SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): FEBRUARY 4, 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 February 4, 1999 the Company issued $35 million in principal amount
of 11.5% senior subordinated notes due February 4, 2004 (the "1999 Notes"). The
purchasers of such notes also received warrants to purchase 310,000 common
shares of the Company at an exercise price of $18.2626 exerciseable at any time
on or prior to February 4, 2004. The interest on the 1999 Notes would increase
to 12.5% if such notes are not prepaid on or before November 3, 1999 and would
thereafter increase by 0.50% per annum on each of the next five quarterly
interest payment dates. The notes can be prepaid without premium at any time
prior to the first anniversary of their issuance. The proceeds of the issuance
of the 1999 Notes were used to reduce borrowings under the Company's $86.5
million revolving line of credit.
In conjunction with the issuance of such debt, the holders of the
Company's $75 million in notes due January 6, 2007 (the "1997 Notes") and the
$25 million in notes due September 1, 2008 (the "1998 Notes"), as well as the
Company's banks, agreed to modify certain financial covenants in the relevant
note purchase and credit agreements. The interest rate on the 1997 Notes and
1998 Notes increased by 1% point (to 9.75% for the 1997 Notes and 9.52% for the
1998 Notes); such rates will decrease by 50 basis points when the Company raises
at least $75 million in equity and/or additional subordinated debt.
<PAGE>
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. Securities Purchase Agreement between Recoton
Corporation, The Prudential Insurance Company of
America and ING (U.S.) Capital LLC dated
February 4, 1999
2. Form of warrants issued to The Prudential Insurance
Company of America and ING (U.S.) Investments
Corporation dated February 4, 1999 and sheet
detailing variable information
3. Registration Rights Agreement with The Prudential
Insurance Company of America and ING (U.S.)
Investments Corporation dated February 4, 1999
4. Amendment Agreement dated as of December 31, 1998
(but executed on February 4, 1999) between Recoton
Corporation and the Holders of the Company's Notes
Issued January 6, 1997
5. Amendment Agreement dated as of December 31, 1998
(but executed on February 4, 1999) between Recoton
Corporation and the Holder of the Company's Notes
Issued September 1, 1998
6. Amendment dated as of December 31, 1998 (but executed
on February 4, 1999) between Recoton Corporation and
The Chase Manhattan Bank (for itself and as
Administrative Agent) amending the Second Amended and
Restated Credit Agreement dated as of June 18, 1998
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: February 9, 1999
<PAGE>
EXHIBIT INDEX
1. Securities Purchase Agreement between Recoton Corporation, The
Prudential Insurance Company of America and ING (U.S.) Capital LLC
dated February 4, 1999
2. Form of warrants issued to The Prudential Insurance Company of America
and ING (U.S.) Investments Corporation dated February 4, 1999 and
sheet detailing variable information
3. Registration Rights Agreement with The Prudential Insurance Company of
America and ING (U.S.) Investments Corporation dated February 4, 1999
4. Amendment Agreement dated as of December 31, 1998 (but executed on
February 4, 1999) between Recoton Corporation and the Holders of the
Company's Notes Issued January 6, 1997
5. Amendment Agreement dated as of December 31, 1998 (but executed on
February 4, 1999) between Recoton Corporation and the Holder of the
Company's Notes Issued September 1, 1998
6. Amendment dated as of December 31, 1998 (but executed on February 4,
1999) between Recoton Corporation and The Chase Manhattan Bank (for
itself and as Administrative Agent) amending the Second Amended and
Restated Credit Agreement dated as of June 18, 1998
EXHIBIT 1
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RECOTON CORPORATION
SECURITIES PURCHASE
AGREEMENT
DATED AS OF FEBRUARY 4, 1999
$35,000,000
SENIOR SUBORDINATED NOTES DUE FEBRUARY 4, 2004
310,000 COMMON STOCK PURCHASE WARRANTS
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<PAGE>
TABLE OF CONTENTS
(NOT PART OF AGREEMENT)
PAGE
1. AUTHORIZATION OF ISSUE OF NOTES AND WARRANTS.............................1
2. PURCHASE AND SALE OF NOTES AND WARRANTS..................................1
3. CONDITIONS OF CLOSING....................................................2
3A. OPINION OF PURCHASERS' SPECIAL COUNSEL..........................2
3B. OPINION OF COMPANY'S COUNSEL....................................2
3C. REGISTRATION RIGHTS AGREEMENT...................................2
3D. REPRESENTATIONS AND WARRANTIES; NO DEFAULT......................2
3E. PURCHASE PERMITTED BY APPLICABLE LAWS...........................3
3F. PRIVATE PLACEMENT NUMBER........................................3
3G. COMMITMENT FEE..................................................3
3H. OTHER PURCHASERS................................................3
3I. CLOSING EXPENSES................................................3
3J. BANK CONSENT....................................................3
3K. PROCEEDINGS.....................................................3
4. PREPAYMENTS AND INTEREST.................................................3
4A. REQUIRED PREPAYMENTS............................................4
4B. OPTIONAL PREPAYMENT WITH EARLY PAYMENT AMOUNT...................4
4C. NOTICE OF PREPAYMENT............................................4
4D. PARTIAL PAYMENTS PRO RATA.......................................4
4E. OBLIGATION TO PURCHASE DURING EXISTENCE OF PUT CONDITION........4
4F. RETIREMENT OF NOTES.............................................6
4G. INTEREST PAYMENTS...............................................6
5. AFFIRMATIVE COVENANTS....................................................7
5A. FINANCIAL STATEMENTS............................................7
5B. INFORMATION REQUIRED BY RULE 144A...............................8
5C. INSPECTION OF PROPERTY..........................................8
5D. OTHER INFORMATION...............................................9
5E. PAYMENT OF TAXES AND CLAIMS....................................10
5F. MAINTENANCE OF PROPERTIES; CORPORATE EXISTENCE; ETC............10
6. NEGATIVE COVENANTS......................................................11
6A. LINE OF BUSINESS...............................................11
6B. DEBT...........................................................11
6C. INTEREST EXPENSE COVERAGE......................................12
6D. NET WORTH......................................................12
6E. RESTRICTED INVESTMENTS AND RESTRICTED PAYMENTS.................13
6F. MERGERS AND CONSOLIDATIONS.....................................13
6G. TRANSFERS OF PROPERTY; SUBSIDIARY STOCK........................14
6H. LIENS..........................................................18
6I. PERMITTED INVESTMENTS..........................................19
6J. TRANSACTIONS WITH AFFILIATES...................................19
6K. DESIGNATION OF SUBSIDIARIES....................................19
6L. SUBSIDIARY GUARANTY............................................20
6M. PRC SUBSIDIARIES...............................................20
7. EVENTS OF DEFAULT.......................................................21
7A. ACCELERATION...................................................21
7B. RESCISSION OF ACCELERATION.....................................24
7C. NOTICE OF ACCELERATION OR RESCISSION...........................24
7D. OTHER REMEDIES.................................................24
8. REPRESENTATIONS, COVENANTS AND WARRANTIES...............................25
8A. ORGANIZATION; SUBSIDIARIES AND AFFILIATES......................25
8B. FINANCIAL STATEMENTS...........................................26
8C. ACTIONS PENDING................................................26
8D. OUTSTANDING DEBT...............................................26
8E. TITLE TO PROPERTIES............................................26
8F. TAXES..........................................................27
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS.......................27
8H. OFFERING OF NOTES AND WARRANTS.................................27
8I. USE OF PROCEEDS................................................27
8J. ERISA..........................................................28
8K. GOVERNMENTAL CONSENT...........................................28
8L. ENVIRONMENTAL COMPLIANCE.......................................28
8M. DISCLOSURE.....................................................28
8N. YEAR 2000......................................................29
9 REPRESENTATIONS OF THE PURCHASER.........................................29
9A. NATURE OF PURCHASE.............................................29
9B. SOURCE OF FUNDS................................................29
10. DEFINITIONS.............................................................31
10A. OTHER TERMS...................................................31
10B. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES......................46
11. MISCELLANEOUS..........................................................46
11A. NOTE PAYMENTS................................................46
11B. EXPENSES.....................................................46
11C. CONSENT TO AMENDMENTS........................................47
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES;
LOST NOTES.................................................47
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS........................47
11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT..................................................48
11G. SUCCESSORS AND ASSIGNS.......................................48
11H. NOTICES......................................................48
11I. PAYMENTS DUE ON NON-BUSINESS DAYS............................48
11J. DISCLOSURE TO OTHER PERSONS..................................49
11K. SATISFACTION REQUIREMENT.....................................50
11L. GOVERNING LAW................................................50
11M. SEVERABILITY.................................................50
11N. DESCRIPTIVE HEADINGS.........................................50
11O. COUNTERPARTS.................................................50
11P. SEVERABILITY OF OBLIGATIONS..................................50
12. SUBORDINATION OF NOTES.................................................50
12A. SUBORDINATION.................................................50
12B. OBLIGATION OF THE COMPANY.....................................53
12C. SUBROGATION...................................................54
12D. RIGHTS OF HOLDERS OF SENIOR DEBT..............................54
Annex 1 -- Purchaser Schedule
Annex 2 -- Wire Information
Annex 3 -- Information as to Company
Exhibit A -- Form of Note
Exhibit B -- Form of Warrant
Exhibit C -- Form of Registration Rights Agreement
Exhibit D -- Form of Opinion of Stroock & Stroock & Lavan LLP
<PAGE>
RECOTON CORPORATION
2950 LAKE EMMA ROAD
LAKE MARY, FLORIDA 32746
$35,000,000
SENIOR SUBORDINATED NOTES DUE FEBRUARY 4, 2004
AND
310,000 COMMON STOCK PURCHASE WARRANTS
As of February 4, 1999
To the Purchasers Named in the
Purchaser Schedule Attached Hereto
Ladies and Gentlemen:
The undersigned, Recoton Corporation (herein called the "COMPANY"),
hereby agrees with the purchasers named in the Purchaser Schedule attached as
Annex 1 hereto (herein collectively called the "PURCHASERS" and individually a
"PURCHASER") as follows:
1. AUTHORIZATION OF ISSUE OF NOTES AND WARRANTS. The Company will
authorize the issue of its senior subordinated promissory notes in the aggregate
principal amount of $35,000,000, to be dated the date of issue thereof, to
mature February 4, 2004, to bear interest on the unpaid balance thereof as set
forth in paragraph 4G hereof, and to be substantially in the form of Exhibit A
attached hereto. The term "NOTES" as used herein shall include each such senior
subordinated promissory note delivered pursuant to any provision of this
Agreement and each such senior subordinated promissory note delivered in
substitution or exchange for any other Note pursuant to any such provision. The
Company will authorize the issue of its common stock purchase warrants
exercisable for 310,000 shares of the Company's common stock to be dated the
date of issue thereof, to expire February 4, 2004, and to be substantially in
the form of Exhibit B attached hereto. The TERM "WARRANTS" as used herein shall
include each common stock purchase warrant delivered pursuant to this Agreement
and each such common stock purchase warrant delivered in substitution or
exchange for any other Warrant pursuant to the terms of such Warrants. The
holders of the Warrants shall have the benefits of a registration rights
agreement (the "REGISTRATION RIGHTS AGREEMENT") to be executed by the Company in
substantially the form of Exhibit C hereto.
2. PURCHASE AND SALE OF NOTES AND WARRANTS. The Company hereby agrees
to sell to the Purchaser and, subject to the terms and conditions herein set
forth, each Purchaser agrees to purchase from the Company, the aggregate
principal amount of Notes and the number of Warrants set forth opposite such
Purchaser's name in the Purchaser Schedule attached as Annex 1 hereto at a price
for both Notes and Warrants equal to 100% of the aggregate principal amount of
Notes being purchased. The Company will deliver to such Purchaser, at the
offices of Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York
10019, one or more Notes and Warrants registered in each Purchaser's name (or
the name of its nominee or assignee), evidencing the aggregate principal amount
of Notes and the number of Warrants to be purchased by the Purchaser and in the
denomination or denominations specified with respect to such Purchaser in the
Purchaser Schedule against payment of the purchase price thereof by transfer of
immediately available funds for credit to the Company's account, as directed by
the Company on Annex 2 hereto, on the date of closing, which shall be February
4, 1999 or any other date upon which the Company and the Purchasers may mutually
agree (the "CLOSING DATE").
The Purchasers and the Company agree that the Warrants have a value of
$2,491,475 in the aggregate and that as a consequence there will be original
issue discount on the Notes resulting in an original issue discount price equal
to 92.8815% of the principal amount of the Notes. The Company and the Purchasers
recognize that the agreements in this paragraph limit the original issue
discount that the Company will be entitled to deduct for federal income tax
purposes over the life of the Notes to an amount, if any, determined by
reference to this paragraph and the Company and the Purchasers agree to adhere
to the agreements set forth in this paragraph for federal income tax purposes.
The Notes shall bear a legend substantially as set forth below as required by
Treasury Regulation Section 1.1275-3(b):
THIS NOTE WAS ORIGINALLY ISSUED WITH ORIGINAL
ISSUE DISCOUNT. THE ISSUE PRICE, THE AMOUNT OF ORIGINAL
ISSUE DISCOUNT, THE ISSUE DATE, AND THE YIELD TO MATURITY
MAY BE OBTAINED BY WRITING AND REQUESTING THE SAME FROM
RECOTON CORPORATION, 2950 LAKE EMMA ROAD, LAKE MARY, FL
32746, ATTENTION: TREASURER.
3. CONDITIONS OF CLOSING. Each Purchaser's obligation to purchase and
pay for the Notes and Warrants to be purchased by it hereunder is subject to the
satisfaction, on or before the Closing Date, of the following conditions:
3A. OPINION OF PURCHASERS' SPECIAL COUNSEL. Such Purchaser shall have
received from Willkie Farr & Gallagher which is acting as special counsel for
the Purchasers in connection with this transaction, a favorable opinion
satisfactory to such Purchaser as to such matters incident to the matters herein
contemplated as it may reasonably request.
3B. OPINION OF COMPANY'S COUNSEL. Such Purchaser shall have received
from Stroock & Stroock & Lavan LLP, regular counsel for the Company, a favorable
opinion satisfactory to the Purchaser and substantially in the form of Exhibit D
attached hereto;
3C. REGISTRATION RIGHTS AGREEMENT. The Company shall have executed and
delivered the Registration Rights Agreement.
3D. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations
and warranties contained in paragraph 8 shall be true on and as of the Closing
Date, except to the extent of changes caused by the transactions herein
contemplated; there shall exist on the Closing Date no Event of Default or
Default; and the Company shall have delivered to such Purchaser an Officer's
Certificate, dated the Closing Date, to both such effects. In addition, the
Company shall have delivered to such Purchaser a certificate from the Secretary
or an Assistant Secretary of the Company certifying the incumbency of officers
of the Company executing this Agreement, the Notes and other documents,
attaching copies of the Company's by-laws and resolutions authorizing its
execution of this Agreement and its issuance of the Notes, and certifying as to
such other matters as such Purchaser shall reasonably request.
3E. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and payment
for the Notes and Warrants to be purchased by such Purchaser on the Closing Date
on the terms and conditions herein provided (including the use of the proceeds
of such Notes and Warrants by the Company) shall not violate any applicable law
or governmental regulation (including, without limitation, section 5 of the
Securities Act or Regulation T, U or X of the Board of Governors of the Federal
Reserve System) and shall not subject such Purchaser to any tax, penalty,
liability or other onerous condition under or pursuant to any applicable law or
governmental regulation, and such Purchaser shall have received such
certificates or other evidence as it may request to establish compliance with
this condition.
3F. PRIVATE PLACEMENT NUMBER. The Company shall have obtained or
caused to be obtained private placement numbers for the Notes and the Warrants
from the CUSIP Service Bureau of Standard & Poor's.
3G. COMMITMENT FEE. The Company shall have paid such Purchaser a
commitment fee in an amount equal to 3.00% of the principal amount of Notes
being purchased by such Purchaser.
3H. OTHER PURCHASERS. Each of the other Purchasers shall have
purchased the Notes and Warrants to be purchased by it in the respective amounts
listed on Annex 1 hereto and the Company shall have received payment therefor.
3I. CLOSING EXPENSES. The Company shall have paid at the closing the
statement for fees and disbursements of the special counsel to the Purchasers
presented on the Closing Date.
3J. BANK CONSENT. The Banks shall have delivered to the Purchasers a
written consent in respect of the transactions contemplated by this Agreement
and the Subsidiary Guaranty.
3K. PROCEEDINGS. All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in substance and form to the Purchaser,
and the Purchaser shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably request.
4. PREPAYMENTS AND INTEREST. The Notes shall be subject to required
prepayment as set forth in paragraph 4A hereof, optional prepayment at the
option of the Company as set forth in paragraph 4B hereof and prepayment at the
option of each holder of Notes as provided in paragraph 4E hereof. Interest
shall accrue and be payable as set forth in paragraph 4G hereof.
4A. REQUIRED PREPAYMENTS. Until the Notes shall be paid in full, the
Company shall apply to the prepayment of the principal of the Notes, Together
with the Early Payment Amount, if any, with respect to such Notes, the sum of
the Net Security Issuance Proceeds received by the Company or one of the
Restricted Subsidiaries on the third Business Day after each Issuance
Transaction giving rise to such Net Cash Proceeds (a "MANDATORY PREPAYMENT
DATE"). Such principal amounts of the Notes, together with interest thereon to
the prepayment date, and the Early Payment Amount, if any, with respect thereto,
shall become due on such Mandatory Prepayment Dates. The remaining unpaid
principal amount of the Notes, if any, together with interest accrued thereon,
shall become due on the maturity date of the Notes.
4B. OPTIONAL PREPAYMENT WITH EARLY PAYMENT AMOUNT. The Notes shall be
subject to prepayment, in whole at any time or from time to time in part (in
multiples of $5,000,000), at the option of the Company, at 100% of the principal
amount so prepaid plus interest thereon to the prepayment date and the Early
Payment Amount, if any, with respect to each Note being prepaid.
4C. NOTICE OF PREPAYMENT. The Company shall give the holder of each
Note irrevocable written notice of any prepayment pursuant to paragraph 4A or 4B
hereof not less than three Business Days prior to the prepayment date,
specifying such prepayment date and the principal amount of the Notes, and of
the Notes held by such holder, to be prepaid on such date and stating that such
prepayment is to be made pursuant to paragraph 4A or 4B of this Agreement, as
applicable. Notice of prepayment having been given as aforesaid, the principal
amount of the Notes specified in such notice, together with interest thereon to
the prepayment date and together with the Early Payment Amount, if any, with
respect thereto, shall become due and payable on such prepayment date. The
making of any prepayment of Notes pursuant to the provisions of paragraph 4A or
paragraph 4B and the receipt of any funds by any holder of Notes in connection
with such prepayment of Notes is subject in all events to the provisions of
paragraph 12. The Company shall, on or before the day on which it gives written
notice of any prepayment pursuant to paragraph 4A or 4B hereof, also call to
give telephonic notice of the principal amount of the Notes to be prepaid and
the prepayment date to each Significant Holder which shall have designated a
recipient of (and provided a current telephone number for) such notices in the
Purchaser Schedule attached hereto or by notice in writing to the Company.
4D. PARTIAL PAYMENTS PRO RATA. Upon any partial prepayment of the
Notes pursuant to paragraph 4A hereof or paragraph 4B hereof, the principal
amount so prepaid shall be allocated to all Notes at the time outstanding
(including, for the purpose of this paragraph 4D only, all Notes prepaid or
otherwise retired or purchased or otherwise acquired by the Company or any of
its Subsidiaries or Affiliates other than by prepayment pursuant to paragraph 4A
hereof or paragraph 4B hereof) in proportion to the respective outstanding
principal amounts thereof.
4E. OBLIGATION TO PURCHASE DURING EXISTENCE OF PUT CONDITION. In the
event that
(i) the Company delivers a written notice (a "WAIVER NOTICE") to
the holders of the Notes requesting a waiver (which notice shall set
forth detailed information concerning the transaction for which the
waiver is requested) of paragraph 6F hereof (a "MERGER PUT
CONDITION"), or
(ii) the Company or any Restricted Subsidiary shall have
Transferred Property pursuant to paragraph 6G(i)(d) (without giving
effect to the first proviso to paragraph 6G(i) in any period of 12
consecutive calendar months with an aggregate book value equal to or
greater than 15% of Consolidated Total Assets or that has contributed
15% or more to Consolidated Operating Income (such book value or such
contribution, whichever exceeds the percentage limitation more, herein
called the "EXCESS AMOUNT") during such period (an "ASSET TRANSFER PUT
Condition"),
each holder of Notes shall have the right, by delivery of a written notice (a
"PUT NOTICE") within 60 days (the "SECOND PUT CUT-OFF DATE") after (a) receipt
of such request in respect of a Merger Put Condition or (b) the later of (1) the
expiration of such 12 month period or (2) its receipt of a notice pursuant to
paragraph 6G(iii) hereof in respect of an Asset Transfer Put Condition, to
require the Company to purchase, and the Company will purchase, the Put Amount
(determined as set forth in clause (A) or clause (B) below, as applicable).
Promptly, but in any event within two Business Days after its receipt of any Put
Notice, the Company shall give written notice thereof to all other holders of
Notes, such notice to include the First Put Date and the Second Put Date (as
such terms are defined below).
On the date (the "FIRST PUT DATE") which is 30 days after the date of
the first Put Notice delivered to the Company by a holder of Notes (or the first
Business Day thereafter if such 30th day shall not be a Business Day), but only
if the First Put Date would occur prior to the Second Put Date, the Company
shall prepay a principal amount of the Notes equal to the Put Amount to each
holder of Notes that has delivered a Put Notice not later than 25 days after
such first Put Notice (the "FIRST PUT CUT-OFF DATE"), at 100% of the principal
amount thereof, together with interest thereon to such Put Date and the Early
Payment Amount, if any, in respect thereof.
On the date (the "SECOND PUT DATE") which is 5 days after the Second
Put Cut-Off Date, the Company shall prepay a principal amount of the Notes equal
to the Put Amount to each holder of Notes that has delivered a Put Notice
subsequent to the First Put Cut-Off Date and not later than the Second Put
Cut-Off Date at 100% of the principal amount thereof, together with interest
thereon to such Put Date and the Early Payment Amount, if any, in respect
thereof. In addition, on the Second Put Date, the Company shall make a payment
to each holder of Notes that delivered a Put Notice on or prior to the First Put
Cut-Off Date in an amount equal to (1) the additional principal amount of Notes,
plus (2) interest thereon accrued to the Second Put Date and Early Payment
Amount in respect thereof determined as of the Second Put Date, that such holder
would have received had the Put Amount for the First Put Date been determined by
reference to the aggregate principal amount of Notes as to which Put Notices
have been delivered as of the Second Put Date, rather than the outstanding
principal amount of all Notes.
