Draft - 9/13/99
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): SEPTEMBER 8, 1999
RECOTON CORPORATION
(Exact name of registrant as specified in charter)
NEW YORK 0-5860 11-1771737
(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
2950 LAKE EMMA ROAD, LAKE MARY, FLORIDA 32746
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: 407-333-8900
N.A.
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
On September 8, 1999, the Company restructured its existing indebtedness
and obtained an additional credit facility of $50 million from certain existing
lenders and noteholders. Pursuant to such restructuring and additional
financing, the following occurred:
o the maturity of the Company's existing multibank credit facility,
consisting of a line of credit of $86.5 million and a term loan with a
current balance of $8.75 million, was extended from its scheduled
December 26, 1999 expiration date until June 30, 2001, the amount of
the facility was increased by approximately $5.9 million, certain
loans previously made by one member of the bank group were paid off
with borrowings under such facility as increased and the interest rate
on borrowings under the line was increased to 3.77% over prime (from
0.5% over prime).
o the maturity date of the Company's existing ten-year adjustable rate
senior notes, totaling $100 million, was changed from 2007 (for $75
million) and 2008 (for $25 million) to June 30, 2001 and the interest
was increased by 3.0% over the previous rates of 9.75% for $75 million
in principal amount and 9.52% for $25 million in principal amount;
o the maturity date of the Company's existing five-year subordinated
notes due in 2004, totaling $35 million, was unchanged and the
interest was increased to 13.5% (with additional increases to 14.5% in
November 1999, 15.0% in February 2000 and 15.5% in May 2000) from
11.5%;
o the new revolving credit facility of $50 million, which amount is
subject to fluctuations at various times over the life of the loan, is
available until June 30, 2001 with interest at 3.5% over prime;
o financial covenants under the existing debt were substantially relaxed
and such modified covenants also apply to the new $50 million credit
facility;
o the new lenders were granted five-year warrants to purchase an
aggregate of 250,000 shares of Recoton common stock at an exercise
price of approximately $7.77 (up to 175,000 of which are subject to
cancellation under certain circumstances) and the Company agreed to
issue up to an additional 75,000 warrants with an exercise price at
the then fair market value if certain prepayments on the existing
credit facility are not made at stated times;
o the Company (a) granted the holders of the subordinated debt warrants
to purchase 100,000 shares of common stock at approximately $7.77 per
share, in lieu of warrants for 320,000 shares previously committed to
be issued under certain circumstances, (b) reduced the exercise price
on warrants previously issued to the subordinated noteholders to
approximately $7.77 and (c) agreed to issue warrants to purchase an
additional 20,000 shares at an exercise price at the then fair market
value if certain conditions are not met;
o the Company granted collateral in substantially all of the assets of
Recoton and its domestic subsidiaries, and certain assets of foreign
subsidiaries, as security for the new loans as well as security for
the exiting multibank credit facility and the senior notes; and
o the Company agreed to pay certain restructuring fees, commitment
fees, facility fees, agency fees and "make-whole" sums.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
a. Financial Statements of Business Acquired: not applicable
b. Pro Forma Financial Information: not applicable
c. Exhibits:
1. Master Restructuring Agreement, dated as of September 8, 1999,
among Recoton Corporation; Certain of its Subsidiaries; the
Existing Creditors identified therein; and The Chase Manhattan
Bank, as Collateral Agent.
2. Credit Agreement, dated as of September 8, 1999, among Recoton
Corporation, the several Lenders from time to time Parties
thereto; and The Chase Manhattan Bank, as Agent.
3. Collateral Agreement, dated as of September 8, 1999, made by
Recoton Corporation and certain of its Subsidiaries in favor of
The Chase Manhattan Bank, as Collateral Agent.
4. Guarantee, dated as of September 8, 1999, among the several
Guarantors listed therein in favor of The Chase Manhattan Bank,
as agent for the several Lenders parties to the Credit Agreement,
dated as of September 8, 1999, among Recoton Corporation, the
several Lenders from time to time Parties thereto; and The Chase
Manhattan Bank, as Agent.
5. Registration Rights Agreement dated as of September 8, 1999 among
Recoton Corporation and each of the parties whose signatures are
set forth thereto under the heading "LIFO Lenders"
6. Form of 1999 Replacement Common Stock Purchase Warrants dated
September 8, 1999 issued to the holders of the Company's
Subordinated Notes issued February 4, 1999 to purchase an
aggregate of 100,000 shares of common stock
7. Letter from Recoton Corporation dated September 8, 1999 to the
holders of the Company's Subordinated Notes issued February 4,
1999 repricing options granted on February 4, 2004.
8. Form of Fixed Facility Fee Common Stock Purchase Warrant dated
September 8, 1999 issued to the lenders under the Credit
Agreement dated as of September 8, 1999 to purchase an aggregate
of 75,000 shares of common stock
9. Form of Common Stock Purchase Warrant dated September 8, 1999
issued to the lenders under the Credit Agreement dated as of
September 8, 1999 to purchase an aggregate of 175,000 shares of
common stock
10. Form of Prepayment Common Stock Purchase Warrant to purchase an
aggregate of up to 75,000 shares of common stock to be issued to
the lenders under the Credit Agreement dated as of September 8,
1999 under certain circumstances
<PAGE>
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 hereunto duly authorized.
RECOTON CORPORATION
By: /s/ Stuart Mont
Name: Stuart Mont
Title: Chief Operating Officer and
Executive Vice President-Operations
Dated: September 13, 1999
<PAGE>
EXHIBIT INDEX
1. Master Restructuring Agreement, dated as of September 8, 1999, among
Recoton Corporation; Certain of its Subsidiaries; the Existing
Creditors identified therein; and The Chase Manhattan Bank, as
Collateral Agent.
2. Credit Agreement, dated as of September 8, 1999, among Recoton
Corporation, the several Lenders from time to time Parties thereto;
and The Chase Manhattan Bank, as Agent.
3. Collateral Agreement, dated as of September 8, 1999, made by Recoton
Corporation and certain of its Subsidiaries in favor of The Chase
Manhattan Bank, as Collateral Agent.
4. Guarantee, dated as of September 8, 1999, among the several Guarantors
listed therein in favor of The Chase Manhattan Bank, as agent for the
several Lenders parties to the Credit Agreement, dated as of September
8, 1999, among Recoton Corporation, the several Lenders from time to
time Parties thereto; and The Chase Manhattan Bank, as Agent.
5. Registration Rights Agreement dated as of September 8, 1999 among
Recoton Corporation and each of the parties whose signatures are set
forth thereto under the heading "LIFO Lenders"
6. Form of 1999 Replacement Common Stock Purchase Warrants dated
September 8, 1999 issued to the holders of the Company's Subordinated
Notes issued February 4, 1999 to purchase an aggregate of 100,000
shares of common stock
7. Letter from Recoton Corporation dated September 8, 1999 to the holders
of the Company's Subordinated Notes issued February 4, 1999 repricing
options granted on February 4, 2004.
8. Form of Fixed Facilty Fee Common Stock Purchase Warrant dated
September 8, 1999 issued to the lenders under the Credit Agreement
dated as of September 8, 1999 to purchase an aggregate of 75,000
shares of common stock
9. Form of Cancellable Facility Fee Common Stock Purchase Warrant dated
September 8, 1999 issued to the lenders under the Credit Agreement
dated as of September 8, 1999 to purchase an aggregate of 175,000
shares of common stock
10. Form of Prepayment Common Stock Purchase Warrant to purchase an
aggregate of up to 75,000 shares of common stock to be issued to the
lenders under the Credit Agreement dated as of September 8, 1999 under
certain circumstances
EXHIBIT 1
- -------------------------------------------------------------------------------
MASTER RESTRUCTURING AGREEMENT
Dated as of September 8, 1999
Among
RECOTON CORPORATION,
Certain of its Subsidiaries,
the Existing Creditors identified herein
and
THE CHASE MANHATTAN BANK,
as Collateral Agent
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.......................................................1
Section 1.1 Definitions of Certain Terms..............................1
Section 1.2 Terms Generally...........................................1
SECTION 2. CONSENT TO LIFO OBLIGATIONS; RESTRUCTURE AND MODIFICATION OF
EXISTING OBLIGATIONS
Section 2.1 LIFO Obligations; Consent to LIFO Obligations.............2
Section 2.2 Restructure and Modification of the Existing Bank
Obligations and the Chase Obligations.....................2
Section 2.3 Restructure of and Modification of the Senior Notes.......4
Section 2.4 Modification of 1999 Note Obligations.....................4
Section 2.5 Modification of Chase Mortgage Agreements.................5
Section 2.6 Reallocation of Interest..................................6
Section 2.7 Prepayment Warrants.......................................6
Section 2.8 Override of the Existing Agreements; Limitations on
Amendments and Modifications of Existing Agreements.......7
Section 2.9 Substitution of Security.................................10
SECTION 3. SUBORDINATION....................................................10
Section 3.1 Subordination............................................10
Section 3.2 Turnover of Payments and Collections.....................12
Section 3.3 Rights in Collateral.....................................13
Section 3.4 Subrogation..............................................13
Section 3.5 Consent of Subordinated Creditors........................14
Section 3.6 Negative Covenants of Subordinated Creditors.............15
Section 3.7 Priority of LIFO Obligations Unconditional...............15
Section 3.8 Existing L/C Obligation Reduction True-Up................15
Section 3.9 Sharing Among Existing Senior Creditors; Sharing
Agreement................................................16
Section 3.10 Survival of Subordination of 1999 Notes.................17
SECTION 4. APPLICATION OF PAYMENTS AND PROCEEDS.............................17
Section 4.1 Collateral Accounts......................................17
Section 4.2 Investment of Funds Deposited in Collateral Accounts.....18
Section 4.3 Application of Payments and Proceeds.....................18
SECTION 5. REPRESENTATIONS AND WARRANTIES...................................19
Section 5.1 Representations and Warranties of the Loan Parties.......19
Section 5.2 Representations and Warranties of the Collateral
Agent and the Creditors..................................20
SECTION 6. CONCERNING THE COLLATERAL AGENT..................................20
Section 6.1 Appointment of Collateral Agent..........................20
Section 6.2 Actions Under Security Documents.........................21
Section 6.3 Limitations on Responsibility of Collateral Agent........21
Section 6.4 Reliance by Collateral Agent; Indemnity Against
Liabilities; etc.........................................22
Section 6.5 Resignation or Removal of the Collateral Agent...........23
Section 6.6 Expenses and Indemnification by Borrower.................24
Section 6.7 Expenses and Indemnification by Secured Creditors........24
Section 6.8 Collateral Agent's Lien..................................24
Section 6.9 Records..................................................24
Section 6.10 Release of Collateral...................................25
SECTION 7. CONDITIONS PRECEDENT.............................................25
SECTION 8. MISCELLANEOUS....................................................27
Section 8.1 No Individual Action.....................................27
Section 8.2 Provisions Applicable After Bankruptcy...................27
Section 8.3 Invalidated Payments.....................................28
Section 8.4 Payment of Expenses......................................28
Section 8.5 Successors and Assigns...................................29
Section 8.6 Notices..................................................29
Section 8.7 Termination..............................................29
Section 8.8 Further Assurances, etc..................................29
Section 8.9 APPLICABLE LAW...........................................30
Section 8.10 Modification of Agreement................................30
Section 8.11 Waiver of Rights.........................................30
Section 8.12 Severability.............................................30
Section 8.13 Counterparts.............................................30
Section 8.14 Section Headings.........................................30
Section 8.15 Complete Agreement.......................................30
Section 8.16 Confidentiality..........................................30
Section 8.17 Additional Loan Parties..................................31
<PAGE>
APPENDICES
Appendix A Definitions
Appendix B Uniform Covenants
Appendix C Uniform Events of Default
SCHEDULES:
Schedule 2.2(a) Existing Term Loans
Schedule 2.2(b) Existing L/C Commitment Percentages
Schedule 2.8(h) Benchmark Financial Covenants for 1999 Notes
Upon Refinancing of the LIFO Obligations
and Existing Obligations
Schedule 8.6 Addresses for Notices
EXHIBITS
Exhibit A Form of LIFO Credit Agreement
Exhibit B Form of 1999 Replacement Warrant
Exhibit C Form of Closing Certificate
Exhibit D Form of Legal Opinion of Stroock & Stroock & Lavan L.L.P.,
Counsel to Certain Loan Parties
Exhibit E Form of Prepayment Warrant
Exhibit F Form of Registration Rights Agreement
Exhibit G Form of Assumption Agreement
<PAGE>
CONFORMED COPY
MASTER RESTRUCTURING AGREEMENT dated as of September 8, 1999, among
Recoton Corporation, a New York corporation (the "BORROWER"), the Subsidiaries
of the Borrower listed on the signature pages hereto under the heading
"Subsidiaries' (collectively with the Borrower, the "LOAN PARTIES'), the
Existing Creditors (as defined below), and The Chase Manhattan Bank, as
collateral agent (the "COLLATERAL AGENT") for the Secured Creditors (as defined
below).
W I T N E S S E T H
WHEREAS, the Existing Creditors (such term, and the other capitalized
terms used in these Recitals, having the meanings hereinafter referred to) and
the Loan Parties have engaged in negotiations to effect a restructuring of the
Loan Parties' obligations under the Existing Agreements and the provision of
additional working capital to the Borrower which culminated in the execution by
the Existing Creditors and the Borrower of the Agreement Regarding Summary Term
Sheet dated as of August 16, 1999 (the "SUMMARY TERM SHEET");
WHEREAS, the Loan Parties have requested, and the Existing Creditors
are agreeable, that the obligations of the Loan Parties under the Existing
Agreements be restructured and modified and that certain of the Existing
Creditors provide the Borrower additional working capital, all as contemplated
by the Summary Term Sheet, this Agreement and certain other agreements;
NOW, THEREFORE, the parties hereto hereby agrees as follows:
SECTION 1. DEFINITIONS
Section 1.1 DEFINITIONS OF CERTAIN TERMS. Unless otherwise defined
herein, the terms defined in Appendix A hereto shall have the respective
meanings set forth in such Appendix A.
Section 1.2 TERMS GENERALLY. The definitions in Appendix A shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section, subsection, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
SECTION 2. CONSENT TO LIFO OBLIGATIONS; RESTRUCTURE AND
MODIFICATION OF EXISTING OBLIGATIONS
Section 2.1 LIFO OBLIGATIONS; CONSENT TO LIFO OBLIGATIONS. (a) Subject
to the terms and conditions hereof and of the LIFO Credit Agreement, the LIFO
Lenders shall make available up to $50,000,0000 of LIFO Loans on and after the
Restructuring Effective Date.
(b) Subject to the terms and conditions hereof, each Existing Creditor
hereby consents to the incurrence of the LIFO Obligations, the execution and
delivery of the LIFO Credit Agreement and the other LIFO Loan Documents by each
of the Loan Parties party thereto and the granting of Liens in favor of the
Collateral Agent for the benefit of the Secured Creditors.
Section 2.2 RESTRUCTURE AND MODIFICATION OF THE EXISTING BANK
OBLIGATIONS AND THE CHASE OBLIGATIONS. Effective on the Restructuring Effective
Date, the Existing Credit Agreement shall be modified and the Chase Term Loans
and Chase Letters of Credit shall be restructured as follows:
(a) (i) on the Restructuring Effective Date, Chase will be deemed
to make a new "Term Loan" under and pursuant to the Existing Credit
Agreement (as modified hereby) in an amount equal to the principal
amount of the Domestic Chase Term Loan and the Borrower shall cause
the Domestic Chase Term Loan to be paid in full (including all amounts
owing thereon in respect of accrued but unpaid interest);
(ii) upon the request of the Borrower made within five Business
Days of the Restructuring Effective Date, Chase will make a new "Term
Loan" under and pursuant to the Existing Credit Agreement (as modified
hereby) in an amount equal to the Dollar equivalent of the Far East
Term Loan; and
(iii) after giving effect to the foregoing, the Term Loans under
the Existing Credit Agreement of each Existing Bank shall be the
amount set forth opposite its name on Schedule 2.2(a);
(b) On the Restructuring Effective Date, the Chase Letters of
Credit shall be deemed to be Existing Letters of Credit under and
pursuant to the terms of the Existing Credit Agreement (as modified
hereby). After giving effect thereto, the Existing L/C Commitment
Percentage of each Existing Bank shall be the percentage set forth
opposite its name on Schedule 2.2(b);
(c) The "Termination Date" under the Existing Credit Agreement
shall be extended to June 30, 2001. The outstanding Existing Loans
shall be due and payable on June 30, 2001 (except to the extent such
Existing Loans become due and payable on an earlier date in accordance
with the Existing Credit Agreement and the terms hereof);
(d) From and after the Restructuring Effective Date (and after
giving effect to the transactions contemplated by paragraphs (a) and
(b) of this Section), the Borrower shall not have the right to request
the making of any "Revolving Credit Loans" as defined in and under the
Existing Credit Agreement and any such Revolving Credit Loans repaid
after the Restructuring Effective Date shall not be available for
reborrowing. Amounts received by the Existing Agent for application to
the Existing Loans shall be applied ratably based on the aggregate
amount of Existing Loans outstanding on the date of any such
prepayment, without any priority of "Revolving Credit Loans" over
"Term Loans" (as each is defined in the Existing Credit Agreement) or
vice versa;
(e) From and after the Restructuring Effective Date, the Borrower
shall not have the right to request the conversion or continuation of
any Existing Loan as a Eurodollar Loan (as defined in the Existing
Credit Agreement). Notwithstanding the Type (as defined in the
Existing Credit Agreement) of any Existing Loan outstanding on the
Restructuring Effective Date, all such outstanding Existing Loans
shall bear interest at a rate equal to ABR (as defined in the LIFO
Credit Agreement) plus 3.77%. Existing Reimbursement Obligations shall
bear interest at a rate equal to ABR plus 3.77%. From and after the
Restructuring Effective Date, (i) the Borrower shall pay a letter of
credit fee with respect to Existing Letters of Credit that are
commercial letters of credit, computed at the rate per annum equal to
1.50% payable in arrears on the last day of each of March, June,
September and December, on the average daily amount from time to time
available to be drawn under all such Existing Letters of Credit and
(ii) a letter of credit fee with respect to each Existing Letter of
Credit that is a standby letter of credit, computed at the rate per
annum equal to 3.50%, payable in arrears on the last day of each of
March, June, September and December, on the aggregate amount from time
to time available to be drawn under each such Existing Letter of
Credit. Subject to the provisions of Section 3 hereof, all such
interest and fees shall be payable (i) in cash and (ii) to the
Existing Agent for the ratable benefit of each Existing Bank in
accordance with its Existing L/C Commitment Percentage; and
(f) Existing Letters of Credit (including deemed Existing Letters
of Credit in accordance with paragraph (b) of this Section) shall
remain outstanding in accordance with their terms. Except as modified
hereby, Section 3 of the Existing Credit Agreement and all other
subsections of the Existing Credit Agreement to the extent applicable
to Section 3 thereof shall be deemed to be in full force and effect
with respect to the rights and obligations of the Existing Issuing
Bank, the Existing Banks, the Borrower and the Existing Guarantors in
respect of Existing Letters of Credit until such time as no Existing
Letter of Credit is outstanding. Notwithstanding anything to the
contrary contained in Section 3 of the Existing Credit Agreement, at
any time after the Restructuring Effective Date, (i) the Existing
Issuing Bank shall have no obligation to issue any Existing Letter of
Credit if, after giving effect to such issuance (a) the Existing L/C
Obligations would exceed the Existing L/C Commitment or (b) the
Aggregate L/C Obligations would exceed $24,000,000 and (ii) the
Existing Issuing Bank shall not issue any Existing Letter of Credit
with an expiration date later than the LIFO Termination Date unless
prior to the issuance thereof the Borrower has deposited cash in an
amount equal to 105% of the face amount of the requested Existing
Letter of Credit in the Existing L/C Cash Collateral Account to be
held as collateral for the Secured Obligations. In the event that
Existing Letters of Credit are drawn upon and honored by the Existing
Issuing Bank, the Borrower shall have the right to pay Existing
Reimbursement Obligations from available cash or, to the extent credit
is available therefor, borrowings under the LIFO Credit Agreement. Any
such payment of Existing Reimbursement Obligations shall restore an
equivalent amount of Existing L/C Availability; PROVIDED that the
failure by the Borrower so to pay any Existing Reimbursement
Obligation shall not constitute a Default or Event of Default.
Section 2.3 RESTRUCTURE OF AND MODIFICATION OF THE SENIOR NOTES.
Effective on the Restructuring Effective Date, the Senior Note Agreements and
the Senior Notes shall be modified as follows:
(a) The Senior Notes shall mature and be due and payable on June
30, 2001 (except to the extent such Senior Notes become due and
payable on an earlier date in accordance with the terms of the
respective Senior Note Agreements and the terms hereof);
(b) Notwithstanding paragraph 4G of each of the Senior Note
Agreements, from and after the Restructuring Effective Date, interest
on the unpaid principal balance of (i) the 1997 Notes shall be at the
rate of 12.75% per annum and (ii) the 1998 Notes shall be at the rate
of 12.52% per annum; and
(c) Any Premium Obligation (including any Premium Obligation
arising by reason of the payment of the Senior Notes in full on or
before June 30, 2001) shall be calculated in accordance with the
interest rates and maturity dates as in effect immediately prior to
the Restructuring Effective Date under the respective Senior Note
Agreement under which such Premium Obligation arises and shall be due
and payable at the time of the prepayment giving rise thereto;
PROVIDED, that Premium Obligations arising from the first $50,000,000
of prepayments of the principal amount of the Existing Senior
Obligations shall be payable on June 30, 2001 (or any earlier date on
which the principal amount of the Existing Senior Obligations become
due and payable), together with interest thereon for the period from
the date such Premium Obligations would have been payable but for this
proviso to the date of payment thereof at a rate per annum equal to
the rate (or rates) applicable to the respective Senior Notes during
such period.
Section 2.4 MODIFICATION OF 1999 NOTE OBLIGATIONS. Effective on the
Restructuring Effective Date, the 1999 Securities Purchase Agreement, the 1999
Notes and the 1999 Original Warrants shall be modified as follows:
(a) Notwithstanding paragraph 4G of the 1999 Securities Purchase
Agreement, interest on the unpaid principal balance of the 1999 Notes
shall be at the rate of (i) 13.5% per annum during the period from the
Restructuring Effective Date to and including November 4, 1999, (ii)
14.5% per annum during the period from November 5, 1999 to and
including February 4, 2000, (iii) 15.0% per annum during the period
from February 5, 2000 to and including May 4, 2000, and (iv) 15.5% per
annum from and after May 5, 2000;
(b) The Initial Exercise Price of the 1999 Original Warrants
shall be an amount equal to the average Market Price (as defined in
1999 Original Warrants) for the ten Business Days immediately
preceding the Restructuring Effective Date; and
(c) In substitution for and in lieu of the "Additional Warrants"
to be issued pursuant to Paragraph 4G of the 1999 Securities Purchase
Agreement, the Borrower shall issue to the holders of the 1999 Notes
on the Restructuring Effective Date, warrants (the "1999 REPLACEMENT
WARRANTS") to purchase an aggregate of 100,000 shares of the
Borrower's common stock, to expire on fifth anniversary of the
Restructuring Effective Date and to be substantially in the form of
Exhibit B.
Section 2.5 MODIFICATION OF CHASE MORTGAGE AGREEMENTS. Effective on
the Restructuring Effective Date, the Chase Mortgages and the Related Mortgage
Documents shall be modified as follows:
(a) To the extent that there is any inconsistency between any
covenant set forth in Sections 1 or 2 of MRA Appendix B and any
covenant set forth in the Chase Mortgages or the Related Mortgage
Documents, the covenant set forth in the Chase Mortgages or any such
Related Mortgage Documents is hereby amended in its entirety to be
consistent with the covenants set forth in Sections 1 or 2 of MRA
Appendix B;
(b) any amendment, supplement, modification, consent or waiver in
respect of the observance or performance of the covenants set forth in
MRA Appendix B shall be binding on Chase and shall be deemed an
amendment, supplement, modification, consent or waiver of or to each
of the Chase Mortgages and the Related Mortgage Documents if such
amendment, supplement, modification, consent or waiver is (x) prior to
the occurrence of the LIFO Repayment Date, executed and delivered in
accordance with the terms of Section 10.1 of the LIFO Credit Agreement
and (y) thereafter, in writing and executed and delivered by the
Borrower and the Required Existing Senior Creditors;
(c) The Events of Default set forth in paragraph 22 of each of
the Chase Mortgages are hereby deleted in their entirety and the
Events of Default are substituted in lieu thereof as "Events of
Default" under the Chase Mortgages and the Related Mortgage Documents,
PROVIDED that, except to the extent modified by the terms of this
Master Restructuring Agreement, the rights and remedies of Chase upon
the occurrence and continuance of an Event of Default shall be
governed by the terms of the Chase Mortgages and the Related Mortgage
Documents;
(d) any waiver of the occurrence of an Event of Default shall be
binding on Chase, and shall be deemed an amendment, supplement,
modification, consent or waiver of or to each of the Chase Mortgages
and the Related Mortgage Documents, if such waiver is (x) prior to the
occurrence of the LIFO Repayment Date, executed and delivered in
accordance with the terms of Section 10.1 of the LIFO Credit Agreement
and (y) thereafter, in writing and executed and delivered by the
Borrower and the Required Existing Senior Creditors, PROVIDED that no
such waiver shall be effective to waive a Payment Default in respect
of any of the Chase Mortgages without the written consent of Chase;
and
(e) Except as otherwise expressly provided above, the Chase
Mortgages and the Related Mortgage Documents and the rights and
remedies of the parties thereto shall not be amended or modified in
any respect (it being understood and agreed that Chase shall continue
to receive monthly payments of principal and interest in respect of
the Chase Mortgages in an aggregate amount of $36,369).
Section 2.6 REALLOCATION OF INTEREST. Any Existing Senior Creditor
that is not also a LIFO Lender (a "NON-PARTICIPATING SENIOR CREDITOR") shall not
receive the incremental interest payable pursuant hereto from and after the
Restructuring Effective Date on its portion of the Existing Senior Obligations.
Accordingly, on each date that any such interest would otherwise be payable to
such Non-Participating Senior Creditor but for the provisions of this Section,
the Borrower shall pay to each Existing Senior Creditor that is a LIFO Lender
(each a "PARTICIPATING SENIOR CREDITOR") an amount equal to the product of (a)
the amount of interest (calculated at the interest rate(s) set forth herein for
the applicable Existing Senior Obligation following the Restructuring) that
would be payable to all Non-Participating Senior Creditors on account of their
respective Existing Senior Obligations but for the first sentence of this
Section TIMES a fraction, the numerator of which is the outstanding Existing
Senior Obligations of such Participating Senior Creditor and the denominator of
which is the outstanding Existing Senior Obligations of all Participating Senior
Creditors. For purposes hereof, an Existing Senior Creditor that is not a LIFO
Lender shall nonetheless be deemed to be a "Participating Senior Creditor" if
the aggregate LIFO Commitment Percentages of such Existing Senior Creditor and
any of its affiliates equals the aggregate Existing Senior Creditor Percentages
of such affiliated Existing Senior Creditors.
Section 2.7 PREPAYMENT WARRANTS. If the principal amount of the
Existing Senior Obligations has not been permanently reduced from the amount
outstanding on the Restructuring Effective Date by a cumulative amount of at
least (x) $5,000,000 on or before September 30, 2000, (y) $10,000,000 on or
before December 31, 2000 and (z) $15,000,000 on or before March 31, 2001, the
Borrower shall issue warrants (the "PREPAYMENT WARRANTS") on each such date,
exercisable for 25,000 shares of the Borrower's common stock, to be dated the
date of issue thereof, to expire on the fifth anniversary of the date of
issuance thereof and to be substantially in the form of Exhibit E. The
Prepayment Warrants shall be issued ratably to each Participating Senior
Creditor in accordance with its LIFO Commitment Percentage. The holders of the
Prepayment Warrants shall have the benefits of a registration rights agreement
to be executed by the Borrower on the Restructuring Effective Date substantially
in the form of Exhibit F.
Section 2.8 OVERRIDE OF THE EXISTING AGREEMENTS; LIMITATIONS ON
AMENDMENTS AND MODIFICATIONS OF EXISTING AGREEMENTS. Effective on the
Restructuring Effective Date (and after giving effect to the transactions
contemplated hereby and by the other Restructuring Documents), each Existing
Creditor agrees that, except as otherwise expressly provided herein and
notwithstanding anything to the contrary contained in any Existing Agreement to
which it is a party:
(a) the Existing Senior Obligations shall mature and become due
and payable on June 30, 2001;
(b) each of the Existing Agreements is hereby amended to delete
any scheduled reduction of the principal amount of the Existing
Obligations thereunder, whether by direct payment, sinking fund
payment or otherwise;
(c) none of the Existing Obligations may be accelerated except as
a result of a Payment Default in respect thereof or upon acceleration
of the LIFO Obligations;
(d) Paragraphs 5 and 6 of each of the Senior Note Agreements,
Paragraphs 5 and 6 of the 1999 Securities Purchase Agreement and
Sections 6 and 7 of the Existing Credit Agreement are hereby deemed
amended in their entirety to be consistent with the covenants set
forth in Sections 1 and 2, respectively, of MRA Appendix B, except
that the Borrower shall remain obligated to comply with its
obligations under (i) Paragraph 5B of each of the Senior Note
Agreements and the 1999 Securities Purchase Agreement in accordance
with the terms thereof and (ii) Paragraph 6L of the 1999 Securities
Purchase Agreement, PROVIDED that (i) the "Subsidiary Guaranty"
referred to in said Paragraph 6L (the "1999 NOTES SUBSIDIARY
GUARANTEE") shall be executed and delivered by only the Existing
Guarantors as of the Guaranty Date (as defined in the 1999 Securities
Purchase Agreement) (but in any event excluding any Hong Kong
Subsidiary), (ii) to the extent that any Existing Guarantor is
released at any time from its obligations under the Existing
Guarantees (other than by payment in full of the Existing Senior
Obligations), such Existing Guarantor shall be released automatically
from the 1999 Notes Subsidiary Guarantee and (iii) the obligations of
any Existing Guarantor under the 1999 Notes Subsidiary Guarantee shall
be subordinate and junior in right of payment to such Existing
Guarantor's obligations under the Guarantees as provided in Section 3;
(e) any amendment, supplement, modification, consent or waiver in
respect of the observance or performance of the covenants set forth in
MRA Appendix B shall be binding on each of the parties hereto and
shall be deemed an amendment, supplement, modification, consent or
waiver of or to each of the Operative Agreements if such amendment
supplement, modification, consent or waiver is (x) prior to the
occurrence of the LIFO Repayment Date, executed and delivered in
accordance with the terms of Section 10.1 of the LIFO Credit Agreement
and (y) thereafter, in writing and executed and delivered by the
Borrower and the Required Existing Senior Creditors, PROVIDED that
without the written consent of the "Required Holders" (under and as
defined in the 1999 Securities Purchase Agreement) no such amendment,
supplement, modification, consent or waiver shall consent to,
authorize or otherwise permit any Asset Sale by the Borrower or any of
its Subsidiaries unless (A) the purchase price for such assets is an
amount that is not less than the Fair Market Value thereof and (B)
except for an aggregate of up to $5,000,000 of the Net Cash Proceeds
from such Asset Sales, all of the Net Cash Proceeds are applied to
permanently reduce the LIFO Commitment or the Existing Senior
Obligations;
(f) clauses (i) through (xvi) of Paragraph 7A of each of the
Senior Note Agreements and the 1999 Securities Purchase Agreement and
paragraphs (a) through (j) of Section 8 of the Existing Credit
Agreement are hereby deleted in their entirety and the Events of
Default are substituted in lieu thereof as "Events of Default" under
each of the Existing Agreements, PROVIDED that, except to the extent
modified by the terms of this Agreement, the rights and remedies of
the holders of the Existing Obligations upon the occurrence and
continuance of an Event of Default shall be governed by the respective
Existing Agreement giving rise to such holders' Existing Obligations;
(g) any waiver of the occurrence of an Event of Default shall be
binding on each of the parties hereto and shall be deemed an
amendment, supplement, modification, consent or waiver of or to each
of the Operative Agreements if such amendment, supplement,
modification, consent or waiver is (x) prior to the occurrence of the
LIFO Repayment Date, executed and delivered in accordance with the
terms of Section 10.1 of the LIFO Credit Agreement and (y) thereafter,
in writing and executed and delivered by the Borrower and the Required
Existing Senior Creditors, PROVIDED that no such wavier shall be
effective to waive a Payment Default in respect of any Creditor's
Existing Obligations without the written consent of such Creditor;
(h) the consent of the 1999 Noteholders shall not be required in
connection with any refinancing, refunding, renewal or extension of
the LIFO Obligations and/or the Existing Senior Obligations and the
granting of any Liens in connection therewith so long as the terms of
any such refinancing, refunding, renewal or extension do not (i)
reduce the stated rate (including scheduled increases in such rate) or
the scheduled date for payment of any interest payable in respect of
the 1999 Notes, (ii) extend the maturity date of any 1999 Note or
otherwise modify the payment of interest on or principal of the 1999
Notes, (iii) modify the terms or conditions of the warrants originally
issued in connection with the issuance of the 1999 Notes or the 1999
Replacement Warrants, in each case, without the consent of each holder
of the 1999 Notes or any such warrants affected thereby, or (iv)
provide for more than $275,000,000 of maximum principal amount of
borrowings (less an amount equal to the sum of any permanent
reductions of the LIFO Commitments and reductions of the Existing
Senior Obligations resulting from the application of the Net Cash
Proceeds of Asset Sales but inclusive of any Existing Senior
Obligations remaining outstanding after giving effect to such
refinancing, refunding, renewal or extension) that would be entitled
to the benefits of the subordination provisions of Paragraph 12 of the
1999 Securities Purchase Agreement; PROVIDED that if the maximum
principal amount of any such refinancing, refunding, renewal or
extension (inclusive of any Existing Senior Obligations remaining
outstanding after giving effect thereto) exceeds $262,000,000, the
Borrower shall issue to the holders of the 1999 Notes at such time,
warrants to purchase an aggregate of 20,000 shares of the Borrower's
common stock, to expire on the fifth anniversary of the date of
issuance thereof, to be immediately exercisable at a price equal to
the average Market Price (as defined in the 1999 Replacement Warrants)
for the ten Business Days immediately preceding the date of issuance
thereof and otherwise to be substantially in the form of the 1999
Replacement Warrants, PROVIDED, FURTHER, that upon the satisfaction of
the foregoing conditions and the issuance of such warrants, the
holders of the 1999 Notes shall agree to covenants and events of
default consistent with any covenants and events of default contained
in any agreement providing for such refinancing, refunding, renewal or
extension (the "REFINANCING AGREEMENT") with appropriate adjustments
to reflect the 1999 Notes' subordinated status (it being understood
that the waiver or modification of any such covenants or events of
default pursuant to the terms of the Refinancing Agreement (other than
a payment default in respect of the 1999 Notes) shall constitute a
waiver or modification of the corresponding covenant or event of
default with respect to the 1999 Notes) and, to the extent such
covenants do not include, or are less restrictive than, the covenants
set forth on Schedule 2.8(h), then (aa) the Borrower shall pay in cash
an aggregate amount equal to $875,000 to the holders of the 1999
Notes, to be shared among such holders ratably in accordance with
their respective share of the aggregate principal amount of the 1999
Notes and (bb) the rate of interest on the unpaid principal balance of
the 1999 Notes shall be increased by 1.0% per annum (which increase
shall be additive to all increases of such interest rate as provided
in Section 2.4 (a)).
(i) Paragraphs 4A and 4E of the 1999 Securities Purchase
Agreement are hereby deleted in their entirety;
(j) except as otherwise provided herein, no amendment, supplement
or other modification to any Operative Agreement shall be effective
unless such amendment, supplement or other modification (i) is
executed and delivered in accordance with the applicable provisions of
the relevant Operative Agreement and (ii) is consented to in writing
by (y) prior to the LIFO Repayment Date, the Required LIFO Lenders and
(y) thereafter, the Required Existing Senior Creditors; PROVIDED that
no such amendment, supplement or other modification that would (x)
increase the amount of the LIFO Commitments shall be effective without
the consent of all of the Existing Senior Creditors or (y) increase
the principal amount of any of the Existing Obligations, modify the
fees or interest rates specified in any of the Operative Agreements or
modify the terms of any warrants issued in connection with any of the
Operative Agreements shall be effective without the consent of each
Existing Creditor.
(k) no Participating Senior Creditor may assign or transfer
(including by way of participating interest) all or any part of its
rights and obligations under the Existing Senior Creditor Agreements
to which it is a party and the Notes (as defined in the Existing
Credit Agreement) or the Senior Notes, as applicable, in accordance
with Section 8.5 or otherwise unless such Participating Senior
Creditor also assigns to the same Person a corresponding percentage
amount of such Participating Senior Creditor's rights and obligations
under the LIFO Credit Agreement and LIFO Commitment.
Section 2.9 SUBSTITUTION OF SECURITY. Effective as of the date that is
91 days after the compliance by the Borrower with its obligations under
subsection 1.13(c) of MRA Appendix B to take all actions necessary to provide
the Collateral Agent with valid and enforceable, perfected Liens on not less
than 65% of each class of the Capital Stock of Far East and to deliver all
agreements and opinions required by such subsection 1.13(c) with respect to the
pledge of the Capital Stock of Far East, so long as no Default or Event of
Default shall have occurred and be continuing on such 91st day, each of the
Existing Senior Creditors shall automatically release and discharge each of the
Hong Kong Subsidiaries party to the Existing Guarantees from its obligations
thereunder, effective as of the date each such Existing Guarantee was executed,
without the need for any further action on the part of any Existing Senior
Creditor; PROVIDED that if the date of the Borrower's compliance with its
obligations under subsection 1.13(c) of MRA Appendix B referred to above is
within ten days of the Restructuring Effective Date, such compliance shall be
deemed to have occurred on the Restructuring Effective Date.
SECTION 3. SUBORDINATION
Section 3.1 SUBORDINATION. (a) Notwithstanding anything to the
contrary contained in any Existing Agreement, each Loan Party and each of the
Creditors, for itself and each future holder of the Obligations held by it,
agrees that (i) each of the Second Priority Obligations, the Third Priority
Obligations and the Fourth Priority Obligations are expressly "subordinate and
junior in right of payment" (as that phrase is defined in Section 3.1(b)) to the
LIFO Obligations.
(b) "SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT" means that:
(i) with respect to any Subordinated Obligation in relation to
any LIFO Obligation, no part of the Subordinated Obligations shall
have any claim to the assets of any Loan Party on a parity with or
prior to the claim of such LIFO Obligation; and
(ii) prior to the payment in full of all LIFO Obligations,
without the express prior written consent of all of the holders of
such LIFO Obligations, no Subordinated Creditor will take, demand or
receive from any Loan Party, and no Loan Party will make, give or
permit, directly or indirectly, by set-off, redemption, purchase or in
any other manner, any payment of or security (other than the Liens
granted to secure the Second Priority Obligations and Third Priority
Obligations pursuant to the Security Documents) for the whole or any
part of its Subordinated Obligations, including any letter of credit
or similar credit support facility to support payment of any of its
Subordinated Obligations.
(c) Notwithstanding anything to the contrary contained in Section
3.1(b) hereof, holders of Subordinated Obligations may receive and retain
Permitted Payments except (x) following the occurrence and during continuance of
a LIFO Payment Default or (y) during a Blockage Period; PROVIDED that, following
the occurrence and during the continuance of any such LIFO Payment Default or
during a Blockage Period, any Permitted Payments not paid to the holders of the
Subordinated Obligations in accordance with this sentence shall continue to
accrue as against the Borrower and the other Loan Parties. Upon the termination
of the Blockage Period and if all then existing LIFO Payment Defaults have been
cured or waived or shall have ceased to exist, the right of the holders of the
Subordinated Obligations to receive Permitted Payments as provided herein shall
be reinstated, and the Borrower may resume making such Permitted Payments in
accordance with the terms of the respective Existing Agreements. All accrued
Permitted Payments shall be paid on the first Business Day following such
reinstatement PROVIDED, in each case, that, as to any Subordinated Obligations,
no new LIFO Payment Default shall have occurred and be continuing on such
Business Day.
(d) No LIFO Obligation Non-Payment Default which existed on the date
any Blockage Notice was given shall be the basis for giving any subsequent
Blockage Notice, unless such LIFO Obligation Non-Payment Default shall have been
cured or waived or otherwise ceased to exist for a period of not less than 90
consecutive days after the date such Blockage Notice was given.
(e) No more than one Blockage Notice may be given within any
consecutive 365-day period.
(f) The expressions "prior payment in full," "payment in full," "paid
in full" and any other similar terms or phrases when used herein with respect to
the LIFO Obligations shall mean the indefeasible payment in full, in immediately
available funds, of all such LIFO Obligations.
Section 3.2 TURNOVER OF PAYMENTS AND COLLECTIONS. (a) Each holder of
Subordinated Obligations and each Loan Party agree that, except for the payment
of Permitted Payments as provided in Section 3.1(c), (i) all LIFO Obligations
shall be paid in full (or in the case of LIFO Letters of Credit then
outstanding, cash collateralized in full) before any direct or indirect payment
or distribution is made with respect to any Subordinated Obligation and (ii) any
payment or distribution of assets of any Loan Party, whether in cash, property
or securities, to which any Subordinated Creditor would be entitled except for
the provisions hereof, shall be paid or delivered by the Borrower or other Loan
Party, or any receiver, trustee in bankruptcy, liquidating trustee, disbursing
agent or other Person making such payment or distribution, directly to the
Collateral Agent, for the account of the holders of the LIFO Obligations, to the
extent necessary to pay in full all such LIFO Obligations as set forth in
Section 4.3, before any payment or distribution shall be made to any
Subordinated Creditor on account of any Subordinated Obligations held by such
Subordinated Creditor.
The foregoing provisions shall be applicable prior to and after the
occurrence of a Bankruptcy Event.
(b) Upon the occurrence of any Bankruptcy Event:
(i) each Subordinated Creditor irrevocably authorizes and
empowers the Collateral Agent, as agent for the LIFO Creditors: (A) to
demand, sue for, collect and receive every payment or distribution on
account of the Subordinated Obligations payable or deliverable to such
Subordinated Creditor in connection with such event or proceeding and
give acquittance therefor, and (B) to file claims and proofs of claim
in any statutory or non-statutory proceeding if such Subordinated
Creditor does not file such claims or proofs of claim in any such
proceeding at least five Business Days prior to any bar date set by a
court of competent jurisdiction for the filing in such proceeding of
claims or proofs of claims, and to take such other actions, in its own
name as the Collateral Agent, or in the name of such Subordinated
Creditor or otherwise, as the Collateral Agent may deem necessary or
advisable for the enforcement of the provisions of this Agreement;
PROVIDED, HOWEVER, that the foregoing authorization and empowerment
(1) imposes no obligation on the Collateral Agent to take any such
action and (2) shall not entitle the Collateral Agent to vote any
claims or proofs of claims in respect of any Subordinated Obligations
on any plan of reorganization filed in any such proceeding, unless (x)
such claims or proofs of claims were filed by the Collateral Agent
under the circumstances set forth in clause (B) of this sentence or
(y) the holder of such Subordinated Obligations fails to vote any
claims or proofs of claims (filed by such Subordinated Creditor) at
least five Business Days prior to any date fixed by a court of
competent jurisdiction as the last date to vote such claims or proofs
of claims; and
(ii) each Subordinated Creditor shall execute and deliver such
powers of attorney, assignments or proofs of claim or other
instruments as the Collateral Agent may request to enable the
Collateral Agent to enforce any and all claims in respect of the
Subordinated Obligations held by such Subordinated Creditor and to
collect and receive any and all payments and distributions which may
be payable or deliverable at any time upon or in respect of the
Subordinated Obligations held by such Subordinated Creditor.
(c) If any direct or indirect payment or distribution, whether
consisting of money, property or securities, shall be collected or received by
any Subordinated Creditor in respect of the Subordinated Obligations, except
Permitted Payments as provided in Section 3.1(c), such Subordinated Creditor
forthwith shall deliver the same to the Collateral Agent for the account of the
holders of the LIFO Obligations, in the form received, duly indorsed to the
Collateral Agent, if required, to be applied to the payment or prepayment of the
LIFO Obligations until such LIFO Obligations are paid in full. Until so
delivered, such payment or distribution shall be held in trust by such
Subordinated Creditor as the property of the LIFO Creditors, segregated from
other funds and property held by such Subordinated Creditor.
Section 3.3 RIGHTS IN COLLATERAL. Notwithstanding anything to the
contrary contained in any Operative Agreement and irrespective of:
(i) the time, order or method of attachment or perfection of the
Liens created by any Security Document,
(ii) the time or order of filing or recording of financing
statements or other documents filed or recorded to perfect Liens in
any Collateral,
(iii) anything contained in any filing or agreement to which the
Collateral Agent, any LIFO Creditor or any Subordinated Creditor now
or hereafter may be a party and
(iv) the rules for determining priority under the Uniform
Commercial Code or any other law governing the relative priorities of
secured creditors,
any security interest in any Collateral granted to secure any LIFO Obligation
pursuant to any Security Document or otherwise has and shall have priority, to
the extent of any unpaid LIFO Obligations, over any security interest in such
Collateral granted to secure any Subordinated Obligations; provided that the
Fourth Priority Obligations are not Secured Obligations and the holders of such
Fourth Priority Obligations have no beneficial interest in the Liens granted to
the Collateral Agent or any rights in or to the Collateral.
Section 3.4 SUBROGATION. Subject to the payment in full of the LIFO
Obligations, the Subordinated Creditors shall be subrogated to the rights of the
holders of the LIFO Obligations to receive payments or distributions of assets
of the Borrower or any other Loan Party in respect of such LIFO Obligations
until such LIFO Obligations shall be paid in full. For the purposes of such
subrogation, payments or distributions to the Collateral Agent, for the account
of the holders of the LIFO Obligations, of any money, property or securities to
which any Subordinated Creditor would be entitled except for the provisions of
this Agreement shall be deemed, as between the Borrower and each Loan Party and
their respective creditors other than the holders of LIFO Obligations and such
Subordinated Creditor, to be a payment by the Borrower or such Loan Party to or
on account of such Subordinated Creditor's Subordinated Obligations, it being
understood that the provisions of this Section 3 are, and are intended solely,
for the purpose of defining the relative rights of the Subordinated Creditors,
on the one hand, and the holders of LIFO Obligations, on the other hand.
Section 3.5 CONSENT OF SUBORDINATED CREDITORS. (a) Each Subordinated
Creditor consents that, without the necessity of any reservation of rights
against any Subordinated Creditor, and without notice to or further assent by
any Subordinated Creditor:
(i) any demand for payment of any LIFO Obligations made by the
Collateral Agent, the LIFO Agent or any LIFO Creditor with respect to
its LIFO Obligations may be rescinded in whole or in part by the party
making such demand or the holder of the LIFO Obligations, and subject
to Section 2.8, any LIFO Obligation may be continued, and the LIFO
Obligations, or the liability of the Borrower or any Loan Party or any
other party upon or for any part thereof, or any collateral security
or guarantee therefor or right of offset with respect thereto, or any
obligation or liability of the Borrower or any other Loan Party with
respect to the LIFO Obligations may, from time to time, in whole or in
part, be renewed, extended, modified, accelerated, compromised,
waived, surrendered, or released by the LIFO Creditor holding such
LIFO Obligations; and
(ii) subject to Section 2.8, the Operative Agreements under which
the LIFO Obligations arise, may be amended, modified, supplemented or
terminated, in whole or in part, as the LIFO Creditors party thereto
may deem advisable from time to time, and any collateral security at
any time held by the Collateral Agent, or any LIFO Creditor for the
payment of such LIFO Obligations may be sold, exchanged, waived,
surrendered or released,
in each case all without notice to or further assent by any Subordinated
Creditor, which will remain bound under this Agreement, and all without
impairing, abridging, releasing or affecting the subordination provided for
herein.
(b) Each Subordinated Creditor waives any and all notice of the
creation, renewal, extension or accrual of any of the LIFO Obligations and
notice of or proof of reliance by the LIFO Creditors upon this Agreement. The
LIFO Obligations, and any of them, shall be deemed conclusively to have been
created, contracted or incurred in reliance upon this Agreement, and all
dealings between the Borrower, the other Loan Parties and the LIFO Creditors
shall be deemed to have been consummated in reliance upon this Agreement. Each
Subordinated Creditor acknowledges and agrees that the LIFO Creditors have
relied upon the subordination provided for herein in entering into the LIFO
Credit Agreement and in making funds available to the Borrower thereunder. Each
Subordinated Creditor waives notice of or proof of reliance on this Agreement
and protest, demand for payment and notice of default.
Section 3.6 NEGATIVE COVENANTS OF SUBORDINATED CREDITORS. So long as
any LIFO Obligations are outstanding, no Subordinated Creditor shall, without
the prior written consent of the Required LIFO Lenders:
(a) sell, assign, or otherwise transfer, in whole or in part, the
Subordinated Obligations or any interest therein except as provided
Sections 2.8(k) and 8.5 hereof; or
(b) permit any of the Operative Agreements to be amended,
modified or otherwise supplemented except as provided herein.
Section 3.7 PRIORITY OF LIFO OBLIGATIONS UNCONDITIONAL. The
subordination of the Existing Obligations to the LIFO Obligations and the
relative priority of the Liens securing the LIFO Obligations to the Liens
(if any) securing the Subordinated Obligations, and all agreements and
obligations of the Subordinated Creditors, the Borrower and each other Loan
Party hereunder in respect thereof shall remain in full force and effect
irrespective of:
(a) any lack of validity or enforceability of any Security
Documents;
(b) subject to Sections 2.8(e), (g), (h) and (j), any change in
the time, manner or place of payment of, or in any other term of, all
or any of the LIFO Obligations, or any amendment or waiver or other
modification, whether by course of conduct or otherwise, of the terms
of the Operative Agreements giving rise to such LIFO Obligations;
(c) any exchange, release or nonperfection of any security
interest in any Collateral, or any release, amendment, waiver or other
modification, whether in writing or by course of conduct or otherwise,
of all or any of the LIFO Obligations or any guarantee thereof; or
(d) any other circumstances which otherwise might constitute a
defense available to, or a discharge of, the Borrower or any Guarantor
in respect of the LIFO Obligations, or of any Subordinated Creditor,
the Borrower or any other Loan Party in respect of this Agreement.
Section 3.8 EXISTING L/C OBLIGATION REDUCTION TRUE-UP. (a) In the
event that the Term Lender Purchase Amount is greater than zero as of the date
of an Acceleration Date or any later date on which the aggregate amount of the
Existing L/C Obligations is reduced, then no later than 30 days after written
request from any Existing Senior Creditor to the Existing Agent each Existing
Bank shall severally purchase at par from each other Existing Senior Creditor
(including Existing Banks to the extent that they hold Existing Bank Obligations
arising out of the Term Loans made under the Existing Credit Agreement) a PARI
PASSU UNDIVIDED participating interest in the Existing Senior Obligations (other
than Existing L/C Obligations) of such other Existing Senior Creditor by paying
to such other Existing Senior Creditor an amount equal to the product of (i)
such Existing Bank's Existing L/C Commitment Percentage of the Term Lender
Purchase Amount TIMES (ii) a fraction, the numerator of which is the outstanding
Existing Senior Obligations of such other Existing Senior Creditor and the
denominator of which is the outstanding Existing Senior Obligations of all
Existing Senior Creditors, in each case without regard to Existing L/C
Obligations.
(b) In any bankruptcy proceeding in which the Borrower is a debtor, if
any Existing Bank finds that it is unable to enforce in such proceeding its
participating interests in the Senior Notes or the Existing Bank Obligations of
other Existing Banks, each Existing Senior Creditor agrees to enforce such
participating interests to the same extent that it enforces its own rights in
the Senior Notes or Existing Bank Obligations, as the case may be. At the
request of the Existing Agent, each Existing Senior Creditor will prepare
appropriate proofs of claim covering such participating interests. Nothing in
this paragraph shall be interpreted as an admission that the Existing Banks may
not enforce any participating interests in the Senior Notes or Existing Bank
Obligations, as applicable, nor shall it be deemed a relinquishment of any such
interests or rights.
Section 3.9 SHARING AMONG EXISTING SENIOR CREDITORS; SHARING
AGREEMENT. (a) Notwithstanding anything to the contrary contained in any
Existing Senior Agreement, each Existing Senior Creditor, for itself and for any
future holder of the Obligations held by it, agrees that, subject to (i) the
prior satisfaction of the LIFO Obligations and (ii) the right to retain
Permitted Payments prior to the occurrence and during the continuance of a
Secured Obligation Payment Default, any payment of any kind (including any
payment resulting from setoff, any realization upon all or any part of the
Collateral and any payment or direct or indirect distribution of any money,
property or securities in a proceeding of the type described in the definition
of "Bankruptcy Event") from or on behalf of any Loan Party or otherwise in
respect of the Existing Senior Obligations is to be distributed among the
Existing Senior Creditors equally and ratably in accordance with the respective
amounts of the Existing Senior Obligations then held by each of them, without
any priority of any one over any other. In order to implement such sharing, each
Existing Senior Creditor forthwith upon receipt of any such payment shall
deliver the same to the Collateral Agent as provided in Section 3.2 hereof
notwithstanding the occurrence of the LIFO Repayment Date for distribution in
accordance with Section 4.3, in the form received, duly indorsed to the
Collateral Agent, if required. Until so delivered, such payment or distribution
shall be held in trust by such Existing Senior Creditor for the benefit of all
of the Existing Senior Creditors, segregated from other funds and property held
by such Existing Senior Creditor.
(b) Any Existing Senior Creditor that has remitted any payment to the
Collateral Agent in accordance with subsection 3.9(a) after the LIFO Repayment
Date shall, to the extent of such remittance, be subrogated to the rights of the
other Existing Senior Creditors to receive payments or distributions of assets
of the Borrower or any Subsidiary Guarantor in respect of the Existing Senior
Obligations owed to such other Existing Senior Creditors until all Existing
Senior Obligations shall be paid in full. For the purposes of such subrogation,
payments or distributions to the Collateral Agent, for the account of the other
Existing Senior Creditors, of any money, property or securities to which the
remitting Existing Senior Creditor would be entitled except for the operation of
Section 3.9(a) hereof, shall be deemed, as between the applicable Loan Party and
its respective creditors other than the remitting Existing Senior Creditor, to
be a payment by the Borrower or any Guarantor or any of them to or on account of
the Existing Senior Obligations of such remitting Existing Senior Creditor, it
being understood that the provisions of this Section 3.9(b) are, and are
intended solely, for the purpose of defining the relative rights of the Existing
Senior Creditors.
(c) Effective as of the Restructuring Effective Date, the Sharing
Agreement is hereby superseded and terminated by the provisions hereof.
Section 3.10 SURVIVAL OF SUBORDINATION OF 1999 NOTES. Nothing
contained in this Section 3 is intended or shall be construed to modify the
provisions of Paragraph 12 of the 1999 Securities Purchase Agreement or the
priority or the rights of the holders of the Existing Senior Obligations in
relation to the holders of the 1999 Notes.
SECTION 4. APPLICATION OF PAYMENTS AND PROCEEDS
Section 4.1 COLLATERAL ACCOUNTS. As such times as it deems
appropriate, the Collateral Agent shall establish and, at all times thereafter
until this Agreement shall have terminated, maintain at its principal banking
office in New York City the following three accounts: (i) the LIFO L/C Cash
Collateral Account, (ii) the Existing L/C Cash Collateral Account and (iii) a
collateral account (the "PRIMARY COLLATERAL ACCOUNT"; collectively with the LIFO
L/C Cash Collateral Account, and the Existing L/C Cash Collateral Account, the
"COLLATERAL ACCOUNTS"). The Collateral Agent shall deposit into (x) the LIFO
L/C Cash Collateral Account all amounts (1) received by it and designated for
such purpose in accordance with subsection 3.5 or Section 8 of the LIFO Credit
Agreement or (2) distributed by it in respect of First Priority Obligations
constituting outstanding LIFO Letters of Credit on the applicable Distribution
Date pursuant to clause "SECOND" of Section 4.3(b); (y) the Existing L/C Cash
Collateral Account all amounts (1) received by it and designated for such
purpose in accordance with Section 2.2(f) of this Agreement or Section 8 of the
Existing Credit Agreement or (2) distributed by it in respect of Second Priority
Obligations constituting outstanding Existing Letters of Credit on the
applicable Distribution Date pursuant to clause "THIRD" of Section 4.3(b) and
(z) except as provided in the preceding clauses (x) and (y), the Primary
Collateral Account all amounts received by it in its capacity as Collateral
Agent (and not in any other capacity) in respect of the Collateral, including
all monies received on account of any sale of or other realization upon any of
the Collateral pursuant to any Security Document, as a result of the enforcement
of rights and remedies under the Security Documents, as a result of the turnover
obligations contained in Section 3.2 hereof or otherwise. All amounts deposited
in the Collateral Accounts shall be held by the Collateral Agent subject to the
terms hereof and of the Security Documents. Neither the Borrower nor any
Guarantor shall have any rights with respect to, and the Collateral Agent shall
have exclusive dominion and control over, the Collateral Accounts; PROVIDED that
so long as no Default or Event of Default shall have occurred and be continuing,
the Collateral Agent shall pay to the Borrower interest accrued on amounts on
deposit in the Existing L/C Cash Collateral Account and the LIFO L/C Cash
Collateral Account on the last day of each month
Section 4.2 INVESTMENT OF FUNDS DEPOSITED IN COLLATERAL ACCOUNTS. The
Collateral Agent may, but is under no obligation to, invest and reinvest moneys
on deposit in the Collateral Accounts at any time in Cash Equivalents. Except to
the extent provided in the last sentence of Section 4.1, all such investments
and the interest and income received thereon and the net proceeds realized on
the sale or redemption thereof shall be held in the Collateral Accounts for the
benefit of the Secured Creditors. The Collateral Agent shall not be responsible
for any diminution in funds resulting from such investments or any liquidation
prior to maturity.
Section 4.3 APPLICATION OF PAYMENTS AND PROCEEDS. (a) The Collateral
Agent shall have the right at any time to apply moneys held by it in the Primary
Collateral Account to the payment of due and unpaid Collateral Agent Expenses.
(b) In order to implement the subordination of the Subordinated
Obligations established pursuant to this Agreement to the LIFO Obligations and
the relative priority of the Liens (if any) securing such Subordinated
Obligations to the Liens securing such LIFO Obligations, and the sharing of
payments among the Existing Senior Creditors contemplated by Section 3.9, the
Creditors, the Borrower and each other Loan Party agree that, any money,
property, securities or other direct or indirect distributions of any nature
whatsoever, regardless of whether such money, property, securities or other
distributions are received directly or indirectly from the sale, disposition or
other realization upon all or any part of the Collateral, or from any other
source, and regardless of whether received in connection with any proceeding
referred to in the definition of "Bankruptcy Event" or otherwise, received by
the Collateral Agent, or any Creditor in respect of any of the Obligations
(other than Permitted Payments in accordance with Section 3.1(c) and after the
occurrence of the LIFO Repayment Date, in accordance with Section 3.9(a)) shall,
in each case, be delivered to the Collateral Agent in the form received, duly
indorsed to the Collateral Agent, if required, and applied as follows:
FIRST, to the payment in full of all unpaid Collateral Agent
Expenses;
SECOND, to the payment in full of all First Priority Obligations,
including the cash collateralization in full of any LIFO Letters of
Credit then outstanding to the extent not cash collateralized in an
amount equal to 105% of the outstanding amount thereof, and, if such
moneys shall be insufficient to pay such amounts in full, then ratably
(without priority of any one over any other) to the holders of such
First Priority Obligations in proportion to the unpaid amounts thereof
on such Distribution Date;
THIRD, to the payment in full of all Premium Obligations that are
Second Priority Obligations (if any), the payment of which was
deferred in accordance with the proviso to Section 2.3(c), plus
accrued but unpaid interest on such Premium Obligations as set forth
in such proviso;
FOURTH, to the payment in full of all unpaid Second Priority
Obligations, including the cash collateralization in full of any
Existing Letters of Credit then outstanding to the extent not cash
collateralized in an amount equal to 105% of the outstanding amount
thereof and, if such moneys shall be insufficient to pay such amounts
in full, then ratably (without priority of any one over any other) to
the holders of such Second Priority Obligations in proportion to the
unpaid amounts thereof on such Distribution Date;
FIFTH, to the payment in full of all Third Priority Obligations
and if such moneys shall be insufficient to pay such amounts in full,
then ratably (without priority of any one over any other) to the
holders of such Third Priority Obligations in proportion to the unpaid
amounts thereof on such Distribution Date; and
LAST, to pay to the Borrower or the applicable Loan Party, or its
representative or as a court of competent jurisdiction may direct, any
surplus then remaining.
(c) On the thirtieth day following any expiration or cancellation of
any outstanding LIFO Letter of Credit or Existing Letter of Credit, or any other
reduction in the amount outstanding thereunder (other than as a result of a
drawing on any such LIFO Letter of Credit or Existing Letter of Credit that is
honored), the amount of funds in the LIFO L/C Cash Collateral Account or
Existing L/C Cash Collateral Account, as applicable, with respect to such LIFO
Letter of Credit or Existing Letter of Credit (or, in the case of any partial
reduction in the outstanding amount thereunder, a pro rata portion of such
funds) shall be released from the LIFO L/C Cash Collateral Account or Existing
L/C Cash Collateral Account, as applicable, and the funds so released shall be
deposited in the Primary Collateral Account and retained therein by the
Collateral Agent pending distribution in accordance with Section 4.3(b) on the
next Distribution Date.
SECTION 5. REPRESENTATIONS AND WARRANTIES
Section 5.1 REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES. To
induce the Existing Creditors to enter into this Agreement and to modify and
restructure the Existing Obligations, the Borrower and each other Loan Party
represents and warrant to the Existing Creditors that:
(a) the execution, delivery and performance of this Agreement (i)
have been duly authorized by all requisite corporate action on its
part and (ii) will not contravene any provision of its charter or
by-laws or any order of any court or other governmental authority
having applicability to it or any applicable law;
(b) this Agreement has been duly executed and delivered by it and
constitutes its legal, valid, enforceable and binding obligation
against such Loan Party in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law);
(c) the Existing Credit Agreement is in full force and effect and
the aggregate principal amount of the Existing Bank Obligations (after
giving effect to the transactions described in Sections 2.2(a) and (b)
hereof) is $101,700,505;
(d) except as otherwise provided in Section 2.9, the Existing
Guarantees are in full force and effect;
(e) the Senior Note Agreements are in full force and effect and
the aggregate principal amount of the Senior Notes is $100,000,000;
and
(f) the 1999 Securities Purchase Agreement is in full force and
effect and the aggregate principal amount of the 1999 Notes is
$35,000,000.
Section 5.2 REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL AGENT AND
THE CREDITORS. The Collateral Agent and each Creditor represent and warrant to
each of the other parties hereto that (a) the execution, delivery and
performance of this Agreement (i) have been duly authorized by all requisite
corporate action on its part and (ii) will not contravene any provision of its
charter or by-laws or any order of any court or other Governmental Authority
having applicability to it or any applicable law, and (b) this Agreement has
been duly executed and delivered by it and constitutes its legal, valid,
enforceable and binding obligation, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
SECTION 6. CONCERNING THE COLLATERAL AGENT
Section 6.1 APPOINTMENT OF COLLATERAL AGENT. Each of the Secured
Creditors appoints Chase to act as Collateral Agent pursuant to the terms of the
Security Documents and this Agreement, and Chase agrees to act as Collateral
Agent for such Secured Creditors, pursuant to the terms of the Security
Documents and this Agreement.
Section 6.2 ACTIONS UNDER SECURITY DOCUMENTS. (a) The Collateral Agent
shall not be obligated to take any action under this Agreement or any of the
Security Documents except for the performance of such duties as are specifically
set forth herein or therein. Subject to the provisions of Sections 6.3 and 6.4,
the Collateral Agent shall take any action under or with respect to the Security
Documents which is requested by the Directing Party and which is not
inconsistent with or contrary to the provisions of this Agreement or the
Operative Agreements. At any time when a Notice of Secured Obligation Payment
Default shall have been given and shall be outstanding, the Collateral Agent
shall, subject in all cases to the provisions of Sections 6.3 and 6.4, exercise
or refrain from exercising all such rights, powers and remedies as shall be
available to it under the Security Documents or any of them in accordance with
any written instructions received from the Directing Party. Absent written
instructions from the Directing Party, the Collateral Agent may take, but shall
have no obligation to take, any and all such actions under the Security
Documents or any of them or otherwise as it shall deem to be in the best
interests of the Secured Creditors in order to maintain the Collateral and
protect and preserve the Collateral and the rights of the Secured Creditors;
PROVIDED that, except as provided in paragraph (b) below, in the absence of
written instructions (which may relate to the exercise of specific remedies or
to the exercise of remedies in general) from the Directing Party the Collateral
Agent shall not foreclose any Lien on the Collateral or exercise any other
remedies available to it under any Security Documents with respect to the
Collateral or any part thereof.
(b) If the Collateral Agent has requested instructions from the
Directing Party at a time when a Notice of Secured Obligation Payment Default
shall be in effect and the Directing Party has not responded to such request
within 10 days thereafter, the Collateral Agent may take, but shall have no
obligation to take, any and all actions under the Security Documents or any of
them or otherwise, including foreclosure of any Lien or any other exercise of
remedies, as the Collateral Agent, in good faith, shall determine to be in the
interests of the Secured Creditors and to maximize both the value of the
Collateral and the present value of the recovery by each of the Secured
Creditors on their Obligations; PROVIDED that, if instructions are thereafter
received from the Directing Party, then the actions of the Collateral Agent
shall be subject to paragraph (a) above.
(c) When the Collateral Agent receives a Notice of Secured Obligation
Payment Default, the Collateral Agent shall give prompt notice thereof to the
Creditors.
Section 6.3 LIMITATIONS ON RESPONSIBILITY OF COLLATERAL AGENT. The
Collateral Agent shall not be responsible in any manner whatsoever for the
correctness of any recitals, statements, representations or warranties contained
herein or in any other Operative Agreement, except for those expressly made by
it herein. The Collateral Agent makes no representation as to the value or
condition of the Collateral or any part thereof, as to the title of the Grantors
to the Collateral, as to the security afforded by this Agreement or any Security
Document, except as expressly set forth in Section 5.2, as to the validity,
execution, enforceability, legality or sufficiency of this Agreement or any
other Operative Agreement, and the Collateral Agent shall incur no liability or
responsibility in respect of any such matters. The Collateral Agent shall not be
responsible for insuring the Collateral, for the payment of taxes, charges,
assessments or liens upon the Collateral or otherwise as to the maintenance of
the Collateral, except as provided in the immediately following sentence when
the Collateral Agent has possession of the Collateral. The Collateral Agent
shall have no duty to the Grantors or to the Secured Creditors as to any
Collateral in its possession or control or in the possession or control of any
agent or nominee of the Collateral Agent or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto, except the duty to accord such of the Collateral as may be in its
possession substantially the same care as it accords its own assets and the duty
to account for monies received by it. The Collateral Agent shall not be required
to ascertain or inquire as to the performance by the Borrower or the other Loan
Parties of any of the covenants or agreements contained herein or in the other
Operative Agreements. Neither the Collateral Agent nor any officer, agent or
representative thereof shall be personally liable for any action taken or
omitted to be taken by any such Person in connection with this Agreement or any
other Operative Agreement except for its or such Person's own gross negligence
or wilful misconduct. Neither the Collateral Agent nor any officer, agent or
representative thereof shall be personally liable for any action taken by it or
any such Person in accordance with any notice given by the Directing Party
hereunder entitled to give such notice, even if, at the time such action is
taken by it or any such Person, the Directing Party which gave the notice to
take such action is no longer the Directing Party and if the Collateral Agent
has not received written notice of such fact. The Collateral Agent may execute
any of the powers granted under this Agreement or any of the Security Documents
and perform any duty hereunder or thereunder either directly or by or through
agents or attorneys-in-fact, and shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it without gross
negligence or wilful misconduct.
Section 6.4 RELIANCE BY COLLATERAL AGENT; INDEMNITY AGAINST
LIABILITIES; ETC. (a) Whenever in the performance of its duties under this
Agreement the Collateral Agent shall deem it necessary or desirable that a
matter be proved or established with respect to any Loan Party or other Person
in connection with the taking, suffering or omitting of any action hereunder by
the Collateral Agent, such matter may be conclusively deemed to be proved or
established by a certificate purporting to be executed by an officer of such
Person or, in the case of any Loan Party, an executive officer of the Borrower,
and the Collateral Agent shall have no liability with respect to any action
taken, suffered or omitted in reliance thereon. Whenever the Collateral Agent is
required to determine the existence or amount of any of the Secured Obligations
or any portion thereof or the existence of any Secured Obligation Payment
Default for any purposes of this Agreement, it shall be entitled to make such
determination on the basis of one or more certificates of any Secured Creditor
(with respect to the Secured Obligations owed to such Secured Creditor), the
Existing Agent (with respect to the Existing Bank Obligations, owed to the
Existing Banks, or any of them) or the LIFO Agent (with respect to the LIFO
Obligations owed to the LIFO Lenders, or any of them); PROVIDED, that if,
notwithstanding the request of the Collateral Agent, any Secured Creditor shall
fail or refuse within five Business Days of such request to certify as to the
existence or amount of any Secured Obligations owed to it, the Collateral Agent
shall be entitled to determine such existence or amount by such method as the
Collateral Agent may, in its sole discretion, determine, including by reliance
upon a certificate of the Borrower; PROVIDED, FURTHER, that, promptly following
determination of any such amount pursuant to the foregoing proviso, the
Collateral Agent shall notify such Secured Creditor of such determination and
thereafter shall correct any error that such Secured Creditor brings to the
attention of the Collateral Agent. The Collateral Agent may rely conclusively,
and shall be fully protected in so relying, on any determination made by it in
accordance with the provisions of the preceding sentence (or as otherwise
directed by a court of competent jurisdiction) and shall have no liability to
the Borrower or any other Grantor or Guarantor, any Secured Creditor or any
other Person as a result of any action taken by the Collateral Agent based upon
such determination prior to receipt of notice of any error in such
determination. Upon any request of the Collateral Agent, the Borrower shall, as
promptly as practicable, furnish a certificate to the Collateral Agent as to the
existence or amount of any Existing Obligation or any Secured Obligation or as
to the existence of any Priority Obligation Payment Default.
(b) The Collateral Agent may consult with counsel and shall be fully
protected in taking any action hereunder in accordance with any advice of such
counsel. The Collateral Agent shall have the right but not the obligation at any
time to seek instructions concerning the administration of this Agreement, the
duties created hereunder or the Collateral from any court of competent
jurisdiction.
(c) If the Collateral Agent has been requested to take any specific
action pursuant to any provision of this Agreement, the Collateral Agent shall
not be under any obligation to exercise any of the rights or powers vested in it
by this Agreement in the manner so requested unless it shall have been provided
indemnity satisfactory to it against the costs, expenses and liabilities which
may be incurred by it in compliance with such request or direction.
Section 6.5 RESIGNATION OR REMOVAL OF THE COLLATERAL AGENT. The
Collateral Agent may at any time (a) by giving 30 days' prior written notice to
the Borrower and each Secured Creditor, resign and be discharged from the
responsibilities hereby created, or (b) if the Directing Party concludes that
the Collateral Agent shall have acted under and in respect of this Agreement in
a manner which constitutes wilful misconduct or gross negligence, be removed
from its position as Collateral Agent by the Directing Party, such resignation
or removal to become effective upon the earlier of (i) the acceptance of the
appointment of a successor pursuant to the next sentence of this Section or (ii)
the appointment of a successor by the Directing Party and the acceptance of such
appointment by such successor. If no successor shall be appointed and approved
pursuant to clause (ii) above within 30 days after the date of any such
resignation, the Collateral Agent may apply to any court of competent
jurisdiction to appoint a successor to act until a successor shall have been
appointed by the Directing Party as above provided or may, on behalf of the
Secured Creditors, appoint a successor Collateral Agent. Any successor
Collateral Agent shall be a bank organized under the laws of the United States
or any State thereof, with an office in New York, New York, having a combined
capital and surplus of at least $500,000,000 that is authorized to perform the
functions of the Collateral Agent hereunder.
