(b) a legal opinion of Pepper Hamilton LLP, counsel for the
Company, in form acceptable to the Holders, opining that (i) the Company has
been duly incorporated and is validly existing and in good standing under the
laws of the State of Michigan, and has all requisite corporate power and
authority to own its properties and assets and conduct its business as currently
conducted, (ii) this Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except that such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws, now or hereafter in effect, affecting
creditors' rights generally, and (iii) the execution, delivery and performance
of this Agreement, and the issuance of Common Stock upon exercise of the
Warrants, as amended by this Agreement, will not (A) result in a breach of any
of the terms, conditions or provisions of, or constitute a default under, any
material indenture, mortgage, deed of trust, credit agreement, note or other
evidence of indebtedness or other material agreement, instrument or obligation
to which the Company is a party and which is known to such counsel, (B)
contravene the articles of incorporation, as amended, or by-laws of the Company,
or (C) to the knowledge of such counsel, contravene any order binding on or
judgment against the Company or its properties or businesses.
9. PAYMENT OF FEES AND EXPENSES. Concurrently with the
execution and delivery of this Agreement, the Company shall pay all fees,
expenses and disbursements of the Holders in connection with the transactions
contemplated by this Agreement and all outstanding fees, expenses and
disbursements of the Holders payable by the Company pursuant to the Purchase
Agreement, including in each case the outstanding fees and expenses of Kaye,
Scholer, Fierman, Hays & Handler, LLP, counsel to the Holders.
10. GOVERNING LAW. In all respects, including all matters
of construction, validity and performance, this Agreement and the obligations
arising hereunder shall be governed by, and construed and enforced in accordance
with, the laws of the State of Michigan applicable to contracts made and
performed in such state, without regard to the principles thereof regarding
conflict of laws, and any applicable laws of the United States of America.
11. COUNTERPARTS. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by any one or more
parties hereto, and each such executed counterpart shall be, and shall be deemed
to be, an original, but all of which shall constitute, and shall be deemed to
constitute, in the aggregate, but one and the same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the day and year first written above.
CODE ALARM, INC.
By:
-----------------------------------------------
5
<PAGE> 6
Name:
Title:
PEGASUS PARTNERS, L.P.
By: Pegasus Investors, L.P., its general partner
By: Pegasus Investors GP, Inc., its general partner
By:
-----------------------------------------------
Name:
Title:
PEGASUS RELATED PARTNERS, L.P.
By: Pegasus Investors, L.P., its general partner
By: Pegasus Investors GP, Inc., its general partner
By:
-----------------------------------------------
Name:
Title:
6
<PAGE> 1
PART I. EXHIBITS
EXHIBIT 11, STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------------
1999 1998
-------------- --------------
<S> <C> <C> <C>
Weighted average common
shares outstanding A 2,320,861 2,320,861
Weighted average dilutive
warrants outstanding 1,172,000
Weighted average common ============== ==============
and dilutive shares outstanding B 2,320,861 3,492,861
============== ==============
Net income (loss) applicable to common stock C $(1,362,000) $ 475,000
============== ==============
Basic earnings (loss) per share C/A $ (0.59) $ 0.20
============== ==============
Diluted earnings (loss) per share C/B $ (0.59) $ 0.14
============== ==============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 753
<SECURITIES> 0
<RECEIVABLES> 5069
<ALLOWANCES> 555
<INVENTORY> 2575
<CURRENT-ASSETS> 8182
<PP&E> 7015
<DEPRECIATION> 5198
<TOTAL-ASSETS> 13111
<CURRENT-LIABILITIES> 6446
<BONDS> 20084
0
7351
<COMMON> 12213
<OTHER-SE> (32983)
<TOTAL-LIABILITY-AND-EQUITY> 13111
<SALES> 8362
<TOTAL-REVENUES> 8362
<CGS> 5429
<TOTAL-COSTS> 8731
<OTHER-EXPENSES> 809
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 424
<INCOME-PRETAX> (1178)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1178)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1362)
<EPS-BASIC> (0.59)
<EPS-DILUTED> (0.59)
</TABLE>