As used in this paragraph 4E, "PUT AMOUNT" shall mean,
(A) in the case of a Merger Put Condition, all or a part of the
Notes of the holder delivering the related Put Notice, as specified in
such Put Notice, or
(B) in the case of an Asset Transfer Put Condition, an amount
equal to the net proceeds received by the Company which are ratably
attributable to the Excess Amount MULTIPLIED BY a fraction, in the
case of the First Put Date, the numerator of which is the outstanding
principal amount of such holder's Notes (or such lesser amount of
Notes as such holder shall have specified in its Put Notice) and the
denominator of which is the outstanding principal amount of all Notes
and, in the case of the Second Put Date, the numerator of which is the
outstanding principal amount of such holder's Notes (or such lesser
amount of Notes as such holder shall have specified in its Put Notice)
and the denominator of which is the aggregate principal amount of all
Notes as to which Put Notices have been delivered in connection with
such Asset Transfer Put Condition.
The making of any payment and the receipt of any funds by the holders
of the Notes in connection with any prepayment of the Notes as provided in this
paragraph 4E is subject in all events to the provisions of paragraph 12.
4F. RETIREMENT OF NOTES. The Company shall not, and shall not permit
any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or
in part prior to their stated final maturity (other than by prepayment pursuant
to paragraph 4A hereof, paragraph 4B hereof or paragraph 4E hereof or upon
acceleration of such final maturity pursuant to paragraph 7A hereof), or
purchase or otherwise acquire, directly or indirectly, Notes held by any holder
unless the Company or such Subsidiary or Affiliate shall have offered to prepay
or otherwise retire or purchase or otherwise acquire, as the case may be, the
same proportion of the aggregate principal amount of Notes held by each other
holder of Notes at the time outstanding upon the same terms and conditions. The
making of any payment and the receipt of any funds by any holder of Notes in
connection with any such prepayment, retirement, purchase or other acquisition
of Notes is subject in all events to the provisions of paragraph 12. Any Notes
so prepaid or otherwise retired or purchased or otherwise acquired by the
Company or any of its Subsidiaries or Affiliates shall not be deemed to be
outstanding for any purpose under this Agreement, except as provided in
paragraph 4D hereof.
4G. INTEREST PAYMENTS. Interest (computed on the basis of a 360-day
year of twelve 30-day months) shall accrue on the unpaid principal balance of
the Notes, from the date of each Note, and shall be payable to the holders
thereof quarterly on the fourth day of February, May, August and November in
each year (each an "INTEREST PAYMENT DATE"), commencing with the Interest
Payment Date next succeeding the date of such Note, until the principal thereof
shall have become due and payable, at the rate of 11.5% per annum for the period
to and including November 4, 1999 and thereafter increasing to a rate of 12.5%
per annum on November 4, 1999 and thereafter increasing by an additional 0.50%
per annum over the rate theretofore in effect on each of the next five Interest
Payment Dates (February 4, May 4, August 4 and November 4, 2000 and February 4,
2001).
If any of the Notes are outstanding on May 4, 2001, the Company will
issue to the holders of the Notes, PRO RATA, a number of additional common stock
purchase warrants (the "ADDITIONAL WARRANTS") equal to the product obtained by
multiplying 310,000 times a fraction, the denominator of which is 35,000,000 and
the numerator of which is the aggregate principal amount of Notes at the time
then outstanding. The form of the Additional Warrants will be in substantially
the form of Exhibit B hereto with the exception that (i) the Initial Exercise
Price will be the average of the Market Price (as defined in Exhibit B) for the
10 Business Days immediately preceding May 4, 2001 and (ii) the Additional
Warrants shall reflect all adjustments that would been made thereto if the same
had been issued on and been outstanding at all times since the Closing Date
hereunder.
5. AFFIRMATIVE COVENANTS.
5A. FINANCIAL STATEMENTS. The Company covenants that it will deliver
to each Significant Holder in duplicate:
(i) as soon as practicable and in any event within 50 days, with
respect to consolidated statements, or 65 days, with respect to
consolidating statements, after the end of each quarterly period
(other than the last quarterly period) in each fiscal year,
consolidating and consolidated statements of operations and cash flows
of the Company and the Restricted Subsidiaries for the period from the
beginning of the current fiscal year to the end of such quarterly
period, and a consolidating and consolidated balance sheet of the
Company and the Restricted Subsidiaries as at the end of such
quarterly period, setting forth in each case in comparative form
figures for the corresponding period in the preceding fiscal year, all
in reasonable detail and satisfactory in form to the Required Holders
and certified by an authorized financial officer of the Company,
subject to changes resulting from year-end adjustments;
(ii) as soon as practicable and in any event within 95 days, with
respect to consolidated statements, or 105 days, with respect to
consolidating statements, after the end of each fiscal year,
consolidating and consolidated statements of operations and cash flows
and a consolidated statement of stockholders' equity of the Company
and the Restricted Subsidiaries for such year, and a consolidating and
consolidated balance sheet of the Company and the Restricted
Subsidiaries as at the end of such year, setting forth in each case in
comparative form corresponding consolidated figures from the preceding
annual audit, all in reasonable detail and satisfactory in form to the
Required Holders and, as to the consolidated statements, reported on
by Cornick, Garber & Sandler, LLP or independent public accountants of
recognized national standing selected by the Company whose report
shall be without limitation as to the scope of the audit and
satisfactory in substance to the Required Holders and, as to the
consolidating statements, certified by an authorized financial officer
of the Company;
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it
shall send to its public stockholders and copies of all registration
statements (without exhibits) and all financial statements and reports
which it files with or makes to the Securities and Exchange Commission
(or any governmental body or agency succeeding to the functions of the
Securities and Exchange Commission);
(iv) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any Subsidiary by independent accountants
in connection with any annual, interim of special audit made by them
of the books of the Company or any Subsidiary, PROVIDED that audits
conducted with respect to foreign Subsidiaries to satisfy statutory
requirements need not be delivered unless requested by any Significant
Holder; and
with reasonable promptness, such other financial data as such Significant Holder
may reasonably request.
The consolidating financial statements required by clause (i) and clause (ii)
above shall include the separate financial position of each direct Subsidiary of
the Company (each, a "FIRST TIER SUBSIDIARY"). The financial statements of each
First Tier Subsidiary, however, may reflect the consolidated position of such
First Tier Subsidiary and its direct and indirect Subsidiaries.
Together with each delivery of consolidating financial statements
required by clause (i) and clause (ii) above, the Company will deliver to each
Significant Holder an Officer's Certificate demonstrating (with computations in
reasonable detail) compliance by the Company and the Restricted Subsidiaries
with the provisions of paragraph 6A through paragraph 6I, inclusive, and
paragraph 6M, and stating that there exists no Event of Default or Default, or,
if any Event of Default or Default exists, specifying the nature and period of
existence thereof and what action the Company proposes to take with respect
thereto. Together with each delivery of consolidated financial statements
required by clause (ii) above, the Company will deliver to each Significant
Holder a certificate of such accountants stating that, in making the audit
necessary for their report on such financial statements, they have obtained no
knowledge of any Event of Default or Default, or, if they have obtained
knowledge of any Event of Default or Default, specifying the nature and period
of existence thereof. The Company also covenants that immediately after any
Responsible Officer obtains knowledge of any Event of Default or Default, it
will deliver to each Significant Holder an Officer's Certificate specifying the
nature and period of existence thereof and what action the Company proposes to
take with respect thereto.
5B. INFORMATION REQUIRED BY RULE 144A. The Company covenants that it
will, upon the request of the holder of any Note, 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 Notes, 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 paragraph 5B, the term "qualified
institutional buyer" shall have the meaning specified in Rule 144A under the
Securities Act.
5C. INSPECTION OF PROPERTY. The Company covenants that it will permit
any Person designated by any Significant Holder in writing, at such Significant
Holder's expense, to visit and inspect any of the properties of the Company and
the Subsidiaries, to inspect the corporate books and financial records of the
Company and the Subsidiaries and make copies thereof or extracts therefrom and
to discuss the affairs, finances and accounts of any of such corporations with
the principal officers of the Company and its independent public accountants,
all at such reasonable times and as often as such Significant Holder may
reasonably request.
5D. OTHER INFORMATION. The Company covenants that it will deliver to
each Significant Holder:
(i) ERISA --
(a) within 30 days of becoming aware of the occurrence of
any "reportable event" (as such term is defined in section 4043
of ERISA) for which notice thereof has not been waived pursuant
to regulations of the Department of Labor, or "prohibited
transaction" (as such term is defined in section 406 of ERISA or
section 4975 of the Code) in connection with any Pension Plan or
any trust created thereunder, a written notice specifying the
nature thereof, what action the Company is taking or proposes to
take with respect thereto, and, when known, any action taken by
the Internal Revenue Service, the Department of Labor or the PBGC
with respect thereto, and
(b) prompt written notice of and, where applicable, a
description of
(1) any notice from the PBGC in respect of the
commencement of any proceedings pursuant to section 4042 of
ERISA to terminate any Pension Plan or for the appointment
of a trustee to administer any Pension Plan, and any
distress termination notice delivered to the PBGC under
section 4041 of ERISA in respect of any Pension Plan, and
any determination of the PBGC in respect thereof,
(2) the placement of any Multiemployer Plan in
reorganization status under Title IV of ERISA, any
Multiemployer Plan becoming "insolvent" (as such term is
defined in section 4245 of ERISA) under Title IV of ERISA,
or the whole or partial withdrawal of the Company or any
ERISA Affiliate from any Multiemployer Plan and the
withdrawal liability incurred in connection therewith, or
(3) the occurrence of any event, transaction or
condition that could result in the incurrence of any
liability of the Company or any ERISA Affiliate or the
imposition of a Lien on the Property of the Company or any
ERISA Affiliate, in either case pursuant to Title I or Title
IV of ERISA or pursuant to the penalty or excise tax or
security provisions of the Code;
(ii) ACTIONS, PROCEEDINGS -- promptly after the commencement of
any action or proceeding, of which the Company is aware, relating to
the Company or any Restricted Subsidiary in any court or before any
governmental authority or arbitration board or tribunal as to which
there is a reasonable possibility of an adverse determination and
that, if adversely determined, is reasonably likely to have a material
adverse effect on the business, condition (financial or otherwise) or
operations of the Company and the Restricted Subsidiaries taken as a
whole, a written notice specifying the nature and period of existence
thereof and what action the Company is taking or proposes to take with
respect thereto; and
(iii) CERTAIN ENVIRONMENTAL MATTERS -- prompt written notice of
and a description of any event or circumstance that, had such event or
circumstance occurred or existed prior to the Closing Date, would have
been required to be disclosed as an exception to any statement set
forth in paragraph 8L hereof and a description of the action that the
Company is taking or proposes to take with respect thereto.
5E. PAYMENT OF TAXES AND CLAIMS. The Company covenants that it will,
and will cause each Restricted Subsidiary to, pay before they become delinquent
(i) all taxes, assessments and governmental charges or levies
imposed upon it or its Property, and
(ii) all claims or demands of materialmen, mechanics, carriers,
warehousemen, vendors, landlords and other like Persons that, if
unpaid, might result in the creation of a Lien upon its Property,
PROVIDED, that items of the foregoing description need not be paid so long as
such items are being actively contested in good faith and by appropriate
proceedings and reasonable book reserves have been established and maintained
with respect thereto.
5F. MAINTENANCE OF PROPERTIES; CORPORATE EXISTENCE; ETC. The Company
covenants that it will, and will cause each Restricted Subsidiary to:
(i) PROPERTY -- maintain its Property in good condition, ordinary
wear and tear and obsolescence excepted, and make all necessary
renewals, replacements, additions, betterments and improvements
thereto;
(ii) INSURANCE -- maintain, with financially sound and reputable
insurers, insurance with respect to its Property and business, against
such casualties and contingencies, of such types and in such amounts
as is customary in the case of Persons of established reputations
engaged in the same or a similar business and similarly situated;
(iii) FINANCIAL RECORDS -- keep proper books of record and
account, in which full and correct entries shall be made of all
dealings and transactions of or in relation to the Properties and
business thereof, and that will permit the production of financial
statements in accordance with GAAP;
(iv) EXISTENCE AND RIGHTS -- do or cause to be done all things
necessary to preserve and keep in full force and effect its
partnership or corporate existence, rights and franchises, except as
permitted by paragraph 6G hereof; and
(v) COMPLIANCE WITH LAW -- comply with all laws, ordinances and
governmental rules and regulations to which it is subject (including,
without limitation, any environmental protection law) and obtain all
licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of its Properties and the
conduct of its business except for such violations and failures to
obtain that, in the aggregate, could not reasonably be expected to
have a material adverse effect on the business, condition (financial
or otherwise) or operations of the Company and the Restricted
Subsidiaries taken as a whole.
6. NEGATIVE COVENANTS.
6A. LINE OF BUSINESS. The Company will not, and will not permit any
Restricted Subsidiary to, engage in any material business if, as a result
thereof, the business and operations of the Company and its Restricted
Subsidiaries would not be in or directly related to the consumer electronics
industry or activities that are ancillary, incidental or necessary to such
business, PROVIDED that the Company and the Restricted Subsidiaries may acquire
businesses that have operations unrelated to the consumer electronics industry
if, with respect to each such acquisition, (i) the assets in respect of such
unrelated operations (the "UNRELATED ASSETS") constitute less than 50% of
consolidated total assets of any such business and contribute less than 50% to
consolidated operating income of any such business and (ii) the Investment in
such Unrelated Assets shall be permitted by the provisions of paragraph 6e
hereof.
6B. DEBT.
(i) TOTAL DEBT. The Company will not permit Consolidated Debt at
any time to exceed the lesser of
(a) 75% of Consolidated Total Capitalization; and
(b) 575% of Consolidated EBITDA for the period of the four
consecutive complete fiscal quarters of the Company then most
recently ended.
(ii) SENIOR DEBT. The Company will not permit Consolidated Senior
Indebtedness at any time to exceed the lesser of
(a) 65% of Consolidated Total Capitalization; and
(b) 500% of Consolidated EBITDA for the period of the four
consecutive complete fiscal quarters of the Company then most
recently ended for any such period ending on or prior to
September 30, 1999 and 450% of Consolidated EBITDA for the period
of the four consecutive complete fiscal quarters of the Company
then most recently ended for any such period ending after
September 30, 1999.
(iii). PRIORITY DEBT. The Company will not permit Priority Debt
at any time to exceed 20% of Consolidated Tangible Net Worth.
6C. INTEREST EXPENSE COVERAGE. The Company will not permit the ratio
of
(i) Consolidated Adjusted Cash Flow for any period of four
consecutive complete fiscal quarters of the Company to
(ii) Consolidated Interest Expense for such period
to be less than 2.00 to 1.00.
6D. NET WORTH. The Company will not at any time permit Consolidated
Tangible Net Worth to be less than the sum of
(i) $85,000,000, PLUS
(ii) the sum of the Annual Net Worth Increase Amounts for all
fiscal years ended after December 31, 1998, PLUS
(iii) the amount of Net Cash Proceeds received by the Company at
such time from the issuance of Capital Stock of the Company in
connection with its first public offering of Capital Stock of the
Company subsequent to the date of this Agreement to Persons other than
Affiliates, employees or consultants of the Company or any of the
Restricted Subsidiaries, PLUS
(iv) the remainder (but not less than zero) of
(a) the aggregate amount of Net Cash Proceeds from all
issuances of Capital Stock of the Company completed at such time
other than, and subsequent to, the issuance of Capital Stock
referred to in the preceding clause (iii), MINUS
(b) the portion of such Net Cash Proceeds used by the
Company or any Restricted Subsidiary to acquire Intangible Assets
at or prior to such time (PROVIDED, that in any case where the
Company or any Restricted Subsidiary shall utilize any such Net
Cash Proceeds to finance the acquistion of any Person or
business, the portion of such Net Cash Proceeds used by the
Company or such Restricted Subsidiary to acquire Intangible
Assets shall be deemed to be equal to the amount, if any, of the
increase in Consolidated Intangible Assets directly resulting
from such acquisition).
As used in this paragraph 6D:
"ANNUAL NET WORTH INCREASE AMOUNT" means, for any fiscal year of the
Company ended after December 31, 1998, the greater of (a) 50% of Consolidated
Net Income for such fiscal year and (b) $0.
"CONSOLIDATED INTANGIBLE ASSETS" means, at any time, the net book
value of all Intangible Assets of the Company and its Restricted Subsidiaries,
as such net book value would be reflected on a balance sheet of the Company
prepared at such time on a consolidated basis in accordance with GAAP.
"NET CASH PROCEEDS" means, in connection with any issuance or sale of
Capital Stock (other than the issuance or sale of Capital Stock pursuant to the
exercise of stock options issued to employees or consultants of the Company or
any of the Restricted Subsidiaries) or debt securities or instruments, the cash
proceeds received from such issuance, net of attorney's fees, investment banking
fees, accountants' fees, underwriting discounts and commissions and other
customary fees and expenses actually incurred in connection therewith.
6E. RESTRICTED INVESTMENTS AND RESTRICTED PAYMENTS. The Company will
not, and will not permit any Restricted Subsidiary to, make any Basket
Investment, or declare, make, set apart any funds or other Property for, or
incur any liability to make, any Restricted Payment unless:
(i) immediately after, and after giving effect to such Basket
Investment or such Restricted Payment, the aggregate amount of all
Basket Investments outstanding at such time PLUS all Restricted
Payments declared or made on or after the 1997 Closing Date would not
exceed the sum of
(a) $5,000,000, PLUS
(b) 50% (or minus 100% in the case of a loss) of
Consolidated Net Income for the period commencing on January 1,
1997 and ending on and including the last day of the fiscal
quarter of the Company most recently ended as of the date such
Basket Investment is made or such Restricted Payment is declared
or made; and
(ii) immediately before, and after giving effect to, such Basket
Investment or such Restricted Payment and any concurrent transactions,
no Default or Event of Default exists or would exist.
6F. MERGERS AND CONSOLIDATIONS. The Company will not, and will not
permit any Restricted Subsidiary to, merge or consolidate with or into any other
Person, or convey, transfer, spin-off or lease all or substantially all of its
assets in a single transaction or series of transactions to any Person, except
that:
(i) any such Restricted Subsidiary may merge or consolidate with
or into, or convey, transfer or spin-off all or substantially all of
its assets to, the Company (provided that the Company is the
continuing or surviving corporation), another Restricted Subsidiary or
any Person that concurrently with such merger, consolidation,
conveyance, transfer or spin-off becomes a Restricted Subsidiary, and
(ii) the Company may merge or consolidate with or into, or
convey, transfer or spin-off all or substantially all of its assets
to, another corporation, PROVIDED that
(a) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by
conveyance, transfer or spin-off all or substantially all of the
assets of the Company as an entirety, as the case may be (the
"SUCCESSOR CORPORATION"), shall be a solvent corporation
organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia,
(b) if the Company is not the Successor Corporation, the
Successor Corporation shall have executed and delivered to each
holder of Notes its assumption of the due and punctual
performance and observance of each covenant and condition of this
Agreement and the Notes pursuant to such agreements and
instruments as shall be reasonably satisfactory to the Required
Holders, and the Company shall have caused to be delivered to
each holder an opinion, in form and substance satisfactory to the
Required Holders, of independent counsel reasonably satisfactory
to the Required Holders, to the effect that all agreements or
instruments effecting such assumption are enforceable in
accordance with their terms and comply with the terms hereof, and
(c) immediately after, and immediately after giving effect
to, such transaction, no Default or Event of Default would exist.
6G. TRANSFERS OF PROPERTY; SUBSIDIARY STOCK.
(i) TRANSFERS OF PROPERTY. The Company will not, and will not
permit any Restricted Subsidiary to, sell, lease as lessor, transfer
or otherwise dispose of any Restricted Subsidiary Stock, except
pursuant to clause (ii) of this paragraph 6G, or any other Property
(collectively, "TRANSFERS") except for:
(a) any Transfer made in compliance with paragraph 6E hereof
or any Transfer of Unrelated Assets;
(b) Transfers of inventory, payments to vendors and
suppliers, payments of compensation (including, without
limitation, salaries, bonuses, options, insurance, benefits,
payments pursuant to employment agreements and other
perquisites), and other similar payments, in each case in the
ordinary course of business of the Company or such Restricted
Subsidiary;
(c) any Transfer of Property by a Restricted Subsidiary to
the Company or any other Restricted Subsidiary;
(d) any other Transfer at any time of any Property to a
Person, other than an Affiliate (whether effected in a single
transaction or in a series of related transactions) not otherwise
permitted under clauses (a) through (c), inclusive, of this
paragraph 6G(i) (for purposes of this clause (d), a "CURRENT
TRANSFER"), if each of the following conditions would be
satisfied with respect to such Transfer:
(1) the consideration received in respect of such
current Transfer is an amount not less than that reasonably
obtainable in a comparable arm's-length transaction or
series of transactions with a Person that is not an
Affiliate of the Company or any Subsidiary, with neither the
seller nor the buyer being under any compulsion to sell or
buy, respectively,
(2) immediately after giving effect to such current
Transfer, no Default or Event of Default would exist,
(3) the sum of
(A) the net book value of the Property
that is the subject of such current Transfer, PLUS
(B) the aggregate net book value of all
other items of Property of the Company and the
Restricted Subsidiaries that were the subject of
prior Transfers under this clause (d) consummated
during the period beginning on the first day of
the four consecutive complete fiscal quarters of
the Company then most recently ended and ending
immediately prior to the time of such current
Transfer,
would not exceed 20% of Consolidated
Total Assets, determined as at the beginning of
such period, and
(4) the sum of
(A) the contribution (expressed as a
percentage and exclusive of losses) to
Consolidated Operating Income of such Property,
plus
(B) the contribution (expressed as a
percentage and exclusive of losses) to
Consolidated Operating Income of all other items
of Property of the Company and the Restricted
Subsidiaries that were the subject of prior
Transfers under this clause (d) consummated during
the period beginning on the first day of the four
consecutive complete fiscal quarters of the
Company then most recently ended and ending
immediately prior to the time of such current
Transfer,
would not exceed 20% of Consolidated
Operating Income for the four consecutive complete
fiscal quarters of the Company then most recently
ended;
PROVIDED that the net book value or the
contribution to Consolidated Operating Income of
any item of Property shall be excluded for
purposes of clause (3) and clause (4) of this
paragraph 6G(i)(d) if, prior to consummation of
any Transfer, the Company gives written notice (a
"REINVESTMENT NOTICE") to all holders of Notes
that, within 12 months after such Transfer, the
entire proceeds of such Transfer, net of ordinary
and reasonable transaction costs and expenses
incurred in connection with such Transfer, will be
applied by the Company or such Restricted
Subsidiary to the purchase of Capital Assets of
the Company or any Restricted Subsidiary to be
used in the business of the Company, as described
in paragraph 6A hereof; PROVIDED further that such
exclusions only apply to the extent that the
aggregate net book value of all Property so
excluded at any one time shall not exceed 25% of
Consolidated Tangible Net Worth and the sum of the
contributions to Consolidated Operating Income
(expressed as a percentage, with each such
contribution being determined as of the date of
Transfer of the Property generating such
contribution) of all Property so excluded at any
one time shall not exceed 25%.