Section 6.6 EXPENSES AND INDEMNIFICATION BY BORROWER. The Borrower and
each other Loan Party agree (i) to reimburse the Collateral Agent, on demand,
for any expenses incurred by the Collateral Agent, including reasonable counsel
fees and compensation of agents, arising out of, in any way connected with, or
as a result of, the execution or delivery of this Agreement or any agreement or
instrument contemplated hereby or thereby or the performance by the parties
hereto or thereto of their respective obligations hereunder or thereunder or in
connection with the enforcement or protection of the rights of the Collateral
Agent and the Secured Creditors under this Agreement and the Security Documents
and (ii) to indemnify and hold harmless the Collateral Agent and its directors,
officers, employees and agents, on demand, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, reasonable expenses or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by or asserted against the Collateral Agent in
its capacity as the Collateral Agent or any of them in any way relating to or
arising out of this Agreement or any Security Document or any action taken or
omitted by them under this Agreement or any Operative Agreement; PROVIDED that
the Borrower shall not be liable to the Collateral Agent for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the gross negligence or wilful
misconduct of the Collateral Agent or any of its directors, officers, employees
or agents.
Section 6.7 EXPENSES AND INDEMNIFICATION BY SECURED CREDITORS. Each
Secured Creditor agrees (i) to reimburse the Collateral Agent, on demand, in the
amount of its pro rata share (based on the amount of the Secured Obligations
held by it as compared to the aggregate of all Secured Obligations), for any
expenses referred to in Section 6.6 which shall not have been reimbursed by the
Borrower or any other Loan Party or paid from the proceeds of Collateral as
provided herein and (ii) to indemnify and hold harmless the Collateral Agent and
its directors, officers, employees and agents, on demand, in the amount of such
pro rata share, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
referred to in Section 6.6, to the extent the same shall not have been
reimbursed by the Borrower or any other Grantor or any Guarantor or paid from
the proceeds of Collateral as provided herein; PROVIDED that no Secured Creditor
shall be liable to the Collateral Agent for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross negligence or wilful
misconduct of the Collateral Agent or any of its directors, officers, employees
or agents.
Section 6.8 COLLATERAL AGENT'S LIEN. Notwithstanding anything to the
contrary in this Agreement, as security for the payment of Collateral Agent
Expenses (a) the Collateral Agent is hereby granted a lien upon all Collateral
and (b) the Collateral Agent shall have the right to use and apply any of the
funds held by the Collateral Agent in the Primary Collateral Account to cover
such Collateral Agent Expenses.
Section 6.9 RECORDS. The Collateral Agent shall maintain records
regarding directions by the Directing Party, determinations of the amounts of
the Obligations for any purpose, the allocation of deposits to the Collateral
Accounts and any distributions therefrom. The information contained in such
records shall be made available to any Secured Creditor upon request.
Section 6.10 RELEASE OF COLLATERAL. The Collateral Agent's rights with
respect to the Collateral include the right to release any or all of the
Collateral from the Liens of any Security Document in connection with the sale
of such Collateral, notwithstanding that the net proceeds of any such sale may
not be sufficient to pay in full all of the Secured Obligations. Each of the
Creditors hereby agrees that if the Collateral Agent (acting at the direction of
the Directing Party) shall reasonably determine, in connection with any sale of
Collateral, that the release of the Liens on such Collateral securing any
Secured Obligations is necessary or advisable, each Secured Creditor shall
execute such release documents and instruments and shall take such further
actions as the Collateral Agent shall request. Each Secured Creditor hereby
irrevocably constitutes and appoints the Collateral Agent and any officer or
agent of the Collateral Agent, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Secured Creditor and in the name of such Secured Creditor or
in the Collateral Agent's own name, from time to time in the Collateral Agent's
discretion (or if directed by the Directing Party, when so directed), for the
purpose of carrying out the terms of this paragraph, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this paragraph,
including, without limitation, any financing statements, endorsements,
assignments or other instruments of transfer or release. Each Secured Creditor
hereby ratifies all that said attorneys shall lawfully do or cause to be done
pursuant to the power of attorney granted in this paragraph.
SECTION 7. CONDITIONS PRECEDENT
The agreement of each Existing Creditor to modify and restructure its
Existing Obligations is subject to the satisfaction (unless otherwise waived to
the extent permitted pursuant to Section 8.10) immediately prior to or
concurrently with such modification and restructuring on the Restructuring
Effective Date, of the following conditions precedent:
(a) RESTRUCTURING AGREEMENTS. The Collateral Agent shall have received
the following agreements (the "RESTRUCTURING AGREEMENTS"), each executed and
delivered by a duly authorized officer of each of the parties thereto, with a
counterpart for each party hereto:
(i) this Master Restructuring Agreement;
(ii) the LIFO Credit Agreement, substantially in the form of
Exhibit A, together with the LIFO Loan Documents required to be
executed and delivered as a condition to the occurrence of the
"Closing Date" thereunder; and
(iii) the 1999 Replacement Warrants, substantially in the form of
Exhibit B, with respect to each holder of the 1999 Notes;
(b) RELATED AGREEMENTS. The Collateral Agent shall have received,
with a copy for each Existing Creditor, such other documents or
instruments as may be reasonably requested by the Collateral Agent,
including, without limitation, a copy of any debt instrument, security
agreement or other material contract to which the Borrower or any
other Loan Party may be a party;
(c) CLOSING CERTIFICATE; CORPORATE PROCEEDINGS. The Collateral
Agent shall have received, with a copy for each Existing Creditor, a
certificate of the Borrower and each Loan Party party hereto as of the
Restructuring Effective Date dated the Restructuring Effective Date,
substantially in the form of Exhibit C, with appropriate insertions
and attachments including (i) a copy of the resolutions, in form and
substance satisfactory to the Collateral Agent, of the Board of
Directors of the Borrower and each Subsidiary that is a party hereto
as of the Restructuring Effective Date authorizing (A) the execution,
delivery and performance of each of the agreements being delivered on
the Restructuring Effective Date to which it is a party and (B) the
modification, restructuring and recapitalization contemplated
hereunder and under the LIFO Credit Agreement, each certified by the
Secretary or an Assistant Secretary of the Borrower or other Loan
Party as of the Closing Date, and (ii) a copy of the Borrower's
strategic Business Plan as approved by the Borrower's Board of
Directors, satisfactory in form and substance to the Collateral Agent,
which certificate shall otherwise be in form and substance
satisfactory to the Collateral Agent, shall state that the resolutions
thereby certified have not been amended, modified, revoked or
rescinded and shall be executed by the President or any Vice President
and the Secretary or any Assistant Secretary of the Borrower or such
Loan Party;
(d) LEGAL OPINION. The Collateral Agent shall have received, with
a copy for each Existing Creditor, the executed legal opinion of
Stroock & Stroock & Lavan L.L.P., counsel to the Borrower and certain
of the other Loan Parties, substantially in the form of Exhibit D;
(e) NO DEFAULT. After giving effect to the modifications and
restructuring contemplated hereby and prior waivers relating thereto,
no Default or Event of Default shall have occurred and be continuing
under any of the Existing Agreements;
(f) FEES AND EXPENSES. The Borrower shall have paid (i) to the
Collateral Agent, for the benefit of each Existing Senior Creditor
entitled thereto, the Restructuring Fee payable to each such Existing
Senior Creditor and (ii) shall have reimbursed, with respect to
invoices received at least one Business Day prior to the Closing Date,
each Existing Creditor and the Existing Agent for all its reasonable
costs and expenses, including, without limitation, the reasonable fees
and disbursements of counsel to each Existing Creditor and the
Existing Agent (including the allocated fees and expenses of in-house
counsel) as provided in Section 8.4; PROVIDED that with respect to
invoices received by the Borrower on or after the Closing Date, the
Borrower shall reimburse the entity submitting such invoice in
accordance with this Agreement as soon as practicable thereafter; and
(g) ADDITIONAL MATTERS. All corporate and other proceedings, and
all documents, instruments and other legal matters in connection with
the transactions contemplated by this Agreement and the LIFO Loan
Documents shall be reasonably satisfactory in form and substance to
the Collateral Agent, and the Collateral Agent shall have received
such other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it
shall reasonably request.
SECTION 8. MISCELLANEOUS
Section 8.1 NO INDIVIDUAL ACTION. No Creditor may require the
Collateral Agent to take or refrain from taking any action hereunder or under
any of the Security Documents or with respect to any of the Collateral except as
and to the extent expressly set forth in this Agreement.
Section 8.2 PROVISIONS APPLICABLE AFTER BANKRUPTCY. (a) The provisions
of this Agreement shall continue in full force and effect notwithstanding the
occurrence of any Bankruptcy Event.
(b) To the extent that any Existing Senior Creditor has or acquires
any rights under Section 363 or Section 364 of the Bankruptcy Code with respect
to the security interests in the Collateral securing its Second Priority
Obligations or Third Priority Obligations, such Existing Senior Creditor hereby
agrees that (i) prior to the payment in full of the LIFO Obligations, it will
not assert such rights in a manner inconsistent with the subordination of such
Second Priority Obligations or Third Priority Obligations and the relative
priority of the Liens securing such Second Priority Obligations or Third
Priority Obligations to the priority of the Liens securing the LIFO Obligations
and (ii) at any time, the benefit of the existence, acquisition or assertion of
any such rights (whether consisting of additional or replacement collateral,
payments or otherwise) shall be subject to the terms of this Agreement,
including Sections 3.2 and 4 hereof.
Section 8.3 INVALIDATED PAYMENTS. If any amount distributed by the
Collateral Agent to the Secured Creditors is subsequently required to be
returned or repaid to any Loan Party or their representatives or successors in
interest, whether by court order, settlement or otherwise, each Secured Creditor
shall promptly upon receipt of notice thereof from the Collateral Agent, pay to
the Collateral Agent the pro rata portion received by it of such amount for
payment to the appropriate Loan Party or their representatives or successors in
interest. If such amounts are subsequently recovered by any Secured Creditor
from any Loan Party or their representatives or successors in interest, such
Secured Creditor shall remit such amounts to the Collateral Agent in accordance
with Section 3.2, which amounts shall be redistributed to the Secured Creditors
in accordance with Section 4.
Section 8.4 PAYMENT OF EXPENSES. In addition to their obligations
under Section 6.6 hereof, the Borrower and each other Loan Party agree (a) to
pay or reimburse the Existing Agent and each Existing Creditor for all their
reasonable out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of this Agreement and the other
Restructuring Agreements and any other documents prepared in connection herewith
or therewith, including, without limitation, the reasonable fees and
disbursements of professionals to the Existing Agent or counsel to any such
Existing Creditor, (b) to pay or reimburse the Existing Agent, The Prudential
Insurance Company of America and John Hancock Mutual Life Insurance Company for
all their reasonable out-of-pocket costs and expenses incurred in connection
with the development, preparation and execution of, and any amendment,
supplement or modification to, this Agreement, the other Restructuring
Agreements and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and
disbursements of professionals to the Existing Agent or counsel to The
Prudential Insurance Company of America and John Hancock Mutual Life Insurance
Company, (c) to pay or reimburse the Existing Agent and each Existing Creditor
for all their reasonable costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement, the other
Restructuring Agreements and any such other documents, including, without
limitation, the reasonable fees and disbursements of counsel (including the
allocated fees and expenses of in-house counsel) to the Existing Agent and each
Existing Creditor, (d) to pay, indemnify, and hold the Existing Agent and each
Existing Creditor harmless from, any and all recording and filing fees and any
and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Restructuring Agreements and any such other documents,
and (e) to pay, indemnify, and hold the Existing Agent and each Existing
Creditor, their respective officers, directors, employees, affiliates, agents
and controlling persons (each, an "indemnitee") harmless from and against any
and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the other Restructuring Agreements and any
such other documents, including any of the foregoing relating to the violation
of, noncompliance with or liability under, any environmental law applicable to
the operations or properties of the Borrower, any of its Subsidiaries, all the
foregoing in this clause (e), collectively, the "indemnified liabilities"),
PROVIDED, that the Borrower shall have no obligation hereunder to any indemnitee
with respect to indemnified liabilities to the extent such indemnified
liabilities result from the gross negligence or willful misconduct of such
indemnitee. The agreements in this subsection shall survive repayment of the
Obligations and all other amounts payable under the Restructuring Agreements.
Section 8.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding on
and inure to the benefit of each of the parties hereto; PROVIDED, that no Loan
Party may assign its rights or obligations hereunder without the consent of each
Existing Senior Creditor; PROVIDED FURTHER that no Subordinated Creditor may
sell, assign, or otherwise transfer, in whole or in part, the Subordinated
Obligations or any interest therein to any other Person (a "TRANSFEREE") or
create, incur or suffer to exist any security interest, lien, charge or other
encumbrance whatsoever upon the Subordinated Obligations in favor of any
Transferee unless such action is made expressly subject to this Agreement and
the Transferee expressly acknowledges to the Collateral Agent, by a writing in
form and substance satisfactory to the Collateral Agent, the subordination
provided for herein and agrees to be bound by all of the terms hereof.
Section 8.6 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by registered or certified mail,
five days (or ten days, in the case of mailings between locations inside and
outside of the United States) days after being deposited in the mails, postage
prepaid (airmail, in the case of mailings between locations inside and outside
of the United States), or (c) in the case of delivery by facsimile transmission,
when sent and receipt has been confirmed, addressed to each party entitled to
receive such notice as set forth in Schedule 8.6 with respect to such party, or
to such other address as may be hereafter notified by the respective parties
hereto.
Section 8.7 TERMINATION. This Agreement shall terminate automatically
upon the indefeasible payment in full of all of the Existing Senior Obligations;
PROVIDED that Sections 2.4, 2.5, 2.8(h), 6.6, 6.7 and 8.4 shall survive, and
remain operative and in full force and effect, regardless of the termination of
this Agreement.
Section 8.8 FURTHER ASSURANCES, ETC. Each party hereto shall execute
and deliver such other documents and instruments, in form and substance
reasonably satisfactory to the other parties hereto, and shall take such other
action, in each case as any other party hereto may reasonably have requested (at
the cost and expense of the Borrower), to effectuate and carry out the
provisions of this Agreement, including by recording or filing in such places as
the requesting party may deem desirable, this Agreement or such other documents
or instruments.
Section 8.9 APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
Section 8.10 MODIFICATION OF AGREEMENT. This Agreement may not be
amended, supplemented or modified except by a written agreement executed by the
Collateral Agent (at the direction of the Directing Party) and each Creditor and
Loan Party directly affected thereby.
Section 8.11 WAIVER OF RIGHTS. Neither any failure nor any delay on
the part of any party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, and a single or partial exercise
thereof shall not preclude any other or further exercise or the exercise of any
other right, power or privilege.
Section 8.12 SEVERABILITY. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provision.
Section 8.13 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument.
Section 8.14 SECTION HEADINGS. The Section headings used herein are
for convenience of reference only and are not to affect the construction of or
be taken into consideration in interpreting this Agreement.
Section 8.15 COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior representations, negotiations, writings, memoranda and
agreements, including the Sharing Agreement. To the extent any provision of this
Agreement conflicts with any other Operative Agreement, the provisions of this
Agreement shall be controlling.
Section 8.16 CONFIDENTIALITY. Each Existing Creditor agrees to keep
confidential all information provided to it by the Borrower or any Loan Party
pursuant to this Agreement or any Operative Agreement; PROVIDED that nothing
herein shall prevent any Existing Creditor from disclosing any such information
(i) to the Collateral Agent or any other Existing Creditors, (ii) to any
Transferee or prospective Transferee which agrees to comply with the provisions
of this Section, (iii) to such of its employees, directors, agents, attorneys,
accountants and other professional advisors who need to know such information,
who are advised of the obligation to maintain the confidentiality of such
information, and who have agreed to maintain the confidentiality of such
information, (iv) upon the request or demand, or in accordance with the
requirements (including report requirements), of any Governmental Authority
having jurisdiction over such Existing Creditors, (v) in response to any order
or subpoena of any court or other Governmental Authority or as may otherwise be
required pursuant to any Requirement of Law, (vi) to the National Association of
Insurance Commissioners, or any similar organization or any nationally
recognized rating agency that requires access to information concerning
investment portfolios, (vii) which has been publicly disclosed other than in
breach of this Agreement, or (viii) in connection with the exercise of any
remedy hereunder.
Section 8.17 ADDITIONAL LOAN PARTIES. Each Subsidiary of the Borrower
that is required to become a party to this Agreement pursuant to Section 1.13 of
MRA Appendix B shall become a Loan Party for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Exhibit G hereto.
IN WITNESS WHEREOF, the Collateral Agent and the Creditors have caused
this Agreement to be duly executed by their duly authorized officers, all as of
the day and year first above written.
RECOTON CORPORATION
By: /S/ STUART MONT
----------------------------
Name: Stuart Mont
Title: Chief Operating Officer
Executive Vice President
SUBSIDIARIES
Christie Design Corporation, a Delaware
corporation
InterAct Accessories, Inc., a Delaware
corporation
Recoton Audio Corporation, a Delaware
corporation
ReCone, Inc., a Delaware corporation
Recoton Home Audio, Inc., a California
corporation
Recoton Japan, Inc., an Illinois corporation
Recoton International Holdings, Inc., a
Delaware corporation
Recoton European Holdings, Inc., a Delaware
corporation
AAMP of Florida, Inc., a Florida corporation
By: /S/ STUART MONT
----------------------------
Name: Stuart Mont
Title: Vice President
Recoton German Holdings GmbH, a German
corporation
Mac Audio Electronic GmbH, a German
corporation
Magnat Audio-Produkte GmbH, a German
corporation
Heco Audio-Produkte GmbH, a German
corporation
By: /S/ J.W. MERMAGEN
-----------------------------
Name: J.W. Mermagen
Title: Geschaftsfuhrer
Recoton Canada Ltd., a Canadian corporation
By: /S/ STUART MONT
-----------------------------
Name: Stuart Mont
Title: President
THE CHASE MANHATTAN BANK,
as Existing Agent, Existing Issuer Bank and
as an Existing Bank
By: /S/ ROGER ODELL
-----------------------------
Name: Roger Odell
Title: Managing Director
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL
ASSOCIATION, as an Existing Bank
By: /S/ BYRON P. KURTGIS
--------------------------------
Name: Byron P. Kurtgis
Title: Director
HARRIS TRUST AND SAVINGS BANK, as an
Existing Bank
By: /S/ RAYMOND WHITACRE
-----------------------------
Name: Raymond Whitacre
Title: Managing Director
HSBC BANK U.S.A. (formerly known as MARINE
MIDLAND BANK), as an Existing Bank
By: /S/ FERNANDO A. TORRES
--------------------------------
Name: Fernando A. Torres
Title: Vice President
FIRST UNION NATIONAL BANK, as an Existing
Bank
By: /S/ JAMES R. CONNORS
----------------------------
Name: James R. Connors
Title: Senior Vice President
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
as a 1997 Noteholder, 1998 Noteholder and
1999 Noteholder
By: /S/ PAUL L. MEIRING
----------------------------
Name: Paul L. Meiring
Title: Vice President
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY,
as a 1997 Noteholder
By: /S/ ANTHONY C. URICK
----------------------------
Name: Anthony C. Urick
Title: Second Vice President
JOHN HANCOCK VARIABLE LIFE INSURANCE
COMPANY, as a 1997 Noteholder
By: /S/ ANTHONY C. URICK
-----------------------------
Name: Anthony C. Urick
Title: Authorized Officer
MELLON BANK, N.A., AS TRUSTEE FOR THE
LONG-TERM INVESTMENT TRUST, solely in its
capacity as Trustee and not in its
individual capacity (as directed by John
Hancock Mutual Life Insurance Company), as
a 1997 Noteholder
By: /S/ CAROLE BRUNO
----------------------------
Name: Carole Bruno
Title: Authorized Signatory
MELLON BANK, N.A. AS TRUSTEE FOR BELL
ATLANTIC MASTER PENSION TRUST, solely in
its capacity as Trustee and not in its
individual capacity (as directed by John
Hancock Mutual Life Insurance Company), as
a 1997 Noteholder
By: /S/ CAROLE BRUNO
-----------------------------
Name: Carole Bruno
Title: Authorized Signatory
THE NORTHERN TRUST COMPANY, AS TRUSTEE OF
THE LUCENT TECHNOLOGIES INC. MASTER PENSION
TRUST, as a 1997 Noteholder
BY: John Hancock Mutual Life Insurance
Company, as Investment Manager
By: ANTHONY C. URICK
----------------------------
Name: Anthony C. Urick
Title: Second Vice President
INVESTORS PARTNER LIFE INSURANCE COMPANY,
as a 1997 Noteholder
By: /S/ ANTHONY C. URICK
----------------------------------
Name: Anthony C. Urick
Title: Second Vice President
ING (U.S.) CAPITAL LLC, as a 1999 Noteholder
By: /S/ WILLIAM B. REDMOND
--------------------------------
Name: William B. Redmond
Title: Vice President
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 2.2(a) to the
Master Restructuring Agreement
EXISTING TERM LOANS
- -------------------------------------------------------------------------------------------------------------------------
Term Loans Under Term Loans Under
Existing Credit Existing Credit
Agreement without Aggregate Amount Agreement after
giving effect to of New Chase giving effect to
Existing Lender Section 2.2(a) Term Loans Section 2.2(a)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Chase
Manhattan Bank $2,333,333.35 $5,870,126 $8,203,459.35
- ------------------------------------------------------------------------------------------------------------------
First Union National
Bank $1,720,833.35 $1,720,833.35
- ------------------------------------------------------------------------------------------------------------------
HSBC Bank U.S.A. $1,750,000.00 $1,750,000.00
- ------------------------------------------------------------------------------------------------------------------
Harris Trust and
Savings Bank $1,195,833.30 $1,195,833.30
- ------------------------------------------------------------------------------------------------------------------
SunTrust Bank $1,750,000.00 $1,750,000.00
- ------------------------------------------------------------------------------------------------------------------
Total $8,750,000.00 $14,620,126.00
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 2.2(b) to the
Master Restructuring Agreement
<TABLE>
<CAPTION>
EXISTING L/C COMMITMENT PERCENTAGE
- --------------------------------------------------------------------------------------------------------------------------------
Existing Lender L/C Commitment Aggregate Existing Letter Existing L/C
Under Existing Credit Amount of of Credit Commitment
Agreement without Outstanding Commitment Percentage
giving effect to Chase Letters of (in Dollars)
Section 2.2(b) Credit Under Existing
Credit Agreement
after giving effect to
Section 2.2(b)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Chase Manhattan Bank $3,259,047.20 $580,380 $3,839,427.20 30.7144839%
- --------------------------------------------------------------------------------------------------------------------------------
First Union National Bank $2,349,551.20 $2,349,551.20 18.7958382%
- --------------------------------------------------------------------------------------------------------------------------------
HSBC Bank U.S.A. $2,342,637.60 $2,342,637.60 18.7405311%
- --------------------------------------------------------------------------------------------------------------------------------
Harris Trust and Savings Bank $1,626,126.40 $1,626,126.40 13.0086157%
- --------------------------------------------------------------------------------------------------------------------------------
SunTrust Bank $2,342,637.60 $2,342,637.60 18.7405311%
- --------------------------------------------------------------------------------------------------------------------------------
Total $11,920,000.00 $12,500,380.00
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule 2.8(h) to the
Master Restructuring Agreement
Benchmark Financial Covenants for
1999 Notes Upon Refinancing of the
LIFO Obligations and Existing Obligations
1. CONSOLIDATED TANGIBLE NET WORTH. The Borrower shall not permit Consolidated
Tangible Net Worth of the Borrower and its Consolidated Subsidiaries to be
less than (i) $65,000,000 as of the end of any fiscal month during the
period from the date of the relevant refinancing, refunding, renewal or
extension referred to in Section 2.8(h) of the Master Restructuring
Agreement to and including September 30, 2000 and (ii) $85,000,000 at any
time thereafter.
2. CONSOLIDATED EBITDA TO CONSOLIDATED INTEREST EXPENSE. The Borrower shall
not permit the ratio of Consolidated EBITDA to Consolidated Interest
Expense for any period of four consecutive fiscal quarters ending during
any period set forth below to be less than the ratio set forth opposite
such period:
PERIOD RATIO
------ -----
October 1, 1999 - September 30, 2000 1.4:1
October 1, 2000 - December 31, 2003 1.6:1
3. CONSOLIDATED DEBT TO CONSOLIDATED EBITDA. The Borrower shall not permit the
ratio of the Consolidated Debt to Consolidated EBITDA for any period of
four consecutive fiscal quarters ending during any period set forth below
to be less than the ratio set forth opposite such period:
PERIOD RATIO
------ -----
October 1, 1999 - March 31, 2000 7.75:1
April 1, 2000 - June 30, 2000 7.00:1
July 1, 2000 - September 30, 2001 6.25:1
October 1, 2001 - December 31, 2003 5.75:1
Capitalized terms used in this Schedule 2.8(h) without being defined
shall have the meaning assigned thereto in MRA Appendix A and the following
terms shall have the following meanings.
"CONSOLIDATED DEBT": as defined in the 1999 Securities Purchase
Agreement.
"CONSOLIDATED INTEREST EXPENSE": as defined in the 1999 Securities
Purchase Agreement.
"CONSOLIDATED TANGIBLE NET WORTH": (i) at any time prior to June 30,
2001, as defined in MRA Appendix A and (ii) at any time thereafter, as defined
in the 1999 Securities Purchase Agreement.
<PAGE>
SCHEDULE 8.6
Addresses for Notices
THE BORROWER AND SUBSIDIARIES:
RECOTON CORPORATION
2950 Lake Emma Road
Lake Mary, Florida 32746
Attention: Stuart Mont
Fax: 407-444-0559
CHRISTIE DESIGN CORPORATION
774 Mays Blvd. #10
Incline Village, NV 89481
Tel.: 702-586-9574
Fax: 702-586-9584
Attn.: Cary Christie
INTERACT ACCESSORIES, INC.
10999 McCormick Road
Hunt Valley, Maryland 21031
Tel.: 410-785-5661
Fax: 410-785-5725
Attn.: Todd Hays
RECOTON HOME AUDIO, INC.
RECOTON AUDIO CORPORATION
RECONE, INC.
RECOTON JAPAN, INC.
RECOTON INTERNATIONAL HOLDINGS, INC.
RECOTON EUROPEAN HOLDINGS, INC.
2950 Lake Emma Road
Lake Mary, Florida 32746
Tel: 407-333-8900
Fax: 407-444-0559
Attn.: Stuart Mont
AAMP OF FLORIDA, INC.
13160 56th Court
Clearwater, FL 34620
Tel: 813-572-9255
Fax: 813-573-9326
Attn.: Micah Ansley
RECOTON GERMAN HOLDINGS GMBH
Lise-Meitner-Strasse 9
50259 Pulheim
GERMANY
Tel: 011-49-2234-984080
Fax: 011-49-2234-984086
Attn.: Jeremey Mermagen
MAGNAT AUDIO-PRODUKTE GMBH
MACAUDIO ELECTRONICS GMBH
HECO AUDIO-PRODUKTE GMBH
Lise-Meitner-Strasse 9
50259 Pulheim
GERMANY
Tel: 011-49-2234-984080
Fax: 011-49-2234-984086
Attn.: Mark Finger, Manager Director
RECOTON CANADA LTD.
680 Granite Court
Pickering, Ontario L1W 3JS Canada
Tel.: 905-831-7177
Fax: 905-831-4996
Attn.: Carol Webster
THE CREDITORS:
THE CHASE MANHATTAN BANK
241-02 Northern Boulevard, 3rd Floor
Douglaston, New York 11362
Attention: Recoton Account Officer
Fax: 718-279-8326
with a copy to:
Mr. Roger Odell
The Chase Manhattan Bank
380 Madison Avenue, 9th Floor
New York, New York 10017
Fax: 212-622-4834
FIRST UNION NATIONAL BANK
Overnight Delivery
800 No. Magnolia Ave, Suite 700
Orlando, FL 32803
Attention: James R. Connors, Sr. Vice President
Tel: 407-649-5620
Fax: 407-649-5628
U.S. Mail Delivery:
P.O. Box 1000
(SL 2202)
Orlando, Florida 32802
HSBC BANK USA
One HSBC Center, 26th Floor
Buffalo, NY 14203
Attention: Gerald A. Nagle, Sr. Vice President & Manager Special Credits Unit
Tel: 716-841-1153
Fax: 716-841-1968
HARRIS TRUST AND SAVINGS BANK
111 West Monroe Street, 4th Floor
Chicago, IL 60603
Attention: Diana Williams
Tel: 312-461-2334
Fax: 312-765-1724
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Address for all notices relating to payments:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center, 7th Floor
100 Mulberry Street
Newark, New Jersey 07102-4077
Attn: Trade Management Group
Fax: 973-802-9425
Recipient of telephonic prepayment notices:
Attn: Manager, Trade Management Group
Tel: (973) 367-3623
Address for all other communications, deliveries and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Corporate and Project Workouts
7th Floor, Gateway Center Four
100 Mulberry Street
Newark, New Jersey 07102-4069
Facsimile (973) 802-2333
Attention: Managing Director
<PAGE>
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, on its own behalf and behalf of the
following entities:
John Hancock Mutual Life Insurance Company, as a Lender
John Hancock Variable Life Insurance Company
Mellon Bank, N.A., as Trustee for the Long-Term Investment Trust, solely
in its capacity as Trustee and not in its individual capacity (as directed
by John Hancock Mutual Life Insurance Company) Mellon Bank, N.A. as
Trustee for Bell Atlantic Master Trust, solely in its capacity as Trustee
and not in its individual capacity (as directed by John Hancock Mutual
Life Insurance Company) The Northern Trust Company, as Trustee of the
Lucent Technologies Inc. Master Pension Trust Investors Partner Life
Insurance Company
200 Clarendon Street, 57th Floor
Boston, MA 02117
Attention: Daniel Budde
Tel: 617-572-9644
Fax: 617-572-1628
Attn: Pam Memishian, Esq.
Tel: 617-572-9208
Fax: 617-572-9268
Attn: Christine Marquis
Tel: 617-572-1867
Fax: 617-572-9475
Attn: Bond & Corporate Finance Group, T-57
Fax: 617-572-1605
MELLON BANK, N.A., AS TRUSTEE FOR THE LONG-TERM INVESTMENT TRUST, SOLELY
IN ITS CAPACITY AS TRUSTEE AND NOT IN ITS INDIVIDUAL CAPACITY (AS DIRECTED
BY JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY) MELLON BANK, N.A. AS
TRUSTEE FOR BELL ATLANTIC MASTER TRUST, SOLELY IN ITS CAPACITY AS TRUSTEE
AND NOT IN ITS INDIVIDUAL CAPACITY (AS DIRECTED BY JOHN HANCOCK MUTUAL
LIFE INSURANCE COMPANY)
One Mellon Bank Center
Room 1935
Pittsburgh, PA 15258
Attn: Bernadette T. Rist
Tel: 412-234-6340
Fax: 412-234-0555
<PAGE>
ING BARING, LLC
55 East 52nd Street
New York, New York 10055
Fax: 212-409-5854
Attn: Barry Iseley
SUNTRUST BANKS, INC.
201 4th Avenue, N/12 Fl.
Nashville, Tennessee 37219
Fax: 615-748-5700
Attn: Byron Kurtgis
<PAGE>
Appendix A to the
Master Restructuring Agreement
DEFINITIONS
Unless the context otherwise requires:
a. any term defined below by reference to an instrument or document
shall continue to have the meaning ascribed thereto whether or
not such instrument or document remains in effect;
b. a reference to any statute, regulation, ordinance or law includes
all statutes, regulations, ordinances or laws, consolidating or
replacing them, and a reference to a statute includes all
regulations, and ordinances issued or otherwise applicable under
that statute;
c. a reference to any document, instrument or agreement includes,
without limitation, except as otherwise specified in a particular
document, instrument or agreement, any amendment or supplement
to, or modification of, such document, instrument or agreement,
entered into from time to time in accordance with the terms of
such document, instrument or agreement and the Master
Restructuring Agreement; and
d. a reference to any Person includes its successors and permitted
assigns.
As used in the Master Restructuring Agreement and other documents,
instruments and agreements contemplated thereby, the following terms shall have
the following meanings unless otherwise defined in such document, instrument or
agreement:
"ACCELERATION DATE": the date of the acceleration of the maturity of
any of the Obligations in accordance with the terms of the applicable Operative
Agreement governing such Obligation and the terms of the Master Restructuring
Agreement.
"ACCOUNTS": as to any Person, all rights to receive payment for goods
sold or leased by such Person or for services rendered in the ordinary course of
business of such Person to the extent not evidenced by an instrument or chattel
paper, together with all interest, finance charges and other amounts payable by
an account debtor in respect thereof.
"AFFILIATE": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in Control of, is Controlled by or
is under common Control with, such Person.
"AGGREGATE L/C OBLIGATIONS": at any time, the sum of (a) the LIFO L/C
Obligations, (b) the Existing L/C Obligations and (c) all other obligations of
the Borrower or any Subsidiary, in respect of letters of credit, bankers=
acceptances or similar credit support documents (other than letters of credit
issued by The Chase Manhattan Bank, Hong Kong for the account of the Borrower to
the extent supported by an Existing Letter of Credit issued in favor of The
Chase Manhattan Bank, Hong Kong).
"ASSET SALE": any Disposition of Property or series of related
Dispositions of Property (excluding any Disposition permitted by subsection 2.5
of MRA Appendix B (other than paragraph (e) and (f)(ii) of such subsection)).
"BANKRUPTCY EVENT": any event described in clause (i) or (ii) of
paragraph (f) of the MRA Appendix C.
"BLOCKAGE NOTICE": a written notice from the LIFO Agent acting at the
direction of the Required LIFO Lenders that a LIFO Obligation Non-Payment
Default has occurred and is continuing.
"BLOCKAGE PERIOD": any period commencing on the date a Blockage Notice
is given and ending on the earlier to occur of (i) the cure or waiver of the
LIFO Obligation Non-Payment Default giving rise thereto and (ii) 179 days after
the date of the Blockage Notice giving rise thereto.
"BORROWER": Recoton Corporation.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.
"CANADIAN SUBSIDIARY": any Subsidiary of the Borrower that is
organized under the laws of Canada.
"CANCELABLE FACILITY FEE WARRANTS": as defined in subsection 2.9 of
the LIFO Credit Agreement
"CAPITAL EXPENDITURE": any expenditure which in accordance with GAAP
would be classified as a non-current tangible asset.
"CAPITAL STOCK": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.
"CASH EQUIVALENTS": (a) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed or insured by the United
States Government or any agency thereof, (b) certificates of deposit and
eurodollar time deposits with maturities of one year or less from the date of
acquisition and overnight bank deposits of any LIFO Lender or of any commercial
bank having capital and surplus in excess of $500,000,000, (c) repurchase
obligations of any LIFO Lender or of any commercial bank satisfying the
requirements of clause (b) of this definition, having a term of not more than 30
days with respect to securities issued or fully guaranteed or insured by the
United States Government, (d) commercial paper of a domestic issuer rated at
least A-2 by Standard and Poor's Ratings Services ("S&P") or P-2 by Moody's
Investors Service, Inc. ("MOODY'S"), (e) securities with maturities of one year
or less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political subdivision or
taxing authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may be) are
rated at least A by S&P or A by Moody's, (f) securities with maturities of one
year or less from the date of acquisition backed by standby letters of credit
issued by any LIFO Lender or any commercial bank satisfying the requirements of
clause (b) of this definition or (g) shares of money market mutual or similar
funds which invest exclusively in assets satisfying the requirements of clauses
(a) through (f) of this definition.
"CHASE": The Chase Manhattan Bank, a New York banking corporation.
"CHASE LETTERS OF CREDIT": The four stand-by Letters of Credit in the
aggregate outstanding amount as of the Restructuring Effective Date of $580,380
issued pursuant to the Chase Reimbursement Agreements.
"CHASE MORTGAGES": (i) the Mortgage, dated July 3, 1991 and recorded
July 8, 1991, made between the Borrower (as successor by merger to Calibron,
Inc., a Delaware corporation) and Chase (f/k/a Chemical Bank) covering the
premises set forth on Exhibit A thereto and securing indebtedness in the
original principal amount of $2,226,000 and (ii) the Mortgage, dated October 4,
1993, made between Chase (f/k/a Chemical Bank) and the Borrower, covering the
premises described in Exhibit A thereto and securing indebtedness in the
original principal amount of $1,650,000.
"CHASE REIMBURSEMENT AGREEMENTS": the Continuing Letter of Credit
Security Agreement, the Supplemental Letter of Credit Agreement and the
Continuing Indemnity Agreement, each dated as of September 6, 1996, between the
Borrower and Chase.
"CHASE TERM LOAN AGREEMENTS": the collective reference to (a) the Loan
Agreement dated as of December 20, 1995 between Chase (f/k/a Chemical Bank) and
Far East and (b) the Term Loan Agreement dated as of December 29, 1995 between
Chase (f/k/a Chemical Bank) and the Borrower.
"CHASE TERM LOANS": the Far East Term Loan and the Domestic Chase Term
Loan.
"CODE": the Internal Revenue Code of 1986.
"COLLATERAL": the collective reference to any and all property upon
which a Lien is purported to be created by any Security Document.
"COLLATERAL ACCOUNTs": the collective reference to the Primary
Collateral Account, the LIFO L/C Cash Collateral Account and the Existing L/C
Cash Collateral Account as those terms are used in Section 4.1 of the Master
Restructuring Agreement.
"COLLATERAL AGENT": Chase, in its capacity as Collateral Agent.
"COLLATERAL AGENT EXPENSES": all fees, costs and expenses of the
Collateral Agent of the types described in Sections 6.6 and 6.7 of the Master
Restructuring Agreement and subsection 4.7 of the Collateral Agreement.
"COLLATERAL AGREEMENT": the Collateral Agreement, as of even date with
the Master Restructuring Agreement, made by the Grantors in favor of the
Collateral Agent, for the benefit of the Secured Creditors.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes the Borrower and which is
treated as a single employer under Section 414 of the Code.
"CONSOLIDATED": when used in connection with any defined term, and not
otherwise defined, such defined term as it applies to the Borrower and its
Subsidiaries on a consolidated basis.
"CONSOLIDATED EBITDA": for any period, all as determined in accordance
with GAAP, the Net Income (or Net Loss) of the Borrower and its Consolidated
Subsidiaries for such period, PLUS (without duplication) (a) the sum of (i)
depreciation expense, (ii) amortization expense, (iii) net total Federal, state
and local income tax expense, (iv) gross interest expense for such period less
gross interest income for such period, net of the effect of any change in
accounting principles, (v) extraordinary losses, (vi) any non-recurring charge
or restructuring charge, including additional reserves for doubtful accounts and
inventory writedowns, in an aggregate amount not to exceed $15,000,000 from and
after July 1, 1999, (vii) the cumulative effect of any change in accounting
principles as shown on the Borrower=s consolidated statement of income for such
period and (viii) any non-cash expense related to any Premium Obligation LESS
(b) extraordinary gains PLUS or MINUS (c) the amount of cash received or
expended in such period in respect of any amount which under clauses (vi) and
(viii) above was taken into account in determining Consolidated EBITDA for such
period or any prior period.
"CONSOLIDATED INTANGIBLES": at a particular date, all assets of the
Borrower and its Subsidiaries, determined on a consolidated basis at such date,
that would be classified as intangible assets in accordance with GAAP.
"CONSOLIDATED NET WORTH": at a particular date, all amounts which
would be included under shareholders equity on a balance sheet of the Borrower
and its Consolidated Subsidiaries determined as of such date in accordance with
GAAP.
"CONSOLIDATED TANGIBLE NET WORTH": as of the end of any fiscal month,
the excess, if any, of Consolidated Net Worth less Consolidated Intangibles as
at such date PLUS or MINUS (i) the net write-up or write-down in the book value
of assets resulting from revaluations arising out of foreign currency valuations
in accordance with GAAP since June 30, 1999 through the end of such fiscal
month, PLUS or MINUS (ii) net total Federal, state and local income taxes since
June 30, 1999 through the end of such fiscal month PLUS (iii) any non-cash
expense related to any Premium Obligations since June 30, 1999 through the end
of such fiscal month.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CONTROL": of a Person means the power, directly or indirectly, either
to (a) vote more than 50% of the securities having ordinary voting power for the
election of directors of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"CREDITORS": the collective reference to the LIFO Creditors and the
Subordinated Creditors.
"CURRENT ASSETS RATIO": at a particular date, the ratio of (a) the sum
of the amounts then appearing on a balance sheet of the Borrower and its
Consolidated Subsidiaries under the captions "cash," "accounts receivable" and
"inventory" to (b) the then outstanding Obligations other than 1999 Note
Obligations and Premium Obligations.
"CURRENT ASSET RATIO CERTIFICATE": as defined in subsection 1.2(e) of
MRA Appendix B.
"DEFAULT": any Event of Default, whether or not any requirement for
the giving of notice, the lapse of time, or both, or any other condition has
been satisfied.
"DIRECTING PARTY": (i) prior to the occurrence of the LIFO Repayment
Date, the Required LIFO Lenders and (ii) thereafter, the Required Existing
Senior Creditors.
"DISPOSITION": with respect to any Property, any sale, lease, sale and
leaseback, assignment, conveyance, transfer or other disposition thereof.
"DISTRIBUTION DATE": each date fixed by the Collateral Agent in its
sole discretion for a distribution to the Secured Creditors of funds held in the
Collateral Account, but, in any event, a date not more than ten Business Days
following any date on which there is at least $3,000,000 in the Primary
Collateral Account available for distribution.
"DOLLARS" and "$": dollars in lawful currency of the United States of
America.
"DOMESTIC CHASE TERM LOAN": the term loans made to the Borrower
pursuant to the Chase Term Loan Agreement described in clause (b) of the
definition of "Chase Term Loan Agreements" in the principal amount outstanding
on the Restructuring Effective Date equal to $1,983,190.
"DOMESTIC SUBSIDIARY": any Subsidiary of the Borrower other than
RAC-FSC organized under the laws of any state or territory of the United States.
"ENVIRONMENTAL LAWS": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
"ENVIRONMENTAL PERMIT": any and all permits, licenses, approvals,
registrations, notifications, exemptions and any other authorization required
under any Environmental Law.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EVENT OF DEFAULT": any of the events set forth in MRA Appendix C,
PROVIDED that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"EXCLUDED FOREIGN SUBSIDIARY": (a) any Subsidiary of the Borrower
organized under the laws of the United Kingdom or (b) any Far East Subsidiary.
"EXISTING AGENT": Chase, in its capacity as administrative agent for
the Existing Banks under the Existing Credit Agreement.
"EXISTING AGREEMENTS": the Existing Credit Agreement, the Senior Note
Agreements, the 1999 Securities Purchase Agreement and all other documents
executed and delivered in connection therewith, respectively.
"EXISTING BANK GUARANTEE": the Guarantee dated as of August 27, 1996,
in favor of the Existing Agent (for the benefit of the Existing Banks), made by
the Existing Guarantors.
"EXISTING BANK OBLIGATIONS": the collective reference to the unpaid
principal of and interest on the Existing Loans, the Existing Reimbursement
Obligations and the Existing Letters of Credit (including interest accruing at
the then applicable rate provided in the Existing Credit Agreement after the
maturity of the Existing Loans or the Existing Reimbursement Obligations and
interest accruing at the then applicable rate provided in the Existing Credit
Agreement after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to the Borrower or
any other Guarantor, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) and all other obligations and
liabilities of the Borrower or any other Guarantor to the Existing Agent, the
Existing Issuing Bank and the Existing Banks in respect of the Existing Loans,
the Existing Reimbursement Obligations and the Existing Letters of Credit,
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, the Existing Credit Agreement, any Existing Letter of Credit, the other
Existing Loan Documents, this Agreement or any other document made, delivered or
given in connection therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including all fees and disbursements of counsel to the Existing
Agent, the Existing Issuing Bank or to the Existing Banks that are required to
be paid by the Borrower or any other Guarantor pursuant to the terms of the
Existing Credit Agreement, any other Existing Loan Document or this Agreement),
but in each case limited to the obligations and liabilities of the Borrower and
each other Guarantor to the Existing Agent, the Existing Issuing Bank and the
Existing Banks in respect of the Existing Loans, the Existing Reimbursement
Obligations and the Existing Letters of Credit.
"EXISTING BANKS": the financial institutions listed on the signature
pages of the Master Restructuring Agreement as "Existing Banks", together with
their respective successors and assigns.
"EXISTING CREDIT AGREEMENT": the Amended and Restated Credit
Agreement, dated as of June 18, 1998, among the Borrower, the Existing Banks and
the Existing Agent.
"EXISTING CREDITORS": the Existing Senior Creditors and the 1999
Noteholders.
"EXISTING GUARANTEES": the Existing Bank Guarantee and the Senior Note
Guarantees.
"EXISTING GUARANTORS": the collective reference to all Persons that
are as of the Restructuring Effective Date or thereafter become guarantors of
the Existing Senior Obligations except to the extent any such Guarantor is
released from such obligations in accordance with Section 2.9 of the Master
Restructuring Agreement.
"EXISTING ISSUING BANK": Chase in its capacity as the "Issuing Bank"
under the Existing Credit Agreement.
"EXISTING L/C AVAILABILITY": at any time, the difference between the
Existing L/C Commitment and the Existing L/C Obligations, each at such time.
"EXISTING L/C CASH COLLATERAL ACCOUNT": the account established by the
Borrower pursuant to subsection 4.1 of the Master Restructuring Agreement under
the sole and exclusive control of the Collateral Agent, currently maintained at
the office of the Collateral Agent at 241-02 Northern Boulevard, Douglaston, New
York, New York 11362 designated as the "Recoton Corporation Existing L/C Cash
Collateral Account" or similar title that shall be used solely for the purposes
set forth in subsection 4.1 of the Master Restructuring Agreement and any other
provision of any Operative Agreement which requires the cash collateralization
of Existing L/C Obligations.
"EXISTING L/C COMMITMENT": $12,500,380.
"EXISTING L/C COMMITMENT PERCENTAGE": as to any Existing Bank, the
percentage set forth opposite the name of such Existing Bank on Schedule 2.2(b)
of the Master Restructuring Agreement.
"EXISTING L/C OBLIGATIONS": at any time, an amount equal to (a) the
sum of (i) the undrawn and unexpired amount of the then outstanding Existing
Letters of Credit and (ii) the Existing Reimbursement Obligations at such time
(b) minus 95.25% of the aggregate amount on deposit in the Existing L/C Cash
Collateral Account.
"EXISTING L/C REDUCTION AMOUNT: at any date of determination, the
difference (if any) between the Existing L/C Obligations as of such date of
determination and (a) in the case of the first date of determination following
the Restructuring Effective Date, the Existing L/C Obligations on the
Restructuring Effective Date and (b) in the case of any subsequent date of
determination, the Existing L/C Obligations on the immediately preceding date of
determination of the Existing L/C Reduction Amount, PROVIDED that any expiration
of, or any dishonor of any proposed drawing on, any Existing Letter of Credit
shall not be deemed to be a reduction of the Existing L/C Obligations until 30
days after the date of expiration of such Existing Letter of Credit or until any
dispute with respect to any such dishonor has been finally determined in favor
of the propriety of such dishonor; PROVIDED FURTHER that for purposes of this
definition Existing L/C Obligations shall be determined without giving effect to
clause (b) of the definition of AExisting L/C Obligations."
"EXISTING LETTERS OF CREDIT": any letter of credit issued (or deemed
issued) pursuant to the Existing Credit Agreement and that is outstanding as of
the Restructuring Effective Date or issued thereafter.
"EXISTING LOAN DOCUMENTS": the "Loan Documents" under and as defined
in the Existing Credit Agreement.
"EXISTING LOANS": the "Revolving Credit Loans" and the "Term Loans"
under and as defined in the Existing Credit Agreement.
"EXISTING OBLIGATIONS": the collective reference to the Existing
Senior Obligations and the 1999 Note Obligations.
"EXISTING REIMBURSEMENT OBLIGATIONS": at any date, the aggregate
amount of drawings under Existing Letters of Credit which have not then been
reimbursed.
"EXISTING SENIOR CREDITOR AGREEMENTS": the Existing Credit Agreement
and the Senior Note Agreements.
"EXISTING SENIOR CREDITOR PERCENTAGE": at a particular time, as to any
Existing Senior Creditor, a percentage represented by a fraction the numerator
of which is the principal amount of Existing Senior Obligations of such Existing
Senior Creditor outstanding at such time, and the denominator of which is the
aggregate principal amount of Existing Senior Obligations of all Existing Senior
Creditors outstanding at such time.
"EXISTING SENIOR CREDITORS": the Existing Banks and the Senior
Noteholders.
"EXISTING SENIOR OBLIGATIONS": the Existing Bank Obligations, the
Senior Note Obligations and the Premium Obligations.
"EXISTING SENIOR OBLIGATIONS PAYMENT DEFAULT": any default in the
payment of the Existing Senior Obligations (whether upon maturity, mandatory
prepayment, acceleration or otherwise) beyond any applicable grace period with
respect thereto.
"FACILITY FEE WARRANTS": the collective reference to the Fixed
Facility Fee Warrants and the Cancelable Facility Fee Warrants.
"FAIR MARKET VALUE": with respect to any Property, the sale value of
such Property that would be realized in an arm=s length sale at such time
between an informed and willing buyer and an informed and willing seller under
no compulsion to buy or sell, respectively.
"FAR EAST": Recoton (Far East) Limited.
"FAR EAST TERM LOAN": the term loans made to Far East pursuant to the
Chase Term Loan Agreement described in clause (a) of the definition of "Chase
Term Loan Agreements" in the principal amount outstanding on the Restructuring
Effective Date equal to 30,169,619 Hong Kong dollars.
"FAR EAST SUBSIDIARY": any Hong Kong Subsidiary or PRC Subsidiary.
"FINANCIAL ADVISOR": (i) Zolfo Cooper or (ii) a management consulting
firm or individual specializing in corporate turnarounds and restructurings
selected by the Borrower and reasonably satisfactory to the Agent and the
Required LIFO Lenders which Financial Advisor shall assist the Borrower with,
among other things, the preparation and delivery of financial information, and
other reports and materials, delivered to any LIFO Lender or any Existing
Creditor pursuant to the terms of any Operative Agreement or otherwise, and
shall be reasonably available to the LIFO Lenders or any Existing Creditor and
their respective advisors to discuss the implementation of the Borrower=s
strategic business plan, the development and implementation of the other reports
described in subsections 1.1, 1.2 and 1.10 of MRA Appendix B, the results of
operations and other matters related to its role as Financial Advisor.
"FINANCING LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"FIRST PRIORITY OBLIGATIONS": the LIFO Obligations.
"FIRST TIER EXCLUDED FOREIGN SUBSIDIARY": any Excluded Foreign
Subsidiary the Capital Stock of which is owned by the Borrower or any Domestic
Subsidiary.
"FIXED FACILITY FEE WARRANTS": as defined in subsection 2.9 of the
LIFO Credit Agreement.
"FOREIGN SUBSIDIARY": any Subsidiary of the Borrower organized under
the laws of any jurisdiction outside the United States of America.
"FOREIGN SUBSIDIARY SECURITY AGREEMENT": each Security Document made
by a (a) Foreign Subsidiary or (b) the Borrower or a Domestic Subsidiary with
respect to the Capital Stock of a Foreign Subsidiary, in each case in favor of
the Collateral Agent for the benefit of the Secured Creditors.
"FOURTH PRIORITY OBLIGATIONS": the 1999 Note Obligations.
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
"GERMAN SUBSIDIARY": any Subsidiary of the Borrower organized under
the laws of Germany.
"GOVERNMENTAL AUTHORITY": any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"GRANTOR": the Borrower and each Guarantor and each other Person that
becomes a "Grantor" under any Security Document after the Restructuring
Effective Date.
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING PERSON"),
any obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "PRIMARY OBLIGATIONS")
of any other third Person (the "PRIMARY OBLIGOR") in any manner, whether
directly or indirectly, including, without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such primary
obligation or any property constituting direct or indirect security therefor,
(ii) to advance or supply funds (1) for the purchase or payment of any such
primary obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; PROVIDED, HOWEVER, that the term
Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good faith.
"GUARANTEES": the collective reference to (i) the LIFO Guarantee and
(ii) the Existing Guarantees and (iii) supplements, addendums or additional
guarantees executed by any Person that becomes a party to either or both the
LIFO Guarantee or any Existing Guarantee, the Master Restructuring Agreement or
the LIFO Credit Agreement.
"GUARANTORS": the collective reference to the Existing Guarantors and
the LIFO Guarantors.
"HAZARDOUS SUBSTANCES": any gasoline or petroleum (including crude oil
or any fraction thereof) or petroleum products or any hazardous or toxic
substances, materials or wastes, defined or regulated as such in or under any
Environmental Law, including, without limitation, asbestos, polychlorinated
biphenyls and urea-formaldehyde insulation.
"HONG KONG SUBSIDIARIES": any Subsidiary of the Borrower that is
organized under the laws of Hong Kong.
"INDEBTEDNESS": of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all obligations of such Person under Financing Leases,
(d) all obligations of such Person in respect of letters of credit, bankers=
acceptances, discounted drafts or trust receipts issued or created for the
account of such Person and (e) all liabilities secured by any Lien on any
property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"ITALIAN SUBSIDIARY": any Subsidiary of the Borrower that is organized
under the laws of Italy.
"LAKE MARY PROPERTY": the collective reference to the following
parcels of property commonly known as 2950 Lake Emma Road and 109 Emma Oaks
Road, Lake Mary, Florida with the following legal descriptions: (a) Parcel One
consisting of (i) Parcel A consisting of the east 648.00 feet of the south
155.70 feet of the southwest 1/4 of the southwest 1/4 of section 18, township 20
south, range 30 east, Seminole County, Florida, less the east 83.00 feet thereof
for Lake Emma Road. And the east 648.00 feet of the north 144.30 feet of the
northwest 1/4 of the northwest 1/4 of section 19, township 20 south, range 30
east, less the east 83.00 feet thereof for Lake Emma Road and (ii) Parcel B,
consisting of the east 648.00 feet of the south 336.12 feet of the north 480.42
feet of the northwest 1/4 of the northwest 1/4 section 19, township 20 south,
range 30 east, Seminole County, Florida, less the east 83.00 feet thereof for
Lake Emma Road and (b) Parcel Two consisting of (A) the south 873.50 feet of the
north 1076.70 feet of the east 250.00 feet of government lot 2, section 24,
township 20 south, range 29 east, Seminole County, Florida; (B) the northwest
1/4 of the southwest 1/4 section of section 19, township 20 south, range 30
east, Seminole County, Florida; less the south 460.00 feet thereof and less the
east 83.00 feet thereof; and (C) the south 873.50 feet of the north 1076.70 feet
of the west 248.00 feet of the east 498.00 feet of government lot 2, section 24,
township 20 south, range 29 east, Seminole County, Florida.
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Financing Lease
having substantially the same economic effect as any of the foregoing).
"LIFO AGENT": Chase, in its capacity as administrative agent for the
LIFO Lenders.
"LIFO COMMITMENT PERCENTAGE": as to any LIFO Lender, its "Commitment
Percentage" under and as defined in the LIFO Credit Agreement.
"LIFO COMMITMENTS": the "Commitments" under and as defined in the LIFO
Credit Agreement.
"LIFO CREDIT AGREEMENT": the Agreement, of even date with the Master
Restructuring Agreement, among the Borrower, the LIFO Lenders, and the LIFO
Agent.
"LIFO CREDITORS": the holders from time to time of the LIFO
Obligations.
"LIFO GUARANTEE": the Guarantee, of even date with the Master
Restructuring Agreement, made by each of the corporations that are signatories
thereto in favor of Chase, as LIFO Agent.
"LIFO GUARANTOR": any guarantor under the LIFO Guarantee.
"LIFO ISSUING BANK": Chase, in its capacity as issuer of any LIFO
Letter of Credit.
"LIFO L/C CASH COLLATERAL ACCOUNT": the account established by the
Borrower pursuant to subsection 4.1 of the Master Restructuring Agreement under
the sole and exclusive control of the Collateral Agent, currently maintained at
the office of the Collateral Agent at 270 Park Avenue, New York, New York 10017
designated as the "Recoton Corporation LIFO L/C Cash Collateral Account" or
similar title that shall be used solely for the purposes set forth in subsection
4.1 of the Master Restructuring Agreement and any other provision of any
Operative Agreement which requires the cash collateralization of LIFO L/C
Obligations.
"LIFO L/C OBLIGATIONS": at any time, the "L/C Obligations" as defined
in the LIFO Credit Agreement.
"LIFO LENDER": a "Lender" (including a "Voting Participant") under and
as defined in the LIFO Credit Agreement.
"LIFO LETTERS OF CREDIT": "Letters of Credit" under and as defined in
the LIFO Credit Agreement.
"LIFO LOANS": Loans under and as defined in the LIFO Credit Agreement.
"LIFO LOAN DOCUMENTS": "Loan Documents" under and as defined in the LIFO Credit
Agreement.
"LIFO NOTES": "Notes" under and as defined in the LIFO Credit
Agreement.
"LIFO OBLIGATIONS": the collective reference to the unpaid principal
of and interest on the LIFO Loans, the LIFO Letters of Credit and the
reimbursement obligations due thereunder (including interest accruing at the
then applicable rate provided in the LIFO Credit Agreement after the maturity of
the LIFO Loans or the LIFO L/C Obligations and interest accruing at the then
applicable rate provided in the LIFO Credit Agreement after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to the Borrower or any other Guarantor, whether or not
a claim for post-filing or post-petition interest is allowed in such proceeding)
and all other obligations and liabilities of the Borrower or any other Guarantor
to the LIFO Agent, the LIFO Issuing Bank and the LIFO Lenders in respect of the
LIFO Loans, the LIFO L/C Obligations and the LIFO Letters of Credit, whether
direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, the LIFO Credit Agreement, any LIFO Letter of Credit, the Collateral
Agreement, the other LIFO Loan Documents or any other document made, delivered
or given in connection therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including all fees and disbursements of counsel to the LIFO Agent,
the LIFO Issuing Bank or to the LIFO Lenders that are required to be paid by the
Borrower or any other Guarantor pursuant to the terms of the LIFO Credit
Agreement, the Collateral Agreement or any other LIFO Loan Document), but in
each case limited to the obligations and liabilities of the Borrower and each
other Guarantor to the LIFO Agent, the LIFO Issuing Bank and the LIFO Lenders in
respect of the LIFO Loans, the LIFO L/C Obligations and the LIFO Letters of
Credit.
"LIFO OBLIGATION NON-PAYMENT DEFAULT": an Event of Default in respect
of the LIFO Obligations other than Payment Default.
"LIFO PAYMENT DEFAULT": a Payment Default in respect of the LIFO
Obligations.
"LIFO REPAYMENT DATE": the date on which (a) the LIFO Obligations
shall have been indefeasibly paid in full, (b) the LIFO Commitments shall have
been terminated and (c) all outstanding but undrawn LIFO Letters of Credit have
been replaced and returned, secured by "back-to-back" letters of credit or cash
collateralized, in each case, in the manner set forth in subsection 3.5(d) of
the LIFO Credit Agreement.
"LIFO TERMINATION DATE": June 30, 2001.
"LOAN PARTY": as defined in the recitals of the Master Restructuring
Agreement.
"MASTER RESTRUCTURING AGREEMENT": the Master Restructuring Agreement,
dated as of September 8, 1999, among the Loan Parties, the Existing Creditors
and the Collateral Agent.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole or (b) the validity or
enforceability of the Master Restructuring Agreement or any of the other
Operative Agreements or the rights or remedies of the Collateral Agent or the
Creditors thereunder.
"MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
"MORTGAGED PROPERTIES": any of the Properties of the Borrower or any
Subsidiary that is subject to a Mortgage.
"MORTGAGES": each of the mortgages and deeds of trust made by any Loan
Party in favor of, or for the benefit of, the Collateral Agent for the benefit
of the Secured Creditors.
"MRA APPENDIX A": Appendix A to the Master Restructuring Agreement.
"MRA APPENDIX B": Appendix B to the Master Restructuring Agreement.
"MRA APPENDIX C": Appendix C to the Master Restructuring Agreement.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"NET CASH PROCEEDS": (a) in connection with any Asset Sale, the
proceeds thereof in the form of cash and Cash Equivalents (including any such
proceeds received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise, but
only as and when received), net of (i) attorneys= fees, accountants= fees,
investment banking fees and other professional fees, (ii) amounts required to be
applied to the repayment of Indebtedness secured by a Lien expressly permitted
hereunder on any asset which is the subject of such Asset Sale (other than any
Lien pursuant to a Security Document) or to the repayment of any other liability
associated with the assets or business sold and required to be paid in
connection with or as a result of such Asset Sale, such as accounts payable,
severance payments or winddown costs, (iii) the amount of such proceeds which
are attributable to (and payable to) minority interests, (iv) the amount of any
reserve reasonably maintained by the Borrower and its Subsidiaries with respect
to indemnification obligations or obligations to repurchase sold property or
other contingent obligations in respect of such Asset Sale pursuant to the
definitive documentation pursuant to which such Asset Sale is consummated (with
any unused portion of such reserve to constitute Net Cash Proceeds on the date
(or dates) upon which any such obligations owing thereunder are satisfied in
whole or in part), and (v) taxes paid or reasonably estimated to be payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and (b) in connection with any
issuance or sale of Capital Stock or debt securities or instruments or the
incurrence of loans, the cash proceeds received by the Borrower or any of its
Subsidiaries from such issuance or incurrence, net of attorneys= fees,
investment banking fees, and other professional fees, underwriting discounts and
commissions and other reasonable fees and expenses actually incurred in
connection therewith; PROVIDED that for purposes of clause (b) of this
definition, any proceeds derived from any issuance of Capital Stock or warrants,
rights or options or the exercise of any such warrants, rights or options
permitted under subsection 2.5 of MRA Appendix B (other than under paragraph
(f)(ii) thereof) shall not constitute Net Cash Proceeds.
"NET INCOME" OR "NET LOSS": of any Person for any period, net income
(or net loss) of such Person, determined on a consolidated basis in accordance
with GAAP.
"NON-PARTICIPATING SENIOR CREDITOR": as defined in Section 2.6 of the
Master Restructuring Agreement.
"NOTICE OF SECURED OBLIGATION PAYMENT DEFAULT": a written notification
given by or on behalf of a Secured Creditor certifying that a Secured Obligation
Payment Default has occurred.
"OBLIGATIONS": the LIFO Obligations and the Subordinated Obligations.
"OPERATIVE AGREEMENTS": the Existing Agreements, the LIFO Credit
Agreement and the other LIFO Loan Documents, the Warrants, and the Registration
Rights Agreement.
"PARTICIPATING SENIOR CREDITOR": as defined in Section 2.6 of the
Master Restructuring Agreement.
"PAYMENT DEFAULT": as to any Obligation, an Event of Default under
paragraph (a) of MRA Appendix C.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"PERMITTED LIENS": Liens described in subsection 2.2 of MRA Appendix
B.
"PERMITTED PAYMENTS": collectively, (a) the fees payable in accordance
with the terms of the Existing Agreements as in effect on the Restructuring
Effective Date (including the Restructuring Fee, unused commitment fees, letter
of credit fees and the payment or reimbursement of any Creditor=s costs and
expenses payable or reimbursable under such Creditor=s Existing Agreement or the
Master Restructuring Agreement), (b) payments on account of interest on (but not
on account of principal of or Premium Obligations in respect of) the Existing
Senior Obligations and the 1999 Notes in accordance with the terms of the
Existing Agreements as in effect on the Restructuring Effective Date, and (c)
the issuance of any warrants to purchase the Borrower=s common stock
contemplated by the LIFO Credit Agreement or the Master Restructuring Agreement
or the issuance of any such common stock upon the exercise thereof.
"PERSON": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"PRC SUBSIDIARY": any Subsidiary of the Borrower that is organized
under the laws of the People's Republic of China (other than Hong Kong).
"PREMIUM OBLIGATIONS": the collective reference to the 1997 Note
Premium Obligations and the 1998 Note Premium Obligations.
"PREPAYMENT WARRANTS": as defined in Section 2.7 of the Master
Restructuring Agreement.
"PRIMARY COLLATERAL ACCOUNT": as defined in Section 4.1 of the Master
Restructuring Agreement.
"PROPERTY": any interest in any kind of property or assets, whether
real, personal or mixed and whether tangible or intangible.
"PROPERTIES": the facilities and properties owned, leased or operated
by the Borrower or any of its Subsidiaries.
"RAC-FSC": RAC-FSC, a U.S. Virgin Islands corporation.
"REGISTRATION RIGHTS AGREEMENT": the Registration Rights Agreement,
dated as of even date herewith, among the Borrower, and each of the parties
whose signatures are set forth thereto under the heading "LIFO Lenders".
"RELATED MORTGAGE DOCUMENTS": the Negative Covenants Agreement, dated
as of July 13, 1991, between the Borrower (for itself and as successor by merger
to Calibron, Inc., a Delaware corporation and Tape Services, Inc., a New Jersey
corporation) and Chase (as successor by merger to Chemical Bank); the First
Mortgage Modification Agreement, dated as of October 4, 1993, between the
Borrower (for itself and as successor by merger to Calibron, Inc.) and Chase (as
successor by merger to Chemical Bank); the Term Loan Agreement dated October 4,
1993, between the Borrower, Recoton Canada Ltd. and Far East and Chase (as
successor by merger to Chemical Bank); and the Amendment Agreement, dated as of
August 27, 1996, between the Borrower and Chase.
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .21, .22, .23, .24, .25, .26, .27, .28, .29, .30, .31,
.32, .34 or .35 of PBGC Reg. ' 4043.
"REQUIRED EXISTING SENIOR CREDITORS": Existing Senior Creditors having
Existing Senior Creditor Percentages aggregating more than 51%.
"REQUIRED LIFO LENDERS": "Required Lenders" under and as defined in
the LIFO Credit Agreement.
"REQUIREMENT OF LAW": as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"RESPONSIBLE OFFICER": the chief executive officer, the president, the
chief operating officer or the chief financial officer of the Borrower.
"RESTRUCTURING AGREEMENTS": as defined in Section 7(a) of the Master
Restructuring Agreement.
"RESTRUCTURING EFFECTIVE DATE": the date upon which all conditions
precedent to the Master Restructuring Agreement have been satisfied or waived as
provided therein.
"RESTRUCTURING FEE": as to any Participating Senior Creditor, the sum
of (a) .65% of the outstanding principal amount of such Participating Senior
Creditor=s Existing Senior Obligations on the Restructuring Effective Date PLUS
(b) an amount equal to such Participating Senior Creditor=s pro rata share
(based on the proportion that the principal amount of its Existing Senior
Obligations bears to the aggregate principal amount of all of the Existing
Senior Obligations other than the Existing Senior Obligations of any
Non-Participating Senior Creditors) of .65% of the outstanding principal amount
of the aggregate Existing Senior Obligations of all Non-Participating Senior
Creditors on the Restructuring Effective date.
"SECOND PRIORITY OBLIGATIONS": the Existing Senior Obligations;
PROVIDED that the amount of Premium Obligations constituting "SECOND PRIORITY
OBLIGATIONS" shall be (i) if the aggregate Premium Obligations are equal to or
greater than $6,666,667, an amount equal to the greater of (x) an amount equal
to 75% of such aggregate Premium Obligations and (y) such aggregate Premium
Obligations minus $3,000,000, (ii) if the aggregate Premium Obligations are less
than $6,666,667 but greater than or equal to $5,000,000, an amount equal to
$5,000,000 and (iii) if the aggregate Premium Obligations are less than
$5,000,000, an amount equal to such aggregate Premium Obligations.
"SECURED CREDITORS": the Collateral Agent, the LIFO Creditors and the
Existing Senior Creditors.
"SECURED OBLIGATIONS": the LIFO Obligations and the Existing Senior
Obligations.
"SECURED OBLIGATION PAYMENT DEFAULT": a Payment Default in respect of
any of the Secured Obligations.
"SECURITY DOCUMENTS": the collective reference to the Collateral
Agreement, the Mortgages, the Foreign Subsidiary Security Agreements and all
other security documents hereafter delivered to the Collateral Agent purporting
to grant a Lien on any asset or assets of any Person to secure the Secured
Obligations.
"SENIOR NOTE AGREEMENTS": the collective reference to the 1997 Note
Purchase Agreement and the 1998 Note Purchase Agreement.
"SENIOR NOTE GUARANTEES": the collective reference to (i) the Guaranty
dated as of January 6, 1997 by the Guarantors in favor of the 1997 Noteholders
and (ii) the Guaranty dated as of September 1, 1998 by the Guarantors in favor
of the 1998 Noteholders.
"SENIOR NOTEHOLDERS": the collective reference to the 1997 Noteholders
and the 1998 Noteholders.
"SENIOR NOTE OBLIGATIONS": the collective reference to the 1997 Note
Obligations and the 1998 Note Obligations.
"SENIOR NOTES": the collective reference to the 1997 Notes and the
1998 Notes.
"SHARING AGREEMENT": the First Amended and Restated Sharing
Agreement, dated as of September 1, 1998, among the Existing Banks and the
Senior Noteholders.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"SUBORDINATED CREDITORS": the holders from time to time of the
Subordinated Obligations.
"SUBORDINATED NOTEHOLDERS": the holders of the notes issued under the
1999 Securities Purchase Agreement.
"SUBORDINATED OBLIGATIONS": the collective reference to the Fourth
Priority Obligations, the Third Priority Obligations and the Second Priority
Obligations in relation to the First Priority Obligations.
"SUBSIDIARY": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of the Borrower.
"SUMMARY TERM SHEET": as defined in the recitals to the Master
Restructuring Agreement.
"TERM LENDER PURCHASE AMOUNT": at any date of determination an amount
equal to the product of the Existing L/C Reduction Amount at such date TIMES a
fraction, the numerator of which is the sum of (a) the principal amount of the
Existing Bank Obligations (other than Existing L/C Obligations) at such date
plus (b) the principal amount of the Senior Note Obligations at such date, and
the denominator of which is the sum of (a) principal amount of the Existing Bank
Obligations at such date plus (b) the principal amount of the Senior Note
Obligations at such date.
"THIRD PRIORITY OBLIGATIONS": any Premium Obligation that is not a
Second Priority Obligation.
"TOTAL TANGIBLE ASSETS": as to any Person and its Consolidated
Subsidiaries, as of any date of determination, all assets of such Person and its
Consolidated Subsidiaries determined in conformity with GAAP other than (a)
assets constituting Accounts owed by the Borrower or any Subsidiary of the
Borrower, and (b) assets that would be classified as intangible assets in
accordance with GAAP.
"TRANSFEREE": as defined in subsection 8.5 of the Master Restructuring
Agreement. "UCC": the Uniform Commercial Code as in effect on the date of the
Master Restructuring Agreement in the State of New York.
"WARRANTS": the Facility Fee Warrants, the Prepayment Warrants and the
1999 Replacement Warrants.
"1997 NOTEHOLDERS": the holders of the 1997 Notes, together with their
respective successors and assigns.
"1997 NOTE OBLIGATIONS": the collective reference to the unpaid
principal of, interest on the 1997 Notes (including interest accruing at the
then applicable rate provided in the 1997 Note Purchase Agreement after the
maturity of the 1997 Notes and interest accruing at the then applicable rate
provided in the 1997 Note Purchase Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower or any other Guarantor, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
and all other obligations and liabilities of the Borrower or any other Guarantor
to each 1997 Noteholder in respect of the 1997 Notes, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with the
1997 Note Purchase Agreement, the applicable Senior Note Guarantee or this
Agreement or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including all fees
and disbursements of counsel to each 1997 Noteholder that are required to be
paid by the Borrower or any other Guarantor pursuant to the terms of the 1997
Note Purchase Agreement or Senior Note Guarantee), but in each case limited to
the obligations and liabilities of the Borrower and each other Guarantor to each
1997 Noteholder in respect of the 1997 Notes and 1997 Note Purchase Agreement.
"1997 NOTE PREMIUM OBLIGATIONS": at any time (i) the
"Yield-Maintenance Amount" (as such term is defined in the 1997 Note Purchase
Agreement) in respect of the 1997 Notes.
"1997 NOTE PURCHASE AGREEMENT": collectively, the separate Note
Purchase Agreements, each dated as of January 6, 1997, between the Borrower and
each of the purchasers named in Annex 1 thereto.
"1997 NOTES": the Adjustable Rate Senior Notes of the Borrower issued
pursuant to the 1997 Note Purchase Agreement.
"1998 NOTEHOLDERS": the holder of the 1998 Notes, together with its
successors and assigns.
"1998 NOTE OBLIGATIONS": the collective reference to the unpaid
principal of, interest on the 1998 Notes (including interest accruing at the
then applicable rate provided in the 1998 Note Purchase Agreement after the
maturity of the 1998 Notes and interest accruing at the then applicable rate
provided in the 1998 Note Purchase Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower or any other Guarantor, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
and all other obligations and liabilities of the Borrower or any other Guarantor
to each 1998 Noteholder in respect of the 1998 Notes, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, the
1998 Note Purchase Agreement, the applicable Senior Note Guarantee or this
Agreement or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including all fees
and disbursements of counsel to each 1998 Noteholder that are required to be
paid by the Borrower or any other Guarantor pursuant to the terms of the 1998
Note Purchase Agreement or Senior Note Guarantee), but in each case limited to
the obligations and liabilities of the Borrower and each other Guarantor to each
1998 Noteholder in respect of the 1998 Notes and 1998 Note Purchase Agreement.
"1998 NOTE PREMIUM OBLIGATIONS": the "Yield-Maintenance Amount" (as
such term is defined in the 1998 Note Purchase Agreement) in respect of the 1998
Notes.
"1998 NOTE PURCHASE AGREEMENT": the Note Purchase Agreement, dated as
of September 1, 1998, between the Borrower and the purchaser named in Annex 1
thereto.
"1998 NOTES": the Adjustable Rate Senior Note of the Borrower issued
pursuant to the 1998 Note Purchase Agreement.
"1999 NOTEHOLDERS": the holders of the 1999 Notes, together with their
respective successors and assigns.
"1999 NOTE OBLIGATIONS": the collective reference to the unpaid
principal of and interest on (including interest accruing at the then applicable
rate provided in the 1999 Securities Purchase Agreement after the maturity of
the 1999 Notes and interest accruing at the then applicable rate provided in the
1999 Securities Purchase Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceedings, relating to the Borrower or any guarantor of the 1999 notes,
whether or not a claim for post-filing or post-petition interest is allowed in
any such proceeding) and any "Early Payment Amounts" owing in respect of the
1999 Notes and all other obligations and liabilities of the Borrower to each
1999 Noteholder in respect of the 1999 Notes, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, the 1999
Securities Purchase Agreement whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including all fees and disbursements of counsel to each 1999 Noteholder that
are required to be paid by the Borrower pursuant to the terms of the 1999
Securities Purchase Agreement), but in each case limited to the obligations and
liabilities of the Borrower to each 1999 Noteholder in respect of the 1999 Notes
and 1999 Securities Purchase Agreement.
"1999 NOTES": the Senior Subordinated Notes due February 4, 2004 of
the Borrower issued pursuant to the 1999 Securities Purchase Agreement.
"1999 NOTES SUBSIDIARY GUARANTEE": as defined in Section 2.8(d) of the
Master Restructuring Agreement.
"1999 ORIGINAL WARRANTS": the warrants originally issued in connection
with the issue and sale by the Borrower of the 1999 Notes, evidencing the right
to purchase an aggregate of 310,000 shares of common stock.
"1999 REPLACEMENT WARRANTS": as defined in Section 2.4(c) of the
Master Restructuring Agreement.
"1999 SECURITIES PURCHASE AGREEMENT": the Securities Purchase
Agreements, dated as of February 4, 1999, between the Borrower and each of the
purchasers named in Annex 1 thereto.
<PAGE>
Appendix B to the
Master Restructuring Agreement
The covenants set forth in this Appendix B are the covenants referred
to in the LIFO Credit Agreement (as such term and all other capitalized terms
used herein without being defined are defined in MRA Appendix A), and the Master
Restructuring Agreement, and shall be applicable to (i) the LIFO Credit
Agreement to the extent provided in Sections 6 and 7 thereof, (ii) the Existing
Credit Agreement, the Senior Note Agreements and the 1999 Securities Purchase
Agreement to the extent provided in Section 2.8(d) of the Master Restructuring
Agreement and (iii) the Chase Mortgages to the extent provided in Section 2.5 of
the Master Restructuring Agreement.
SECTION 1. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, until the payment in full of the LIFO
Obligations and Existing Obligations, the Borrower shall and (except in the case
of delivery of financial information, reports and notices) shall cause each of
its Subsidiaries to:
1.1 FINANCIAL STATEMENTS. Furnish to the Collateral Agent, each LIFO
Lender and each Creditor:
(a) as soon as available, but in any event within (x) 95 days, in the
case of consolidated financial statements and the related accountants
report, or (y) 105 days, in the case of consolidating financial statements
and the related certificate of a Responsible Officer, after the end of each
fiscal year of the Borrower, copies of the consolidated and consolidating
balance sheets of the Borrower and its consolidated Subsidiaries as at the
end of such year and the related consolidated and consolidating statements
of income and retained earnings and of cash flows for such year, setting
forth in each case in comparative form the figures for the previous year,
(i) in the case of such consolidated financial statements, reported on
without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by independent
certified public accountants of nationally recognized standing retained
pursuant to subsection 1.11(a) hereof and (ii) in the case of such
consolidating financial statements, certified by a Responsible Officer as
being fairly stated in all material respects;
(b) as soon as available, but in any event not later than (x) 50 days,
in the case of consolidated financial statements, or (y) 65 days, in the
case of consolidating financial statements, after the end of each of the
first three quarterly periods of each fiscal year of the Borrower, the
unaudited consolidated and consolidating balance sheets of the Borrower and
its consolidated Subsidiaries as at the end of such quarter and the related
unaudited consolidated and consolidating statements of income and retained
earnings and of cash flows of the Borrower and its consolidated
Subsidiaries for such quarter and the portion of the fiscal year through
the end of such quarter, setting forth in each case in comparative form the
figures for the previous year, certified by a Responsible Officer as being
fairly stated in all material respects (subject to normal year-end audit
adjustments); and
(c) with respect to each fiscal month of the Borrower that is not also
the end of a fiscal quarter or the fiscal year of the Borrower, as soon as
available, but in any event not later than (i) 30 days after the end of
such month, the unaudited consolidated balance sheet of the Borrower and
its Subsidiaries as at the end of such fiscal month and the related
unaudited consolidated statements of income and stockholders' equity of the
Borrower and its Subsidiaries for such fiscal month and (ii) 40 days after
the end of such month, the related unaudited consolidated statements of
cash flows of the Borrower and its Subsidiaries for such fiscal month and,
in each case, for the portion of the fiscal year through the end of such
fiscal month, setting forth in each case in comparative form the figures
for the previous year and the figures for such period, certified by the
chief financial officer of the Borrower as being fairly stated in all
material respects (subject to normal quarter-en review and year-end audit
adjustments), PROVIDED that in the case of (x) January of each fiscal year,
the Borrower shall deliver all such financial statements within 60 days
after the end of such month and (y) February of each fiscal year, the
Borrower shall deliver all such financial statements within 45 days after
the end of such month;
All financial statements referred to in paragraphs (a), (b) and (c) of this
Subsection 1.1 shall be complete and correct in all material respects and shall
be prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except as approved by such accountants or officer, as the case may be, and
disclosed therein);
1.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Collateral Agent
and each Creditor:
(a) concurrently with the delivery of the consolidated financial
statements referred to in subsection 1.1(a) of MRA Appendix B, a letter
from the independent certified public accountants reporting on such
financial statements stating that in making the examination necessary to
express their opinion on such financial statements no knowledge was
obtained of any Default or Event of Default except as specified in such
letter;
(b) concurrently with the delivery of the financial statements
referred to in subsections 1.1(a), (b) and (c) of MRA Appendix B, a
certificate of the president, chief executive officer or chief operating
officer of the Borrower (i) stating that, to the best of such officer's
knowledge, each Loan Party has observed or performed all of its covenants
and other agreements, and satisfied in all material respects each
condition, contained in the Operative Agreements to be observed, performed
or satisfied by it, and that such officer has obtained no knowledge of any
Default or Event of Default except as specified in such certificate, (ii)
showing in detail as of the end of the related period the figures and
calculations supporting such statement in respect of the financial
covenants to be tested at the end of the related period as set forth
subsection 2.1 of this Appendix B, and (iii) showing in detail as of the
end of the related period the calculations for monthly Consolidated EBITDA
for purposes of determining the applicable Maximum Outstanding Amount;
(c) within five days of receipt thereof, copies of all final reports
submitted to the Borrower or to any of its Subsidiaries by independent
certified public accountants in connection with each annual, interim or
special audit of the books of the Borrower or any of its Subsidiaries made
by such accountants, including, without limitation, any final comment
letter submitted by such accountants to management in connection with their
annual audit;
(d) within five days after the same are sent or made available, copies
of all financial statements, reports, notices and proxy statements sent or
made available to stockholders or the public generally by the Borrower or
any of its Subsidiaries, if any, and all regular and periodic reports and
all final registration statements and final prospectuses, if any, filed by
the Borrower or any of its Subsidiaries with any securities exchange or
with the Securities and Exchange Commission or any Governmental Authority
succeeding to any of its functions;
(e)(i) as soon as available but in any event on or before Wednesday of
each week, a certificate in the form of Exhibit A-1 hereto (a "CURRENT
ASSETS RATIO CERTIFICATE"), certified as true and correct in all material
respects by any executive officer of the Borrower setting forth the Current
Assets Ratio and the calculation thereof as of the preceding Saturday;
PROVIDED that no less frequently than once every 30 days, either the
President, Chief Executive Officer or Chief Operating Officer shall certify
as to the truth and correctness in all material respects of each Current
Assets Ratio Certificate that had not previously certified in the preceding
30-day period by any such officer and (ii) unless the Collateral Agent
agrees otherwise, on the respective dates specified in Exhibit A-2 hereto,
the information specified in such Exhibit A-2;
(f) promptly, on or before Wednesday of each week, a weekly cash flow
projection for the Borrower and its Subsidiaries for the period of five
consecutive calendar weeks beginning in the week in which the applicable
Wednesday occurs, together with a comparison of the actual cash flows of
the Borrower and its Subsidiaries for the immediately preceding week to the
most recently forecasted cash flows of the Borrower and its Subsidiaries
for such week and a discussion of any material variances therein;
(g) on or before the first day of any month, commencing with September
1999, a weekly cash flow projection for the Borrowers and its Subsidiaries
for the period of 13 consecutive weeks from the beginning of such month,
together with a report identifying and explaining any material variances
for weeks common to such projection and the immediately preceding
projection delivered pursuant hereto or otherwise; and
(h) concurrently with the delivery of the financial statements
referred to on subsections 1.1(a) and (b) of MRA Appendix B, a certificate
of the president, chief executive officer or chief operating officer of the
Borrower showing in detail as of the end of the applicable period the
calculations showing compliance with the agreements contained in subsection
2.6 of MRA Appendix B.
(i) promptly, such additional financial and other information as any
Creditor may from time to time reasonably request.
1.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy before
they become delinquent, as the case may be, all its obligations of whatever
nature, except where the amount or validity thereof is currently being contested
in good faith by appropriate proceedings and reserves in conformity with GAAP
with respect thereto have been provided on the books of the Borrower or its
Subsidiaries, as the case may be.
1.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Except as
otherwise contemplated by Schedule 1.4, continue to engage in business of the
same general type as now conducted by it and preserve, renew and keep in full
force and effect its corporate existence and take all reasonable action to
maintain all rights, privileges and franchises necessary or desirable in the
normal conduct of its business except as otherwise permitted pursuant to
subsection 2.5 of MRA Appendix B or to the extent that the failure to do so
could not, in the aggregate, be reasonably expected to have a Material Adverse
Effect; and comply with all Contractual Obligations and Requirements of Law
except to the extent that failure to comply therewith could not, in the
aggregate, be reasonably expected to have a Material Adverse Effect.
1.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all property useful and
necessary in its business in good working order and condition except to the
extent that the failure do so could not, in the aggregate, be reasonably
expected to have a Material Adverse Effect; maintain the insurance on all its
Property and with respect to its businesses as required by the Collateral
Agreement; and furnish to the Collateral Agent or any Secured Creditor at the
Borrower's expense, upon such Person's written request, full information as to
the insurance carried.
1.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all material
dealings and transactions in relation to its business and activities; and permit
representatives of any Creditor to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of the Borrower and its
Subsidiaries with officers of the Borrower and its Subsidiaries and with its
independent certified public accountants so long as representatives of the
Borrower are given the opportunity to be present.
1.7 NOTICES. Promptly give notice to the Collateral Agent and each
Creditor of:
(a) the occurrence of any Default or Event of Default of which it is
aware;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries of which it is aware
or (ii) litigation, investigation or proceeding of which it is aware which
may exist at any time between the Borrower or any of its Subsidiaries and
any Governmental Authority, which in either case, if not cured or if
adversely determined, as the case may be, could reasonably be expected to
have a Material Adverse Effect;
(c) any litigation or proceeding of which it is aware affecting the
Borrower or any of its Subsidiaries in which the amount involved is
$1,000,000 or more and not covered by insurance or in which injunctive or
similar relief is sought;
(d) the following events, as soon as possible and in any event within
30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to
any Plan, a failure to make any required contribution to a Plan where such
failure could reasonably be expected to have a Material Adverse Effect or
to result in the creation of a Lien, the creation of any Lien in favor of
the PBGC or a Plan or the Reorganization or Insolvency of, any
Multiemployer Plan or any withdrawal from, or termination of, any
Multiemployer Plan where such withdrawal or termination could reasonably be
expected to have a Material Adverse Effect, or (ii) the institution of
proceedings or the taking of any other action by the PBGC or the Borrower
or any Commonly Controlled Entity or any Multiemployer Plan with respect to
the Reorganization or Insolvency of any Plan or any withdrawal from, or
termination of, any Multiemployer Plan where such withdrawal or termination
could reasonably be expected to have a Material Adverse Effect; and
(e) Any development or event of which it is aware which has had or
could reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
1.8 ENVIRONMENTAL LAWS. (a) Other than exceptions to any of the
following that would not (either individually or in the aggregate) have a
Material Adverse Effect, (i) comply with all Environmental Laws applicable to
it, and obtain, comply with and maintain any and all Environmental Permits
necessary for its operations as conducted and as planned; and (ii) take all
reasonable efforts to ensure that all of its tenants, subtenants, contractors,
subcontractors, and invitees comply with all Environmental Laws, and obtain,
comply with and maintain any and all Environmental Permits, applicable to any of
them.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws except to the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings could not be
reasonably expected to have a Material Adverse Effect.
(c) At any time upon the Collateral Agent's request following the
occurrence and during the continuance of an Event of Default in respect of any
Secured Obligations permit an environmental consultant whom the Collateral Agent
in its discretion designates to perform an environmental assessment (including,
without limitation: reviewing documents; interviewing knowledgeable persons; and
sampling and analyzing soil, air, surface water, groundwater, and/or other media
or building materials) in or about real property owned or leased by the Borrower
or any of its Subsidiaries, or on which operations of the Borrower or any of its
Subsidiaries otherwise take place. Such environmental assessment shall be in
form, scope, and substance reasonably satisfactory to the Collateral Agent. The
Borrower and any such Subsidiary shall cooperate fully in the conduct of such
environmental assessment, and the Borrower shall pay the costs of such
environmental assessment promptly upon written demand by the Collateral Agent.
The Collateral Agent shall have the right, but shall not have any duty, to
request and/or obtain such environmental assessment.
1.9 COLLATERAL AUDIT. Permit employees, representatives and/or agents
of the Collateral Agent, at any time upon the Collateral Agent's reasonable
request, during normal business hours, to enter into the premises of the
Borrower and any of its Subsidiaries to conduct an audit, the reasonable cost
and expense of which will be borne by the Borrower, of (a) the assets of the
Borrower and its Subsidiaries that comprise the Collateral and (b) the
Borrower's and the Guarantors' practices in the computation of the Currents
Assets Ratio.
1.10 OTHER REPORTS. Deliver to the Collateral Agent and each Creditor:
(a) on or before Friday of each week, commencing with the first Friday
after the Restructuring Effective Date, a report detailing the status of
operational and financial restructuring activities of the Borrower and its
Subsidiaries as of the end of the week preceding the week in which such report
is delivered;
(b) as soon as available, but in any event no later than 30 days after
the Restructuring Effective Date, a report, prepared with the assistance of the
Financial Advisor, detailing the Borrower's present efforts and future plans to
reduce general, selling and administrative expenses to levels appropriate for
businesses in comparable financial circumstances to the Borrower and its
Subsidiaries; and
(c) on or before December 31, 1999, a strategic plan, prepared with
the assistance of the Financial Advisor, outlining specific capital financial
measures to reduce and pay in full the Existing Senior Obligations in form and
substance reasonably satisfactory to the Required Existing Senior Creditors.
1.11 RETENTION OF PROFESSIONALS. (a) As promptly as possible, but by
no later than November 30, 1999, retain a nationally recognized certified public
accounting firm with in-house international capabilities and expertise in the
foreign jurisdictions in which the Borrower or any Subsidiary operates or files
a tax return, to audit the financial statements referred to in subsection 1.1(a)
of MRA Appendix B and to review the financial statements referred to in
subsection 1.1(b) of MRA Appendix B.
(b) Unless otherwise agreed by the Required Existing Senior Creditors,
continue at all times the retention of a Financial Advisor on terms and
conditions reasonably satisfactory to the Required Existing Senior Creditors.
1.12 BOARD OF DIRECTORS. Exercise its best efforts to elect two
independent directors to its Board of Directors by January 15, 2000; PROVIDED
that if the Borrower shall not have elected two independent directors to its
Board of Directors within 90 days after the Restructuring Effective Date, the
Borrower shall promptly retain, for the purpose of assisting the Borrower in
effectuating such election by January 15, 2000 a reputable consulting firm
specializing in the identification and retention of professional independent
directors. For purposes of this subsection, the term "independent director"
shall mean a natural Person who does not have a material business, social,
familial or economic relationship with the Chief Executive Officer, the Chief
Operating Officer or the Chief Financial Officer of the Borrower other than his
or her relationship as an independent director.
1.13 POST CLOSING COLLATERAL; ADDITIONAL COLLATERAL, ETC. (a) (i)
Deliver to the Collateral Agent as soon as available, but in any event by
October 15, 1999, (A) an as-is appraisal of the Lake Mary Property, prepared by
an appraiser that is a member of the American Institute of Real Estate
Appraisers and has at least ten (10) years' experience in evaluating and
appraising properties similar in type and geographic location to the Lake Mary
Property, which appraisal shall meet the minimum appraisal standards for
national banks promulgated by the Comptroller of the Currency pursuant to Title
XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989,
as amended, (B) a first priority deed of trust or mortgage, as the case may be
(subordinate only to the Chase Mortgages and any other Permitted Liens) in favor
of the Collateral Agent, for the benefit of the Secured Creditors, covering the
Lake Mary Property, in form for recording and otherwise in form and substance
reasonably satisfactory to the Collateral Agent and (C) title and extended
coverage insurance covering the Lake Mary Property in an amount at least equal
to the purchase price of such real estate and the cost of the improvements
thereto (or such other amount as shall be reasonably specified by the Collateral
Agent) and (ii) use its best efforts to deliver by October 15, 1999 and in any
case deliver no later than November 15, 1999, to the Collateral Agent (A) a
current ALTA survey of the Lake Mary Property, together with a surveyor's
certificate, (B) any consents or estoppels deemed necessary or advisable by the
Agent in connection with such Mortgage, (C) a Abring-down or update of the title
insurance referred to above to remove any exceptions relating to the surveys,
each of the foregoing in form and substance reasonably satisfactory to the
Collateral Agent and (D) legal opinions relating to the matters described in the
this paragraph, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Collateral Agent.
(b) Cooperate with the Collateral Agent in the formulation and
development of a cash management system, to be implemented no later than October
1, 1999, which cash management system shall be memorialized in a cash collateral
and administration agreement, in a form reasonably satisfactory to the Borrower
and the Collateral Agent, and provide for (i) the collection of domestic
accounts receivable in bank accounts maintained with the Collateral Agent or in
an account or accounts maintained with other banks and (ii) the concentration of
available funds on a daily basis in an account or accounts maintained by the
Collateral Agent; in connection with such cash management system, deliver to the
Collateral Agent as soon as available, but in any event by October 15, 1999, (x)
lockbox agreements, in a form reasonably satisfactory to the Collateral Agent,
with respect to the lockbox accounts set forth on Part A of Schedule 1.13(b)
hereto, duly executed by the respective bank(s) at which such accounts are
maintained and the Borrower or applicable Loan Party specified in relation to
each such lockbox account on such Schedule 1.13(b), (y) blocked account
agreements, in a form reasonably satisfactory to the Collateral Agent, with
respect to the depositary accounts among the bank accounts set forth on Part B
of Schedule 1.13(b) hereto, duly executed by the respective bank(s) at which
such accounts are maintained and the Borrower or applicable Loan Party specified
in relation to each such bank account on such Schedule 1.13(b) and (z) the cash
collateral and administration agreement referred to above;
(c) As soon as available but in any event by October 1, 1999, deliver
to the Collateral Agent Assumption Agreements relating to each of the LIFO
Guarantee and the Master Restructuring Agreement, duly executed by each Italian
Subsidiary, in a form satisfactory to the Collateral Agent, and opinions, in a
form and from counsel reasonably satisfactory to the Collateral Agent, relating
to the validity and enforceability of the obligations under the LIFO Guarantee
of each Foreign Subsidiary that executed and delivered the LIFO Guarantee on the
Restructuring Effective Date and each Italian Subsidiary.
(d) As soon as available but in any event by October 15, 1999:
(i) With respect to Far East, (A) deliver to the Collateral Agent, a
mortgage of shares or other comparable agreement with respect to 65% of
each class of Capital Stock of Far East, duly executed and delivered by the
Borrower and any Domestic Subsidiary that owns any such Capital Stock, in a
form or forms satisfactory to the Collateral Agent, (B) take all actions
reasonably necessary or advisable to grant the Collateral Agent, for the
benefit of the Secured Creditors, perfected Liens on such Capital Stock,
including the issuance of share certificates representing such Capital
Stock in the name of the Collateral Agent or its nominee and the delivery
of copies of the shareholder registry of Far East showing the Collateral
Agent or its nominee as the registered owner of such pledged shares and (C)
deliver to the Collateral Agent opinions relating to the enforceability of
any such mortgage of shares or other agreement and the perfected status and
priority of such Liens, which opinions shall be in form and substance and
from counsel, reasonably satisfactory to the Collateral Agent;
(ii) With respect to Recoton (UK) Limited, (A) deliver to the
Collateral Agent, a mortgage of shares or other comparable agreement with
respect to 65% of each class of Capital Stock of Recoton (UK) Limited, duly
executed and delivered by the Borrower and any Domestic Subsidiary that
owns any such Capital Stock, in a form or forms satisfactory to the
Collateral Agent, (B) take all actions reasonably necessary or advisable to
grant the Collateral Agent, for the benefit of the Secured Creditors,
perfected Liens on such Capital Stock, including the issuance of share
certificates representing such Capital Stock in the name of the Collateral
Agent or its nominee and the delivery of copies of the shareholder registry
of each such Subsidiary showing the Collateral Agent or its nominee as the
registered owner of such pledged shares and (C) deliver to the Collateral
Agent opinions relating to the enforceability of any such mortgage of
shares or other agreement and the perfected status and priority of such
Liens, which opinions shall be in form and substance and from counsel,
reasonably satisfactory to the Collateral Agent;
(iii) with respect to each German Subsidiary, Italian Subsidiary and
Canadian Subsidiary that is a Foreign Subsidiary owned by the Borrower or a
Domestic Subsidiary, (A) deliver to the Collateral Agent, a pledge
agreement or comparable agreement with respect to 100% of each class of
Capital Stock of such Foreign Subsidiary owned by the Borrower or a
Domestic Subsidiary, duly executed and delivered by such Loan Party, in a
form satisfactory to the Collateral Agent, (B) take all actions reasonably
necessary or advisable to grant the Collateral Agent, for the benefit of
the Secured Creditors, perfected Liens in such Capital Stock including, to
the extent applicable, the issuance of share certificates representing such
Capital Stock in the name of the Collateral Agent or its nominee and the
delivery of copies of the shareholder registry of each such Subsidiary
showing the Collateral Agent or its nominee as the registered owner of such
pledged shares and (C) deliver to the Collateral Agent opinions relating to
the validity and enforceability of such pledge or comparable agreements and
the perfected status and priority of such Liens, which opinions shall be in
form and substance and from counsel reasonably satisfactory to the
Collateral Agent PROVIDED that in the case of any such Subsidiary that is
an Italian Subsidiary, the obligations of the Borrower under clause (B)
above shall be satisfied upon the delivery of the pledge or comparable
agreement with respect to the Capital Stock of such Italian Subsidiary to
the appropriate Italian Governmental Authority for recordation under
applicable Italian law; and
(iv) with respect to each Canadian Subsidiary, (A) deliver duly
executed agreements that are valid and enforceable under the laws under
which each such Canadian Subsidiary is organized granting the Collateral
Agent, for the benefit of the Secured Creditors, perfected Liens (subject
to Permitted Liens) on substantially all of the tangible and intangible
assets of such Canadian Subsidiary, (B) to the extent possible under the
laws of each applicable jurisdiction, take all actions reasonably necessary
or advisable to perfect such Liens in Canada and (C) deliver to the
Collateral Agent opinions relating to the validity and enforceability of
such pledge or comparable agreements and the perfected status and priority
of such Liens, which opinions shall be in form and substance and from
counsel, reasonably satisfactory to the Collateral Agent.
(e) With respect to any assets acquired after the Restructuring
Effective Date by the Borrower or any other domestic Loan Party (other than (x)
assets covered by the (A) after-acquired property clauses of the Collateral
Agreement to which the Person acquiring such assets is a party and (B) the
Uniform Commercial Code financing statements already on file with respect to
such Person, (y) any assets described in paragraph (f), (g), (h) or (i) below
and (z) assets with an aggregate value not to exceed $500,000 with respect to
which a security interest cannot be perfected by filing UCC-1 financing
statements), promptly (i) execute and deliver to the Collateral Agent such
amendments to any Operative Agreements or such other documents as the Collateral
Agent, the Required LIFO Lenders or the Required Existing Senior Creditors deem
necessary or advisable in order to grant to the Collateral Agent, for the
benefit of the Secured Creditors, perfected Liens on such assets, (ii) take all
actions reasonably necessary or advisable to grant to the Collateral Agent, for
the benefit of the Secured Creditors, perfected first and second priority Liens
in such assets, prior to all other Liens, including the filing of UCC financing
statements in such jurisdictions as may be required by the appropriate Security
Document or by law or as may be requested by the Collateral Agent and (iii) if
reasonably requested by the Collateral Agent, the Required LIFO Lenders or the
Required Existing Senior Creditors, deliver to the Collateral Agent legal
opinions relating to the matters described in the preceding clauses (i) and
(ii), which opinions shall be in form and substance reasonably consistent with
the opinion delivered on the Restructuring Effective Date as to relevant
matters, and from counsel reasonably satisfactory to the Collateral Agent and
any requesting LIFO Lenders and/or Existing Senior Creditors.
(f) With respect to any fee interest in any real estate having a value
(together with improvements thereof), of at least $100,000 in each case acquired
after the Restructuring Effective Date by the Borrower or any of its
Subsidiaries, promptly (i) execute and deliver a first priority mortgage or deed
of trust, as the case may be (subordinate only to Permitted Liens), in favor of
the Collateral Agent, for the benefit of the Secured Creditors, covering such
real estate, in form and substance reasonably satisfactory to the Collateral
Agent, (ii) if requested by the Collateral Agent or the Required Existing Senior
Creditors, provide the Collateral Agent with (x) title and extended coverage
insurance covering such real estate in an amount at least equal to the purchase
price of such real estate (or such other amount as shall be reasonably specified
by the Collateral Agent) as well as a current ALTA survey thereof, together with
a surveyor's certificate and (y) any consents or estoppels reasonably deemed
necessary or advisable by the Collateral Agent in connection with such mortgage
or deed of trust, each of the foregoing in form and substance (x) reasonably
satisfactory to the Collateral Agent and (iii) if requested by the Collateral
Agent, the Required LIFO Lenders or the Required Existing Senior Creditors,
deliver to the Collateral Agent legal opinions relating to the matters described
in the preceding clauses (i) and (ii),which opinions shall be in form and
substance reasonably consistent with the opinion delivered on the Restructuring
Effective Date as to relevant matters, and from counsel reasonably satisfactory
to the Collateral Agent and any requesting LIFO Lenders and/or Existing Senior
Creditors.
(g) With respect to any new Subsidiary other than an Excluded Foreign
Subsidiary, a German Subsidiary or an Italian Subsidiary created or acquired
after the Restructuring Effective Date by the Borrower or any of its
Subsidiaries, promptly (i) execute and deliver to the Collateral Agent such
amendments to any Operative Agreement or any Security Document that the
Collateral Agent, the Required LIFO Lenders or the Required Existing Senior
Creditors deem necessary or advisable in order to grant to the Collateral Agent,
for the benefit of the Secured Creditors, perfected Liens on the Capital Stock
of such new Subsidiary which is owned by the Borrower or any of its
Subsidiaries, (ii) deliver to the Collateral Agent the certificates representing
such Capital Stock, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the Borrower or such Subsidiary, as
the case may be, or take such other actions as prescribed under the law under
which the issuer of such Capital Stock is organized to perfect the Liens granted
under clause (i) above, (iii) cause such new Subsidiary (A) to become a party to
the Guarantee, the Existing Guarantees, the Collateral Agreement and any other
Security Document (or comparable forms of agreement under local law to the
extent legal) and (B) to take such actions necessary or advisable to grant to
the Collateral Agent, for the benefit of the Secured Creditors, perfected Liens
in the Collateral described in the Collateral Agreement with respect to such new
Subsidiary, including, without limitation, the filing of UCC financing
statements or comparable filings or registrations in such jurisdictions as may
be required by the Collateral Agreement or by law or as may be requested by the
Collateral Agent, and (iv) if requested by the Collateral Agent, the Required
LIFO Lenders or the Required Existing Senior Creditors, deliver to the
Collateral Agent legal opinions relating to the matters described in the
preceding clauses (i), (ii) and, (iii) , which opinions shall be in form and
substance reasonably consistent with the opinion delivered on the Restructuring
Effective Date as to relevant matters, and from counsel reasonably satisfactory
to the Collateral Agent and any requesting LIFO Lenders and/or Existing Senior
Creditors.
(h) With respect to any new First Tier Excluded Foreign Subsidiary
created or acquired after the Restructuring Effective Date by the Borrower or
any of its Domestic Subsidiaries, promptly (i) execute and deliver to the
Collateral Agent such amendments to the Collateral Agreement as the Collateral
Agent or the Required Existing Senior Creditors deem necessary or advisable in
order to grant to the Collateral Agent, for the benefit of the Secured
Creditors, perfected Liens in the Capital Stock of such new Foreign Subsidiary
which is owned by the Borrower or any of its Domestic Subsidiaries (provided
that in no event shall more than 65% of each class of the Capital Stock of any
such new Foreign Subsidiary be required to be so pledged), (ii) deliver to the
Collateral Agent the certificates representing such Capital Stock, together with
undated stock powers, in blank, executed and delivered by a duly authorized
officer of the Borrower or such Subsidiary, as the case may be, and otherwise
take all actions reasonably necessary or advisable to grant to the Collateral
Agent, for the benefit of the Secured Creditors, perfected Liens on such Capital
Stock and (iii) if requested by the Collateral Agent or the Required Existing
Senior Creditors, deliver to the Collateral Agent legal opinions relating to the
matters described in the preceding clauses (i) and (ii), which opinions shall be
in form and substance reasonably consistent with the opinion delivered on the
Restructuring Effective Date as to relevant matters, and from counsel reasonably
satisfactory to the Collateral Agent and any requesting LIFO Lenders and/or
Existing Senior Creditors.
(i) With respect to each German or Italian Subsidiary created or
acquired after the Restructuring Effective Date, promptly (i) deliver to the
Collateral Agent, a pledge agreement with respect to 100% of the Capital Stock
of such new Subsidiary owned by the Borrower or a Domestic Subsidiary, duly
executed and delivered by such Loan Party, in a form or forms satisfactory to
the Collateral Agent, customary under applicable law, (ii) cause such new
Subsidiary(A) to become a party to the Guarantee, the Existing Guarantees and
the Master Restructuring Agreement and (B) to take such actions reasonably
necessary or advisable to grant the Collateral Agent, for the benefit of the
Secured Creditors, perfected Liens on such Capital Stock and (iii) deliver to
the Collateral Agent opinions relating to the validity and enforceability of the
obligations of such new Subsidiary under the Guarantee, the Existing Guarantees
and any such pledge agreements and the Master Restructuring Agreement, which
opinions shall be in form and substance reasonably consistent with the opinion
delivered on the Restructuring Effective Date as to relevant matters, and from
counsel reasonably satisfactory to the Collateral Agent and any requesting LIFO
Lenders and/or Existing Senior Creditors.
1.14 FURTHER ASSURANCES; SECURITY INTERESTS. Upon the reasonable
request of the Collateral Agent, promptly perform or cause to be performed any
and all acts and execute or cause to be executed any and all documents
(including, without limitation, the execution, amendment or supplementation of
any financing statement and continuation statement or other statement) for
filing under the provisions of the UCC and the rules and regulations thereunder,
or any other statute, rule or regulation of any applicable foreign, federal,
state or local jurisdiction, which are desirable, from time to time, in order to
grant and maintain in favor of the Secured Creditors as beneficiaries thereof
the Liens in the Collateral contemplated by the Operative Agreements, subject
only to Permitted Liens.
SECTION 2. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the LIFO Commitments
remain in effect, or any LIFO Obligations or Existing Obligations remains
outstanding and unpaid to the Borrower shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly:
2.1 FINANCIAL CONDITION COVENANTS.
(a) MINIMUM CURRENT ASSETS RATIO. Permit the Current Assets Ratio, at
any time during any period set forth on Schedule 2.1(a) hereto, to be less than
the amount set forth opposite such period.
(b) MINIMUM CUMULATIVE EBITDA. Permit Consolidated EBITDA, as of the
end of any period set forth on Schedule 2.1(b) hereto to be less than the amount
set forth opposite such period.
(c) MINIMUM NON-CUMULATIVE EBITDA. Permit Consolidated EBITDA as of
the end of any fiscal quarter set forth on Schedule 2.1(c) hereto to be less
than the amount set forth opposite such fiscal quarter.
(d) MAXIMUM CAPITAL EXPENDITURES. Permit Capital Expenditures during
any period set forth on Schedule 2.1(d) hereto to exceed than the amount set
forth opposite such period.
(e) MINIMUM CONSOLIDATED TANGIBLE NET WORTH. Permit Consolidated
Tangible Net Worth of the Borrower and its Consolidated Subsidiaries to be less
than (i) $65,000,000 as of the end of any fiscal month ending during the period
from the Restructuring Effective Date to and including December 30, 2000 and
(ii) $85,000,000 as of the end of any fiscal month thereafter.
2.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of the Borrower under (i) the LIFO Credit Agreement
in a maximum principal amount not to exceed $50,000,000, (ii) the Existing
Agreements set forth on Schedule 2.2(a) hereto in the respective maximum
principal amounts set forth opposite each such Existing Agreement on
Schedule 2.2(a) hereto and (iii) any refinancing, renewal or extension of
both the LIFO Commitments and the Existing Senior Obligations (but not one
without the other) so long as the maximum principal amount available to be
borrowed under any such refinancing, renewal or extension of the LIFO
Commitments and the Existing Senior Obligations collectively does not
exceed $275,000,000;
(b) Indebtedness of (i) the Borrower to any Guarantor, (ii) any
Subsidiary to the Borrower or any other Guarantor, (iii) any Subsidiary
that is not a Guarantor to any other Subsidiary that is not a Guarantor and
(iv) the Borrower or any Guarantor to any Subsidiary that is not a
Guarantor incurred after the Restructuring Effective Date in an aggregate
amount not to exceed $100,000 at any one time outstanding;
(c) Indebtedness of the Borrower and any of its Subsidiaries incurred
to finance the acquisition of fixed or capital assets (whether pursuant to
a loan, a Financing Lease or otherwise) in a principal amount not exceeding
100% of the purchase price of such asset, which Indebtedness (i) was
outstanding on the Restructuring Effective Date or (ii) is incurred
thereafter in an aggregate amount not to exceed $500,000 at any one time
outstanding;
(d) Indebtedness outstanding on the date hereof and listed on Schedule
2.2(d);
(e) Indebtedness constituting amounts owing in respect of goods and
services purchased pursuant to corporate credit cards in an aggregate
amount for the Borrower and its Subsidiaries not to exceed $50,000 at any
one time outstanding;
(f) Indebtedness of the Borrower and its Subsidiaries in respect of
letters of credit issued in connection with their Hong Kong operations
and/or in respect of trust receipt financing obtained in connection with
such Hong Kong operations other than under the LIFO Credit Agreement or the
Existing Credit Agreement; PROVIDED that (i) no such Indebtedness shall
have a tenor of more than 120 days and (ii) the aggregate amount of all
such Indebtedness of the Borrower and its Subsidiaries shall not at any
time exceed the Hong Kong dollar equivalent of $5,400,000 and (iii) the
incurrence of any such Indebtedness would not cause the Aggregate L/C
Obligations at the time of such incurrence to exceed $24,000,000;
(g) Indebtedness of the Borrower and its Subsidiaries in an aggregate
amount for the Borrower and its Subsidiaries not to exceed $1,000,000 at
any one time outstanding in respect of overdrafts outstanding for not more
than 15 days;
(h) Indebtedness of the Borrower in an amount not to exceed
$14,000,000 plus accrued interest evidenced by a promissory note payable to
the United States of America or an agency thereof delivered in settlement
of obligations of the Borrower arising out of the customs investigation
discussed in the Borrower's Form 10-Q for the period ended June 30, 1999;
(i) Indebtedness of the Borrower and its Subsidiaries in respect of
letters of credit issued in connection with their German operations other
than under the LIFO Credit Agreement or the Existing Credit Agreement;
PROVIDED that (i) no such Indebtedness shall have a tenor of more than 120
days, (ii) the aggregate amount of all such Indebtedness of the Borrower
and its Subsidiaries shall not at any time exceed 4,750,000 Deutsche Marks
and (iii) the incurrence of any such Indebtedness would not cause the
Aggregate L/C Obligations at the time of such incurrence to exceed
$24,000,000; and
(j) Indebtedness of the Borrower and its Subsidiaries in respect of
drafts received from customers that are discounted on a full recourse basis
by the Borrower or any Subsidiaries, PROVIDED that (i) no such discounted
draft shall have a maturity of more than 180 days and (ii) the aggregate
amount of all such Indebtedness in respect of discounted drafts shall not
at any time exceed 16,500,000 Deutsche Marks.
2.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes, assessments and governmental charges or levies
not yet due or which are being contested in good faith by appropriate
proceedings, PROVIDED that adequate reserves with respect thereto are
maintained on the books of the Borrower or the affected Subsidiaries, as
the case may be, in conformity with GAAP;
(b) landlords', carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
which are not overdue for a period of more than 20 days or which are being
contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the Property subject thereto or
materially interfere with the ordinary conduct of the business of the
Borrower or such Subsidiary;
(f) Liens in existence on the date hereof listed on Schedule 2.3,
securing Indebtedness permitted by subsections 2.2(c) or 2.2(d), PROVIDED
that such Liens are not to be renewed, extended, amended or refinanced and
PROVIDED FURTHER that no such Lien is spread to cover any additional
Property after the Restructuring Effective Date and that the amount of
Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Borrower and its Subsidiaries
permitted by subsection 2.2(c) incurred to finance the acquisition of fixed
or capital assets, PROVIDED that (i) such Liens shall be created in the
ordinary course of business and substantially simultaneously with the
acquisition of such fixed or capital assets, (ii) such Liens do not at any
time encumber any Property other than the Property financed by such
Indebtedness, (iii) the amount of Indebtedness secured thereby is not
increased and (iv) the principal amount of Indebtedness secured by any such
Lien shall at no time exceed 100% of the original purchase price of such
Property at the time it was acquired;
(h) Liens on the property or assets of a Person which becomes a
Subsidiary after the date of this Agreement or on property or assets
acquired by the Borrower or any Subsidiary after the date of this
Agreement, in each case securing Indebtedness permitted by subsection
2.2(c) or (d) of this MRA Appendix B, PROVIDED that (i) such Liens exist at
the time such Person becomes a Subsidiary or such property or assets are
acquired, as the case may be, and are not created in anticipation thereof
and (ii) any such Lien is not extended to cover any property or assets of
such Person or any other property or assets of the Borrower or such
Subsidiary, as the case may be, after the time such Person becomes a
Subsidiary or such property or assets are acquired, as the case may be;
(i) Liens arising in respect of (i) any judgment arising from the
customs investigation referred to in subsection 2.2 (h), but only to the
extent credited against the Indebtedness discussed in such subsection, and
(ii) other judgments in an aggregate amount of less than $3,000,000 at any
one time outstanding in circumstances not constituting a Default or Event
of Default;
(j) attachments, judgments, or other similar Liens arising in
connection with court proceedings, provided that the execution or other
enforcement of such Liens is effectively stayed by being contested in good
faith by appropriate proceedings;
(k) Liens on goods (and the documents of title related thereto) the
purchase price of which is financed by a letter of credit issued for the
account of the Borrower or its Subsidiaries, PROVIDED that such Lien
secures only the obligations of the Borrower or such Subsidiaries in
respect of such letter of credit;
(l) Liens created pursuant to the Security Documents;
(m) Liens on deposits on other property of the Borrower or any
Subsidiary to secure up to $500,000 of insurance obligations incurred in
the ordinary course of business;
(n) Liens on the inventory of the Borrowers or any of its Subsidiaries
that is consigned in an aggregate amount not to exceed $500,000 at any one
time outstanding; and
(o) Liens against the interest of the Borrower or any Subsidiary in
real property arising out of the lease or sublease of such real property,
but only to the extent that the lease or sublease constitutes an
"encumbrance" as such term is used in the definition of the term "Lien".
2.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations of the Borrower in existence on the date
hereof and listed on Schedule 2.4;
(b) guarantees made in the ordinary course of its business by the
Borrower of obligations of any of its Subsidiaries, and guarantees made in
the ordinary course of its business by any Guarantor of obligations of the
Borrower or any Subsidiary of the Borrower, which obligations are not
prohibited by this Agreement;
(c) the Guarantees;
(d) Guarantee Obligations of the Borrower and its Subsidiaries in
respect of Indebtedness permitted under subsection 2.2(j); and
(e) Guarantee Obligations under the 1999 Notes Subsidiary Guaranty to
the extent such 1999 Notes Subsidiary Guaranty is consistent with Section
2.8(d) of the Master Restructuring Agreement.
2.5 LIMITATION ON FUNDAMENTAL CHANGES AND SALES OF ASSETS. Except as
contemplated by Schedule 1.4, enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or, except if such transaction is in the ordinary
course of business, convey, sell, lease, assign, transfer or otherwise dispose
of its property, business or assets (including the Capital Stock of the Borrower
or any of its Subsidiaries), or make any material change in its present method
of conducting business, except:
(a) any Subsidiary of the Borrower may be merged or consolidated with
or into the Borrower (PROVIDED that the Borrower shall be the continuing or
surviving corporation) or with or into any one or more wholly owned
Subsidiaries of the Borrower that are Guarantors (PROVIDED that the wholly
owned Subsidiary, or Subsidiaries that are Guarantors shall be the
continuing or surviving corporation);
(b) any wholly owned Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Borrower or any other wholly owned Subsidiary of the
Borrower that is a Guarantor;
(c) the sale or other Disposition of any property in the ordinary
course of business;
(d) the sale or discount without recourse, in the ordinary course of
business, of accounts receivable arising in the ordinary course of business
in connection with the compromise or collection thereof;
(e) the sale or other Disposition of worn out, obsolete or surplus
property so long as the Net Cash Proceeds of any such sale or Disposition
are applied to the prepayment of the LIFO Loans and the reduction of the
LIFO Commitments or, with the consent of all of the LIFO Lenders, to the
reduction of the Existing Senior Obligations when the aggregate Net Cash
Proceeds of such sales equal $1,000,000 and each whole multiple thereof,
PROVIDED that to the extent that the Borrower reinvests the Net Cash
Proceeds from the Disposition of worn out or obsolete fixed or capital
assets in replacement fixed or capital assets within 45 days following any
such Disposition such Net Cash Proceeds shall not be counted toward the
$1,000,000 baskets referred to above (it being understood that any such
reinvestments shall nonetheless constitute Capital Expenditures);
(f) the issuance of shares of Capital Stock of the Borrower or any
Subsidiary (i) upon the exercise of any warrant, option or rights (A)
outstanding on the Restructuring Effective Date or issued in connection
with the LIFO Credit Agreement or the transactions contemplated by the
Master Restructuring Agreement or (B) issued after the Restructuring
Effective Date under clause (g) of this subsection or (ii) for Fair Market
Value as of the date of such issuance; PROVIDED that, in the case of clause
(ii), the Net Cash Proceeds thereof are applied to the prepayment of the
LIFO Obligations and the reduction of the LIFO Commitment, or with the
consent of all of the LIFO Lenders, the reduction of the Existing Senior
Obligations;
(g) The issuance of shares of Capital Stock of the Borrower and the
issuance of warrants, options or rights to acquire such Capital Stock to
employees, former employees or directors of, or consultants to, the
Borrower or any of its Subsidiaries under shareholder approved plans or
which were outstanding on the Restructuring Effective Date; and
(h) form or create new Subsidiaries so long as the applicable Loan
Party and such new Subsidiary complies with subsection 1.13 of MRA Appendix
B.
2.6 LIMITATION ON NON-DOMESTIC ASSETS. (a) Permit at any time (i) the
aggregate Total Tangible Assets of the Far East Subsidiaries to be greater than
$35,000,000 or (ii) the aggregate cash on hand of the Far East Subsidiaries to
exceed for a period of five consecutive Business Days $3,000,000.
(b) Permit the aggregate Total Tangible Assets of the PRC
Subsidiaries, taken as a whole, to be greater than $22,000,000 or (ii) at any
time the aggregate cash on hand of the PRC Subsidiaries to exceed $500,000.
(c) Permit the aggregate Total Tangible Assets of the Borrower and any
Domestic Subsidiary located outside the United States to exceed (i) $11,000,000
at any time prior to January 1, 2000 and (ii) $5,000,000 at any time thereafter.
(d) Permit the German Subsidiaries, taken as a whole, to have Total
Tangible Assets in excess of $55,000,000 at any time.
(e) Permit Recoton (UK), a United Kingdom corporation, to have Total
Tangible Assets in excess of $25,000,000 at any time.
(f) Permit the Italian Subsidiaries, taken as a whole, to have Total
Tangible Assets in excess of $17,500,000 at any time.
2.7 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any other Person, except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) loans and advances to employees of the Borrower or its
Subsidiaries in an aggregate amount not to exceed $2,000,000 at any one
time outstanding;
(d) investments by the Borrower in its Subsidiaries and investments by
such Subsidiaries in the Borrower and in other Subsidiaries, which
investments (i) are in existence as of the Restructuring Effective Date,
(ii) made thereafter to the extent permitted under subsection 2.2(b) of MRA
Appendix B or (iii) constitute investments in Guarantors that are Domestic
Subsidiaries;
(e) the advance by the Borrower to STD Manufacturing Limited not to
exceed $4,000,000 made within ten days of the Restructuring Effective Date;
(f) loans and advances to suppliers in the ordinary course of business
not to exceed $2,000,000 at any one time outstanding, PROVIDED that no such
loan or advance shall be outstanding for more than 180 days; and --------
(g) to the extent otherwise prohibited by this subsection 2.7, amounts
on deposit in the Collateral Accounts.
2.8 LIMITATION ON DIVIDENDS. Declare or pay any dividend (other than
dividends payable solely in Capital Stock of the Person making such dividend)
on, or make any payment on account of, or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any shares of any class of Capital Stock of the Borrower
or any Subsidiary or any warrants or options to purchase any such Capital Stock,
whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of the Borrower or any Subsidiary (collectively, "RESTRICTED
PAYMENTS"), except that any Subsidiary may make Restricted Payments to the
Borrower and to any other Subsidiary if such other Subsidiary owns 100% of each
class of Capital Stock of the first Subsidiary.
2.9 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) not prohibited by this Agreement, (b) in the ordinary
course of the Borrower's or such Subsidiary's business and (c) upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary, as the
case may be, than it would obtain in a comparable arm's length transaction with
a Person which is not an Affiliate.
2.10 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal year of
the Borrower to end on a day other than December 31.
2.11 LIMITATION ON LINES OF BUSINESS. Engage in any material business
other than those in or directly related to the consumer electronics industry.
2.12 LIMITATION ON RAC-FSC ASSETS. Permit RAC-FSC to have any material
assets.
2.13 CASH MANAGEMENT; BANK ACCOUNTS. At any time after October 1, 1999
or October 15, 1999, as applicable (a) fail to maintain the system of cash
management developed and implemented in accordance with subsection 1.13(b) of
MRA Appendix B and (b) maintain more than $2,000,000 of cash in domestic bank
accounts with banks that are not party to a duly executed lockbox or blocked
account agreement, as applicable, that has been delivered, and is in a form
reasonably satisfactory, to the Collateral Agent.
2.14 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
INSTRUMENTS, ETC. (a) Make any optional payment, prepayment, repurchase or
redemption of or otherwise defease or segregate funds with respect to any
Indebtedness (other than the Secured Obligations), and (b) amend, modify or
change, or consent or agree to any amendment, modification or change to, any of
the terms of any Indebtedness subordinated to the LIFO Obligations (other than
any such amendment, modification or change which would extend the maturity or
reduce the amount of any payment of principal thereof or which would reduce the
rate or extend the date for payment of interest thereon).
<PAGE>
SCHEDULE 2.1(a)
to MRA Appendix B
- -------------------------------------------------------------------------------
Minimum Current Assets Ratio (000's)
- -------------------------------------------------------------------------------
Month Amount
- -------------------------------------------------------------------------------
August 1999 1.25:1
- -------------------------------------------------------------------------------
September 1999 1.25:1
- -------------------------------------------------------------------------------
October 1999 1.25:1
- -------------------------------------------------------------------------------
November 1999 1.25:1
- -------------------------------------------------------------------------------
December 1999 1.25:1
- -------------------------------------------------------------------------------
January 2000 1.25:1
- -------------------------------------------------------------------------------
February 2000 1.25:1
- -------------------------------------------------------------------------------
March 2000 1.20:1
- -------------------------------------------------------------------------------
April 2000 1.20:1
- -------------------------------------------------------------------------------
May 2000 1.20:1
- -------------------------------------------------------------------------------
June 2000 1.25:1
- -------------------------------------------------------------------------------
July 2000 1.25:1
- -------------------------------------------------------------------------------
August 2000 1.25:1
- -------------------------------------------------------------------------------
September 2000 1.25:1
- -------------------------------------------------------------------------------
October 2000 1.25:1
- -------------------------------------------------------------------------------
November 2000 1.25:1
- -------------------------------------------------------------------------------
December 2000 1.25:1
- -------------------------------------------------------------------------------
January 2001 1.25:1
- -------------------------------------------------------------------------------
February 2001 1.25:1
- -------------------------------------------------------------------------------
March 2001 1.25:1
- -------------------------------------------------------------------------------
April 2001 1.25:1
- -------------------------------------------------------------------------------
May 2001 1.25:1
- -------------------------------------------------------------------------------
<PAGE>
SCHEDULE 2.1(b)
to MRA Appendix B
- -------------------------------------------------------------------------------
Minimum Cumulative Consolidated EBITDA (000's)
- -------------------------------------------------------------------------------
Period Amount
- -------------------------------------------------------------------------------
July 1, 1999 - September 30, 1999 $ 5,700
- -------------------------------------------------------------------------------
July 1, 1999 - December 31, 1999 $27,370
- -------------------------------------------------------------------------------
July 1, 1999 - March 31, 2000 $32,700
- -------------------------------------------------------------------------------
July 1, 1999- June 30, 2000 $34,900
- -------------------------------------------------------------------------------
October 1, 1999- September 30, 2000 $44,300
- -------------------------------------------------------------------------------
January 1, 2000 - December 31, 2000 $46,000
- -------------------------------------------------------------------------------
April 1, 2000 - March 31, 2001 $50,400
- -------------------------------------------------------------------------------
<PAGE>
SCHEDULE 2.1(c)
to MRA Appendix B
- -------------------------------------------------------------------------------
Minimum Non-Cumulative Consolidated EBITDA (000's)
- -------------------------------------------------------------------------------
Fiscal Quarter Ending Amount
- ------------------------------------------------------------------------
September 30, 1999 $5,700
- ------------------------------------------------------------------------
December 31, 1999 $19,400
- ------------------------------------------------------------------------
March 31, 2000 $2,100
- ------------------------------------------------------------------------
June 30, 2000 $1,000
- ------------------------------------------------------------------------
September 30, 2000 $12,900
- ------------------------------------------------------------------------
December 31, 2000 $25,600
- ------------------------------------------------------------------------
March 31, 2001 $6,900
- ------------------------------------------------------------------------
<PAGE>
SCHEDULE 2.1(d)
to MRA Appendix B
- ---------------------------------------------------------------------------
Maximum Capital Expenditures (000's)
- ---------------------------------------------------------------------------
Period Amount
- ---------------------------------------------------------------------------
September 1, 1999 -September 30, 1999 $2,500
- ---------------------------------------------------------------------------
September 1, 1999- December 31, 1999 $6,000
- ---------------------------------------------------------------------------
January 1, 2000 - March 31, 2000 $10,000
- ---------------------------------------------------------------------------
January 1, 2000 - June 30, 2000 $12,000
- ---------------------------------------------------------------------------
January 1, 2000 - September 30, 2000 $12,000
- ---------------------------------------------------------------------------
January 1, 2000- December 31, 2000 $12,000
- ---------------------------------------------------------------------------
January 1, 2001 -March 31, 2001 $5,000
- ---------------------------------------------------------------------------
<PAGE>
SCHEDULE 2.2(a)
to MRA Appendix B
Indebtedness under Existing Agreements
- --------------------------------------------------------------------------------
Existing Agreement Principal Amount Outstanding on
Restructuring Effective Date
- --------------------------------------------------------------------------------
Existing Credit Agreement $101,700,505
- --------------------------------------------------------------------------------
1997 Note Purchase Agreement $75,000,000
- --------------------------------------------------------------------------------
1998 Note Purchase Agreement $25,000,000
- --------------------------------------------------------------------------------
1999 Securities Purchase Agreement $35,000,000
- --------------------------------------------------------------------------------
<PAGE>
Appendix C to the
Master Restructuring Agreement
The following Events of Default are applicable to the LIFO Credit
Agreement (as such term and all other capitalized terms used herein without
being defined are defined in MRA Appendix A) and the Master Restructuring
Agreement, and shall be applicable to (i) the LIFO Credit Agreement to the
extent provided in Section 8 thereof, (ii) the Existing Agreements as provided
in Section 2.8(f) of the Master Restructuring Agreement and (iii) the Chase
Mortgages to the extent provided in Section 2.5 of the Master Restructuring
Agreement.
UNIFORM EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) As to the holder of any Obligations, the Borrower shall fail to
pay any principal of any Obligation owed to such holder when due in
accordance with the terms thereof; or the Borrower shall fail to pay any
interest on any Obligation, or any other amount payable with respect
thereto, (x) in the case of LIFO Obligations or Existing Senior Obligations
or Premium Obligations, within five days and (y) in the case of the 1999
Note Obligations, within 15 days after any such interest or other amount
becomes due in accordance with the terms of the Operative Agreements
governing such holder's Obligations; or
(b) Any representation or warranty made or deemed made by the Borrower
or any other Loan Party in the Master Restructuring Agreement, the LIFO
Credit Agreement or in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished by it at
any time under or in connection with the Master Restructuring Agreement,
the LIFO Credit Agreement or any such other Loan Document shall prove to
have been incorrect in any material respect on or as of the date made or
deemed made; or
(c) The Borrower shall default in the observance or performance of (i)
any agreement contained in subsection 1.11 or Section 2 of MRA Appendix B,
(ii) any agreement contained in subsection 1.10 of MRA Appendix B and such
default shall continue uncured for a period of one Business Day, (iii) any
agreement contained in subsections 1.1, 1.2(e)(i) or 1.13 of MRA Appendix B
and such default shall continue uncured for a period of five Business Days
and (iv) any agreement contained in subsection 1.2(e)(ii) of MRA Appendix B
and such default shall continue uncured for a period of 10 Business Days;
or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in Section 1 of
MRA Appendix B, the LIFO Credit Agreement or any other Loan Document (other
than as provided in paragraphs (a) through (c) above), and such default
shall continue unremedied for a period of 30 days after the occurrence
thereof; or
(e) As to the holder of any Obligation, the Borrower or any of its
Subsidiaries shall (i) default in any payment of principal of or interest
of any Indebtedness (other than such holder's Obligations) or in the
payment of any Guarantee Obligation, beyond the period of grace (not to
exceed 30 days), if any, provided in the instrument or agreement under
which such Indebtedness or Guarantee Obligation was created; or (ii)
default in the observance or performance of any other agreement or
condition relating to any such Indebtedness or Guarantee Obligation or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of
which default or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of
such Guarantee Obligation (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries) to cause, with the giving of
notice if required, such Indebtedness to become due prior to its stated
maturity or such Guarantee Obligation to become payable; PROVIDED, HOWEVER,
that no Default or Event of Default shall exist under this paragraph unless
the aggregate amount of Indebtedness and/or Guarantee Obligations in
respect of which any default or other event or condition referred to in
this paragraph shall have occurred shall be equal to at least $1,000,000;
or
(f) (i) The Borrower or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or the Borrower or any of its Subsidiaries shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Borrower or any of its Subsidiaries any case,
proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
the Borrower or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) the Borrower or any of its Subsidiaries
shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii), or (iii) above; or (v) the Borrower or any of its Subsidiaries shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(g) (i) Any of the Operative Agreements shall cease, for any reason,
to be in full force and effect and valid, or (ii) as to any Secured
Creditor, any security interest or Lien purported to be created under any
Security Document shall cease, or the Borrower or any other Loan Party
shall claim that such security interest or Lien shall have ceased, to be
effective to create a perfected Lien on the Collateral (otherwise than by
the release of the Collateral as provided in the Master Restructuring
Agreement or applicable Security Document) with the priority purported to
have been created thereby, except to the extent that any such loss of
enforceability or priority results from the failure of the Collateral Agent
to maintain possession of certificates representing Pledged Securities
referred to in the Collateral Agreement or otherwise take any action within
its control (including the filing of UCC continuation statements); or
(h) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Existing Senior Creditors, likely to result in the termination
of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer
Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or
any Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Existing Senior Creditors is likely to, incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of,
a Multiemployer Plan or (vi) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through (vi)
above, such event or condition, together with all other such events or
conditions, if any, could reasonably be expected to have a Material Adverse
Effect; or
(i) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance) of $1,000,000 or more, and all
such judgments or decrees shall not have been vacated, discharged, stayed
or bonded pending appeal within 60 days from the entry thereof; or
(j) Any of the Guarantees shall cease, for any reason, to be in full
force and effect or any Guarantor shall so assert; or
(k) (i) Any natural person other than Robert L. Borchardt, his estate,
any trust established by him or his heirs, or any Person or "group" (within
the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended) not controlled by Robert L. Borchardt, his estate, any
trust established by him or his heirs (other than a Permitted Holder, as
defined below) (A) shall have acquired beneficial ownership of 20% or more
of any outstanding class of Capital Stock having ordinary voting power in
the election of directors of the Borrower or (B) shall obtain the power
(whether or not exercised) to elect a majority of the Borrower's directors
or (ii) the Board of Directors of the Borrower shall not consist of a
majority of Continuing Directors; "CONTINUING DIRECTORS" shall mean the
directors of the Borrower on the Restructuring Effective Date and each
other director, if such other director's nomination for election to the
Board of Directors of the Borrower is recommended by a majority of the then
Continuing Directors; as used in this paragraph the term "Permitted Holder"
shall mean any holder of shares of any outstanding class of the Capital
Stock of the Borrower that shall have been designated as a Permitted Holder
in a resolution duly adopted by the Board of Directors of the Borrower and
that shall have been approved in writing by the Required Existing Senior
Creditors; or
(l) without the written consent of Chase, the Domestic Term Loan shall
not have been paid in full on the Restructuring Effective Date; or
(m) without the written consent of Chase, the Far East Term Loan shall
not have been paid in full within two Business Days following the making of
the loan described in Section 2.2(a)(ii) of the Master Restructuring
Agreement.
EXHIBIT 2
CREDIT AGREEMENT
among
RECOTON CORPORATION,
The Several Lenders
from Time to Time Parties Hereto
and
THE CHASE MANHATTAN BANK,
as Agent
Dated as of September 8, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS.......................................................1
1.1 DEFINED TERMS...................................................1
1.2 OTHER DEFINITIONAL PROVISIONS...................................5
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS...................................6
2.1 COMMITMENTS.....................................................6
2.2 PROCEDURE FOR BORROWING.........................................7
2.3 COMMITMENT FEE..................................................7
2.4 TERMINATION OR REDUCTION OF COMMITMENTS; MANDATORY
PREPAYMENTS.....................................................7
2.5 REPAYMENT OF LOANS; EVIDENCE OF DEBT............................8
2.6 OPTIONAL PREPAYMENTS............................................9
2.7 INTEREST RATES AND PAYMENT DATES................................9
2.8 COMPUTATION OF INTEREST AND FEES................................9
2.9 FACILITY FEE...................................................10
2.10 PRO RATA TREATMENT AND PAYMENTS...............................10
2.11 TAXES.........................................................11
2.12 CHANGE OF LENDING OFFICE......................................12
SECTION 3. LETTERS OF CREDIT................................................13
3.1 L/C COMMITMENT.................................................13
3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT....................13
3.3 FEES, COMMISSIONS AND OTHER CHARGES............................14
3.4 L/C PARTICIPATIONS.............................................14
3.5 REIMBURSEMENT OBLIGATION OF THE BORROWER.......................15
3.6 OBLIGATIONS ABSOLUTE...........................................16
3.7 LETTER OF CREDIT PAYMENTS......................................16
3.8 APPLICATION....................................................16
SECTION 4. REPRESENTATIONS AND WARRANTIES...................................16
4.1 ORGANIZATION, CORPORATE EXISTENCE, ETC.........................17
4.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS........17
4.3 SECURITY DOCUMENTS.............................................17
4.4 FINANCIAL CONDITION............................................18
4.5 TAXES..........................................................18
4.6 TITLE TO PROPERTIES............................................18
4.7 LITIGATION.....................................................19
4.8 AGREEMENTS.....................................................19
4.9 EMPLOYEE BENEFIT PLANS.........................................19
4.10 FEDERAL RESERVE REGULATIONS...................................19
4.11 GOVERNMENTAL APPROVAL; LICENSES...............................20
4.12 AFFILIATES; SUBSIDIARIES......................................20
4.13 COMPLIANCE WITH APPLICABLE LAWS...............................20
4.14 ENVIRONMENTAL MATTERS.........................................20
4.15 INTELLECTUAL PROPERTY.........................................21
4.16 INVESTMENT COMPANY ACT........................................21
4.17 DEPOSITARY ACCOUNTS...........................................21
4.18 SCHEDULES.....................................................21
4.19 PURPOSE OF LOANS..............................................21
4.20 RAC-FSC.......................................................21
4.21 YEAR 2000 MATTERS.............................................21
4.22 REGULATION H..................................................22
4.23 LABOR MATTERS.................................................22
SECTION 5. CONDITIONS PRECEDENT.............................................22
5.1 CONDITIONS TO EFFECTIVENESS....................................22
5.2 CONDITIONS TO EACH EXTENSION OF CREDIT.........................23
SECTION 6. AFFIRMATIVE COVENANTS............................................25
SECTION 7. NEGATIVE COVENANTS...............................................25
SECTION 8. EVENTS OF DEFAULT................................................25
SECTION 9. THE AGENT........................................................26
9.1 APPOINTMENT....................................................26
9.2 DELEGATION OF DUTIES...........................................26
9.3 EXCULPATORY PROVISIONS.........................................26
9.4 RELIANCE BY AGENT..............................................26
9.5 NOTICE OF DEFAULT..............................................27
9.6 NON-RELIANCE ON AGENT AND OTHER LENDERS........................27
9.7 INDEMNIFICATION................................................28
9.8 AGENT IN ITS INDIVIDUAL CAPACITY...............................28
9.9 SUCCESSOR AGENT................................................28
SECTION 10. MISCELLANEOUS...................................................29
10.1 AMENDMENTS AND WAIVERS........................................29
10.2 NOTICES.......................................................29
10.3 NO WAIVER; CUMULATIVE REMEDIES................................30
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES....................31
10.5 PAYMENT OF EXPENSES AND TAXES.................................31
10.6 FACILITY FEE ADJUSTMENT.......................................32
10.7 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS........32
10.8 ADJUSTMENTS; SET-OFF..........................................34
10.9 COUNTERPARTS..................................................35
10.10 SEVERABILITY.................................................35
10.11 INTEGRATION..................................................35
10.12 GOVERNING LAW................................................35
10.13 SUBMISSION TO JURISDICTION; WAIVERS..........................36
10.14 ACKNOWLEDGEMENTS.............................................36
10.15 WAIVERS OF JURY TRIAL........................................36
<PAGE>
SCHEDULES
Schedule 1.1A Commitment Amounts
Schedule 2.1 Maximum Outstanding Amounts
Schedule 4.3(b) Jurisdictions in Which UCC-1 Financing Statements Filed
Schedule 4.7 Litigation
Schedule 4.12 Subsidiaries of Recoton Corporation
Schedule 4.15 Intellectual Property Claims
Schedule 10.2 Addresses for Notices
EXHIBITS
Exhibit A Form of Collateral Agreement
Exhibit B Form of Guarantee Agreement
Exhibit C Form of Participation Agreement
Exhibit D Form of Note
Exhibit E-1 Form of Fixed Facility Fee Warrant Agreement
Exhibit E-2 Form of Cancelable Facility Fee Warranty Agreement
Exhibit F Form of Registration Rights Agreement
Exhibit G Form of Borrowing Certificate
Exhibit H Form of Assignment and Acceptance
<PAGE>
CREDIT AGREEMENT, dated as of September 8 1999, among RECOTON
CORPORATION, a New York corporation (the "BORROWER"), the several financial
institutions signatories to this Agreement (the "LENDERS"), and The Chase
Manhattan Bank, as agent for the Lenders (the "AGENT").
WITNESSETH
WHEREAS, the Borrower, certain of the Lenders (the "EXISTING BANKS"),
and the Agent are parties to the Second Amended and Restated Credit Agreement,
dated as of June 18, 1998 (as heretofore amended, supplemented or otherwise
modified prior to the date hereof (the "Existing Credit Agreement");
WHEREAS, the Borrower and certain other Lenders (the "SENIOR
NOTEHOLDERS") are parties to (i) the Note Purchase Agreement dated as of January
6, 1997, for $75,000,000 in adjustable rate senior notes due January 6, 2007,
and (ii) the Note Purchase Agreement dated as of September 1, 1998, for
$25,000,000 in adjustable rate senior notes due September 1, 2008 (collectively,
the "Senior Note Agreements");
WHEREAS, the Borrower has requested that the outstanding obligations
under the Existing Credit Agreement, the Senior Note Agreements and the
Securities Purchase Agreement dated as of February 4, 1999, for $35,000,000 in
senior subordinated notes due February 4, 2004 and 310,000 common stock purchase
warrants (the "1999 SECURITIES PURCHASE AGREEMENT") be restructured as set forth
in the Master Restructuring Agreement; and
WHEREAS, in connection with such restructuring transactions and to
finance working capital needs, the Borrower has requested, and the Lenders have
agreed to, the extension of new credit upon the following terms and conditions;
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, terms defined in MRA
Appendix A are used as so defined and the following terms shall have the
following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in
effect on such day and (b) the Federal Funds Effective Rate in effect on
such day plus 2 of 1%. For purposes hereof: "PRIME RATE" shall mean the
rate of interest per annum publicly announced from time to time by the
Agent as its prime rate in effect at its principal office in New York City
(the Prime Rate not being intended to be the lowest rate of interest
charged by the Agent in connection with extensions of credit to debtors);
and "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted
average of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it. Any change in the ABR due to a change
in the Prime Rate or the Federal Funds Effective Rate shall be effective as
of the opening of business on the effective day of such change in the Prime
Rate or the Federal Funds Effective Rate, respectively.
"AGENCY FEE": $150,000 per annum to the Agent for its own account
payable in advance on the Closing Date and on each anniversary thereof.
"AGENT": Chase as the Agent for the Lenders under this Agreement and
the other Loan Documents.
"AGGREGATE OUTSTANDING EXTENSIONS OF CREDIT": as to any Lender at any
time, an amount equal to the sum of (a) the aggregate principal amount of
all Loans made (including Loans made by way of participation pursuant to
the Participation Agreement to which such Lender is a party) by such Lender
then outstanding and (b) such Lender's Commitment Percentage of the L/C
Obligations then outstanding; PROVIDED that Chase=s Loans and Commitment
Percentage of L/C Obligations shall not include any portion thereof
participated to other Lenders pursuant to the Participation Agreement.
"AGREEMENT": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"APPLICATION": an application, in such form as the Issuing Bank may
specify from time to time, requesting the Issuing Bank to open a Letter of
Credit.
"AVAILABLE COMMITMENT": as to any Lender, at any time, an amount equal
to the excess, if any, of (a) such Lender's Commitment over (b) such
Lender's Aggregate Outstanding Extensions of Credit.
"BORROWING DATE": any Business Day specified in a notice pursuant to
subsection 2.2 as a date on which the Borrower requests the Lenders to make
Loans hereunder.
"CLOSING DATE": the date on which the conditions precedent set forth
in subsection 5.1 shall be satisfied or waived as provided therein.
"COLLATERAL AGENCY FEE": $50,000 per annum to the Collateral Agent for
its own account payable in advance on the Closing Date and on each
anniversary thereof.
"COLLATERAL AGENT": as defined in the Collateral Agreement.
"COLLATERAL AGREEMENT": the Collateral Agreement, substantially in the
form of Exhibit A, in favor of the Collateral Agent for the benefit of the
Secured Creditors.
"COMMERCIAL LETTER OF CREDIT": as defined in subsection 3.1(b).
"COMMITMENT": as to any Lender, the obligation of such Lender to make
Loans (including by way of participation pursuant to the Participation
Agreements) and/or to issue or participate in (including by way of
participation pursuant to the Participation Agreements) Letters of Credit
issued on behalf of the Borrower hereunder in an aggregate principal and/or
face amount at any one time outstanding not to exceed the amount set forth
opposite such Lender's name on Schedule 1.1A (as such amount may be
adjusted from time to time in accordance with the provisions of this
Agreement, including, without limitation, subsections 2.4(a), 2.4(b) and
10.7(c)); PROVIDED that (i) the Commitment of Chase shall not include the
portion thereof participated to Voting Participants pursuant to the
Participation Agreements and (ii) the Commitment of each Voting Participant
shall be deemed to be the portion of the Commitments participated to such
Voting Participant pursuant to the Participation Agreement.
"COMMITMENT FEE RATE": 0.75% per annum on the average daily amount of
the Available Commitment.
"COMMITMENT PERCENTAGE": as to any Lender, a percentage representing a
fraction the numerator of which is the Commitment of such Lender (or,
following the termination or expiration of the Commitments, the sum of (x)
the aggregate principal amount of such Lender's Loans then outstanding PLUS
(y) such Lender's Commitment Percentage of all L/C Obligations then
outstanding), and the denominator of which is the aggregate Commitments of
all Lenders (or, following the termination or expiration of the
Commitments, the sum of (x) the aggregate principal amount of all Loans
then outstanding PLUS (y) the aggregate principal amount of all L/C
Obligations then outstanding); PROVIDED that (i) the Loans of Chase shall
not include the portion thereof participated to Voting Participants
pursuant to the Participation Agreement and (ii) the Loans of each Voting
Participant shall be deemed to be the portion of the Loans participated to
such Voting Participant pursuant to the Participation Agreement.
"COMMITMENT PERIOD": the period from and including the date hereof to
but not including the Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
"ELIGIBLE ASSIGNEE": as defined in subsection 10.7(c).
"FACILITY FEE": as defined in subsection 2.9.