If the Company shall fail to apply the proceeds of any
Transfer in accordance with a Reinvestment Notice given in
respect thereof, such failure shall constitute an Event of
Default.
(ii) TRANSFERS OF SUBSIDIARY STOCK. The Company will not, and will not
permit any Restricted Subsidiary to, Transfer any shares of the stock (or
any warrants, rights or options to purchase stock or other Securities
exchangeable for or convertible into stock) of a Restricted Subsidiary
(such stock, warrants, rights, options and other Securities herein called
"RESTRICTED SUBSIDIARY STOCK"), nor will any Restricted Subsidiary issue,
sell or otherwise dispose of any shares of its own Restricted Subsidiary
Stock, PROVIDED that the foregoing restrictions do not apply to:
(a) the issuance by a Restricted Subsidiary of shares of its own
Restricted Subsidiary Stock to the Company or another Restricted
Subsidiary;
(b) Transfers by the Company or a Restricted Subsidiary of shares
of Restricted Subsidiary Stock to the Company or another Restricted
Subsidiary;
(c) the issuance by a Restricted Subsidiary of directors'
qualifying shares or shares to holders (who hold for the benefit of
the Company or a Restricted Subsidiary) to meet statutory requirements
for domestic holdings or minimum numbers of stockholders;
(d) the Transfer of all of the Restricted Subsidiary Stock of a
Restricted Subsidiary owned by the Company and the other Restricted
Subsidiaries if:
(1) such Transfer satisfies the requirement of
paragraph 6G(i)(d) hereof (for purposes of such paragraph,
the net book value of such Restricted Subsidiary Stock being
deemed to be the aggregate net book value of all assets of
such Restricted Subsidiary);
(2) in connection with such Transfer, the entire
investment (whether represented by stock, Debt, claims or
otherwise) of the Company and the other Restricted
Subsidiaries in such Restricted Subsidiary is Transferred to
a Person other than the Company or a Restricted Subsidiary
not simultaneously being disposed of;
(3) the Restricted Subsidiary being disposed of has no
continuing investment in any other Restricted Subsidiary not
simultaneously being disposed of or in the Company; and
(4) immediately before and after the consummation of
such Transfer, and after giving effect thereto, no Default
or Event of Default would exist;
(e) Transfers of Unrelated Assets consisting of Restricted
Subsidiary Stock if the requirements set forth in subclauses (2),
(3) and (4) of the foregoing clause (d) have been satisfied; and
(f) Transfers by the Company or a Restricted Subsidiary of
shares of Restricted Subsidiary Stock of any PRC/HK Subsidiaries
in accordance with the provisions of paragraph 6M of the 1998
Senior Note Agreement.
(iii) NOTICES WITH RESPECT TO TRANSFERS. The Company shall give
written notice to each holder of Notes at least ten days prior to the
consummation of any Transfer that would give rise to a potential
prepayment obligation under paragraph 4E hereof specifying:
(a) the anticipated consummation date of the related
Transfer; and
(b) an estimate of the net proceeds to be received for the
Property subject to such Transfer.
6H. LIENS. The Company will not, and it will not permit any Restricted
Subsidiary to, create, assume or suffer to exist any Lien upon any of its
Property, whether now owned or hereafter acquired, except:
(i) Liens outstanding on the 1997 Closing Date and listed in Part
6H(i) of Annex 3 hereto and Liens securing Senior Debt;
(ii) Liens incurred or deposits made in the ordinary course of
business,
(a) in connection with workers' compensation, unemployment
insurance, social security and other like laws,
(b) to secure the performance of letters of credit, bids,
tenders, sales contracts, surety and performance bonds (of a type
other than set forth in clause (iv) of this paragraph 6H) and
other ordinary course obligations not incurred in connection with
the borrowing of money, the obtaining of advances or the payment
of the deferred purchase price of Property, and
(c) in respect of statutory obligations or claims or demands
of materialmen, mechanics, carriers, warehousemen, landlords and
other like Persons, PROVIDED that the obligations secured by such
Liens shall not be in default and the title of the Company or the
Restricted Subsidiary, as the case may be, to, and its right to
use, the Property subject to such Lien, is not materially
adversely affected thereby;
(iii) Liens for taxes not yet due or that are being actively
contested in good faith by appropriate proceedings;
(iv) Liens, arising in connection with court proceedings,
(a) in the nature of attachments, remedies and judgments,
PROVIDED that the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being
actively contested in good faith and by appropriate proceedings,
and
(b) securing appeal bonds, supersede as bonds and other
similar Liens arising in connection with court proceedings
(including, without limitation, surety bonds and letters of
credit) or any other instrument serving a similar purpose,
PROVIDED that the aggregate amount so secured pursuant
to this clause (iv) shall not at any time exceed
$2,500,000;
(v) reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions and other similar
title exceptions or encumbrances affecting real property, PROVIDED
they do not in the aggregate materially detract from the value of such
real property or materially interfere with their use in the ordinary
conduct of the owning Person's business;
(vi) any Lien on Property that is acquired or constructed by the
Company or any Restricted Subsidiary that secures Debt incurred by the
owner of such Property to pay for all or a portion of the related
purchase price or construction costs of such Property, PROVIDED that
(a) such Lien shall not extend to or cover any Property
other than Property acquired or constructed after the 1997
Closing Date with the proceeds of the Debt secured thereby and
shall not secure Debt other than such Debt,
(b) such Lien shall be created within 12 months after the
acquisition or substantial completion of such Property, and
(c) such Lien shall secure Debt in an amount not exceeding
100% of the lesser of (1) the cost of acquisition or construction
of the Property to which such Debt relates and (2) the Fair
Market Value of the Property to which such Debt relates,
determined as of the time of the incurrence of such Debt; and
(vii) Liens securing Debt other than those Liens permitted by
clause (i) through clause (vi) of this paragraph 6H, but only
(a) to the extent that Priority Debt would not exceed 20% of
Consolidated Tangible Net Worth, and
(b) if, immediately before, and after giving effect to, such
Liens and any concurrent transactions, no Default or Event of
Default exists or would exist.
6I. PERMITTED INVESTMENTS. The Company will not, nor will it permit
any of its Restricted Subsidiaries to, make any Investment other than a
Permitted Investment or a Basket Investment.
6J. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not
permit any Restricted Subsidiary to, enter into any transaction, including,
without limitation, the purchase, sale or exchange of Property or the rendering
of any service, with any Affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of the business of the Company or such
Restricted Subsidiary and upon fair and reasonable terms no less favorable to
the Company or such Restricted Subsidiary than would be obtained in a comparable
arm's-length transaction with a Person not an Affiliate.
6K. DESIGNATION OF SUBSIDIARIES. Each Person which shall become a
Subsidiary for the first time after the Closing Date shall be a Restricted
Subsidiary unless, within 30 days after such Person shall first have become a
Subsidiary, the Company shall give written notice to all holders of the Notes
stating that such Person shall be an Unrestricted Subsidiary. Any Person so
designated as an Unrestricted Subsidiary may not thereafter be redesignated as a
Restricted Subsidiary without the approval of the Required Holders.
6L. SUBSIDIARY GUARANTY. If any of the Notes remain outstanding on
November 3, 1999 (the "Guaranty Date"), the Company will (A) cause each
Subsidiary which is a party to the Subsidiary Guaranty as defined in the 1998
Senior Note Agreement (the "Senior Note Guaranty") to execute and deliver in
favor of the holders of the Notes a guaranty (the "Subsidiary Guaranty")
substantially in the same form and to the same effect as the Senior Note
Guaranty with such changes therein as shall be necessary (x) to reflect the fact
that the beneficiaries thereof are the holders of the Notes and that the
obligations guaranteed thereby are those arising under the Notes and this
Agreement rather than under the 1998 Senior Note Agreement and the Company's
senior promissory notes issued thereunder and (y) to provide that the respective
obligations of each such Subsidiary thereunder shall be subordinate and junior
to such Subsidiary's obligations in respect of Senior Debt (as defined in
paragraph 12) to the same extent as the Company's obligations in respect of the
Notes are subordinate and junior to Senior Debt as provided in paragraph 12, and
(B) provide to the holders of the Notes favorable opinions of counsel with
respect to the Subsidiary Guaranty substantially to the same effect as the
opinions of counsel delivered in respect of the Senior Note Guaranty as provided
in the 1998 Senior Note Agreement. The Company will cause each Subsidiary that,
after the Guaranty Date, executes a guaranty of obligations outstanding under
the Bank Credit Agreement, to execute and deliver to each holder of Notes,
simultaneously with its execution and delivery of any such guaranty of
obligations under the Bank Credit Agreement, a copy of the Joinder Agreement in
the form to be attached to the Subsidiary Guaranty as Annex 2, duly executed by
such Subsidiary. If the dissolution process with respect to any Inactive
Subsidiary shall be abandoned or otherwise cease, the Company shall promptly,
but in any event within not less than fifteen (15) days after such abandonment
or cessation, cause such Inactive Subsidiary to execute and deliver to each
holder of Notes a copy of the Joinder Agreement in the form to be attached to
the Subsidiary Guaranty as Annex 2, duly executed by such Inactive Subsidiary.
6M. PRC/HK SUBSIDIARIES.
(i) PRC SUBSIDIARIES. The Company will not permit Combined
Adjusted PRC Assets, determined as of the last day of any fiscal
quarter, to be greater than an amount equal to 20% of Consolidated
Tangible Net Worth determined as of such day.
(ii) PRC/HK SUBSIDIARIES. The Company will not permit Combined
Adjusted PRC/HK Assets, determined as of the last day of any fiscal
quarter, to be greater than an amount equal to 40% of Consolidated
Tangible Net Worth determined as of such day.
As used in this paragraph 6N:
"COMBINED ADJUSTED PRC ASSETS" means the aggregate value of the assets
(net of reserves) of the PRC Subsidiaries, determined on a combined basis (but
not including intercompany receivables due to any PRC Subsidiary from the
Company or any Subsidiary that is a party to the Subsidiary Guaranty or, prior
to the Guaranty Date, would be such a party were the Guaranty Date to have
already occurred), as reported in the consolidating financial statements
referred to in clauses (i) and (ii) of paragraph 5A hereof.
"COMBINED ADJUSTED PRC/HK ASSETS" means the aggregate value of the
assets (net of reserves) of the PRC/HK Subsidiaries, determined on a
consolidated basis (but not including intercompany receivables due to any PRC/HK
Subsidiary from the Company or any Subsidiary (other than a PRC/HK Subsidiary)
that is a party to the Subsidiary Guaranty or, prior to the Guaranty Date, would
be such a party were the Guaranty Date to have already occurred), as reported in
the consolidating financial statements referred to in clauses (i) and (ii) of
paragraph 5A hereof.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of or
Early Payment Amount payable with respect to any Note for more than
five days after the date when the same shall become due, either by the
terms thereof or otherwise as herein provided; or
(ii) the Company defaults in the payment of any interest on any
Note for more than 15 days after the date due; or
(iii) the Company fails to perform or observe any agreement
contained in paragraph 6 hereof (other than any default caused by the
incurrence of Debt by a Subsidiary in an amount less than $5,000,000,
PROVIDED that such default is remedied within 15 days after such
incurrence); or
(iv) the Company fails to perform or observe any other agreement,
term or condition contained herein and such failure shall not be
remedied within 60 days after any Responsible Officer obtains actual
knowledge thereof, or
(v) any representation or warranty made by the Company herein or
by the Company or any of its officers in any writing furnished in
connection with or pursuant to this Agreement shall be false in any
material respect on the date as of which made; or
(vi) (a) the Company or any Restricted Subsidiary defaults
(whether as primary obligor or as guarantor or other surety) in any
payment of principal of any other obligation for money borrowed (or
any Capitalized Lease Obligation, any obligation under a conditional
sale or other title retention agreement, any obligation issued or
assumed as full or partial payment for Property whether or not secured
by a purchase money mortgage or any obligation under notes payable or
drafts accepted representing extensions of credit) beyond any period
of grace (not to exceed 30 days) provided with respect thereto (any
such default, a "PAYMENT DEFAULT"), or (b) the Company or any
Restricted Subsidiary fails to perform or observe any other agreement,
term or condition contained in any agreement under which any such
obligation is created (or if any other event thereunder or under any
such agreement shall occur and be continuing) and the effect of such
failure or other event is to cause, or as a consequence of such
failure or other event the holder or holders of such obligation (or a
trustee on behalf of such holder or holders) shall cause, such
obligation to become due (or to be repurchased by the Company or any
Restricted Subsidiary) prior to any stated maturity (any such
accelerated maturity or repurchase obligation being herein called an
"ACCELERATED PAYMENT"); PROVIDED that the aggregate principal amount
of all such Payment Defaults and Accelerated Payments exceeds
$15,000,000; or
(vii) the Company or any Restricted Subsidiary (other than a
Minor Subsidiary) makes an assignment for the benefit of creditors or
is generally not paying its debts as such debts become due; or
(viii) any decree or order for relief in respect of the Company
or any Restricted Subsidiary (other than a Minor Subsidiary) is
entered under any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or
similar law, whether now or hereafter in effect (the "BANKRUPTCY
LAW"), of any jurisdiction; or
(ix) the Company or any Restricted Subsidiary (other than a Minor
Subsidiary) petitions or applies to any tribunal for, or consents to,
the appointment of, or taking possession by, a trustee, receiver,
custodian, liquidator or similar official of the Company or any
Restricted Subsidiary (other than a Minor Subsidiary), or of the
majority of the assets of the Company or any Restricted Subsidiary
(other than a Minor Subsidiary), or commences a voluntary case under
the Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a
Restricted Subsidiary) relating to the Company or any Restricted
Subsidiary (other than a Minor Subsidiary) under the Bankruptcy Law of
any other jurisdiction; or
(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Restricted
Subsidiary (other than a Minor Subsidiary) and the Company or such
Restricted Subsidiary by any act indicates its approval thereof,
consent thereto or acquiescence therein, or an order, judgment or
decree is entered appointing any such trustee, receiver, custodian,
liquidator or similar official, or approving the petition in any such
proceedings, and such order, judgment or decree remains unstayed and
in effect for more than 60 days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company or any
Restricted Subsidiary (other than a Minor Subsidiary) and such order,
judgment or decree remains unstayed and in effect for more than 60
days; or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Restricted Subsidiary (other than a Minor
Subsidiary) decreeing a splitup of the Company or such Restricted
Subsidiary which requires the divestiture of assets representing a
material part, or the divestiture of the stock of a Restricted
Subsidiary whose assets represent a material part, of the consolidated
assets of the Company and the Restricted Subsidiaries (determined in
accordance with GAAP) or which requires the divestiture of assets, or
stock of a Restricted Subsidiary, which shall have contributed a
material part of the consolidated net income of the Company and the
Restricted Subsidiaries (determined in accordance with GAAP) for any
of the three fiscal years then most recently ended, and such order,
judgment or decree remains unstayed and in effect for more than 60
days; or
(xiii) after the Guaranty Date (a)the Subsidiary Guaranty shall
cease to be in full force and effect or shall be declared by a court
or governmental authority of competent jurisdiction to be void,
voidable or unenforceable against any Subsidiary (other than a Minor
Subsidiary), (b)the validity or enforceability of the Subsidiary
Guaranty against any Subsidiary shall be contested by such Subsidiary,
the Company or any Affiliate, or (c) any Subsidiary, the Company or
any Affiliate shall deny that such Subsidiary has any further
liability or obligation under the Subsidiary Guaranty; or
(xiv) a final judgment in an amount in excess of $10,000,000 is
rendered against the Company or any Restricted Subsidiary and, within
60 days after entry thereof, such judgment is not discharged or
execution thereof stayed pending appeal, or within 60 days after the
expiration of any such stay, such judgment is not discharged;
(xv) the Company or any ERISA Affiliate, in its capacity as an
employer under a Multiemployer Plan, makes a complete or partial
withdrawal from such Multiemployer Plan resulting in the incurrence by
such withdrawing employer of a withdrawal liability in an amount
exceeding $10,000,000; or
(xvi) (a) 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 section 14(d) of the
Exchange Act) not controlled by Robert L. Borchardt, his estate, any
trust established by him or his heirs (other than any holder of shares
of any outstanding class of the capital stock of the Company that
shall have been designated as a "permitted holder" in a resolution
duly adopted by the board of directors of the Company and that shall
have been approved in writing by the Required Holders)
(1) shall have acquired beneficial ownership of 20% or
more of any outstanding class of Voting Stock of the Company
or
(2) shall obtain the power (whether or not exercised)
to elect a majority of the Company's directors or
(b) the board of directors of the Company shall not consist
of a majority of continuing directors (for purposes of this
clause (b), "CONTINUING DIRECTORS" shall mean the members of the
board of directors of the Company on the Closing Date and each
other director nominated for election to the board of directors
of the Company by a majority of the then continuing directors);
then
(a) if such event is an Event of Default specified in clause
(viii), clause (ix) or clause (x) of this paragraph 7A with respect to
the Company, all of the Notes at the time outstanding shall
automatically become immediately due and payable, together with
interest accrued thereon, and together with the Early Payment Amount
with respect to each Note, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by the Company; and
(b) if such Event of Default is any other Event of Default, the
Required Holders may at their option, by notice in writing to the
Company, declare all of the Notes to be, and all of the Notes shall
thereupon be and become, immediately due and payable together with
interest accrued thereon and together with the Early Payment Amount,
if any, with respect to each Note, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
the Company.
The making of any payment and the receipt of any funds by any holder of Notes in
connection with any acceleration of Notes as provided in this paragraph 7A is
subject in all events to the provisions of paragraph 12
7B. RESCISSION OF ACCELERATION. At any time after any or all of the
Notes shall have been declared immediately due and payable pursuant to paragraph
7A(b), the Required Holders may, by notice in writing to the Company, rescind
and annul such declaration and its consequences if (i) the Company shall have
paid all overdue interest on the Notes, the principal of and Early Payment
Amount, if any, payable with respect to any Notes which have become due
otherwise than by reason of such declaration, and interest on such overdue
interest and overdue principal and Early Payment Amount at the rate specified in
the Notes, (ii) the Company shall not have paid any amounts which have become
due solely by reason of such declaration, (iii) all Events of Default and
Defaults, other than non-payment of amounts which have become due solely by
reason of such declaration, shall have been cured or waived pursuant to
paragraph 11C hereof, and (iv) no judgment or decree shall have been entered for
the payment of any amounts due pursuant to the Notes or this Agreement. No such
rescission or annulment shall extend to or affect any subsequent Event of
Default or Default or impair any right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A hereof or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B hereof, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall occur and
be continuing, the holder of any Note may proceed to protect and enforce its
rights under this Agreement and such Note by exercising such remedies as are
available to such holder in respect thereof under applicable law, either by suit
in equity or by action at law, or both, whether for specific performance of any
covenant or other agreement contained in this Agreement or in aid of the
exercise of any power granted in this Agreement. No remedy conferred in this
Agreement upon the holder of any Note is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law or in equity or by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents,
covenants and warrants as of the date hereof as follows:
8A. ORGANIZATION; SUBSIDIARIES AND AFFILIATES.
(i) ORGANIZATION; AUTHORITY; ENFORCEABILITY. The Company is a
corporation duly organized and existing in good standing under the
laws of the State of New York and each Subsidiary is duly organized
and existing in good standing under the laws of the jurIisdiction in
which it is incorporated. The execution, delivery and performance of
this Agreement, the Notes, the Warrants and the Registration Rights
Agreement are within the Company's corporate authority and have been
duly authorized by proper corporate proceedings. This Agreement has
been, and each of the Notes, the Warrants and the Registration Rights
Agreement will be, duly executed and delivered by the Company. This
Agreement constitutes, and the Notes, the Warrants and the
Registration Rights Agreement when duly executed and delivered by the
Company in accordance with this Agreement will constitute, legal,
valid and binding obligations of the Company, each enforceable in
accordance with its terms except as the enforceability thereof may be
limited (x) by general principles of equity and conflicts of laws or
(y) by bankruptcy, reorganization, insolvency, moratorium or other
laws of general application relating to or affecting the enforcement,
of creditors' or security holders' rights.
(ii) OWNERSHIP OF SUBSIDIARIES. Part 8A(ii) of Annex 3 hereto
states the name of each of the Subsidiaries, its jurisdiction of
organization and the percentage of its Voting Stock beneficially owned
by the Company and each other Subsidiary.
(iii) AFFILIATES. Part 8A(iii) of Annex 3 hereto sets forth the
name of each Affiliate and the nature of the affiliation of such
Affiliate.
(iv) TITLE TO SHARES. Each of the Company and the Subsidiaries
has good title to all of the shares it purports to own of the stock of
each Subsidiary, free and clear in each case of any Lien. All such
shares have been duly issued and are fully paid and nonassessable.
(v) SUBSIDIARY GUARANTORS. All Subsidiaries, other than Inactive
Subsidiaries, that have guaranteed the Company's obligations under the
Bank Credit Agreement will be parties to any Subsidiary Guaranty (each
a "Guarantor"). Each of the Inactive Subsidiaries is in the process of
being dissolved. None of the Excluded Subsidiaries has guaranteed the
obligations outstanding under the Bank Credit Agreement. The
execution, delivery and performance of the Subsidiary Guaranty are
within each Guarantor's corporate authority and have been duly
authorized by proper corporate proceedings. The Subsidiary Guaranty
will be duly executed and delivered by each Guarantor. The Subsidiary
Guaranty when duly executed and delivered by a Guarantor in accordance
with this Agreement will constitute, legal, valid and binding
obligations of such Guarantor enforceable in accordance with its terms
except as the enforceability thereof may be limited (x) by general
principles of equity and conflicts of laws or (y) by bankruptcy,
reorganization, insolvency, moratorium or other laws of general
application relating to or affecting the enforcement, of creditors'
rights.