"GUARANTEE": the Guarantee, substantially in the form of Exhibit B,
executed and delivered by (i) certain Subsidiaries of the Borrower listed
on the signature pages thereof and (ii) any Person that becomes a party
thereto in accordance with the terms thereof, this Agreement or subsection
1.13(c) of MRA Appendix B.
"GUARANTOR": any Person which is or becomes a party to the Guarantee
or to any agreement delivered pursuant to Section 1.13(c) of MRA Appendix B
pursuant to which such Person guarantees the Borrower=s obligations under
this Agreement.
"INTEREST PAYMENT DATE": the last day of each calendar month.
"ISSUING BANK": Chase, in its capacity as issuer of any Letter of
Credit.
"L/C COMMITMENT": $8,080,000.
"L/C OBLIGATIONS": at any time, an amount equal to the (a) sum of (i)
the aggregate then undrawn and unexpired face amount of the then
outstanding Letters of Credit and (ii) the aggregate amount of drawings
under Letters of Credit which have not then been reimbursed pursuant to
subsection 3.5(a) minus (b) 95.25% of the aggregate amount on deposit in
the LIFO L/C Cash Collateral Account at such time.
"L/C PARTICIPANTS": the collective reference to all the Lenders other
than the Issuing Bank.
"LETTERS OF CREDIT": as defined in subsection 3.1(a).
"LOAN": any loan made (including by way of participation pursuant to
the Participation Agreement) by any Lender pursuant to this Agreement.
"LOAN DOCUMENTS": this Agreement, the Notes, the Applications, the
Guarantee, any agreement delivered pursuant to Section 1.13 of MRA Appendix
B pursuant to which such Person guarantees the Borrower=s obligations under
this Agreement, the Security Documents and the Master Restructuring
Agreement.
"LOAN PARTIES": the Borrower and each Subsidiary of the Borrower which
is a party to a Loan Document.
"MAXIMUM OUTSTANDING AMOUNT": as defined in subsection 2.1(b).
"NON-EXCLUDED TAXES": as defined in subsection 2.11(a).
"NOTES": as defined in subsection 2.5(e).
"NONVOTING PARTICIPANT": as defined in subsection 10.7(b).
"PARTICIPATION AGREEMENT": each agreement between Chase and a Voting
Participant, substantially in the form of Exhibit C.
"REGISTER": as defined in subsection 10.7(d).
"REIMBURSEMENT OBLIGATION": the obligation of the Borrower to
reimburse the Issuing Bank pursuant to subsection 3.5(a) for amounts drawn
under Letters of Credit.
"REQUIRED LENDERS": at any time, Lenders the Commitment Percentages of
which aggregate at least 51%.
"RESPONSIBLE OFFICER": the chief executive officer, the president or
the chief operating officer of the Borrower.
"STANDBY LETTER OF CREDIT": as defined in subsection 3.1(b).
"TERMINATION DATE": June 30, 2001 (or, if such date is not a Business
Day, the next succeeding Business Day).
"TRANSFEREE": as defined in subsection 10.7(f).
"UCC": the Uniform Commercial Code as in effect on the date hereof in
the State of New York.
"UNIFORM CUSTOMS": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, as the same may be amended from time to time.
"VOTING PARTICIPANTS": John Hancock Mutual Life Insurance Company,
John Hancock Variable Life Insurance Company, Investors Partner Life
Insurance Company, Mellon Bank, N.A., as trustee for the Long-Term
Investment Trust, Mellon Bank, N.A., as trustee for Bell Atlantic Master
Trust, and The Northern Trust Company, as trustee of the Lucent
Technologies Inc. Master Pension Trust.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement or in MRA Appendix A shall have the
defined meanings when used in any Notes or any certificate or other document
made or delivered pursuant hereto.
(b) As used herein and in any Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Borrower and its Subsidiaries not defined in subsection 1.1 or in MRA Appendix A
and accounting terms partly defined in subsection 1.1 or in MRA Appendix A, to
the extent not defined, shall have the respective meanings given to them under
GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation".
(e) Unless the context otherwise requires, a reference to any
document, instrument or agreement includes, except as otherwise specified in a
particular document. instrument or agreement, any amendment or supplement to, or
modification of, such document, instrument or agreement, entered into from time
to time in accordance with the terms of the document, instrument or agreement
and the Master Restructuring Agreement.
(f) Unless the context otherwise requires, a reference to any Person
includes its successors and permitted assigns.
(g) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 COMMITMENTS. (a) Subject to the terms and conditions hereof, each
Lender severally agrees to make Loans to the Borrower from time to time during
the Commitment Period in an aggregate principal amount at any one time
outstanding (i) which, when added to such Lender's Commitment Percentage of the
then outstanding L/C Obligations, does not exceed the amount of such Lender's
Commitment and (ii) which does not exceed such Lender=s Commitment Percentage of
the then applicable Maximum Outstanding Amount. For purposes of the preceding
sentence, (i) the amount of any Loan made by Chase shall be determined net of
the portion of such Loan participated to Voting Participants pursuant to the
Participation Agreement and (ii) the amount of any Loan of a Voting Participant
shall be the portion of such Loan participated to such Voting Participant
pursuant to the Participation Agreement to which it is a party. During the
Commitment Period the Borrower may use the Commitments by borrowing, prepaying
the Loans in whole or in part, and reborrowing, all in accordance with the terms
and conditions hereof, PROVIDED that no Loans may be made hereunder in an
aggregate amount greater than the then aggregate amount of the Available
Commitments.
(b) The Aggregate Outstanding Extensions of Credit of all Lenders
shall not exceed (i) on any day during any period set forth on Schedule 2.1
(except the last day during such period) the amount for such period under the
heading "Peak Amount" on Schedule 2.1 or (ii) on the last day of any period set
forth on Schedule 2.1, the amount set forth for such period under the heading
"End Amount" on Schedule 2.1 (such limits being referred to herein as the
"MAXIMUM OUTSTANDING AMOUNT"); PROVIDED that, unless the Borrower shall have
demonstrated in the manner provided in Schedule 2.1 that during the period set
forth on Schedule 2.1 in which the date of any proposed extension of credit
occurs Consolidated EBITDA and the Current Assets Ratio are not less than the
amount and ratio set forth for such period under the headings "Consolidated
EBITDA" and "Current Assets Ratio" on Schedule 2.1, the Aggregate Outstanding
Extensions of Credit after giving effect to any proposed extension of credit
shall be the lesser of (x) the "End Amount" on Schedule 2.1 for the period next
preceding the period in which the proposed extension of credit occurs and (ii)
the "End Amount" on Schedule 2.1 for the period in which the proposed extension
of credit occurs; PROVIDED, FURTHER, that during the period from September 1 to
September 30, 1999 if the Borrower shall not have demonstrated the requisite
amount of Consolidated EBITDA and the Current Asset Ratio for such period, such
proposed extension of credit shall not be made.
2.2 PROCEDURE FOR BORROWING. The Borrower may borrow under the
Commitments during the Commitment Period on any Business Day, PROVIDED that the
Borrower shall give the Agent irrevocable notice (which notice must be received
by the Agent prior to 10:00 A.M., New York City time, one Business Day prior to
the requested Borrowing Date, specifying (i) the amount to be borrowed, and (ii)
the requested Borrowing Date. Each borrowing under the Commitments shall be in
an amount equal to $1,000,000 or a whole multiple thereof (or, if the then
Available Commitments are less than $1,000,000, such lesser amount). Upon
receipt of any such notice from the Borrower, the Agent shall promptly notify
each Lender thereof. Each Lender which is not a Voting Participant will make the
amount of its pro rata share (which in the case of Chase shall be based on its
Commitment Percentage PLUS the Commitment Percentages of each Voting
Participant) of each borrowing available to the Agent for the account of the
Borrower at the office of the Agent located at 241-02 Northern Boulevard, 3rd
Floor, Douglaston, New York 11362 prior to 11:00 A.M., New York City time, on
the Borrowing Date requested by the Borrower in funds immediately available to
the Agent. Such borrowing will then be made available to the Borrower by the
Agent crediting the account of the Borrower on the books of such office with the
aggregate of the amounts made available to the Agent by the Lenders and in like
funds as received by the Agent. Settlements on Loans by Voting Participants
shall be made as provided in the Participation Agreement on the settlement dates
set forth therein.
2.3 COMMITMENT FEE. The Borrower agrees to pay to the Agent for the
account of each Lender a commitment fee for the period from and including the
first day of the Commitment Period to the Termination Date, computed at the
Commitment Fee Rate on the average daily amount of the Available Commitment of
such Lender during the period for which payment is made, payable monthly in
arrears on each Interest Payment Date, and on the Termination Date or such
earlier date as the Commitments shall terminate as provided herein, commencing
on the first of such dates to occur after the date hereof. The Borrower shall
pay to Chase, for its own account, a servicing fee in an amount equal to .10%
per annum of the aggregate Commitments of all Lenders that are Voting
Participants as of the Closing Date, payable monthly in arrears on each Interest
Payment Date.
2.4 TERMINATION OR REDUCTION OF COMMITMENTS; MANDATORY PREPAYMENTS.
(a) The Borrower shall have the right, upon not less than three Business Days'
notice to the Agent, to terminate the Commitments or, from time to time, to
reduce the amount of the Commitments PROVIDED that no such termination or
reduction shall be permitted if, after giving effect thereto and to any
prepayments of the Loans made on the effective date thereof, the Aggregate
Outstanding Extensions of Credit would exceed the Commitments then in effect.
Any such reduction shall be in an amount equal to $1,000,000 or a whole multiple
thereof and shall reduce permanently the Commitments then in effect.
(b) If on any date prior to the LIFO Repayment Date, (i) the Aggregate
Outstanding Extensions of Credit of all Lenders exceed the applicable Maximum
Outstanding Amount during the period in which such date occurs or (ii) the
outstanding Loans and the L/C Obligations exceed the aggregate Commitments then
in effect, the Borrower, without notice or demand, shall immediately after
obtaining knowledge thereof apply an amount equal to the greater of such excess:
FIRST, to the prepayment in full of the outstanding Loans, SECOND, to the
payment in full of any unreimbursed drawings under any Letters of Credit, and
THIRD, to cash collateralize any outstanding but undrawn Letter of Credit in
accordance with Section 3.5(d).
(c) If at any time the Borrower or any Subsidiary shall receive Net
Cash Proceeds from an Asset Sale of the type described in subsections 2.5(e) or
2.5(f)(ii) of MRA Appendix B then, within two Business Days following such
receipt, the Borrower shall apply such Net Cash Proceeds: FIRST, to the
prepayment in full of the outstanding Loans, SECOND, to the payment in full of
any unreimbursed drawings under any Letters of Credit, and THIRD, to cash
collateralize any outstanding but undrawn Letter of Credit in accordance with
Section 3.5(d), or with the consent of all Lenders, to the prepayment of the
Existing Senior Obligations.
2.5 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower hereby
unconditionally promises to pay on the Termination Date (or such earlier date on
which the Loans become due and payable pursuant to Section 8) to the Agent (i)
for the account of each Lender which is not Chase or a Voting Participant, the
then unpaid amount of each Loan of such Lender and (ii) for the account of
Chase, the then unpaid principal amount of each Loan of Chase and each Voting
Participant. If there are any L/C Obligations constituting undrawn Letters of
Credit, the Borrower shall replace such Letter(s) of Credit or cash
collateralize such L/C Obligations, in each case in accordance with subsection
3.5(d). The Borrower hereby further agrees to pay interest on the unpaid
principal amount of the Loans from time to time outstanding from the date hereof
until payment in full thereof at the rates per annum, and on the dates, set
forth in subsection 2.7. Settlement of payments with Voting Participants shall
be made by Chase as provided in the Participation Agreement.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Borrower to such Lender
resulting from each Loan (or purchase of participations in Loans pursuant to the
Participation Agreement by such Lender) from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement (or the Participation Agreement).
(c) The Agent shall maintain the Register pursuant to subsection
10.7(d), and a subaccount therein for each Lender, in which shall be recorded
(i) the amount of each Loan made hereunder, (ii) the amount of any principal or
interest due and payable on to become due and payable from the Borrower to each
Lender hereunder and (iii) both the amount of any sum received by the Agent
hereunder from the Borrower and each Lender=s share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 2.5(b) shall, to the extent permitted by
applicable law, be PRIMA FACIE evidence of the existence and amounts of the
obligations of the Borrower therein recorded; PROVIDED, HOWEVER, that the
failure of any Lender to maintain any such account, or any error therein, shall
not in any manner affect the obligation of the Borrower to repay (with
applicable interest) the Loans made (including by way of purchase of
participations pursuant to the Participation Agreement) by such Lender in
accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the Agent by any
Lender which is not a Voting Participant, the Borrower will promptly execute and
deliver to such Lender a promissory note of the Borrower evidencing the Loans of
such Lender (which, in the case of Chase, shall include Loans participated to
Voting Participants pursuant to the Participation Agreement), substantially in
the form of Exhibit D with appropriate insertions as to date and principal
amount (a "NOTE").
2.6 OPTIONAL PREPAYMENTS. The Borrower may at any time and from time
to time, prepay the Loans, in whole or in part, without premium or penalty, on
at least one Business Day's irrevocable notice to the Agent, specifying the date
and amount of prepayment. Upon receipt of any such notice, the Agent shall
promptly notify each Lender thereof. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified therein,
together with any amounts payable pursuant to subsection 2.11. Partial
prepayments shall be in an aggregate principal amount of $1,000,000 or a whole
multiple thereof. Settlement of prepayments with Voting Participants shall be
made by Chase as provided in the Participation Agreement.
2.7 INTEREST RATES AND PAYMENT DATES. (a) Each Loan shall bear
interest at a rate per annum equal to the ABR plus 3.5%.
(b) If all or a portion of (i) any principal of any Loan, (ii) any
interest payable thereon, (iii) any commitment fee or (iv) any other amount
payable hereunder shall not be paid after the expiration of any applicable grace
period (whether at the stated maturity, by acceleration or otherwise), the
principal of the Loans and any such overdue interest, commitment fee or other
amount shall bear interest at a rate per annum equal to the ABR plus 5.5%, in
each case from the date of such non-payment until such overdue principal,
interest, commitment fee or other amount is paid in full (as well after as
before judgment).
(c) Interest shall be payable in arrears on each Interest Payment
Date, PROVIDED that interest accruing pursuant to paragraph (b) of this
subsection shall be payable from time to time on demand.
2.8 COMPUTATION OF INTEREST AND FEES. (a) Commitment and Standby
Letter of Credit fees and, whenever it is calculated on the basis of the Prime
Rate, interest shall be calculated on the basis of a 365- (or 366-, as the case
may be) day year for the actual days elapsed, and, otherwise, interest shall be
calculated on the basis of a 360-day year for the actual days elapsed. Any
change in the interest rate on a Loan resulting from a change in the ABR shall
become effective as of the opening of business on the day on which such change
becomes effective. The Agent shall as soon as practicable notify the Borrower
and the Lenders of the effective date and the amount of each such change in
interest rate.
(b) Each determination of an interest rate by the Agent pursuant to
any provision of this Agreement shall be conclusive and binding on the Borrower
and the Lenders in the absence of manifest error.
2.9 FACILITY FEE. On the Closing Date the Borrower shall (i) pay to
the Agent for the ratable benefit of the Lenders a fee in an amount equal to
2.35% of the aggregate Commitments payable in cash on the Closing Date and (ii)
issue to each Lender its ratable share of warrants exercisable for 250,000
shares of the Borrower=s common stock, to be dated the date of issue thereof, to
expire on the fifth anniversary of the Closing Date and to be substantially in
the form of Exhibit E (the "FACILITY FEE WARRANTS"); PROVIDED that 75,000 of
such Facility Fee Warrants (the "FIXED FACILITY FEE WARRANTS") shall be
immediately exercisable on the Closing Date and subject to Section 10.6, the
balance (i.e., 175,000 (the "CANCELABLE FACILITY FEE WARRANTS")) of such
warrants shall be exercisable at any time on or after July 1, 2000. The holders
of such Warrants shall have the benefit of a registration rights agreement to be
executed by the Borrower on the Closing Date substantially in the form of
Exhibit F. The cash payment and the Facility Fee Warrants described in this
subsection 2.9 are collectively the "FACILITY FEE".
2.10 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing of Loans by
the Borrower from the Lenders hereunder shall be made, each payment by the
Borrower on account of any commitment fee in respect of the Commitments and on
account of the Facility Fee hereunder shall be allocated by the Agent, and any
reduction of the Commitments of the Lenders shall be allocated by the Agent, PRO
RATA according to the Commitment Percentages of the Lenders; PROVIDED that the
Agent shall allocate to Chase both the PRO RATA share due to it and the PRO rata
shares due to the Voting Participants, and Chase shall settle with the Voting
Participants as provided in the Participation Agreement. Each payment (including
each prepayment) by the Borrower on account of principal of and interest on any
Loan shall be allocated by the Agent PRO RATA according to the respective
outstanding principal amounts of such Loans then held by the Lenders, PROVIDED,
that the Agent shall allocate to Chase both the PRO rata share due to it and the
PRO RATA shares due to the Voting Participants, and Chase shall settle with the
Voting Participants as provided in the Participation Agreement. All payments
(including prepayments) to be made by the Borrower hereunder, whether on account
of principal, interest, fees or otherwise, shall be made without set off or
counterclaim and shall be made prior to 2:00 P.M., New York City time, on the
due date thereof to the Agent, for the account of the Lenders, at the Agent's
office specified in subsection 10.2, in Dollars and in immediately available
funds. The Agent shall distribute such payments to the Lenders which are not
Voting Participants promptly upon receipt in like funds as received. If any
payment hereunder becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day, and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
(b) Unless the Agent shall have been notified in writing by any Lender
which is not a Voting Participant prior to a borrowing that such Lender will not
make the amount that would constitute its Commitment Percentage (or, in the case
of Chase, its Commitment Percentage plus the Commitment Percentages of the
Voting Participants) of such borrowing available to the Agent, the Agent may
assume that such Lender is making such amount available to the Agent, and the
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Agent by the
required time on the Borrowing Date therefor, such Lender shall pay to the
Agent, on demand, such amount with interest thereon at a rate equal to the daily
average Federal Funds Effective Rate for the period until such Lender makes such
amount immediately available to the Agent. A certificate of the Agent submitted
to any Lender which is not a Voting Participant with respect to any amounts
owing under this subsection shall be conclusive in the absence of manifest
error. If such Lender's Commitment Percentage (or, in the case of Chase, its
Commitment Percentage plus the Commitment Percentages of the Voting
Participants) of such borrowing is not made available to the Agent by such
Lender within three Business Days of such Borrowing Date, the Agent shall also
be entitled to recover such amount with interest thereon at the rate per annum
applicable to ABR Loans hereunder, on demand, from the Borrower.
2.11 TAXES. (a) All payments made by the Borrower under this Agreement
and any Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Agent or any Lender as a result of a
present or former connection between the Agent or such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from the Agent or such Lender having executed,
delivered or performed its obligations or received a payment under, or enforced,
this Agreement or any Note). If any such non-excluded taxes, levies, imposts,
duties, charges, fees deductions or withholdings ("NON-EXCLUDED TAXES") are
required to be withheld from any amounts payable to the Agent or any Lender
hereunder or under any Note, the amounts so payable to the Agent or such Lender
shall be increased to the extent necessary to yield to the Agent or such Lender
(after payment of all Non-Excluded Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Agreement,
PROVIDED, HOWEVER, that the Borrower shall not be required to increase any such
amounts payable to any Lender that is not organized under the laws of the United
States of America or a state thereof if such Lender fails to comply with the
requirements of paragraph (b) of this subsection. Whenever any Non-Excluded
Taxes are payable by the Borrower, as promptly as possible thereafter the
Borrower shall send to the Agent for its own account or for the account of such
Lender, as the case may be, a certified copy of an original official receipt
received by the Borrower showing payment thereof. If the Borrower fails to pay
any Non-Excluded Taxes when due to the appropriate taxing authority or fails to
remit to the Agent the required receipts or other required documentary evidence,
the Borrower shall indemnify the Agent and the Lenders for any incremental
taxes, interest or penalties that may become payable by the Agent or any Lender
as a result of any such failure. The agreements in this subsection shall survive
the termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) deliver to the Borrower and the Agent (A) two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224, or
successor applicable form, as the case may be, and (B) an Internal Revenue
Service Form W-8 or W-9, or successor applicable form, as the case may be;
(ii) deliver to the Borrower and the Agent two further copies of
any such form or certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recent form previously delivered by it
to the Borrower; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrower or
the Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the Agent.
Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax. Each Person that shall become a Lender or a Nonvoting
Participant pursuant to subsection 10.7 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms and statements
required pursuant to this subsection, provided that in the case of a Nonvoting
Participant such Nonvoting Participant shall furnish all such required forms and
statements to the Lender from which the related participation shall have been
purchased.
2.12 CHANGE OF LENDING OFFICE. Each Lender agrees that if it makes any
demand for payment under subsection 2.11(a), it will use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions and
so long as such efforts would not be disadvantageous to it, as determined in its
sole discretion) to designate a different lending office if the making of such a
designation would reduce or eliminate the need for the Borrower to make payments
under subsection 2.11(a).
SECTION 3. LETTERS OF CREDIT
3.1 L/C COMMITMENT. (a) Subject to the terms and conditions hereof,
the Issuing Bank, in reliance on the agreements of the other Lenders set forth
in subsection 3.4(a), agrees to issue letters of credit ("LETTERS OF CREDIT")
for the account of the Borrower on any Business Day during the Commitment Period
in such form as may be approved from time to time by the Issuing Bank; PROVIDED
that the Issuing Bank shall have no obligation to issue any Letter of Credit (i)
if there is sufficient availability under the Existing Credit Agreement to issue
an Existing Letter of Credit in the requested amount or (ii) if, after giving
effect to such issuance, (x) the L/C Obligations would exceed the L/C
Commitment, (y) the Available Commitments would be less than zero or (z) the
Aggregate L/C Obligations would exceed $24,000,000. No Letter of Credit shall be
issued hereunder unless after giving effect thereto the Borrower shall be in
compliance with the provisions of subsection 2.1(b).
(b) Each Letter of Credit shall:
(i) be denominated in Dollars and shall be either (A) a standby
letter of credit issued to support obligations of the Borrower, contingent
or otherwise, the terms and conditions of which are satisfactory to the
Required Lenders, as evidenced by their prior written approval (a "STANDBY
LETTER OF CREDIT"), or (B) a commercial letter of credit issued in respect
of the purchase of goods and services by the Borrower and its Subsidiaries
in the ordinary course of business (a "COMMERCIAL LETTER OF Credit"); and
(ii) expire no later than the Termination Date unless cash
collateralized as provided in subsection 3.5(d).
(c) Each Letter of Credit shall be subject to the Uniform Customs and,
to the extent not inconsistent therewith, the laws of the State of New York.
(d) The Issuing Bank shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Bank or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. The Borrower may from
time to time request that the Issuing Bank issue a Letter of Credit by
delivering to the Issuing Bank at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Bank, and
such other certificates, documents and other papers and information as the
Issuing Bank may request. Upon receipt of any Application, the Issuing Bank will
process such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Bank be required to issue any Letter
of Credit earlier than three Business Days after its receipt of the Application
therefor and all such other certificates, documents and other papers and
information relating thereto) by issuing the original of such Letter of Credit
to the beneficiary thereof or as otherwise may be agreed by the Issuing Bank and
the Borrower. The Issuing Bank shall furnish a copy of such Letter of Credit to
the Borrower promptly following the issuance thereof.
3.3 FEES, COMMISSIONS AND OTHER CHARGES. (a) The Borrower shall pay to
the Agent, for the account of the Issuing Bank and the L/C Participants, a
letter of credit fee (i) with respect to each Standby Letter of Credit, computed
at the rate per annum equal to 3.50%, payable in arrears on each Interest
Payment Date, on the aggregate amount from time to time available to be drawn
under such Standby Letter of Credit and (ii) with respect to Commercial Letters
of Credit, computed at the rate per annum equal to 1.50% of the average daily
amount from time to time available to be drawn under all outstanding Commercial
Letters of Credit, payable in arrears on each Interest Payment Date. Such fees
shall be nonrefundable and shall be payable to the Agent to be shared ratably
among the Lenders in accordance with their respective Commitment Percentages in
effect from time to time during the period for which payment of such fee is
being made.
(b) In addition to the foregoing fees, the Borrower shall pay or
reimburse the Issuing Bank for such normal and customary costs and expenses as
are incurred or charged by the Issuing Bank in issuing, effecting payment under,
amending or otherwise administering any Letter of Credit.
(c) The Agent shall, not more often than monthly, distribute to the
Issuing Bank and the L/C Participants all fees and commissions received by the
Agent for their respective accounts pursuant to this subsection.
3.4 L/C PARTICIPATIONS. (a) The Issuing Bank irrevocably agrees to
grant and hereby grants to each L/C Participant, and, to induce the Issuing Bank
to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to
accept and purchase and hereby accepts and purchases from the Issuing Bank, on
the terms and conditions hereinafter stated, for such L/C Participant's own
account and risk an undivided interest equal to such L/C Participant's
Commitment Percentage in the Issuing Bank's obligations and rights under each
Letter of Credit issued hereunder and the amount of each draft paid by the
Issuing Bank thereunder. Each L/C Participant unconditionally and irrevocably
agrees with the Issuing Bank that, if a draft is paid under any Letter of Credit
for which the Issuing Bank is not reimbursed in full by the Borrower in
accordance with the terms of this Agreement, such L/C Participant shall pay to
the Issuing Bank upon demand at the Issuing Bank's address for notices specified
herein an amount equal to such L/C Participant's Commitment Percentage of the
amount of such draft, or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Bank pursuant to subsection 3.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Bank under any Letter of Credit is
paid to the Issuing Bank within three Business Days after the date demand is
made by the Issuing Bank as contemplated by Section 3.4(a), such L/C Participant
shall pay to the Issuing Bank on demand an amount equal to the product of (i)
such amount, times (ii) the daily average Federal Funds Effective Rate, as
quoted by the Issuing Bank, during the period from and including the date such
payment is required to the date on which such payment is immediately available
to the Issuing Bank, times (iii) a fraction the numerator of which is the number
of days that elapse during such period and the denominator of which is 360. If
any such amount required to be paid by any L/C Participant pursuant to paragraph
3.4(a) is not in fact made available to the Issuing Bank by such L/C Participant
within three Business Days after the date such payment is due, the Issuing Bank
shall be entitled to recover from such L/C Participant, on demand, such amount
with interest thereon calculated from such due date at the rate per annum
applicable to the Loans hereunder. A certificate of the Issuing Bank submitted
to any L/C Participant with respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Bank has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with subsection 3.4(a), the Issuing
Bank receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, including proceeds of collateral applied thereto
by the Issuing Bank), or any payment of interest on account thereof, the Issuing
Bank will distribute to such L/C Participant its pro rata share thereof;
PROVIDED, HOWEVER, that in the event that any such payment received by the
Issuing Bank shall be required to be returned by the Issuing Bank, such L/C
Participant shall return to the Issuing Bank the portion thereof previously
distributed by the Issuing Bank to it.
3.5 REIMBURSEMENT OBLIGATION OF THE BORROWER. (a) The Borrower agrees
to reimburse the Issuing Bank on each date on which the Issuing Bank notifies
the Borrower of the date and amount of a draft presented under any Letter of
Credit and paid by the Issuing Bank for the amount of (i) such draft so paid and
(ii) any taxes, fees, charges or other costs or expenses incurred by the Issuing
Bank in connection with such payment. Each such payment shall be made to the
Issuing Bank at its address for notices specified herein in Dollars and in
immediately available funds.
(b) Interest shall be payable on any and all amounts remaining unpaid
by the Borrower under this subsection from the date such amounts become payable
(whether at stated maturity, by acceleration or otherwise) until payment in
full, in accordance with paragraph (c) below or from the Borrower=s available
cash or otherwise, at a rate equal to the ABR plus 5.5%.
(c) Each drawing under any Letter of Credit which is not reimbursed
pursuant to subsection 3.5(a) on the same day it is drawn shall constitute a
request by the Borrower to the Agent for a borrowing (pursuant to subsection
2.2) of Loans in the amount of such drawing (which Loan shall be made
irrespective of the Borrower=s ability to satisfy the conditions set forth in
subsection 5.2). The Borrowing Date with respect to a borrowing under this
paragraph shall be deemed to be the date of such drawing.
(d) On the Termination Date, all outstanding Letters of Credit shall
be replaced and returned to the Issuing Bank undrawn and marked "canceled", or
to the extent that the Borrower is unable to replace any Letters of Credit, such
Letters of Credit shall be cash collateralized under the Collateral Agreement by
the Borrower depositing an amount equal to 105% of the face amount of such
Letters of Credit into the LIFO L/C Cash Collateral Account.
3.6 OBLIGATIONS ABSOLUTE. (a) The Borrower's obligations under this
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any set-off, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing Bank or any beneficiary of a
Letter of Credit.
(b) The Borrower also agrees with the Issuing Bank that the Issuing
Bank shall not be responsible for, and the Borrower's Reimbursement Obligations
under subsection 3.5(a) shall not be affected by, among other things, (i) the
validity or genuineness of documents or of any endorsements thereon, even though
such documents shall in fact prove to be invalid, fraudulent or forged, or (ii)
any dispute between or among the Borrower and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or
(iii) any claims whatsoever of the Borrower against any beneficiary of such
Letter of Credit or any such transferee.
(c) The Issuing Bank shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except for
errors or omissions caused by the Issuing Bank's gross negligence or willful
misconduct.
(d) The Borrower agrees that any action taken or omitted by the
Issuing Bank under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards of care specified in the UCC,
shall be binding on the Borrower and shall not result in any liability of the
Issuing Bank to the Borrower.
3.7 LETTER OF CREDIT PAYMENTS. If any draft shall be presented for
payment under any Letter of Credit, the Issuing Bank shall promptly notify the
Borrower of the date and amount thereof. The responsibility of the Issuing Bank
to the Borrower in connection with any draft presented for payment under any
Letter of Credit shall, in addition to any payment obligation expressly provided
for in such Letter of Credit, be limited to determining that the documents
(including each draft) delivered under such Letter of Credit in connection with
such presentment are in conformity with such Letter of Credit.
3.8 APPLICATION. To the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall govern.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Loans and issue or participate in the Letters of Credit, the Borrower hereby
represents and warrants to the Agent and each Lender that:
4.1 ORGANIZATION, CORPORATE EXISTENCE, ETC. Each of the Borrower and
the other Loan Parties (a) is a corporation duly incorporated, validly existing
and in good standing (or equivalent) under the laws of its state or country of
incorporation (as applicable), (b) has the corporate power and authority to own
its properties and to carry on its business as now being conducted, (c) is duly
qualified to do business in every jurisdiction wherein the conduct of its
business or the ownership of its properties is such as to require such
qualification in all cases where failure to do so would be reasonably likely to
have a Material Adverse Effect, (d) has the corporate power to execute and
perform this Agreement and all other Loan Documents to which it is a party, and
(e) with respect to the Borrower only, has the corporate power to borrow the
Loans.
4.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each Loan
Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party and, in the case of the Borrower, to
authorize the borrowings on the terms and conditions of this Agreement. Other
than for the filing of UCC financing statements and the recordation of Mortgages
with respect to the Collateral and any filings with Governmental Authorities
with respect to the Foreign Subsidiary Security Agreements, no consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of the Loan Documents. Each Loan Document has been duly executed
and delivered on behalf of each Loan Party party thereto. This Agreement
constitutes, and each other Loan Document when executed will constitute, a
legal, valid and binding obligation of each Loan Party party thereto enforceable
against each such Loan Party in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
4.3 SECURITY DOCUMENTS. (a) The Collateral Agreement is effective to
create in favor of the Collateral Agent, for the benefit of the Lenders, a
legal, valid and enforceable security interest in the Pledged Securities
referred to in the Collateral Agreement and proceeds thereof and, the stock
certificates representing the Pledged Stock referred to in the Collateral
Agreement having been delivered to, and remaining in the possession of, the
Collateral Agent, the Collateral Agreement constitutes a fully perfected first
priority Lien on, and security interest in, all right, title and interest of the
relevant Loan Party in such Pledged Securities and the proceeds thereof, as
security for the LIFO Obligations, in each case prior and superior in right to
any other Person.
(b) The Collateral Agreement is effective to create in favor of the
Collateral Agent, for the benefit of the Lenders, a legal, valid and enforceable
security interest in the Collateral described therein (and not covered in
subsection 4.3(a)) and proceeds thereof, and subject to financing statements in
appropriate form being on file in the offices specified on Schedule 4.3(b) and
the other actions indicated on such schedule as having been taken, the
Collateral Agreement constitutes a fully perfected Lien on, and security
interest in, all right, title and interest of the Loan Parties executing such
agreement in such Collateral and the proceeds thereof, as security for the LIFO
Obligations, in each case prior and superior in right to any other Person, other
than with respect to Permitted Liens.
(c) Each of the Mortgages upon execution and delivery thereof will be
effective to create in favor of the Collateral Agent, for the benefit of the
Lenders, a legal, valid and enforceable Lien on the Mortgaged Properties
described therein and proceeds thereof, and subject to the Mortgages being on
file in the appropriate offices, each such Mortgage will constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in the Mortgaged Properties and the proceeds thereof, as
security for the LIFO Obligations (as defined in the relevant Mortgage), in each
case prior and superior in right to any other Person, other than with respect to
Permitted Liens.
(d) Each Foreign Subsidiary Security Agreement upon execution and
delivery thereof will be effective to create in favor of the Collateral Agent,
for the benefit of the Lenders, a legal, valid and enforceable security interest
in the Collateral described therein and proceeds thereof, and subject to all
appropriate actions necessary to perfect a security interest in the Collateral
having been taken, each such Foreign Subsidiary Security Agreement will
constitute a fully perfected Lien on all right, title and interest of the
Subsidiary executing such agreement in such Collateral and the proceeds thereof,
as security for the Secured Obligations, in each case prior and superior in
right to any other Person, other than with respect to Permitted Liens.
4.4 FINANCIAL CONDITION. The Borrower has heretofore furnished to each
Lender consolidated financial statements, including a balance sheet and
statements of income and of cash flows, for the fiscal year ended December 31,
1998, audited by Cornick, Garber & Sandler LLP, as well as unaudited statements
for the quarters ending March 31, 1999 and June 30, 1999. Such financial
statements present fairly the financial condition of the Borrower and its
Subsidiaries on a consolidated basis as of such date and their consolidated
results of operations and cash flows for the periods covered thereby in
conformity with GAAP. There is no obligation or liability, contingent or
otherwise, of the Borrower or any of its Subsidiaries, which is material in
amount and which is not reflected in such financial statements. Other than the
items set forth on Schedule 1.4 to MRA Appendix B, since June 30, 1999, no
Material Adverse Effect has occurred.
4.5 TAXES. No Loan Party has received any notice of deficiencies from
any taxing authority having jurisdiction over it or any of its property other
than those that could not reasonably be expected to have a Material Adverse
Effect. Each Loan Party has filed or caused to be filed all Federal, state and
local tax returns which are required to be filed, and has paid or caused to be
paid all taxes as shown on said returns or on any assessment received by it to
the extent that such taxes have become due.
4.6 TITLE TO PROPERTIES. Each Loan Party has good and marketable title
in fee simple to, or a valid leasehold interest in, all of its real property,
and good title to, or a valid leasehold interest in, all its other properties
and assets except to the extent that any defects therein, individually and in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect. There are no Liens on any of its properties and assets, except for those
in favor of the Collateral Agent or Permitted Liens.
4.7 LITIGATION. As to the Borrower and each Loan Party except as set
forth in Schedule 4.7, (a) there are no actions, suits or proceedings (whether
or not purportedly on behalf of the Borrower or any Guarantor) pending or, to
its knowledge, threatened against it at law or in equity or before or by any
Federal, state, municipal, or other governmental department, commission, board,
bureau, agency, or instrumentality, domestic or foreign, which could reasonably
be expected to have a Material Adverse Effect; and (b) it is not in default with
respect to any judgment, writ, injunction, decree, rule, or regulation of any
court or Federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign in
any respect which could reasonably be expected to have a Material Adverse
Effect.
4.8 AGREEMENTS. Neither the Borrower nor any other Loan Party is a
party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree or
regulation which would be reasonably likely to have a Material Adverse Effect,
assuming such agreement or instrument, charter, other corporate restriction or
any judgment, order, writ, injunction, decree or regulation is performed as
written. Neither the Borrower nor any other Loan Party is in default in its
performance, observance, or fulfillment of any material obligation, covenant, or
condition contained in any other agreement or instrument to which it is a party,
including, without limitation, those involving the Lenders (including this
Agreement) which has not been waived except to the extent such default
individually and in the aggregate, would not be reasonably likely to have a
Material Adverse Effect.
4.9 EMPLOYEE BENEFIT PLANS. If applicable, each of the Borrower and
the other Loan Parties is in compliance in all material respects with the
applicable provisions of ERISA and the regulations and published interpretations
thereunder. No Reportable Event has occurred with respect to a Plan, if any,
administered by the Borrower or any Loan Party or an administrator designated by
it. The present value of all accrued benefits under each Single Employer Plan
(based on those assumptions used to fund such Plans) did not, as of the last
annual valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such Plan allocable to such
accrued benefits by an amount which could reasonably be expected to have a
Material Adverse Effect.
4.10 FEDERAL RESERVE REGULATIONS. (a) Neither the Borrower nor any
other Loan Party is engaged principally in, nor has as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying any "margin stock" (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System). If requested by any Lender, the
Borrower will furnish to such Lender a statement on Federal Reserve Form U-1.
(b) No part of the proceeds of the Loans will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, (i)
to purchase or carry margin stock or to extend credit to others for the purpose
of purchasing or carrying margin stock, or to refund Indebtedness originally
incurred for such purpose, or (ii) for any purpose which violates or is
inconsistent with the provisions of Regulations T, U or X of the Board of
Governors of the Federal Reserve System.
4.11 GOVERNMENTAL APPROVAL; LICENSES. Other than for the filing of UCC
financing statements and the recordation of Mortgages with respect to the
Collateral and any filings with Governmental Authorities with respect to the
Foreign Subsidiary Security Agreements, no license, permit or certificate,
registration with or consent or approval of, or other action by, any Federal,
state, municipal or other Governmental Authority is required in connection with
its execution, delivery, and performance of this Agreement or any of the other
Loan Documents. Each of the Borrower and the other Loan Parties possesses all
licenses, permits, certificates, approvals and the like ("LICENSES") necessary
for the lawful operation of its business, to the extent that failure to possess
such Licenses would have a Material Adverse Effect. All such Licenses are in
full force and effect, and there exists no threat of a revocation or suspension
of any Licenses, except as could not reasonably be expected to have a Material
Adverse Effect.
4.12 AFFILIATES; SUBSIDIARIES. As of the date hereof, the Borrower has
no Affiliates or Subsidiaries except as set forth on Schedule 4.12.
4.13 COMPLIANCE WITH APPLICABLE LAWS. Each of the Borrower and the
other Loan Parties is in compliance with the material requirements of all
applicable laws, rules, regulations, and orders of any Governmental Authority
applicable to it, except as could not reasonably be expected to have a Material
Adverse Effect.
4.14 ENVIRONMENTAL MATTERS. In the ordinary course of its business,
the Borrower conducts an ongoing review of the effect of Environmental Laws on
the business, operations and properties of the Borrower and its Subsidiaries
(not, however, necessarily including PRC Subsidiaries), in the course of which
it identifies and evaluates associated liabilities and costs (including, without
limitation, any capital or operating expenditures required for clean-up or
closure of properties presently or previously owned, any capital or operating
expenditures required to achieve or maintain compliance with environmental
protection standards imposed by law or as a condition of any license, permit or
contract, any related constraints on operating activities, including any
periodic or permanent shutdown of any facility or reduction in the level of or
change in the nature of operations conducted thereat, any costs or liabilities
in connection with off-site disposal of wastes or Hazardous Substances, and any
actual or potential liabilities to third parties, including employees, and any
related costs and expenses). On the basis of this review, the Borrower has
reasonably concluded that such associated liabilities and costs, including the
costs of compliance with Environmental Laws, could not reasonably be expected to
exceed $1,500,000.
4.15 INTELLECTUAL PROPERTY. Each of the Borrower and the other Loan
Parties owns, or is taking appropriate actions to secure the ownership of (and
believes in good faith that, prior to obtaining such ownership, it is entitled
to use) or is licensed to use, all trademarks, trade names, patents, copyrights,
technology, know-how and processes necessary for the conduct of its business as
currently conducted (the "INTELLECTUAL PROPERTY"), except for those where the
failure to own or license the same could not have a Material Adverse Effect.
Except as set forth on Schedule 4.15, as of the date hereof, to the best
knowledge of the Borrower and each other Loan Party, (i) no claim is pending by
any Person challenging or questioning the use of any such Intellectual Property
or the validity or effectiveness of any such Intellectual Property, (ii) there
is no valid basis for any such claim and (iii) the use of such Intellectual
Property does not infringe upon the rights of any Person. Except as set forth on
Schedule 4.15, as of any date after the Closing Date upon which this
representation and warranty shall be deemed to be made pursuant to subsection
5.2 of this Agreement or otherwise, to the best knowledge of the Borrower and
each Loan Party, (i) no claim is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, (ii) there is no valid basis
for any such claim, and (iii) the use of such Intellectual Property does not
infringe on the rights of any Person except for claims or infringements that in
the aggregate are not reasonably likely to have a Material Adverse Effect.
4.16 INVESTMENT COMPANY ACT. Neither the Borrower nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
4.17 DEPOSITARY ACCOUNTS. As of the date hereof, Schedule 1.13(b) to
MRA Appendix B sets forth a true and complete list of all bank accounts
maintained by the Borrower and its Subsidiaries.
4.18 SCHEDULES. All of the information which is required to be
scheduled pursuant to this Agreement and any other Loan Document is correct and
accurate on the date hereof.
4.19 PURPOSE OF LOANS. The proceeds of the Loans shall be used by the
Borrower exclusively for working capital purposes in the ordinary course of
business.
4.20 RAC-FSC. RAC-FSC has no material assets.
4.21 YEAR 2000 MATTERS. Any reprogramming required to permit the
proper functioning (but only to the extent that such proper functioning would
otherwise be impaired by the occurrence of the year 2000) in and following the
year 2000 of computer systems and other equipment containing embedded
microchips, in either case owned or operated by the Borrower or any of its
Subsidiaries or used or relied upon in the conduct of their business (including
any such systems and other equipment supplied by others or with which the
computer systems of the Borrower or any of its Subsidiaries interface), and the
testing of all such systems and other equipment as so reprogrammed, has been
completed. The costs to the Borrower and its Subsidiaries that have not been
incurred as of the date hereof for such reprogramming and testing and for the
other reasonably foreseeable consequences to them of any improper functioning of
other computer systems and equipment containing embedded microchips due to the
occurrence of the year 2000 could not reasonably be expected to result in a
Default or Event of Default or to have a Material Adverse Effect. Except for any
reprogramming referred to above, the computer systems of the Borrower and its
Subsidiaries are and, with ordinary course upgrading and maintenance, will
continue for the term of this Agreement to be, sufficient for the conduct of
their business as currently conducted.
4.22 REGULATION H. No Mortgage encumbers improved real property which
is located in an area that has been identified by the Secretary of Housing and
Urban Development as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968.
4.23 LABOR MATTERS. There are no strikes or other labor disputes
against the Borrower or any of its Subsidiaries pending or, to the knowledge of
the Borrower, threatened that (individually or in the aggregate) could
reasonably be expected to have a Material Adverse Effect. Hours worked by and
payment made to employees of the Borrower and its Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other applicable Requirement of
Law dealing with such matters, which violation (individually or in the
aggregate) could reasonably be expected to have a Material Adverse Effect. All
payments due from the Borrower or any of its Subsidiaries on account of employee
health and welfare insurance that (individually or in the aggregate) could
reasonably be expected to have a Material Adverse Effect if not paid have been
paid or accrued as a liability on the books of the Borrower or the relevant
Subsidiary.
SECTION 5. CONDITIONS PRECEDENT
5.1 CONDITIONS TO EFFECTIVENESS. The agreement of each Lender to make
Loans hereunder shall not become effective unless and until the following
conditions precedent shall have been satisfied on or before September 10, 1999.
(a) LOAN DOCUMENTS. The Agent shall have received each Loan Document,
executed and delivered by a duly authorized officer of the Borrower or other
relevant Loan Party, with a counterpart for each Lender, PROVIDED, HOWEVER, that
(i) with respect to the Guarantee, such document shall have been executed and
delivered by a duly authorized officer of each Domestic Subsidiary, Recoton
German Holdings GmbH, MacAudio Electronic GmbH, Magnat Audio-Produkte GmbH, HECO
Audio-Produkte GmbH, and Recoton Canada Ltd.; and (ii) with respect to the
Collateral Agreement, such document shall have been executed and delivered by a
duly authorized officer of the Borrower and each Domestic Subsidiary.
(b) CORPORATE PROCEEDINGS OF THE LOAN PARTIES. The Agent shall have
received, with a counterpart for each Lender, a copy of the resolutions, in form
and substance satisfactory to the Agent, of the Board of Directors of the
Borrower and each Domestic Subsidiary authorizing (i) the execution, delivery
and performance of this Agreement and the other Loan Documents to which it is a
party and (ii) the performance of all transactions contemplated under the Loan
Documents, certified by the Secretary or an Assistant Secretary of such Loan
Party as of the Closing Date, which certificate shall be in form and substance
satisfactory to the Agent and shall state that the resolutions thereby certified
have not been amended, modified, revoked or rescinded.
(c) BORROWER INCUMBENCY CERTIFICATE. The Agent shall have received,
with a counterpart for each Lender, a Borrowing Certificate, dated the Closing
Date, as to the incumbency and signature of the officers of the Borrower
executing any Loan Document satisfactory in form and substance to the Agent,
executed by the President or any Vice President and the Secretary or any
Assistant Secretary of the Borrower; substantially in the form of Exhibit G
hereto.
(d) FEES. The Borrower shall have (i) paid to the Agent (x) for the
ratable benefit of the Lenders the Facility Fee and (y) for the Agent=s own
account, the Agency Fee and the Collateral Agency Fee and (ii) reimbursed, with
respect to invoices received at least one Business Day prior to the Closing
Date, each Lender and the Agent for all its reasonable costs and expenses,
including without limitation, the reasonable fees and disbursements of counsel
to each Lender and the Agent (including the allocated fees and expenses of
in-house counsel) as provided in Section 10.5; PROVIDED that with respect to
invoices received on or after the Closing Date, the Borrower shall reimburse the
entity submitting such invoice in accordance with this Agreement as soon as
practicable thereafter.
(e) INSURANCE. The Agent shall have received on the Closing Date one
or more schedules describing all insurance maintained by the Borrower and each
Guarantor pursuant to subsection 1.5 of MRA Appendix B.
(f) INFORMATION. The Agent and each of the Lenders shall have received
such information (financial or otherwise) as may be reasonably requested by the
Agent or any Lender and the Agent and each of Lenders shall have completed, and
shall be satisfied with the results of, all due diligence deemed necessary by
each of them.
(g) MASTER RESTRUCTURING AGREEMENT CONDITIONS PRECEDENT. Each of the
conditions precedent specified in Section 7 of the Master Restructuring
Agreement has been satisfied or waived in accordance with the terms thereof.
(h) ADDITIONAL MATTERS. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be satisfactory in form and substance to the Agent, and the Agent shall have
received such other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it shall
reasonably request.
5.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of each
Lender to make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit but excluding
the purchase of participations pursuant to the Participation Agreement, which
shall be governed by the terms thereof) is subject to the satisfaction of the
following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties made by any Loan Party in or pursuant to Section 4 or which
are contained in any other Loan Document shall be true and correct in all
material respects on and as of the date of such Loan or the issuance of
such Letter of Credit as if made on and as of such date (unless stated to
relate to a specific earlier date, in which case, such representations and
warranties shall be true and correct in all material respects as of such
earlier date), including that there shall not have occurred any event or
condition since the Closing Date which could reasonably be expected to
result in a Material Adverse Effect.
(b) NO DEFAULT. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
extensions of credit requested to be made on such date.
(c) BORROWING CERTIFICATE. The Agent shall have received a
certificate executed by an executive officer of the Borrower, substantially
in the form of Exhibit G, certifying that (i) the requested Loan or Letter
of Credit and the application or use thereof are consistent with the terms
of this Agreement and is necessary, after utilization and application of
the Borrower=s available cash, in order to satisfy the Borrower=s
obligations in the ordinary course of business or as otherwise permitted
hereunder, (ii) the Borrower and each Guarantor has observed or performed
all of its covenants and other agreements in all material respects, and
satisfied in all material respects every condition, contained herein or in
any other Loan Document to be observed, performed or satisfied by the
Borrower or such Guarantor and (iii) such officer has no knowledge of any
Default or Event of Default.
(d) FEES. The Borrower shall have paid to the Agent and the
Lenders the then unpaid balance of all accrued and unpaid fees and expenses
then payable under and pursuant to this Agreement.
(e) AVAILABILITY UNDER EXISTING L/C COMMITMENT. With respect to
the issuance of any Letter of Credit, there shall not be sufficient
availability under the Existing L/C Commitment to issue an Existing Letter
of Credit in the requested amount.
Each borrowing by and Letter of Credit issued on behalf of the
Borrower hereunder shall constitute a representation and warranty by the
Borrower as of the date of such Loan or issuance that the conditions contained
in this subsection have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note or any Letter of Credit remains outstanding and unpaid (unless
cash collateralized) or any other amount is owing to any Lender or the Agent
hereunder, the Borrower shall and (except in the case of delivery of financial
information, reports and notices) shall cause each of its Subsidiaries to
observe the affirmative covenants set forth in Section 1 of MRA Appendix B,
which are incorporated by reference herein as if fully set forth herein.
SECTION 7. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note or any Letter of Credit remains outstanding and unpaid (unless
cash collateralized) or any other amount is owing to any Lender or the Agent
hereunder, the Borrower shall not, and shall not permit any of its Subsidiaries,
directly or indirectly, to breach any of the negative covenants set forth in
Section 2 of MRA Appendix B, which are incorporated by reference herein as if
fully set forth herein.
SECTION 8. EVENTS OF DEFAULT
If any Event of Default shall occur and be continuing then, and in any
such event, (A) if such event is an Event of Default specified in clause (i) or
(ii) of paragraph (f) of MRA Appendix C with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement (including, without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder) and the Notes shall
immediately become due and payable, and (B) if such event is any other Event of
Default, either or both of the following actions may be taken: (i) with the
consent of the Required Lenders, the Agent may, or upon the request of the
Required Lenders, the Agent shall, by notice to the Borrower declare the
Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) with the consent of the Required Lenders, the
Agent may, or upon the request of the Required Lenders, the Agent shall, by
notice of default to the Borrower, declare the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement (including,
without limitation, all amounts of L/C Obligations, whether or not the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder) and the Notes to be due and payable forthwith,
whereupon the same shall immediately become due and payable. With respect to all
Letters of Credit with respect to which presentment for honor shall not have
occurred at the time of an acceleration pursuant to the preceding paragraph, the
Borrower shall at such time deposit in the LIFO L/C Cash Collateral Account an
amount equal to the aggregate then undrawn and unexpired amount of such Letters
of Credit.
Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 9. THE AGENT
9.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints the Agent as the Agent of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes the Agent, in
such capacity, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
9.2 DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care.
9.3 EXCULPATORY PROVISIONS. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or any other Loan Document (except
for its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or any officer thereof
contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Agent under or in connection with, this Agreement or any other Loan
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document or for any failure
of the Borrower to perform its obligations hereunder or thereunder. The Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Borrower or any of its Subsidiaries.
9.4 RELIANCE BY AGENT. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower or any of its Subsidiaries), accountants of
the Borrower, independent accountants and other experts selected by the Agent.
The Agent may deem and treat the payee of any Note as the owner thereof for all
purposes unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected held harmless and indemnified in
acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Required Lenders, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Loans.
9.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default hereunder unless
the Agent has received notice from a Lender or the Borrower, referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent shall give notice thereof to the Lenders. The Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; PROVIDED that unless and until the
Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
9.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon the Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and its Subsidiaries and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower and its Subsidiaries. Except for notices,
reports and other documents expressly required to be furnished to the Lenders by
the Agent hereunder (including matters with respect to which the Borrower is
required to deliver to the Agent a sufficient number of copies of counterparts
for each Lender), the Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of the Borrower or any of its Subsidiaries which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
9.7 INDEMNIFICATION. The Lenders agree to indemnify the Agent in its
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
Commitment Percentages in effect on the date on which indemnification is sought
(or, if indemnification is sought after the date upon which the Commitments
shall have terminated and the Loans and Reimbursement Obligations shall have
been paid in full, ratably in accordance with their Commitment Percentages
immediately prior to such date), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of, the Commitments, this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; PROVIDED that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Agent's gross negligence or
willful misconduct. The agreements in this subsection shall survive the payment
of the Loans, the termination of the Commitments, and all other amounts payable
hereunder.
9.8 AGENT IN ITS INDIVIDUAL CAPACITY.
(a) The Agent and its Affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the Borrower as though
the Agent were not the Agent hereunder and under the other Loan Documents.
(b) With respect to its Loans made or renewed by it and any Note
issued to it and with respect to any Letter of Credit issued or participated in
by it, the Agent shall have the same rights and powers under this Agreement and
the other Loan Documents as any Lender and may exercise the same as though it
were not the Agent, and the terms "Lender" and "Lenders" shall include the Agent
in its individual capacity.
9.9 SUCCESSOR AGENT. The Agent may resign as Agent upon 30 days'
notice to the Lenders and the Borrower. If the Agent shall resign as Agent under
this Agreement and the other Loan Documents, then the Required Lenders shall
appoint from among the Lenders a successor Agent for the Lenders, whereupon such
successor Agent, shall succeed to the rights, powers and duties of the Agent
hereunder. Effective upon such appointment and approval, the term "Agent" shall
mean such successor Agent, and the former Agent's rights, powers and duties as
Agent shall be terminated, without any other or further act or deed on the part
of such former Agent or any of the parties to this Agreement or any holders of
the Loans. After any retiring Agent's resignation as Agent, the provisions of
this Section 9 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement and the other Loan
Documents.
SECTION 10. MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Agent may, from time to time, (a) enter into with the Borrower written
amendments, supplements or modifications hereto and to the other Loan Documents
for the purpose of adding any provisions to this Agreement or the other Loan
Documents or changing in any manner the rights of the Lenders or of the Borrower
hereunder or thereunder or (b) waive, on such terms and conditions as the
Required Lenders or the Agent, as the case may be, may specify in such
instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; PROVIDED,
HOWEVER, that no such waiver and no such amendment, supplement or modification
shall (i) reduce the amount or extend the scheduled date of maturity of any Loan
or of any installment thereof, or reduce the stated rate of any interest or fee
payable hereunder or extend the scheduled date of any payment thereof, or
increase the amount or extend the expiration date of any Lender's Commitment, or
modify the provisions of subsection 2.10 with regard to pro rata treatment of
the Lenders, or modify the terms of any warrants issued to any Lender hereunder
in each case without the consent of each Lender affected thereby, or (ii) amend,
modify or waive any provision of this subsection or reduce the percentage
specified in the definition of Required Lenders, or consent to the assignment or
transfer by the Borrower of any of its rights and obligations under this
Agreement and the other Loan Documents, in each case without the written consent
of all the Lenders, or (iii) increase the total amount of the Commitment set
forth on Schedule 1.1A without the consent of all Lenders, or (iv) amend, modify
or waive any provision of Section 9 without the written consent of the then
Agent. Any such waiver and any such amendment, supplement or modification shall
apply equally to each of the Lenders and shall be binding upon the Borrower, the
Lenders, the Agent and all future holders of the Loans. In the case of any
waiver, the Borrower, the Lenders and the Agent shall be restored to their
former positions and rights hereunder and under the other Loan Documents, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing, but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereon.
10.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by registered or certified mail,
five days (or ten days, in the case of mailings between locations inside and
outside of the United States) after being deposited in the mails, postage
prepaid (airmail, in the case of mailings between locations inside and outside
of the United States), or (c) in the case of delivery by facsimile transmission,
when sent and receipt has been confirmed, addressed as follows in the case of
the Borrower and the Agent, and as set forth in Schedule 10.2 in the case of the
other parties hereto, or to such other address as may be hereafter notified by
the respective parties hereto:
The Borrower: Recoton Corporation
2950 Lake Emma Road
Lake Mary, Florida 32746
Attention: Stuart Mont
Fax: 407-444-0559
With a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Fax: 212-806-6006
Attn: Managing Clerk
The Administrative
Agent: The Chase Manhattan Bank
241-02 Northern Boulevard, 3rd Floor
Douglaston, New York 11362
Attention: Recoton Account Officer
Fax: 718-279-8326
with a copy to:
Mr. Roger Odell
The Chase Manhattan Bank
380 Madison Avenue, 9th Floor
New York, New York 10017
PROVIDED that any notice, request or demand to or upon the Agent or the Lenders
pursuant to subsection 2.2, 2.4, 2.6 or 2.10 shall not be effective until
received.
10.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Agent or any Lender, any right, remedy,
power or privilege hereunder or under the other Loan Documents shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder.
10.5 PAYMENT OF EXPENSES AND TAXES. In addition to their obligations
under Section 5.1 hereof, the Borrower and each other Loan Party agree (a) to
pay or reimburse the Agent and each Lender for all their reasonable
out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of this Agreement and the other Loan Documents and any
other documents prepared in connection herewith or therewith, including the
reasonable fees and disbursements of professionals to the Agent or counsel to
any such Lender, (b) to pay or reimburse the Agent, The Prudential Insurance
Company of America and John Hancock Mutual Life Insurance Company for all their
reasonable out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement, the other Loan Documents and any other
documents prepared in connection herewith or therewith, and the consummation and
administration of the transactions contemplated hereby and thereby, but
including only the reasonable fees and disbursements of professionals to the
Agent or counsel to The Prudential Insurance Company of America and counsel to
John Hancock Mutual Life Insurance Company, (c) to pay or reimburse the Agent
and each Lender for all their reasonable costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the other Loan Documents and any such other documents, including,
without limitation, the reasonable fees and disbursements of counsel (including
the allocated fees and expenses of in-house counsel) to the Agent and each
Lender, (d) to pay, indemnify, and hold the Agent and each Lender harmless from,
any and all recording and filing fees and any and all liabilities with respect
to, or resulting from any delay in paying, stamp, excise and other taxes, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (e) to pay, indemnify, and hold the
Agent and each Lender, their respective officers, directors, employees,
affiliates, agents and controlling persons (each, an "indemnitee") harmless from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents or
the use of proceeds of the Loans, including, any of the foregoing relating to
the violation of, noncompliance with or liability under any Environmental Law
applicable to the operations or properties of the Borrower, any of its
Subsidiaries, (all the foregoing in this clause (e), collectively, the
"indemnified liabilities"), PROVIDED, that the Borrower shall have no obligation
hereunder to any indemnitee with respect to indemnified liabilities to the
extent such indemnified liabilities resulted from the gross negligence or
willful misconduct of such indemnitee. The agreements in this subsection shall
survive repayment of the Loans and all other amounts payable under the Loan
Documents.
10.6 FACILITY FEE ADJUSTMENT. If on or before June 30, 2000 (a) the
LIFO Repayment Date shall have occurred and (b) all Existing Senior Obligations
shall have been paid or cash collateralized, as applicable, in full and the
Existing L/C Commitment shall have been terminated, the Cancelable Facility Fee
Warrants shall be returned to the Borrower and cancelled.
10.7 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders, the Agent, all future holders of the Notes and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of each Lender.
(b) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to any financially sound bank,
insurance company or other similar financial institution ("NONVOTING
PARTICIPANTS") participating interests in any portion of (i) with respect to a
Lender not a Voting Participant, any Loan or Reimbursement Obligation owing to
such Lender, any Note held by such Lender, any Commitment of such Lender or any
other interest of such Lender hereunder and under such Lender's Notes or any
other Loan Documents and (ii) with respect to a Voting Participant, its
participating interest under the Participation Agreement, any Commitment of such
Voting Participant or any other interest of such Voting Participant hereunder or
under any other Loan Documents PROVIDED, that a participant of a Voting
Participant may not become a Voting Participant without the written consent of
Chase, PROVIDED, FURTHER that with respect to clauses (i) and (ii) (y) such
Lender shall simultaneously sell, and such Nonvoting Participant shall purchase,
a participating interest in a similar percentage of such Lender=s Existing
Senior Obligations and (z) the aggregate principal amount of the portion of the
Loans or Reimbursement Obligations or the aggregate amount of the Commitments,
as the case may be, in which any such participating interest is sold shall not
be less than US$1,000,000. In the event of any such sale by a Lender of a
participating interest to a Nonvoting Participant, such Lender's obligations
under this Agreement to the other parties to this Agreement (and its
Participation Agreement, if applicable) shall remain unchanged, such Lender
shall remain solely responsible for the performance thereof, such Lender shall
remain the holder of any such Loan for all purposes under this Agreement and the
other Loan Documents, and the Borrower, the Agent and, if applicable, Chase as a
party to the Participation Agreement shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
this Agreement and, if applicable, the Participation Agreement and the other
Loan Documents. No Lender shall be entitled to create in favor of any Nonvoting
Participant, in the agreement pursuant to which such Nonvoting Participant's
participating interest shall be created or otherwise, any right to vote on,
consent to or approve any matter relating to this Agreement or any other Loan
Document except for those specified in clauses (i) and (ii) of the proviso to
subsection 10.1. The Borrower agrees that if amounts outstanding under this
Agreement and the Notes are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Nonvoting Participant shall, to the maximum extent permitted by applicable law,
be deemed to have the right of setoff in respect of its participating interest
in amounts owing under this Agreement and any Note to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement or any Note, PROVIDED that, in purchasing such participating
interest, such Nonvoting Participant shall be deemed to have agreed to share
with the Lenders the proceeds thereof as provided in subsection 10.8(a) as fully
as if it were a Lender hereunder. The Borrower also agrees that each Nonvoting
Participant shall be entitled to the benefits of subsection 2.11 with respect to
its participation in the Commitments and the Loans outstanding from time to time
as if it was a Lender; PROVIDED that such Nonvoting Participant shall have
complied with the requirements of said subsection and PROVIDED, FURTHER, that no
Nonvoting Participant shall be entitled to receive any greater amount pursuant
to any such subsection than the transferor Lender would have been entitled to
receive in respect of the amount of the participation transferred by such
transferor Lender to such Nonvoting Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time and from time to time assign to any
Lender or any Affiliate thereof or, with the consent of the Agent (which shall
not be unreasonably withheld), to any financially sound bank, insurance company
or other similar financial institution that satisfies the requirements in
clauses (i) and (ii) below, as applicable, (an "ELIGIBLE ASSIGNEE") all or any
part of its rights and obligations under this Agreement and the other Loan
Documents pursuant to an Assignment and Acceptance, substantially in the form of
Exhibit H, executed by such Eligible Assignee, such assigning Lender (and, in
the case of an Eligible Assignee that is not then a Lender or an Affiliate
thereof, by the Agent) and delivered to the Agent for its acceptance, PROVIDED
that (i) such Lender shall assign, and the Eligible Assignee shall assume, a
similar percentage of such Lender=s Existing Senior Obligations and (ii) the sum
of the aggregate principal amount of the Loans, the aggregate amount of the L/C
Obligations and the aggregate amount of the Available Commitment being assigned
is equal to at least $5,000,000 (or if such Lender=s Commitment is less than
$5,000,000, the remaining amount of its Commitment), PROVIDED, FURTHER, that
unless Chase shall otherwise consent in writing, the Eligible Assignee of any
Voting Participant shall not be a Voting Participant but shall become a party to
this Agreement as a direct Lender. Upon such execution, delivery, acceptance and
recording, from and after the effective date determined pursuant to such
Assignment and Acceptance, (x) the Eligible Assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender, hereunder with a Commitment as set forth
therein, and (y) the assigning Lender thereunder shall, to the extent provided
in such Assignment and Acceptance, be released from its obligations under this
Agreement and its Participation Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such assigning Lender shall cease to be a
party hereto).
(d) The Agent, on behalf of the Borrower, shall maintain at the
address of the Agent referred to in subsection 10.2 a copy of each Assignment
and Acceptance delivered to it and a register (the "REGISTER") for the
recordation of the names and addresses of the Lenders and the Commitments of,
and principal amounts of the Loans owing to, each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, the Agent and the Lenders may (and, in the case of any Loan or
other obligation hereunder not evidenced by a Note, shall) treat each Person
whose name is recorded in the Register as the owner of a Loan or other
obligation hereunder as the owner thereof for all purposes of this Agreement and
the other Loan Documents, notwithstanding any notice to the contrary. Any
assignment of any Loan or other obligation hereunder not evidenced by a Note
shall be effective only upon appropriate entries with respect thereto being made
in the Register. The Register shall be available for inspection by the Borrower
or any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Eligible Assignee (and, in the case of an Eligible
Assignee that is not then a Lender or an Affiliate thereof, by the Agent)
together with payment by the Eligible Assignee to the Agent of a registration
and processing fee of $3,500, the Agent shall (i) promptly accept such
Assignment and Acceptance and (ii) on the effective date determined pursuant
thereto record the information contained therein in the Register and give notice
of such acceptance and recordation to the Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose, subject to
appropriate confidentiality agreements to any Nonvoting Participant or Eligible
Assignee (each, a "TRANSFEREE") and any prospective Transferee any and all
financial information in such Lender's possession concerning the Borrower and
its Affiliates which has been delivered to such Lender by or on behalf of the
Borrower pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of the Borrower in connection with such Lender's credit
evaluation of the Borrower and its Affiliates prior to becoming a party to this
Agreement.
(g) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this subsection concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law or Federal Reserve Bank requirement.
10.8 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "benefitted Lender")
at any time shall receive any payment of all or part of its Loans or the
Reimbursement Obligations owing to it, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in paragraph (f) of
MRA Appendix C, or otherwise), in a greater proportion than any such payment to
or collateral received by any other Lender, if any, in respect of such other
Lender's Loans or the Reimbursement Obligations owing to it, or interest
thereon, such benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Loan or the
Reimbursement Obligations owing to it, or shall provide such other Lenders with
the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders; and if
after taking into account such sharing the benefitted Lender continues to have
access to additional funds of or collateral granted by the Borrower for
application on account of its debt, then the benefitted Lender shall use such
funds or collateral to reduce indebtedness of the Borrower held by it and share
such payments and the benefits of such collateral with the other Lenders;
PROVIDED, HOWEVER, that if all or any portion of such excess payment or benefits
is thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. The Borrower agrees that each Lender so
purchasing a portion of another Lender's Loan may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such portion
as fully as if such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder or under the Notes (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower. Each Lender agrees
promptly to notify the Borrower and the Agent after any such set-off and
application made by such Lender, PROVIDED that the failure to give such notice
shall not affect the validity of such set-off and application.
10.9 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Agent.
10.10 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.11 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Agent and the Lenders with respect
to the subject matter hereof and thereof, and there are no promises,
undertakings, representations or warranties by the Agent or any Lender relative
to subject matter hereof and thereof not expressly set forth or referred to
herein or in the other Loan Documents or in the Participation Agreement.
10.12 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.13 SUBMISSION TO JURISDICTION; WAIVERS. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth in subsection 10.2 or at
such other address of which the Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
10.14 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the other Loan Documents;
(b) neither the Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or in connection
with this Agreement or any of the other Loan Documents, and the
relationship between Agent and Lenders, on one hand, and the Borrower, on
the other hand, in connection herewith or therewith is solely that of
debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Borrower and the Lenders.