8B. FINANCIAL STATEMENTS. The Company has furnished the Purchaser with
the following financial statements, identified by a principal financial officer
of the Company: (i) a consolidated balance sheet of the Company and the
Subsidiaries as at December 31 in each of the years 1995, 1996 and 1997, and
consolidated statements of operations, stockholders' equity and cash flows of
the Company and the Subsidiaries for each such year, all reported on by Cornick,
Garber & Sandler, LLP; and (ii) a consolidated balance sheet of the Company and
the Subsidiaries as at September 30, 1998 and September 30, 1997 and
consolidated statements of operations and cash flows for the nine-month period
ended on each such date, prepared by the Company. Such financial statements
(including any related schedules and/or notes) are true and correct in all
material respects (subject, as to interim statements, to changes resulting from
audits and year-end adjustments), have been prepared in accordance with GAAP
consistently followed throughout the periods involved and show all liabilities,
direct and contingent, of the Company and the Subsidiaries required to be shown
in accordance with GAAP. The balance sheets fairly present the financial
condition of the Company and the Subsidiaries as at the dates thereof, and the
statements of income, stockholders' equity and cash flows fairly present the
results of the operations of the Company and the Subsidiaries and their cash
flows for the periods indicated. There has been no material adverse change in
the business, condition (financial or otherwise) or operations of the Company
and the Subsidiaries taken as a whole since December 31, 1997.
8C. ACTIONS PENDING. Except as set forth in Part 8C of Annex 3 hereto,
there is no action, suit, investigation or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of the
Subsidiaries, or any Properties of the Company or any of the Subsidiaries, by or
before any court, arbitrator or administrative or governmental body which might
result in any material adverse change in the business, condition (financial or
otherwise) or operations of the Company and the Subsidiaries taken as a whole.
8D. OUTSTANDING DEBT. Consolidated Debt outstanding on December 31,
1998 is set forth in Part 8D of Annex 3 hereto. There exists no default under
the provisions of any instrument evidencing such Debt or of any agreement
relating thereto
8E. TITLE TO PROPERTIES. Each of the Company and the Subsidiaries has
good and indefeasible title to its respective real Property (other than Property
which it leases) and good title to all of its other respective Property (other
than Property which it leases), including the Property reflected in the balance
sheet as at December 31, 1997 referred to in paragraph 8B hereof (other than
Property disposed of in the ordinary course of business), subject to no Lien of
any kind except Liens permitted by paragraph 6H hereof. All leases necessary in
any material respect for the conduct of the respective businesses of the Company
and the Subsidiaries are valid and subsisting and are in full force and effect.
8F. TAXES. Each of the Company and the Subsidiaries has filed all
federal, state and other income tax returns which, to the knowledge of the
officers of the Company, are required to be filed, and each has paid all taxes
as shown on such returns and on all assessments received by it to the extent
that such taxes have become due, except such taxes as are being contested in
good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP.
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company nor
any of the Subsidiaries is a party to any contract or agreement or subject to
any charter or other corporate restriction which materially and adversely
affects its business, Property or financial condition. Neither the execution nor
delivery of this Agreement, the Notes, the Warrants or the Registration Rights
Agreement nor the offering, issuance and sale of the Notes or Warrants, nor
fulfillment of nor compliance with the terms and provisions hereof and of the
Notes, the Warrants (including the issuance of Common Stock of the Company upon
exercise thereof) and the Registration Rights Agreement will conflict with, or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of any
Lien upon any of the Property of the Company or any of the Subsidiaries pursuant
to, the charter or by-laws of the Company or any of the Subsidiaries, any award
of any arbitrator or any agreement (including any agreement with stockholders),
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Company or any of the Subsidiaries is subject. Neither the Company nor any
of the Subsidiaries is a party to, or otherwise subject to any provision
contained in, any instrument evidencing Debt of the Company or such Subsidiary,
any agreement relating thereto or any other contract or agreement (including its
charter) which limits the amount of, or otherwise imposes restrictions on the
incurring of, Debt of the Company of the type to be evidenced by the Notes
except as set forth in the agreements listed in Part 8G of Annex 3 hereto.
8H. OFFERING OF NOTES AND WARRANTS. Neither the Company nor any agent
acting on its behalf has, directly or indirectly, offered the Notes or Warrants
or any similar Security of the Company for sale to, or solicited any offers to
buy the Notes or Warrants or any similar Security of the Company from, or
otherwise approached or negotiated with respect thereto with, any Person other
than the Purchaser, and neither the Company nor any agent acting on its behalf
has taken or will take any action which would subject the issuance or sale of
the Notes or Warrants to the provisions of section 5 of the Securities Act or to
the provisions of any securities or Blue Sky law of any applicable jurisdiction.
8I. USE OF PROCEEDS. Neither the Company nor any Subsidiary owns or
has any present intention of acquiring any "margin stock" as defined in
Regulation U (12 CFR Part 221) of the Board of Governors of the Federal Reserve
System ("MARGIN STOCK"). The proceeds of sale of the Notes will be used to repay
the Debt set forth in Part 8I of Annex 3 hereto and for general corporate
purposes. None of such proceeds will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying
any margin stock or for the purpose of maintaining, reducing or retiring any
Debt which was originally incurred to purchase or carry any stock that is
currently a margin stock or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of such Regulation U. Neither
the Company nor any agent acting on its behalf has taken or will take any action
which might cause this Agreement or the Notes to violate Regulation U,
Regulation T or any other regulation of the Board of Governors of the Federal
Reserve System or to violate the Exchange Act, in each case as in effect now or
as the same may hereafter be in effect.
8J. ERISA. No accumulated funding deficiency (as defined in section
302 of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC
has been or is expected by the Company or any ERISA Affiliate to be incurred
with respect to any Plan (other than a Multiemployer Plan) by the Company, any
Subsidiary or any ERISA Affiliate which is or would be materially adverse to the
business, condition (financial or otherwise) or operations of the Company and
the Subsidiaries taken as a whole. Neither the Company, any Subsidiary nor any
ERISA Affiliate has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan which
is or would be materially adverse to the business, condition (financial or
otherwise) or operations of the Company and the Subsidiaries taken as a whole.
The execution and delivery of this Agreement and the issuance and sale of the
Notes will be exempt from, or will not involve any transaction which is subject
to, the prohibitions of section 406 of ERISA and will not involve any
transaction in connection with which a penalty could be imposed under section
502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the Code.
The representation by the Company in the next preceding sentence is made in
reliance upon and subject to the accuracy of the Purchaser's representation in
paragraph 9B hereof.
8K. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Notes or Warrants is such as to require any authorization, consent, approval,
exemption or other action by or notice to or filing with any court or
administrative or governmental body (other than routine filings after the
Closing Date with the Securities and Exchange Commission and/or state Blue Sky
authorities) in connection with the execution and delivery of this Agreement,
the offering, issuance, sale or delivery of the Notes or Warrants or fulfillment
of or compliance with the terms and provisions hereof or of the Notes, the
Warrants (including the issuance of Common Stock of the Company upon exercise
thereof) or the Registration Rights Agreement.
8L. ENVIRONMENTAL COMPLIANCE. The Company and the Subsidiaries and all
of their respective Properties and facilities have complied at all times and in
all respects with all federal, state, local and regional statutes, laws,
ordinances and judicial or administrative orders, judgments, rulings and
regulations relating to protection of the environment except, in any such case,
where failure to comply would not result in a material adverse effect on the
business, condition (financial or otherwise) or operations of the Company and
the Subsidiaries taken as a whole.
8M. DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to the Purchaser by or on behalf of the
Company in connection herewith contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading. There is no fact peculiar to the
Company or any of the Subsidiaries which materially adversely affects or in the
future may (so far as the Company can now foresee) materially adversely affect
the business, Property or financial condition of the Company or any of the
Subsidiaries and which has not been set forth in this Agreement or in the other
documents, certificates and statements furnished to the Purchaser by or on
behalf of the Company prior to the date hereof in connection with the
transactions contemplated hereby.
8N. YEAR 2000. The Company has reviewed the areas within its business
and operations (and that of its Subsidiaries) which could be adversely affected
by the "Year 2000 Problem" (that is, the risk that computer applications, as
well as embedded microchips in non- computing devices used by the Company and
its Subsidiaries may be unable to recognize and properly perform date-sensitive
functions involving certain dates prior to and any date after December 31,
1999). The Company has developed or is developing programs to address its "Year
2000 Problem" on a timely basis. Based on such review and program and on current
information available to it, the Company believes that its "Year 2000 Problem"
will not result in a material adverse effect on the business, condition
(financial or otherwise) or operations of the Company and its Subsidiaries taken
as a whole.
9 REPRESENTATIONS OF THE PURCHASER.
9A. NATURE OF PURCHASE. Each Purchaser represents as of the Closing
Date that such Purchaser is an accredited investor (as defined in the Securities
Act) and is not acquiring the Notes or Warrants to be purchased by it hereunder
with a view to or for sale in connection with any distribution thereof (or the
common stock of the Company issuable upon exercise of the Warrants) within the
meaning of the Securities Act, PROVIDED that the disposition of such Purchaser's
Property shall at all times be and remain within its control.
9B. SOURCE OF FUNDS. The Purchaser represents as of the Closing Date:
(i) if it is acquiring the Notes and Warrants for its own account
with funds from or attributable to its general account, and in
reliance upon the Company's representations set forth in paragraph 8J,
that the amount of the reserves and liabilities for the general
account contracts (as defined by the annual statement for life
insurance companies as in effect on the date hereof and approved by
the National Association of Insurance Commissioners (the "NAIC ANNUAL
STATEMENT")) held by or on behalf of any Pension Plan together with
the amount of the reserves and liabilities for the general account
contracts held by or on behalf of any other Pension Plans maintained
by the same employer (or affiliate thereof, as such term is defined in
section V of DOL Prohibited Transaction Exemption 95-60 (60 FR 35925,
July 12, 1995)) or by the same employee organization (as defined in
ERISA) in the general account do not exceed 10% of the total reserves
and liabilities of the general account (exclusive of separate account
liabilities) plus surplus as set forth in the NAIC Annual Statement
filed with the state of domicile of the insurance company; for
purposes of the percentage limitation in this clause (i), the amount
of reserves and liabilities for the general account contracts held by
or on behalf of a Pension Plan shall be determined before reduction
for credits on account of any reinsurance ceded on a coinsurance
basis; or
(ii) if any part of the funds being used by it to purchase the
Notes and Warrants shall come from assets of an employee benefit plan
(as defined in section 3(3) of ERISA) or a plan (as defined in section
4975(e)(1) of the Code):
(a) if such funds are attributable to a separate account (as
defined in section 3(17) of ERISA), then
(I) all requirements for an exemption under DOL
Prohibited Transaction Exemption 90-1 (issued January 29,
1990) are met with respect to the use of such funds to
purchase the Notes, or
(II) the employee benefit plans with an interest in
such separate account have been identified in a writing
delivered by the Purchaser to the Company;
(b) if such funds are attributable to a separate account (as
defined in section 3(17) of ERISA) that is maintained solely in
connection with fixed contracted obligations of an insurance
company, any amounts payable, or credited, to any employee
benefit plan having an interest in such account and to any
participant or beneficiary of such plan (including an annuitant)
are not affected in any manner by the investment performance of
the separate account;
(c) if such funds are attributable to an investment fund
managed by a qualified plan asset manager (as such terms are
defined in Part V of DOL Prohibited Transaction Exemption 84-14,
issued March 13, 1984), all requirements for an exemption under
such Exemption are met with respect to the use of such funds to
purchase the Notes and Warrants; or
(d) such employee benefit plan is excluded from the
provisions of section 406 of ERISA by virtue of section 4(b) of
ERISA; or
(iii) the source of funds being used by it to purchase the Notes
is:
(a) a governmental plan (as defined in section 3(32) of
ERISA);
(b) a bank collective investment fund (within the meaning of
DOL Prohibited Transaction Exemption 91-38, issued July 12,1991),
and it has identified in writing to the Company each plan (as
defined in section 3(3) of ERISA) or group of related plans that
comprises ten percent of the assets of such fund; or
(c) one or more plans (as defined in section 3(3) of ERISA),
or a separate account (as defined in section 3(17) of ERISA) or a
trust fund comprised of one or more plans, each of which has been
identified in writing to the Company; or
(iv) none of the funds being used by such Purchaser to acquire
the Notes and Warrants comes from assets of a Pension Plan or an
employee benefit plan (as defined in section 3(3) of ERISA) or a plan
(as defined in section 4975(e)(1) of the Code).
10. DEFINITIONS. For the purpose of this Agreement, the terms defined
in the introductory sentence and in paragraphs 1 and 2 shall have the respective
meanings specified therein, and the following terms shall have the meanings
specified with respect thereto below:
10A. OTHER TERMS.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company,
except a Restricted Subsidiary. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.
"AGREEMENT, THIS" shall mean this Agreement as it may from time to
time be amended, supplemented, modified or restated.
"APPLICABLE DEFAULT INTEREST RATE" shall mean, at any time, the
greater of
(i) the rate of interest which is 2.0% in excess of the interest
rate then applicable to the Notes or
(ii) 2.0% over the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York from time to time in New York City
as its prime rate.
"ASSET TRANSFER PUT CONDITION" shall have the meaning assigned to it
in paragraph 4E(ii) of this Agreement.
"BANK" shall mean the banks that are parties to the Bank Credit
Agreement from time to time.
"BANK CREDIT AGREEMENT" shall mean the Second Amended and Restated
Credit Agreement, dated as of June 18, 1998, among the Company, The Chase
Manhattan Bank, as administrative agent and as a lender, SunTrust Bank, Central
Florida, National Association, Marine Midland Bank, Harris Trust and Savings
Bank and First Union National Bank, as may be amended, supplemented or modified
from time to time and any renewal, extension, refunding, restructuring,
replacement or refinancing thereof (whether with the original administrative
agent and lenders or another administrative agent or agents or one or more other
lenders and whether provided under the original Bank Credit Agreement or one or
more other credit or other agreements or indentures but only to the extent that
the aggregate principal amount of the Debt incurred thereunder and the undrawn
face amount of all letters of credit issued thereunder do not exceed
$101,500,000 at any one time outstanding).
"BANK FINANCING AGREEMENTS" shall mean (i) the term loan agreement
dated as of December 29, 1995 between the Company and The Chase Manhattan Bank
("Chase"), relating to an outstanding term loan in a principal amount of not
more than $2,799,880, (ii) the mortgage note and mortgage dated as of July 3,
1991 relating to an outstanding mortgage financing provided by Chase to the
Company in a principal amount of not more than $1,372,777, (iii) the mortgage
note and mortgage dated as of October 4, 1993 relating to an outstanding
mortgage financing provided by Chase to the Company in a principal amount of not
more than $1,286,777, (iv) the loan agreement dated as of December 20, 1995
between Recoton (Far East) Limited and Chase relating to a credit facility
provided by Chase to Recoton (Far East) Limited and guaranteed by the Company in
a principal amount of not more than HK$41,000,000 (which at the date of this
agreement is not more than US$5,300,000) and (v) all other payment obligations,
now existing or hereafter incurred, of the Company to Chase in a principal
amount not to exceed $5,000,000, in each case as such agreement, notes and
mortgages, obligations and related documents may be amended, supplemented or
modified from time to time and any renewal, extension, refunding, restructuring,
replacement or refinancing thereof (whether with the original administrative
agent and lenders or another administrative agent or agents or one or more other
lenders and whether provided under the original instruments and agreements or
one or more other credit or other agreements or indentures but only to the
extent that the aggregate principal amount of the Debt incurred thereunder does
not exceed US$10,500,000 plus HK$41,000,000 at any one time outstanding).
"BANKRUPTCY LAW" shall have the meaning assigned to it in clause
(viii) of paragraph 7A of this Agreement.
"BASKET INVESTMENT" shall mean any Investment (including, without
limitation, any Investment in Unrelated Assets) other than a Permitted
Investment.
"BUSINESS DAY" shall mean a day other than a Saturday, a Sunday or a
day on which the national banks located in New York City, New York, are required
by law (other than a general banking moratorium or holiday for a period
exceeding four consecutive days) to be closed. "CAPITAL ASSETS" shall mean all
tangible assets of a Person that at the time of acquisition or construction have
an expected economic useful life of more that one year, and would be shown on a
balance sheet of the acquiring or constructing Person as an asset.
"CAPITALIZED LEASE OBLIGATION" SHALL mean any rental obligation which,
under GAAP, is or will be required to be capitalized on the books of the Company
or any of its Subsidiaries, taken at the amount thereof accounted for as
indebtedness (net of interest expense) in accordance with GAAP.
"CAPITAL STOCK" shall mean 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.
"CLOSING DATE" shall have the meaning assigned to it in paragraph 2 of
this Agreement.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" shall have the meaning assigned to it in the introductory
sentence of this Agreement.
"CONFIDENTIAL INFORMATION" shall have the meaning assigned to it in
paragraph 11J of this Agreement.
"CONSOLIDATED ADJUSTED CASH FLOW" shall mean, for any period, the sum
of
(i) Consolidated Operating Income for such period, PLUS
(ii) to the extent, and only to the extent, that such amount was
deducted in the computation of Consolidated Net Income for such period, the
aggregate amount of amortization and depreciation of the Company and the
Restricted Subsidiaries during such period, determined on a consolidated
basis for such Persons.
"CONSOLIDATED DEBT" shall mean, at any time, all Debt of the Company
and the Restricted Subsidiaries, determined at such time on a consolidated basis
for such Persons."
"CONSOLIDATED EBITDA" shall mean, for any period,
(i) Consolidated Net Income for such period, PLUS
(ii) without duplication and only to the extent deducted from revenues
in the determination of Consolidated Net Income for such period, the sum of
(a) income tax expense, (b) interest expense, amortization or writeoffs of
debt discount and debt issuance costs and commissions, discounts and other
fees and charges associated with the issuance of Debt (including the
Notes), (c) depreciation and amortization expense and (d) amortization of
intangibles (including , but not limited to, goodwill) and organization
costs, MINUS
(iii) only to the extent included in the determination of Consolidated
Net Income for such period, the sum of (a) interest income and (b) income
tax credits, all determined on a consolidated basis.
"CONSOLIDATED INTEREST EXPENSE" shall mean, for any period, the
consolidated interest expense of the Company and the Restricted Subsidiaries for
such period (including the interest component of Capitalized Lease Obligations)
payable in cash.
"CONSOLIDATED NET INCOME" shall mean, for any period, net earnings (or
loss), after income taxes, of the Company and the Restricted Subsidiaries for
such period, determined on a consolidated basis for such Persons in accordance
with GAAP, but excluding on an after-tax basis:
(i) any gain or loss during such period resulting from the receipt of
any proceeds of any insurance policy, except business interruption
insurance;
(ii) any gains or Permitted Losses arising from any sale, abandonment
or other disposition of Capital Assets other than in the ordinary course of
business;
(iii) any gain arising from any re-evaluation or write-up of assets;
(iv) any gain resulting from the redemption of Debt at a price below
the outstanding principal amount of, and accrued interest on, such Debt;
(v) extraordinary gains or Permitted Losses, gains or Permitted Losses
resulting from transactions of a non-recurring, or non-operating, and
material nature, and gains or Permitted Losses arising from the
discontinuance of operations;
(vi) net earnings or losses of any Restricted Subsidiary accrued prior
to the date it became a Restricted Subsidiary;
(vii) net earnings of any Person (other than a Restricted Subsidiary)
in which the Company or any of the Restricted Subsidiaries shall have an
ownership interest unless such net earnings shall have actually been
received by the Company or such Restricted Subsidiary in the form of a cash
distribution;
(viii) any portion of the net earnings of any Restricted Subsidiary
that by reason of contract, charter restriction or applicable law is
unavailable for payment to the Company;
(ix) any earnings or losses of any successor to the Company, whether
through purchase, merger, consolidation, acquisition of assets or
otherwise, for any period prior to the date of acquisition;
(x) any deferred credit (or the amortization of any deferred credit)
arising in connection with the acquisition of any Person acquired by the
Company or a Restricted Subsidiary through purchase, merger, consolidation,
acquisition of assets or otherwise; and
(xi) any restoration during such period to income of any contingency
reserve, except to the extent that provision for such reserve was made
during such period out of income accrued during such period.
As used in this definition,
"PERMITTED LOSSES" means, for any period for which Consolidated Net
Income is being measured, (a) if aggregate gains for either item (ii)
or item (v) exceed aggregate losses for such item during such period,
actual aggregate losses for such period or (b) if aggregate losses for
either item (ii) or item (v) exceed aggregate gains for such item
during such period, the LESSER of (1) that amount by which such
aggregate losses exceed such aggregate gains during such period and (2)
$2,500,000.
"CONSOLIDATED NET WORTH" shall mean, at any time, all amounts which
would be included under shareholder's equity on a consolidated balance sheet of
the Company and the Restricted Subsidiaries determined on a consolidated basis
in accordance with GAAP at such time.
"CONSOLIDATED OPERATING INCOME" shall mean, for any period, the sum of
(i) Consolidated Net Income for such period, PLUS
(ii) to the extent, and only to the extent, that such amount was
deducted in the computation of Consolidated Net Income for such
period, the aggregate amount of income tax expense and interest
expense of the Company and the Restricted Subsidiaries during such
period, determined on a consolidated basis for such Persons.
"CONSOLIDATED SENIOR INDEBTEDNESS" shall mean, at any time, all Senior
Indebtedness of the Company and the Restricted Subsidiaries, determined at such
time on a consolidated basis for such Persons.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, at any time, the result
of
(i) the shareholders' equity of the Company and the Restricted
Subsidiaries, minus
(ii) all Intangible Assets of the Company and the Restricted
Subsidiaries, minus
(iii) (a) all Basket Investments, (b) Investments by the Company
or any Restricted Subsidiary set forth in clause (vii) of the
definition of Permitted Investments, and (c) Insider Loans in excess
of the sum of (1) $2,500,000 PLUS (2) up to an additional $2,500,000
so long as such additional amount consists of Insider Loans referred
to in subclause (A) of clause (viii) of the definition of "Permitted
Investments", and then only to the extent that such Insider Loans are
each in an original principal amount of $500,000 or less and are used
solely for relocation costs of officers, directors and employees of
the Company or any Restricted Subsidiary (including, without
limitation, financing the purchase of homes),
in each case as would be reflected on a consolidated balance sheet of such
Persons at such time.
"CONSOLIDATED TOTAL ASSETS" means, at any time, the net book value of
all of the assets of the Company and its Restricted Subsidiaries, as such net
book value would be reflected on the Company's balance sheet as of its most
recent fiscal year end prepared at such time on a consolidated basis in
accordance with GAAP. "CONSOLIDATED TOTAL CAPITALIZATION" shall mean, at any
time, the sum of (a) Consolidated Net Worth plus (b) Consolidated Debt at such
time."