10.15 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENT AND THE LENDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
10.16 CONFIDENTIALITY. Each Lender agrees to keep confidential all
information provided to it by the Borrower pursuant to this Agreement; PROVIDED
that nothing herein shall prevent any Lender from disclosing any such
information (i) to the Agent or any other Lender, (ii) to any Transferee or
prospective Transferee which agrees to comply with the provisions of this
subsection, (iii) to such of its employees, directors, agents, attorneys,
accountants and other professional advisors who need to know such information
and who are advised of the obligation to maintain the confidentiality of such
information, and who have agreed to maintain the confidentiality of such
information, (iv) upon the request or demand, or in accordance with the
requirements (including reporting requirements), of any Governmental Authority
having jurisdiction over such Lender, (v) in response to any subpoena, order of
any court or other Governmental Authority or as may otherwise be required
pursuant to any Requirement of Law, (vi) the National Association of Insurance
Commissioners or any similar organization, or any nationally recognized rating
agency that requires access to information about such Lender=s investment
portfolio, (vii) which has been publicly disclosed other than in breach of this
Agreement, or (viii) in connection with the exercise of any remedy hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
RECOTON CORPORATION
By: /S/ STUART MONT
-----------------------------------
Name: Stuart Mont
Title: Chief Operating Officer
Executive Vice President
THE CHASE MANHATTAN BANK, as Agent, Issuing
Bank and as a Lender
By: /S/ ROGER ODELL
----------------------------
Name: Roger Odell
Title: Managing Director
HARRIS TRUST AND SAVINGS BANK, as a Lender
By: /S/ RAYMOND C. WHITACRE
--------------------------------
Name: Raymond C. Whitacre
Title: Managing Director
HSBC BANK U.S.A. (formerly known as MARINE
MIDLAND BANK), as a Lender
By: /S/ FERNANDO A. TORRES
-------------------------------
Name: Fernando A. Torres
Title: Vice President
FIRST UNION NATIONAL BANK, as a Lender
By: /S/ JAMES R. CONNORS
------------------------------
Name: James R. Connors
Title: Senior Vice President
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, as a Lender
By: /S/ PAUL L. MEIRING
-----------------------------
Name: Paul L. Meiring
Title: Vice President
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY,
as a Lender and a Voting Participant
By: /S/ ANTHONY C. URICK
-------------------------------
Name: Anthony C. Urick
Title: Second Vice President
JOHN HANCOCK VARIABLE LIFE INSURANCE
COMPANY, as a Lender and a Voting
Participant
By: /S/ ANTHONY C. URICK
------------------------------
Name: Anthony C. Urick
Title: Authorized Officer
MELLON BANK, N.A., AS TRUSTEE FOR THE
LONG-TERM INVESTMENT TRUST, solely in its
capacity as Trustee and not in its
individual capacity (as directed by John
Hancock Mutual Life Insurance Company), as
a Lender and a Voting Participant
By: /S/ CAROLE BRUNO
------------------------------
Name: Carole Bruno
Title: Authorized Signatory
MELLON BANK, N.A. AS TRUSTEE FOR BELL
ATLANTIC MASTER PENSION TRUST, solely in
its capacity as Trustee and not in its
individual capacity (as directed by John
Hancock Mutual Life Insurance Company), as
a Lender and a Voting Participant
By: /S/ CAROLE BRUNO
------------------------------
Name: Carole Bruno
Title: Authorized Signatory
THE NORTHERN TRUST COMPANY, AS TRUSTEE OF
THE LUCENT TECHNOLOGIES INC. MASTER PENSION
TRUST, as a Lender and a Voting Participant
BY: John Hancock Mutual Life Insurance
Company, as Investment Manager
By: /S/ ANTHONY C. URICK
---------------------------
Name: Anthony C. Urick
Title: Second Vice President
INVESTORS PARTNER LIFE INSURANCE COMPANY,
as a Lender and a Voting Participant
By: /S/ ANTHONY C. URICK
---------------------------------
Name: Anthony C. Urick
Title: Second Vice President
<PAGE>
<TABLE>
<CAPTION>
Schedule 1.1A
COMMITMENT AMOUNTS
HOLDER LIFO LIFO
COMMITMENT COMMITMENT
AMOUNT PERCENTAGES
<S> <C> <C>
The Chase Manhattan Bank $ 12,688,088.00 25.37617600%
First Union National Bank 4,653,175.00 9.30635000%
Harris Trust and Savings Bank 3,221,600.00 6.44320000%
HSBC Bank, U.S.A. (formerly known as Marine Midland Bank) 4,647,969.00 9.29593800%
The Prudential Insurance Company of America 15,493,230.00 30.98646000%
John Hancock Mutual Life Insurance Company 7,938,731.06 15.87746212%
John Hancock Variable Life Insurance Company 371,837.52 0.74367504%
Investors Partner Life Insurance Company 120,847.19 0.24169438%
Mellon Bank, N.A., as Trustee for Long-Term
Investment Trust, solely in its capacity as Trustee 158,030.94 0.31606190%
and not in its individual capacity (as directed by John
Hancock Mutual Life Insurance Company)
Mellon Bank, N.A., as Trustee for Bell Atlantic
Master Pension Trust, solely in its capacity as 371,837.52 0.74367504%
Trustee and not in its individual capacity (as
directed by John Hancock Mutual Life Insurance
Company)
The Northern Trust Company, as Trustee of
the Lucent Technologies Inc. Master Pension Trust 334,653.77 0.66930754%
TOTAL $50,000,000.00 100%
============== ===
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 2.1
Period Maximum Outstanding Amount Consolidated Current
(000's) EBITDA Assets Ratio
Peak Amount End Amount
<S> <C> <C> <C> <C> <C>
September 1-30, 1999 $23,100,000 $23,100,000 ($2,500,000) 1.35:1
October 1-31, 1999 30,600,000 30,600,000 (2,500,000) 1.35:1
November 1-15, 1999 34,600,000 34,600,000 (2,500,000) 1.35:1
November 16-30, 1999 44,600,000 44,600,000 5,700,000 1.35:1
December 1-31, 1999 44,600,000 38,100,000 7,400,000 1.35:1
January 1-31, 2000 38,100,000 23,100,000 7,150,000 1.30:1
February 1-29, 2000 23,100,000 18,100,000 7,150,000 1.30:1
March 1-31, 2000 23,100,000 18,100,000 7,150,000 1.25:1
April 1-30, 2000 23,100,000 18,100,000 1,700,000 1.25:1
May 1-15, 2000 31,100,000 26,100,000 1,400,000 1.25:1
May 16-31, 2000 31,100,000 26,100,000 5,700,000 1.25:1
June 1-30, 2000 34,100,000 29,100,000 650,000 1.30:1
July 1-31, 2000 34,100,000 29,100,000 600,000 1.30:1
August 1-15, 2000 39,100,000 34,100,000 600,000 1.30:1
August 16-31, 2000 39,100,000 34,100,000 2,400,000 1.30:1
September 1-30, 2000 44,100,000 39,100,000 4,000,000 1.35:1
October 1-31, 2000 44,600,000 44,600,000 5,300,000 1.35:1
November 1-15, 2000 44,600,000 44,600,000 5,300,000 1.35:1
November 16-30, 2000 44,600,000 39,600,000 14,700,000 1.35:1
December 1-31, 2000 44,600,000 34,600,000 9,900,000 1.35:1
January 1-31, 2001 38,100,000 21,000,000 9,900,000 1.30:1
February 1-28, 2001 23,100,000 10,000,000 9,900,000 1.30:1
March 1-31, 2001 18,100,000 8,100,000 9,900,000 1.30:1
April 1-30, 2001 13,100,000 2,600,000 2,200,000 1.30:1
May 1-15, 2001 13,100,000 2,600,000 1,800,000 1.30:1
May 16-30, 2001 13,100,000 2,600,000 7,900,000 1.30:1
June 1-30, 2001 13,100,000 2,600,000 2,200,000 1.30:1
NOTE: Compliance with the Current Asset Ratio test during any period set forth
above shall be determined in accordance with the most recently delivered
Current Asset Ratio Certificate. Compliance with Consolidated EBITDA
test set forth above for any period shall be determined by reference to
the following financial statements:
</TABLE>
PERIOD FINANCIAL STATEMENTS REFERENCED FOR PERIOD
------ ------------------------------------------
January through March Financial statements for November of the
preceding year
April Financial statements for month of January
May 1-15 Financial statements for month of February
May 16-31 Financial statements for fiscal quarter
ending March 31
June Financial statements for month of April
July Financial statements for month of May
August 1-15 Financial statements for month of May
August 16-31 Financial statements for fiscal quarter
ending June 30
September Financial statements for month of July
October Financial statements for month of August
November 1-15 Financial statements for month of August
November 16-30 Financial statements for fiscal quarter
ending September 30
December Financial statements for month of October
<PAGE>
EXHIBIT D
[FORM OF NOTE]
$___________________New York, New York
_____________, 1999
FOR VALUE RECEIVED, the undersigned, Recoton Corporation, a New York
corporation (the "Borrower"), hereby unconditionally promises to pay to the
order of _____________ (the "LENDER") at the office of The Chase Manhattan Bank
located at 241-02 Northern Boulevard, 3rd Floor, Douglaston, New York, 11362, in
lawful money of the United States of America and in immediately available funds,
on the Termination Date (as defined in the Credit Agreement referred to below)
the principal amount of (a) DOLLARS ($ ), or, if less, (b) the aggregate unpaid
principal amount of all Loans made by the Lender to the Borrower pursuant to
subsection 2.1 of the Credit Agreement, as hereinafter defined. The Borrower
further agrees to pay interest in like money at such office on the unpaid
principal amount hereof from time to time outstanding at the rates and on the
dates specified in subsection 2.7 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date and amount of each Loan made
pursuant to the Credit Agreement and the date and amount of each payment or
prepayment of principal thereof. Each such endorsement shall constitute PRIMA
FACIE evidence of the accuracy of the information endorsed. The failure to make
any such endorsement shall not affect the obligations of the Borrower in respect
of such Loan.
This Note (a) is one of the Notes referred to in the Credit Agreement
dated as of __________, 1999 (as amended, supplemented or otherwise modified
from time to time, the "CREDIT AGREEMENT"), among the Borrower, the Lender, the
other banks and financial institutions from time to time parties thereto and The
Chase Manhattan Bank, as Agent, (b) is subject to the provisions of the Credit
Agreement and (c) is subject to optional and mandatory prepayment in whole or in
part as provided in the Credit Agreement. This Note is guaranteed and secured as
provided in the Loan Documents. Reference is hereby made to the Loan Documents
for a description of the nature and extent of the Guarantee, the terms and
conditions upon which the Guarantee was granted and the rights of the holder of
this Note in respect thereof and for a description of the Collateral securing
the obligations of the Borrower and the Guarantors under the Loan Documents.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
<PAGE>
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
RECOTON CORPORATION
By: ____________________________
Name: ____________________________
Title: ____________________________
<PAGE>
SCHEDULE A TO NOTE
LOANS AND REPAYMENTS OF LOANS
AMOUNT OF UNPAID PRINCIPAL
DATE AMOUNT OF PRINCIPAL OF BALANCE OF NOTATION
LOANS LOANS REPAID LOANS MADE BY
<PAGE>
EXHIBIT H
[FORM OF
ASSIGNMENT AND ACCEPTANCE]
Reference is made to the Credit Agreement, dated as of ______ ___,
1999 (as amended, supplemented or otherwise modified from time to time, the
"CREDIT AGREEMENT"), among Recoton Corporation (the "BORROWER"), the Lenders
named therein and The Chase Manhattan Bank, as Agent for the Lenders (in such
capacity, the "AGENT" or "AGENT"). Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement.
The Assignor identified on Schedule l hereto (the "ASSIGNOR") and the
Assignee identified on Schedule l hereto (the "ASSIGNEE") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), the interest described in Schedule 1 hereto
(the "ASSIGNED INTEREST") in and to the Assignor's rights and obligations under
the Credit Agreement with respect to those credit facilities contained in the
Credit Agreement as are set forth on Schedule 1 hereto (individually, an
"ASSIGNED FACILITY"; collectively, the "ASSIGNED Facilities"), in a principal
amount for each Assigned Facility as set forth on Schedule 1 hereto.
2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or with respect to the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto, other than that the Assignor has not
created any adverse claim upon the interest being assigned by it hereunder and
that such interest is free and clear of any such adverse claim; (b) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower, any of its Subsidiaries or any other
obligor or the performance or observance by the Borrower, any of its
Subsidiaries or any other obligor of any of their respective obligations under
the Credit Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto; and (c) attaches any Notes held
by it evidencing the Assigned Facilities and (i) requests that the Agent, upon
request by the Assignee, exchange the attached Notes for a new Note or Notes
payable to the Assignee and (ii) if the Assignor has retained any interest in
the Assigned Facility, requests that the Agent exchange the attached Notes for a
new Note or Notes payable to the Assignor, in each case in amounts which reflect
the assignment being made hereby (and after giving effect to any other
assignments which have become effective on the Effective Date).
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements delivered pursuant to subsection 4.4 thereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (c) agrees
that it will, independently and without reliance upon the Assignor, the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement, the other Loan Documents or any
other instrument or document furnished pursuant hereto or thereto; (d) appoints
and authorizes the Agent to take such action as Agent on its behalf and to
exercise such powers and discretion under the Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or
thereto as are delegated to the Agent by the terms thereof, together with such
powers as are incidental thereto; and (e) agrees that it will be bound by the
provisions of the Credit Agreement and will perform in accordance with its terms
all the obligations which by the terms of the Credit Agreement are required to
be performed by it as a Lender including, if it is organized under the laws of a
jurisdiction outside the United States, its obligation pursuant to subsection
2.11(b) of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall be the
Effective Date of Assignment described in Schedule 1 hereto (the "EFFECTIVE
DATE"). Following the execution of this Assignment and Acceptance, it will be
delivered to the Agent for acceptance by it and recording by the Agent pursuant
to the Credit Agreement, effective as of the Effective Date (which shall not,
unless otherwise agreed to by the Agent, be earlier than five Business Days
after the date of such acceptance and recording by the Agent).
5. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees and other amounts) to the
Assignor for amounts which have accrued to the Effective Date and to the
Assignee for amounts which have accrued subsequent to the Effective Date. The
Assignor and the Assignee shall make all appropriate adjustments in payments by
the Agent for periods prior to the Effective Date or with respect to the making
of this assignment directly between themselves.
6. From and after the Effective Date, (a) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
7. This Assignment and Acceptance shall be governed by and construed
in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
<PAGE>
Schedule 1
to Assignment and Acceptance
Name of Assignor: __________________________________________________________
Name of Assignee: __________________________________________________________
Effective Date of Assignment: ______________________________________________
Credit Principal Commitment Percentage
Facility Assigned Amount Assigned Assigned(1) _____
$____________.____________%
[Name of Assignee] [Name of Assignor]
By: By:
Title: Title:
Accepted:
THE CHASE MANHATTAN BANK, as Agent
By:
Title:
- -------------------
(1) Calculate the Commitment Percentage that is assigned to at least
15 decimal places and show as a percentage of the aggregate Commitments of
all Lenders.
EXHIBIT 3
COLLATERAL AGREEMENT
made by
RECOTON CORPORATION
and certain of its Subsidiaries
in favor of
THE CHASE MANHATTAN BANK,
as Collateral Agent
Dated as of September 8, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINED TERMS....................................................1
1.1 Definitions....................................................1
1.2 Other Definitional Provisions..................................5
SECTION 2. GRANT OF SECURITY INTEREST.....................................5
2.1 Description of Collateral......................................5
2.2 Grant of Security for First Priority Obligations...............6
2.3 Grant of Security for Second Priority Obligations..............6
2.4 Grant of Security for Third Priority Obligations...............6
2.5 Creation of Liens..............................................7
SECTION 3. REPRESENTATIONS AND WARRANTIES.................................7
3.1 Title; No Other Liens..........................................7
3.2 Priority of Liens..............................................7
3.3 Chief Executive Office.........................................7
3.4 Inventory and Equipment........................................8
3.5 Farm Products..................................................8
3.6 Pledged Securities.............................................8
3.7 Accounts.......................................................8
3.8 Intellectual Property..........................................8
SECTION 4. COVENANTS......................................................9
4.1 Delivery of Instruments and Chattel Paper......................9
4.2 Maintenance of Property; Insurance.............................9
4.3 Payment of Obligations........................................10
4.4 Maintenance of Perfected Security Interests; Further
Documentation...............................................10
4.5 Changes in Locations, Name, etc...............................10
4.6 Notices.......................................................11
4.7 Indemnification. .............................................11
4.8 Accounts......................................................11
4.9 Pledged Securities............................................12
4.10 Intellectual Property.........................................13
SECTION 5. REMEDIAL PROVISIONS...........................................15
5.1 Certain Matters Relating to Accounts..........................15
5.2 Communications with Obligors; Grantors Remain Liable..........15
5.3 Pledged Stock.................................................16
5.4 Proceeds to be Turned Over To Collateral Agent................17
5.5 Application of Proceeds.......................................17
5.6 Code and Other Remedies.......................................17
5.7 Registration Rights...........................................18
5.8 Waiver; Deficiency............................................19
SECTION 6. THE COLLATERAL AGENT..........................................19
6.1 Collateral Agent's Appointment as Attorney-in-Fact, etc.......19
6.2 Duty of Collateral Agent......................................21
6.3 Execution of Financing Statements.............................21
6.4 Authority of Collateral Agent.................................22
SECTION 7. MISCELLANEOUS.................................................22
7.1 Amendments in Writing.........................................22
7.2 Notices.......................................................22
7.3 No Waiver by Course of Conduct; Cumulative Remedies...........22
7.4 Successors and Assigns........................................22
7.5 Set-Off.......................................................22
7.6 Counterparts..................................................23
7.7 Severability..................................................23
7.8 Section Headings..............................................23
7.9 Integration...................................................23
7.10 GOVERNING LAW.................................................23
7.11 Submission To Jurisdiction; Waivers...........................24
7.12 Acknowledgements..............................................24
7.13 WAIVER OF JURY TRIAL..........................................24
7.14 Additional Grantors...........................................25
7.15 Releases......................................................25
<PAGE>
COLLATERAL AGREEMENT, dated as of September 8, 1999, made by each of
the signatories hereto (together with any other entity that may become a party
hereto as provided herein, the "GRANTORS"), in favor of THE CHASE MANHATTAN
BANK, as collateral agent (in such capacity, the "COLLATERAL AGENT") for the
Secured Creditors (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, the LIFO Lenders (such term, and the other capitalized terms
used in these Recitals, having the meanings hereinafter referred to) have agreed
to extend credit in an aggregate principal amount of up to $50,000,000 to
Recoton Corporation, a New York corporation (the "BORROWER"), pursuant to the
Credit Agreement dated as of September 8, 1999 (as amended and in effect from
time to time, the "LIFO CREDIT AGREEMENT"), among the Borrower, the financial
institutions party thereto as lenders (the "LIFO LENDERS"), and The Chase
Manhattan Bank, as administrative agent for the Lenders (in such capacity, the
"LIFO AGENT", and together with the LIFO Lenders and the LIFO Issuing Bank, the
"LIFO CREDITORS");
WHEREAS, in connection with the execution and delivery of the LIFO
Credit Agreement, each Grantor (other than the Borrower) has entered into the
Guarantee dated September 8, 1999 (as amended and in effect from time to time,
the "LIFO GUARANTEE"), in favor of the LIFO Credit Agreement (for the benefit of
the LIFO Lenders) guaranteeing the payment and performance obligations of the
Borrower under the LIFO Credit Agreement;
WHEREAS, the Existing Senior Creditors have extended credit to the
Borrower pursuant to the Existing Credit Agreement and the Senior Note
Agreements and, pursuant to the Existing Guarantees, the Guarantors have
guaranteed the obligations of the Borrower thereunder.
WHEREAS, it is a condition precedent to the effectiveness of the LIFO
Credit Agreement and Master Restructuring Agreement and the transactions
contemplated thereby that this Agreement be executed and delivered by the
parties hereto in order to grant the Collateral Agent a first priority Lien to
secure the LIFO Obligations and a second priority Lien to secure the Existing
Senior Obligations;
NOW, THEREFORE, in consideration of the premises and to induce the
LIFO Agent and the LIFO Lenders to enter into the LIFO Credit Agreement and to
induce the LIFO Lenders to make their respective extensions of credit to the
Borrower and to induce the Secured Creditors to enter into the Master
Restructuring Agreement, each Grantor hereby agrees with the Collateral Agent,
for the ratable benefit of the Secured Creditors, as follows:
SECTION 1. DEFINED TERMS
1.1 DEFINITIONS. (a) Unless otherwise defined herein, terms used
herein that are defined in Appendix A to the Master Restructuring Agreement
shall have the meanings given to them therein, and the following terms which are
defined in the Uniform Commercial Code in effect in the State of New York on the
date hereof are used herein as so defined: Accounts, Chattel Paper, Documents,
Equipment, Farm Products, Instruments, Inventory and Investment Property.
(b) The following terms shall have the following meanings:
"AGREEMENT": this Collateral Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"COLLATERAL": as defined in Section 2 of this Agreement.
"CONTRACTS": all contracts and agreements to which any Grantor is a
party and the terms of which do not prohibit (unless such term is waived by
the other party thereto) the granting by such Grantor of a security
interest therein, as the same may be amended, supplemented or otherwise
modified from time to time, including, without limitation, (a) all rights
of such Grantor to receive moneys due and to become due to it thereunder or
in connection therewith, (b) all rights of such Grantor to damages arising
out of or for breach or default in respect thereof and (c) all rights of
such Grantor to exercise all remedies thereunder.
"COPYRIGHTS": (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in SCHEDULE 6), all registrations and
recordings thereof, and all applications in connection therewith,
including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, and (ii) the right to
obtain all renewals thereof.
"COPYRIGHT LICENSES": any written agreement naming any Grantor as
licensor or licensee (including, without limitation, those listed in
SCHEDULE 6), granting any right under any Copyright, including, without
limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright, to the extent, in each case
where any Grantor is a licensee under any such written agreement, the grant
by such Grantor of a security interest pursuant to this Agreement is not
prohibited by such written agreement.
"DEPOSIT ACCOUNTS": any bank account set forth on Schedule 1.13(b) to
MRA Appendix B.
"GENERAL INTANGIBLES": all "general intangibles" as such term is
defined in Section 9-106 of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, including, without
limitation, with respect to any Grantor, all contracts, agreements,
instruments and indentures in any form, and portions thereof, to which such
Grantor is a party or under which such Grantor has any right, title or
interest or to which such Grantor or any property of such Grantor is
subject, as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (i) all rights of such
Grantor to receive moneys due and to become due to it thereunder or in
connection therewith, (ii) all rights of such Grantor to damages arising
thereunder and (iii) all rights of such Grantor to perform and to exercise
all remedies thereunder, in each case to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or indenture is
not prohibited by such contract, agreement, instrument or indenture without
the consent of any other party thereto, would not give any other party to
such contract, agreement, instrument or indenture the right to terminate
its obligations thereunder, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained from the
other parties thereto (it being understood that the foregoing shall not be
deemed to obligate such Grantor to obtain such consents); PROVIDED, that
the foregoing limitation shall not affect, limit, restrict or impair the
grant by such Grantor of a security interest pursuant to this Agreement in
any Account or any money or other amounts due or to become due under any
such contract, agreement, instrument or indenture.
"INTELLECTUAL PROPERTY": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, the Copyrights, the Copyright Licenses, the
Patents, the Patent Licenses, the Trademarks and the Trademark Licenses,
and all rights to sue at law or in equity for any infringement or other
impairment thereof, including the right to receive all proceeds and damages
therefrom.
"INTERCOMPANY NOTE": any Note from any Subsidiary to the Borrower, the
Borrower to any Subsidiary or any Subsidiary to any other Subsidiary.
"ISSUER": any Person identified on Schedule 2 attached hereto as an
issuer of Pledged Stock.
"MASTER RESTRUCTURING AGREEMENT": as defined in the recitals hereto.
"NY UCC": the Uniform Commercial Code as from time to time in effect
in the State of New York.
"OBLIGATIONS": the First Priority Obligations, and the Second Priority
Obligations and the Third Priority Obligations.
"PATENTS": (i) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, including, without
limitation, any of the foregoing referred to in SCHEDULE 6, (ii) all
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any of the foregoing referred to in SCHEDULE
6, and (iii) all rights to obtain any reissues or extensions of the
foregoing.
"PATENT LICENSE": all agreements, whether written or oral, providing
for the grant by or to any Grantor of any right to manufacture, use or sell
any invention covered in whole or in part by a Patent, including, without
limitation, any of the foregoing referred to in SCHEDULE 6, to the extent,
in each case where any Grantor is a grantee under any such agreement, the
grant by such Grantor of a security interest pursuant to this Agreement is
not prohibited by such agreement.
"PLEDGED NOTES": all promissory notes listed on SCHEDULE 2, all
Intercompany Notes at any time issued to any Grantor and all other
promissory notes issued to or held by any Grantor (other than promissory
notes issued in connection with extensions of trade credit by any Grantor
in the ordinary course of business or promissory notes made by employees in
favor of any Grantor in an aggregate amount not to exceed $2,000,000) or
any Investment Property.
"PLEDGED SECURITIES": the collective reference to the Pledged Notes
and the Pledged Stock.
"PLEDGED STOCK": the shares of Capital Stock listed on SCHEDULE 2,
together with any other shares, stock certificates, options or rights of
any nature whatsoever in respect of the Capital Stock of any Person that
may be issued or granted to, or held by, any Grantor while this Agreement
is in effect or any Investment Property, PROVIDED that, in any case
"Pledged Stock" shall not include more than 65% of each class of Capital
Stock of any First Tier Excluded Foreign Subsidiary and shall not include
any of the Capital Stock of RAC-FSC.
"PROCEEDS": all "proceeds" as such term is defined in Section 9-306(1)
of the Uniform Commercial Code in effect in the State of New York on the
date hereof and, in any event, shall include, without limitation, all
dividends or other income from the Pledged Securities, collections thereon
or distributions or payments with respect thereto.
"SECURED OBLIGATIONS": First Priority Obligations, the Second Priority
Obligations and the Third Priority Obligations.
"SECURITIES ACT": the Securities Act of 1933, as amended.
"TRADEMARKS": (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and all
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, or
otherwise, and all common-law rights related thereto, including any of the
foregoing referred to in SCHEDULE 6, and (ii) the right to obtain all
renewals thereof.
"TRADEMARK LICENSE": any agreement, whether written or oral, providing
for the grant by or to any Grantor of any right to use any Trademark,
including any of the foregoing referred to in SCHEDULE 6, to the extent, in
each case where any Grantor is a grantee under any such agreement, the
grant by such Grantor of a security interest pursuant to this Agreement is
not prohibited by such agreement.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof," "herein",
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.
(b) The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation".
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(d) Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to a Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
SECTION 2. GRANT OF SECURITY INTEREST
2.1 DESCRIPTION OF COLLATERAL. All of the following property now owned
or at any time hereafter acquired by any Grantor or in which such Grantor now
has or at any time in the future may acquire any right, title or interest is
collectively referred as the "COLLATERAL":
(a) all Accounts;
(b) all Chattel Paper;
(c) all Collateral Accounts (and all cash, money and instruments at
any time on deposit in the Collateral Accounts, all investments made and
interest earned in respect of such cash and monies and all proceeds of any
of the foregoing);
(d) all Copyrights;
(e) all Copyright Licenses;
(f) all Deposit Accounts;
(g) all Documents;
(h) all Equipment;
(i) all General Intangibles;
(j) all Instruments (including, without limitation, Instruments
representing other Collateral or evidencing Proceeds thereof);
(k) all Intellectual Property (to the extent assignable);
(l) all Inventory;
(m) all Investment Property;
(n) all Patents;
(o) all Patent Licenses;
(p) all Pledged Securities;
(q) all Trademarks;
(r) all Trademark Licenses;
(s) all books and records pertaining to the Collateral; and
(t) to the extent not otherwise included, all Proceeds and products of
any and all of the foregoing and all collateral security and guarantees
given by any Person with respect to any of the foregoing.
2.2 GRANT OF SECURITY FOR FIRST PRIORITY OBLIGATIONS. As collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the First Priority
Obligations, each Grantor hereby grants to the Collateral Agent, for the benefit
of the holders of the First Priority Obligations, a first priority security
interest in the Collateral.
2.3 GRANT OF SECURITY FOR SECOND PRIORITY OBLIGATIONS. As collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the Second Priority
Obligations, each Grantor hereby grants to the Collateral Agent, for the benefit
of the holders of the Second Priority Obligations, a second priority security
interest in the Collateral.
2.4 GRANT OF SECURITY FOR THIRD PRIORITY OBLIGATIONS. As collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the Third Priority
Obligations, each Grantor hereby grants to the Collateral Agent, for the benefit
of the holders of the Third Priority Obligations, a third priority security
interest in the Collateral.
2.5 CREATION OF LIENS. As set forth in the separate granting clauses
contained in subsections 2.1 through 2.3 above, it is the intent of the Grantor,
the LIFO Lenders, the LIFO Agent and the Collateral Agent that this Agreement
shall create three separate and distinct Liens in favor of the Collateral Agent,
for the benefit of the holders of the First Priority Obligations, the Second
Priority Obligations and the Third Priority Obligations, as the case may be.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce (i) the LIFO Agent and the LIFO Lenders to enter into the
LIFO Credit Agreement, (ii) the LIFO Lenders to make their respective extensions
of credit to the Borrower thereunder, and (iii) the Existing Senior Creditors to
restructure and modify their Existing Senior Obligations provided in the Master
Restructuring Agreement, each Grantor hereby represents and warrants to the
Secured Creditors that:
3.1 TITLE; NO OTHER LIENS. Except for the separate and distinct
security interests granted to the Collateral Agent pursuant to this Agreement
and the other Permitted Liens, the Grantors own each item of the Collateral free
and clear of any and all Liens or claims of others. No security agreement,
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except such as have
been filed in favor of the Collateral Agent for the benefit of the Secured
Creditors pursuant to this Agreement or as are permitted pursuant to the LIFO
Credit Agreement and MRA Appendix B.
3.2 PRIORITY OF LIENS. Other than with respect to any Collateral in
which a security interest cannot be perfected by any action within the United
States, the security interests granted pursuant to this Agreement (a) upon
delivery to the Collateral Agent of stock certificates or other documents
representing the Pledged Stock (together with undated stock powers duly executed
in blank relating thereto), delivery to the Collateral Agent of the Pledged
Notes, duly endorsed in blank by the appropriate Grantor and completion of the
filings and other actions specified on SCHEDULE 3 (which, in the case of all
filings referred to on said Schedule, have been delivered to the Collateral
Agent in completed and duly executed form) will constitute valid perfected
security interests in all of the Collateral located in the United States in
favor of the Collateral Agent, for the ratable benefit of the Secured Creditors,
as collateral security for such Grantor's Obligations, enforceable in accordance
with the terms hereof against all creditors of such Grantor and any Persons
purporting to purchase any Collateral from such Grantor (except, in each case,
under the circumstances provided to the contrary in the Code or in the Uniform
Commercial Code in effect in any applicable jurisdiction) and (b) are prior to
all other Liens on the Collateral in existence on the date hereof except for (i)
unrecorded Permitted Liens which have priority over the Liens on the Collateral
by operation of law and (ii) Liens described on SCHEDULE 7.
3.3 CHIEF EXECUTIVE OFFICE. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief executive
office or principal place of business are specified on SCHEDULE 4.
3.4 INVENTORY AND EQUIPMENT. On the date hereof, the Inventory and the
Equipment (other than mobile goods) are kept at the locations listed on SCHEDULE
5.
3.5 FARM PRODUCTS. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
3.6 PLEDGED SECURITIES. (a) The shares of Pledged Stock pledged or to
be pledged by such Grantor hereunder constitute all the issued and outstanding
shares of all classes of the Capital Stock of each Issuer owned by such Grantor.
(b) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has good
and marketable title to, the Pledged Securities pledged by it hereunder, free of
any and all Liens or options in favor of, or claims of, any other Person, except
the security interest created by this Agreement.
3.7 ACCOUNTS. (a) No amount payable to such Grantor under or in
connection with any Account is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Collateral Agent.
(b) The place where each Grantor keeps its records concerning its
Accounts is at its chief executive office specified in Section 3.3 or at the
Borrower's corporate headquarters.
(c) The amounts represented by such Grantor to the Lenders from time
to time as owing to such Grantor in respect of the Accounts will at such times
be accurate in all material respects.
3.8 INTELLECTUAL PROPERTY. (a) SCHEDULE 6 lists all Intellectual
Property that are registered Copyrights, Copyright Licenses, Patents, patent
applications, Patent Licenses, registered Trademarks, Trademark Licenses and
other material Trademarks currently in use owned by such Grantor in its own name
on the date hereof.
(b) On the date hereof, all material Intellectual Property is valid,
subsisting, unexpired and enforceable, has not been abandoned and, to the best
of such Grantor's knowledge, does not infringe in any material respect the
intellectual property rights of any other Person, subject to the disclosure made
in SCHEDULE 6.
(c) Except as set forth in SCHEDULE 6, on the date hereof, none of the
Intellectual Property is the subject of any licensing or franchise agreement
pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor's rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.
(e) Except as disclosed in SCHEDULE 6, no action or proceeding is
pending, or, to the knowledge of such Grantor, threatened, on the date hereof
(i) seeking to limit, cancel or question the validity of any Intellectual
Property or such Grantor's ownership interest therein, or (ii) which, if
adversely determined, would have a material adverse effect on the value of any
Intellectual Property.
SECTION 4. COVENANTS
Each Grantor covenants and agrees with the Collateral Agent and the
Secured Creditors that, from and after the date of this Agreement until the
Obligations shall have been paid in full and this Agreement shall have
terminated and the security interests created hereby shall have been released:
4.1 DELIVERY OF INSTRUMENTS AND CHATTEL PAPER. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper not constituting Investment Property, such
Instrument or Chattel Paper shall promptly be delivered to the Collateral Agent,
duly indorsed in a manner satisfactory to the Collateral Agent, to be held as
Collateral pursuant to this Agreement.
4.2 MAINTENANCE OF PROPERTY; INSURANCE. (a) Such Grantor will maintain
with financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks (but including
in any event general liability, product liability and business interruption) as
are usually insured against in the same general area by companies engaged in the
same or a similar business, which policies, within 30 days after the
Restructuring Effective Date, shall name the Collateral Agent as a loss payee
for the proceeds of any such policy covering damage to tangible Property of the
Borrower and its Subsidiaries; and furnish to the Collateral Agent or any
Secured Creditor at the Borrower's expense, upon such Person's written request,
full information as to the insurance carried.
(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Collateral Agent of
written notice thereof, (ii) name the Collateral Agent as an additional insured
party or loss payee, (iii) if reasonably requested by the Collateral Agent,
include a breach of warranty clause, (iv) be from an insurer and in amounts
reasonably satisfactory to the Collateral Agent and (v) be reasonably
satisfactory to the Collateral Agent in all other material respects.
(c) Such Grantor shall annually deliver to the Collateral Agent and
the Secured Creditors a renewal notice of a reputable insurance broker with
respect to such insurance at least 15 days prior to the expiration of such
insurance and reports of a reputable insurance broker with respect to such
insurance as the Collateral Agent may from time to time reasonably request.
4.3 PAYMENT OF OBLIGATIONS. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such payment thereof could not reasonably be expected to result in a Material
Adverse Effect.
4.4 MAINTENANCE OF PERFECTED SECURITY INTERESTS; FURTHER
DOCUMENTATION. (a) Such Grantor shall maintain the security interests created by
this Agreement as perfected security interests (to the extent the security
interests in such Collateral can be perfected by filing of one or more financing
statements or by possession of such Collateral by the Collateral Agent) having
at least the priority described in Section 3.2 and shall defend such security
interests against the claims and demands of all Persons whomsoever, except for
Permitted Liens.
(b) Such Grantor will furnish to the Collateral Agent and the Secured
Creditors from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in reasonable
detail.
(c) At any time and from time to time, upon the written request of the
Collateral Agent, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Collateral Agent
may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code (or other similar laws) in effect
in any jurisdiction with respect to the security interests created hereby.
4.5 CHANGES IN LOCATIONS, NAME, ETC. Such Grantor will not, except in
the case of clause (i) below upon 10 days' prior written notice (or in the case
of Inventory to be located at a location owned or leased by a non-Grantor, 15
days' subsequent written notice) and in the case of clause (ii) upon 30 days'
prior written notice to the Collateral Agent and delivery to the Collateral
Agent of (a) all additional executed financing statements and other documents
requested by the Collateral Agent to maintain the validity, perfection and
priority of the security interests provided for herein and (b) if applicable, a
written supplement to SCHEDULE 5 showing any additional location at which
Inventory or Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a location
other than those listed on SCHEDULE 5;
(ii) change the location of its chief executive office or principal
place of business, as the case may be or jurisdiction of organization, from
that referred to in Section 3.3; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Collateral Agent in
connection with this Agreement would become misleading.
4.6 NOTICES. Such Grantor will advise the Collateral Agent and the
Secured Creditors promptly after obtaining knowledge, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or
Permitted Liens) on, or claim against, any of the Collateral of which it becomes
aware; and
(b) the occurrence of any other event of which it becomes aware which
could reasonably be expected to have a material adverse effect on the aggregate
value of the Collateral or on the security interests created hereby taken as a
whole.
4.7 INDEMNIFICATION. Each Grantor agrees to pay, and to save the
Collateral Agent and the Secured Creditors harmless from, any and all
liabilities, reasonable costs and expenses.(including, without limitation,
reasonable legal fees and expenses) (i) with respect to, or resulting from any
delay in paying, any and all excise, sales or other taxes which may be payable
or determined to be payable with respect to any of the Collateral, (ii) with
respect to, or resulting from, any delay in complying with any Requirement of
Law applicable to any of the Collateral and (iii) in connection with any of the
transactions contemplated by this Agreement.
4.8 ACCOUNTS. (a) Other than in the ordinary course of business
(including sales incentive programs) and consistent with the Grantor's past
practices, but subject to reasonable business judgment standards, such Grantor
will not (i) grant any extension of the time of payment of any Account, (ii)
compromise or settle any Account for less than the full amount thereof, (iii)
release, wholly or partially, any Person liable for the payment of any Account,
(iv) allow any credit or discount whatsoever on any Account or (v) amend,
supplement or modify any Account in any manner that could adversely affect the
value thereof except to the extent such actions are reflected in applicable
reserves.
(b) Such Grantor will deliver to the Collateral Agent a copy of each
written demand, notice or document received by it that questions or calls into
doubt the validity or enforceability of more than 5% of the aggregate amount
(for the Grantors as a whole) of the then outstanding Accounts.
(c) The amount represented by each Grantor to the Collateral Agent as
owing by each account debtor or by all account debtors in respect of the
Accounts will at such time be the correct amount actually owing by such account
debtor or debtors thereunder (except for de minimis or immaterial inaccuracies).
(d) Without the prior written consent of the Collateral Agent, the
Grantors will not fail to exercise promptly and diligently each and every
material right which it may have under each agreement giving rise to an Account
(other than any right of termination), unless any such failure could not
reasonably be expected to materially adversely affect the value of such Account
as Collateral or in the exercise of such Grantor's reasonable business judgment,
the exercise of such rights would not be commercially reasonable in light of the
amount of the relevant Account (taking into consideration the business
relationship with the relevant account debtor).
(e) The Grantors will not remove its books and records from the
location specified in paragraph 3.7(b) (unless the Collateral Agent is given 30
days prior written notice).
(f) In any suit, proceeding or action brought by the Collateral Agent
or any Secured Creditor under any Account for any sum owing thereunder, or to
enforce any provisions of any Contract, the relevant Grantor will save,
indemnify and keep the Collateral Agent and such Secured Creditor harmless from
and against all expense, loss or damage suffered by reason of any defense,
setoff, counterclaim, recoupment or reduction or liability whatsoever of the
account debtor thereunder, arising out of a breach by such Grantor of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of such account debtor or its
successors from such Grantor.
4.9 PLEDGED SECURITIES. (a) If such Grantor shall become entitled to
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a distribution in connection
with any reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights in respect of
the Capital Stock of any Issuer or any Investment Property, whether in addition
to, in substitution of, as a conversion of, or in exchange for, any shares of
the Pledged Stock, or otherwise in respect thereof, such Grantor shall accept
the same as the agent of the Collateral Agent and the Secured Creditors, hold
the same in trust for the Collateral Agent and the Secured Creditors and deliver
the same forthwith to the Collateral Agent in the exact form received, duly
indorsed by such Grantor to the Collateral Agent, if required, together with an
undated stock power covering such certificate duly executed in blank by such
Grantor and with, if the Collateral Agent so requests, signature guaranteed, to
be held by the Collateral Agent, subject to the terms hereof, as additional
collateral security for the Obligations, PROVIDED, HOWEVER, that in no event
shall the amount of Pledged Stock held by the collateral Agent hereunder exceed
65% of each class of Capital Stock of any First Tier Excluded Foreign
Subsidiary. After the occurrence and during the continuance of a Default or
Event of Default, any sums paid upon or in respect of the Pledged Securities
upon the liquidation or dissolution of any Issuer shall be paid over to the
Collateral Agent to be held by it hereunder as additional collateral security
for the Obligations, and in case any distribution of capital shall be made on or
in respect of the Pledged Securities or any property shall be distributed upon
or with respect to the Pledged Securities pursuant to the recapitalization or
reclassification of the capital of any Issuer or pursuant to the reorganization
thereof, the property so distributed shall, unless otherwise subject to a
perfected security interest in favor of the Collateral Agent, be delivered to
the Collateral Agent to be held by it hereunder as additional collateral
security for the Obligations. If any sums of money or property so paid or
distributed in respect of the Pledged Securities shall be received by such
Grantor, such Grantor shall, until such money or property is paid or delivered
to the Collateral Agent, hold such money or property in trust for the Secured
Creditors, segregated from other funds of such Grantor, as additional collateral
security for the Obligations.
(b) Without the prior written consent of the Collateral Agent, such
Grantor will not (i) vote to enable, or take any other action to permit, any
Issuer to issue any stock or other equity securities of any nature or to issue
any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer,
(ii) except as permitted by the Credit Agreement, sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect to, the
Pledged Securities or Proceeds thereof (except pursuant to a transaction
expressly permitted by the LIFO Credit Agreement), (iii) create, incur or permit
to exist any Lien or option in favor of, or any claim of any Person with respect
to, any of the Pledged Securities or Proceeds thereof, or any interest therein,
except for the security interests created by this Agreement or otherwise
permitted by the LIFO Credit Agreement or (iv) enter into any agreement or
undertaking restricting the right or ability of such Grantor or the Collateral
Agent to sell, assign or transfer any of the Pledged Securities or Proceeds
thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer agrees
that (i) it will be bound by the terms of this Agreement relating to the Pledged
Securities issued by it and will comply with such terms insofar as such terms
are applicable to it, (ii) it will notify the Collateral Agent promptly in
writing of the occurrence of any of the events described in Section 4.9(a) with
respect to the Pledged Securities issued by it and (iii) the terms of Sections
5.3(c) and 5.7 of this Agreement shall apply to it, MUTATIS MUTANDIS, with
respect to all actions that may be required of it pursuant to Section 5.3(c) or
5.7 of this Agreement with respect to the Pledged Securities issued by it.
4.10 INTELLECTUAL PROPERTY. (a) Such Grantor (either itself or through
licensees) will (i) continue to use each material Trademark on each and every
trademark class of goods, if any, or services as reflected in its current
catalogs, brochures and price lists in order to maintain such Trademark in full
force free from any claim of abandonment for non-use, (ii) maintain as in the
past the quality of products, if any, and services offered under such Trademark
except as such Grantor shall determine in the exercise of its reasonable
business judgment in connection with the repositioning of its products, (iii)
use such Trademark with the appropriate notice of registration and all other
notices and legends required by applicable Requirements of Law, (iv) not adopt
or use any mark which is confusingly similar or a colorable imitation of such
Trademark unless the Collateral Agent, for the ratable benefit of the Secured
Creditors, shall obtain a perfected security interest in such mark pursuant to
this Agreement, and (v) not do (and use commercially reasonable efforts to
prevent any licensee or sublicensee thereof from doing) any act or knowingly
omit to do any act whereby such Trademark may become invalidated or impaired in
any way if such invalidity or impairment would have a Material Adverse Effect.
(b) Such Grantor (either itself or through licensees) will not do any
act, or omit to do any act, whereby any material Patent may become forfeited,
abandoned or dedicated to the public if such act would have a Material Adverse
Effect.
(c) Such Grantor (either itself or through licensees) (i) will employ
each material Copyright and (ii) will not do (and will use commercially
reasonable efforts to prevent any licensee or sublicensee thereof from doing)
any act or knowingly omit to do any act whereby any material portion of the
Copyrights may become invalidated or otherwise impaired if such invalidity or
impairment would have a Material Adverse Effect. Such Grantor will not (either
itself or through licensees) do any act whereby any material portion of the
Copyrights may fall into the public domain.
(d) Such Grantor (either itself or through licensees) will not do any
act that knowingly uses any Intellectual Property to infringe the intellectual
property rights of any other Person if such infringement could reasonably be
expected to have a Material Adverse Effect.
(e) Such Grantor will promptly notify the Collateral Agent if it knows
of any material adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any court or tribunal in any country) regarding such
Grantor's ownership of, or the validity of, any material Intellectual Property
or such Grantor's right to register the same or to own and maintain the same.
(f) Whenever such Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office, such Grantor shall report such filing to the
Collateral Agent as required pursuant to the LIFO Credit Agreement. Upon request
of the Collateral Agent, such Grantor shall execute and deliver, and have
recorded, any and all agreements, instruments, documents, and papers as the
Collateral Agent may reasonably request to evidence the Collateral Agent's and
the Secured Creditors' security interest in any Copyright, Patent or Trademark
and the goodwill and general intangibles of such Grantor relating thereto or
represented thereby.
(g) Such Grantor will take all commercially reasonable steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of material Intellectual Property, including, without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability, unless the failure to take such action is not reasonably
likely to result in a Material Adverse Effect.
(h) In the event that any material Intellectual Property is infringed,
misappropriated or diluted by a third party, such Grantor shall (i) take such
actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Collateral Agent after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution.
(i) Nothing contained in this Section 4.10 shall operate or be
construed to require any Grantor to initiate or file any new applications to
register any Trademark or Copyright.
SECTION 5. REMEDIAL PROVISIONS
5.1 CERTAIN MATTERS RELATING TO ACCOUNTS. (a) The Collateral Agent
shall have the right to make test verifications of the Accounts in any manner
and through any medium that it reasonably considers advisable, and each Grantor
shall furnish all such assistance and information as the Collateral Agent may
reasonably require in connection with such test verifications. At any time and
from time to time, upon the Collateral Agent's reasonable request and at the
expense of the relevant Grantor, such Grantor shall cause its independent public
accountants or others satisfactory to the Collateral Agent to furnish to the
Collateral Agent reports showing reconciliations, aging and test verifications
of, and trial balances for, the Accounts.
(b) At the Collateral Agent's request at any time after the occurrence
and during the continuance of a Default or Event of Default, each Grantor shall
deliver to the Collateral Agent all original and other documents evidencing, and
relating to, the agreements and transactions which gave rise to the Accounts,
including, without limitation, all original orders, invoices and shipping
receipts, though such Grantor may retain copies thereof for its records.
5.2 COMMUNICATIONS WITH OBLIGORS; GRANTORS REMAIN LIABLE. (a) The
Collateral Agent in its own name or in the name of others may at any time after
the occurrence and during the continuance of an Event of Default communicate
with obligors under the Accounts to verify with them to the Collateral Agent's
satisfaction the existence, amount and terms of any Accounts.
(b) Upon the request of the Collateral Agent at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
notify obligors on the Accounts that the Accounts have been assigned to the
Collateral Agent for the ratable benefit of the Secured Creditors and that
payments in respect thereof shall be made directly to the Collateral Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of the Accounts to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise thereto. Neither the
Collateral Agent nor any Secured Creditor shall have any obligation or liability
under any Account (or any agreement giving rise thereto) by reason of or arising
out of this Agreement or the receipt by the Collateral Agent or any Secured
Creditor of any payment relating thereto, nor shall the Collateral Agent or any
Secured Creditor be obligated in any manner to perform any of the obligations of
any Grantor under or pursuant to any Account (or any agreement giving rise
thereto), to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party thereunder, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
5.3 PLEDGED STOCK. (a) Unless an Event of Default shall have occurred
and be continuing and the Collateral Agent shall have given notice to the
relevant Grantor of the Collateral Agent's intent to exercise its corresponding
rights pursuant to Section 5.3(b), each Grantor shall be permitted to receive
all cash dividends paid in respect of the Pledged Stock and all payments made in
respect of the Pledged Notes, in each case paid in the normal course of business
of the relevant Issuer and to exercise all voting and corporate rights with
respect to the Pledged Securities; PROVIDED, HOWEVER, that no vote shall be cast
or corporate right exercised or other action taken which, in the Collateral
Agent's reasonable judgment, would impair the Collateral or which would be
inconsistent with or result in any violation of any provision of the LIFO Credit
Agreement, this Agreement or the Master Restructuring Agreement.
(b) If an Event of Default shall occur and be continuing and the
Collateral Agent shall give notice of its intent to exercise such rights to the
relevant Grantor or Grantors, (i) the Collateral Agent shall have the right to
receive any and all cash dividends, payments or other Proceeds paid in respect
of the Pledged Securities and make application thereof to the Obligations in
such order as the Collateral Agent may determine in accordance with the Master
Restructuring Agreement, and (ii) any or all of the Pledged Securities shall be
registered in the name of the Collateral Agent or its nominee, and the
Collateral Agent or its nominee may thereafter exercise (x) all voting,
corporate and other rights pertaining to such Pledged Securities at any meeting
of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and
all rights of conversion, exchange and subscription and any other rights,
privileges or options pertaining to such Pledged Securities as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Securities upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of any Issuer, or upon the exercise by any Grantor or
the Collateral Agent of any right, privilege or option pertaining to such
Pledged Securities, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Securities with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Collateral Agent may determine), all without liability except
to account for property actually received by it, but the Collateral Agent shall
have no duty to any Grantor to exercise any such right, privilege or option and
shall not be responsible for any failure to do so or delay in so doing.
(c) Each Issuer acknowledges and consents to the pledge herein of the
Pledged Stock issued by it. Each Grantor hereby authorizes and instructs each
Issuer of any Pledged Securities pledged by such Grantor hereunder to (i) comply
with any instruction received by it from the Collateral Agent in writing that
(x) states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Securities directly to the Collateral Agent.
5.4 PROCEEDS TO BE TURNED OVER TO COLLATERAL AGENT. In addition to the
rights of the Collateral Agent and the Secured Creditors specified in Section
5.1 with respect to payments of Accounts, if an Event of Default shall occur and
be continuing, all Proceeds received by any Grantor consisting of cash, checks
and other near-cash items shall be held by such Grantor in trust for the
Collateral Agent and the Secured Creditors, segregated from other funds of such
Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to
the Collateral Agent in the exact form received by such Grantor (duly indorsed
by such Grantor to the Collateral Agent, if required). All Proceeds received by
the Collateral Agent hereunder shall be held by the Collateral Agent in a
Collateral Account maintained under its sole dominion and control. All Proceeds
while held by the Collateral Agent in the Collateral Account (or by such Grantor
in trust for the Collateral Agent and the Secured Creditors) shall continue to
be held as collateral security for all the Obligations and shall not constitute
payment thereof until applied as provided in Section 5.5.
5.5 APPLICATION OF PROCEEDS. If an Event of Default shall have
occurred and be continuing, at any time at the Collateral Agent's election, the
Collateral Agent may apply all or any part of Proceeds held in the Collateral
Account in payment of the Obligations in accordance with Section 4.3 of the
Master Restructuring Agreement.
5.6 CODE AND OTHER REMEDIES. If an Event of Default shall occur and be
continuing, the Collateral Agent, on behalf of the Secured Creditors, may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code or any other applicable law. Without limiting the generality of the
foregoing, the Collateral Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below or any notice otherwise expressly required in
the LIFO Loan Documents) to or upon any Grantor or any other Person (all and
each of which demands, defenses, advertisements and notices are hereby waived),
may in such circumstances forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, at any exchange,
broker's board or office of the Collateral Agent or any Secured Creditor or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Collateral Agent, or any Secured Creditor
shall have the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to purchase the whole or
any part of the Collateral so sold, free of any right or equity of redemption in
any Grantor, which right or equity is hereby waived and released. Each Grantor
further agrees, at the Collateral Agent's request, to assemble the Collateral
and make it available to the Collateral Agent at places which the Collateral
Agent shall reasonably select, whether at such Grantor's premises or elsewhere.
The Collateral Agent shall apply the net proceeds of any action taken by it
pursuant to this Section 5.6, after deducting all reasonable costs and expenses
of every kind incurred in connection therewith or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Collateral Agent and the Secured Creditors hereunder,
including, without limitation, reasonable attorneys' fees and disbursements, to
the payment in whole or in part of the Obligations, in such order as the
Collateral Agent may elect in accordance with the Master Restructuring
Agreement, and only after such application and after the payment by the
Collateral Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code, need the
Collateral Agent account for the surplus, if any, to any Grantor. To the extent
permitted by applicable law, each Grantor waives all claims, damages and demands
it may acquire against the Collateral Agent or any Secured Creditor arising out
of the exercise by them of any rights hereunder. If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days before such sale
or other disposition.
5.7 REGISTRATION RIGHTS. (a) If the Collateral Agent shall determine
to exercise its right to sell any or all of the Pledged Stock pursuant to
Section 5.6 or otherwise hereunder, and if in the opinion of the Collateral
Agent it is necessary or advisable to have the Pledged Stock, or that portion
thereof to be sold, registered under the provisions of the Securities Act, the
relevant Grantor will cause the Issuer thereof to (i) execute and deliver, and
cause the directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Collateral Agent, necessary or advisable to register
the Pledged Stock, or that portion thereof to be sold, under the provisions of
the Securities Act, (ii) use its best efforts to cause the registration
statement relating thereto to become effective and to remain effective for a
period of one year from the date of the first public offering of the Pledged
Stock, or that portion thereof to be sold, and (iii) make all amendments thereto
and/or to the related prospectus which, in the opinion of the Collateral Agent,
are necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. Each Grantor agrees to cause such Issuer to
comply with the provisions of the securities or "Blue Sky" laws of any and all
jurisdictions which the Collateral Agent shall designate and to make available
to its security holders, as soon as practicable, an earnings statement (which
need not be audited) which will satisfy the provisions of Section 11(a) of the
Securities Act.
(b) Each Grantor recognizes that the Collateral Agent may be unable to
effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Collateral
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Stock pursuant to this Section 5.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor further agrees that a breach of any of the covenants contained in
this Section 5.7 will cause irreparable injury to the Collateral Agent and the
Secured Creditors, that the Collateral Agent and the Secured Creditors have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section 5.7 shall be specifically
enforceable against such Grantor, and such Grantor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred under any
Operative Agreement.
5.8 WAIVER; DEFICIENCY. Each Grantor waives and agrees not to assert
any rights or privileges which it may acquire under Section 9-112 of the Code.
Each Grantor shall remain liable for any deficiency if the proceeds of any sale
or other disposition of the Collateral are insufficient to pay its Obligations
and the fees and disbursements of any attorneys employed by the Collateral Agent
or any Secured Creditor to collect such deficiency.
SECTION 6. THE COLLATERAL AGENT
6.1 COLLATERAL AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT, ETC. (a) Each
Grantor hereby irrevocably constitutes and appoints the Collateral Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name,
for the purpose of carrying out the terms of this Agreement, to take any and all
appropriate actions and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor hereby gives the
Collateral Agent the power and right, on behalf of such Grantor, without notice
to or assent by such Grantor, to do any or all of the following:
(i) in the case of any Account, at any time when any Event of Default
shall have occurred and is continuing, in the name of such Grantor or its
own name, or otherwise, take possession of and indorse and collect any
checks, drafts, notes, acceptances or other instruments for the payment of
moneys due under any Account or with respect to any other Collateral and
file any claim or take any other action or proceeding in any court of law
or equity or otherwise deemed appropriate by the Collateral Agent for the
purpose of collecting any and all such moneys due under any Account,
Instrument or General Intangible or with respect to any other Collateral
whenever payable;
(ii) in the case of any Intellectual Property, execute and deliver,
and have recorded, any and all agreements, instruments, documents and
papers as the Collateral Agent may request to evidence the Collateral
Agent's and the Secured Creditors' security interests in such Intellectual
Property and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section 5.6
or 5.7, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(v) (i) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Collateral Agent or as the Collateral Agent
shall direct; (ii) ask or demand for, collect, and receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Collateral; (iii) sign
and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (iv) commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in respect
of any Collateral; (v) defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral; (vi) settle,
compromise or adjust any such suit, action or proceeding and, in connection
therewith, give such discharges or releases as the Collateral Agent may
deem appropriate; (vii) assign any Copyright, Patent or Trademark (along
with the goodwill of the business to which any such Copyright, Patent or
Trademark pertains), throughout the world for such term or terms, on such
conditions, and in such manner, as the Collateral Agent shall in its sole
discretion determine; and (viii) generally, sell, transfer, pledge and make
any agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Collateral Agent were the absolute
owner thereof for all purposes, and do, at the Collateral Agent's option
and such Grantor's expense, at any time, or from time to time, all acts and
things which the Collateral Agent deems necessary to protect, preserve or
realize upon the Collateral and the Collateral Agent's and the Secured
Creditors' security interests therein and to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.
Anything in this Section 6.1(a) to the contrary notwithstanding, the Collateral
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this Section 6.1(a) unless an Event of Default shall have
occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Collateral Agent, at its option, but without
any obligation so to do, may perform or comply, or otherwise cause performance
or compliance, with such agreement.
(c) The expenses of the Collateral Agent incurred in connection with
actions undertaken as provided in this Section 6.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due ABR Loans under the LIFO Credit Agreement, from the
date of payment by the Collateral Agent to the date reimbursed by the relevant
Grantor, shall be payable by such Grantor to the Collateral Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
6.2 DUTY OF COLLATERAL AGENT. The Collateral Agent's sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the Code or otherwise, shall be to
deal with it in the same manner as the Collateral Agent deals with similar
property for its own account. Neither the Collateral Agent, any Secured Creditor
nor any of their respective officers, directors, employees or agents shall be
liable for failure to demand, collect or realize upon any of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of any Grantor or any other Person or
to take any other action whatsoever with regard to the Collateral or any part
thereof. The powers conferred on the Collateral Agent and the Secured Creditors
hereunder are solely to protect the Collateral Agent's and the Secured
Creditors' interests in the Collateral and shall not impose any duty upon the
Collateral Agent or any Secured Creditor to exercise any such powers. The
Collateral Agent and the Secured Creditors shall be accountable only for amounts
that they actually receive as a result of the exercise of such powers, and
neither they nor any of their officers, directors, employees or agents shall be
responsible to any Grantor for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct.
6.3 EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of
the Code and any other applicable law, each Grantor authorizes the Collateral
Agent to file or record financing statements and other filing or recording
documents or instruments with respect to the Collateral without the signature of
such Grantor in such form and in such offices as the Collateral Agent reasonably
determines appropriate to perfect the security interests of the Collateral Agent
under this Agreement. A photographic or other reproduction of this Agreement
shall be sufficient as a financing statement or other filing or recording
document or instrument for filing or recording in any jurisdiction.
6.4 AUTHORITY OF COLLATERAL AGENT. Each Grantor acknowledges that the
rights and responsibilities of the Collateral Agent under this Agreement with
respect to any action taken by the Collateral Agent or the exercise or
non-exercise by the Collateral Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as among the Collateral Agent and the Secured
Creditors, be governed by the Master Restructuring Agreement, and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Collateral Agent and the Grantors, the Collateral Agent shall be
conclusively presumed to be acting as agent for the Secured Creditors with full
and valid authority so to act or refrain from acting, and no Grantor shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.
SECTION 7. MISCELLANEOUS
7.1 AMENDMENTS IN WRITING. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written agreement executed by the Collateral Agent (at the direction of the
Directing Party) and each Grantor directly affected thereby.
7.2 NOTICES. All notices, requests and demands to or upon the
Collateral Agent or any Grantor hereunder shall be effected in the manner
provided for in Section 8.6 of the Master Restructuring Agreement at the
addresses set forth on Schedule 1 hereto.
7.3 NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE REMEDIES. Neither the
Collateral Agent nor any Secured Creditor shall by any act (except by a written
instrument pursuant to Section 7.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Collateral Agent or any Secured Creditor, any
right, power or privilege hereunder shall operate as a waiver thereof. No single
or partial exercise of any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. A waiver by the Collateral Agent or any Secured Creditor of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Collateral Agent or such Secured Creditor would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
7.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of the
Collateral Agent, the Secured Creditors and their successors and assigns;
PROVIDED that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Collateral Agent.
7.5 SET-OFF. Each Grantor hereby irrevocably authorizes the Collateral
Agent and each Secured Creditor at any time and from time to time during the
continuance of an Event of Default, without prior notice to such Grantor or any
other Grantor, any such notice being expressly waived by each Grantor, to
set-off and appropriate and apply any and all deposits (general or special, time
or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Collateral Agent or such Secured Creditor to or for the credit or
the account of such Grantor, or any part thereof in such amounts as the
Collateral Agent or such Secured Creditor may elect, against and on account of
the obligations and liabilities of such Grantor to the Collateral Agent or such
Secured Creditor hereunder and claims of every nature and description of the
Collateral Agent or such Secured Creditor against such Grantor, in any currency,
whether arising hereunder or under any Operative Agreement, or otherwise, as the
Collateral Agent or such Secured Creditor may elect, whether or not the
Collateral Agent or any Secured Creditor has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The Collateral Agent and each Secured Creditor shall notify such
Grantor promptly of any such set-off and the application made by the Collateral
Agent or such Secured Creditor of the proceeds thereof, PROVIDED that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Collateral Agent and each Secured Creditor under
this Section 7.5 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Collateral Agent or such
Secured Creditor may have.
7.6 COUNTERPARTS. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
7.7 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
7.8 SECTION HEADINGS. The Section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
7.9 INTEGRATION. This Agreement and the Operative Agreements represent
the agreement of the Grantors, the Collateral Agent and the Secured Creditors
with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Collateral Agent or
any Secured Creditor relative to subject matter hereof and thereof not expressly
set forth or referred to herein, or in any Operative Agreement.
7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
7.11 SUBMISSION TO JURISDICTION; WAIVERS. Each Grantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Operative Agreement or
for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New York,
the courts of the United States of America for the Southern District of New
York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Grantor at its address referred to in Section 7.2 or at such other address
of which the Collateral Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
7.12 ACKNOWLEDGEMENTS. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Operative Agreements to which it
is a party;
(b) neither the Collateral Agent nor any Secured Creditor has any
fiduciary relationship with or duty to any Grantor arising out of or in
connection with this Agreement or any other Operative Agreement and the
relationship between the Grantors, on the one hand, and the Collateral
Agent and the Secured Creditors, on the other hand, in connection herewith
or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Operative
Agreements or otherwise exists by virtue of the transactions contemplated
hereby among the Secured Creditors or among the Grantors and the Secured
Creditors.
7.13 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
7.14 ADDITIONAL GRANTORS. Each Subsidiary of the Borrower that is
required to become a party to this Agreement pursuant to Subsection 1.14(e) of
MRA Appendix B shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.
7.15 RELEASES. (a) At such time as the Obligations shall have been
paid in full or cash collateralized, the Commitments have been terminated and no
Letters of Credit shall be outstanding, the Collateral shall be released from
the Liens created hereby, and this Agreement and all obligations (other than
those expressly stated to survive such termination) of the Collateral Agent and
each Grantor hereunder shall terminate, all without delivery of any instrument
or performance of any act by any party, and all rights to the Collateral shall
revert to the Grantors. At the request and sole expense of any Grantor following
any such termination, the Collateral Agent shall deliver to such Grantor any
Collateral held by the Collateral Agent hereunder, and execute and deliver to
such Grantor such documents as such Grantor shall reasonably request to evidence
such termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Operative
Agreements, then the Collateral Agent, at the request and sole expense of such
Grantor, shall execute and deliver to such Grantor all releases or other
documents reasonably necessary or desirable for the release of the Liens created
hereby on such Collateral. At the request and sole expense of the Borrower, a
Guarantor shall be released from its obligations hereunder in the event that all
the Capital Stock of such Guarantor shall be sold, transferred or otherwise
disposed of in a transaction permitted by the Operative Agreements; PROVIDED
that the Borrower shall have delivered to the Collateral Agent, at least ten
Business Days prior to the date of the proposed release, a written request for
release identifying the relevant Guarantor and the terms of the sale or other
disposition in reasonable detail, including the price thereof and any expenses
in connection therewith, together with a certification by the Borrower stating
that such transaction is in compliance with the Operative Agreements.
IN WITNESS WHEREOF, each of the undersigned has caused this Collateral
Agreement to be duly executed and delivered as of the date first above written.
RECOTON CORPORATION
By: /S/ STUART MONT
Name: Stuart Mont
Title: Chief Operating Officer
Executive Vice President
SUBSIDIARIES
Christie Design Corporation, a Delaware
corporation
InterAct Accessories, Inc., a Delaware
corporation
Recoton Audio Corporation, a Delaware
corporation
ReCone, Inc., a Delaware corporation
Recoton Home Audio, Inc., a
California corporation
Recoton Japan, Inc., an Illinois corporation
Recoton International Holdings, Inc., a
Delaware corporation
Recoton European Holdings, Inc., a
Delaware corporation
AAMP of Florida, Inc., a Florida corporation
By: /S/ STUART MONT
Name: Stuart Mont
Title: Vice President
<PAGE>
Annex 1 to
COLLATERAL AGREEMENT
ASSUMPTION AGREEMENT, dated as of ________________, _____, made by
______________________________, a ______________ corporation (the "ADDITIONAL
GRANTOR"), in favor of THE CHASE MANHATTAN BANK, as collateral agent (in such
capacity, the "COLLATERAL AGENT") for the Secured Creditors. All capitalized
terms not defined herein shall have the meaning ascribed to them in the
Guarantee and Collateral Agreement referred to below.
W I T N E S S E T H :
WHEREAS, the LIFO Credit Agreement requires the Additional Grantor to
become a party to the Collateral Agreement and to the Collateral Agency
Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Collateral Agreement and
the Collateral Agency Agreement;
NOW, THEREFORE, IT IS AGREED:
1. COLLATERAL AGREEMENT. By executing and delivering this Assumption
Agreement, the Additional Grantor, as provided in Section 7.14 of the Collateral
Agreement, hereby becomes a party to the Collateral Agreement as a Grantor
thereunder and to the Collateral Agency Agreement, in each case with the same
force and effect as if originally named therein as a Grantor or a party thereto
and, without limiting the generality of the foregoing, hereby expressly assumes
all obligations and liabilities of a Grantor under the Collateral Agreement and
a party to the Collateral Agency Agreement. The information set forth in Annex
1-A hereto is hereby added to the information set forth in Schedules
____________* to the Collateral Agreement. The Additional Grantor hereby
represents and warrants that each of the representations and warranties
contained in Section 3 of the Collateral Agreement is true and correct on and as
the date hereof (after giving effect to this Assumption Agreement) as if made on
and as of such date.
- -------------
* Refer to each Schedule which needs to be supplemented.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
Name:
Title:
<PAGE>
ACKNOWLEDGMENT AND CONSENT*
The undersigned hereby acknowledges receipt of a copy of the Collateral
Agreement, dated as of September 8, 1999 (the "AGREEMENT"), made by the Grantors
parties thereto for the benefit of The Chase Manhattan Bank, as Collateral
Agent. The undersigned agrees for the benefit of the Collateral Agent and the
Secured Creditors as follows:
1. The undersigned will be bound by the terms of the Agreement and will
comply with such terms insofar as such terms are applicable to the undersigned.
2. The undersigned will notify the Collateral Agent promptly in writing of
the occurrence of any of the events described in Section 4.6(a) of the
Agreement.
3. The terms of Sections 5.3 and 5.7 of the Agreement shall apply to it,
MUTATIS MUTANDIS, with respect to all actions that may be required of it
pursuant to Section 5.3 or 5.7 of the Agreement.
[NAME OF ISSUER]
By ----------------------------
Name:
Title:
Address for Notices:
-------------------------------
-------------------------------
Fax: --------------------------
* To be delivered by any Issuer which is not party to this Guarantee and
Collateral Agreement.
EXHIBIT 4
GUARANTEE
GUARANTEE, dated as of September 8, 1999 (the "Guarantee"), made by
each of the corporations that are signatories hereto (together with any other
entity that may become a party hereto as provided herein, the "Guarantors"), in
favor of THE CHASE MANHATTAN BANK, as agent (in such capacity, the "Agent") for
the lenders (the "Lenders") parties to the Loan Agreement, dated as of September
8, 1999 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Recoton Corporation (the "Borrower"), the Lenders and
the Agent.
W I T N E S S E T H:
WHEREAS, the Lenders are the holders of a portion of the Existing
Senior Obligations (such term, and the other capitalized terms in the Recitals,
having the meanings hereinafter assigned to them) and subject to the terms and
conditions thereto, have agreed to modify and restructure the Existing Senior
Obligations and provide additional working capital to the Borrower pursuant to
the Master Restructuring Agreement among such parties, the Borrower and certain
other creditors of the Borrower;
WHEREAS, pursuant to the Credit Agreement the Lenders have agreed,
subject to the terms and conditions thereof, to make certain loans and other
extensions of credit to the Borrower;
WHEREAS, the Borrower beneficially owns directly or indirectly at
least a majority of the issued and outstanding stock of each Guarantor;
WHEREAS, the proceeds of the extensions of credit provided for in the
Credit Agreement will be used in part to enable the Borrower to make valuable
transfers (as determined as provided herein) to some of the Guarantors in
connection with the operation of their businesses;
WHEREAS, the Borrower and the Guarantors are engaged in related
businesses, and each Guarantor will derive substantial direct and indirect
benefit from the making of the extensions of credit provided for in the Credit
Agreement; and
WHEREAS, it is a condition precedent to the effectiveness of the
Credit Agreement, which in turn is a condition precedent to the effectiveness of
the Master Restructuring Agreement, that, among other things, the Guarantors
shall have executed and delivered this Guarantee to the Agent, for the ratable
benefit of the Lenders.
NOW, THEREFORE, in consideration of the premises and to induce the
Agent and the Lenders to enter into the Credit Agreement, the Existing Banks to
consummate the restructuring contemplated thereby, and the Lenders to make their
respective loans and other extensions of credit to the Borrower under the Credit
Agreement, the Guarantors hereby agree with the Agent, for the ratable benefit
of the Lenders, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms used
herein that are defined the Credit Agreement or MRA Appendix B shall have the
meanings given to them therein and the following terms shall have the following
meanings:
"Obligations": the collective reference to the unpaid principal of and
interest on any Notes and all other obligations and liabilities of the Borrower
to the Agent or the Lenders (including, without limitation, interest accruing at
the then applicable rate provided in the Credit Agreement after the maturity of
the Loans and interest accruing at the then applicable rate provided in the
Credit Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Borrower, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding), whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred, which may
arise under, out of, or in connection with, the Credit Agreement, any Notes, the
other Loan Documents or any other document made, delivered or given in
connection therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Agent or to the Lenders
that are required to be paid by the Borrower or the Guarantors pursuant to the
terms of the Credit Agreement or this Agreement or any other Loan Document).
(b) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Guarantee shall refer to this Guarantee as a whole and
not to any particular provision of this Guarantee, and section and paragraph
references are to this Guarantee unless otherwise specified.
(c) The words "include," "includes" and "including" shall be deemed to
be followed by the phrase "without limitation".
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Guarantee (a) Subject to the provisions of paragraph 2(b), each of
the Guarantors hereby, jointly and severally, unconditionally and irrevocably,
guarantees to the Agent, for the ratable benefit of the Lenders and their
respective successors, indorsees, transferees and assigns, the prompt and
complete payment and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under the laws of any applicable national, federal, state,
provincial or other Governmental Authority relating to the insolvency of debtors
regardless of whether such insolvency arises from the inability to pay debts as
they come due or otherwise; provided that in the case of any Guarantor that is a
German Subsidiary, its maximum liability shall be further limited to the amount
in excess of such Guarantor's minimum stated capital.
(c) Each Guarantor further agrees to pay any and all reasonable
expenses (including, without limitation, all fees and disbursements of counsel)
which may be paid or incurred by the Agent or any Lender in enforcing, or
obtaining advice of counsel in respect of, any rights with respect to, or
collecting, any or all of the Obligations and/or enforcing any rights with
respect to, or collecting against, such Guarantor under this Guarantee. This
Guarantee shall remain in full force and effect until the Obligations are paid
in full and the Commitments are terminated, notwithstanding that from time to
time prior thereto the Borrower may be free from any Obligations.
(d) Each Guarantor agrees that the Obligations may at any time and
from time to time exceed the amount of the liability of such Guarantor hereunder
without impairing this Guarantee or affecting the rights and remedies of the
Agent or any Lender hereunder.
(e) No payment or payments made by the Borrower, any of the
Guarantors, any other guarantor or any other Person or received or collected by
the Agent or any Lender from the Borrower, any of the Guarantors, any other
guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor hereunder which
shall, notwithstanding any such payment or payments other than payments made by
such Guarantor in respect of the Obligations or payments received or collected
from such Guarantor in respect of the Obligations, remain liable for the
Obligations up to the maximum liability of such Guarantor hereunder until the
Obligations are paid in full and the Commitments are terminated.
(f) Each Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Agent or any Lender on account of its
liability hereunder, it will notify the Agent in writing that such payment is
made under this Guarantee for such purpose.
3. Right of Contribution. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 5 hereof. The provisions
of this Section shall in no respect limit the obligations and liabilities of any
Guarantor to the Agent and the Lenders, and each Guarantor shall remain liable
to the Agent and the Lenders for the full amount guaranteed by such Guarantor
hereunder.
4. Right of Set-off. Each Guarantor hereby irrevocably authorizes each
Lender at any time and from time to time without notice to such Guarantor or any
other Guarantor, any such notice being expressly waived by each Guarantor, to
set-off and appropriate and apply any and all deposits (general or special, time
or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender to or for the credit or the account of such Guarantor, or
any part thereof in such amounts as such Lender may elect, against and on
account of the obligations and liabilities of such Guarantor to such Lender
hereunder that shall have become due and payable. The Agent and each Lender
shall notify such Guarantor promptly of any such set-off and the application
made by the Agent or such Lender, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of the
Agent and each Lender under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Agent or such Lender may have.
5. No Subrogation. Notwithstanding any payment or payments made by any
of the Guarantors hereunder or any set-off or application of funds of any of the
Guarantors by any Lender, no Guarantor shall be entitled to be subrogated to any
of the rights of the Agent or any Lender against the Borrower or any other
Guarantor or any collateral security or guarantee or right of offset held by any
Lender for the payment of the Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from the Borrower or any
other Guarantor in respect of payments made by such Guarantor hereunder, until
all amounts owing to the Agent and the Lenders by the Borrower on account of the
Obligations are paid in full and the Commitments are terminated. If any amount
shall be paid to any Guarantor on account of such subrogation rights at any time
when all of the Obligations shall not have been paid in full, such amount shall
be held by such Guarantor in trust for the Agent and the Lenders, segregated
from other funds of such Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Agent in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Agent, if required), to be
applied against the Obligations, whether matured or unmatured, in such order as
the Agent may determine.
6. Amendments, etc. with respect to the Obligations; Waiver of Rights.
Each Guarantor shall remain obligated hereunder notwithstanding that, without
any reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Obligations made
by the Agent or any Lender may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Agent or any Lender, and the Credit Agreement,
any Notes and the other Loan Documents and any other documents executed and
delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Agent (or the Required Lenders, as the
case may be) may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by the Agent or any Lender for the
payment of the Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Obligations or for this Guarantee or any property subject thereto. When making
any demand hereunder against any of the Guarantors, the Agent or any Lender may,
but shall be under no obligation to, make a similar demand on the Borrower or
any other Guarantor or guarantor, and any failure by the Agent or any Lender to
make any such demand or to collect any payments from the Borrower or any such
other Guarantor or guarantor or any release of the Borrower or such other
Guarantor or guarantor shall not relieve any of the Guarantors in respect of
which a demand or collection is not made or any of the Guarantors not so
released of their several obligations or liabilities hereunder, and shall not
impair or affect the rights and remedies, express or implied, or as a matter of
law, of the Agent or any Lender against any of the Guarantors. For the purposes
hereof "demand" shall include the commencement and continuance of any legal
proceedings.