"DEBT" shall mean, with respect to any Person, without duplication,
(i) all obligations of such Person for borrowed money (including,
without limitation, all obligations of such Person evidenced by any
debenture, bond, note, commercial paper or Security, but also
including all such obligations for borrowed money not so evidenced);
(ii) all obligations for borrowed money secured by any Lien
existing on Property owned by such Person (whether or not such
obligations have been assumed by such Person or recourse in respect
thereof is available against such Person);
(iii) all Capitalized Lease Obligations of such Person;
(iv) all obligations of such Person to pay the deferred purchase
price of Property or services, all conditional sale obligations of
such Person and all obligations of such Person under any title
retention agreements, PROVIDED that trade account payables incurred in
the ordinary course of business of such Person shall be excluded from
this clause (iv);
(v) all obligations of such Person in respect of banker's
acceptances, other acceptances, stand-by letters of credit and other
instruments serving a similar function issued or accepted by banks and
other financial institutions for the account of such Person (whether
or not incurred in connection with the borrowing of money); and
(vi) any Guarantee of such Person of any obligation or liability
of another Person of a type described in any of clause (i) through
clause (v), inclusive, of this definition.
"DOL" shall mean the Department of Labor of the government of the
United States of America or any other department or agency of such government
that shall succeed to the functions of the Department of Labor.
"EARLY PAYMENT AMOUNT" shall mean in connection with the prepayment of
Notes or the acceleration thereof an amount determined as of the date of
prepayment or acceleration (a "Payment Date"), as the case may be, equal to the
applicable percentage of the principal amount of the Notes being prepaid or
accelerated as follows:
PAYMENT DATE IN THE PERIOD: APPLICABLE PERCENTAGE:
On or prior to February 4, 2000 .................................0.0%
Thereafter and prior to February 4, 2001........................10.0%
Thereafter and prior to February 4, 2002.........................7.5%
Thereafter and prior to February 4, 2003.........................5.0%
Thereafter.......................................................2.5%
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean any corporation which is a member of the
same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph
7A of this Agreement, PROVIDED that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "DEFAULT" shall mean
any of such events, whether or not any such requirement has been satisfied.
"EXCESS AMOUNT" shall have the meaning assigned to it in paragraph
4E(ii) of this Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXCLUDED SUBSIDIARIES" shall mean the PRC Subsidiaries, the Inactive
Subsidiaries, RAC-FSC, a U.S. Virgin Islands corporation, Entel Limited, an
English corporation, Avelco Trading Limited, a Hong Kong corporation, Recoton
(UK) Limited, an English corporation, and Tambalan Limited, an English
corporation.
"FAIR MARKET VALUE" shall mean, 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.
"FIRST PUT DATE" shall have the meaning assigned to it in paragraph 4E
of this Agreement.
"FIRST PUT CUT-OFF DATE" shall have the meaning assigned to it in
paragraph 4E of this Agreement.
"FIRST TIER SUBSIDIARY" shall have the meaning assigned to it in
paragraph 5A of this Agreement.
"GAAP" means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
"GUARANTEE" shall mean, with respect to any Person (for the purposes
of this definition, the "guarantor"), any obligation (except the endorsement in
the ordinary course of business of negotiable instruments for deposit or
collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person (the "Primary
Obligor") in any manner, whether directly or indirectly, including, without
limitation, obligations incurred through an agreement, contingent or otherwise,
by the guarantor:
(i) to purchase such indebtedness or obligation or any Property
constituting security therefor;
(ii) to advance or supply funds
(a) for the purchase or payment of such indebtedness,
dividend or obligation, or
(b) to maintain working capital or other balance sheet
condition or any income statement condition of the Primary
Obligor or otherwise to advance or make available funds for the
purchase or payment of such indebtedness, dividend or obligation;
(iii) to lease Property or to purchase securities or other
Property or services primarily for the purpose of assuring the owner
of such indebtedness or obligation of the ability of the Primary
Obligor to make payment of the indebtedness or obligation; or
(iv) otherwise to assure the owner of the indebtedness or
obligation of the Primary Obligor against loss in respect thereof.
For purposes of computing the amount of any Guarantee, in connection with any
computation of indebtedness or other liability,
(i) in each case where the obligation that is the subject of such
Guarantee is in the nature of indebtedness for money borrowed it shall
be assumed that the amount of the Guarantee is the amount of the
direct obligation then outstanding, and
(ii) in each case where the obligation that is the subject of
such Guarantee is not in the nature of indebtedness for money borrowed
it shall be assumed that the amount of the Guarantee is the maximum
aggregate amount (if any) of such obligation.
"GUARANTY DATE" shall have the meaning assigned to it in paragraph 6L
of this Agreement.
"INACTIVE SUBSIDIARIES" shall mean STD Plastic Industrial Limited, a
Hong Kong corporation, STD Trading Limited, a Hong Kong corporation, and Peak
Hero Limited, a Hong Kong corporation.
"INSIDER LOANS" shall mean the Investments described in clause (viii)
of the definition of "Permitted Investments."
"INTANGIBLE ASSETS" shall mean any assets of a Person that would be
classified as "intangible assets" under GAAP, including, without limitation,
goodwill, trademarks, trade names, patents, copyrights, franchises and other
intangible assets of such Person.
"INTEREST PAYMENT DATE" shall have the meaning assigned to it in
paragraph 4G of this Agreement.
"INVESTMENT" shall mean any investment made in cash or by delivery of
Property by the Company or a Restricted Subsidiary (i) in any Person, whether by
acquisition of stock, indebtedness or other obligation or Security, or by loan,
Guarantee, advance, capital contribution or otherwise, or (ii) in any Property.
Investments shall be valued at the greater of:
(x) the amount at which such Investment is shown on the books of
the Company or any Restricted Subsidiary; and
(y) either
(1) in the case of any Guarantee of the obligation of any
Person, the amount which the Company or any Restricted Subsidiary
has paid on account of such obligation less any recoupment by the
Company or such Restricted Subsidiary of any such payments, or
(2) in the case of any other Restricted Investment, the
excess of (A) the greater of (I) the amount originally entered on
the books of the Company or any Restricted Subsidiary with
respect thereto and (II) the cost thereof to the Company or such
Restricted Subsidiary over (B) any return of capital (after
income taxes applicable thereto) upon such Restricted Investment
through the sale or other liquidation thereof or any part thereof
or otherwise.
"ISSUANCE TRANSACTION" shall mean any transaction resulting in the
receipt of Net Security Issuance Proceeds by the Company or one of the
Restricted Subsidiaries.
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or otherwise) or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction) or any other type of preferential arrangement for the purpose,
or having the effect, of protecting a creditor against loss or securing the
payment or performance of an obligation.
"MARGIN STOCK" shall have the meaning assigned to it in paragraph 81
of this Agreement.
"MERGER PUT CONDITION" shall have the meaning assigned to it in
paragraph 4E(i) of this Agreement.
"MINOR SUBSIDIARY" shall mean, at any time, any Subsidiary that is
organized under a jurisdiction other than the United States of America or any
State thereof and that satisfies the following conditions:
(i) the portion of consolidated Total Assets, determined as of
the of the then most recently ended fiscal quarter of the Company,
attributable to such Subsidiary in accordance with GAAP is less than
five percent, determined at such time, of Consolidated Total Assets;
and
(ii) the portion of Consolidated Operating Income, determined for
the then most recently ended period of four consecutive fiscal
quarters of the Company, attributable to such Subsidiary in accordance
with GAAP is less than five percent, determined for such period, of
Consolidated Operating Income.
"MOODY'S" shall mean Moody's Investor Services, Inc.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"1997 CLOSING DATE" means January 6, 1997
"1997 SENIOR NOTE AGREEMENTS" is defined in the definition of Senior
Note Agreements.
"1998 SENIOR NOTE AGREEMENT" is defined in the definition of Senior
Note Agreements.
"NET SECURITY ISSUANCE PROCEEDS" means, the cash proceeds received by
the Company and/or one or more of its Restricted Subsidiaries (the "Issuer")
from the issuance or sale after the Closing Date of equity interests or
Subordinated Indebtedness of the Issuer, net of attorney's fees, investment
banking fees, accountants' fees, underwriting discounts and commissions and
other customary fees and expenses actually incurred in connection therewith. The
term "SUBORDINATED INDEBTEDNESS" shall mean any Debt of an Issuer (other than
Debt owing to Restricted Subsidiaries or the Company which is not subject to any
Lien in favor of any other Person) which is subordinated in right of payment (in
liquidation or otherwise) to any other Debt of the Issuer.
"NOTES" shall have the meaning assigned to it in paragraph 1 of this
Agreement.
"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.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor corporation or governmental agency.
"PENSION PLAN" means any "employee pension benefit plan" (as such term
is defined in ERISA) maintained by the Company or any ERISA Affiliate for
employees of the Company or such ERISA Affiliate, excluding any Multiemployer
Plan, but including, without limitation, any Multiple Employer Pension Plan.
As used in this definition,
"MULTIPLE EMPLOYER PENSION PLAN" means any employee benefit plan
within the meaning of Section 3(3) of ERISA (other than a Multiemployer Plan),
subject to Title- IV of ERISA, to which the Company or any ERISA Affiliate and
an employer (as such term is defined in Section 3 of ERISA), other than an ERISA
Affiliate or the Company, contribute.
"PERMITTED INVESTMENTS" means and includes the following:
(i) Investments existing on the 1997 Closing Date (other than
Insider Loans) and described in Part 10B-1 of Annex 3 hereto, and
Investments in Property used by the Company or any Restricted
Subsidiary in its operations in the ordinary course of its business;
(ii) Investments in the ordinary course of business of the
Company in one or more Restricted Subsidiaries or any corporation that
concurrently with such Investment becomes a Restricted Subsidiary
(except to the extent that any such Investment is in Unrelated
Assets);
(iii) Investments in direct obligations of the United States of
America or any agency thereof, maturing within one year of the date of
acquisition thereof;
(iv) Investments in commercial paper maturing within 270 days
from the date of acquisition and rated A-1 or P-1 (or the equivalent)
or better at the date of acquisition by Standard & Poor's or Moody's;
(v) Investments in debt obligations of corporations organized
under the laws of the United States of America or any state thereof or
obligations of any state of the United States of America or any
municipality thereof, in each case maturing within one year from the
date of acquisition and rated AA or Aa (or the equivalent) or better
at the date of acquisition by Standard & Poors or Moody's;
(vi) Investments in certificates of deposit issued by an
Acceptable Bank and, in each case, maturing within one year of the
date of acquisition thereof, PROVIDED that such Investments issued by
banks deemed to be "Acceptable Banks" pursuant to the proviso of the
definition of "Acceptable Bank" shall not exceed $2,500,000 in any one
such deemed Acceptable Bank, or $5,000,000 in the aggregate for all
such deemed Acceptable Banks, at any one time;
(vii) Investments in any other Person in an amount not exceeding
the net proceeds of a concurrent sale of Capital Stock of the Company
(other than an Investment of the type referred to in clause (ii) of
this definition); and
(viii) Investments (A) in loans and advances in the ordinary
course of business, and necessary to carrying on the business of the
Company or any Restricted Subsidiary, to officers, directors and
employees of the Company or any Restricted Subsidiary, (B) in loans
and advances to corporations that are acquisition targets of the
Company or any Restricted Subsidiary, and (C) by consisting of short
term advances or prepayments to suppliers, PROVIDED that the aggregate
amount of all Investments referred to in subclauses (A), (B) and (C)
of this clause (viii) does not at any time exceed $7,000,000.
As used in this definition,
"ACCEPTABLE BANK" means (i)(a) a commercial bank or trust company
organized in the United States of America and having combined capital,
surplus and undivided profits aggregating at least $500,000,000 or (b)
any other commercial bank having capital, surplus and undivided
profits of at least $1,000,000,000 and (ii) the long-term unsecured
debt obligations of which (or the long-term unsecured debt obligations
of the bank holding company owning all of the Capital Stock of such
bank) are rated "A" or higher by Standard & Poor's or "A2" or higher
by Moody's, PROVIDED that a commercial bank not organized in the
United States of America that satisfies the requirement set forth in
the foregoing clause (i)b but whose long-term unsecured debt
obligations (or the long-term unsecured debt obligations of the bank
holding company owning all of the Capital Stock of such . bank) are
not rated by Standard & Poor's or Moody's shall be deemed to be an
"Acceptable Bank" if the Required Holders shall have consented in
writing to Investments in certificates of deposit issued by such bank.
"PERSON" shall mean and include an individual, a partnership, a
limited liability company, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
"PLAN" shall mean any "employee pension benefit plan" (as such term is
defined in section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any ERISA
Affiliate.
"PRC SUBSIDIARIES" shall mean Subsidiaries organized under the laws of
the People's Republic of China, other than Subsidiaries organized under the laws
of Hong Kong.
"PRC/HK SUBSIDIARIES" shall mean, collectively, Subsidiaries organized
under the laws of the People's Republic of China and Subsidiaries organized
under the laws of Hong Kong.
"PREFERRED STOCK" shall mean any class of capital stock of a Person
that is preferred over any other class of capital stock of such Person as to the
payment of dividends or the payment of any amount upon liquidation of such
Person.
"PRIORITY DEBT" shall mean the sum of (a) all Debt secured by Liens
other than Liens permitted by clause (i) through clause (v), inclusive, of
paragraph 6H hereof, plus (b) without duplication, all Debt of Restricted
Subsidiaries (other than Debt (i) owing to the Company or to other Restricted
Subsidiaries, or (ii) which constitutes "Guarantied Obligations" (as defined in
the Subsidiary Guaranty)).
"PROPERTY" shall mean any interest in any kind of property or assets,
whether real, personal or mixed, and whether tangible or intangible.
"PURCHASER" shall have the meaning assigned to it in the introductory
sentence of this Agreement.
"PUT AMOUNT" shall have the meaning assigned to it in paragraph 4E of
this Agreement.
"PUT NOTICE" shall have the meaning assigned to it in paragraph 4E of
this Agreement.
"REINVESTMENT NOTICE" shall have the meaning assigned to it in
paragraph 6G of this Agreement.
"REQUIRED HOLDERS" shall mean the holder or holders of at least 66% of
the aggregate principal amount of the Notes from time to time outstanding
(exclusive of Notes then owned by any one or more of the Company, any Subsidiary
or any Affiliate).
"RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of the
Company or any other officer of the Company involved principally in its
financial administration or its controllership function.
"RESTRICTED PAYMENT" means and includes
(i) any dividend or other distribution, direct or indirect and
whether payable in cash or Property, on account of any capital stock
or other equity interests of the Company or any of the Restricted
Subsidiaries, except to the extent such dividend or distribution
(a) is payable solely to the Company or any Restricted
Subsidiary;
(b) is payable solely in capital stock or other equity
interests of the Company or such Restricted Subsidiary;
or
(c) is payable in respect of Preferred Stock issued by the
Company after the 1997 Closing Date, PROVIDED that the
full purchase price of such Preferred Stock was paid in
cash to the Company prior to the payment of such
dividend or distribution:
(ii) any redemption, retirement, purchase or other acquisition,
direct or indirect, of any capital stock or other equity interests of
the Company or any of the Restricted Subsidiaries now or hereafter
outstanding, or of any warrants, rights or options to acquire any such
capital stock or other equity interests, except to the extent that any
amount due in respect of such redemption, retirement, purchase or
other acquisition
(a) is payable to the Company or any of its Restricted
Subsidiaries; or
(b) is payable solely in capital stock or other equity
interests of the Company or such Restricted Subsidiary;
(c) is payable with the proceeds of the sale of capital
stock of the Company consummated after the 1997 Closing Date.
"RESTRICTED SUBSIDIARY" shall mean each Wholly-Owned Subsidiary of the
Company which is a Wholly-Owned Subsidiary on the Closing Date and each
Wholly-Owned Subsidiary that becomes a Wholly-Owned Subsidiary after the Closing
Date and that has not been designated as an Unrestricted Subsidiary by the
Company pursuant to paragraph 6K of this Agreement.
"RESTRICTED SUBSIDIARY STOCK" shall have the meaning assigned to it in
paragraph 6G(ii) of this Agreement.
"SECOND PUT CUT-OFF DATE" shall have the meaning assigned to it in
paragraph 4E of this Agreement.
"SECOND PUT DATE" shall have the meaning assigned to it in paragraph
4E of this Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITY" shall mean "security" as defined in the Securities Act.
"SENIOR DEBT" shall have the meaning assigned to it in paragraph 12D
of this Agreement.
"SENIOR INDEBTEDNESS" shall mean, with respect to any Person, at any
time, all Debt of such Person other than Subordinated Debt.
"SENIOR NOTE AGREEMENTS" shall mean (i) the separate Note Purchase
Agreements dated as of January 6, 1997 (the "1997 SENIOR NOTE AGREEMENTS") among
the Company, the purchasers of $75,000,000 aggregate principal amount of the
Company's Adjustable Rate Senior Notes Due January 6, 2007 and (ii) the Note
Purchase Agreement dated as of September 1, 1998 (the "1998 SENIOR NOTE
AGREEMENT") between the Company and the purchaser of $25,000,000 aggregate
principal amount of the Company's Adjustable Rate Senior Notes Due September 1,
2008, in each case as such agreements may be amended, restated, renewed,
extended or replaced and be from time to time in effect and providing for an
aggregate of not exceeding $100,000,000 aggregate principal amount of Debt of
the Company thereunder.
"SENIOR NOTES" shall mean the Company's Adjustable Rate Senior Notes
Due January 6, 2007 outstanding under the 1997 Note Agreements and its
Adjustable Rate Senior Notes Due September 1, 2008 outstanding under the 1998
Note Agreement, in each case as such Senior Notes may be amended, restated,
renewed, extended or replaced and be from time to time in effect and be
outstanding under the Senior Note Agreements in an aggregate principal amount
not exceeding $100,000,000.
"SIGNIFICANT HOLDER" shall mean (i) the Purchaser, so long as the
Purchaser shall hold (or be committed under this Agreement to purchase) any
Note, or (ii) any other holder of at least five percent of the aggregate
principal amount of the Notes from time to time outstanding.
"STANDARD & POOR'S" shall mean Standard & Poor's Rating Group, a
division of McGraw Hill, Inc.
"SUBORDINATED DEBT" shall mean, with respect to any Person, at any
time, without duplication: (a) all Debt of such Person which is subordinated to
the prior payment in full of the obligations of (i) the Company under this
Agreement and the Notes and (ii) the Restricted Subsidiaries under the
Subsidiary Guaranty, as the case may be, in each case in a manner acceptable to
the Required Holders as evidenced by their prior written approval, and all other
terms and conditions of which are satisfactory to the Required Holders as
evidenced by their prior written approval; and (b) the Notes.
"SUBSIDIARY" shall mean any corporation more than 50% of the total
combined voting power of all classes of Voting Stock of which shall, at the time
as of which any determination is being made, be owned by the Company either
directly or through Subsidiaries.
"SUBSIDIARY GUARANTY" shall mean the guaranty agreement executed and
delivered as provided in paragraph 6L, as the same may be from time to time in
effect.
"SUCCESSOR CORPORATION" shall have the meaning assigned to it in
paragraph 6F(ii)(a) of this Agreement.
"TRANSFEREE" shall mean any direct or indirect transferee of all or
any part of any Note purchased by the Purchaser under this Agreement.
"TRANSFERS" shall have the meaning assigned to it in paragraph 6G(i)
of this Agreement.
"UNRELATED ASSETS" shall have the meaning assigned to it in paragraph
6A of this Agreement.
"UNRESTRICTED SUBSIDIARY" shall mean, at any time, any Subsidiary
other than a Restricted Subsidiary.
"VOTING STOCK" shall mean, with respect to any corporation, any shares
of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
"WAIVER NOTICE" shall have the meaning assigned to it in paragraph
4E(i) of this Agreement.
"WHOLLY-OWNED SUBSIDIARY" shall mean any corporation 100% of the total
combined voting power of all classes of Voting Stock of which shall, at the time
as of which any determination is being made, be beneficially owned by the
Company either directly or through Wholly-Owned Subsidiaries.
10B. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Where the character or
amount of any asset or liability or item of income or expense, or any
consolidation or other accounting computation is required to be made for any
purpose hereunder, it shall be done in accordance with GAAP as in effect on the
date of, or at the end of the period covered by, the financial statements from
which such asset, liability, item of income, or item of expense, is derived, or,
in the case of any such computation, as in effect on the date as of which such
computation is required to be determined; PROVIDED, however, that if any term
defined herein includes or excludes amounts, items, or concepts that would not
be included in or excluded from such term if such term were defined with
reference solely to GAAP, such term will be deemed to include or exclude such
amounts, items or concepts as set forth herein
11. MISCELLANEOUS.
11A. NOTE PAYMENTS. The Company agrees that, so long as the Purchaser
shall hold any Note, it will make payments of principal of, interest on and any
Yield-Maintenance Amount payable with respect to such Note by wire transfer of
immediately available funds for credit (not later than 12:00 noon, New York City
time, on the date due) to the Purchaser's account or accounts as specified in
the Purchaser Schedule attached hereto, or such other account or accounts in the
United States as the Purchaser may designate in writing, notwithstanding any
contrary provision herein or in any Note with respect to the place of payment.
The Purchaser agrees that, before disposing of any Note, the Purchaser will make
a notation thereon (or on a schedule attached thereto) of all principal payments
previously made thereon and of the date to which interest thereon has been paid.
The Company agrees to afford the benefits of this paragraph 11A to any
Transferee which shall have made the same agreement as the Purchaser has made in
this paragraph 11A.
11B. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save each Purchaser and
any Transferee harmless against liability for the payment of, all out-of-pocket
expenses arising in connection with such transactions, including (i) all
document production and duplication charges and the reasonable fees and expenses
of any special counsel engaged by any Purchaser or such Transferee in connection
with this Agreement, the transactions contemplated hereby and any subsequent
proposed modification, amendment or waiver of, or proposed consent under, this
Agreement or the Notes, 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 Purchaser or
such Transferee in enforcing or defending (or determining whether or how to
enforce or defend) any rights under this Agreement or the Notes or in responding
to any subpoena or other legal process or informal investigative demand issued
in connection with this Agreement or the transactions contemplated hereby or by
reason of the Purchasers' or such Transferee's having acquired any Note,
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 and the Notes. The Company will pay, and will save each holder of a
Note 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 paragraph 11B shall survive the transfer
of any Note or portion thereof or interest therein by the Purchaser or any
Transferee and the payment of any Note.
11C. CONSENT TO AMENDMENTS. 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, if the Company shall obtain the written consent
to such amendment, action or omission to act, of the Required Holders except
that, without the written consent of the holder or holders of all Notes at the
time outstanding, no amendment to this Agreement shall change the maturity of
any Note, or change the principal of, or the rate or time of payment of interest
on or any Early Payment Amount payable with respect to any Note, or affect the
time, amount or allocation of any prepayments, or change the proportion of the
principal amount of the Notes required with respect to any consent, amendment,
waiver or declaration. Each holder of any Note at the time or thereafter
outstanding shall be bound by any consent authorized by this paragraph 11C,
whether or not such Note shall have been marked to indicate such consent, but
any notes issued thereafter may bear a notation referring to any such consent.
No course of dealing between the Company and the holder of any Note nor any
delay in exercising any rights hereunder or under any Note shall operate as a
waiver of any rights of any holder of such Note.
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES.