7. Guarantee Absolute and Unconditional. Each Guarantor waives any and
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Agent or any Lender upon
this Guarantee or acceptance of this Guarantee, the Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon this Guarantee; and
all dealings between the Borrower and any of the Guarantors, on the one hand,
and the Agent and the Lenders, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon this Guarantee. Each
Guarantor waives diligence, presentment, protest, demand for payment and notice
of default or nonpayment to or upon the Borrower or any of the Guarantors with
respect to the Obligations. Each Guarantor understands and agrees that this
Guarantee shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity, regularity or
enforceability of the Credit Agreement, any Note or any other Loan Document, any
of the Obligations or any other collateral security therefor or guarantee or
right of offset with respect thereto at any time or from time to time held by
the Agent or any Lender, (b) any defense, set-off or counterclaim (other than a
defense of payment or performance) which may at any time be available to or be
asserted by the Borrower against the Agent or any Lender or (c) any other
circumstance whatsoever (with or without notice to or knowledge of the Borrower
or such Guarantor) which constitutes, or might be construed to constitute, an
equitable or legal discharge of the Borrower for the Obligations, or of such
Guarantor under this Guarantee, in bankruptcy or in any other instance. When
pursuing its rights and remedies hereunder against any Guarantor, the Agent and
any Lender may, but shall be under no obligation to, pursue such rights and
remedies as it may have against the Borrower or any other Person or against any
collateral security or guarantee for the Obligations or any right of offset with
respect thereto, and any failure by the Agent or any Lender to pursue such other
rights or remedies or to collect any payments from the Borrower or any such
other Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrower or any such
other Person or any such collateral security, guarantee or right of offset,
shall not relieve such Guarantor of any liability hereunder, and shall not
impair or affect the rights and remedies, whether express, implied or available
as a matter of law, of the Agent and the Lenders against such Guarantor. This
Guarantee shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon each Guarantor and the successors and
assigns thereof, and shall inure to the benefit of the Agent and the Lenders,
and their respective successors, indorsees, transferees and assigns, until all
the Obligations and the obligations of each Guarantor under this Guarantee shall
have been satisfied by payment in full and the Commitments shall be terminated,
notwithstanding that from time to time during the term of the Credit Agreement
the Borrower may be free from any Obligations.
8. Reinstatement. This Guarantee shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Agent or any Lender upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrower or any Guarantor, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Borrower or any Guarantor or any substantial
part of its property, or otherwise, all as though such payments had not been
made.
9. Payments. Each Guarantor hereby guarantees that payments hereunder
will be paid to the Agent without set-off or counterclaim in U.S. Dollars at the
office of the Agent, currently located at 241-02 Northern Boulevard, 3rd Floor,
Douglaston, New York 11362 or such other office as specified in a written notice
delivered in accordance with paragraph 12.
10. Representations and Warranties. Each Guarantor hereby represents
and warrants that:
(a) it has the corporate power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Guarantee, and
has taken all necessary corporate action to authorize its execution, delivery
and performance of this Guarantee;
(b) this Guarantee constitutes a legal, valid and binding obligation
of such Guarantor enforceable in accordance with its terms, except as affected
by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting the enforcement of creditors' rights
generally, general equitable principles and an implied covenant of good faith
and fair dealing;
(c) the execution, delivery and performance of this Guarantee will not
violate any provision of any Requirement of Law or Contractual Obligation of
such Guarantor and will not result in or require the creation or imposition of
any Lien on any of the properties or revenues of such Guarantor pursuant to any
Requirement of Law or Contractual Obligation of the Guarantor;
(d) no consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority and no consent of any other
Person (including, without limitation, any stockholder or creditor of such
Guarantor) is required in connection with the execution, delivery, performance,
validity or enforceability of this Guarantee; and
(e) except in certain jurisdictions in each of which the provisions of
paragraph 20 hereof are enforceable against such Guarantor, each Guarantor is
not required to make any deduction or withholding from any payment to be made by
it under this Guarantee, and this Guarantee is not liable to any registration
tax, stamp duty or similar tax or duty imposed by any competent authority of or
within the jurisdiction in which it is organized. Each Guarantor agrees that the
foregoing representations and warranties shall be deemed to have been made by
such Guarantor on the date of each extension of credit in favor of the Borrower
under the Credit Agreement on and as of such date of such extension of credit as
though made hereunder on and as of such date.
11. Authority of Agent. Each Guarantor acknowledges that the rights
and responsibilities of the Agent under this Guarantee with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Guarantee shall, as between the Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Agent and such Guarantor, the Agent shall be conclusively presumed to be acting
as agent for the Lenders with full and valid authority so to act or refrain from
acting, and no Guarantor shall be under any obligation, or entitlement, to make
any inquiry respecting such authority.
12. Notices. All notices, requests and demands to or upon the Agent,
any Lender or any Guarantor to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by registered or certified mail,
five days (or ten days, in the case of mailings between locations inside and
outside of the United States) days after being deposited in the mails, postage
prepaid (airmail, in the case of mailings between locations inside and outside
of the United States), or (c) in the case of delivery by facsimile transmission,
when sent and receipt has been confirmed, addressed as follows:
(a) if to the Agent or any Lender, at its address or transmission
number for notices provided in subsection 10.2 of the Credit Agreement; and
(b) if to any Guarantor, at its address or transmission number for
notices set forth on Schedule I to this Guarantee.
The Agent, each Lender and each Guarantor may change its address and
transmission numbers for notices or for payments pursuant to paragraph 9 by
notice in the manner provided in this Section.
13. Counterparts. This Guarantee may be executed by one or more of the
Guarantors on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the counterparts of this Guarantee signed by all the Guarantors shall be
lodged with the Agent.
14. Severability. Any provision of this Guarantee which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. Integration. This Guarantee represents the agreement of each
Guarantor with respect to the subject matter hereof and there are no promises or
representations by the Agent or any Lender relative to the subject matter hereof
not reflected herein.
16. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of
the terms or provisions of this Guarantee may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by each Guarantor
and the Agent, provided that any provision of this Guarantee may be waived by
the Agent and the Lenders in a letter or agreement executed by the Agent or by
telex or facsimile transmission from the Agent.
(b) Neither the Agent nor any Lender shall by any act (except by a
written instrument pursuant to paragraph 16(a) hereof), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default or in any breach of any of
the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Agent or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Agent or any Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Agent
or such Lender would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
17. Section Headings. The section headings used in this Guarantee are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
18. Successors and Assigns. This Guarantee shall be binding upon the
successors and assigns of each Guarantor and shall inure to the benefit of the
Agent and the Lenders and their successors and assigns.
19. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
20. Taxes. All payments made by each Guarantor under this Guarantee
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority, excluding
net income taxes and franchise taxes (imposed in lieu of net income taxes)
imposed on the Agent or any Lender as a result of a present or former connection
between the Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from the Agent
or such Lender having executed, delivered or performed its obligations or
received a payment under, or enforced, this Guarantee). If any such non-excluded
taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-
Excluded Taxes") are required to be withheld from any amounts payable to the
Agent or any Lender hereunder, the amounts so payable to the Agent or such
Lender shall be increased to the extent necessary to yield to the Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement.
21. Submission To Jurisdiction Waivers. Each Guarantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Guarantee, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof.
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to such Guarantor at
its address set forth with its signature below or at such other address of which
the Agent shall have been notified pursuant hereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this subsection any special, exemplary, punitive or consequential damages.
22. Acknowledgments. Each Guarantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Guarantee;
(b) neither the Agent nor any Lender has any fiduciary relationship
with or duty to such Guarantor arising out of or in connection with this
Agreement or any of the other Loan Documents, and the relationship between the
Agent and Lenders, on one hand, and such Guarantor, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among the Guarantors and the Lenders.
23. WAIVERS OF JURY TRIAL. EACH GUARANTOR, ANY, BY THEIR ACCEPTANCE
HEREOF, THE AGENT AND THE LENDERS, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTEE AND
FOR ANY COUNTERCLAIM THEREIN.
24. Payment Currency. The obligation of each Guarantor in respect of
any amount due hereunder to make payments in Dollars shall not be discharged or
satisfied by payment in another currency, whether pursuant to a judgment or
otherwise, to the extent that the amount so paid on prompt conversion to Dollars
and transfer to the designated place of payment under normal banking procedures
does not yield the amount owing hereunder at the designated place of payment. In
the event that any payment by any Guarantor whether pursuant to a judgment or
otherwise, upon such conversion and transfer does not result in payment of such
amount in Dollars at the designated place of payment, the Agent shall be
entitled to demand immediate payment of, and shall have a separate cause of
action against such Guarantor for the additional amount necessary to yield the
amount of Dollars owing hereunder.
25. Additional Guarantors. Each Subsidiary of the Borrower that is
required to become a party to this Guarantee pursuant to subsection 1.13(c) of
MRA Appendix B shall become a Guarantor for all purposes of this Guarantee upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
to be duly executed and delivered by its duly authorized officer as of the day
and year first above written.
RECOTON CORPORATION
SUBSIDIARIES
Christie Design Corporation, a Delaware
corporation
InterAct Accessories, Inc., a Delaware
corporation
Recoton Audio Corporation, a Delaware
corporation
ReCone, Inc., a Delaware corporation
Recoton Home Audio, Inc., a California
corporation
Recoton Japan, Inc., an Illinois
corporation
Recoton International Holdings, Inc., a
Delaware corporation
Recoton European Holdings, Inc., a Delaware
corporation
AAMP of Florida, Inc., a Florida
corporation
By: /s/ Stuart Mont
--------------------------
Name: Stuart Mont
Title: Vice President
Recoton German Holdings GmbH, a German
corporation
Mac Audio Electronic GmbH, a German
corporation
Magnat Audio-Produkte GmbH, a German
corporation
Heco Audio-Produkte GmbH, a German
corporation
By: /s/ JW Mermagen
----------------------------------
Name: JW Mermagen
Title: Managing Director
Recoton Canada Ltd., a Canadian corporation
By: /s/ Stuart Mont
-----------------------------------
Name: Stuart Mont
Title: President
<PAGE>
Schedule I
GUARANTORS' ADDRESSES1
(1) Recoton Canada Ltd.
680 Granite Court
Pickering, Ontario L1W 3JS Canada
Tel.: 905-831-7177
Fax: 905-831-4996
Attn.: Carol Webster
(2) Christie Design Corporation
774 Mays Blvd. #10
Incline Village, NV 89481
Tel.: 702-586-9574
Fax: 702-586-9584
Attn.: Cary Christie
(3) Interact Accessories, Inc.
10999 McCormick Road
Hunt Valley, Maryland 21031
Tel.: 410-785-5661
Fax: 410-785-5725
Attn.: Todd Hays
(4) Recoton Home Audio, Inc.
Recoton Audio Corporation
ReCone, Inc.
Recoton Japan, Inc.
Recoton International Holdings, Inc.
Recoton European Holdings, Inc.
2950 Lake Emma Road
Lake Mary, Florida 32746
Tel: 407-333-8900
Fax: 407-444-0559
Attn.: Stuart Mont
(5) AAMP of Florida, Inc.
13160 56th Court
Clearwater, FL 33760
Tel: 813-572-9255
Fax: 813-573-9326
Attn.: Micah Ansley
(6) Recoton German Holdings GmbH
Lise-Meitner-Strasse 9
50259 Pulheim
GERMANY
Tel: 011-49-2234-984080
Fax: 011-49-2234-984086
Attn.: Jeremey Mermagen
(7) Magnat Audio-Produkte GmbH
MacAudio Electronics GmbH
HECO Audio-Produkte GmbH
Lise-Meitner-Strasse 9
50259 Pulheim
GERMANY
Tel: 011-49-2234-984080
Fax: 011-49-2234-984086
Attn.: Mark Finger, Manager Director
- --------
1. In each case, notice shall also be given to the Guarantor at the
following address: c/o Recoton Corporation, 2950 Lake Emma Road, Lake
Mary, Florida 32746; Attn.: Stuart Mont; Fax: 407-444-0559; Tel:
407-333-8900.
<PAGE>
STATE OF )
:ss.:
COUNTY OF )
On the ______ day of __________ 1999, before me personally came
__________, to me known, who, being by me duly sworn, did depose and say that
he/she resides at __________________________; that he/she is
_____________________ of _______________ _______________________, the
corporation described in and which executed the above instrument; and that
he/she signed his/her name thereto by authority of the Board of Directors of
said corporation.
---------------------------------
Notary Public
<PAGE>
Annex 1 to
Guarantee
ASSUMPTION AGREEMENT, dated as of ________________, 199_, made by
______________________________, a ______________ corporation (the "Additional
Guarantor"), in favor of THE CHASE MANHATTAN BANK, as administrative agent (in
such capacity, the "Agent") for the banks and other financial institutions (the
"Lenders") parties to the Credit Agreement referred to below. All capitalized
terms not defined herein shall have the meaning ascribed to them in such Credit
Agreement.
W I T N E S S E T H :
WHEREAS, Recoton Corporation (the "Borrower"), the Lenders and the
Agent have entered into a Credit Agreement, dated as of September 8, 1999 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement");
WHEREAS, in connection with the Credit Agreement, certain of the
Borrower's Subsidiaries (other than the Additional Guarantor) have entered into
the Guarantee Agreement, dated as of September 8, 1999 (as amended, supplemented
or otherwise modified from time to time, the "Guarantee") in favor of the Agent
for the benefit of the Lenders;
WHEREAS, the Lenders are the holders of a portion of the Existing
Senior Obligations (such term, and the other capitalized terms in the Recitals
having the meanings hereinafter assigned to them in the guarantee) and subject
to the terms and conditions thereto, have agreed to modify and restructure the
Existing Senior Obligations and provide additional working capital to the
Borrower pursuant to the Master Restructuring Agreement among such parties, the
Borrower and certain other creditors of the Borrower;
WHEREAS, the Credit Agreement and the Master Restructuring Agreement
require the Additional Guarantor to become a party to the Guarantee; and
WHEREAS, the Additional Guarantor has agreed to execute and deliver
this Assumption Agreement in order to become a party to the Guarantee;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee. By executing and delivering this Assumption Agreement,
the Additional Guarantor, as provided in subsection 1.13(c) of MRA Appendix B,
hereby becomes a party to the Guarantee as a Guarantor thereunder with the same
force and effect as if originally named therein as a Guarantor and, without
limiting the generality of the foregoing, hereby expressly assumes all
obligations and liabilities of a Guarantor thereunder. The Guarantor hereby
represents and warrants that each of the representations and warranties
contained in Section 3 of the Guarantee is true and correct on and as the date
hereof (after giving effect to this Assumption Agreement) as if made on and as
of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GUARANTOR]
By:
--------------------------
Name:
Title:
Address for Notices:
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of September 8, 1999 among
RECOTON CORPORATION, a New York corporation (the "COMPANY"), and each of the
parties whose signatures are set forth under the heading "LIFO Lenders" (the
"LIFO LENDERS").
1. BACKGROUND. The LIFO Lenders are the holders of certain existing
obligations of the Company and each of the LIFO Lenders, pursuant to, and
subject to the terms and conditions of (i) the Master Restructuring Agreement
(such term, and all other capitalized terms used in these Recitals without being
otherwise defined, having the meanings hereinafter referred to in Section 3
below), has agreed to restructure and modify the obligations of the Company owed
to it and (ii) the LIFO Credit Agreement, has agreed to provide the Company
additional working capital financing in an aggregate amount of up to
$50,000,000. As consideration for such actions on the part of each LIFO Lender,
the Company has agreed to issue to the LIFO Lenders (x) on the date hereof the
Fixed Facility Fee Warrants and the Cancelable Facility Fee Warrants referred to
in the Credit Agreement and (y) the Prepayment Warrants in the amounts and on
the conditions set forth in Section 2.7 of the Master Restructuring Agreement
(the Fixed Facility Fee Warrants, the Cancelable Facility Fee Warrants and the
Prepayment Warrants are hereinafter referred to collectively as the "WARRANTS").
This Agreement shall become effective upon the occurrence of the Closing Date in
accordance with the terms of the LIFO Credit Agreement.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1. REGISTRATION ON REQUEST.
(a) REQUEST. Upon the written request of the Requisite Holders,
requesting that the Company effect the registration under the Securities Act of
all or part of such holders' Registrable Securities and specifying the intended
method of disposition thereof and whether or not such requested registration is
to be an underwritten offering, the Company will promptly give written notice of
such requested registration to all other holders of Registrable Securities and
thereupon the Company will use its best efforts to effect the registration under
the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such holders, and
(ii) all other Registrable Securities which the Company has been
requested to register by the holders thereof by written request given to
the Company within 30 days after the giving of such written notice by the
Company (which request shall specify the intended method of disposition of
such Registrable Securities), all to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid)
of the Registrable Securities so to be registered.
The number of registrations which may requested under this Section 2.1
are as follows: (i) five (5) Limited Demand Registrations, in the aggregate, may
be requested of the Company by the Requisite Holders, and (ii) one (1) Full
Demand Registrations may be requested the "FULL DEMAND REQUEST") of the Company
by the Requisite Holders, PROVIDED, that upon the occurrence of the Full Demand
Request, the number of Limited Demand Registrations which may be requested
pursuant to this Section 2.1 shall be reduced by one.
(b) REGISTRATION OF OTHER SECURITIES. Whenever the Company shall
effect the Full Demand Registration pursuant to this Section 2.1 in connection
with an underwritten offering by one or more holders of Registrable Securities,
no securities other than Registrable Securities shall be included among the
securities covered by such registration unless (a) the managing underwriter of
such offering shall have advised each holder of Registrable Securities to be
covered by such registration in writing that the inclusion of such other
securities would not adversely affect such offering or (b) the holders of all
Registrable Securities to be covered by such registration shall have consented
in writing to the inclusion of such other securities.
(c) REGISTRATION STATEMENT FORM. Limited Demand Registrations shall be
on Form S-3 (or any similar successor form) with only such additional
information as shall be determined to be appropriate by the Company and as shall
permit the disposition of the Registrable Securities by the holders thereof. The
Full Demand Registration under this Section 2.1 shall be on such appropriate
registration form of the Commission (i) as shall be selected by the Company and
as shall be reasonably acceptable to the holders of a majority of the
Registrable Securities so to be registered and (ii) as shall permit the
disposition of such Registrable Securities in accordance with the intended
method or methods of disposition specified in their request for such
registration. The Company agrees to include in any such registration statement
in connection with the Full Demand Registration all information which holders of
Registrable Securities being registered shall reasonably request.
(d) EXPENSES. The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this Section 2.1.
(e) EFFECTIVE REGISTRATION STATEMENT. A registration requested
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective, (ii)
if after it has become effective, such registration is interfered with by any
stop order, injunction or other order or requirements of the Commission or other
governmental agency or court for any reason, or (iii) if the conditions to
closing specified in the purchase agreement or underwriting agreement entered
into in connection with such registration (in the case of the Full Demand
Registration) are not satisfied.
(f) SELECTION OF UNDERWRITERS. If the requested Full Demand
Registration pursuant to this Section 2.1 involves an underwritten offering, the
underwriter or underwriters thereof shall be selected by the Company with the
reasonable approval of the holders of a majority of the Registrable Securities
to be so registered.
(g) PRIORITY IN REQUESTED REGISTRATIONS. If the requested Full Demand
Registration pursuant to this Section 2.1 involves an underwritten offering, and
the managing underwriter shall advise the Company in writing (with a copy to
each holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities requested
to be included in such registration, the Company will include in such
registration to the extent of the number which the Company is so advised can be
sold in such offering, FIRST, such Registrable Securities requested to be
included in such registration and held by a holder making the Full Demand
Request under this Section 2.1 (a "REQUESTING HOLDER"), allocated pro rata among
the Requesting Holders on the basis of the number of Registrable Securities
requested to be included by such Requesting Holders, and SECOND, such other
Registrable Securities requested to be included in such registration, allocated
pro rata among the holders thereof requesting such registration on the basis of
the numbers of such Registrable Securities requested to be included by such
holders. In connection with any registration as to which the provisions of this
clause (g) apply, no securities other than Registrable Securities shall be
covered by such registrations.
(h) COMPANY'S PURCHASE RIGHT. The Company shall have the right, in
connection with any request under this Section 2.1 and in lieu of effecting such
requested registration, to purchase the Registrable Securities of each
Requesting Holder that each such Requesting Holder sought to include within such
requested registration at the Fair Value thereof. The Company shall exercise its
option by notice given to each holder thereof within ten (10) days after receipt
of the registration request (the "OPTION NOTICE") which shall include an offer
to purchase such holder's Registrable Securities on a date no later than thirty
(30) days after the Option Notice (the "PURCHASE DATE"). Each such holder may
either accept or reject the Company's offer after the Fair Value of the
Registrable Securities is determined. If the offer is accepted, the Company will
purchase the Registrable Securities of the such holder on the Purchase Date for
cash. As to any such holder that rejects the Company's offer, the Company shall
then and thereafter have no further obligation to effect any registration of
such holder's Registrable Securities under any provision of this Section 2.1 and
such holder's Registrable Securities shall be deemed not to be "Registrable
Securities" for any purposes of this Agreement. As used herein "FAIR VALUE"
shall mean the fair market value of the Registrable Securities of the affected
holder thereof as of a date which is within five days of the Purchase Date (a)
determined by agreement between the Company and the affected holder, or (b) if
the Company and the affected holder fail to agree, determined jointly by an
independent investment banking firm retained by the Company and by an
independent investment banking firm retained by the affected holder, either of
which firms may be an independent investment banking firm regularly retained by
the Company, or (c) if the Company or the affected holder shall fail so to
retain an independent investment banking firm within seven Business Days of the
retention of such a firm by the affected holder or the Company, as the case may
be, determined solely by the firm so retained, or (d) if the firms so retained
by the Company and by the affected holder shall be unable to reach a joint
determination within ten Business Days of the retention of the last firm so
retained, determined by another independent investment banking firm which is not
a regular investment banking firm of the Company chosen by the first two such
firms.
2.2. INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company at any
time proposes to register any of its securities (which are the same type of
securities as Registrable Securities) under the Securities Act (other than by a
registration on Form S-4, Form S-8 or any successor or similar forms and other
than pursuant to Section 2.1), whether or not for sale for its own account, it
will each such time give prompt written notice to all holders of Registrable
Securities of its intention to do so and of such holders' rights under this
Section 2.2. Upon the written request of any such holder made within 30 days
after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will use its best efforts
to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the holders
thereof, to the extent requisite to permit the disposition (in accordance with
the intended methods thereof as aforesaid) of the Registrable Securities so to
be registered; PROVIDED that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection therewith
up to the date of receipt of such notice). Registrable Securities to be
registered pursuant to this Section 2.2 shall be sold or distributed (if
requested by the Company) in the same manner as the other securities subject to
such registration statement are to be sold or distributed. The Company will pay
all Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this Section 2.2.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If a registration pursuant
to this Section 2.2 involves an underwritten offering of the securities so being
registered to be distributed (on a firm commitment basis) by or through one or
more underwriters of recognized standing under underwriting terms appropriate
for such a transaction, the inclusion of Registrable Securities so requested to
be registered for sale for the account of holders of Registrable Securities is
subject to the provisions of Section 2.4(b).
2.3. REGISTRATION PROCEDURES. If and whenever the Company is required
to use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Sections 2.1 and 2.2, the Company will
as expeditiously as possible:
(i) prepare and (as soon thereafter as possible or in any event
no later than 60 days after the end of the period within which requests for
registration may be given to the Company) file with the Commission the
requisite registration statement to effect such registration and thereafter
use its best efforts to cause such registration statement to become
effective, PROVIDED that the Company may discontinue any registration of
its securities which are not Registrable Securities (and, under the
circumstances specified in Section 2.2(a), its securities which are
Registrable Securities) at any time prior to the effective date of the
registration statement relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the
Seller or sellers thereof set forth in such registration statement;
PROVIDED, HOWEVER, that, except as otherwise set forth in this Agreement,
the Company shall not be required to amend or supplement such Registration
Statement or prospectus after the expiration of 90 days from the effective
date of such Registration Statement;
(iii) furnish to each seller of Registrable Securities covered by
such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act in conformity with the
requirements of the Securities Act, and such other documents, as such
seller may reasonably request;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of such jurisdictions as each
seller thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains
in effect, and take any other action which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would
not but for the requirements of this clause (iv) be obligated to be so
qualified or to consent to general service of process in such jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) furnish to each seller of Registrable Securities:
(x) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the date
of the closing under the underwriting agreement), addressed to and
reasonably satisfactory in form and substance to each such seller, and
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) as are
customarily covered in opinions of issues counsel delivered to the
underwriters in underwritten public offerings of securities and such
other legal matters as any such seller may reasonably request, and
(y) if such registration includes an underwritten public
offering, a copy of any "comfort" letter delivered to any underwriter
by the independent public accountants who have certified the Company's
financial statements included in such registration statement;
(vii) notify each seller of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act upon discovery that or
upon the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading in the fight of the circumstances under which they were
made, and at the request of any such seller promptly prepare and furnish to
such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they
were made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least 12 months, but not more than 18
months, beginning with the first fall calendar month after the effective
date of such registration statement, which earnings statement shall satisfy
the provisions of Section 1l(a) of the Securities Act, and furnish to each
such seller at least five business days prior to the filing thereof a copy
of any amendment or supplement to such registration statement or prospectus
and not file any thereof to which any such seller shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Securities Act or of
the rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement; and
(x) use its best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange on which
any securities of the same class as such Registrable Securities are then
listed.
In addition to the foregoing the Company will enter into such
agreements and take such other actions as the Requisite Holders shall reasonably
request in order to expedite or facilitate the disposition of such Registrable
Securities (including, without limitation, making its management reasonably
available to the extent reasonably requested by the Requisite Holders to
participate in marketing presentations to potential investors in connection with
any underwritten offering), and in that regard, will deliver to the holders of
the Registrable Securities being sold such documents and certificates as may be
reasonably requested by the Requisite Holders or, as applicable, the managing
underwriters, to evidence the Company's compliance with this Agreement,
including, in the case of any underwritten offering, using commercially
reasonable efforts to cause its independent accountants to deliver to the
managing underwriters an accountants' comfort letter substantially similar to
that in scope delivered in an underwritten public offering and covering audited
and interim financial statements included in the registration statement, or if
such letter cannot be obtained through the exercise of commercially reasonable
efforts, cause its independent accountants to deliver to the managing
underwriters a comfort letter based on negotiated procedures providing comfort
with respect to the Company's financial statements included or incorporated by
reference in the registration statement at the highest level permitted to be
given by such accountants under the then applicable standards of the American
Institute of Certified Public Accountants with respect to such Registration
Statement.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in clause (vii) of this Section
2.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holders receipt of the copies of the
supplemented or amended prospectus contemplated by clause (vii) of this Section
2.3 and, if so directed by the Company, will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in such
holder's possession of the prospectus redating to such Registrable Securities
current at the time of receipt of such notice. If the Company shall give such
notice, the 90-day time period mentioned in clause (ii) of this Section 2.3
shall be extended by the number of days during the period from and including the
date of the giving of such notice to and including the date when the holders
shall have received the copies of the supplemented or amended prospectus
contemplated by clause (vii) of this Section 2.3.
2.4. UNDERWRITTEN OFFERINGS.
(a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the underwriters
for any underwritten offering by holders of Registrable Securities pursuant to
the Full Demand Registration requested under Section 2.1, the Company will enter
into an underwriting agreement with such underwriters for such offering, such
agreement to be satisfactory in substance and form to each such holder and the
underwriters and to contain such representations and warranties by the Company
and such other terms as are generally prevailing in underwriting agreements of
the same type, including, without limitation, indemnities to the effect and to
the extent provided in Section 2.6. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to such underwriting agreement
and may, at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such holders of Registrable Securities and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement shall also be conditions precedent to the obligations such holders of
Registrable Securities. Any such holder of Registrable Securities shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding such holder, such holder's Registrable Securities and such holder's
intended method of distribution and any other representation required by law.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any holder
of Registrable Securities as provided in Section 2.2 and subject to the
provisions of Section 2.2(b), arrange for such underwriters to include all the
Registrable Securities to be offered and sold by such holder among the
securities to be distributed by such underwriters. In the event that the
managing underwriter of such underwritten offering shall inform the Company and
the holders of the Registrable Securities requesting the inclusion of
Registrable Securities in such offering by letter of its belief that the number
of securities requested to be included in such offering exceeds the number which
can be sold in such offering, then the Company may include in such offering all
securities proposed by the Company to be sold for its own account and will
include in such registration, to the extent of the number which the Company is
so advised can be sold in such offering, FIRST, all securities proposed by the
Company to be sold for its own account, SECOND, such Registrable Securities
requested to be included in such offering pro rata on the basis of the numbers
of such Registrable Securities so requested to be included and THIRD, all other
securities of the Company requested to be included in such registration pro rata
on the basis of the numbers of such securities so requested to be included). The
holders of Registrable Securities to be distributed by such underwriters shall
be parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwrites under such
underwriting agreement shall also be conditions precedent to the obligations of
such holders of Registrable Securities. Any such holder of Registrable
Securities shall not be required to make any representations or Warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such holder, such holder's Registrable
Securities and such holder's intended method of distribution and any other
representation required by law.
2.5. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
2.6. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any registration
of any securities of the Company under the Securities Act, the Company will, and
hereby does, indemnify and hold harmless the seller of any Registrable
Securities covered by such registration statement, its directors and officers,
its affiliates, each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who controls
such seller or any such underwriter within the meaning of the Securities Act, or
any such director or officer or underwriter or controlling person which may
become subject under the Securities Act or otherwise, from and against any loss,
claim, damage or liability, or any action in respect thereof, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse such seller and each such director, officer,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigation or defending any
such loss, claim, liability, action or proceeding, PROVIDED that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information finished
to the Company through an instrument duly executed by such seller specifically
stating that it is for use in the preparation thereof. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such seller or any such director, officer, underwriter or controlling
person and shall survive the transfer of such securities by such sellers.
(b) INDEMNIFICATION BY THE SELLERS. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed pursuant to Section 2.3, that the Company shall have received an
undertaking satisfactory to it from the prospective seller of such Registrable
Securities, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 2.6(a)) the Company, its directors and officers
and each other Person, if any, who controls the Company within the meaning of
the Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such seller specifically stating that it is for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; PROVIDED, HOWEVER, that no such seller
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such seller from the sale of the Registrable Securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in Section 2.6(a) or 2.6(b), such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action, PROVIDED that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under Section 2.6(a) or
2.6(b), as the case may be, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
(d) OTHER INDEMNIFICATION. Indemnification similar to that specified
in this Section 2.6 (with appropriate modifications) shall be given by the
Company and each seller of Registrable Securities with respect to any required
registration or other qualification of securities under any Federal or state law
or regulation of any governmental authority other than the Securities Act.
(e) INDEMNIFICATION PAYMENTS. The indemnification required by this
Section 2.6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
2.7. ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will
not effect or permit to occur any combination or subdivision of shares which
would adversely affect the ability of the holders of Registrable Securities to
include such Registrable Securities in any registration of its securities or the
marketability of such Registrable Securities under any such registration.
3. DEFINITIONS. As used herein (A) capitalized terms that are not
otherwise defined shall have the meanings assigned thereto in Appendix A to the
Master Restructuring Agreement and (B) unless the context otherwise requires,
the following terms have the following respective meanings:
COMMISSION: The Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
COMPANY: As defined in the introductory paragraph of this Agreement.
EXCHANGE ACT: The Securities Exchange Act of 1934, or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time. Reference to a particular section of
the Securities Exchange Act of 1934 shall include a reference to the comparable
section, if any, of any such similar Federal statute.
FULL DEMAND REGISTRATION: A registration requested pursuant to Section
2.1 and specified as such by the holders of Registrable Securities requesting
the same, and in respect of which such holders may require that it be an
underwritten registration.
FULL DEMAND REQUEST: As defined in Section 2.1(a).
LIFO LENDER: As defined in the introductory paragraph to this
Agreement.
LIMITED DEMAND REGISTRATION: A registration requested pursuant to
Section 2.1 and specified as such by the holders of Registrable Securities
requesting the same, and in respect of which such holders may not require that
it be an underwritten registration.
PERSON: As defined in Appendix A to the Master Restructuring
Agreement.
PURCHASED SECURITIES: As defined in Section 1.
REGISTRABLE SECURITIES: (a) the Warrants, (b) the shares of Common
Stock or other equity securities issued or issuable pursuant to the Warrants or
issued to the holders thereof as such holders, (c) any securities purchased upon
exercise, or issued upon conversion or exchange, of other Registrable
Securities, and (d) any securities issued or issuable with respect to any other
Registrable Securities by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (ii) such securities
shall have been distributed to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act, (iii) such securities shall have been
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require registration or qualification
of them under the Securities Act or any similar state law then in force, (iv)
such securities shall be free to be sold under Rule 144(k) (or any successor
provision) under the Securities Act, or (v) such securities shall have ceased to
be outstanding.
REGISTRATION EXPENSES: All expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration, filing and National Association of Securities Dealers fees, all
fees and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and delivery expenses,
the fees and disbursements of counsel for the Company and of its independent
public accountants, including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and compliance, the
fees and disbursements incurred by the holders of Registrable Securities to be
registered (including the fees and disbursements of any counsel and accountants
retained by the any such holders), premiums and other costs of policies of
insurance against liabilities arising out of the public offering of the
Registrable Securities being registered obtained by the Company and any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities, the fees and expenses incurred in connection with the listing of
Registrable Securities on each securities exchange on which Company securities
of the same class are then listed or with the Nasdaq National Market System (but
excluding underwriting discounts and commissions and transfer taxes, if any).
REQUISITE HOLDERS: (a) In connection with a Limited Demand
Registration, the holders of not less than 17.5% of the aggregate number of
Registrable Securities at the time outstanding, and (b) in connection with the
Full Demand Registration, the holders of not less than a majority of the
aggregate number of Registrable Securities outstanding at the time of the Full
Demand Request.
SECURITIES ACT: The Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder, all as of
the same shall be in effect at the time. References to a particular section of
the Securities Act of 1933 shall include a reference to the comparable section,
if any, of any such similar Federal Statute.
WARRANTS: As defined in Section 1.
All references herein to the holder or holders of Registrable
Securities shall also include holders of the Warrants, with the number of shares
of Registrable Securities being held by such holder being the number issuable
upon exercise of such Warrants.
4. RULE 144. If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, the Company will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission thereunder
(or, if the Company is not required to file such reports, will, upon the request
of any holder of Registrable Securities, make publicly available other
information) and will take such further action as any holder of Registrable
Securities may reasonably request, all to the extent required from time to time
to enable such holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144 under the Securities Act, as such Rule may be amended from time to time, or
(b) any similar rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended and the
Company may take any action herein prohibited or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holders of
not less than 51% of the Registrable Securities outstanding at the time of any
such amendment or waiver. Each holder of any Registrable Securities at the time
or thereafter outstanding shall be bound by any consent authorized by this
Section 5, whether or not such Registrable Securities shall have been marked to
indicate such consent.
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of Registrable Securities held by any
holder or holders of Registrable Securities contemplated by this Agreement. If
the beneficial owner of any Registrable Securities so elects the Company may
require assurances reasonably satisfactory to it of such owner's beneficial
ownership of such Registrable Securities.
7. NOTICES. All communications provided for hereunder shall be sent by
first-class mail, by nationwide overnight delivery service (with charges
prepaid) or by facsimile transmission (confirmed by delivery by nationwide
overnight delivery service sent on the day of the sending of such facsimile
transmission) and (a) if addressed to a party other than the Company, addressed
to such party in the manner set forth in the Master Restructuring Agreement, or
at such other address as such party shall have furnished to the Company in
writing, or (b) if addressed to the Company, at 2950 Lake Emma Road, Lake Mary,
FL 32746, Attention: Corporate Secretary (Facsimile no. 407-444-0559) or at such
other address, or to the attention of such other officer, as the Company shall
have furnished to each holder of Registrable Securities at the time outstanding
PROVIDED, HOWEVER, that any such communication to the Company may also, at the
option of any of the parties hereunder, be either delivered to the Company at
its address set forth above or to any officer of the Company.
8. EXPENSES. The Company will pay, and save each Person which is or
has been the holder of a Warrant or Registrable Securities issuable upon
exercise thereof (a "SECURITYHOLDER") harmless against liability for the payment
of, all out-of-pocket expenses arising in connection with the transactions
contemplated by this Agreement, including (i) all document production and
duplication charges and the reasonable fees and expenses of any counsel engaged
by any Securityholder in connection with this Agreement, the transactions
contemplated hereby and any subsequent proposed modification, amendment or
waiver of, or proposed consent under, this Agreement, whether or not such
proposed modification, amendment or waiver shall be effected or proposed consent
granted, and (ii) the costs and expenses, including reasonable attorneys' fees,
incurred by any Securityholder in enforcing or defending (or determining whether
or how to enforce or defend) any rights under this Agreement or in responding to
any subpoena or other legal process or informal investigative demand issued in
connection with this Agreement or the transactions contemplated thereby or by
reason of the Securityholders having acquired any Warrant or Registrable
Securities issuable upon exercise thereof, including without limitation costs
and expenses (including the costs and expenses of financial advisors) incurred
in any bankruptcy case or in connection with any work-out or restructuring of
the transactions contemplated by this Agreement. The Company will pay, and will
save each Securityholder harmless from all claims in respect of any fees, costs
or expenses, if any, of brokers and finders (other than those retained by any
such holder). The obligations of the Company under this Section 5 shall survive
the transfer or exercise of any Warrant or Registrable Securities or any portion
thereof or interest therein by the Securityholder.
9. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit of
and enforceable by any subsequent holder of any Registrable Securities.
10. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
11. SPECIFIC PERFORMANCE. The parties hereto recognize and agree that
money damages may be insufficient to compensate the holders of any Registrable
Securities for breaches by the Company of the terms hereof and, consequently,
that the equitable remedy of specific performance of the terms hereof will be
available in the event of any such breach.
12. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
13. COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
RECOTON CORPORATION
By: /S/ STUART MONT
----------------------------
Name: Stuart Mont
Title: Executive Vice President-Operations
LIFO LENDERS
THE CHASE MANHATTAN BANK
By: /S/ ROGER ODELL
-------------------------------
Name: Roger Odell
Title: Managing Director
HARRIS TRUST AND SAVINGS BANK
By: /S/ RAYMOND C. WHITACRE
-------------------------------
Name: Raymond C. Whitacre
Title: Managing Director
HSBC BANK U.S.A. (formerly known as MARINE
MIDLAND BANK)
By: /S/ FERNANDO A. TORRES
--------------------------------
Name: Fernando A. Torres
Title: Vice President
FIRST UNION NATIONAL BANK
By: /S/ JAMES R. CONNORS
----------------------------
Name: James R. Connors
Title: Senior Vice President
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /S/ PAUL L. MEIRING
-------------------------------
Name: Paul L. Meiring
Title: Vice President
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: /S/ ANTHONY C. URICK
--------------------------------
Name: Anthony C. Urick
Title: Authorized Officer
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
By: /S/ ANTHONY C. URICK
----------------------------------
Name: Anthony C. Urick
Title: Authorized Officer
MELLON BANK, N.A., AS TRUSTEE FOR THE
LONG-TERM INVESTMENT TRUST, solely in its
capacity as Trustee and not in its individual
capacity (as directed by John Hancock Mutual
Life Insurance Company)
By: /S/ CAROLE BRUNO
-------------------------------
Name: Carole Bruno
Title: Authorized Signature
MELLON BANK, N.A. AS TRUSTEE FOR BELL ATLANTIC
MASTER PENSION TRUST, solely in its capacity
as Trustee and not in its individual capacity
(as directed by John Hancock Mutual Life
Insurance Company)
By: /S/ CAROLE BRUNO
---------------------------------
Name: Carole Bruno
Title: Authorized Signature
THE NORTHERN TRUST COMPANY, AS TRUSTEE OF THE
LUCENT TECHNOLOGIES INC. MASTER PENSION TRUST
BY: John Hancock Mutual Life Insurance
Company, as Investment Manager
By: /S/ ANTHONY C. URICK
------------------------------------
Name: Anthony C. Urick
Title: Authorized Officer
INVESTORS PARTNER LIFE INSURANCE COMPANY
By: /S/ ANTHONY C. URICK
------------------------------------
Name: Anthony C. Urick
Title: Authorized Officer
EXHIBIT 6
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT.
RECOTON CORPORATION
1999 REPLACEMENT COMMON STOCK PURCHASE WARRANT
No. RR-___ New York, New York
PPN: 756268 2* 8 September 8, 1999
RECOTON CORPORATION (the "COMPANY"), a New York corporation, for value
received, hereby certifies that __________ or its registered assigns is entitled
to purchase from the Company __________duly authorized, validly issued, fully
paid and nonassessable common shares of the Company, par value $0.20 per share
(the "ORIGINAL COMMON STOCK"), at an initial exercise price per share equal to
$7.76875 (the "INITIAL EXERCISE PRICE") at any time or from time to time
after the date hereof and prior to 5:00 p.m. (United States Eastern Time), on
the fifth anniversary date of the date hereof (the "EXPIRATION DATE"), all
subject to the terms, conditions and adjustments set forth below in this
Warrant; PROVIDED, HOWEVER, that if on the fifth anniversary date of the date
hereof, the Company is then required, pursuant to an effective request therefor
under the Registration Rights Agreement (as defined herein), or is in the
process of effecting a registration under the Securities Act for a public
offering in which Warrant Shares (as defined herein) are entitled to be included
as provided in the Registration Rights Agreement, or if the Company is in
default of any of such obligations to register the sale of such shares, the
right to exercise this Warrant shall continue until 5:00 p.m. (United States
Eastern Time) on the 30th day following the date on which such registration
shall have become effective or on the 30th day following the date all such
defaults shall have been cured, whichever is the later date.
This Warrant is one of the 1999 Replacement Warrants (the "WARRANTS",
such term to include all Warrants issued in substitution therefor or upon
transfer thereof) issued pursuant to Section 2.4(c) of the Master Restructuring
Agreement (such term, and all other capitalized terms used herein without being
otherwise defined, having the meaning referred to in Section 13 below) as a
substitute for the Additional Warrants to be issued pursuant to the 1999 Note.
The Warrants originally so issued evidence rights to purchase an aggregate of
100,000 shares of Original Common Stock, subject to adjustment as provided
herein.
SECTION 1. EXERCISE OF WARRANT.
A. MANNER OF EXERCISE. This Warrant may be exercised by the holder
hereof, in whole or in part during normal business hours on any Business Day
during the Exercise Period, by surrender of this Warrant, with the form of
subscription at the end hereof (or a reasonable facsimile thereof) duly executed
by such holder, to the Company at the principal office of the Company located at
2950 Lake Emma Road, Lake Mary, FL 32746, or such other location in the United
States which shall at the time be the principal office of the Company and of
which the Company shall have notified the holder hereof in writing (or, if such
exercise shall be in connection with an underwritten public offering of shares
of Common Stock (or Other Securities) subject to this Warrant, at the location
at which the underwriters shall have agreed to accept delivery thereof),
accompanied by payment of an amount obtained by multiplying (a) the number of
shares of Original Common Stock (without giving effect to any adjustment
therein) designated in such form of subscription by (b) the Initial Exercise
Price (the "EXERCISE PAYMENT"). The Exercise Payment shall be payable (i) in
cash or its equivalent, (ii) in shares of Common Stock newly acquired upon
exercise of this Warrant (valued at the Market Price), (iii) by surrendering to
the Company the right to purchase a number of shares of Common Stock issuable
upon exercise of this Warrant (valued at the Market Price) equal to the product
obtained by multiplying the number of shares of Common Stock to be purchased
(including the shares relating to the surrendered rights) by a fraction, the
numerator of which is the Exercise Payment per share and the denominator of
which is the Market Price per share, or (iv) any combination of (i), (ii) and
(iii).
B. ADJUSTMENT TO NUMBER OF SHARES OF COMMON STOCK. The number of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
which the holder of this Warrant shall be entitled to receive upon each exercise
hereof shall be determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of Section 2) be issuable upon
such exercise, as designated by the holder hereof pursuant to this Section 1B,
by a fraction of which (x) the numerator is the Initial Exercise Price and (y)
the denominator is the Exercise Price in effect on the date of such exercise.
The "Exercise Price" shall initially be an amount equal to the Initial Exercise
Price per share, shall be adjusted and readjusted from time to time as provided
in Section 2 and, as so adjusted and readjusted, shall remain in effect until a
further adjustment or readjustment thereof is required by Section 2.
C. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be
deemed to have been effected and the Exercise Price shall be determined
immediately prior to the close of business on the Business Day on which this
Warrant shall have been surrendered to the Company as provided in Section 1A,
and at such time the person or persons in whose name or names any certificate or
certificates for shares of Original Common Stock (or Other Securities) shall be
issuable upon such exercise as provided in Section 1D shall be deemed to have
become the holder or holders of record thereof.
D. DELIVERY OF STOCK CERTIFICATES, ETC. Promptly after the exercise of
this Warrant, in whole or in part, and in any event within three Business Days
thereafter (unless such exercise shall be in connection with an underwritten
public offering of shares of Common Stock (or Other Securities) subject to this
Warrant, in which event concurrently with such exercise), the Company at its
expense will cause to be issued in the name of and delivered to the holder
hereof or, subject to Section 8, as such holder may direct,
(1) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be entitled upon such
exercise, and
(2) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, specifying the aggregate on the face or faces thereof the
number of shares of Common Stock equal to the number of such shares
specified on the face of this Warrant minus the number of such shares
designated by the holder upon such exercise as provided in Section 1A.
E. COMPANY TO REAFFIRM OBLIGATIONS. The Company will, at the time of
or at any time after each exercise of this Warrant, upon the request of the
holder hereof or of any shares of Common Stock (or Other Securities) issued upon
such exercise, acknowledge in writing its continuing obligation to afford to
such holder all rights to which such holder shall continue to be entitled after
such exercise in accordance with the terms of this Warrant, PROVIDED that if any
such holder shall fail to make any such request, the failure shall not affect
the continuing obligation of the Company to afford such rights to such holder.
F. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant and no payment or adjustment shall be made upon any
exercise on account of any cash dividends (except as provided in Section 2B) on
the Common Stock or Other Securities issued upon such conversion. If any
fractional interest in a share of Common Stock would, except for the provisions
of the first sentence of this Section 1F, be deliverable upon the exercise of
this Warrant, the Company shall, in lieu of delivering the fractional share
therefor, pay to the holder exercising this Warrant an amount in cash equal to
the Market Price of such fractional interest.
SECTION 2. PROTECTION AGAINST DILUTION OR OTHER IMPAIRMENT OF RIGHTS;
ADJUSTMENTS OF EXERCISE PRICE.
A. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case the Company,
at any time or from time to time after September 8, 1999 (the "INITIAL DATE"),
shall issue or sell Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section 2D or 2E) without
consideration or for a consideration per share (determined pursuant to Section
2F) less than 95% of the Market Price in effect, in each case, on the date of
and immediately prior to such issue or sale (or, in the case of issuances where
the price has been fixed or finally determined by contract prior to the date of
such issuance or sale, as of the date that such price is fixed or finally
determined), then, and in each such case, subject to Section 2I, the Exercise
Price shall be reduced, concurrently with such issue or sale, to a price
(calculated to the nearest .001 of a cent) determined by multiplying such
Exercise Price by a fraction,
a) the numerator of which shall be (i) the number of shares of Common
Stock outstanding immediately prior to such issue or sale plus (ii) the
number of shares of Common Stock which the aggregate consideration received
by the Company for the total number of such Additional Shares of Common
Stock so issued or sold would purchase at the Market Price, and
b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale,
PROVIDED that, for the purposes of this Section 2A, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant to
Section 2D or 2E, such Additional Shares shall be deemed to be outstanding, and
(y) treasury shares shall not be deemed to be outstanding.
B. EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS; PRO RATA REPURCHASES. In
case the Company at any time or from time to time after the date hereof shall
declare, order, pay or make a dividend or other distribution to the holders of
the Common Stock (including, without limitation, any distribution of other or
additional stock or other securities or property or Options by way of dividend
or spin-off, reclassification, recapitalization or similar corporate
rearrangement and any redemption or acquisition of any such stock or Options on
the Common Stock), other than (a) a dividend payable in additional Shares of
Common Stock or in Options for Common Stock or (b) a regular periodic dividend
payable in cash and not constituting an Extraordinary Cash Dividend, then, and
in each such case, the Company shall pay over to the holder of this Warrant, on
the date on which such dividend or other distribution is paid to the holders of
Common Stock, the securities and property (including cash) which such holder
would have received if such holder had exercised this Warrant immediately prior
to the record date fixed in connection with such dividend or other distribution.
In case the Company or any subsidiary thereof shall make a Pro Rata Repurchase,
the Exercise Price shall be adjusted by dividing the Exercise Price in effect
immediately prior to such action by a fraction (which in no event shall be less
than one), the numerator of which shall be the product of (A) the number of
shares of Common Stock outstanding immediately before such Pro Rata Repurchase
minus the number of shares of Common Stock repurchased in such Pro Rata
Repurchase and (B) the Market Price as of the date immediately preceding the
first public announcement by the Company of the intent to effect such Pro Rata
Repurchase, and the denominator of which shall be (A) the product of (x) the
number of shares of Common Stock outstanding immediately before such Pro Rata
Repurchase and (y) the Market Price as of the date immediately preceding the
first public announcement by the Company of the intent to effect such Pro Rata
Repurchase minus (B) the aggregate purchase price of the Pro Rata Repurchase.
C. ABOVE MARKET REPURCHASES OF COMMON STOCK. In case the Company, at
any time or from time to time after the date hereof shall repurchase, by
self-tender offer or otherwise, any shares of Common Stock (or any Options or
Convertible Securities) at a purchase price in excess of the Market Price
thereof, on the Business Day immediately prior to the earliest of (i) the date
of such repurchase, (ii) the commencement of an offer to repurchase, or (iii)
the public announcement of either (such date being the "DETERMINATION DATE"),
the Exercise Price shall be determined by dividing the Exercise Price by a
fraction, the numerator of which shall be the product of (A) the number of
shares of Common Stock outstanding immediately prior to such Determination Date
minus the number of shares of Common Stock repurchased and (B) the Market Price
as of the Determination Date, and the denominator of which shall be (A) the
product of (x) the number of shares of Common Stock outstanding immediately
before such repurchase and (y) the Market Price as of the Determination Date,
minus (B) the aggregate purchase price of such repurchase; PROVIDED, that in the
case of a self-tender offer by the Company, any shares of Common Stock issued
upon the exercise or partial exercise of this Warrant at an Exercise Price
adjusted pursuant to this Section 2C due to such self-tender offer, shall not be
eligible to be sold in such self-tender offer.
D. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case the
Company, at any time or from time to time after the date hereof, shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable, then, and
in each such case, the maximum number of Additional Shares of Common Stock (as
set forth in the instrument relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
thereof, issuable upon the conversion or exchange of such Convertible Securities
(or the exercise of such Options for Convertible Securities and subsequent
conversion or exchange of the Convertible Securities issued), shall be deemed to
be Additional Shares of Common Stock issued as of the time of such issue, sale,
grant or assumption of such Options or Convertible Securities or, in case such a
record date shall have been fixed, as of the close of business on such record
date; PROVIDED, that such Additional Shares of Common Stock shall not be deemed
to have been issued unless the consideration per share (determined pursuant to
Section 2F) of such shares would be less than 95% of the Market Price in effect
on the date of and immediately prior to such issue, sale, grant or assumption or
immediately prior to the close of business on such record date or, if the Common
Stock trades on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading, as the case may be, and PROVIDED, FURTHER, that in any such
case in which Additional Shares of Common Stock are deemed to be issued,
a) if an adjustment of the Exercise Price shall be made upon the
fixing of a record date as referred to in the first sentence of this
Section 2D, no further adjustment of the Exercise Price shall be made as a
result of the subsequent issue or sale of any Options or Convertible
Securities for the purpose of which such record date was set;
b) no further adjustment of the Exercise Price shall be made upon the
subsequent issue or sale of Additional Shares of Common Stock or
Convertible Securities upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
c) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any change in the consideration
payable to the Company, or change in the number of Additional Shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof
(by change of rate or otherwise), the Exercise Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence
of the record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such change becoming effective, be
recomputed to reflect such change insofar as it affects such Options, or
the rights of conversion or exchange under such Convertible Securities,
which are outstanding at such time;
d) upon the expiration of any such Options or of the rights of
conversion or exchange under any such Convertible Securities which shall
not have been exercised (or upon purchase by the Company and cancellation
or retirement of any such Options which shall not have been exercised or of
any such Convertible Securities the rights of conversion or exchange under
which shall not have been exercised), the Exercise Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence
of the record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or in the case of
Convertible Securities, the only Additional Shares of Common Stock issued
or sold (or deemed issued or sold) were the Additional Shares of Common
Stock, if any, actually issued or sold upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and the
consideration received therefor was (x) an amount equal to (A) the
consideration actually received by the Company for the issue, sale, grant
or assumption of all such Options, whether or not exercised, plus (B) the
consideration actually received by the Company upon such exercise, minus
(C) the consideration paid by the Company for any purchase of such Options
which were not exercised, or (y) an amount equal to (A) the consideration
actually received by the Company for the issue, sale, grant or assumption
of all such Convertible Securities which were actually converted or
exchanged, plus (B) the additional consideration, if any, actually received
by the Company upon such conversion or exchange, minus (C) the excess, if
any, of the consideration paid by the Company for any purchase of such
Convertible Securities, the rights of conversion or exchange under which
were not exercised, over an amount that would be equal to the Fair Value of
the Convertible Securities so purchased if such Convertible Securities were
not convertible into or exchangeable for Additional Shares of Common Stock,
and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the exercise
of such Options were issued at the time of the issue, sale, grant or
assumption of such Options, and the consideration received by the Company
for the Additional Shares of Common Stock deemed to have then been issued
was an amount equal to (x) the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options,
whether or not exercised, PLUS (y) the consideration deemed to have been
received by the Company (pursuant to Section 2F) upon the issue or sale of
the Convertible Securities with respect to which such Options were actually
exercised, minus (z) the consideration paid by the Company for any purchase
of such Options which were not exercised; and
e) no recomputation pursuant to subsection (c) or (d) above shall have
the effect of increasing the Exercise Price then in effect by an amount in
excess of the amount of the adjustment thereof originally made in respect
of the issue, sale, grant or assumption of such Options or Convertible
Securities.
Notwithstanding the foregoing provisions of this Section 2D, any
rights, options or warrants (herein called "SPECIAL OPTIONS") distributed by the
Company to all holders of Common Stock that entitle the holders thereof to
purchase shares of the Company's capital stock (either initially or under
certain circumstances), and that, until the occurrence of an event (the "TRIGGER
EVENT") (i) are deemed to be transferred with the Common Stock, (ii) are not
exercisable and (iii) are also issued in respect of future issuances of Common
Stock, shall not be deemed to have been distributed for the purposes of this
Section 2D (and no adjustment of the Exercise Price shall be required) until the
occurrence of the earliest Trigger Event. In addition, in the event of any
distribution of Special Options, or any Trigger Event with respect thereto, that
shall have resulted in an adjustment of the Exercise Price under this Section
2D, (A) in the case of any Special Options that shall have been redeemed or
repurchased without exercise by any holders thereof, the Exercise Price shall be
readjusted upon such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though it were an
Extraordinary Cash Dividend, equal to the per share redemption or repurchase
price received by a holder of Common Stock with respect to such Special Options
(assuming such holder had retained the same), made to all holders of Common
Stock as of the date of such redemption or repurchase, and (2 in the case of any
such Special Options all of which shall have expired or terminated without
having been exercised, redeemed or repurchased, the Exercise Price shall be
readjusted as if such distribution had not occurred.
E. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the
Company, at any time or from time to time after the date hereof, shall declare
or pay any dividend or other distribution on any class of securities of the
Company payable in shares of Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in Common
Stock), then, and in each such case, Additional Shares of Common Stock shall be
deemed to have been issued (a) in the case of any such dividend or other
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or other distribution, or (b) in the case of any such subdivision, at
the close of business on the day immediately prior to the day upon which such
corporate action becomes effective.
F. COMPUTATION OF CONSIDERATION. For the purposes of this Warrant:
a) The consideration for the issue or sale of any Additional Shares of
Common Stock or for the issue, sale, grant or assumption of any Options or
Convertible Securities, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, shall be computed as the
amount of cash received by the Company, and insofar as it consists of
securities or other property, shall be computed as of the date
immediately preceding such issue, sale, grant or assumption as the
Fair Value of such consideration (or, if such consideration is
received for the issue or sale of Additional Shares of Common Stock
and the Market Price thereof is less than the Fair Value of such
consideration, then such consideration shall be computed as the Market
Price of such Additional Shares of Common Stock), in each case without
deducting any expenses paid or incurred by the Company, any
commissions or compensation paid or concessions or discounts allowed
to underwriters, dealers or others performing similar services and any
accrued interest or dividends in connection with such issue or sale,
and
(ii) in case Additional Shares of Common Stock are issued or sold
or Options or Convertible Securities are issued, sold, granted or
assumed together with other stock or securities or other assets of the
Company for a consideration which covers both, shall be the proportion
of such consideration so received, computed as provided in clause (i)
above, allocable to such Additional Shares of Common Stock or Options
or Convertible Securities, as the case may be, all as determined in
good faith by the Board of Directors of the Company.
b) All Additional Shares of Common Stock, Options or Convertible
Securities issued in payment of any dividend or other distribution on any
class of stock of the Company and all Additional Shares of Common Stock
issued to effect a subdivision of the outstanding shares of Common Stock
into a greater number of shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock) shall be deemed to
have been issued without consideration.
c) Additional Shares of Common Stock deemed to have been issued for
consideration pursuant to Section 2D, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per
share determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, PLUS the minimum
aggregate amount of additional consideration (as set forth in the
instrument relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to
the Company upon the exercise in full of such Options or the
conversion or exchanges of such Convertible Securities or, in the case
of Options for Convertible Securities, the exercise of such Options
for Convertible Securities and the conversion or exchange of such
Convertible Securities, in each case computing such consideration as
provided in the foregoing subsection (a),
by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.
G. ADJUSTMENTS FOR COMBINATIONS, ETC. In case the outstanding shares
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
H. MINIMUM ADJUSTMENT OF EXERCISE PRICE. If the amount of any
adjustment of the Exercise Price required hereunder would be less than one
percent of the Exercise Price in effect at the time such adjustment is otherwise
so required to be made, such amount shall be carried forward and adjustment with
respect thereto made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate at least one percent of such Exercise Price; PROVIDED,
that upon the exercise of this Warrant all adjustment carried forward and not
therefore made up to and including the date of such exercise shall be made to
the nearest .001 of a cent.
I. CHANGES IN COMMON STOCK. At any time while this Warrant remains
outstanding and unexpired, in case of any reclassification or change of
outstanding securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination of
outstanding securities issuable upon the exercise of this Warrant) or in case of
any consolidation or merger of the Company with or into another corporation
(herein called a "TRANSACTION") (other than a merger with another corporation in
which the Company is a continuing corporation and which does not result in any
reclassification or change, other than a change in par value, or from par value
to no par value, or from no value to par value, or as a result of a subdivision
or combination of outstanding securities issuable upon the exercise of this
Warrant), the Company, or such successor corporation, as the case may be, shall,
without payment of any additional consideration therefor, execute and deliver to
the holder of this Warrant (upon surrender of this Warrant) a new Warrant
providing that the holder of this Warrant shall have the right to exercise such
new Warrant (upon terms not less favorable to the holder of this Warrant than
those then applicable to this Warrant) and to receive upon such exercise, in
lieu of each share of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money or
property receivable upon such reclassification, change, consolidation or merger,
by the holder of one Common Share issuable upon exercise of this Warrant had it
been exercised immediately prior to such reclassification, change, consolidation
or merger. Such new Warrant shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustment provided for in this
Section 2. Notwithstanding the foregoing, in the case of any Transaction which
pursuant to this Section 2I would result in the execution and delivery by the
Company or any successor of a new Warrant to the holder of this Warrant and in
which the holders of shares of Common Stock are entitled only to receive money
or other property exclusive of common equity securities, then in lieu of such
new Warrant being exercisable as provided above, the holder of this Warrant
shall have the right, at its sole option, to require the Company to purchase
this Warrant (without prior exercise by the holder of this Warrant) at its fair
value as of the day before such Transaction became publicly known, as determined
by an unaffiliated internationally recognized accounting firm or investment bank
selected by the holder of this Warrant and reasonably acceptable to the Company.
The provisions of this Section 2I shall similarly apply to successive
reclassifications, changes, consolidations, mergers, sales and transfers.
Notwithstanding anything contained herein to the contrary, the Company shall not
effect any Transaction unless prior to the consummation thereof each corporation
or entity (other than the Company) which may be required to deliver any
securities or other property upon the exercise of Warrants shall assume, by
written instrument delivered to each holder of Warrants, the obligation to
deliver to such holder such securities or other property as to which, in
accordance with the foregoing provisions, such holder may be entitled, and such
corporation or entity shall have similarly delivered to each holder of Warrants
an opinion of counsel for such corporation or entity, satisfactory to each
holder of Warrants, which opinion shall state that all the outstanding Warrants,
shall thereafter continue in full force and effect and shall be enforceable
against such corporation or entity in accordance with the terms hereof and
thereof, together with such other matters as such holders may reasonably
request.
J. CERTAIN ISSUES EXCEPTED. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustments of
the Exercise Price in the case of the issuance of the Warrants and the issuance
of shares of Common Stock issuable upon exercise of the Warrants.
K. NOTICE OF ADJUSTMENT. Upon the occurrence of any event requiring an
adjustment of the Exercise Price, then and in each such case the Company shall
promptly deliver to the holder of this Warrant an Officer's Certificate stating
the Exercise Price resulting from such adjustment and the increase or decrease,
if any, in the number of shares of Common Stock issuable upon the exercise of
this Warrant, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Within 90 days after each fiscal
year in which any such adjustment shall have occurred, or within 30 days after
any request therefor by the holder of this Warrant stating that such holder
contemplates the exercise of such Warrant, the Company will obtain and deliver
to the holder of this Warrant the opinion of its regular independent auditors or
another firm of independent public accountants of recognized national standing
selected by the Company's Board of Directors, which opinion shall confirm the
statements in the most recent Officer's Certificate delivered under this Section
2K.
L. OTHER NOTICES. In case at any time:
a) the Company shall declare or pay any dividend upon Common Stock
payable in stock or make any dividend or other distribution to the holders
of Common Stock;
b) the Company shall offer for subscription pro rata to the holders of
Common Stock any additional shares of stock of any class or other rights;
c) there shall be any capital reorganization, or reclassification of
the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another
corporation or other entity (other than a merger or consolidation with a
directly or indirectly wholly-owned subsidiary of the Company in which the
Company is the survivor);
d) there shall be voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
e) there shall be made any tender offer for any shares of capital
stock of the Company; or
f) there shall be any other Transaction.
then, in any one or more of such cases, the Company shall give to the holder of
this Warrant (i) at least 15 days prior to the record date for any dividend or
distribution referred to in subsection (a) above, at least 30 days prior to any
event referred to in subsection (b), (c) or (d) above, and within five days
after it has knowledge of any pending tender offer or other Transaction, written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up or Transaction or the date by which shareholders must tender shares
in any tender offer and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up or tender offer or Transaction known to the Company, at least 30 days
prior written notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
notice in accordance with the foregoing clause (i) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (ii) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up, tender offer or Transaction, as the case may be. Such notice shall
also state that the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act or to a
favorable vote of security holders or any other approval requirement, if such is
required.
M. CERTAIN EVENTS. If any event occurs as to which, in the good faith
judgment of the Board of Directors of the Company, the other provisions of this
Warrant are not strictly applicable or if strictly applicable would not fairly
protect the exercise rights of the holders of the Warrants in accordance with
the essential intent and principles of such provisions, then the Board of
Directors of the Company shall make such adjustments, if any, on a basis
consistent with such essential intent and principles, necessary to preserve,
without dilution, the rights of the holders of the Warrants; PROVIDED, that no
such adjustment shall have the effect of increasing the Exercise Price as
otherwise determined pursuant to this Warrant. The Company may make such
reductions in the Exercise Price as it deems advisable, including any reductions
necessary to ensure that any event treated for Federal income tax purposes as a
distribution of stock or stock rights not be taxable to recipients.
N. PROHIBITION OF CERTAIN ACTIONS. The Company will not, by amendment
of its certificate of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions of
this Warrant and in the taking of all such action as may be necessary in order
to protect the exercise privilege of the holder of this Warrant against dilution
or other impairment, consistent with the tenor and purpose of this Warrant.
Without limiting the generality of the foregoing, the Company (a) will not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, (b) will take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of all Warrants from time to time outstanding, and (c) will
not take any action which results in any adjustment of the Exercise Price if the
total number of shares of Common Stock or Other Securities issuable after the
action upon the exercise of all of the Warrants would exceed the total number of
shares of Common Stock or Other Securities then authorized by the Company's
certificate of incorporation and available for the purpose of issue upon such
conversion.
SECTION 3. STOCK TO BE RESERVED. The Company will at all times reserve
and keep available out of the authorized Common Stock, solely for the purpose of
issue upon the exercise of the Warrants as herein provided, such number of
shares of Common Stock as shall then be issuable upon the exercise of all
outstanding Warrants and the Company will maintain at all times all other rights
and privileges sufficient to enable it to fulfill all its obligations hereunder.
The Company covenants that all shares of Common Stock which shall be so issuable
shall, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable, free from preemptive or similar rights on the part of the holders
of any shares of capital stock or securities of the Company or any other Person,
and free from all taxes, liens and charges with respect to the issue thereof
(not including any income taxes payable by the holders of Warrants being
exercised in respect of gains thereon), and the Exercise Price will be credited
to the capital and surplus of the Company. The Company will take all such action
as may be necessary to assure that such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any applicable
requirements of the National Association of Securities Dealers, Inc. and of any
domestic securities exchange upon which the Common Stock may be listed.
SECTION 4. REGISTRATION OF COMMON STOCK. If any shares of Common Stock
required to be reserved for purposes of the exercise of Warrants require
registration with or approval of any governmental authority under any Federal or
State law (other than the Securities Act, registration under which is governed
by the Registration Rights Agreement), before such shares may be issued upon the
exercise thereof, the Company will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be duly registered or
approved, as the case may be. Shares of Common Stock issuable upon exercise of
the Warrants shall be registered by the Company under the Securities Act or
similar statute then in force if required by the Registration Rights Agreement
and subject to the conditions stated in such agreement. At any such time as the
Common Stock is listed on any national securities exchange or quoted by the
Nasdaq National Market or any successor thereto or comparable system, the
Company will, at its expense, obtain promptly and maintain the approval for
listing on each such exchange or quoting by the Nasdaq National Market on such
successor thereto a comparable systems, upon official notice of issuance, the
shares of Common Stock issuable upon exercise of the then outstanding Warrants
and maintain the listing or quoting of such shares after their issuance so long
as the Common Stock is so listed or quoted; and the Company will also cause to
be so listed or quoted, will register under the Exchange Act and will maintain
such listing or quoting of, any Other Securities that at any time are issuable
upon exercise of the Warrants, if and at the time that any securities of the
same class shall be listed on such national securities exchange by the Company.
SECTION 5. EXPENSES. The Company will pay, and save each Person which
is or has been the holder of a Warrant (a "WARRANTHOLDER") harmless against
liability for the payment of, all out-of-pocket expenses arising in connection
with the transactions contemplated by the Warrants, including (i) all document
production and duplication charges and the reasonable fees and expenses of any
counsel engaged by any Warrantholder in connection with the Warrants or the
transactions contemplated thereby and any subsequent proposed modification,
amendment or waiver of, or proposed consent under, the Warrants, whether or not
such proposed modification, amendment or waiver shall be effected or proposed
consent granted, and (ii) the costs and expenses, including reasonable
attorneys' fees, incurred by any Warrantholder in enforcing or defending (or
determining whether or how to enforce or defend) any rights under the Warrants
or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with the Warrants or the transactions
contemplated thereby or by reason of the Warrantholder's have acquired any
Warrant or any securities issuable upon exercise thereof, including without
limitation costs and expenses (including the costs and expenses of financial
advisors) incurred in any bankruptcy case or in connection with any work-out or
restructuring of the transactions contemplated by the Warrants. The Company will
pay, and will save each Warrantholder harmless from all claims in respect of any
fees, costs or expenses, if any, of brokers and finders (other than those
retained by any such holder). The issuance of certificates for shares of Common
Stock upon exercise of the Warrants shall be made without charge to the
Warrantholders for any issuance tax or other governmental charge in respect
thereof, all of which shall be paid by the Company. The obligations of the
Company under this Section 5 shall survive the transfer or exercise of any
Warrant or any portion thereof or interest therein by the Warrantholder.
SECTION 6. CLOSING OF BOOKS. The Company will at no time close its
transfer books to the transfer of any Warrant or of any share of Common Stock
issued or issuable upon the exercise of any Warrant in any manner which
interferes with the timely exercise of such Warrant.
SECTION 7. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant
shall not entitle the holder thereof to any of the rights of a stockholder of
the Company, except as expressly contemplated herein. No provision of this
Warrant, in the absence of the actual exercise of such Warrant and receipt by
the holder thereof of Common Stock issuable upon such conversion, shall give
rise to any liability on the part of such holder as a stockholder of the
Company, whether such liability shall be asserted by the Company or by creditors
of the Company.
SECTION 8. RESTRICTIVE LEGENDS. Except as otherwise permitted by this
Section 8, each Warrant originally issued and each Warrant issued upon direct or
indirect transfer or in substitution for any Warrant pursuant to this Section 8
shall be stamped or otherwise imprinted with a legend in substantially the
following or a comparable form:
"This Warrant and any shares acquired upon the exercise of this Warrant
have not been registered under the Securities Act of 1933 and may not be
transferred in the absence of such registration or an exemption therefrom
under such Act."
Except as otherwise permitted by this Section 8, (a) each certificate for shares
of Common Stock (or Other Securities) issued upon the exercise of any Warrant,
and (b) each certificate issued upon the direct or indirect transfer of any such
Common Stock (or Other Securities) shall be stamped or otherwise imprinted with
a legend in substantially the following or a comparable form:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933 and may not be transferred in the absence of
such registration or an exception therefrom under such Act."
The holder (or its transferee, as applicable) of any Restricted Securities shall
be entitled to receive from the Company, without expense, new securities of like
tenor not bearing the applicable legend set forth above in this Section 8 when
such securities shall have been (a) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering such
Restricted Securities, (b) disposed of pursuant to the provisions of Rule 144 or
any comparable rule under the Securities Act, or (c) when, in the written
reasonable opinion of independent counsel for the holder thereof experienced in
Securities Act matters, such restrictions are no longer required in order to
insure compliance with the Securities Act (including when the provisions of Rule
144(k) or any comparable rule under the Securities Act have been satisfied). The
Company will pay the reasonable fees and disbursements of counsel for any holder
of Restricted Securities in connection with all opinions rendered pursuant to
this Section 8.
SECTION 9. AVAILABILITY OF INFORMATION. The Company will cooperate
with each holder of any Restricted Securities in supplying such information as
may be necessary for such holder to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any
Restricted Securities. The Company will furnish to each holder of any Warrants,
promptly upon their becoming available, copies of all financial statements,
reports, notices and proxy statements sent or made available generally by the
Company to its stockholders, and copies of all regular and periodic reports and
all registration statements and prospectuses filed by the Company with any
securities exchange or with the Commission.
SECTION 10. INFORMATION REQUIRED BY RULE 144A. The Company will, upon
the request of the holder of this Warrant, provide such holder, and any
qualified institutional buyer designated by such holder, such financial and
other information as such holder may reasonably determine to be necessary in
order to permit compliance with the information requirements of Rule 144A under
the Securities Act in connection with the resale of Warrants, except at such
times as the Company is subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act. For the purpose of this Section 10, the term
"qualified institutional buyer" shall have the meaning specified in Rule 144A
under the Securities Act.
SECTION 11. REGISTRATION RIGHTS AGREEMENT. The holder of this Warrant
and the holders of any securities issued or issuable upon the exercise hereof
are each entitled to the benefits of the Registration Rights Agreement.
SECTION 12. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
A0 OWNERSHIP OF WARRANTS. Except as otherwise required by law, the
Company may treat the Person in whose name any Warrant is registered on the
register kept at the principal office of the Company as the owner and holder
thereof for all purposes, notwithstanding any notice to the contrary except
that, if and when any Warrant is properly assigned in blank, the Company, in its
discretion, may (but shall not be obligated to) treat the bearer thereof as the
owner of such Warrant for all purposes, notwithstanding any notice to the
Company to the contrary. Subject to Section 8, a Warrant, if properly assigned,
may be exercised by a new holder without first having a new Warrant issued.
B0 TRANSFER AND EXCHANGE OF WARRANTS. Upon the surrender of any
Warrant, properly endorsed, for registration of transfer or for exchange at the
principal office of the Company, the Company at its expense will (subject to
compliance with Section 8, if applicable) execute and deliver to or upon the
order of the holder thereof a new Warrant or Warrants of like tenor, in the name
of such holder or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Original Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
C0 REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than the original holder thereof, upon delivery of its
unsecured indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the principal office of the Company, the Company at its expense
will execute and deliver, in lieu thereof, a new Warrant of like tenor.