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, if
the Company shall obtain the written consent to such amendment, action or
omission to act, of the Required Holders except that, without the written
consent of the holder or holders of all Notes at the time outstanding, no
amendment to this Agreement shall change the maturity of any Note, or change the
principal of, or the rate or time of payment of interest on or any
Yield-Maintenance Amount payable with respect to any Note, or affect the time,
amount or allocation of any prepayments, or change the proportion of the
principal amount of the Notes required with respect to any consent, amendment,
waiver or declaration. Each holder of any Note at the time or thereafter
outstanding shall be bound by any consent authorized by this paragraph 11C,
whether or not such Note shall have been marked to indicate such consent, but
any notes issued thereafter may bear a notation referring to any such consent.
No course of dealing between the Company and the holder of any Note nor any
delay in exercising any rights hereunder or under any Note shall operate as a
waiver of any rights of any holder of such Note.
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment
for registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of, interest on and any Early Payment Amount
payable with respect to such Note and for all other purposes whatsoever, whether
or not such Note shall be overdue, and the Company shall not be affected by
notice to the contrary. Subject to the preceding sentence, the holder of any
Note may from time to time grant participations in such Note to any Person on
such terms and conditions as may be determined by such holder in its sole and
absolute discretion, PROVIDED that any such participation shall be in a
principal amount of at least $100,000.
11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein or made in writing by or on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement and the Notes, the transfer by the Purchaser of any
Note or portion thereof or interest therein and the payment of any Note, and may
be relied upon by any Transferee, regardless of any investigation made at any
time by or on behalf of the Purchaser or any Transferee. Subject to the
preceding sentence, this Agreement and the Notes embody the entire agreement and
understanding between the Purchaser and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof.
11G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in
this Agreement contained by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not.
11H. NOTICES. All written 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 (i) if to a Purchaser, addressed to such Purchaser
at the address specified for such communications in the Purchaser Schedule
attached as Annex 1 hereto, or at such other address as such Purchaser shall
have specified to the Company in writing, (ii) if to any other holder of any
Note, addressed to such other holder at such address as such other holder shall
have specified to the Company in writing or, if any such other holder shall not
have so specified an address to the Company, then addressed to such other holder
in care of the last holder of such Note which shall have so specified an address
to the Company, and (iii) if to the Company, addressed to it at 2950 Lake Emma
Road, Lake Mary, Florida 32746, Attention: Stuart Mont (facsimile no.
407-444-0559), with a copy (which shall not constitute notice) to Stroock &
Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038, Attention:
Theodore S. Lynn, Esq. (facsimile no. 212-806-6006), or at such other address as
the Company shall have specified to the holder of each Note in writing;
PROVIDED, HOWEVER, that any such communication to the Company may also, at the
option of the holder of any Note, be delivered by any other means either to the
Company at its address specified above or to any officer of the Company.
11I. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or
the Notes to the contrary notwithstanding, any payment of principal of or
interest on any Note that is due on a date other than a Business Day shall be
made on the next succeeding Business Day. If the date for any payment is
extended to the next succeeding Business Day by reason of the preceding
sentence, the period of such extension shall be excluded in the computation of
the interest payable on such Business Day.
11J. DISCLOSURE TO OTHER PERSONS. For purposes of this paragraph 11J,
"CONFIDENTIAL INFORMATION" means information delivered to a Purchaser or its
representatives by or on behalf of the Company or any Subsidiary in connection
with the transactions contemplated by or otherwise pursuant to this Agreement or
the Subsidiary Guaranty that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by such
Purchaser as being confidential information of the Company or such Subsidiary,
PROVIDED that such term does not include information that (i) was publicly known
or otherwise known to such Purchaser prior to the time of such disclosure, (ii)
subsequently becomes publicly known through no act or omission by such Purchaser
or any Person acting on such Purchaser's behalf, (iii) otherwise becomes known
to such Purchaser other than through disclosure by the Company or any Subsidiary
or (iv) constitutes financial statements delivered to the holders of the Notes
pursuant to this Agreement that are otherwise publicly available. Each Purchaser
will use its best efforts to maintain the confidentiality of such Confidential
Information in accordance with procedures adopted by it in good faith to protect
confidential information of third parties delivered to it. The Company
acknowledges that any Purchaser may deliver copies of any such Confidential
Information delivered to it, and disclose any other information disclosed to it,
in connection herewith or the Subsidiary Guaranty to
(i) its directors, officers, employees, agents and professional
consultants who have been informed of the confidential nature of the
information provided,
(ii) any other Noteholder,
(iii) any Person to which it offers to sell any Note held by it or any
part thereof if such Person has agreed to be bound by the provisions of
this paragraph 11J,
(iv) any Person to which it sells or offers to sell a participation in
all or any part of any Note held by it if such Person has agreed to be
bound by the provisions of this paragraph 11J,
(v) any federal or state regulatory authority having jurisdiction over
it,
(vi) the National Association of Insurance Commissioners or any
similar organization, or any nationally recognized rating agency that
requires access to information about its investment portfolio, or
(vii) any other Person to which such delivery or disclosure may be
necessary or appropriate
(a) in compliance with any law, rule, regulation or order
applicable to it,
(b) in response to any subpoena or other legal process,
(c) in connection with any litigation to which it is a party, or
(d) in connection with the enforcement or protection of its
rights and remedies under the Notes, this Agreement or the Subsidiary
Guaranty.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this paragraph 11J
as a "Purchaser" as though it were a party to this Agreement.
11K. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to the Purchaser or to the Required Holders, the
determination of such satisfaction shall be made by the Purchaser or the
Required Holders, as the case may be, in the sole and exclusive judgment
(exercised in good faith) of the Person or Persons making such determination.
11L. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK.
11M. 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.
11N. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
11O. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
11P. SEVERALTY OF OBLIGATIONS. No failure by any holder of Notes to
perform its obligations under this Agreement shall relieve any other holder of
Notes or the Company of any of its obligations hereunder, and no holder of Notes
shall be responsible for the obligations of, or any action taken or omitted by,
any other holder of Notes hereunder.
12. SUBORDINATION OF NOTES.
12A. SUBORDINATION. Anything in this Agreement to the contrary
notwithstanding, the indebtedness evidenced by the Notes and all other
obligations in respect of the Notes and this Agreement including, without
limitation, for principal, Early Payment Amount, if any, and interest, shall be
subordinate and junior to the extent set forth in subparagraphs (i) to (v)
inclusive, below, to all Senior Debt.
(i) INSOLVENCY. In the event of any insolvency, bankruptcy,
liquidation, reorganization or other similar proceedings, or any
receivership proceedings in connection therewith, relative to the
Company, and in the event of any proceedings for voluntary
liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy proceedings, then all Senior
Debt shall first be paid in full in cash or Cash Equivalents before
any payment of or on account of principal, Early Payment Amount, if
any, interest or any other amount is made by the Company with respect
to the Notes.
(ii) INSOLVENCY DISTRIBUTIONS. In any of the proceedings referred
to in subparagraph (i) above, any payment or distribution of any kind
or character, whether in cash, property, stock or obligations, which
may be payable or deliverable by the Company in respect of the Notes
shall be paid or delivered directly to the holders of Senior Debt (or
to a banking institution selected by the court or Person making the
payment or delivery or designated by any holder of Senior Debt) for
application in payment thereof in accordance with the priorities then
existing among such holders, unless and until all Senior Debt shall
have been paid in full in cash or Cash Equivalents; PROVIDED, HOWEVER,
that no such delivery shall be made to holders of Senior Debt of
equity securities of the Company as reorganized or readjusted pursuant
to a plan of reorganization or readjustment or debt securities of the
Company as reorganized or adjusted, or debt securities of the Company
(or any other company, trust or organization provided for by a plan of
reorganization or adjustment succeeding to the assets and liabilities
of the Company), that, in each case, are subordinate and junior
(whether by law or agreement) at least to the extent provided in this
paragraph 12 to the payment of all Senior Debt then outstanding and to
the payment of any stock or obligations which are issued in exchange
or substitution for any Senior Debt then outstanding; PROVIDED that,
with respect to equity securities or debt securities referred to
above, (x) if a new corporation results from any such reorganization
or readjustment, such corporation assumes all Senior Debt that will be
outstanding after giving effect thereto and (y) the rights of the
holders of the Senior Debt are not, without the consent of such
holders, altered by any such reorganization or readjustment,
including, without limitation, by reason of such rights being impaired
within the meaning of Section 1124 of Title 11 of the United States
Code
In any of the proceedings referred to in subparagraph (i) above
the holders of Senior Debt (or any of them) are authorized and
empowered to file a claim in such proceeding (a "Required Filing") in
respect of any of the Notes (the "Subject Notes") if the holders of
the Subject Notes shall, after request shall have been made upon them
by any such holder of Senior Debt at least 30 days before the date
(the "Bar Date") on which all claims must be filed in such proceeding
by rule of law or court order in order to be considered as allowed or
proved claims for the purposes of such proceeding or any distribution
of assets in respect of the Subject Notes therein, fail to make the
Required Filing at least five Business Days prior to the Bar Date,
then, in such event, such holder of Senior Debt shall be authorized
(but not obligated) to make such Required Filing in respect of the
Subject Notes.
The consolidation of the Company with, or the merger of the
Company with or into, another corporation or entity or the liquidation
or dissolution of the Company following the conveyance or transfer of
its property as an entirety, or substantially as an entirety, to
another corporation or entity upon the terms and conditions provided
in paragraph 6F shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this paragraph if
such other corporation or entity shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the
conditions stated in paragraph 6F.
(iii) PAYMENT DEFAULT ON SENIOR DEBT. If any Senior Debt is not
paid when due in cash or Cash Equivalents or any other default on
Senior Debt occurs and the maturity of such Senior Debt is accelerated
in accordance with its terms (any such payment default or other
default resulting in such acceleration being herein called a "SENIOR
PAYMENT DEFAULT"), no holder of the Notes shall
(A) accept or receive any direct or indirect payment by the
Company of or for the account of the Company in respect of the
principal of, Early Payment Amount (if any) or interest on or any
other amounts with respect to the Notes or in connection with any
repurchase or other retirement of any Notes (collectively, "NOTE
PAYMENTS") or
(B) exercise any Remedies in respect of the Company or any
Subsidiary during the period (a "REMEDIES STANDSTILL PERIOD")
commencing upon the receipt by the holders of the Notes (with a
copy to the Company) of written notice (a "REMEDIES STANDSTILL
NOTICE") of such Senior Payment Default from any holder of Senior
Debt (or the Representative of any such holder) specifying an
election to effect a Remedies Standstill Period and ending 90
days thereafter (or such earlier date as the Majority Senior Debt
Holders (or their Representative) shall specify in a subsequent
notice to the holders of the Notes terminating such Remedies
Standstill Period),
unless, in either case, (x) the default has been cured or waived
and any such acceleration has been rescinded in writing or (y) such
Senior Debt has been paid in full in cash or Cash Equivalents;
PROVIDED, HOWEVER, that the holders of the Notes may accept Note
Payments and exercise Remedies without regard to the foregoing if the
Company and the holders of the Notes receive written notice approving
such payment or exercise from the Majority Senior Debt Holders (or
their Representative) with respect to which any such Senior Payment
Default has occurred or is continuing. Not more than one Remedies
Standstill Notice may be given, and not more than one Remedies
Standstill Period may occur, in any consecutive 180-day period,
irrespective of the number of Payment Defaults with respect to Senior
Debt during such period.
(iv) NON-PAYMENT DEFAULT ON SENIOR DEBT. During the continuance
of any default (other than a Senior Payment Default) with respect to
any Senior Debt pursuant to which the maturity thereof may be
accelerated immediately without further notice (except such notice as
may be required to effect such acceleration) or the expiration of any
applicable grace periods, no holder of Notes may accept or receive
Note Payments (except in Notes substantially identical to the Notes
issued by the Company in payment of interest thereon) for a period (a
"PAYMENT BLOCKAGE PERIOD") commencing upon the receipt by the holders
of the Notes (with a copy to the Company) of written notice (a
"BLOCKAGE NOTICE") of such default from holders of such Senior Debt
(or their Representative) specifying an election to effect a Payment
Blockage period and ending 179 days thereafter (or earlier if such
Payment Blockage Period is terminated (a) by written notice to the
holders of the Notes and the Company from the Person or Persons who
gave such Blockage Notice, (b) because the default giving rise to such
Blockage Notice is no longer continuing or (c) because such Senior
Debt has been repaid in full in cash or Cash Equivalents).
Notwithstanding the provisions of the immediately preceding sentence,
unless the holders of such Senior Debt or the Representative(s) of
such holders shall have accelerated the maturity of such Senior Debt,
the Company may resume payments on the Notes after the end of such
Payment Blockage Period. Not more than one Blockage Notice may be
given, and not more than one Payment Blockage may occur, in any
consecutive 360-day period, irrespective of the number of defaults
with respect to Senior Debt during such period.
(v) ACCELERATION OF PAYMENT OF NOTES. If payment of the Notes is
accelerated because of an Event of Default, the Company and the
holders of the Notes shall promptly notify the holders of the Senior
Debt (or their Representatives) of the acceleration. The holders of
the Notes shall not accept any Note Payments until five Business Days
after the holders or Representative(s) of such Senior Debt receives
notice of such acceleration and, thereafter, may accept such payments,
only if this paragraph 12 otherwise permits the acceptance of Note
Payments at that time.
(vi) TURNOVER. If any payment or distribution of any character,
whether in cash, securities or other property, shall be received by
any holder of Notes in contravention of any of the terms of this
paragraph 12 and before all the Senior Debt shall have been paid in
full in cash or Cash Equivalents, such payment or distribution shall
be received in trust for the benefit of the holders of the Senior Debt
at the time outstanding and shall forthwith be paid over or delivered
and transferred to the holders of Senior Debt as their respective
interests may appear.
12B. OBLIGATION OF THE COMPANY The provisions of this paragraph 12 are
for the purpose of defining the relative rights of the holders of Senior Debt on
the one hand, and the holders of the Notes on the other hand, against the
Company and its property, and nothing herein shall impair, as between the
Company and the holders of the Notes, the obligation of the Company, which is
unconditional and absolute, to pay to the holders thereof the principal thereof
and Early Payment Amount, if any, and interest thereon in accordance with their
terms and the provisions hereof, nor shall anything herein prevent the holders
of the Notes from exercising (except as otherwise provided in paragraph
12A(iii)(B)) all remedies otherwise permitted by applicable law or hereunder
upon default hereunder or under the Notes (including, without limitation, the
right to demand payment and sue for performance hereof and of the Notes and to
accelerate the maturity thereof as provided in paragraph 7A), subject to the
rights, if any, under this paragraph 12 of holders of Senior Debt to receive
cash, property, stock or obligations otherwise payable or deliverable by the
Company to the holders of the Notes.
12C. SUBROGATION Upon payment in full of Senior Debt, the holders of
the Notes shall be subrogated to the rights of the holders of the Senior Debt to
receive payments or distributions of assets of the Company made on Senior Debt
until the principal of and Early Payment Amount, if any, and interest on the
Notes shall be paid in full, and, for the purposes of such subrogation, no
payments to the holders of Senior Debt of any cash, property, stock or
obligations to which the holders of the Notes would be entitled except for the
provisions of paragraph 12A above shall, as between the Company, its creditors
(other than the holders of the Senior Debt) and the holders of the Notes, be
deemed to be a payment by the Company to or on account of Senior Debt.
12D. RIGHTS OF HOLDERS OF SENIOR DEBT. The provisions of this
paragraph 12 shall be deemed a continuing offer to all holders of Senior Debt to
act in reliance on such provisions (but no such reliance shall be required to be
proven to receive the benefits hereof) and may be enforced by such holders, and
no right of any present or future holder of any Senior Debt to enforce
subordination as provided in this paragraph 12 shall be prejudiced or impaired
by any act or failure to act on the part of the Company or by any act or failure
to act by any such holder, or by any non-compliance by the Company with the
terms, provisions and covenants of this Agreement or the Notes. Without in any
way limiting the generality of the foregoing, the holders of Senior Debt may, at
any time and from time to time, without the consent of or notice to the holders
of the Notes, and without impairing or releasing the subordination provided in
this paragraph 12 or the obligations hereunder of the holders of the Notes to
the holders of Senior Debt, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, or waive defaults under Senior Debt, or otherwise amend or supplement in
any manner Senior Debt or any instrument evidencing the same or any agreement
under which Senior Debt is outstanding; (ii) release any Person liable in any
manner for the payment or collection of Senior Debt; and (iii) exercise or
refrain from exercising any rights against the Company and any other Person,
including any guarantor or surety. Each holder of a Note, by accepting the same,
agrees that no amendment of the provisions of this paragraph 12 (or of any
defined terms as used in this paragraph 12) shall be effective without the
consent of the Majority Senior Debt Holders.
As used in this paragraph 12, the following terms have the following
meanings:
"CASH EQUIVALENTS" means Investments of a type described in clauses
(iii) through (vi) of the definition of the term "Permitted Investments."
"MAJORITY SENIOR DEBT HOLDERS" shall mean (x) the Required Lenders (as
defined in the Bank Credit Agreement), (y) the holders of a majority of the
aggregate principal amount of the Senior Notes at the time outstanding
(excluding for such purpose any holder of Senior Notes holding (together with
any of its affiliates or managed accounts) more than $5,000,000 principal amount
of Notes) and, or as the context may require, or (z) the holders of a majority
of the aggregate principal and/or face amount of the obligations under the Bank
Financing Agreements at the time outstanding.
"REMEDIES" means, with respect to the Debt evidenced by the Notes, (i)
acceleration of the maturity of such Debt by action of the holders thereof, (ii)
commencing or causing the commencement, of, participation in or support of any
action or proceeding (whether at law or in equity) against the Company or any
Subsidiary to recover all or any part of such Debt, (iii) any action to commence
or prosecute any bankruptcy or similar proceeding in respect of the Company or
any Subsidiary, or (iv) commencement of any foreclosure of any Lien upon any
Property of the Company or any Subsidiary, the proceeds of which are applied, or
may be applied, to the payment of such Debt.
"REPRESENTATIVE" means the trustee, agent or representative (if any)
for an issue of Senior Debt which has been identified to the holders of the
Notes as such by the holders of such Senior Debt or by the Company (having
received notification thereof from such holders of Senior Debt).
"SENIOR DEBT" shall mean and include all obligations (whether now
outstanding or hereafter incurred), for the payment of which the Company is
responsible or liable as obligor, guarantor or otherwise in respect of (i) all
payment obligations under the Senior Notes, and the Senior Note Agreements,
including without limitation in respect of, principal, interest (including
interest accruing after the commencement of any proceeding of the type specified
in subparagraph (i) of paragraph 12A, or an amount equal to interest that would
have so accrued but for the commencement of such proceeding - herein called
"Post-petition Interest"), yield- maintenance amount and fees, charges,
expenses,, reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof whether now owing or hereafter incurred, (ii)
all payment obligations under the Bank Credit Agreement, including without
limitation in respect of principal, interest (including Post-petition Interest),
cash collateralization of letters of credit, breakage costs and fees, charges,
expenses, reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof whether now owing or hereafter incurred. and
(iii) all payment obligations under the Bank Financing Agreements, including
without limitation in respect of principal, interest (including Post-petition
Interest), cash collateralization of letters of credit, breakage costs and fees,
charges, expenses, reimbursement obligations, guarantees and all other amounts
payable thereunder or in respect thereof whether now owing or hereafter
incurred.
[Remainder of page intentionally blank. Next page is signature page.]
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterparts of this letter and return the same to
the Company, whereupon this letter shall become a binding agreement between the
Company and the Purchasers.
Very truly yours,
RECOTON CORPORATION
By /S/ STUART MONT
---------------------------------------
Name: Stuart Mont
Title: Executive Vice President and Chief
Operating Officer
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /S/ KEVIN J. KRASKA
-----------------------------------
Name: Kevin J. Kraska
Title:
ING (U.S.) CAPITAL LLC
By: BARRY A. ISELEY
- --------------------------------------
Name: Barry A. Isely
Title: Senior Vice President
<PAGE>
ANNEX 1
INFORMATION AS TO PURCHASERS
==============================================================================
PURCHASER NAME THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
- ------------------------------------------------------------------------------
Note Registration: The Prudential Insurance Company of America
Warrant Registration: The Prudential Insurance Company of America
- ------------------------------------------------------------------------------
Note No. / Principal Amount: Notes: R-1 / $20,000,00
Warrant No. / number of
Warrants Warrants: R-1 / 177,143
- ------------------------------------------------------------------------------
Payment on Account of Note Federal Funds Wire Transfer
Account No.: 890-0304-391, Prudential
Managed Account
Method The Bank of New York
New York, New York
Account Information ABA No.: 021-000-018
- ------------------------------------------------------------------------------
Accompanying Information Name of Company: RECOTON CORPORATION
Description of Security:
Senior Subordinated Notes due February 4, 2004
Security Number: 756268 A# 5
Due Date and Application (as among principal,
premium and interest) of the payment
being made.
- -------------------------------------------------------------------------------
Address for Notices The Prudential Insurance Company of America
Related to Payments Three Gateway Center
100 Mulberry Street
Newark, NJ 07102-4077
Attention: Manager, Billings and Collections
Telephone: (973) 802-5260
Fax: (973) 802-8055
with telephonic advice of prepayments to:
Manager, Trade Department
Telephone: (973) 802-7398
Fax: (973) 802-9425
- ------------------------------------------------------------------------------
Address for All other The Prudential Insurance Company of America
Notices c/o Prudential Capital Group
One Gateway Center, 11th Floor
Newark, NJ 07102-5311
Attention: Managing Director
Telephone: (973) 802-9182
Fax: (973) 802-3200
- ------------------------------------------------------------------------------
Tax Identification Number 22-1211670
==============================================================================
<PAGE>
==============================================================================
PURCHASER NAME ING (U.S.) CAPITAL LLC
- ------------------------------------------------------------------------------
Note Registration: ING (U.S.) Capital LLC
Warrant Registration: ING (U.S.) Investments Corporation
- ------------------------------------------------------------------------------
Note No. / Principal Amount: Notes: R-2 / $15,000,000
Warrant No. / number
of Warrants Warrants: R-2 / 132,857
- ------------------------------------------------------------------------------
Payment on Account of Note Federal Funds Wire Transfer
The Chase Manhattan Bank
Method Account No.: 9301035763, A/C ING (U.S.)
Capital LLC
Account Information One Chase Manhattan Plaza, NY, NY 10081
ABA No.: 021000021
Ref: Recoton Corporation
- ------------------------------------------------------------------------------
Accompanying Information Name of Company: RECOTON CORPORATION
Description of Security:
Senior Subordinated Notes due
February 4, 2004
Security Number: 756268 A# 5
Due Date and Application (as among principal,
premium and interest) of the payment
being made.
- ------------------------------------------------------------------------------
Address for Notices ING Barings
Related to Payments 135 East 57th Street
New York, NY 10022
Attention: Lisa Hannahoe
Telephone: 212-409-1676
Fax: 212-486-6341
with telephonic advice of prepayments to:
Lisa Hannahoe
Telephone: 212-409-1676
Fax: 212-486-6341
- ------------------------------------------------------------------------------
Address for All other ING Barings
Notices 55 East 55nd Street
New York, NY 10055
Attention: William Redmond
Telephone: 212-409-1723
Fax: 212-593-3362
- ------------------------------------------------------------------------------
Tax Identification
Number:
ING (U.S.) Capital LLC 13-4038440
ING (U.S.) Investments
Corporation 13-3527168
==============================================================================
<PAGE>
ANNEX 2
PAYMENT INSTRUCTIONS AT CLOSING
In accordance with paragraph 2 of the Agreement, the Company
authorizes and directs you to make payment for the Notes and Warrants being
purchased by you by payment by federal funds wire transfer in immediately
available funds of the purchase price thereof to:
Bank: The Chase Manhattan Bank
ABA No.: 021000021
Account No.: 087-024284
Account Name: Recoton Corporation
<PAGE>
ANNEX 3
INFORMATION AS TO COMPANY
PART 6H(i): LIENS EXISTING ON THE 1997 CLOSING DATE.
PART 8A(ii): SUBSIDIARIES.
PART 8A(iii): AFFILIATES.
PART 8C: LITIGATION.
PART 8D: CONSOLIDATED DEBT AT DECEMBER 31, 1998.
PART 8G: AGREEMENTS RESTRICTING DEBT.
PART 8I: REPAYMENT OF DEBT WITH PROCEEDS OF NOTES.
PART 10B-1: INVESTMENTS EXISTING ON THE 1997 CLOSING DATE.
PART 10B-2: RESTRICTED SUBSIDIARIES.
<PAGE>
EXHIBIT A
FORM OF NOTE
THIS NOTE WAS ORIGINALLY ISSUED WITH ORIGINAL ISSUE DISCOUNT. THE
ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, AND THE
YIELD TO MATURITY MAY BE OBTAINED BY WRITING AND REQUESTING THE SAME FROM
RECOTON CORPORATION, 2950 LAKE EMMA ROAD, LAKE MARY, FL 32746, ATTENTION:
TREASURER.
RECOTON CORPORATION
SENIOR SUBORDINATED NOTE DUE 2004
No. R- ______ PPN: 756268 A# 5
$______________ [Date]
FOR VALUE RECEIVED, the undersigned, RECOTON CORPORATION (the
"Company"), a corporation organized and existing under the laws of the State of
New York, hereby promises to pay to ____________________________________ or
registered assigns, the principal sum of _______________________ DOLLARS
($____________________ ) on February 4, 2004, with interest (computed on the
basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance
thereof quarterly on the fourth day of February, May, August and November in
each year (each an "INTEREST PAYMENT DATE"), commencing on the later of May 4,
1999 or the payment date next succeeding the date hereof, until the principal
hereof shall have become due and payable, at a rate per annum equal to the
Current Effective Rate (as defined below) and (b) on any overdue payment
(including any overdue prepayment) of principal, any overdue payment of interest
and any overdue payment of any Early Payment Amount (as defined in the Purchase
Agreement), payable quarterly as aforesaid (or, at the option of the registered
holder hereof, on demand), at a rate per annum from time to time equal to the
greater of (i) the 2.0% over the Current Effective Rate or (ii) 2.0% over the
rate of interest publicly announced by Morgan Guaranty Trust Company of New York
from time to time in New York City as its prime rate.
Interest (computed on the basis of a 360-day year of twelve 30-day
months) shall accrue on the unpaid principal balance of this Note, from the date
of each Note, and shall be payable to the holders thereof quarterly on each
Interest Payment Date commencing with the Interest Payment Date next succeeding
the date hereof, until the principal hereof shall have become due and payable,
at the rate of 11.5% per annum for the period to and including November 3, 1999
and thereafter increasing to a rate of 12.5% per annum on November 4, 1999 and
thereafter increasing by an additional 0.50% per annum over the rate theretofore
in effect on each of the next five Interest Payment Dates (February 4, May 4,
August 4 and November 4, 2000 and February 4, 2001). The rate in effect at any
time as provided in the preceding sentence is the "CURRENT EFFECTIVE RATE."
This Note is one of a series of Senior Subordinated Notes (herein
called the "Notes") issued pursuant to the Securities Purchase Agreement, dated
as of February 4, 1999 (as may be amended, restated or otherwise modified from
time to time, the "Purchase Agreement"), between the Company and the original
purchasers of the Notes named in the Purchaser Schedule attached thereto and is
entitled to the benefits thereof.
Payments of principal of, interest on and any Early Payment Amount
payable with respect to this Note are to be made at the main office of Morgan
Guaranty Trust Company of New York in New York City or at such other place as
the holder hereof shall designate to the Company in writing, in lawful money of
the United States of America.
This Note is a registered Note and, as provided in the Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company shall not be affected by any notice to
the contrary.
This Note is subordinated to the payment of all Senior Debt (as
defined in the Purchase Agreement) on the terms specified in the Purchase
Agreement.
The Company agrees to make required prepayments of principal on the
dates and in the amounts specified in the Purchase Agreement. This Note is also
subject to optional prepayment, in whole or from time to time in part, on the
terms specified in the Purchase Agreement.
In case an Event of Default, as defined in the Purchase Agreement,
shall occur and be continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner and with the effect provided in
the Purchase Agreement.
This Note is intended to be performed in the State of New York and
shall be construed and enforced in accordance with the law of such State.
RECOTON CORPORATION
By_____________________________
Name:
Title:
EXHIBIT 2
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
COMMON STOCK PURCHASE WARRANT
EXPIRING FEBRUARY 4, 2004
No. R- __ New York, New York
PPN: 756268 2# 4 February 4, 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 of $18.2626 (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 February 4, 2004 (the "EXPIRATION DATE"), all subject to the terms,
conditions and adjustments set forth below in this Warrant; PROVIDED, HOWEVER,
that if on February 4, 2004, the Company is then required, pursuant to 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 Common Stock Purchase Warrants Expiring
February 4, 2004 (the "WARRANTS", such term to include all Warrants issued in
substitution therefor or upon transfer thereof) originally issued in connection
with the issue and sale by the Company of the Company's Senior Subordinated
Notes due February 4, 2004, in the aggregate principal amount of $35,000,000
(the "NOTES") pursuant to that certain Securities Purchase Agreement dated of
even date herewith (the "PURCHASE AGREEMENT") between the Company and original
purchasers of the Notes and Warrants (the "PURCHASERS"). The Warrants originally
so issued evidence rights to purchase an aggregate of 310,000 shares of Original
Common Stock, subject to adjustment as provided herein. The term "NOTES" as used
herein shall include each Note delivered pursuant to any provision of the
Purchase Agreement and each Note delivered in substitution or exchange for any
such Note pursuant to any such provision. Certain capitalized terms used in this
Warrant are defined in Section 13.
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 on
or after the date hereof to and including the Expiration Date, 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 1C 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;
ADJUSTMENT OF EXERCISE PRICE.
A. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case the Company,
at any time or from time to time after February -, 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 2C or 2D) without
consideration or for a consideration per share (determined pursuant to Section
2E) 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 2H, 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 2C or 2D, 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 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. 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
therefor, 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 2E) 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 2C, 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 2E) 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 2C, 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 2C (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
2C, (1) 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.
D. 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.
E. 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 other 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 2C, 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
instruments 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 exchange 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.
F. 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.
G. 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 adjustments carried forward and not
theretofore made up to and including the date of such exercise shall be made to
the nearest .001 of a cent.
H. 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 shares 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 adjustments 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 bolder 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.
I. CERTAIN ISSUES EXCEPTED. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of the
Exercise Price in the case of the issuance of the Warrants (or any "Additional
Warrants" which may be issued to the holders of the Notes as provided in
paragraph 4G of the Purchase Agreement) and the issuance of shares of Common
Stock issuable upon exercise of the Warrants or such Additional Warrants.
J. 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.
K. 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 a 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.
L. 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.
M. 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 any 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 or such
successor thereto or comparable system, 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 conemplated 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 having 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 exemption 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.
A. 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.
B. 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 expanse 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.
C. 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 a Purchaser, 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, unless the context otherwise
requires, the following terms have the following respective meanings:
"ACQUIRING COMPANY" shall have the meaning specified in Section 2I.
"ACQUIRER'S COMMON STOCK" shall have the meaning specified in Section
2I.
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares (including
treasury shares) of Common Stock issued or sold (or, pursuant to Section 2C or
2D 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, any
Additional Warrants (as defined in the Purchase Agreement) and shares issuable
upon exercise of options, warrants or rights granted to employees or consultants
or directors of the Company or its subsidiariesunder 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 Purchase
Agreement.
"ANNOUNCEMENT DATE" shall have the meaning specified in Section 2I.
"BUSINESS DAY" shall mean any day on which banks are open for business
in New York City (other than a Saturday, Sunday or legal holiday in the State of
New York or the State of New Jersey), PROVIDED, that any reference to "days"
(unless Business Days are specified) shall mean calendar days.
"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.
"CONSUMMATION DATE" shall have the meaning specified in Section 2I.
"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 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 Affiilate 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 interest), 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.
"NOTES", shall have the meaning specified in the opening paragraphs of
this Warrant.
"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 2I or otherwise.
"PARENT" shall have the meaning specified in Section 2I.
"PERSON" shall mean and include an individual, a partnership, an
association, a joint venture, a corporation, a trust, a limited liability
company, an unincorporated organization and a government or any department or
agency thereof.
"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
(inlcuding, 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.
"PURCHASE AGREEMENT" shall have the meaning specified in the opening
paragraphs of this Warrant.
"PURCHASERS" shall have the meaning specified in the opening
paragraphs of this Warrant.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement dated as February 4, 1999, among the Company and The Prudential
Insurance Company of America and ING.(U.S.) Investments Corporation.
"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 purchasable 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 21.
"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 of 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 as of the
date first above written.
RECOTON CORPORATION
By: /S/ STUART MONT
-------------------------------------
Name: Stuart Mont
Title: Executive Vice
President-Operations
and Chief Operating Officer
<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_____________________.
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)
- --------
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.
<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.
<PAGE>
VARING TERMS IN WARRANTS ISSUED:
WARRANT ISSUED TO THE PRUDENTIAL INSURANCE COMPANY OF AMERICA:
NO. R-1 FOR 177,143 SHARES
WARRANT ISSUED TO ING (U.S.) INVESTMENTS CORPORATION:
NO. R-2 FOR 132,857 SHARES
EXHIBIT 3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of February 4, 1999 among
RECOTON CORPORATION, a New York corporation (the "Company"), and THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA and ING (U.S.) INVESTMENTS CORPORATION (the
"PURCHASERS").
1. BACKGROUND. The Company is a party to a Securities Purchase
Agreement (the "PURCHASE AGREEMENT"), dated as of February 4, 1999 with the The
Prudential Insurance Company of America and ING (U.S.) Capital LLC (which has
assigned its right to receive the Warrants being purchsed by it to ING (U.S.)
Investments Corporation) pursuant to which the Company has agreed, among other
things, to issue Common Stock Purchase Warrants Expiring February 4, 2004
relating to 310,000 shares of Common Stock of the Company (the "PURCHASED
SECURITIES"). This agreement shall become effective upon the issuance of the
Purchased Securities pursuant to the Purchase 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;
PROVIDED, HOWEVER, that (A) participation by any holder of ING Registrable
Securities (as defined below in this Section) in a Prudential Registration (as
so defined) shall be permitted only if approved by a majority of the Prudential
Registrable Securities at the time outstanding, and (B) participation by any
holder of Prudential Registrable Securities (as defined below in this Section)
in an ING Registration (as so defined) shall be permitted only if approved by a
majority of the ING Registrable Securities at the time outstanding.
The number of registrations which may requested under this Section 2.1
are as follows: (1) two Limited Demand Registrations, in each case at the
request of the holders of a majority of the ING Registrable Securities at the
time outstanding (each such registration being herein called an "ING
REGISTRATION"); (2) two Limited Demand Registrations, in each case at the
request of the holders of a majority of the Prudential Registrable Securities at
the time outstanding (each such registration being herein called a "PRUDENTIAL
Registration"); and (3) one Full Demand Registration at the request (a "FULL
DEMAND REQUEST") of the holders of a majority of Registrable Securities at the
time outstanding otherwise having rights to demand a Limited Demand Registration
("LIMITED DEMAND RIGHTS") pursuant to the foregoing provisions of this sentence,
provided, that the Limited Demand Rights with respect to one Limited Demand
Registration shall be surrendered in connection with such Full Demand Request.
If the only Registrable Securities are either ING Registrable Securities or
Prudential Registrable Securities, such Full Demand Registration shall be
considered either an ING Registration or a Prudential Registration, as the case
may be.
(b) REGISTRATION OF OTHER SECURITIES. Whenever the Company shall
effect a 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 sucessor 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. A 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 a 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 requirement 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 a Full Demand
Registration) are not satisfied.
(f) SELECTION OF UNDERWRITERS. If a 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 a 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, 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 by the holder or holders of
any Registrable Securities (a "REQUESTING HOLDER") and in lieu of effecting such
requested registration, to purchase the Registrable Securities of the Requesting
Holder at the Fair Value thereof. The Company shall exercise its option by
notice given to the holder thereof within ten (10) days after receipt of the
registration request (the "OPTION NOTICE") which shall include an offer to
purchase such Registrable Securities on a date no later than thirty (30) days
after the Option Notice (the "PURCHASE DATE"). The Requesting 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 Requesting Holder on the Purchase Date for
cash. If the offer is rejected by the Requesting Holder, the Company shall then
and thereafter have no further obligation to effect any registration of such
Requesting Holder's Registrable Securities under any provision of this Section
2.1. As used herein "FAIR VALUE" shall mean the fair market value of the
Registrable Securities of the Requesting Holder thereof as of a date which is
within five days of the Purchase Date (a) determined by agreement between the
Company and the Requesting Holder, or (b) if the Company and the Requesting
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 Requesting Holder, either of which firms may be an independent
investment banking firm regularly retained by the Company, or (c) if the Company
or the Requesting Holder shall fail so to retain an independent investment
banking firm within seven Business Days of the retention of such a firm by the
Requesting 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
Requesting 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 Securites 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 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 11(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 holder's 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 relating 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 a
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 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.
(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 include 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 underwriters 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,
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 may become subject under the
Securities Act or otherwise, 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 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 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. 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 parry 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, 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.
ING REGISTRABLE SECURITIES: Registrable Securities originally
issued to (and whether or not still held by) ING (U.S.) Investments
Corporation and any Registrable Securities derived from, or issued in
respect of, such originally issued Registrable Securities.
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: A corporation, an association, a partnership, a business,
an individual, a governmental or political subdivision thereof or a
governmental agency.
PRUDENTIAL REGISTRABLE SECURITIES: Registrable Securities
originally issued to (and whether or not still held by) The Prudential
Insurance Company of America and any Registrable Securities derived
from, or issued in respect of, such originally issued Registrable
Securities.
PURCHASE AGREEMENT: As defined in Section 1.
PURCHASED SECURITIES: As defined in Section 1.
PURCHASERS: As defined in the introductory paragraph of this
Agreement.
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 Requisite
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: With respect to any registration of
Registrable Securities by the Company pursuant to Section 2, any
holder or holders of a majority of the Registrable Securities to be so
registered.
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: The Company's Warrants as defined in and issued under
the Purchase Agreement and any Additional Warrants (as defined in the
Purchase Agreement) to the extent issued as provided in the Purchase
Agreement.
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 Requisite
Holders. 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 Purchase 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,
Attrntion: 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
conemplated 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 thereby 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 Securityholder's 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.
<PAGE>
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
----------------------------------
Title: Executive Vice President
and Chief Operating Officer
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /S/ KEVIN J. KRASKA
-----------------------------------
Title:
ING (U.S.) INVESTMENTS CORPORATION
By: /S/ BARRY A. ISELEY
-----------------------------------
Title: Vice President
EXHIBIT 4
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT (this "AGREEMENT"), dated as of December 31, 1998,
to the several Note Purchase Agreements (collectively, as amended and in effect
prior to the amendments effected hereby, the "EXISTING NOTE AGREEMENT" and,
immediately after giving effect to the such amendments, the "AMENDED NOTE
AGREEMENT"), each dated as of January 6, 1997, between Recoton Corporation, a
New York corporation (the "COMPANY"), and each of the purchasers (collectively,
together with their respective successors and assigns, the "NOTEHOLDERS") of the
Adjustable Rate Senior Notes Due January 6, 2007 issued thereunder, is entered
into as of December 31, 1998 by the Company and each of the Noteholders.
PRELIMINARY STATEMENT:
Certain Events of Default may exist as of the date hereof
(collectively, the ""EXISTING EVENTS OF DEFAULT"). As a result of any such
Existing Events of Default, the Required Holders would have the right under the
Existing Note Agreement to exercise various rights and remedies, including,
without limitation, the right to declare all of the Notes to be immediately due
and payable, together with interest accrued thereon and the Yield-Maintenance
Amount, if any, with respect to each Note. The Company has requested that the
Noteholders consent to the amendment of certain provisions of the Existing Note
Agreement (to become retroactively effective as of December 31, 1998) in order
to eliminate any such Existing Events of Default. Subject to the terms and
conditions of this Agreement, the Noteholders are willing to amend the Existing
Note Agreement as set forth herein.
AGREEMENT:
1. DEFINED TERMS.
All capitalized terms used but not specifically defined in this
Agreement have the respective meanings assigned to them in, or pursuant to the
provisions of, the Existing Note Agreement. As used in this Agreement, the term
"TRANSACTION DOCUMENTS" means, collectively, each of this Agreement, the Amended
Note Agreement, the Notes and the Subsidiary Guaranty.
2. REPRESENTATIONS AND WARRANTIES.
The Company warrants and represents to each Noteholder that as of the
Effective Date (as defined below):
2.1 ORGANIZATION; POWER AND AUTHORITY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York, and is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is required by law,
other than those jurisdictions as to which the failure to be so qualified or in
good standing could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the business, condition (financial
or otherwise) or operations of the Company and the Subsidiaries taken as a
whole. The Company has the corporate power and authority to own or hold under
lease the properties it purports to own or hold under lease, to transact the
business it transacts and proposes to transact, to execute and deliver this
Agreement and to perform the provisions of the Transaction Documents.
2.2 AUTHORIZATION, ETC. This Agreement has been duly authorized by all
necessary corporate action on the part of the Company, and each of the
Transaction Documents constitutes a legal, valid and binding obligation of the
Company and each of the Subsidiaries party thereto, enforceable against the
Company and such Subsidiaries, as the case may be, in accordance with its terms,
except as such enforceability may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (b) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
2.3 DISCLOSURE. None of the written statements, documents or other
written materials (including, without limitation, the financial statements and
related certificates most recently provided to the Noteholders pursuant to
paragraph 5A of the Existing Note Agreement) furnished by, or on behalf of, the
Company to the Noteholders in connection with the negotiation, execution and
delivery of this Agreement contain any untrue statement of a material fact or
omit a material fact necessary to make the statements contained therein or
herein not misleading in light of the circumstances in which they were made.
There is no fact which the Company has not disclosed to the Noteholders which
materially affects adversely or, so far as the Company can now foresee, will
materially affect adversely the business, prospects, profits, Properties or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole, or the ability of the Company to perform its obligations set forth in
the Transaction Documents.
2.4 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution,
delivery and performance by the Company of this Agreement will not:
(a) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any
Property of the Company or any Subsidiary under, any indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other agreement or instrument to
which the Company or any Subsidiary is bound or by which the Company
or any Subsidiary or any of their respective properties may be bound
or affected;
(b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of
any court, arbitrator or governmental body applicable to the Company
or any Subsidiary; or
(c) violate any provision of any statute or other rule or
regulation of any governmental body applicable to the Company or any
Subsidiary.
Neither the Company nor any of the Subsidiaries is a party to, or
otherwise subject to any provision contained in, any instrument evidencing Debt
of the Company or such Subsidiary, any agreement relating thereto or any other
contract or agreement (including its charter) which limits the amount of, or
otherwise imposes restrictions on the incurring of, Debt of the Company of the
type to be evidenced by the Notes except as set forth in the agreements listed
in ANNEX 1 hereto.
2.5 GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or
authorization of, or registration, filing or declaration with, any court or
administrative or governmental body is required in connection with the
execution, delivery or performance by the Company of this Agreement.
2.6 LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as set forth on ANNEX 2, there are no actions, suits
or proceedings pending or, to the knowledge of the Company, threatened
against or affecting the Company or any Subsidiary or any Property of
the Company or any Subsidiary in any court or before any arbitrator of
any kind or before or by any governmental body that, individually or
in the aggregate, could reasonably be expected to have a material
adverse effect on the business, condition (financial or otherwise) or
operations of the Company and the Subsidiaries taken as a whole.
(b) After giving effect to the amendments to be effected by
Section 4, neither the Company nor any Subsidiary is in default under
any term of any agreement or instrument to which it is a party or by
which it is bound (except for any defaults that may exist under the
agreements listed in Annex 1 hereto, which will be cured or waived on
the Effective Date), or any order, judgment, decree or ruling of any
court, arbitrator or governmental body or is in violation of any
applicable law, ordinance, rule or regulation (including, without
limitation, all federal, state, local and regional statutes, laws,
ordinances and judicial or administrative orders, judgments, rulings
and regulations relating to the protection of the environment) of any
court or administrative or governmental body, which default or
violation, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on the business, condition
(financial or otherwise) or operations of the Company and the
Subsidiaries taken as a whole.
2.7 NO DEFAULTS. No event has occurred and is continuing and no
condition exists which, upon the effectiveness of the amendments provided for in
this Agreement, would constitute a Default or Event of Default.
2.8 YEAR 2000. The Company has reviewed the areas within its business
and operations (and that of the Subsidiaries) which could be adversely affected
by the "Year 2000 Problem" (that is, the risk that computer applications, as
well as embedded microchips in non- computing devices used by the Company and
the Subsidiaries, may be unable to recognize and properly perform date-sensitive
functions involving certain dates prior to and any date after December 31,
1999). The Company has developed or is developing programs to address its "Year
2000 Problem" on a timely basis. Based on such review and program and on current
information available to it, the Company believes that its "Year 2000 Problem"
will not result in a material adverse effect on the business, condition
(financial or otherwise) or operations of the Company and the Subsidiaries taken
as a whole.