SECTION 13. DEFINITIONS. As used herein (A) capitalized terms that are
not otherwise defined shall have the meanings assigned thereto in Appendix A to
the Master Restructuring Agreement referred to below and (B) unless the context
otherwise requires, the following terms have the following respective meanings:
"ACQUIRING COMPANY" shall have the meaning specified in Section 2J.
"ACQUIRER'S COMMON STOCK" shall have the meaning specified in Section
2J.
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares (including
treasury shares) of Common Stock issued or sold (or, pursuant to Section 2D or
2E deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than shares of Common
Stock issued upon the exercise or partial exercise of the Warrants and shares
issuable upon exercise of options, warrants or rights granted to employees or
consultants or directors of the Company or its subsidiaries under shareholder
approved plans and other options, warrants or rights in each case providing for
an exercise price of at least 95% of Market Price at the date of grant.
"AFFILIATE" shall have the meaning specified in the 1999 Securities
Purchase Agreement.
"ANNOUNCEMENT DATE" shall have the meaning specified in Section 2J.
"BUSINESS DAY" shall have the meaning specified in MRA Appendix A.
"CLOSING DATE" shall mean the date upon which all conditions precedent
to the making of the initial extensions of credit as set forth in the LIFO
Credit Agreement have been satisfied.
"COMMISSION" shall mean the Securities and Exchange Commission or any
successor federal agency having similar powers.
"COMMON STOCK" shall mean the Original Common Stock, any stock into
which such stock shall have been converted or changed or any stock resulting
from any reclassification of such stock and all other stock of any class or
classes (however designated) of the Company the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.
"COMPANY" shall mean Recoton Corporation, a New York corporation, and
its permitted successors hereunder.
"CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness,
shares of stock (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Additional Shares of Common
Stock.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934, as
amended.
"EXERCISE PERIOD" shall mean the date of this Warrant to and including
the Expiration Date.
"EXERCISE PRICE" shall have the meaning specified in Section 1B.
"EXPIRATION DATE" shall have the meaning specified in the opening
paragraphs of this Warrant.
"EXTRAORDINARY CASH DIVIDEND" shall mean, with respect to any
consecutive 12-month period, the amount, if any, by which the aggregate amount
of all cash and non-cash dividends or distributions on any shares of Common
Stock occurring in such 12-month period (or, if such Common Stock was not
outstanding at the commencement of such 12-month period, occurring in such
shorter period during which such Capital Stock was outstanding) exceeds on a per
share basis 5% of the average of the daily Market Prices per share of such
Common Stock over such 12-month period (or such shorter period during which such
Common Stock was outstanding); PROVIDED that, for purposes of the foregoing
definition, the amount of cash and non-cash dividends paid on a per share basis
will be appropriately adjusted to reflect the occurrence during such period of
any stock dividend or distribution of shares of capital stock of the Company or
any subdivision, split, combination or reclassification of shares of such Common
Stock.
"FAIR VALUE" shall mean with respect to any securities or other
property, the fair value thereof as of a date which is within 15 days of the
date as of which the determination is to be made as determined by the Board of
Directors of the Company in good faith, unless such determination is to be made
in connection with a transaction with an Affiliate in which case such fair value
shall be (a) determined by agreement between the Company and the Required
Holders, or (b) if the Company and the Required Holders fail to agree,
determined jointly by an independent investment banking firm retained by the
Company and by an independent investment banking firm retained by the Required
Holders, either of which firms may be an independent investment banking firm
regularly retained by the Company, or (c) if the Company or the Required Holders
shall fail so to retain an independent investment banking firm within 10
Business Days of the retention of such a firm by the Required Holders or the
Company, as the case may be, determined solely by the firm so retained, or (d)
if the firms so retained by the Company and by such holders shall be unable to
reach a joint determination within 15 Business Days of the retention of the last
firm so retained, determined by another independent investment banking firm
which is not a regular investment banking firm of the Company chosen by the
first two such firms.
"INITIAL DATE" shall have the meaning specified in Section 2A.
"MARKET PRICE" shall mean on any date specified herein, (a) with
respect to Common Stock or to common stock (or equivalent equity interests) of
an Acquiring Person or its Parent, the amount per share equal to (i) the last
sale price of shares of Common Stock, regular way, or of shares of such common
stock (or equivalent equity interests) on such date or, if no such sale takes
place on such date, the average of the closing bid and asked prices thereof on
such date, in each case as officially reported on the principal national
securities exchange on which the same are then listed or admitted to trading, or
(ii) if no shares of Common Stock or no shares of such common stock (or
equivalent equity interests), as the case may be, are then listed or admitted to
trading on any national securities exchange, the last sale price of shares of
Common Stock, regular way, or of shares of such common stock (or equivalent
equity interests) on such date, in each case or, if no such sale takes place on
such date, the average of the reported closing bid and asked prices thereof on
such date as quoted in the Nasdaq National Market or other over-the-counter
market or, if no shares of Common Stock or no shares of such common stock (or
equivalent equity interests), as the case may be, are then quoted in the Nasdaq
National Market or other over-the-counter market, as published by the National
Quotation Bureau, Incorporated or any similar successor organization, and in any
such case as reported by any member firm of the New York Stock Exchange selected
by the Company, or (iii) if no shares of Common Stock or no shares of such
common stock (or equivalent equity interests), as the case may be, are then
listed or admitted to trading on any national securities exchange or quoted or
published in the over-the-counter market, the higher of (x) the book value
thereof as determined by any firm of independent public accountants of
recognized standing selected by the Board of Directors of the Company, as of the
last day of any month ending within 60 days preceding the date as of which the
determination is to be made or (y) the Fair Value thereof, and (b) with respect
to any other securities, the Fair Value thereof.
"MASTER RESTRUCTURING AGREEMENT" shall mean the Master Restructuring
Agreement, dated as of August 31, 1999 among the Company, the subsidiaries of
the Company party thereto, the creditors of the Company party thereto and The
Chase Manhattan Bank, as collateral agent, as amended, supplemented or otherwise
modified from time to time.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
the Company by its President, one of its Vice Presidents or its Treasurer.
"OPTIONS" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
"ORIGINAL COMMON STOCK" shall have the meaning specified in the
opening paragraphs of this Warrant.
"OTHER SECURITIES" shall mean any stock (other than Common Stock) and
any other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 2J or otherwise.
"PARENT" shall have the meaning specified in Section 2J.
"PERSON" shall have the meaning specified in MRA Appendix A.
"PRO RATA REPURCHASE" shall mean any purchase of shares of Common
Stock by the Company or by any of its subsidiaries whether for cash, shares of
Common Stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other Person or any other property
(including, without limitation, shares of capital stock, other securities or
evidences of indebtedness of a subsidiary of the Company), or any combination
thereof, which purchase is subject to Section 13(e) of the Securities Exchange
Act of 1934, as amended, or is made pursuant to an offer made available to all
holders of shares of Common Stock.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement dated as of August 31, 1999, among the Company and the holders of
"Registrable Securities" party thereto, as the same may be amended, supplemented
or otherwise modified from time to time.
"REQUIRED HOLDERS" shall mean the holders of at least 66 2/3% of all
the Warrants at the time outstanding, determined on the basis of the number of
shares of Common Stock then purchased upon the exercise of all Warrants then
outstanding.
"RESTRICTED SECURITIES" shall mean (a) any Warrants bearing the
applicable legend set forth in Section 8 and (b) any shares of Common Stock (or
Other Securities) which have been issued upon the exercise of Warrants and which
are evidenced by a certificate or certificates bearing the applicable legend set
forth in such section, and (c) unless the context otherwise requires, any shares
of Common Stock (or Other Securities) which are at the time issuable upon the
exercise of Warrants and which, when so issued, will be evidenced by a
certificate or certificates bearing the applicable legend set forth in such
section.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"TRANSACTION" shall have the meaning specified in Section 2I.
"WARRANT" shall have the meaning specified in the opening paragraphs
of this Warrant.
SECTION 14. REMEDIES. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
SECTION 15. NOTICES. All notices and other communications under this
Warrant shall be in writing and shall be sent (a) by registered or certified
mail, return receipt requested, or (b) by a recognized overnight delivery
service, addressed (i) if to any holder or any Warrant or any holder of any
Common Stock (or Other Securities), at the registered address of such holder as
set forth in the applicable register kept at the principal office of the
Company, or (ii) if to the Company, to the attention of its Secretary at its
principal office, PROVIDED that the exercise of any Warrant shall be effected in
the manner provided in Section 1.
SECTION 16. MISCELLANEOUS.
a) This Warrant and any term hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against
which enforcement of such change, waiver, discharge or termination is
sought.
b) The agreements of the Company contained in this Warrant other than
those applicable solely to the Warrants and the holders thereof shall inure
to the benefit of and be enforceable by any holder or holders at the time
of any Common Stock (or Other Securities) issued upon the exercise of
Warrants, whether so expressed or not.
c) This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York.
d) The section headings in this Warrant are for purposes of
convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, this Warrant has been executed and delivered on
behalf of Recoton Corporation by one of its duly authorized officers at of the
date first above written.
RECOTON CORPORATION
By: /s/ STUART MONT
---------------------------------
Name: Stuart Mont
Title: Executive Vice President -
Operations
<PAGE>
FORM OF SUBSCRIPTION
(To be executed only upon exercise of Warrant)
To RECOTON CORPORATION
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder,1 shares of
Original Common Stock of RECOTON CORPORATION, [and herewith makes payment of
$__________ therefor]2 [in a "cashless exercise" pursuant to Section 1A of the
within Warrant]3, and requests that the certificates for such shares be
issued in the name of, and delivered to ______________ whose address is
______________.
- --------------
1 Insert the number of shares called for on the face of this Warrant (or, in
the case of a partial exercise, the portion thereof as to which this
Warrant is being exercised), in either case without making any adjustment
for additional Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of this
Warrant, may be delivered upon exercise. In the case of a partial exercise,
a new Warrant or Warrants will be issued and delivered, representing the
unexercised portion of this Warrant, to the holder surrendering the same.
2 Use in connection with an exercise involving a delivery of funds to the
Company.
3 Use in connection with a cashless exercise.
Dated:
(Signature must conform in all respects to name of
holder as specified on the face of this Warrant)
(Street Address)
(City) (State) (Zip Code)
<PAGE>
FORM OF ASSIGNMENT
(To be executed only upon transfer of Warrant)
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto ______________ the right represented by
such Warrant to purchase ______________4 shares of Original Common Stock of
RECOTON CORPORATION, to which such Warrant relates, and appoints ______________
Attorney to make such transfer on the books of RECOTON CORPORATION, maintained
for such purpose, with full power of substitution in the premises.
Dated:
(Signature must conform in all respects to name of
holder as specified on the face of this Warrant)
(Street Address)
(City) (State) (Zip Code)
Signed in the presence of:
- --------
4 Insert here the number of shares called for on the face of the within
Warrant (or, in the case of a partial assignment, the portion thereof as to
which this Warrant is being assigned), in either case without making any
adjustment for additional Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions
of the within Warrant, may be delivered upon exercise. In the case of a
partial assignment, a new Warrant or Warrants will be issued and delivered,
representing the portion of the within Warrant not being assigned, to the
holder assigning the same.
Exhibit 7
RECOTON CORPORATION
2950 Lake Emma Road
Lake Mary, FL 32746
September 8, 1999
The Prudential Insurance Company of America
c/o Prudential Capital Group
One Gateway Center
7-45 Raymond Boulevard West
Newark, NJ 07102-5311
ING (U.S.) Capital LLC
230 Park Avenue
New York, NY 10169
Ladies and Gentlemen:
This will confirm our agreement pursuant to the Master Restructuring
Agreement dated the date hereof between ourselves and other parties that the
Initial Exercise Price set forth in the Common Stock Purchase Warrants Expiring
February 4, 2004 (Nos. R-1 and R21, PPN: 756268 2#4) is hereby changed to
$7.76875 from $18.2626.
RECOTON CORPORATION
By: /s/ Stuart Mont
Name: Stuart Mont
Title: Executive Vice President-Operations
and Chief Operating Officer
EXHIBIT 8
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER SUCH ACT.
RECOTON CORPORATION
FIXED FACILITY FEE COMMON STOCK PURCHASE WARRANT
No. FR-___ New York, New York
PPN: 756268 3* 7 September 8, 1999
RECOTON CORPORATION (the "COMPANY"), a New York corporation, for value
received, hereby certifies that __________ or its registered assigns is entitled
to purchase from the Company __________duly authorized, validly issued, fully
paid and nonassessable common shares of the Company, par value $0.20 per share
(the "ORIGINAL COMMON STOCK"), at an initial exercise price per share equal to
$7.76875 (the "INITIAL EXERCISE PRICE") at any time or from time to time
after the date hereof and prior to 5:00 p.m. (United States Eastern Time), on
the fifth anniversary date of the date hereof (the "EXPIRATION DATE"), all
subject to the terms, conditions and adjustments set forth below in this
Warrant; provided, however, that if on the fifth anniversary date of the date
hereof, the Company is then required, pursuant to an effective request therefor
under the Registration Rights Agreement (as defined herein), or is in the
process of effecting a registration under the Securities Act for a public
offering in which Warrant Shares (as defined herein) are entitled to be included
as provided in the Registration Rights Agreement, or if the Company is in
default of any of such obligations to register the sale of such shares, the
right to exercise this Warrant shall continue until 5:00 p.m. (United States
Eastern Time) on the 30th day following the date on which such registration
shall have become effective or on the 30th day following the date all such
defaults shall have been cured, whichever is the later date.
This Warrant is one of the Fixed Facility Fee Warrants issued to the
LIFO Lenders (such term, and all other capitalized terms used herein without
being otherwise defined, having the meaning referred to in Section 13 below)
pursuant to subsection 2.9 of the LIFO Credit Agreement (the "WARRANTS", such
term to include all Warrants issued in substitution therefor or upon transfer
thereof). The Warrants originally so issued evidence rights to purchase an
aggregate of 75,000 shares of Original Common Stock, subject to adjustment as
provided herein.
SECTION 1. EXERCISE OF WARRANT.
A. MANNER OF EXERCISE. This Warrant may be exercised by the holder
hereof, in whole or in part during normal business hours on any Business Day
during the Exercise Period, by surrender of this Warrant, with the form of
subscription at the end hereof (or a reasonable facsimile thereof) duly executed
by such holder, to the Company at the principal office of the Company located at
2950 Lake Emma Road, Lake Mary, FL 32746, or such other location in the United
States which shall at the time be the principal office of the Company and of
which the Company shall have notified the holder hereof in writing (or, if such
exercise shall be in connection with an underwritten public offering of shares
of Common Stock (or Other Securities) subject to this Warrant, at the location
at which the underwriters shall have agreed to accept delivery thereof),
accompanied by payment of an amount obtained by multiplying (a) the number of
shares of Original Common Stock (without giving effect to any adjustment
therein) designated in such form of subscription by (b) the Initial Exercise
Price (the "EXERCISE PAYMENT"). The Exercise Payment shall be payable (i) in
cash or its equivalent, (ii) in shares of Common Stock newly acquired upon
exercise of this Warrant (valued at the Market Price), (iii) by surrendering to
the Company the right to purchase a number of shares of Common Stock issuable
upon exercise of this Warrant (valued at the Market Price) equal to the product
obtained by multiplying the number of shares of Common Stock to be purchased
(including the shares relating to the surrendered rights) by a fraction, the
numerator of which is the Exercise Payment per share and the denominator of
which is the Market Price per share, or (iv) any combination of (i), (ii) and
(iii).
B. ADJUSTMENT TO NUMBER OF SHARES OF COMMON STOCK. The number of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
which the holder of this Warrant shall be entitled to receive upon each exercise
hereof shall be determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of Section 2) be issuable upon
such exercise, as designated by the holder hereof pursuant to this Section 1B,
by a fraction of which (x) the numerator is the Initial Exercise Price and (y)
the denominator is the Exercise Price in effect on the date of such exercise.
The "Exercise Price" shall initially be an amount equal to the Initial Exercise
Price per share, shall be adjusted and readjusted from time to time as provided
in Section 2 and, as so adjusted and readjusted, shall remain in effect until a
further adjustment or readjustment thereof is required by Section 2.
C. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be
deemed to have been effected and the Exercise Price shall be determined
immediately prior to the close of business on the Business Day on which this
Warrant shall have been surrendered to the Company as provided in Section 1A,
and at such time the person or persons in whose name or names any certificate or
certificates for shares of Original Common Stock (or Other Securities) shall be
issuable upon such exercise as provided in Section 1D shall be deemed to have
become the holder or holders of record thereof.
D. DELIVERY OF STOCK CERTIFICATES, ETC. Promptly after the exercise of
this Warrant, in whole or in part, and in any event within three Business Days
thereafter (unless such exercise shall be in connection with an underwritten
public offering of shares of Common Stock (or Other Securities) subject to this
Warrant, in which event concurrently with such exercise), the Company at its
expense will cause to be issued in the name of and delivered to the holder
hereof or, subject to Section 8, as such holder may direct,
(1) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be entitled upon such
exercise, and
(2) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, specifying the aggregate on the face or faces thereof the
number of shares of Common Stock equal to the number of such shares
specified on the face of this Warrant minus the number of such shares
designated by the holder upon such exercise as provided in Section 1A.
E. COMPANY TO REAFFIRM OBLIGATIONS. The Company will, at the time of
or at any time after each exercise of this Warrant, upon the request of the
holder hereof or of any shares of Common Stock (or Other Securities) issued upon
such exercise, acknowledge in writing its continuing obligation to afford to
such holder all rights to which such holder shall continue to be entitled after
such exercise in accordance with the terms of this Warrant, provided that if any
such holder shall fail to make any such request, the failure shall not affect
the continuing obligation of the Company to afford such rights to such holder.
F. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant and no payment or adjustment shall be made upon any
exercise on account of any cash dividends (except as provided in Section 2B) on
the Common Stock or Other Securities issued upon such conversion. If any
fractional interest in a share of Common Stock would, except for the provisions
of the first sentence of this Section 1F, be deliverable upon the exercise of
this Warrant, the Company shall, in lieu of delivering the fractional share
therefor, pay to the holder exercising this Warrant an amount in cash equal to
the Market Price of such fractional interest.
SECTION 2. PROTECTION AGAINST DILUTION OR OTHER IMPAIRMENT OF RIGHTS;
ADJUSTMENTS OF EXERCISE PRICE.
A. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case the Company,
at any time or from time to time after September 8, 1999 (the "INITIAL DATE"),
shall issue or sell Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section 2D or 2E) without
consideration or for a consideration per share (determined pursuant to Section
2F) less than 95% of the Market Price in effect, in each case, on the date of
and immediately prior to such issue or sale (or, in the case of issuances where
the price has been fixed or finally determined by contract prior to the date of
such issuance or sale, as of the date that such price is fixed or finally
determined), then, and in each such case, subject to Section 2I, the Exercise
Price shall be reduced, concurrently with such issue or sale, to a price
(calculated to the nearest .001 of a cent) determined by multiplying such
Exercise Price by a fraction,
a) the numerator of which shall be (i) the number of shares of Common
Stock outstanding immediately prior to such issue or sale plus (ii) the
number of shares of Common Stock which the aggregate consideration received
by the Company for the total number of such Additional Shares of Common
Stock so issued or sold would purchase at the Market Price, and
b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale,
provided that, for the purposes of this Section 2A, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant to
Section 2D or 2E, such Additional Shares shall be deemed to be outstanding, and
(y) treasury shares shall not be deemed to be outstanding.
B. EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS; PRO RATA REPURCHASES. In
case the Company at any time or from time to time after the date hereof shall
declare, order, pay or make a dividend or other distribution to the holders of
the Common Stock (including, without limitation, any distribution of other or
additional stock or other securities or property or Options by way of dividend
or spin-off, reclassification, recapitalization or similar corporate
rearrangement and any redemption or acquisition of any such stock or Options on
the Common Stock), other than (a) a dividend payable in additional Shares of
Common Stock or in Options for Common Stock or (b) a regular periodic dividend
payable in cash and not constituting an Extraordinary Cash Dividend, then, and
in each such case, the Company shall pay over to the holder of this Warrant, on
the date on which such dividend or other distribution is paid to the holders of
Common Stock, the securities and property (including cash) which such holder
would have received if such holder had exercised this Warrant immediately prior
to the record date fixed in connection with such dividend or other distribution.
In case the Company or any subsidiary thereof shall make a Pro Rata Repurchase,
the Exercise Price shall be adjusted by dividing the Exercise Price in effect
immediately prior to such action by a fraction (which in no event shall be less
than one), the numerator of which shall be the product of (A) the number of
shares of Common Stock outstanding immediately before such Pro Rata Repurchase
minus the number of shares of Common Stock repurchased in such Pro Rata
Repurchase and (B) the Market Price as of the date immediately preceding the
first public announcement by the Company of the intent to effect such Pro Rata
Repurchase, and the denominator of which shall be (A) the product of (x) the
number of shares of Common Stock outstanding immediately before such Pro Rata
Repurchase and (y) the Market Price as of the date immediately preceding the
first public announcement by the Company of the intent to effect such Pro Rata
Repurchase minus (B) the aggregate purchase price of the Pro Rata Repurchase.
C. ABOVE MARKET REPURCHASES OF COMMON STOCK. In case the Company, at
any time or from time to time after the date hereof shall repurchase, by
self-tender offer or otherwise, any shares of Common Stock (or any Options or
Convertible Securities) at a purchase price in excess of the Market Price
thereof, on the Business Day immediately prior to the earliest of (i) the date
of such repurchase, (ii) the commencement of an offer to repurchase, or (iii)
the public announcement of either (such date being the "DETERMINATION DATE"),
the Exercise Price shall be determined by dividing the Exercise Price by a
fraction, the numerator of which shall be the product of (A) the number of
shares of Common Stock outstanding immediately prior to such Determination Date
minus the number of shares of Common Stock repurchased and (B) the Market Price
as of the Determination Date, and the denominator of which shall be (A) the
product of (x) the number of shares of Common Stock outstanding immediately
before such repurchase and (y) the Market Price as of the Determination Date,
minus (B) the aggregate purchase price of such repurchase; provided, that in the
case of a self-tender offer by the Company, any shares of Common Stock issued
upon the exercise or partial exercise of this Warrant at an Exercise Price
adjusted pursuant to this Section 2C due to such self-tender offer, shall not be
eligible to be sold in such self-tender offer.
D. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case the
Company, at any time or from time to time after the date hereof, shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable, then, and
in each such case, the maximum number of Additional Shares of Common Stock (as
set forth in the instrument relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
thereof, issuable upon the conversion or exchange of such Convertible Securities
(or the exercise of such Options for Convertible Securities and subsequent
conversion or exchange of the Convertible Securities issued), shall be deemed to
be Additional Shares of Common Stock issued as of the time of such issue, sale,
grant or assumption of such Options or Convertible Securities or, in case such a
record date shall have been fixed, as of the close of business on such record
date; provided, that such Additional Shares of Common Stock shall not be deemed
to have been issued unless the consideration per share (determined pursuant to
Section 2F) of such shares would be less than 95% of the Market Price in effect
on the date of and immediately prior to such issue, sale, grant or assumption or
immediately prior to the close of business on such record date or, if the Common
Stock trades on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading, as the case may be, and provided, further, that in any such
case in which Additional Shares of Common Stock are deemed to be issued,
a) if an adjustment of the Exercise Price shall be made upon the
fixing of a record date as referred to in the first sentence of this
Section 2D, no further adjustment of the Exercise Price shall be made as a
result of the subsequent issue or sale of any Options or Convertible
Securities for the purpose of which such record date was set;
b) no further adjustment of the Exercise Price shall be made upon the
subsequent issue or sale of Additional Shares of Common Stock or
Convertible Securities upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
c) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any change in the consideration
payable to the Company, or change in the number of Additional Shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof
(by change of rate or otherwise), the Exercise Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence
of the record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such change becoming effective, be
recomputed to reflect such change insofar as it affects such Options, or
the rights of conversion or exchange under such Convertible Securities,
which are outstanding at such time;
d) upon the expiration of any such Options or of the rights of
conversion or exchange under any such Convertible Securities which shall
not have been exercised (or upon purchase by the Company and cancellation
or retirement of any such Options which shall not have been exercised or of
any such Convertible Securities the rights of conversion or exchange under
which shall not have been exercised), the Exercise Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence
of the record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or in the case of
Convertible Securities, the only Additional Shares of Common Stock issued
or sold (or deemed issued or sold) were the Additional Shares of Common
Stock, if any, actually issued or sold upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and the
consideration received therefor was (x) an amount equal to (A) the
consideration actually received by the Company for the issue, sale, grant
or assumption of all such Options, whether or not exercised, plus (B) the
consideration actually received by the Company upon such exercise, minus
(C) the consideration paid by the Company for any purchase of such Options
which were not exercised, or (y) an amount equal to (A) the consideration
actually received by the Company for the issue, sale, grant or assumption
of all such Convertible Securities which were actually converted or
exchanged, plus (B) the additional consideration, if any, actually received
by the Company upon such conversion or exchange, minus (C) the excess, if
any, of the consideration paid by the Company for any purchase of such
Convertible Securities, the rights of conversion or exchange under which
were not exercised, over an amount that would be equal to the Fair Value of
the Convertible Securities so purchased if such Convertible Securities were
not convertible into or exchangeable for Additional Shares of Common Stock,
and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the exercise
of such Options were issued at the time of the issue, sale, grant or
assumption of such Options, and the consideration received by the Company
for the Additional Shares of Common Stock deemed to have then been issued
was an amount equal to (x) the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus (y) the consideration deemed to have been
received by the Company (pursuant to Section 2F) upon the issue or sale of
the Convertible Securities with respect to which such Options were actually
exercised, minus (z) the consideration paid by the Company for any purchase
of such Options which were not exercised; and
e) no recomputation pursuant to subsection (c) or (d) above shall have
the effect of increasing the Exercise Price then in effect by an amount in
excess of the amount of the adjustment thereof originally made in respect
of the issue, sale, grant or assumption of such Options or Convertible
Securities.
Notwithstanding the foregoing provisions of this Section 2D, any
rights, options or warrants (herein called "SPECIAL OPTIONS") distributed by the
Company to all holders of Common Stock that entitle the holders thereof to
purchase shares of the Company's capital stock (either initially or under
certain circumstances), and that, until the occurrence of an event (the "TRIGGER
EVENT") (i) are deemed to be transferred with the Common Stock, (ii) are not
exercisable and (iii) are also issued in respect of future issuances of Common
Stock, shall not be deemed to have been distributed for the purposes of this
Section 2D (and no adjustment of the Exercise Price shall be required) until the
occurrence of the earliest Trigger Event. In addition, in the event of any
distribution of Special Options, or any Trigger Event with respect thereto, that
shall have resulted in an adjustment of the Exercise Price under this Section
2D, (A) in the case of any Special Options that shall have been redeemed or
repurchased without exercise by any holders thereof, the Exercise Price shall be
readjusted upon such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though it were an
Extraordinary Cash Dividend, equal to the per share redemption or repurchase
price received by a holder of Common Stock with respect to such Special Options
(assuming such holder had retained the same), made to all holders of Common
Stock as of the date of such redemption or repurchase, and (2 in the case of any
such Special Options all of which shall have expired or terminated without
having been exercised, redeemed or repurchased, the Exercise Price shall be
readjusted as if such distribution had not occurred.
E. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the
Company, at any time or from time to time after the date hereof, shall declare
or pay any dividend or other distribution on any class of securities of the
Company payable in shares of Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in Common
Stock), then, and in each such case, Additional Shares of Common Stock shall be
deemed to have been issued (a) in the case of any such dividend or other
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or other distribution, or (b) in the case of any such subdivision, at
the close of business on the day immediately prior to the day upon which such
corporate action becomes effective.
F. COMPUTATION OF CONSIDERATION. For the purposes of this Warrant:
a) The consideration for the issue or sale of any Additional Shares of
Common Stock or for the issue, sale, grant or assumption of any Options or
Convertible Securities, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, shall be computed as the
amount of cash received by the Company, and insofar as it consists of
securities or other property, shall be computed as of the date
immediately preceding such issue, sale, grant or assumption as the
Fair Value of such consideration (or, if such consideration is
received for the issue or sale of Additional Shares of Common Stock
and the Market Price thereof is less than the Fair Value of such
consideration, then such consideration shall be computed as the Market
Price of such Additional Shares of Common Stock), in each case without
deducting any expenses paid or incurred by the Company, any
commissions or compensation paid or concessions or discounts allowed
to underwriters, dealers or others performing similar services and any
accrued interest or dividends in connection with such issue or sale,
and
(ii) in case Additional Shares of Common Stock are issued or sold
or Options or Convertible Securities are issued, sold, granted or
assumed together with other stock or securities or other assets of the
Company for a consideration which covers both, shall be the proportion
of such consideration so received, computed as provided in clause (i)
above, allocable to such Additional Shares of Common Stock or Options
or Convertible Securities, as the case may be, all as determined in
good faith by the Board of Directors of the Company.
b) All Additional Shares of Common Stock, Options or Convertible
Securities issued in payment of any dividend or other distribution on any
class of stock of the Company and all Additional Shares of Common Stock
issued to effect a subdivision of the outstanding shares of Common Stock
into a greater number of shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock) shall be deemed to
have been issued without consideration.
c) Additional Shares of Common Stock deemed to have been issued for
consideration pursuant to Section 2D, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per
share determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instrument relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to
the Company upon the exercise in full of such Options or the
conversion or exchanges of such Convertible Securities or, in the case
of Options for Convertible Securities, the exercise of such Options
for Convertible Securities and the conversion or exchange of such
Convertible Securities, in each case computing such consideration as
provided in the foregoing subsection (a),by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.
G. ADJUSTMENTS FOR COMBINATIONS, ETC. In case the outstanding shares
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
H. MINIMUM ADJUSTMENT OF EXERCISE PRICE. If the amount of any
adjustment of the Exercise Price required hereunder would be less than one
percent of the Exercise Price in effect at the time such adjustment is otherwise
so required to be made, such amount shall be carried forward and adjustment with
respect thereto made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate at least one percent of such Exercise Price; provided,
that upon the exercise of this Warrant all adjustment carried forward and not
therefore made up to and including the date of such exercise shall be made to
the nearest .001 of a cent.
I. CHANGES IN COMMON STOCK. At any time while this Warrant remains
outstanding and unexpired, in case of any reclassification or change of
outstanding securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination of
outstanding securities issuable upon the exercise of this Warrant) or in case of
any consolidation or merger of the Company with or into another corporation
(herein called a "TRANSACTION") (other than a merger with another corporation in
which the Company is a continuing corporation and which does not result in any
reclassification or change, other than a change in par value, or from par value
to no par value, or from no value to par value, or as a result of a subdivision
or combination of outstanding securities issuable upon the exercise of this
Warrant), the Company, or such successor corporation, as the case may be, shall,
without payment of any additional consideration therefor, execute and deliver to
the holder of this Warrant (upon surrender of this Warrant) a new Warrant
providing that the holder of this Warrant shall have the right to exercise such
new Warrant (upon terms not less favorable to the holder of this Warrant than
those then applicable to this Warrant) and to receive upon such exercise, in
lieu of each share of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money or
property receivable upon such reclassification, change, consolidation or merger,
by the holder of one Common Share issuable upon exercise of this Warrant had it
been exercised immediately prior to such reclassification, change, consolidation
or merger. Such new Warrant shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustment provided for in this
Section 2. Notwithstanding the foregoing, in the case of any Transaction which
pursuant to this Section 2I would result in the execution and delivery by the
Company or any successor of a new Warrant to the holder of this Warrant and in
which the holders of shares of Common Stock are entitled only to receive money
or other property exclusive of common equity securities, then in lieu of such
new Warrant being exercisable as provided above, the holder of this Warrant
shall have the right, at its sole option, to require the Company to purchase
this Warrant (without prior exercise by the holder of this Warrant) at its fair
value as of the day before such Transaction became publicly known, as determined
by an unaffiliated internationally recognized accounting firm or investment bank
selected by the holder of this Warrant and reasonably acceptable to the Company.
The provisions of this Section 2I shall similarly apply to successive
reclassifications, changes, consolidations, mergers, sales and transfers.
Notwithstanding anything contained herein to the contrary, the Company shall not
effect any Transaction unless prior to the consummation thereof each corporation
or entity (other than the Company) which may be required to deliver any
securities or other property upon the exercise of Warrants shall assume, by
written instrument delivered to each holder of Warrants, the obligation to
deliver to such holder such securities or other property as to which, in
accordance with the foregoing provisions, such holder may be entitled, and such
corporation or entity shall have similarly delivered to each holder of Warrants
an opinion of counsel for such corporation or entity, satisfactory to each
holder of Warrants, which opinion shall state that all the outstanding Warrants,
shall thereafter continue in full force and effect and shall be enforceable
against such corporation or entity in accordance with the terms hereof and
thereof, together with such other matters as such holders may reasonably
request.
J. CERTAIN ISSUES EXCEPTED. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustments of
the Exercise Price in the case of the issuance of the Warrants and the issuance
of shares of Common Stock issuable upon exercise of the Warrants.
K. NOTICE OF ADJUSTMENT. Upon the occurrence of any event requiring an
adjustment of the Exercise Price, then and in each such case the Company shall
promptly deliver to the holder of this Warrant an Officer's Certificate stating
the Exercise Price resulting from such adjustment and the increase or decrease,
if any, in the number of shares of Common Stock issuable upon the exercise of
this Warrant, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Within 90 days after each fiscal
year in which any such adjustment shall have occurred, or within 30 days after
any request therefor by the holder of this Warrant stating that such holder
contemplates the exercise of such Warrant, the Company will obtain and deliver
to the holder of this Warrant the opinion of its regular independent auditors or
another firm of independent public accountants of recognized national standing
selected by the Company's Board of Directors, which opinion shall confirm the
statements in the most recent Officer's Certificate delivered under this Section
2K.
L. OTHER NOTICES. In case at any time:
a) the Company shall declare or pay any dividend upon Common Stock
payable in stock or make any dividend or other distribution to the holders
of Common Stock;
b) the Company shall offer for subscription pro rata to the holders of
Common Stock any additional shares of stock of any class or other rights;
c) there shall be any capital reorganization, or reclassification of
the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another
corporation or other entity (other than a merger or consolidation with a
directly or indirectly wholly-owned subsidiary of the Company in which the
Company is the survivor);
d) there shall be voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
e) there shall be made any tender offer for any shares of capital
stock of the Company; or
f) there shall be any other Transaction.
then, in any one or more of such cases, the Company shall give to the holder of
this Warrant (i) at least 15 days prior to the record date for any dividend or
distribution referred to in subsection (a) above, at least 30 days prior to any
event referred to in subsection (b), (c) or (d) above, and within five days
after it has knowledge of any pending tender offer or other Transaction, written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up or Transaction or the date by which shareholders must tender shares
in any tender offer and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up or tender offer or Transaction known to the Company, at least 30 days
prior written notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
notice in accordance with the foregoing clause (i) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (ii) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up, tender offer or Transaction, as the case may be. Such notice shall
also state that the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act or to a
favorable vote of security holders or any other approval requirement, if such is
required.
M. CERTAIN EVENTS. If any event occurs as to which, in the good faith
judgment of the Board of Directors of the Company, the other provisions of this
Warrant are not strictly applicable or if strictly applicable would not fairly
protect the exercise rights of the holders of the Warrants in accordance with
the essential intent and principles of such provisions, then the Board of
Directors of the Company shall make such adjustments, if any, on a basis
consistent with such essential intent and principles, necessary to preserve,
without dilution, the rights of the holders of the Warrants; provided, that no
such adjustment shall have the effect of increasing the Exercise Price as
otherwise determined pursuant to this Warrant. The Company may make such
reductions in the Exercise Price as it deems advisable, including any reductions
necessary to ensure that any event treated for Federal income tax purposes as a
distribution of stock or stock rights not be taxable to recipients.
N. PROHIBITION OF CERTAIN ACTIONS. The Company will not, by amendment
of its certificate of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions of
this Warrant and in the taking of all such action as may be necessary in order
to protect the exercise privilege of the holder of this Warrant against dilution
or other impairment, consistent with the tenor and purpose of this Warrant.
Without limiting the generality of the foregoing, the Company (a) will not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, (b) will take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of all Warrants from time to time outstanding, and (c) will
not take any action which results in any adjustment of the Exercise Price if the
total number of shares of Common Stock or Other Securities issuable after the
action upon the exercise of all of the Warrants would exceed the total number of
shares of Common Stock or Other Securities then authorized by the Company's
certificate of incorporation and available for the purpose of issue upon such
conversion.
SECTION 3. STOCK TO BE RESERVED. The Company will at all times reserve
and keep available out of the authorized Common Stock, solely for the purpose of
issue upon the exercise of the Warrants as herein provided, such number of
shares of Common Stock as shall then be issuable upon the exercise of all
outstanding Warrants and the Company will maintain at all times all other rights
and privileges sufficient to enable it to fulfill all its obligations hereunder.
The Company covenants that all shares of Common Stock which shall be so issuable
shall, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable, free from preemptive or similar rights on the part of the holders
of any shares of capital stock or securities of the Company or any other Person,
and free from all taxes, liens and charges with respect to the issue thereof
(not including any income taxes payable by the holders of Warrants being
exercised in respect of gains thereon), and the Exercise Price will be credited
to the capital and surplus of the Company. The Company will take all such action
as may be necessary to assure that such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any applicable
requirements of the National Association of Securities Dealers, Inc. and of any
domestic securities exchange upon which the Common Stock may be listed.
SECTION 4. REGISTRATION OF COMMON STOCK. If any shares of Common Stock
required to be reserved for purposes of the exercise of Warrants require
registration with or approval of any governmental authority under any Federal or
State law (other than the Securities Act, registration under which is governed
by the Registration Rights Agreement), before such shares may be issued upon the
exercise thereof, the Company will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be duly registered or
approved, as the case may be. Shares of Common Stock issuable upon exercise of
the Warrants shall be registered by the Company under the Securities Act or
similar statute then in force if required by the Registration Rights Agreement
and subject to the conditions stated in such agreement. At any such time as the
Common Stock is listed on any national securities exchange or quoted by the
Nasdaq National Market or any successor thereto or comparable system, the
Company will, at its expense, obtain promptly and maintain the approval for
listing on each such exchange or quoting by the Nasdaq National Market on such
successor thereto a comparable systems, upon official notice of issuance, the
shares of Common Stock issuable upon exercise of the then outstanding Warrants
and maintain the listing or quoting of such shares after their issuance so long
as the Common Stock is so listed or quoted; and the Company will also cause to
be so listed or quoted, will register under the Exchange Act and will maintain
such listing or quoting of, any Other Securities that at any time are issuable
upon exercise of the Warrants, if and at the time that any securities of the
same class shall be listed on such national securities exchange by the Company.
SECTION 5. EXPENSES. The Company will pay, and save each Person which
is or has been the holder of a Warrant (a "WARRANTHOLDER") harmless against
liability for the payment of, all out-of-pocket expenses arising in connection
with the transactions contemplated by the Warrants, including (i) all document
production and duplication charges and the reasonable fees and expenses of any
counsel engaged by any Warrantholder in connection with the Warrants or the
transactions contemplated thereby and any subsequent proposed modification,
amendment or waiver of, or proposed consent under, the Warrants, whether or not
such proposed modification, amendment or waiver shall be effected or proposed
consent granted, and (ii) the costs and expenses, including reasonable
attorneys' fees, incurred by any Warrantholder in enforcing or defending (or
determining whether or how to enforce or defend) any rights under the Warrants
or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with the Warrants or the transactions
contemplated thereby or by reason of the Warrantholder's have acquired any
Warrant or any securities issuable upon exercise thereof, including without
limitation costs and expenses (including the costs and expenses of financial
advisors) incurred in any bankruptcy case or in connection with any work-out or
restructuring of the transactions contemplated by the Warrants. The Company will
pay, and will save each Warrantholder harmless from all claims in respect of any
fees, costs or expenses, if any, of brokers and finders (other than those
retained by any such holder). The issuance of certificates for shares of Common
Stock upon exercise of the Warrants shall be made without charge to the
Warrantholders for any issuance tax or other governmental charge in respect
thereof, all of which shall be paid by the Company. The obligations of the
Company under this Section 5 shall survive the transfer or exercise of any
Warrant or any portion thereof or interest therein by the Warrantholder.
SECTION 6. CLOSING OF BOOKS. The Company will at no time close its
transfer books to the transfer of any Warrant or of any share of Common Stock
issued or issuable upon the exercise of any Warrant in any manner which
interferes with the timely exercise of such Warrant.
SECTION 7. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant
shall not entitle the holder thereof to any of the rights of a stockholder of
the Company, except as expressly contemplated herein. No provision of this
Warrant, in the absence of the actual exercise of such Warrant and receipt by
the holder thereof of Common Stock issuable upon such conversion, shall give
rise to any liability on the part of such holder as a stockholder of the
Company, whether such liability shall be asserted by the Company or by creditors
of the Company.
SECTION 8. RESTRICTIVE LEGENDS. Except as otherwise permitted by this
Section 8, each Warrant originally issued and each Warrant issued upon direct or
indirect transfer or in substitution for any Warrant pursuant to this Section 8
shall be stamped or otherwise imprinted with a legend in substantially the
following or a comparable form:
"This Warrant and any shares acquired upon the exercise of this Warrant
have not been registered under the Securities Act of 1933 and may not be
transferred in the absence of such registration or an exemption therefrom
under such Act."
Except as otherwise permitted by this Section 8, (a) each certificate for shares
of Common Stock (or Other Securities) issued upon the exercise of any Warrant,
and (b) each certificate issued upon the direct or indirect transfer of any such
Common Stock (or Other Securities) shall be stamped or otherwise imprinted with
a legend in substantially the following or a comparable form:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933 and may not be transferred in the absence of
such registration or an exception therefrom under such Act."
The holder (or its transferee, as applicable) of any Restricted Securities shall
be entitled to receive from the Company, without expense, new securities of like
tenor not bearing the applicable legend set forth above in this Section 8 when
such securities shall have been (a) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering such
Restricted Securities, (b) disposed of pursuant to the provisions of Rule 144 or
any comparable rule under the Securities Act, or (c) when, in the written
reasonable opinion of independent counsel for the holder thereof experienced in
Securities Act matters, such restrictions are no longer required in order to
insure compliance with the Securities Act (including when the provisions of Rule
144(k) or any comparable rule under the Securities Act have been satisfied). The
Company will pay the reasonable fees and disbursements of counsel for any holder
of Restricted Securities in connection with all opinions rendered pursuant to
this Section 8.
SECTION 9. AVAILABILITY OF INFORMATION. The Company will cooperate
with each holder of any Restricted Securities in supplying such information as
may be necessary for such holder to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any
Restricted Securities. The Company will furnish to each holder of any Warrants,
promptly upon their becoming available, copies of all financial statements,
reports, notices and proxy statements sent or made available generally by the
Company to its stockholders, and copies of all regular and periodic reports and
all registration statements and prospectuses filed by the Company with any
securities exchange or with the Commission.
SECTION 10. INFORMATION REQUIRED BY RULE 144A. The Company will, upon
the request of the holder of this Warrant, provide such holder, and any
qualified institutional buyer designated by such holder, such financial and
other information as such holder may reasonably determine to be necessary in
order to permit compliance with the information requirements of Rule 144A under
the Securities Act in connection with the resale of Warrants, except at such
times as the Company is subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act. For the purpose of this Section 10, the term
"qualified institutional buyer" shall have the meaning specified in Rule 144A
under the Securities Act.
SECTION 11. REGISTRATION RIGHTS AGREEMENT. The holder of this Warrant
and the holders of any securities issued or issuable upon the exercise hereof
are each entitled to the benefits of the Registration Rights Agreement.
SECTION 12. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
A0 OWNERSHIP OF WARRANTS. Except as otherwise required by law, the
Company may treat the Person in whose name any Warrant is registered on the
register kept at the principal office of the Company as the owner and holder
thereof for all purposes, notwithstanding any notice to the contrary except
that, if and when any Warrant is properly assigned in blank, the Company, in its
discretion, may (but shall not be obligated to) treat the bearer thereof as the
owner of such Warrant for all purposes, notwithstanding any notice to the
Company to the contrary. Subject to Section 8, a Warrant, if properly assigned,
may be exercised by a new holder without first having a new Warrant issued.
B0 TRANSFER AND EXCHANGE OF WARRANTS. Upon the surrender of any
Warrant, properly endorsed, for registration of transfer or for exchange at the
principal office of the Company, the Company at its expense will (subject to
compliance with Section 8, if applicable) execute and deliver to or upon the
order of the holder thereof a new Warrant or Warrants of like tenor, in the name
of such holder or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Original Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
C0 REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than the original holder thereof, upon delivery of its
unsecured indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the principal office of the Company, the Company at its expense
will execute and deliver, in lieu thereof, a new Warrant of like tenor.
SECTION 13. DEFINITIONS. As used herein (A) capitalized terms that are
not otherwise defined shall have the meanings assigned thereto in Appendix A to
the Master Restructuring Agreement referred to below and (B) unless the context
otherwise requires, the following terms have the following respective meanings:
"ACQUIRING COMPANY" shall have the meaning specified in Section 2J.
"ACQUIRER'S COMMON STOCK" shall have the meaning specified in Section
2J.
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares (including
treasury shares) of Common Stock issued or sold (or, pursuant to Section 2D or
2E deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than shares of Common
Stock issued upon the exercise or partial exercise of the Warrants and shares
issuable upon exercise of options, warrants or rights granted to employees or
consultants or directors of the Company or its subsidiaries under shareholder
approved plans and other options, warrants or rights in each case providing for
an exercise price of at least 95% of Market Price at the date of grant.
"AFFILIATE" shall have the meaning specified in the 1999 Securities
Purchase Agreement.
"ANNOUNCEMENT DATE" shall have the meaning specified in Section 2J.
"BUSINESS DAY" shall have the meaning specified in MRA Appendix A.
"CLOSING DATE" shall mean the date upon which all conditions precedent
to the making of the initial extensions of credit as set forth in the LIFO
Credit Agreement have been satisfied.
"COMMISSION" shall mean the Securities and Exchange Commission or any
successor federal agency having similar powers.
"COMMON STOCK" shall mean the Original Common Stock, any stock into
which such stock shall have been converted or changed or any stock resulting
from any reclassification of such stock and all other stock of any class or
classes (however designated) of the Company the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.
"COMPANY" shall mean Recoton Corporation, a New York corporation, and
its permitted successors hereunder.
"CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness,
shares of stock (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Additional Shares of Common
Stock.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934, as
amended.
"EXERCISE PERIOD" shall mean the date of this Warrant to and including
the Expiration Date.
"EXERCISE PRICE" shall have the meaning specified in Section 1B.
"EXPIRATION DATE" shall have the meaning specified in the opening
paragraphs of this Warrant.
"EXTRAORDINARY CASH DIVIDEND" shall mean, with respect to any
consecutive 12-month period, the amount, if any, by which the aggregate amount
of all cash and non-cash dividends or distributions on any shares of Common
Stock occurring in such 12-month period (or, if such Common Stock was not
outstanding at the commencement of such 12-month period, occurring in such
shorter period during which such Capital Stock was outstanding) exceeds on a per
share basis 5% of the average of the daily Market Prices per share of such
Common Stock over such 12-month period (or such shorter period during which such
Common Stock was outstanding); provided that, for purposes of the foregoing
definition, the amount of cash and non-cash dividends paid on a per share basis
will be appropriately adjusted to reflect the occurrence during such period of
any stock dividend or distribution of shares of capital stock of the Company or
any subdivision, split, combination or reclassification of shares of such Common
Stock.
"FAIR VALUE" shall mean with respect to any securities or other
property, the fair value thereof as of a date which is within 15 days of the
date as of which the determination is to be made as determined by the Board of
Directors of the Company in good faith, unless such determination is to be made
in connection with a transaction with an Affiliate in which case such fair value
shall be (a) determined by agreement between the Company and the Required
Holders, or (b) if the Company and the Required Holders fail to agree,
determined jointly by an independent investment banking firm retained by the
Company and by an independent investment banking firm retained by the Required
Holders, either of which firms may be an independent investment banking firm
regularly retained by the Company, or (c) if the Company or the Required Holders
shall fail so to retain an independent investment banking firm within 10
Business Days of the retention of such a firm by the Required Holders or the
Company, as the case may be, determined solely by the firm so retained, or (d)
if the firms so retained by the Company and by such holders shall be unable to
reach a joint determination within 15 Business Days of the retention of the last
firm so retained, determined by another independent investment banking firm
which is not a regular investment banking firm of the Company chosen by the
first two such firms.
"INITIAL DATE" shall have the meaning specified in Section 2A.
"MARKET PRICE" shall mean on any date specified herein, (a) with
respect to Common Stock or to common stock (or equivalent equity interests) of
an Acquiring Person or its Parent, the amount per share equal to (i) the last
sale price of shares of Common Stock, regular way, or of shares of such common
stock (or equivalent equity interests) on such date or, if no such sale takes
place on such date, the average of the closing bid and asked prices thereof on
such date, in each case as officially reported on the principal national
securities exchange on which the same are then listed or admitted to trading, or
(ii) if no shares of Common Stock or no shares of such common stock (or
equivalent equity interests), as the case may be, are then listed or admitted to
trading on any national securities exchange, the last sale price of shares of
Common Stock, regular way, or of shares of such common stock (or equivalent
equity interests) on such date, in each case or, if no such sale takes place on
such date, the average of the reported closing bid and asked prices thereof on
such date as quoted in the Nasdaq National Market or other over-the-counter
market or, if no shares of Common Stock or no shares of such common stock (or
equivalent equity interests), as the case may be, are then quoted in the Nasdaq
National Market or other over-the-counter market, as published by the National
Quotation Bureau, Incorporated or any similar successor organization, and in any
such case as reported by any member firm of the New York Stock Exchange selected
by the Company, or (iii) if no shares of Common Stock or no shares of such
common stock (or equivalent equity interests), as the case may be, are then
listed or admitted to trading on any national securities exchange or quoted or
published in the over-the-counter market, the higher of (x) the book value
thereof as determined by any firm of independent public accountants of
recognized standing selected by the Board of Directors of the Company, as of the
last day of any month ending within 60 days preceding the date as of which the
determination is to be made or (y) the Fair Value thereof, and (b) with respect
to any other securities, the Fair Value thereof.
"MASTER RESTRUCTURING AGREEMENT" shall mean the Master Restructuring
Agreement, dated as of August 31, 1999 among the Company, the subsidiaries of
the Company party thereto, the creditors of the Company party thereto and The
Chase Manhattan Bank, as collateral agent, as amended, supplemented or otherwise
modified from time to time.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
the Company by its President, one of its Vice Presidents or its Treasurer.
"OPTIONS" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
"ORIGINAL COMMON STOCK" shall have the meaning specified in the
opening paragraphs of this Warrant.
"OTHER SECURITIES" shall mean any stock (other than Common Stock) and
any other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 2J or otherwise.
"PARENT" shall have the meaning specified in Section 2J.
"PERSON" shall have the meaning specified in MRA Appendix A.
"PRO RATA REPURCHASE" shall mean any purchase of shares of Common
Stock by the Company or by any of its subsidiaries whether for cash, shares of
Common Stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other Person or any other property
(including, without limitation, shares of capital stock, other securities or
evidences of indebtedness of a subsidiary of the Company), or any combination
thereof, which purchase is subject to Section 13(e) of the Securities Exchange
Act of 1934, as amended, or is made pursuant to an offer made available to all
holders of shares of Common Stock.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement dated as of August 31, 1999, among the Company and the holders of
"Registrable Securities" party thereto, as the same may be amended, supplemented
or otherwise modified from time to time.
"REQUIRED HOLDERS" shall mean the holders of at least 66 2/3% of all
the Warrants at the time outstanding, determined on the basis of the number of
shares of Common Stock then purchased upon the exercise of all Warrants then
outstanding.
"RESTRICTED SECURITIES" shall mean (a) any Warrants bearing the
applicable legend set forth in Section 8 and (b) any shares of Common Stock (or
Other Securities) which have been issued upon the exercise of Warrants and which
are evidenced by a certificate or certificates bearing the applicable legend set
forth in such section, and (c) unless the context otherwise requires, any shares
of Common Stock (or Other Securities) which are at the time issuable upon the
exercise of Warrants and which, when so issued, will be evidenced by a
certificate or certificates bearing the applicable legend set forth in such
section.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"TRANSACTION" shall have the meaning specified in Section 2I.
"WARRANT" shall have the meaning specified in the opening paragraphs
of this Warrant.
SECTION 14. REMEDIES. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
SECTION 15. NOTICES. All notices and other communications under this
Warrant shall be in writing and shall be sent (a) by registered or certified
mail, return receipt requested, or (b) by a recognized overnight delivery
service, addressed (i) if to any holder or any Warrant or any holder of any
Common Stock (or Other Securities), at the registered address of such holder as
set forth in the applicable register kept at the principal office of the
Company, or (ii) if to the Company, to the attention of its Secretary at its
principal office, provided that the exercise of any Warrant shall be effected in
the manner provided in Section 1.
SECTION 16. MISCELLANEOUS.
a This Warrant and any term hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against
which enforcement of such change, waiver, discharge or termination is
sought.
b The agreements of the Company contained in this Warrant other than
those applicable solely to the Warrants and the holders thereof shall inure
to the benefit of and be enforceable by any holder or holders at the time
of any Common Stock (or Other Securities) issued upon the exercise of
Warrants, whether so expressed or not.
c This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York.
d The section headings in this Warrant are for purposes of convenience
only and shall not constitute a part hereof.
IN WITNESS WHEREOF, this Warrant has been executed and delivered on
behalf of Recoton Corporation by one of its duly authorized officers at of the
date first above written.
RECOTON CORPORATION
By: /s/ STUART MONT
----------------------------------
Name: Stuart Mont
Title: Executive Vice President-
Operations
<PAGE>
FORM OF SUBSCRIPTION
(To be executed only upon exercise of Warrant)
To RECOTON CORPORATION
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder,nt, may be
delivered upon exercise. In the case of a partial exercise, a new Warrant or
Warrants will be issued and delivered, representing the unexercised portion of
this Warrant, to the holder surrendering the same.ion with an exercise involving
a delivery of funds to the Company.s that the certificates for such shares be
issued in the name of, and delivered to ______________ whose address is
______________.
- ----------------
1 Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any
adjustment for additional Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions
of this Warrant, may be delivered upon exercise. In the case of a partial
exercise, a new Warrant or Warrants will be issued and delivered,
representing the unexercised portion of this Warrant, to the holder
surrendering the same.
2 Use in connection with an exercise involving a delivery of funds to the
Company.
3 Use in connection with a cashless exercise.
Dated:
(Signature must conform in all respects to name of
holder as specified on the face of this Warrant)
(Street Address)
(City) (State) (Zip Code)
<PAGE>
FORM OF ASSIGNMENT
(To be executed only upon transfer of Warrant)
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto ______________ the right represented by
such Warrant to purchase ______________4 shares of Original Common Stock of
RECOTON CORPORATION, to which such Warrant relates, and appoints ______________
Attorney to make such transfer on the books of RECOTON CORPORATION, maintained
for such purpose, with full power of substitution in the premises.
Dated:
(Signature must conform in all respects to name of
holder as specified on the face of this Warrant)
(Street Address)
(City) (State) (Zip Code)
Signed in the presence of:
- --------
4 Insert here the number of shares called for on the face of the within Warrant
(or, in the case of a partial assignment, the portion thereof as to which this
Warrant is being assigned), in either case without making any adjustment for
additional Common Stock or any other stock or other securities or property or
cash which, pursuant to the adjustment provisions of the within Warrant, may be
delivered upon exercise. In the case of a partial assignment, a new Warrant or
Warrants will be issued and delivered, representing the portion of the within
Warrant not being assigned, to the holder assigning the same.
EXHIBIT 9
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT.
RECOTON CORPORATION
CANCELABLE FACILITY FEE COMMON STOCK PURCHASE WARRANT
No. CR-___ New York, New York
PPN: 756268 4* 6 September 8, 1999
RECOTON CORPORATION (the "COMPANY"), a New York corporation, for value
received, hereby certifies that __________ or its registered assigns is entitled
to purchase from the Company __________duly authorized, validly issued, fully
paid and nonassessable common shares of the Company, par value $0.20 per share
(the "ORIGINAL COMMON STOCK"), at an initial exercise price per share equal to
$7.76875 (the "INITIAL EXERCISE PRICE") at any time or from time to time
after July 1, 2000 and prior to 5:00 p.m. (United States Eastern Time), on the
fifth anniversary date of the date hereof (the "EXPIRATION DATE"), all subject
to the terms, conditions and adjustments set forth below in this Warrant;
PROVIDED, HOWEVER, that if on the fifth anniversary date of the date hereof, the
Company is then required, pursuant to an effective request therefor under the
Registration Rights Agreement (as defined herein), or is in the process of
effecting a registration under the Securities Act for a public offering in which
Warrant Shares (as defined herein) are entitled to be included as provided in
the Registration Rights Agreement, or if the Company is in default of any of
such obligations to register the sale of such shares, the right to exercise this
Warrant shall continue until 5:00 p.m. (United States Eastern Time) on the 30th
day following the date on which such registration shall have become effective or
on the 30th day following the date all such defaults shall have been cured,
whichever is the later date.
This Warrant is one of the Cancelable Facility Fee Warrants issued to
the LIFO Lenders (such term, and all other capitalized terms used herein without
being otherwise defined, having the meaning referred to in Section 13 below)
pursuant to subsection 2.9 of the LIFO Credit Agreement (the "WARRANTS", such
term to include all Warrants issued in substitution therefor or upon transfer
thereof). The Warrants originally so issued evidence rights to purchase an
aggregate of 175,000 shares of Original Common Stock, subject to adjustment as
provided herein.
SECTION 1. EXERCISE OF WARRANT.
A. MANNER OF EXERCISE. This Warrant may be exercised by the holder
hereof, in whole or in part during normal business hours on any Business Day
during the Exercise Period, by surrender of this Warrant, with the form of
subscription at the end hereof (or a reasonable facsimile thereof) duly executed
by such holder, to the Company at the principal office of the Company located at
2950 Lake Emma Road, Lake Mary, FL 32746, or such other location in the United
States which shall at the time be the principal office of the Company and of
which the Company shall have notified the holder hereof in writing (or, if such
exercise shall be in connection with an underwritten public offering of shares
of Common Stock (or Other Securities) subject to this Warrant, at the location
at which the underwriters shall have agreed to accept delivery thereof),
accompanied by payment of an amount obtained by multiplying (a) the number of
shares of Original Common Stock (without giving effect to any adjustment
therein) designated in such form of subscription by (b) the Initial Exercise
Price (the "EXERCISE PAYMENT"). The Exercise Payment shall be payable (i) in
cash or its equivalent, (ii) in shares of Common Stock newly acquired upon
exercise of this Warrant (valued at the Market Price), (iii) by surrendering to
the Company the right to purchase a number of shares of Common Stock issuable
upon exercise of this Warrant (valued at the Market Price) equal to the product
obtained by multiplying the number of shares of Common Stock to be purchased
(including the shares relating to the surrendered rights) by a fraction, the
numerator of which is the Exercise Payment per share and the denominator of
which is the Market Price per share, or (iv) any combination of (i), (ii) and
(iii).
B. ADJUSTMENT TO NUMBER OF SHARES OF COMMON STOCK. The number of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
which the holder of this Warrant shall be entitled to receive upon each exercise
hereof shall be determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of Section 2) be issuable upon
such exercise, as designated by the holder hereof pursuant to this Section 1B,
by a fraction of which (x) the numerator is the Initial Exercise Price and (y)
the denominator is the Exercise Price in effect on the date of such exercise.
The "Exercise Price" shall initially be an amount equal to the Initial Exercise
Price per share, shall be adjusted and readjusted from time to time as provided
in Section 2 and, as so adjusted and readjusted, shall remain in effect until a
further adjustment or readjustment thereof is required by Section 2.
C. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be
deemed to have been effected and the Exercise Price shall be determined
immediately prior to the close of business on the Business Day on which this
Warrant shall have been surrendered to the Company as provided in Section 1A,
and at such time the person or persons in whose name or names any certificate or
certificates for shares of Original Common Stock (or Other Securities) shall be
issuable upon such exercise as provided in Section 1D shall be deemed to have
become the holder or holders of record thereof.
D. DELIVERY OF STOCK CERTIFICATES, ETC. Promptly after the exercise of
this Warrant, in whole or in part, and in any event within three Business Days
thereafter (unless such exercise shall be in connection with an underwritten
public offering of shares of Common Stock (or Other Securities) subject to this
Warrant, in which event concurrently with such exercise), the Company at its
expense will cause to be issued in the name of and delivered to the holder
hereof or, subject to Section 8, as such holder may direct,
(1) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be entitled upon such
exercise, and
(2) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, specifying the aggregate on the face or faces thereof the
number of shares of Common Stock equal to the number of such shares
specified on the face of this Warrant minus the number of such shares
designated by the holder upon such exercise as provided in Section 1A.
E. COMPANY TO REAFFIRM OBLIGATIONS. The Company will, at the time of
or at any time after each exercise of this Warrant, upon the request of the
holder hereof or of any shares of Common Stock (or Other Securities) issued upon
such exercise, acknowledge in writing its continuing obligation to afford to
such holder all rights to which such holder shall continue to be entitled after
such exercise in accordance with the terms of this Warrant, PROVIDED that if any
such holder shall fail to make any such request, the failure shall not affect
the continuing obligation of the Company to afford such rights to such holder.
F. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant and no payment or adjustment shall be made upon any
exercise on account of any cash dividends (except as provided in Section 2B) on
the Common Stock or Other Securities issued upon such conversion. If any
fractional interest in a share of Common Stock would, except for the provisions
of the first sentence of this Section 1F, be deliverable upon the exercise of
this Warrant, the Company shall, in lieu of delivering the fractional share
therefor, pay to the holder exercising this Warrant an amount in cash equal to
the Market Price of such fractional interest.
SECTION 2. PROTECTION AGAINST DILUTION OR OTHER IMPAIRMENT OF RIGHTS;
ADJUSTMENTS OF EXERCISE PRICE.
A. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case the Company,
at any time or from time to time after September ___, 1999 (the "INITIAL DATE"),
shall issue or sell Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section 2D or 2E) without
consideration or for a consideration per share (determined pursuant to Section
2F) less than 95% of the Market Price in effect, in each case, on the date of
and immediately prior to such issue or sale (or, in the case of issuances where
the price has been fixed or finally determined by contract prior to the date of
such issuance or sale, as of the date that such price is fixed or finally
determined), then, and in each such case, subject to Section 2I, the Exercise
Price shall be reduced, concurrently with such issue or sale, to a price
(calculated to the nearest .001 of a cent) determined by multiplying such
Exercise Price by a fraction,
a) the numerator of which shall be (i) the number of shares of Common
Stock outstanding immediately prior to such issue or sale plus (ii) the
number of shares of Common Stock which the aggregate consideration received
by the Company for the total number of such Additional Shares of Common
Stock so issued or sold would purchase at the Market Price, and
b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale,
PROVIDED that, for the purposes of this Section 2A, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant to
Section 2D or 2E, such Additional Shares shall be deemed to be outstanding, and
(y) treasury shares shall not be deemed to be outstanding.
B. EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS; PRO RATA REPURCHASES. In
case the Company at any time or from time to time after the date hereof shall
declare, order, pay or make a dividend or other distribution to the holders of
the Common Stock (including, without limitation, any distribution of other or
additional stock or other securities or property or Options by way of dividend
or spin-off, reclassification, recapitalization or similar corporate
rearrangement and any redemption or acquisition of any such stock or Options on
the Common Stock), other than (a) a dividend payable in additional Shares of
Common Stock or in Options for Common Stock or (b) a regular periodic dividend
payable in cash and not constituting an Extraordinary Cash Dividend, then, and
in each such case, the Company shall pay over to the holder of this Warrant, on
the date on which such dividend or other distribution is paid to the holders of
Common Stock, the securities and property (including cash) which such holder
would have received if such holder had exercised this Warrant immediately prior
to the record date fixed in connection with such dividend or other distribution.
In case the Company or any subsidiary thereof shall make a Pro Rata Repurchase,
the Exercise Price shall be adjusted by dividing the Exercise Price in effect
immediately prior to such action by a fraction (which in no event shall be less
than one), the numerator of which shall be the product of (A) the number of
shares of Common Stock outstanding immediately before such Pro Rata Repurchase
minus the number of shares of Common Stock repurchased in such Pro Rata
Repurchase and (B) the Market Price as of the date immediately preceding the
first public announcement by the Company of the intent to effect such Pro Rata
Repurchase, and the denominator of which shall be (A) the product of (x) the
number of shares of Common Stock outstanding immediately before such Pro Rata
Repurchase and (y) the Market Price as of the date immediately preceding the
first public announcement by the Company of the intent to effect such Pro Rata
Repurchase minus (B) the aggregate purchase price of the Pro Rata Repurchase.
C. ABOVE MARKET REPURCHASES OF COMMON STOCK. In case the Company, at
any time or from time to time after the date hereof shall repurchase, by
self-tender offer or otherwise, any shares of Common Stock (or any Options or
Convertible Securities) at a purchase price in excess of the Market Price
thereof, on the Business Day immediately prior to the earliest of (i) the date
of such repurchase, (ii) the commencement of an offer to repurchase, or (iii)
the public announcement of either (such date being the "DETERMINATION DATE"),
the Exercise Price shall be determined by dividing the Exercise Price by a
fraction, the numerator of which shall be the product of (A) the number of
shares of Common Stock outstanding immediately prior to such Determination Date
minus the number of shares of Common Stock repurchased and (B) the Market Price
as of the Determination Date, and the denominator of which shall be (A) the
product of (x) the number of shares of Common Stock outstanding immediately
before such repurchase and (y) the Market Price as of the Determination Date,
minus (B) the aggregate purchase price of such repurchase; PROVIDED, that in the
case of a self-tender offer by the Company, any shares of Common Stock issued
upon the exercise or partial exercise of this Warrant at an Exercise Price
adjusted pursuant to this Section 2C due to such self-tender offer, shall not be
eligible to be sold in such self-tender offer.
D. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case the
Company, at any time or from time to time after the date hereof, shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable, then, and
in each such case, the maximum number of Additional Shares of Common Stock (as
set forth in the instrument relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
thereof, issuable upon the conversion or exchange of such Convertible Securities
(or the exercise of such Options for Convertible Securities and subsequent
conversion or exchange of the Convertible Securities issued), shall be deemed to
be Additional Shares of Common Stock issued as of the time of such issue, sale,
grant or assumption of such Options or Convertible Securities or, in case such a
record date shall have been fixed, as of the close of business on such record
date; PROVIDED, that such Additional Shares of Common Stock shall not be deemed
to have been issued unless the consideration per share (determined pursuant to
Section 2F) of such shares would be less than 95% of the Market Price in effect
on the date of and immediately prior to such issue, sale, grant or assumption or
immediately prior to the close of business on such record date or, if the Common
Stock trades on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading, as the case may be, and PROVIDED, FURTHER, that in any such
case in which Additional Shares of Common Stock are deemed to be issued,
a) if an adjustment of the Exercise Price shall be made upon the
fixing of a record date as referred to in the first sentence of this
Section 2D, no further adjustment of the Exercise Price shall be made as a
result of the subsequent issue or sale of any Options or Convertible
Securities for the purpose of which such record date was set;
b) no further adjustment of the Exercise Price shall be made upon the
subsequent issue or sale of Additional Shares of Common Stock or
Convertible Securities upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
c) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any change in the consideration
payable to the Company, or change in the number of Additional Shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof
(by change of rate or otherwise), the Exercise Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence
of the record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such change becoming effective, be
recomputed to reflect such change insofar as it affects such Options, or
the rights of conversion or exchange under such Convertible Securities,
which are outstanding at such time;
d) upon the expiration of any such Options or of the rights of
conversion or exchange under any such Convertible Securities which shall
not have been exercised (or upon purchase by the Company and cancellation
or retirement of any such Options which shall not have been exercised or of
any such Convertible Securities the rights of conversion or exchange under
which shall not have been exercised), the Exercise Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence
of the record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or in the case of
Convertible Securities, the only Additional Shares of Common Stock issued
or sold (or deemed issued or sold) were the Additional Shares of Common
Stock, if any, actually issued or sold upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and the
consideration received therefor was (x) an amount equal to (A) the
consideration actually received by the Company for the issue, sale, grant
or assumption of all such Options, whether or not exercised, plus (B) the
consideration actually received by the Company upon such exercise, minus
(C) the consideration paid by the Company for any purchase of such Options
which were not exercised, or (y) an amount equal to (A) the consideration
actually received by the Company for the issue, sale, grant or assumption
of all such Convertible Securities which were actually converted or
exchanged, plus (B) the additional consideration, if any, actually received
by the Company upon such conversion or exchange, minus (C) the excess, if
any, of the consideration paid by the Company for any purchase of such
Convertible Securities, the rights of conversion or exchange under which
were not exercised, over an amount that would be equal to the Fair Value of
the Convertible Securities so purchased if such Convertible Securities were
not convertible into or exchangeable for Additional Shares of Common Stock,
and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the exercise
of such Options were issued at the time of the issue, sale, grant or
assumption of such Options, and the consideration received by the Company
for the Additional Shares of Common Stock deemed to have then been issued
was an amount equal to (x) the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options,
whether or not exercised, PLUS (y) the consideration deemed to have been
received by the Company (pursuant to Section 2F) upon the issue or sale of
the Convertible Securities with respect to which such Options were actually
exercised, minus (z) the consideration paid by the Company for any purchase
of such Options which were not exercised; and
e) no recomputation pursuant to subsection (c) or (d) above shall have
the effect of increasing the Exercise Price then in effect by an amount in
excess of the amount of the adjustment thereof originally made in respect
of the issue, sale, grant or assumption of such Options or Convertible
Securities.
Notwithstanding the foregoing provisions of this Section 2D, any
rights, options or warrants (herein called "SPECIAL OPTIONS") distributed by the
Company to all holders of Common Stock that entitle the holders thereof to
purchase shares of the Company's capital stock (either initially or under
certain circumstances), and that, until the occurrence of an event (the "TRIGGER
EVENT") (i) are deemed to be transferred with the Common Stock, (ii) are not
exercisable and (iii) are also issued in respect of future issuances of Common
Stock, shall not be deemed to have been distributed for the purposes of this
Section 2D (and no adjustment of the Exercise Price shall be required) until the
occurrence of the earliest Trigger Event. In addition, in the event of any
distribution of Special Options, or any Trigger Event with respect thereto, that
shall have resulted in an adjustment of the Exercise Price under this Section
2D, (A) in the case of any Special Options that shall have been redeemed or
repurchased without exercise by any holders thereof, the Exercise Price shall be
readjusted upon such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though it were an
Extraordinary Cash Dividend, equal to the per share redemption or repurchase
price received by a holder of Common Stock with respect to such Special Options
(assuming such holder had retained the same), made to all holders of Common
Stock as of the date of such redemption or repurchase, and (2 in the case of any
such Special Options all of which shall have expired or terminated without
having been exercised, redeemed or repurchased, the Exercise Price shall be
readjusted as if such distribution had not occurred.
E. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the
Company, at any time or from time to time after the date hereof, shall declare
or pay any dividend or other distribution on any class of securities of the
Company payable in shares of Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in Common
Stock), then, and in each such case, Additional Shares of Common Stock shall be
deemed to have been issued (a) in the case of any such dividend or other
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or other distribution, or (b) in the case of any such subdivision, at
the close of business on the day immediately prior to the day upon which such
corporate action becomes effective.
F. COMPUTATION OF CONSIDERATION. For the purposes of this Warrant:
a) The consideration for the issue or sale of any Additional Shares of
Common Stock or for the issue, sale, grant or assumption of any Options or
Convertible Securities, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, shall be computed as the amount of
cash received by the Company, and insofar as it consists of securities or
other property, shall be computed as of the date immediately preceding such
issue, sale, grant or assumption as the Fair Value of such consideration
(or, if such consideration is received for the issue or sale of Additional
Shares of Common Stock and the Market Price thereof is less than the Fair
Value of such consideration, then such consideration shall be computed as
the Market Price of such Additional Shares of Common Stock), in each case
without deducting any expenses paid or incurred by the Company, any
commissions or compensation paid or concessions or discounts allowed to
underwriters, dealers or others performing similar services and any accrued
interest or dividends in connection with such issue or sale, and
(ii) in case Additional Shares of Common Stock are issued or sold or
Options or Convertible Securities are issued, sold, granted or assumed
together with other stock or securities or other assets of the Company for
a consideration which covers both, shall be the proportion of such
consideration so received, computed as provided in clause (i) above,
allocable to such Additional Shares of Common Stock or Options or
Convertible Securities, as the case may be, all as determined in good faith
by the Board of Directors of the Company.
b) All Additional Shares of Common Stock, Options or Convertible
Securities issued in payment of any dividend or other distribution on any
class of stock of the Company and all Additional Shares of Common Stock
issued to effect a subdivision of the outstanding shares of Common Stock
into a greater number of shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock) shall be deemed to
have been issued without consideration.
c) Additional Shares of Common Stock deemed to have been issued for
consideration pursuant to Section 2D, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per
share determined by dividing
(i) the total amount, if any, received and receivable by the Company
as consideration for the issue, sale, grant or assumption of the Options or
Convertible Securities in question, PLUS the minimum aggregate amount of
additional consideration (as set forth in the instrument relating thereto,
without regard to any provision contained therein for a subsequent
adjustment of such consideration) payable to the Company upon the exercise
in full of such Options or the conversion or exchanges of such Convertible
Securities or, in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the conversion or
exchange of such Convertible Securities, in each case computing such
consideration as provided in the foregoing subsection (a),by
(ii) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
G. ADJUSTMENTS FOR COMBINATIONS, ETC. In case the outstanding shares
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
H. MINIMUM ADJUSTMENT OF EXERCISE PRICE. If the amount of any
adjustment of the Exercise Price required hereunder would be less than one
percent of the Exercise Price in effect at the time such adjustment is otherwise
so required to be made, such amount shall be carried forward and adjustment with
respect thereto made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate at least one percent of such Exercise Price; PROVIDED,
that upon the exercise of this Warrant all adjustment carried forward and not
therefore made up to and including the date of such exercise shall be made to
the nearest .001 of a cent.
I. CHANGES IN COMMON STOCK. At any time while this Warrant remains
outstanding and unexpired, in case of any reclassification or change of
outstanding securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination of
outstanding securities issuable upon the exercise of this Warrant) or in case of
any consolidation or merger of the Company with or into another corporation
(herein called a "TRANSACTION") (other than a merger with another corporation in
which the Company is a continuing corporation and which does not result in any
reclassification or change, other than a change in par value, or from par value
to no par value, or from no value to par value, or as a result of a subdivision
or combination of outstanding securities issuable upon the exercise of this
Warrant), the Company, or such successor corporation, as the case may be, shall,
without payment of any additional consideration therefor, execute and deliver to
the holder of this Warrant (upon surrender of this Warrant) a new Warrant
providing that the holder of this Warrant shall have the right to exercise such
new Warrant (upon terms not less favorable to the holder of this Warrant than
those then applicable to this Warrant) and to receive upon such exercise, in
lieu of each share of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money or
property receivable upon such reclassification, change, consolidation or merger,
by the holder of one Common Share issuable upon exercise of this Warrant had it
been exercised immediately prior to such reclassification, change, consolidation
or merger. Such new Warrant shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustment provided for in this
Section 2. Notwithstanding the foregoing, in the case of any Transaction which
pursuant to this Section 2I would result in the execution and delivery by the
Company or any successor of a new Warrant to the holder of this Warrant and in
which the holders of shares of Common Stock are entitled only to receive money
or other property exclusive of common equity securities, then in lieu of such
new Warrant being exercisable as provided above, the holder of this Warrant
shall have the right, at its sole option, to require the Company to purchase
this Warrant (without prior exercise by the holder of this Warrant) at its fair
value as of the day before such Transaction became publicly known, as determined
by an unaffiliated internationally recognized accounting firm or investment bank
selected by the holder of this Warrant and reasonably acceptable to the Company.
The provisions of this Section 2I shall similarly apply to successive
reclassifications, changes, consolidations, mergers, sales and transfers.
Notwithstanding anything contained herein to the contrary, the Company shall not
effect any Transaction unless prior to the consummation thereof each corporation
or entity (other than the Company) which may be required to deliver any
securities or other property upon the exercise of Warrants shall assume, by
written instrument delivered to each holder of Warrants, the obligation to
deliver to such holder such securities or other property as to which, in
accordance with the foregoing provisions, such holder may be entitled, and such
corporation or entity shall have similarly delivered to each holder of Warrants
an opinion of counsel for such corporation or entity, satisfactory to each
holder of Warrants, which opinion shall state that all the outstanding Warrants,
shall thereafter continue in full force and effect and shall be enforceable
against such corporation or entity in accordance with the terms hereof and
thereof, together with such other matters as such holders may reasonably
request.
J. CERTAIN ISSUES EXCEPTED. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustments of
the Exercise Price in the case of the issuance of the Warrants and the issuance
of shares of Common Stock issuable upon exercise of the Warrants.
K. NOTICE OF ADJUSTMENT. Upon the occurrence of any event requiring an
adjustment of the Exercise Price, then and in each such case the Company shall
promptly deliver to the holder of this Warrant an Officer's Certificate stating
the Exercise Price resulting from such adjustment and the increase or decrease,
if any, in the number of shares of Common Stock issuable upon the exercise of
this Warrant, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Within 90 days after each fiscal
year in which any such adjustment shall have occurred, or within 30 days after
any request therefor by the holder of this Warrant stating that such holder
contemplates the exercise of such Warrant, the Company will obtain and deliver
to the holder of this Warrant the opinion of its regular independent auditors or
another firm of independent public accountants of recognized national standing
selected by the Company's Board of Directors, which opinion shall confirm the
statements in the most recent Officer's Certificate delivered under this Section
2K.
L. OTHER NOTICES. In case at any time:
a) the Company shall declare or pay any dividend upon Common Stock
payable in stock or make any dividend or other distribution to the holders
of Common Stock;
b) the Company shall offer for subscription pro rata to the holders of
Common Stock any additional shares of stock of any class or other rights;
c) there shall be any capital reorganization, or reclassification of
the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another
corporation or other entity (other than a merger or consolidation with a
directly or indirectly wholly-owned subsidiary of the Company in which the
Company is the survivor);
d) there shall be voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
e) there shall be made any tender offer for any shares of capital
stock of the Company; or
f) there shall be any other Transaction.
then, in any one or more of such cases, the Company shall give to the holder of
this Warrant (i) at least 15 days prior to the record date for any dividend or
distribution referred to in subsection (a) above, at least 30 days prior to any
event referred to in subsection (b), (c) or (d) above, and within five days
after it has knowledge of any pending tender offer or other Transaction, written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up or Transaction or the date by which shareholders must tender shares
in any tender offer and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up or tender offer or Transaction known to the Company, at least 30 days
prior written notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
notice in accordance with the foregoing clause (i) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (ii) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up, tender offer or Transaction, as the case may be. Such notice shall
also state that the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act or to a
favorable vote of security holders or any other approval requirement, if such is
required.
M. CERTAIN EVENTS. If any event occurs as to which, in the good faith
judgment of the Board of Directors of the Company, the other provisions of this
Warrant are not strictly applicable or if strictly applicable would not fairly
protect the exercise rights of the holders of the Warrants in accordance with
the essential intent and principles of such provisions, then the Board of
Directors of the Company shall make such adjustments, if any, on a basis
consistent with such essential intent and principles, necessary to preserve,
without dilution, the rights of the holders of the Warrants; PROVIDED, that no
such adjustment shall have the effect of increasing the Exercise Price as
otherwise determined pursuant to this Warrant. The Company may make such
reductions in the Exercise Price as it deems advisable, including any reductions
necessary to ensure that any event treated for Federal income tax purposes as a
distribution of stock or stock rights not be taxable to recipients.
N. PROHIBITION OF CERTAIN ACTIONS. The Company will not, by amendment
of its certificate of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions of
this Warrant and in the taking of all such action as may be necessary in order
to protect the exercise privilege of the holder of this Warrant against dilution
or other impairment, consistent with the tenor and purpose of this Warrant.
Without limiting the generality of the foregoing, the Company (a) will not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, (b) will take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of all Warrants from time to time outstanding, and (c) will
not take any action which results in any adjustment of the Exercise Price if the
total number of shares of Common Stock or Other Securities issuable after the
action upon the exercise of all of the Warrants would exceed the total number of
shares of Common Stock or Other Securities then authorized by the Company's
certificate of incorporation and available for the purpose of issue upon such
conversion.
SECTION 3. STOCK TO BE RESERVED. The Company will at all times reserve
and keep available out of the authorized Common Stock, solely for the purpose of
issue upon the exercise of the Warrants as herein provided, such number of
shares of Common Stock as shall then be issuable upon the exercise of all
outstanding Warrants and the Company will maintain at all times all other rights
and privileges sufficient to enable it to fulfill all its obligations hereunder.
The Company covenants that all shares of Common Stock which shall be so issuable
shall, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable, free from preemptive or similar rights on the part of the holders
of any shares of capital stock or securities of the Company or any other Person,
and free from all taxes, liens and charges with respect to the issue thereof
(not including any income taxes payable by the holders of Warrants being
exercised in respect of gains thereon), and the Exercise Price will be credited
to the capital and surplus of the Company. The Company will take all such action
as may be necessary to assure that such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any applicable
requirements of the National Association of Securities Dealers, Inc. and of any
domestic securities exchange upon which the Common Stock may be listed.
SECTION 4. REGISTRATION OF COMMON STOCK. If any shares of Common Stock
required to be reserved for purposes of the exercise of Warrants require
registration with or approval of any governmental authority under any Federal or
State law (other than the Securities Act, registration under which is governed
by the Registration Rights Agreement), before such shares may be issued upon the
exercise thereof, the Company will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be duly registered or
approved, as the case may be. Shares of Common Stock issuable upon exercise of
the Warrants shall be registered by the Company under the Securities Act or
similar statute then in force if required by the Registration Rights Agreement
and subject to the conditions stated in such agreement. At any such time as the
Common Stock is listed on any national securities exchange or quoted by the
Nasdaq National Market or any successor thereto or comparable system, the
Company will, at its expense, obtain promptly and maintain the approval for
listing on each such exchange or quoting by the Nasdaq National Market on such
successor thereto a comparable systems, upon official notice of issuance, the
shares of Common Stock issuable upon exercise of the then outstanding Warrants
and maintain the listing or quoting of such shares after their issuance so long
as the Common Stock is so listed or quoted; and the Company will also cause to
be so listed or quoted, will register under the Exchange Act and will maintain
such listing or quoting of, any Other Securities that at any time are issuable
upon exercise of the Warrants, if and at the time that any securities of the
same class shall be listed on such national securities exchange by the Company.
SECTION 5. EXPENSES. The Company will pay, and save each Person which
is or has been the holder of a Warrant (a "WARRANTHOLDER") harmless against
liability for the payment of, all out-of-pocket expenses arising in connection
with the transactions contemplated by the Warrants, including (i) all document
production and duplication charges and the reasonable fees and expenses of any
counsel engaged by any Warrantholder in connection with the Warrants or the
transactions contemplated thereby and any subsequent proposed modification,
amendment or waiver of, or proposed consent under, the Warrants, whether or not
such proposed modification, amendment or waiver shall be effected or proposed
consent granted, and (ii) the costs and expenses, including reasonable
attorneys' fees, incurred by any Warrantholder in enforcing or defending (or
determining whether or how to enforce or defend) any rights under the Warrants
or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with the Warrants or the transactions
contemplated thereby or by reason of the Warrantholder's have acquired any
Warrant or any securities issuable upon exercise thereof, including without
limitation costs and expenses (including the costs and expenses of financial
advisors) incurred in any bankruptcy case or in connection with any work-out or
restructuring of the transactions contemplated by the Warrants. The Company will
pay, and will save each Warrantholder harmless from all claims in respect of any
fees, costs or expenses, if any, of brokers and finders (other than those
retained by any such holder). The issuance of certificates for shares of Common
Stock upon exercise of the Warrants shall be made without charge to the
Warrantholders for any issuance tax or other governmental charge in respect
thereof, all of which shall be paid by the Company. The obligations of the
Company under this Section 5 shall survive the transfer or exercise of any
Warrant or any portion thereof or interest therein by the Warrantholder.
SECTION 6. CLOSING OF BOOKS. The Company will at no time close its
transfer books to the transfer of any Warrant or of any share of Common Stock
issued or issuable upon the exercise of any Warrant in any manner which
interferes with the timely exercise of such Warrant.
SECTION 7. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant
shall not entitle the holder thereof to any of the rights of a stockholder of
the Company, except as expressly contemplated herein. No provision of this
Warrant, in the absence of the actual exercise of such Warrant and receipt by
the holder thereof of Common Stock issuable upon such conversion, shall give
rise to any liability on the part of such holder as a stockholder of the
Company, whether such liability shall be asserted by the Company or by creditors
of the Company.
SECTION 8. RESTRICTIVE LEGENDS. Except as otherwise permitted by this
Section 8, each Warrant originally issued and each Warrant issued upon direct or
indirect transfer or in substitution for any Warrant pursuant to this Section 8
shall be stamped or otherwise imprinted with a legend in substantially the
following or a comparable form:
"This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933 and may not be
transferred in the absence of such registration or an exemption therefrom under
such Act."
Except as otherwise permitted by this Section 8, (a) each certificate for shares
of Common Stock (or Other Securities) issued upon the exercise of any Warrant,
and (b) each certificate issued upon the direct or indirect transfer of any such
Common Stock (or Other Securities) shall be stamped or otherwise imprinted with
a legend in substantially the following or a comparable form:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933 and may not be transferred in the absence of
such registration or an exception therefrom under such Act."
The holder (or its transferee, as applicable) of any Restricted Securities shall
be entitled to receive from the Company, without expense, new securities of like
tenor not bearing the applicable legend set forth above in this Section 8 when
such securities shall have been (a) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering such
Restricted Securities, (b) disposed of pursuant to the provisions of Rule 144 or
any comparable rule under the Securities Act, or (c) when, in the written
reasonable opinion of independent counsel for the holder thereof experienced in
Securities Act matters, such restrictions are no longer required in order to
insure compliance with the Securities Act (including when the provisions of Rule
144(k) or any comparable rule under the Securities Act have been satisfied). The
Company will pay the reasonable fees and disbursements of counsel for any holder
of Restricted Securities in connection with all opinions rendered pursuant to
this Section 8.
SECTION 9. AVAILABILITY OF INFORMATION. The Company will cooperate
with each holder of any Restricted Securities in supplying such information as
may be necessary for such holder to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any
Restricted Securities. The Company will furnish to each holder of any Warrants,
promptly upon their becoming available, copies of all financial statements,
reports, notices and proxy statements sent or made available generally by the
Company to its stockholders, and copies of all regular and periodic reports and
all registration statements and prospectuses filed by the Company with any
securities exchange or with the Commission.
SECTION 10. INFORMATION REQUIRED BY RULE 144A. The Company will, upon
the request of the holder of this Warrant, provide such holder, and any
qualified institutional buyer designated by such holder, such financial and
other information as such holder may reasonably determine to be necessary in
order to permit compliance with the information requirements of Rule 144A under
the Securities Act in connection with the resale of Warrants, except at such
times as the Company is subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act. For the purpose of this Section 10, the term
"qualified institutional buyer" shall have the meaning specified in Rule 144A
under the Securities Act.
SECTION 11. REGISTRATION RIGHTS AGREEMENT. The holder of this Warrant
and the holders of any securities issued or issuable upon the exercise hereof
are each entitled to the benefits of the Registration Rights Agreement.
SECTION 12. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
A0 OWNERSHIP OF WARRANTS. Except as otherwise required by law, the
Company may treat the Person in whose name any Warrant is registered on the
register kept at the principal office of the Company as the owner and holder
thereof for all purposes, notwithstanding any notice to the contrary except
that, if and when any Warrant is properly assigned in blank, the Company, in its
discretion, may (but shall not be obligated to) treat the bearer thereof as the
owner of such Warrant for all purposes, notwithstanding any notice to the
Company to the contrary. Subject to Section 8, a Warrant, if properly assigned,
may be exercised by a new holder without first having a new Warrant issued.
B0 TRANSFER AND EXCHANGE OF WARRANTS. Upon the surrender of any
Warrant, properly endorsed, for registration of transfer or for exchange at the
principal office of the Company, the Company at its expense will (subject to
compliance with Section 8, if applicable) execute and deliver to or upon the
order of the holder thereof a new Warrant or Warrants of like tenor, in the name
of such holder or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Original Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
C0 REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than the original holder thereof, upon delivery of its
unsecured indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the principal office of the Company, the Company at its expense
will execute and deliver, in lieu thereof, a new Warrant of like tenor.
SECTION 13. DEFINITIONS. As used herein (A) capitalized terms that are
not otherwise defined shall have the meanings assigned thereto in Appendix A to
the Master Restructuring Agreement referred to below and (B) unless the context
otherwise requires, the following terms have the following respective meanings:
"ACQUIRING COMPANY" shall have the meaning specified in Section 2J.
"ACQUIRER'S COMMON STOCK" shall have the meaning specified in Section
2J.
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares (including
treasury shares) of Common Stock issued or sold (or, pursuant to Section 2D or
2E deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than shares of Common
Stock issued upon the exercise or partial exercise of the Warrants and shares
issuable upon exercise of options, warrants or rights granted to employees or
consultants or directors of the Company or its subsidiaries under shareholder
approved plans and other options, warrants or rights in each case providing for
an exercise price of at least 95% of Market Price at the date of grant.
"AFFILIATE" shall have the meaning specified in the 1999 Securities
Purchase Agreement.
"ANNOUNCEMENT DATE" shall have the meaning specified in Section 2J.
"BUSINESS DAY" shall have the meaning specified in MRA Appendix A.
"CLOSING DATE" shall mean the date upon which all conditions precedent
to the making of the initial extensions of credit as set forth in the LIFO
Credit Agreement have been satisfied.
"COMMISSION" shall mean the Securities and Exchange Commission or any
successor federal agency having similar powers.
"COMMON STOCK" shall mean the Original Common Stock, any stock into
which such stock shall have been converted or changed or any stock resulting
from any reclassification of such stock and all other stock of any class or
classes (however designated) of the Company the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.
"COMPANY" shall mean Recoton Corporation, a New York corporation, and
its permitted successors hereunder.
"CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness,
shares of stock (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Additional Shares of Common
Stock.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934, as
amended.
"EXERCISE PERIOD" shall mean July 1, 2000 to and including the
Expiration Date.
"EXERCISE PRICE" shall have the meaning specified in Section 1B.
"EXISTING LETTER OF CREDIT COMMITMENT" shall have the meaning
specified in MRA Appendix A.
"EXISTING SENIOR OBLIGATIONS" shall have the meaning specified in MRA
Appendix A.
"EXPIRATION DATE" shall have the meaning specified in the opening
paragraphs of this Warrant.
"EXTRAORDINARY CASH DIVIDEND" shall mean, with respect to any
consecutive 12-month period, the amount, if any, by which the aggregate amount
of all cash and non-cash dividends or distributions on any shares of Common
Stock occurring in such 12-month period (or, if such Common Stock was not
outstanding at the commencement of such 12-month period, occurring in such
shorter period during which such Capital Stock was outstanding) exceeds on a per
share basis 5% of the average of the daily Market Prices per share of such
Common Stock over such 12-month period (or such shorter period during which such
Common Stock was outstanding); PROVIDED that, for purposes of the foregoing
definition, the amount of cash and non-cash dividends paid on a per share basis
will be appropriately adjusted to reflect the occurrence during such period of
any stock dividend or distribution of shares of capital stock of the Company or
any subdivision, split, combination or reclassification of shares of such Common
Stock.
"FAIR VALUE" shall mean with respect to any securities or other
property, the fair value thereof as of a date which is within 15 days of the
date as of which the determination is to be made as determined by the Board of
Directors of the Company in good faith, unless such determination is to be made
in connection with a transaction with an Affiliate in which case such fair value
shall be (a) determined by agreement between the Company and the Required
Holders, or (b) if the Company and the Required Holders fail to agree,
determined jointly by an independent investment banking firm retained by the
Company and by an independent investment banking firm retained by the Required
Holders, either of which firms may be an independent investment banking firm
regularly retained by the Company, or (c) if the Company or the Required Holders
shall fail so to retain an independent investment banking firm within 10
Business Days of the retention of such a firm by the Required Holders or the
Company, as the case may be, determined solely by the firm so retained, or (d)
if the firms so retained by the Company and by such holders shall be unable to
reach a joint determination within 15 Business Days of the retention of the last
firm so retained, determined by another independent investment banking firm
which is not a regular investment banking firm of the Company chosen by the
first two such firms.
"INITIAL DATE" shall have the meaning specified in Section 2A.
"LIFO REPAYMENT DATE" shall have the meaning specified in MRA Appendix
A.
"MARKET PRICE" shall mean on any date specified herein, (a) with
respect to Common Stock or to common stock (or equivalent equity interests) of
an Acquiring Person or its Parent, the amount per share equal to (i) the last
sale price of shares of Common Stock, regular way, or of shares of such common
stock (or equivalent equity interests) on such date or, if no such sale takes
place on such date, the average of the closing bid and asked prices thereof on
such date, in each case as officially reported on the principal national
securities exchange on which the same are then listed or admitted to trading, or
(ii) if no shares of Common Stock or no shares of such common stock (or
equivalent equity interests), as the case may be, are then listed or admitted to
trading on any national securities exchange, the last sale price of shares of
Common Stock, regular way, or of shares of such common stock (or equivalent
equity interests) on such date, in each case or, if no such sale takes place on
such date, the average of the reported closing bid and asked prices thereof on
such date as quoted in the Nasdaq National Market or other over-the-counter
market or, if no shares of Common Stock or no shares of such common stock (or
equivalent equity interests), as the case may be, are then quoted in the Nasdaq
National Market or other over-the-counter market, as published by the National
Quotation Bureau, Incorporated or any similar successor organization, and in any
such case as reported by any member firm of the New York Stock Exchange selected
by the Company, or (iii) if no shares of Common Stock or no shares of such
common stock (or equivalent equity interests), as the case may be, are then
listed or admitted to trading on any national securities exchange or quoted or
published in the over-the-counter market, the higher of (x) the book value
thereof as determined by any firm of independent public accountants of
recognized standing selected by the Board of Directors of the Company, as of the
last day of any month ending within 60 days preceding the date as of which the
determination is to be made or (y) the Fair Value thereof, and (b) with respect
to any other securities, the Fair Value thereof.
"MASTER RESTRUCTURING AGREEMENT" shall mean the Master Restructuring
Agreement, dated as of August 31, 1999 among the Company, the subsidiaries of
the Company party thereto, the creditors of the Company party thereto and The
Chase Manhattan Bank, as collateral agent, as amended, supplemented or otherwise
modified from time to time.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
the Company by its President, one of its Vice Presidents or its Treasurer.
"OPTIONS" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
"ORIGINAL COMMON STOCK" shall have the meaning specified in the
opening paragraphs of this Warrant.
"OTHER SECURITIES" shall mean any stock (other than Common Stock) and
any other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 2J or otherwise.
"PARENT" shall have the meaning specified in Section 2J.
"PERSON" shall have the meaning specified in MRA Appendix A.
"PRO RATA REPURCHASE" shall mean any purchase of shares of Common
Stock by the Company or by any of its subsidiaries whether for cash, shares of
Common Stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other Person or any other property
(including, without limitation, shares of capital stock, other securities or
evidences of indebtedness of a subsidiary of the Company), or any combination
thereof, which purchase is subject to Section 13(e) of the Securities Exchange
Act of 1934, as amended, or is made pursuant to an offer made available to all
holders of shares of Common Stock.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement dated as of August 31, 1999, among the Company and the holders of
"Registrable Securities" party thereto, as the same may be amended, supplemented
or otherwise modified from time to time.
"REQUIRED HOLDERS" shall mean the holders of at least 66 2/3% of all
the Warrants at the time outstanding, determined on the basis of the number of
shares of Common Stock then purchased upon the exercise of all Warrants then
outstanding.
"RESTRICTED SECURITIES" shall mean (a) any Warrants bearing the
applicable legend set forth in Section 8 and (b) any shares of Common Stock (or
Other Securities) which have been issued upon the exercise of Warrants and which
are evidenced by a certificate or certificates bearing the applicable legend set
forth in such section, and (c) unless the context otherwise requires, any shares
of Common Stock (or Other Securities) which are at the time issuable upon the
exercise of Warrants and which, when so issued, will be evidenced by a
certificate or certificates bearing the applicable legend set forth in such
section.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"TRANSACTION" shall have the meaning specified in Section 2I.
"WARRANT" shall have the meaning specified in the opening paragraphs
of this Warrant.
SECTION 14. REMEDIES. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
SECTION 15. NOTICES. All notices and other communications under this
Warrant shall be in writing and shall be sent (a) by registered or certified
mail, return receipt requested, or (b) by a recognized overnight delivery
service, addressed (i) if to any holder or any Warrant or any holder of any
Common Stock (or Other Securities), at the registered address of such holder as
set forth in the applicable register kept at the principal office of the
Company, or (ii) if to the Company, to the attention of its Secretary at its
principal office, PROVIDED that the exercise of any Warrant shall be effected in
the manner provided in Section 1.
SECTION 16. CANCELLATION. If on or prior to June 30, 2000, (a) the
LIFO Repayment Date shall have occurred and (b) all Existing Senior Obligations
shall have been paid or cahs collateralized, as applicable, in full and the
Existing Letter of Credit Commitment shall have been terminated, this Warrant
shall be canceled and returned to the Company.
SECTION 17. MISCELLANEOUS.
a This Warrant and any term hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against
which enforcement of such change, waiver, discharge or termination is
sought.
b The agreements of the Company contained in this Warrant other than
those applicable solely to the Warrants and the holders thereof shall inure
to the benefit of and be enforceable by any holder or holders at the time
of any Common Stock (or Other Securities) issued upon the exercise of
Warrants, whether so expressed or not.
c This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York.
d The section headings in this Warrant are for purposes of convenience
only and shall not constitute a part hereof.
IN WITNESS WHEREOF, this Warrant has been executed and delivered on
behalf of Recoton Corporation by one of its duly authorized officers at of the
date first above written.
RECOTON CORPORATION
By: /s/ STUART MONT
---------------------------------
Name: Stuart Mont
Title: Executive Vice President -
Operations
<PAGE>
FORM OF SUBSCRIPTION
(To be executed only upon exercise of Warrant)
To RECOTON CORPORATION
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder,1 shares of
Original Common Stock of RECOTON CORPORATION, [and herewith makes payment of
$__________ therefor]2 [in a "cashless exercise" pursuant to Section 1A of the
within Warrant]3, and requests that the certificates for such shares be
issued in the name of, and delivered to ______________ whose address is
______________.
- --------------
1 Insert the number of shares called for on the face of this Warrant (or, in
the case of a partial exercise, the portion thereof as to which this
Warrant is being exercised), in either case without making any adjustment
for additional Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of this
Warrant, may be delivered upon exercise. In the case of a partial exercise,
a new Warrant or Warrants will be issued and delivered, representing the
unexercised portion of this Warrant, to the holder surrendering the same.
2 Use in connection with an exercise involving a delivery of funds to the
Company.
3 Use in connection with a cashless exercise.
Dated:
(Signature must conform in all respects to name of
holder as specified on the face of this Warrant)
(Street Address)
(City) (State) (Zip Code)
<PAGE>
FORM OF ASSIGNMENT
(To be executed only upon transfer of Warrant)
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto ______________ the right represented by
such Warrant to purchase ______________4 shares of Original Common Stock of
RECOTON CORPORATION, to which such Warrant relates, and appoints ______________
Attorney to make such transfer on the books of RECOTON CORPORATION, maintained
for such purpose, with full power of substitution in the premises.
Dated:
(Signature must conform in all respects to name of
holder as specified on the face of this Warrant)
(Street Address)
(City) (State) (Zip Code)
Signed in the presence of:
- --------
4 Insert here the number of shares called for on the face of the within
Warrant (or, in the case of a partial assignment, the portion thereof as to
which this Warrant is being assigned), in either case without making any
adjustment for additional Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions
of the within Warrant, may be delivered upon exercise. In the case of a
partial assignment, a new Warrant or Warrants will be issued and delivered,
representing the portion of the within Warrant not being assigned, to the
holder assigning the same.
EXHIBIT 10
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT.
RECOTON CORPORATION
PREPAYMENT COMMON STOCK PURCHASE WARRANT
No. PR-___ New York, New York
PPN: 756268 5* 5 ___________, 1999
RECOTON CORPORATION (the "COMPANY"), a New York corporation, for value
received, hereby certifies that __________ or its registered assigns is entitled
to purchase from the Company __________duly authorized, validly issued, fully
paid and nonassessable common shares of the Company, par value $0.20 per share
(the "ORIGINAL COMMON STOCK"), at an initial exercise price per share equal to
[the average Market Price (as defined herein) of one share of common stock of
the Company for the ten Business Days immediately preceding their respective
issuance dates] (the "INITIAL EXERCISE PRICE") at any time or from time to time
after the date hereof and prior to 5:00 p.m. (United States Eastern Time), on
the fifth anniversary date of the date hereof (the "EXPIRATION DATE"), all
subject to the terms, conditions and adjustments set forth below in this
Warrant; PROVIDED, HOWEVER, that if on the fifth anniversary date of the date
hereof, the Company is then required, pursuant to an effective request therefor
under the Registration Rights Agreement (as defined herein), or is in the
process of effecting a registration under the Securities Act for a public
offering in which Warrant Shares (as defined herein) are entitled to be included
as provided in the Registration Rights Agreement, or if the Company is in
default of any of such obligations to register the sale of such shares, the
right to exercise this Warrant shall continue until 5:00 p.m. (United States
Eastern Time) on the 30th day following the date on which such registration
shall have become effective or on the 30th day following the date all such
defaults shall have been cured, whichever is the later date.
This Warrant is one of the Prepayment Warrants issued to the
Participating Senior Creditors (such term, and all other capitalized terms used
herein without being otherwise defined, having the meaning referred to in
Section 13 below) pursuant to Section 2.7 of the Master Restructuring Agreement
(the "WARRANTS", such term to include all Warrants issued in substitution
therefor or upon transfer thereof). The Warrants so issued evidence rights to
purchase an aggregate maximum number of 75,000 shares of Original Common Stock,
subject to adjustment as provided herein.
SECTION 1. EXERCISE OF WARRANT.
A. MANNER OF EXERCISE. This Warrant may be exercised by the holder
hereof, in whole or in part during normal business hours on any Business Day
during the Exercise Period, by surrender of this Warrant, with the form of
subscription at the end hereof (or a reasonable facsimile thereof) duly executed
by such holder, to the Company at the principal office of the Company located at
2950 Lake Emma Road, Lake Mary, FL 32746, or such other location in the United
States which shall at the time be the principal office of the Company and of
which the Company shall have notified the holder hereof in writing (or, if such
exercise shall be in connection with an underwritten public offering of shares
of Common Stock (or Other Securities) subject to this Warrant, at the location
at which the underwriters shall have agreed to accept delivery thereof),
accompanied by payment of an amount obtained by multiplying (a) the number of
shares of Original Common Stock (without giving effect to any adjustment
therein) designated in such form of subscription by (b) the Initial Exercise
Price (the "EXERCISE PAYMENT"). The Exercise Payment shall be payable (i) in
cash or its equivalent, (ii) in shares of Common Stock newly acquired upon
exercise of this Warrant (valued at the Market Price), (iii) by surrendering to
the Company the right to purchase a number of shares of Common Stock issuable
upon exercise of this Warrant (valued at the Market Price) equal to the product
obtained by multiplying the number of shares of Common Stock to be purchased
(including the shares relating to the surrendered rights) by a fraction, the
numerator of which is the Exercise Payment per share and the denominator of
which is the Market Price per share, or (iv) any combination of (i), (ii) and
(iii).
B. ADJUSTMENT TO NUMBER OF SHARES OF COMMON STOCK. The number of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
which the holder of this Warrant shall be entitled to receive upon each exercise
hereof shall be determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of Section 2) be issuable upon
such exercise, as designated by the holder hereof pursuant to this Section 1B,
by a fraction of which (x) the numerator is the Initial Exercise Price and (y)
the denominator is the Exercise Price in effect on the date of such exercise.
The "Exercise Price" shall initially be an amount equal to the Initial Exercise
Price per share, shall be adjusted and readjusted from time to time as provided
in Section 2 and, as so adjusted and readjusted, shall remain in effect until a
further adjustment or readjustment thereof is required by Section 2.
C. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be
deemed to have been effected and the Exercise Price shall be determined
immediately prior to the close of business on the Business Day on which this
Warrant shall have been surrendered to the Company as provided in Section 1A,
and at such time the person or persons in whose name or names any certificate or
certificates for shares of Original Common Stock (or Other Securities) shall be
issuable upon such exercise as provided in Section 1D shall be deemed to have
become the holder or holders of record thereof.
D. DELIVERY OF STOCK CERTIFICATES, ETC. Promptly after the exercise of
this Warrant, in whole or in part, and in any event within three Business Days
thereafter (unless such exercise shall be in connection with an underwritten
public offering of shares of Common Stock (or Other Securities) subject to this
Warrant, in which event concurrently with such exercise), the Company at its
expense will cause to be issued in the name of and delivered to the holder
hereof or, subject to Section 8, as such holder may direct,
(1) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be entitled upon such
exercise, and
(2) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, specifying the aggregate on the face or faces thereof the
number of shares of Common Stock equal to the number of such shares
specified on the face of this Warrant minus the number of such shares
designated by the holder upon such exercise as provided in Section 1A.
E. COMPANY TO REAFFIRM OBLIGATIONS. The Company will, at the time of
or at any time after each exercise of this Warrant, upon the request of the
holder hereof or of any shares of Common Stock (or Other Securities) issued upon
such exercise, acknowledge in writing its continuing obligation to afford to
such holder all rights to which such holder shall continue to be entitled after
such exercise in accordance with the terms of this Warrant, PROVIDED that if any
such holder shall fail to make any such request, the failure shall not affect
the continuing obligation of the Company to afford such rights to such holder.
F. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant and no payment or adjustment shall be made upon any
exercise on account of any cash dividends (except as provided in Section 2B) on
the Common Stock or Other Securities issued upon such conversion. If any
fractional interest in a share of Common Stock would, except for the provisions
of the first sentence of this Section 1F, be deliverable upon the exercise of
this Warrant, the Company shall, in lieu of delivering the fractional share
therefor, pay to the holder exercising this Warrant an amount in cash equal to
the Market Price of such fractional interest.
SECTION 2. PROTECTION AGAINST DILUTION OR OTHER IMPAIRMENT OF RIGHTS;
ADJUSTMENTS OF EXERCISE PRICE.
A. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case the Company,
at any time or from time to time after September ___, 1999 (the "INITIAL DATE"),
shall issue or sell Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section 2D or 2E) without
consideration or for a consideration per share (determined pursuant to Section
2F) less than 95% of the Market Price in effect, in each case, on the date of
and immediately prior to such issue or sale (or, in the case of issuances where
the price has been fixed or finally determined by contract prior to the date of
such issuance or sale, as of the date that such price is fixed or finally
determined), then, and in each such case, subject to Section 2I, the Exercise
Price shall be reduced, concurrently with such issue or sale, to a price
(calculated to the nearest .001 of a cent) determined by multiplying such
Exercise Price by a fraction,
a) the numerator of which shall be (i) the number of shares of Common
Stock outstanding immediately prior to such issue or sale plus (ii) the
number of shares of Common Stock which the aggregate consideration received
by the Company for the total number of such Additional Shares of Common
Stock so issued or sold would purchase at the Market Price, and
b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale,
PROVIDED that, for the purposes of this Section 2A, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant to
Section 2D or 2E, such Additional Shares shall be deemed to be outstanding, and
(y) treasury shares shall not be deemed to be outstanding.
B. EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS; PRO RATA REPURCHASES. In
case the Company at any time or from time to time after the date hereof shall
declare, order, pay or make a dividend or other distribution to the holders of
the Common Stock (including, without limitation, any distribution of other or
additional stock or other securities or property or Options by way of dividend
or spin-off, reclassification, recapitalization or similar corporate
rearrangement and any redemption or acquisition of any such stock or Options on
the Common Stock), other than (a) a dividend payable in additional Shares of
Common Stock or in Options for Common Stock or (b) a regular periodic dividend
payable in cash and not constituting an Extraordinary Cash Dividend, then, and
in each such case, the Company shall pay over to the holder of this Warrant, on
the date on which such dividend or other distribution is paid to the holders of
Common Stock, the securities and property (including cash) which such holder
would have received if such holder had exercised this Warrant immediately prior
to the record date fixed in connection with such dividend or other distribution.
In case the Company or any subsidiary thereof shall make a Pro Rata Repurchase,
the Exercise Price shall be adjusted by dividing the Exercise Price in effect
immediately prior to such action by a fraction (which in no event shall be less
than one), the numerator of which shall be the product of (A) the number of
shares of Common Stock outstanding immediately before such Pro Rata Repurchase
minus the number of shares of Common Stock repurchased in such Pro Rata
Repurchase and (B) the Market Price as of the date immediately preceding the
first public announcement by the Company of the intent to effect such Pro Rata
Repurchase, and the denominator of which shall be (A) the product of (x) the
number of shares of Common Stock outstanding immediately before such Pro Rata
Repurchase and (y) the Market Price as of the date immediately preceding the
first public announcement by the Company of the intent to effect such Pro Rata
Repurchase minus (B) the aggregate purchase price of the Pro Rata Repurchase.
C. ABOVE MARKET REPURCHASES OF COMMON STOCK. In case the Company, at
any time or from time to time after the date hereof shall repurchase, by
self-tender offer or otherwise, any shares of Common Stock (or any Options or
Convertible Securities) at a purchase price in excess of the Market Price
thereof, on the Business Day immediately prior to the earliest of (i) the date
of such repurchase, (ii) the commencement of an offer to repurchase, or (iii)
the public announcement of either (such date being the "DETERMINATION DATE"),
the Exercise Price shall be determined by dividing the Exercise Price by a
fraction, the numerator of which shall be the product of (A) the number of
shares of Common Stock outstanding immediately prior to such Determination Date
minus the number of shares of Common Stock repurchased and (B) the Market Price
as of the Determination Date, and the denominator of which shall be (A) the
product of (x) the number of shares of Common Stock outstanding immediately
before such repurchase and (y) the Market Price as of the Determination Date,
minus (B) the aggregate purchase price of such repurchase; PROVIDED, that in the
case of a self-tender offer by the Company, any shares of Common Stock issued
upon the exercise or partial exercise of this Warrant at an Exercise Price
adjusted pursuant to this Section 2C due to such self-tender offer, shall not be
eligible to be sold in such self-tender offer.
D. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case the
Company, at any time or from time to time after the date hereof, shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable, then, and
in each such case, the maximum number of Additional Shares of Common Stock (as
set forth in the instrument relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
thereof, issuable upon the conversion or exchange of such Convertible Securities
(or the exercise of such Options for Convertible Securities and subsequent
conversion or exchange of the Convertible Securities issued), shall be deemed to
be Additional Shares of Common Stock issued as of the time of such issue, sale,
grant or assumption of such Options or Convertible Securities or, in case such a
record date shall have been fixed, as of the close of business on such record
date; PROVIDED, that such Additional Shares of Common Stock shall not be deemed
to have been issued unless the consideration per share (determined pursuant to
Section 2F) of such shares would be less than 95% of the Market Price in effect
on the date of and immediately prior to such issue, sale, grant or assumption or
immediately prior to the close of business on such record date or, if the Common
Stock trades on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading, as the case may be, and PROVIDED, FURTHER, that in any such
case in which Additional Shares of Common Stock are deemed to be issued,
a) if an adjustment of the Exercise Price shall be made upon the
fixing of a record date as referred to in the first sentence of this
Section 2D, no further adjustment of the Exercise Price shall be made as a
result of the subsequent issue or sale of any Options or Convertible
Securities for the purpose of which such record date was set;
b) no further adjustment of the Exercise Price shall be made upon the
subsequent issue or sale of Additional Shares of Common Stock or
Convertible Securities upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
c) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any change in the consideration
payable to the Company, or change in the number of Additional Shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof
(by change of rate or otherwise), the Exercise Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence
of the record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such change becoming effective, be
recomputed to reflect such change insofar as it affects such Options, or
the rights of conversion or exchange under such Convertible Securities,
which are outstanding at such time;
d) upon the expiration of any such Options or of the rights of
conversion or exchange under any such Convertible Securities which shall
not have been exercised (or upon purchase by the Company and cancellation
or retirement of any such Options which shall not have been exercised or of
any such Convertible Securities the rights of conversion or exchange under
which shall not have been exercised), the Exercise Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence
of the record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or in the case of
Convertible Securities, the only Additional Shares of Common Stock issued
or sold (or deemed issued or sold) were the Additional Shares of Common
Stock, if any, actually issued or sold upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and the
consideration received therefor was (x) an amount equal to (A) the
consideration actually received by the Company for the issue, sale, grant
or assumption of all such Options, whether or not exercised, plus (B) the
consideration actually received by the Company upon such exercise, minus
(C) the consideration paid by the Company for any purchase of such Options
which were not exercised, or (y) an amount equal to (A) the consideration
actually received by the Company for the issue, sale, grant or assumption
of all such Convertible Securities which were actually converted or
exchanged, plus (B) the additional consideration, if any, actually received
by the Company upon such conversion or exchange, minus (C) the excess, if
any, of the consideration paid by the Company for any purchase of such
Convertible Securities, the rights of conversion or exchange under which
were not exercised, over an amount that would be equal to the Fair Value of
the Convertible Securities so purchased if such Convertible Securities were
not convertible into or exchangeable for Additional Shares of Common Stock,
and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the exercise
of such Options were issued at the time of the issue, sale, grant or
assumption of such Options, and the consideration received by the Company
for the Additional Shares of Common Stock deemed to have then been issued
was an amount equal to (x) the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options,
whether or not exercised, PLUS (y) the consideration deemed to have been
received by the Company (pursuant to Section 2F) upon the issue or sale of
the Convertible Securities with respect to which such Options were actually
exercised, minus (z) the consideration paid by the Company for any purchase
of such Options which were not exercised; and
e) no recomputation pursuant to subsection (c) or (d) above shall have
the effect of increasing the Exercise Price then in effect by an amount in
excess of the amount of the adjustment thereof originally made in respect
of the issue, sale, grant or assumption of such Options or Convertible
Securities.
Notwithstanding the foregoing provisions of this Section 2D, any
rights, options or warrants (herein called "SPECIAL OPTIONS") distributed by the
Company to all holders of Common Stock that entitle the holders thereof to
purchase shares of the Company's capital stock (either initially or under
certain circumstances), and that, until the occurrence of an event (the "TRIGGER
EVENT") (i) are deemed to be transferred with the Common Stock, (ii) are not
exercisable and (iii) are also issued in respect of future issuances of Common
Stock, shall not be deemed to have been distributed for the purposes of this
Section 2D (and no adjustment of the Exercise Price shall be required) until the
occurrence of the earliest Trigger Event. In addition, in the event of any
distribution of Special Options, or any Trigger Event with respect thereto, that
shall have resulted in an adjustment of the Exercise Price under this Section
2D, (A) in the case of any Special Options that shall have been redeemed or
repurchased without exercise by any holders thereof, the Exercise Price shall be
readjusted upon such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though it were an
Extraordinary Cash Dividend, equal to the per share redemption or repurchase
price received by a holder of Common Stock with respect to such Special Options
(assuming such holder had retained the same), made to all holders of Common
Stock as of the date of such redemption or repurchase, and (2 in the case of any
such Special Options all of which shall have expired or terminated without
having been exercised, redeemed or repurchased, the Exercise Price shall be
readjusted as if such distribution had not occurred.
E. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the
Company, at any time or from time to time after the date hereof, shall declare
or pay any dividend or other distribution on any class of securities of the
Company payable in shares of Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in Common
Stock), then, and in each such case, Additional Shares of Common Stock shall be
deemed to have been issued (a) in the case of any such dividend or other
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or other distribution, or (b) in the case of any such subdivision, at
the close of business on the day immediately prior to the day upon which such
corporate action becomes effective.
F. COMPUTATION OF CONSIDERATION. For the purposes of this Warrant:
a) The consideration for the issue or sale of any Additional Shares of
Common Stock or for the issue, sale, grant or assumption of any Options or
Convertible Securities, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, shall be computed as the
amount of cash received by the Company, and insofar as it consists of
securities or other property, shall be computed as of the date
immediately preceding such issue, sale, grant or assumption as the
Fair Value of such consideration (or, if such consideration is
received for the issue or sale of Additional Shares of Common Stock
and the Market Price thereof is less than the Fair Value of such
consideration, then such consideration shall be computed as the Market
Price of such Additional Shares of Common Stock), in each case without
deducting any expenses paid or incurred by the Company, any
commissions or compensation paid or concessions or discounts allowed
to underwriters, dealers or others performing similar services and any
accrued interest or dividends in connection with such issue or sale,
and
(ii) in case Additional Shares of Common Stock are issued or sold
or Options or Convertible Securities are issued, sold, granted or
assumed together with other stock or securities or other assets of the
Company for a consideration which covers both, shall be the proportion
of such consideration so received, computed as provided in clause (i)
above, allocable to such Additional Shares of Common Stock or Options
or Convertible Securities, as the case may be, all as determined in
good faith by the Board of Directors of the Company.
b) All Additional Shares of Common Stock, Options or Convertible
Securities issued in payment of any dividend or other distribution on any
class of stock of the Company and all Additional Shares of Common Stock
issued to effect a subdivision of the outstanding shares of Common Stock
into a greater number of shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock) shall be deemed to
have been issued without consideration.
c) Additional Shares of Common Stock deemed to have been issued for
consideration pursuant to Section 2D, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per
share determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, PLUS the minimum
aggregate amount of additional consideration (as set forth in the
instrument relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to
the Company upon the exercise in full of such Options or the
conversion or exchanges of such Convertible Securities or, in the case
of Options for Convertible Securities, the exercise of such Options
for Convertible Securities and the conversion or exchange of such
Convertible Securities, in each case computing such consideration as
provided in the foregoing subsection (a),
by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.
G. ADJUSTMENTS FOR COMBINATIONS, ETC. In case the outstanding shares
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
H. MINIMUM ADJUSTMENT OF EXERCISE PRICE. If the amount of any
adjustment of the Exercise Price required hereunder would be less than one
percent of the Exercise Price in effect at the time such adjustment is otherwise
so required to be made, such amount shall be carried forward and adjustment with
respect thereto made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate at least one percent of such Exercise Price; PROVIDED,
that upon the exercise of this Warrant all adjustment carried forward and not
therefore made up to and including the date of such exercise shall be made to
the nearest .001 of a cent.
I. CHANGES IN COMMON STOCK. At any time while this Warrant remains
outstanding and unexpired, in case of any reclassification or change of
outstanding securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination of
outstanding securities issuable upon the exercise of this Warrant) or in case of
any consolidation or merger of the Company with or into another corporation
(herein called a "TRANSACTION") (other than a merger with another corporation in
which the Company is a continuing corporation and which does not result in any
reclassification or change, other than a change in par value, or from par value
to no par value, or from no value to par value, or as a result of a subdivision
or combination of outstanding securities issuable upon the exercise of this
Warrant), the Company, or such successor corporation, as the case may be, shall,
without payment of any additional consideration therefor, execute and deliver to
the holder of this Warrant (upon surrender of this Warrant) a new Warrant
providing that the holder of this Warrant shall have the right to exercise such
new Warrant (upon terms not less favorable to the holder of this Warrant than
those then applicable to this Warrant) and to receive upon such exercise, in
lieu of each share of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money or
property receivable upon such reclassification, change, consolidation or merger,
by the holder of one Common Share issuable upon exercise of this Warrant had it
been exercised immediately prior to such reclassification, change, consolidation
or merger. Such new Warrant shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustment provided for in this
Section 2. Notwithstanding the foregoing, in the case of any Transaction which
pursuant to this Section 2I would result in the execution and delivery by the
Company or any successor of a new Warrant to the holder of this Warrant and in
which the holders of shares of Common Stock are entitled only to receive money
or other property exclusive of common equity securities, then in lieu of such
new Warrant being exercisable as provided above, the holder of this Warrant
shall have the right, at its sole option, to require the Company to purchase
this Warrant (without prior exercise by the holder of this Warrant) at its fair
value as of the day before such Transaction became publicly known, as determined
by an unaffiliated internationally recognized accounting firm or investment bank
selected by the holder of this Warrant and reasonably acceptable to the Company.
The provisions of this Section 2I shall similarly apply to successive
reclassifications, changes, consolidations, mergers, sales and transfers.
Notwithstanding anything contained herein to the contrary, the Company shall not
effect any Transaction unless prior to the consummation thereof each corporation
or entity (other than the Company) which may be required to deliver any
securities or other property upon the exercise of Warrants shall assume, by
written instrument delivered to each holder of Warrants, the obligation to
deliver to such holder such securities or other property as to which, in
accordance with the foregoing provisions, such holder may be entitled, and such
corporation or entity shall have similarly delivered to each holder of Warrants
an opinion of counsel for such corporation or entity, satisfactory to each
holder of Warrants, which opinion shall state that all the outstanding Warrants,
shall thereafter continue in full force and effect and shall be enforceable
against such corporation or entity in accordance with the terms hereof and
thereof, together with such other matters as such holders may reasonably
request.
J. CERTAIN ISSUES EXCEPTED. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustments of
the Exercise Price in the case of the issuance of the Warrants and the issuance
of shares of Common Stock issuable upon exercise of the Warrants.
K. NOTICE OF ADJUSTMENT. Upon the occurrence of any event requiring an
adjustment of the Exercise Price, then and in each such case the Company shall
promptly deliver to the holder of this Warrant an Officer's Certificate stating
the Exercise Price resulting from such adjustment and the increase or decrease,
if any, in the number of shares of Common Stock issuable upon the exercise of
this Warrant, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Within 90 days after each fiscal
year in which any such adjustment shall have occurred, or within 30 days after
any request therefor by the holder of this Warrant stating that such holder
contemplates the exercise of such Warrant, the Company will obtain and deliver
to the holder of this Warrant the opinion of its regular independent auditors or
another firm of independent public accountants of recognized national standing
selected by the Company's Board of Directors, which opinion shall confirm the
statements in the most recent Officer's Certificate delivered under this Section
2K.
L. OTHER NOTICES. In case at any time:
a) the Company shall declare or pay any dividend upon Common Stock
payable in stock or make any dividend or other distribution to the holders
of Common Stock;
b) the Company shall offer for subscription pro rata to the holders of
Common Stock any additional shares of stock of any class or other rights;
c) there shall be any capital reorganization, or reclassification of
the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another
corporation or other entity (other than a merger or consolidation with a
directly or indirectly wholly-owned subsidiary of the Company in which the
Company is the survivor);
d) there shall be voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
e) there shall be made any tender offer for any shares of capital
stock of the Company; or
f) there shall be any other Transaction.
then, in any one or more of such cases, the Company shall give to the holder of
this Warrant (i) at least 15 days prior to the record date for any dividend or
distribution referred to in subsection (a) above, at least 30 days prior to any
event referred to in subsection (b), (c) or (d) above, and within five days
after it has knowledge of any pending tender offer or other Transaction, written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up or Transaction or the date by which shareholders must tender shares
in any tender offer and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up or tender offer or Transaction known to the Company, at least 30 days
prior written notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
notice in accordance with the foregoing clause (i) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (ii) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up, tender offer or Transaction, as the case may be. Such notice shall
also state that the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act or to a
favorable vote of security holders or any other approval requirement, if such is
required.
M. CERTAIN EVENTS. If any event occurs as to which, in the good faith
judgment of the Board of Directors of the Company, the other provisions of this
Warrant are not strictly applicable or if strictly applicable would not fairly
protect the exercise rights of the holders of the Warrants in accordance with
the essential intent and principles of such provisions, then the Board of
Directors of the Company shall make such adjustments, if any, on a basis
consistent with such essential intent and principles, necessary to preserve,
without dilution, the rights of the holders of the Warrants; PROVIDED, that no
such adjustment shall have the effect of increasing the Exercise Price as
otherwise determined pursuant to this Warrant. The Company may make such
reductions in the Exercise Price as it deems advisable, including any reductions
necessary to ensure that any event treated for Federal income tax purposes as a
distribution of stock or stock rights not be taxable to recipients.
N. PROHIBITION OF CERTAIN ACTIONS. The Company will not, by amendment
of its certificate of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions of
this Warrant and in the taking of all such action as may be necessary in order
to protect the exercise privilege of the holder of this Warrant against dilution
or other impairment, consistent with the tenor and purpose of this Warrant.
Without limiting the generality of the foregoing, the Company (a) will not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, (b) will take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of all Warrants from time to time outstanding, and (c) will
not take any action which results in any adjustment of the Exercise Price if the
total number of shares of Common Stock or Other Securities issuable after the
action upon the exercise of all of the Warrants would exceed the total number of
shares of Common Stock or Other Securities then authorized by the Company's
certificate of incorporation and available for the purpose of issue upon such
conversion.
SECTION 3. STOCK TO BE RESERVED. The Company will at all times reserve
and keep available out of the authorized Common Stock, solely for the purpose of
issue upon the exercise of the Warrants as herein provided, such number of
shares of Common Stock as shall then be issuable upon the exercise of all
outstanding Warrants and the Company will maintain at all times all other rights
and privileges sufficient to enable it to fulfill all its obligations hereunder.
The Company covenants that all shares of Common Stock which shall be so issuable
shall, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable, free from preemptive or similar rights on the part of the holders
of any shares of capital stock or securities of the Company or any other Person,
and free from all taxes, liens and charges with respect to the issue thereof
(not including any income taxes payable by the holders of Warrants being
exercised in respect of gains thereon), and the Exercise Price will be credited
to the capital and surplus of the Company. The Company will take all such action
as may be necessary to assure that such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any applicable
requirements of the National Association of Securities Dealers, Inc. and of any
domestic securities exchange upon which the Common Stock may be listed.
SECTION 4. REGISTRATION OF COMMON STOCK. If any shares of Common Stock
required to be reserved for purposes of the exercise of Warrants require
registration with or approval of any governmental authority under any Federal or
State law (other than the Securities Act, registration under which is governed
by the Registration Rights Agreement), before such shares may be issued upon the
exercise thereof, the Company will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be duly registered or
approved, as the case may be. Shares of Common Stock issuable upon exercise of
the Warrants shall be registered by the Company under the Securities Act or
similar statute then in force if required by the Registration Rights Agreement
and subject to the conditions stated in such agreement. At any such time as the
Common Stock is listed on any national securities exchange or quoted by the
Nasdaq National Market or any successor thereto or comparable system, the
Company will, at its expense, obtain promptly and maintain the approval for
listing on each such exchange or quoting by the Nasdaq National Market on such
successor thereto a comparable systems, upon official notice of issuance, the
shares of Common Stock issuable upon exercise of the then outstanding Warrants
and maintain the listing or quoting of such shares after their issuance so long
as the Common Stock is so listed or quoted; and the Company will also cause to
be so listed or quoted, will register under the Exchange Act and will maintain
such listing or quoting of, any Other Securities that at any time are issuable
upon exercise of the Warrants, if and at the time that any securities of the
same class shall be listed on such national securities exchange by the Company.
SECTION 5. EXPENSES. The Company will pay, and save each Person which
is or has been the holder of a Warrant (a "WARRANTHOLDER") harmless against
liability for the payment of, all out-of-pocket expenses arising in connection
with the transactions contemplated by the Warrants, including (i) all document
production and duplication charges and the reasonable fees and expenses of any
counsel engaged by any Warrantholder in connection with the Warrants or the
transactions contemplated thereby and any subsequent proposed modification,
amendment or waiver of, or proposed consent under, the Warrants, whether or not
such proposed modification, amendment or waiver shall be effected or proposed
consent granted, and (ii) the costs and expenses, including reasonable
attorneys' fees, incurred by any Warrantholder in enforcing or defending (or
determining whether or how to enforce or defend) any rights under the Warrants
or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with the Warrants or the transactions
contemplated thereby or by reason of the Warrantholder's have acquired any
Warrant or any securities issuable upon exercise thereof, including without
limitation costs and expenses (including the costs and expenses of financial
advisors) incurred in any bankruptcy case or in connection with any work-out or
restructuring of the transactions contemplated by the Warrants. The Company will
pay, and will save each Warrantholder harmless from all claims in respect of any
fees, costs or expenses, if any, of brokers and finders (other than those
retained by any such holder). The issuance of certificates for shares of Common
Stock upon exercise of the Warrants shall be made without charge to the
Warrantholders for any issuance tax or other governmental charge in respect
thereof, all of which shall be paid by the Company. The obligations of the
Company under this Section 5 shall survive the transfer or exercise of any
Warrant or any portion thereof or interest therein by the Warrantholder.
SECTION 6. CLOSING OF BOOKS. The Company will at no time close its
transfer books to the transfer of any Warrant or of any share of Common Stock
issued or issuable upon the exercise of any Warrant in any manner which
interferes with the timely exercise of such Warrant.
SECTION 7. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant
shall not entitle the holder thereof to any of the rights of a stockholder of
the Company, except as expressly contemplated herein. No provision of this
Warrant, in the absence of the actual exercise of such Warrant and receipt by
the holder thereof of Common Stock issuable upon such conversion, shall give
rise to any liability on the part of such holder as a stockholder of the
Company, whether such liability shall be asserted by the Company or by creditors
of the Company.
SECTION 8. RESTRICTIVE LEGENDS. Except as otherwise permitted by this
Section 8, each Warrant originally issued and each Warrant issued upon direct or
indirect transfer or in substitution for any Warrant pursuant to this Section 8
shall be stamped or otherwise imprinted with a legend in substantially the
following or a comparable form:
"This Warrant and any shares acquired upon the exercise of this Warrant
have not been registered under the Securities Act of 1933 and may not be
transferred in the absence of such registration or an exemption therefrom
under such Act."
Except as otherwise permitted by this Section 8, (a) each certificate for shares
of Common Stock (or Other Securities) issued upon the exercise of any Warrant,
and (b) each certificate issued upon the direct or indirect transfer of any such
Common Stock (or Other Securities) shall be stamped or otherwise imprinted with
a legend in substantially the following or a comparable form:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933 and may not be transferred in the absence of
such registration or an exception therefrom under such Act."
The holder (or its transferee, as applicable) of any Restricted Securities shall
be entitled to receive from the Company, without expense, new securities of like
tenor not bearing the applicable legend set forth above in this Section 8 when
such securities shall have been (a) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering such
Restricted Securities, (b) disposed of pursuant to the provisions of Rule 144 or
any comparable rule under the Securities Act, or (c) when, in the written
reasonable opinion of independent counsel for the holder thereof experienced in
Securities Act matters, such restrictions are no longer required in order to
insure compliance with the Securities Act (including when the provisions of Rule
144(k) or any comparable rule under the Securities Act have been satisfied). The
Company will pay the reasonable fees and disbursements of counsel for any holder
of Restricted Securities in connection with all opinions rendered pursuant to
this Section 8.
SECTION 9. AVAILABILITY OF INFORMATION. The Company will cooperate
with each holder of any Restricted Securities in supplying such information as
may be necessary for such holder to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any
Restricted Securities. The Company will furnish to each holder of any Warrants,
promptly upon their becoming available, copies of all financial statements,
reports, notices and proxy statements sent or made available generally by the
Company to its stockholders, and copies of all regular and periodic reports and
all registration statements and prospectuses filed by the Company with any
securities exchange or with the Commission.
SECTION 10. INFORMATION REQUIRED BY RULE 144A. The Company will, upon
the request of the holder of this Warrant, provide such holder, and any
qualified institutional buyer designated by such holder, such financial and
other information as such holder may reasonably determine to be necessary in
order to permit compliance with the information requirements of Rule 144A under
the Securities Act in connection with the resale of Warrants, except at such
times as the Company is subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act. For the purpose of this Section 10, the term
"qualified institutional buyer" shall have the meaning specified in Rule 144A
under the Securities Act.
SECTION 11. REGISTRATION RIGHTS AGREEMENT. The holder of this Warrant
and the holders of any securities issued or issuable upon the exercise hereof
are each entitled to the benefits of the Registration Rights Agreement.
SECTION 12. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
A0 OWNERSHIP OF WARRANTS. Except as otherwise required by law, the
Company may treat the Person in whose name any Warrant is registered on the
register kept at the principal office of the Company as the owner and holder
thereof for all purposes, notwithstanding any notice to the contrary except
that, if and when any Warrant is properly assigned in blank, the Company, in its
discretion, may (but shall not be obligated to) treat the bearer thereof as the
owner of such Warrant for all purposes, notwithstanding any notice to the
Company to the contrary. Subject to Section 8, a Warrant, if properly assigned,
may be exercised by a new holder without first having a new Warrant issued.
B0 TRANSFER AND EXCHANGE OF WARRANTS. Upon the surrender of any
Warrant, properly endorsed, for registration of transfer or for exchange at the
principal office of the Company, the Company at its expense will (subject to
compliance with Section 8, if applicable) execute and deliver to or upon the
order of the holder thereof a new Warrant or Warrants of like tenor, in the name
of such holder or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Original Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
C0 REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than the original holder thereof, upon delivery of its
unsecured indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the principal office of the Company, the Company at its expense
will execute and deliver, in lieu thereof, a new Warrant of like tenor.
SECTION 13. DEFINITIONS. As used herein (A) capitalized terms that are
not otherwise defined shall have the meanings assigned thereto in Appendix A to
the Master Restructuring Agreement referred to below and (B) unless the context
otherwise requires, the following terms have the following respective meanings:
"ACQUIRING COMPANY" shall have the meaning specified in Section 2J.
"ACQUIRER'S COMMON STOCK" shall have the meaning specified in Section
2J.
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares (including
treasury shares) of Common Stock issued or sold (or, pursuant to Section 2D or
2E deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than shares of Common
Stock issued upon the exercise or partial exercise of the Warrants and shares
issuable upon exercise of options, warrants or rights granted to employees or
consultants or directors of the Company or its subsidiaries under shareholder
approved plans and other options, warrants or rights in each case providing for
an exercise price of at least 95% of Market Price at the date of grant.
"AFFILIATE" shall have the meaning specified in the 1999 Securities
Purchase Agreement.
"ANNOUNCEMENT DATE" shall have the meaning specified in Section 2J.
"BUSINESS DAY" shall have the meaning specified in MRA Appendix A.
"CLOSING DATE" shall mean the date upon which all conditions precedent
to the making of the initial extensions of credit as set forth in the LIFO
Credit Agreement have been satisfied.
"COMMISSION" shall mean the Securities and Exchange Commission or any
successor federal agency having similar powers.
"COMMON STOCK" shall mean the Original Common Stock, any stock into
which such stock shall have been converted or changed or any stock resulting
from any reclassification of such stock and all other stock of any class or
classes (however designated) of the Company the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.
"COMPANY" shall mean Recoton Corporation, a New York corporation, and
its permitted successors hereunder.
"CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness,
shares of stock (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Additional Shares of Common
Stock.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934, as
amended.
"EXERCISE PERIOD" shall mean the date of this Warrant to and including
the Expiration Date.
"EXERCISE PRICE" shall have the meaning specified in Section 1B.
"EXPIRATION DATE" shall have the meaning specified in the opening
paragraphs of this Warrant.
"EXTRAORDINARY CASH DIVIDEND" shall mean, with respect to any
consecutive 12-month period, the amount, if any, by which the aggregate amount
of all cash and non-cash dividends or distributions on any shares of Common
Stock occurring in such 12-month period (or, if such Common Stock was not
outstanding at the commencement of such 12-month period, occurring in such
shorter period during which such Capital Stock was outstanding) exceeds on a per
share basis 5% of the average of the daily Market Prices per share of such
Common Stock over such 12-month period (or such shorter period during which such
Common Stock was outstanding); PROVIDED that, for purposes of the foregoing
definition, the amount of cash and non-cash dividends paid on a per share basis
will be appropriately adjusted to reflect the occurrence during such period of
any stock dividend or distribution of shares of capital stock of the Company or
any subdivision, split, combination or reclassification of shares of such Common
Stock.
"FAIR VALUE" shall mean with respect to any securities or other
property, the fair value thereof as of a date which is within 15 days of the
date as of which the determination is to be made as determined by the Board of
Directors of the Company in good faith, unless such determination is to be made
in connection with a transaction with an Affiliate in which case such fair value
shall be (a) determined by agreement between the Company and the Required
Holders, or (b) if the Company and the Required Holders fail to agree,
determined jointly by an independent investment banking firm retained by the
Company and by an independent investment banking firm retained by the Required
Holders, either of which firms may be an independent investment banking firm
regularly retained by the Company, or (c) if the Company or the Required Holders
shall fail so to retain an independent investment banking firm within 10
Business Days of the retention of such a firm by the Required Holders or the
Company, as the case may be, determined solely by the firm so retained, or (d)
if the firms so retained by the Company and by such holders shall be unable to
reach a joint determination within 15 Business Days of the retention of the last
firm so retained, determined by another independent investment banking firm
which is not a regular investment banking firm of the Company chosen by the
first two such firms.
"INITIAL DATE" shall have the meaning specified in Section 2A.
"MARKET PRICE" shall mean on any date specified herein, (a) with
respect to Common Stock or to common stock (or equivalent equity interests) of
an Acquiring Person or its Parent, the amount per share equal to (i) the last
sale price of shares of Common Stock, regular way, or of shares of such common
stock (or equivalent equity interests) on such date or, if no such sale takes
place on such date, the average of the closing bid and asked prices thereof on
such date, in each case as officially reported on the principal national
securities exchange on which the same are then listed or admitted to trading, or
(ii) if no shares of Common Stock or no shares of such common stock (or
equivalent equity interests), as the case may be, are then listed or admitted to
trading on any national securities exchange, the last sale price of shares of
Common Stock, regular way, or of shares of such common stock (or equivalent
equity interests) on such date, in each case or, if no such sale takes place on
such date, the average of the reported closing bid and asked prices thereof on
such date as quoted in the Nasdaq National Market or other over-the-counter
market or, if no shares of Common Stock or no shares of such common stock (or
equivalent equity interests), as the case may be, are then quoted in the Nasdaq
National Market or other over-the-counter market, as published by the National
Quotation Bureau, Incorporated or any similar successor organization, and in any
such case as reported by any member firm of the New York Stock Exchange selected
by the Company, or (iii) if no shares of Common Stock or no shares of such
common stock (or equivalent equity interests), as the case may be, are then
listed or admitted to trading on any national securities exchange or quoted or
published in the over-the-counter market, the higher of (x) the book value
thereof as determined by any firm of independent public accountants of
recognized standing selected by the Board of Directors of the Company, as of the
last day of any month ending within 60 days preceding the date as of which the
determination is to be made or (y) the Fair Value thereof, and (b) with respect
to any other securities, the Fair Value thereof.
"MASTER RESTRUCTURING AGREEMENT" shall mean the Master Restructuring
Agreement, dated as of August 31, 1999 among the Company, the subsidiaries of
the Company party thereto, the creditors of the Company party thereto and The
Chase Manhattan Bank, as collateral agent, as amended, supplemented or otherwise
modified from time to time.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
the Company by its President, one of its Vice Presidents or its Treasurer.
"OPTIONS" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
"ORIGINAL COMMON STOCK" shall have the meaning specified in the
opening paragraphs of this Warrant.
"OTHER SECURITIES" shall mean any stock (other than Common Stock) and
any other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 2J or otherwise.
"PARENT" shall have the meaning specified in Section 2J.
"PARTICIPATING SENIOR CREDITOR" shall have the meaning specified in
Appendix A to the Master Restructuring Agreement.
"PERSON" shall have the meaning specified in Appendix A to the Master
Restructuring Agreement.
"PRO RATA REPURCHASE" shall mean any purchase of shares of Common
Stock by the Company or by any of its subsidiaries whether for cash, shares of
Common Stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other Person or any other property
(including, without limitation, shares of capital stock, other securities or
evidences of indebtedness of a subsidiary of the Company), or any combination
thereof, which purchase is subject to Section 13(e) of the Securities Exchange
Act of 1934, as amended, or is made pursuant to an offer made available to all
holders of shares of Common Stock.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement dated as of August 31, 1999, among the Company and the holders of
ARegistrable Securities" party thereto, as the same may be amended, supplemented
or otherwise modified from time to time.
"REQUIRED HOLDERS" shall mean the holders of at least 66 2/3% of all
the Warrants at the time outstanding, determined on the basis of the number of
shares of Common Stock then purchased upon the exercise of all Warrants then
outstanding.
"RESTRICTED SECURITIES" shall mean (a) any Warrants bearing the
applicable legend set forth in Section 8 and (b) any shares of Common Stock (or
Other Securities) which have been issued upon the exercise of Warrants and which
are evidenced by a certificate or certificates bearing the applicable legend set
forth in such section, and (c) unless the context otherwise requires, any shares
of Common Stock (or Other Securities) which are at the time issuable upon the
exercise of Warrants and which, when so issued, will be evidenced by a
certificate or certificates bearing the applicable legend set forth in such
section.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"TRANSACTION" shall have the meaning specified in Section 2I.
"WARRANT" shall have the meaning specified in the opening paragraphs
of this Warrant.
SECTION 14. REMEDIES. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
SECTION 15. NOTICES. All notices and other communications under this
Warrant shall be in writing and shall be sent (a) by registered or certified
mail, return receipt requested, or (b) by a recognized overnight delivery
service, addressed (i) if to any holder or any Warrant or any holder of any
Common Stock (or Other Securities), at the registered address of such holder as
set forth in the applicable register kept at the principal office of the
Company, or (ii) if to the Company, to the attention of its Secretary at its
principal office, PROVIDED that the exercise of any Warrant shall be effected in
the manner provided in Section 1.
SECTION 16. MISCELLANEOUS.
a This Warrant and any term hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against
which enforcement of such change, waiver, discharge or termination is
sought.
b The agreements of the Company contained in this Warrant other than
those applicable solely to the Warrants and the holders thereof shall inure
to the benefit of and be enforceable by any holder or holders at the time
of any Common Stock (or Other Securities) issued upon the exercise of
Warrants, whether so expressed or not.
c This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York.
d The section headings in this Warrant are for purposes of convenience
only and shall not constitute a part hereof.
IN WITNESS WHEREOF, this Warrant has been executed and delivered on
behalf of Recoton Corporation by one of its duly authorized officers at of the
date first above written.
RECOTON CORPORATION
By: /s/ STUART MONT
-----------------------------
Name: Stuart Mont
Title: Executive Vice President -
Operations
<PAGE>
FORM OF SUBSCRIPTION
(To be executed only upon exercise of Warrant)
To RECOTON CORPORATION
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder,1 shares of
Original Common Stock of RECOTON CORPORATION, [and herewith makes payment of
$____________ therefor]2 [in a "cashless exercise" pursuant to Section 1A of the
within Warrants]3, and requests that the certificates for such shares be issued
in the name of, and delivered to _____________ whose address is
_________________.
- ---------------
1 Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any
adjustment for additional Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions
of this Warrant, may be delivered upon exercise. In the case of a partial
exercise, a new Warrant or Warrants will be issued and delivered,
representing the unexercised portion of this Warrant, to the holder
surrendering the same.
2 Use in connection with an exercise involving a delivery of funds to the
Company.
3 Use in connection with a cashless exercise.
Dated:
(Signature must conform in all respects to name of
holder as specified on the face of this Warrant)
(Street Address)
(City) (State) (Zip Code)
<PAGE>
FORM OF ASSIGNMENT
(To be executed only upon transfer of Warrant)
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto ______________ the right represented by
such Warrant to purchase ______________4 shares of Original Common Stock of
RECOTON CORPORATION, to which such Warrant relates, and appoints ______________
Attorney to make such transfer on the books of RECOTON CORPORATION, maintained
for such purpose, with full power of substitution in the premises.
Dated:
(Signature must conform in all respects to name of
holder as specified on the face of this Warrant)
(Street Address)
(City) (State) (Zip Code)
Signed in the presence of:
- --------
4 Insert here the number of shares called for on the face of the within
Warrant (or, in the case of a partial assignment, the portion thereof as to
which this Warrant is being assigned), in either case without making any
adjustment for additional Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions
of the within Warrant, may be delivered upon exercise. In the case of a
partial assignment, a new Warrant or Warrants will be issued and delivered,
representing the portion of the within Warrant not being assigned, to the
holder assigning the same.