3. CONDITIONS PRECEDENT
Each of the amendments to be effected by Section 4 shall become
retroactively effective, as of December 31, 1998, at such time as the Company
and each of the Noteholders shall have executed and delivered this Agreement
(the time and date of such execution and delivery is referred to herein as the
"EFFECTIVE DATE"); the willingness of the Noteholders to execute and deliver
this Agreement is contingent on the satisfaction of each of the following
conditions (which shall be deemed to have been satisfied upon such execution and
delivery; however, no such deemed satisfaction shall affect the provisions of
Section 6.3 hereof):
3.1 CONSENT OF NOTEHOLDERS. The Company and each Noteholder shall have
executed and delivered a counterpart of this Agreement.
3.2 WARRANTIES AND REPRESENTATIONS TRUE; COMPLIANCE WITH THIS
AGREEMENT.
(a) WARRANTIES AND REPRESENTATIONS TRUE. The warranties and
representations contained in Section 2 shall be true on the Effective
Date with the same effect as though made on and as of that date.
(b) COMPLIANCE WITH THIS AGREEMENT. The Company shall have
performed and complied with all agreements and conditions contained
herein that are required to be performed or complied with by the
Company on or prior to the Effective Date, and such performance and
compliance shall remain in effect on the Effective Date.
3.3 OPINION OF COUNSEL. The Noteholders shall have received from
Stroock & Stroock & Lavan LLP, regular counsel for the Company, a favorable
opinion satisfactory to the Noteholders and substantially in the form of EXHIBIT
A.
3.4 OFFICER'S CERTIFICATES. The Noteholders shall have received:
(a) a certificate dated the Effective Date and signed by a
Responsible Officer, substantially in the form of EXHIBIT B; and
(b) a certificate dated the Effective Date and signed by the
Secretary or an Assistant Secretary of the Company, substantially in
the form of EXHIBIT C.
3.5 SUBSIDIARY CONSENTS. Each of the Subsidiaries party to the
Subsidiary Guaranty shall have executed and delivered a consent to this
Agreement in the form attached hereto as EXHIBIT D.
3.6 BANK AGREEMENT. The Company shall have delivered to each
Noteholder a true and correct copy of the Bank Credit Agreement, as amended and
in effect on the Effective Date, which shall be in form and substance
satisfactory to each Noteholder, and shall include an executed copy of an
acceptable waiver of any violations of covenants contained in the Bank Credit
Agreement. No "Default" or "Event of Default" under, and as defined in, the Bank
Credit Agreement shall exist on the Effective Date.
3.7 1998 NOTE PURCHASE AGREEMENT. The Company shall have delivered to
each Noteholder a true and correct copy of an amendment to the Company's Note
Purchase Agreement, dated as of September 1, 1998 (as amended, the "1998 NOTE
PURCHASE AGREEMENT"), pursuant to which it issued $25,000,000 in aggregate
principal amount of its Adjustable Rate Senior Notes Due September 1, 2008,
which amendment shall be in form and substance satisfactory to each Noteholder.
No "Default" or "Event of Default" under, and as defined in, the 1998 Note
Purchase Agreement shall exist on the Effective Date.
3.8 SUBORDINATED DEBT ISSUANCE. The Company shall have issued
$35,000,000 in aggregate principal amount of its Senior Subordinated Notes due
2004 in a private sale on the Effective Date. The Company shall have delivered
to each Noteholder a true and correct copy of the securities purchase agreement
under which such senior subordinated notes are issued, as in effect on the
Effective Date, which shall be in form and substance satisfactory to each
Noteholder.
3.9 FEE. In consideration of the amendments set forth herein, the
Company shall have paid to each Noteholder a fee in an amount equal to 0.50% of
the outstanding principal amount of each Note held by such Noteholder as of the
date hereof.
3.10 EXPENSES. All fees and disbursements required to be paid pursuant
to Section 6.2 shall have been paid in full, including, but not limited to, the
statement for reasonable fees and disbursements of Hebb & Gitlin, the
Noteholders' special counsel, presented to the Company on or prior to the
Effective Date.
3.11 PROCEEDINGS SATISFACTORY. All proceedings taken in connection
with the execution and delivery of this Agreement and the transactions
contemplated hereby shall be satisfactory to the Noteholders and their special
counsel; and the Noteholders and their special counsel shall have received
copies of such documents and papers as they may reasonably request in connection
therewith.
4. AMENDMENTS TO EXISTING NOTE AGREEMENT.
Each of the Company and the Noteholders hereby consents and agrees to
the amendments to the Existing Note Agreement set forth in this Section 4.
4.1 PARAGRAPH 4G. Paragraph 4G of the Existing Note Agreement is
hereby amended and restated in its entirety as follows:
"4G. INTEREST PAYMENTS.
Interest (computed on the basis of a 360-day year of twelve
30-day months) shall accrue on the unpaid principal balance of the
Notes, from the date of each Note, and shall be payable to the holders
thereof quarterly on the sixth day of January, April, July and October
in each year (each an "INTEREST PAYMENT DATE"), commencing with the
Interest Payment Date next succeeding the date of such Note, until the
principal thereof shall have become due and payable, at the rate of:
(i) PRIOR TO JANUARY 1, 1999 -- if such time is prior to
January 1, 1999, 8.75% per annum, and on any overdue payment
(including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any
Yield-Maintenance Amount at the Applicable Default Interest Rate;
and
(ii) ON AND AFTER JANUARY 1, 1999 --
(a) if such time is on or after January 1, 1999 and
prior to the occurrence of the Rate Decrease Event, 9.75%
per annum, and
(b) if such time is on or after the occurrence of the
Rate Decrease Event, 9.25% per annum,
and on any overdue payment (including any overdue prepayment)
of principal, any overdue payment of interest and any overdue payment
of any Yield-Maintenance Amount at the Applicable Default Interest
Rate. If the Rate Decrease Event shall occur, it shall be effective as
of the date of occurrence of the Rate Decrease Event.
The term "RATE DECREASE EVENT" shall mean the receipt by the Company
of not less than $75,000,000 of Net Cash Proceeds from the issuance and
public sale of either or both of (A) its Capital Stock and (B) not more
than $150,000,000 in aggregate principal amount of subordinated debt
securities, pursuant to documentation and upon terms and conditions
satisfactory to each holder of the Notes, as evidenced by the holders'
prior written approval thereof."
4.2 PARAGRAPH 6. Paragraph 6 of the Existing Note Agreement is hereby
amended and restated in its entirety as follows:
6. NEGATIVE COVENANTS.
6A. LINE OF BUSINESS. The Company will not, and will not permit
any Restricted Subsidiary to, engage in any material business if, as a
result thereof, the business and operations of the Company and its
Restricted Subsidiaries would not be in or directly related to the
consumer electronics industry or activities that are ancillary,
incidental or necessary to such business, PROVIDED that the Company
and the Restricted Subsidiaries may acquire businesses that have
operations unrelated to the consumer electronics industry if, with
respect to each such acquisition, (i) the assets in respect of such
unrelated operations (the "UNRELATED ASSETS") constitute less than 50%
of consolidated total assets of any such business and contribute less
than 50% to consolidated operating income of any such business and
(ii) the Investment in such Unrelated Assets shall be permitted by the
provisions of paragraph 6F hereof.
6B. QUICK ASSETS RATIO. The Company will not permit the ratio of
(i) the sum of (a) cash and Cash Equivalents of the Company
and the Restricted Subsidiaries on the last day of any fiscal
quarter of the Company set forth below, PLUS (b) accounts
receivable (less provision for doubtful accounts) of the Company
and the Restricted Subsidiaries on such date, to
(ii) Consolidated Current Liabilities on such date
to be less than the ratio set forth opposite such fiscal quarter below:
=============================================================================
FISCAL QUARTER ENDING RATIO
=============================================================================
December 31, 1998 0.80 to 1.00
- ------------------------------------------------------------------------------
March 31 in each year 1.00 to 1.00
- ------------------------------------------------------------------------------
June 30 in each year 0.80 to 1.00
- ------------------------------------------------------------------------------
September 30 in each year 0.80 to 1.00
- ------------------------------------------------------------------------------
December 31 in each year after 1998 1.00 to 1.00
==============================================================================
Notwithstanding the foregoing, if the Rate Decrease Event shall have
occurred, the Company shall not permit the ratio of clause (i) to clause
(ii) above to be less than 1.00 to 1.00 on the last day of any fiscal
quarter of the Company.
6C. DEBT.
(i) TOTAL DEBT. The Company will not permit Consolidated
Debt at any time to exceed the lesser of:
(a) 65% of Consolidated Total Capitalization; and
(b) 500% of Consolidated EBITDA for the period of four
consecutive complete fiscal quarters of the Company then
most recently ended.
(ii) SENIOR DEBT. The Company will not permit Consolidated
Senior Debt at any time to exceed the lesser of:
(a) (1) prior to the Amendment Effective Date, 65% of
Consolidated Total Capitalization at such time, (2) on or
subsequent to the Amendment Effective Date and prior to the
Rate Decrease Event, 55% of Consolidated Total
Capitalization at such time, or (3) on or subsequent to the
Rate Decrease Event, 50% of Consolidated Total
Capitalization at such time; and
(b) (1) prior to the 6th day following the occurrence
of the Rate Decrease Event,
(A) for the period commencing on
December 31, 1998 and ending on June 29, 1999,
450% of Consolidated EBITDA for the period of four
consecutive complete fiscal quarters of the
Company then most recently ended,
(B) for the period commencing on June
30, 1999 and ending on December 30, 1999, 425% of
Consolidated EBITDA for the period of four
consecutive complete fiscal quarters of the
Company then most recently ended, and
(C) at all times on and after December
31, 1999, 400% of Consolidated EBITDA for the
period of four consecutive complete fiscal
quarters of the Company then most recently ended,
or
(2) on or after the 6th day following the occurrence of
the Rate Decrease Event, 350% of Consolidated EBITDA for the
period of four consecutive complete fiscal quarters of the
Company then most recently ended.
(iii) PRIORITY DEBT. The Company will not permit Priority
Debt at any time to exceed 15% of Consolidated Tangible Net
Worth.
6D. COVERAGE RATIOS.
(i) INTEREST EXPENSE COVERAGE. The Company will not permit
the ratio of
(a) Consolidated Adjusted Cash Flow for any period of
four consecutive complete fiscal quarters of the Company to
(b) Consolidated Interest Expense for such period
to be less than 2.50 to 1.00.
(ii) FIXED CHARGE COVERAGE. The Company will not permit the
Fixed Charge Total Debt Coverage Ratio on the last day of any
fiscal quarter to be less than 1.25 to 1.00.
6E. NET WORTH. The Company will not at any time permit
Consolidated Tangible Net Worth to be less than the sum of
(i) $100,000,000, PLUS
(ii) the sum of the Annual Net Worth Increase Amounts for
all fiscal years ended after December 31, 1998, PLUS
(iii) the amount of Net Cash Proceeds received by the
Company at such time from the issuance of Capital Stock of the
Company in connection with its first public offering of Capital
Stock of the Company subsequent to the Amendment Effective Date
to Persons other than Affiliates, employees or consultants of the
Company or any of the Restricted Subsidiaries, PLUS
(iv) the remainder (but not less than zero) of
(a) the aggregate amount of Net Cash Proceeds from all
issuances of Capital Stock of the Company completed at such
time, other than, and subsequent to, the issuance of Capital
Stock referred to in the preceding clause (iii), MINUS
(b) the portion of such Net Cash Proceeds used by the
Company or any Restricted Subsidiary to acquire Intangible
Assets at or prior to such time (PROVIDED, that in any case
where the Company or any Restricted Subsidiary shall utilize
any such Net Cash Proceeds to finance the acquisition of any
Person or business, the portion of such Net Cash Proceeds
used by the Company or such Restricted Subsidiary to acquire
Intangible Assets shall be deemed to be equal to the amount,
if any, of the increase in Consolidated Intangible Assets
directly resulting from such acquisition).
As used in this paragraph 6E:
"ANNUAL NET WORTH INCREASE AMOUNT" means, for any fiscal year of the
Company ended after December 31, 1998, the greater of (a) 50% of
Consolidated Net Income for such fiscal year and (b) $0.
"CONSOLIDATED INTANGIBLE ASSETS" means, at any time, the net book
value of all Intangible Assets of the Company and its Restricted
Subsidiaries, as such net book value would be reflected on a balance sheet
of the Company prepared at such time on a consolidated basis in accordance
with GAAP.
6F. RESTRICTED INVESTMENTS AND RESTRICTED PAYMENTS. The Company will
not, and will not permit any Restricted Subsidiary to, make any Basket
Investment, or declare, make, set apart any funds or other Property for, or
incur any liability to make, any Restricted Payment unless:
(i) immediately after, and after giving effect to such Basket
Investment or such Restricted Payment, the aggregate amount of all
Basket Investments outstanding at such time PLUS all Restricted
Payments declared or made on or after the Closing Date would not
exceed the sum of
(a) $5,000,000, PLUS
(b) 50% (or minus 100% in the case of a loss) of
Consolidated Net Income for the period commencing on January 1,
1997 and ending on and including the last day of the fiscal
quarter of the Company most recently ended as of the date such
Basket Investment is made or such Restricted Payment is declared
or made; and
(ii) immediately before, and after giving effect to, such Basket
Investment or such Restricted Payment and any concurrent transactions,
no Default or Event of Default exists or would exist.
6G. MERGERS AND CONSOLIDATIONS. The Company will not, and will not
permit any Restricted Subsidiary to, merge or consolidate with or into any
other Person, or convey, transfer, spin-off or lease all or substantially
all of its assets in a single transaction or series of transactions to any
Person, except that:
(i) any such Restricted Subsidiary may merge or consolidate with
or into, or convey, transfer or spin-off all or substantially all of
its assets to, the Company (provided that the Company is the
continuing or surviving corporation), another Restricted Subsidiary or
any Person that concurrently with such merger, consolidation,
conveyance, transfer or spin-off becomes a Restricted Subsidiary, and
(ii) the Company may merge or consolidate with or into, or
convey, transfer or spin-off all or substantially all of its assets
to, another corporation, PROVIDED that
(a) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by
conveyance, transfer or spin-off all or substantially all of the
assets of the Company as an entirety, as the case may be (the
"SUCCESSOR CORPORATION"), shall be a solvent corporation
organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia,
(b) if the Company is not the Successor Corporation, the
Successor Corporation shall have executed and delivered to each
holder of Notes its assumption of the due and punctual
performance and observance of each covenant and condition of this
Agreement and the Notes pursuant to such agreements and
instruments as shall be reasonably satisfactory to the Required
Holders, and the Company shall have caused to be delivered to
each holder an opinion, in form and substance satisfactory to the
Required Holders, of independent counsel reasonably satisfactory
to the Required Holders, to the effect that all agreements or
instruments effecting such assumption are enforceable in
accordance with their terms and comply with the terms hereof, and
(c) immediately after, and immediately after giving effect
to, such transaction, no Default or Event of Default would exist.
6H. TRANSFERS OF PROPERTY; SUBSIDIARY Stock.
(i) TRANSFERS OF PROPERTY. The Company will not, and will not
permit any Restricted Subsidiary to, sell, lease as lessor, transfer
or otherwise dispose of any Restricted Subsidiary Stock, except
pursuant to clause (ii) of this paragraph 6H, or any other Property
(collectively, "TRANSFERS") except for:
(a) any Transfer made in compliance with paragraph 6G hereof
or any Transfer of Unrelated Assets;
(b) Transfers of inventory, payments to vendors and
suppliers, payments of compensation (including, without
limitation, salaries, bonuses, options, insurance, benefits,
payments pursuant to employment agreements and other
perquisites), and other similar payments, in each case in the
ordinary course of business of the Company or such Restricted
Subsidiary;
(c) any Transfer of Property by a Restricted Subsidiary to
the Company or any other Restricted Subsidiary;
(d) any other Transfer at any time of any Property to a
Person, other than an Affiliate (whether effected in a single
transaction or in a series of related transactions) not otherwise
permitted under clauses (a) through (c), inclusive, of this
paragraph 6H(i) (for purposes of this clause (d), a "CURRENT
TRANSFER"), if each of the following conditions would be
satisfied with respect to such Transfer:
(1) the consideration received in respect of such
current Transfer is an amount not less than that reasonably
obtainable in a comparable arm's-length transaction or
series of transactions with a Person that is not an
Affiliate of the Company or any Subsidiary, with neither the
seller nor the buyer being under any compulsion to sell or
buy, respectively,
(2) immediately after giving effect to such current
Transfer, no Default or Event of Default would exist,
(3) the sum of
(A) the net book value of the Property that is the
subject of such current Transfer, PLUS
(B) the aggregate net book value of all other
items of Property of the Company and the Restricted
Subsidiaries that were the subject of prior Transfers under
this clause (d) consummated during the period beginning on
the first day of the four consecutive complete fiscal
quarters of the Company then most recently ended and ending
immediately prior to the time of such current Transfer,
would not exceed 20% of Consolidated Total Assets,
determined as at the beginning of such period, and
(4) the sum of
(A) the contribution (expressed as a percentage
and exclusive of losses) to Consolidated Operating Income of
such Property, plus
(B) the contribution (expressed as a percentage
and exclusive of losses) to Consolidated Operating Income of
all other items of Property of the Company and the
Restricted Subsidiaries that were the subject of prior
Transfers under this clause (d) consummated during the
period beginning on the first day of the four consecutive
complete fiscal quarters of the Company then most recently
ended and ending immediately prior to the time of such
current Transfer,
would not exceed 20% of Consolidated Operating
Income for the four consecutive complete fiscal quarters of
the Company then most recently ended;
PROVIDED that the net book value or the contribution to
Consolidated Operating Income of any item of Property shall be
excluded for purposes of clause (3) and clause (4) of this paragraph
6H(i)(d) if, prior to consummation of any Transfer, the Company gives
written notice (a "REINVESTMENT NOTICE") to all holders of Notes that,
within 12 months after such Transfer, the entire proceeds of such
Transfer, net of ordinary and reasonable transaction costs and
expenses incurred in connection with such Transfer, will be applied by
the Company or such Restricted Subsidiary to the purchase of Capital
Assets of the Company or any Restricted Subsidiary to be used in the
business of the Company, as described in paragraph 6A hereof; PROVIDED
further that such exclusions only apply to the extent that the
aggregate net book value of all Property so excluded at any one time
shall not exceed 25% of Consolidated Tangible Net Worth and the sum of
the contributions to Consolidated Operating Income (expressed as a
percentage, with each such contribution being determined as of the
date of Transfer of the Property generating such contribution) of all
Property so excluded at any one time shall not exceed 25%.
If the Company shall fail to apply the proceeds of any Transfer in
accordance with a Reinvestment Notice given in respect thereof, such
failure shall constitute an Event of Default.
(ii) TRANSFERS OF SUBSIDIARY Stock. The Company will not,
and will not permit any Restricted Subsidiary to, Transfer any shares
of the stock (or any warrants, rights or options to purchase stock or
other Securities exchangeable for or convertible into stock) of a
Restricted Subsidiary (such stock, warrants, rights, options and other
Securities herein called "RESTRICTED SUBSIDIARY STOCK"), nor will any
Restricted Subsidiary issue, sell or otherwise dispose of any shares
of its own Restricted Subsidiary Stock, PROVIDED that the foregoing
restrictions do not apply to:
(a) the issuance by a Restricted Subsidiary of shares
of its own Restricted Subsidiary Stock to the Company or
another Restricted Subsidiary;
(b) Transfers by the Company or a Restricted Subsidiary
of shares of Restricted Subsidiary Stock to the Company or
another Restricted Subsidiary;
(c) the issuance by a Restricted Subsidiary of
directors' qualifying shares or shares to holders (who hold
for the benefit of the Company or a Restricted Subsidiary)
to meet statutory requirements for domestic holdings or
minimum numbers of stockholders;
(d) the Transfer of all of the Restricted Subsidiary
Stock of a Restricted Subsidiary owned by the Company and
the other Restricted Subsidiaries if:
(1) such Transfer satisfies the
requirement of paragraph 6H(i)(d) hereof (for
purposes of such paragraph, the net book value of
such Restricted Subsidiary Stock being deemed to
be the aggregate net book value of all assets of
such Restricted Subsidiary);
(2) in connection with such Transfer,
the entire investment (whether represented by
stock, Debt, claims or otherwise) of the Company
and the other Restricted Subsidiaries in such
Restricted Subsidiary is Transferred to a Person
other than the Company or a Restricted Subsidiary
not simultaneously being disposed of;
(3) the Restricted Subsidiary being
disposed of has no continuing investment in any
other Restricted Subsidiary not simultaneously
being disposed of or in the Company; and
(4) immediately before and after the
consummation of such Transfer, and after giving
effect thereto, no Default or Event of Default
would exist;
(e) Transfers of Unrelated Assets consisting of Restricted
Subsidiary Stock if the requirements set forth in subclauses (2),
(3) and (4) of the foregoing clause (d) have been satisfied; and
(f) Transfers by the Company or a Restricted Subsidiary of
shares of Restricted Subsidiary Stock of any PRC/HK Subsidiaries,
PROVIDED such Transfer is made to a collateral agent in
accordance with the provisions of paragraph 6M hereof.
(iii) NOTICES WITH RESPECT TO TRANSFERS. The Company shall give
written notice to each holder of Notes at least ten days prior to the
consummation of any Transfer that would give rise to a potential
prepayment obligation under paragraph 4E hereof specifying:
(a) the anticipated consummation date of the related
Transfer; and
(b) an estimate of the net proceeds to be received for the
Property subject to such Transfer.
6I. LIENS. The Company will not, and it will not permit any Restricted
Subsidiary to, create, assume or suffer to exist any Lien upon any of its
Property, whether now owned or hereafter acquired, except:
(i) Liens outstanding on the Closing Date and listed in Part
6I(i) of Annex 3 hereto, Liens securing any obligations evidenced by
the Notes and Liens granted by the Company or any Restricted
Subsidiary with respect to any PRC/HK Subsidiaries pursuant to
paragraph 6M hereof;
(ii) Liens incurred or deposits made in the ordinary course of
business,
(a) in connection with workers' compensation, unemployment
insurance, social security and other like laws,
(b) to secure the performance of letters of credit, bids,
tenders, sales contracts, surety and performance bonds (of a type
other than set forth in clause (iv) of this paragraph 6I) and
other ordinary course obligations not incurred in connection with
the borrowing of money, the obtaining of advances or the payment
of the deferred purchase price of Property, and
(c) in respect of statutory obligations or claims or demands
of materialmen, mechanics, carriers, warehousemen, landlords and
other like Persons, PROVIDED that the obligations secured by such
Liens shall not be in default and the title of the Company or the
Restricted Subsidiary, as the case may be, to, and its right to
use, the Property subject to such Lien, is not materially
adversely affected thereby;
(iii) Liens for taxes not yet due or that are being actively
contested in good faith by appropriate proceedings;
(iv) Liens, arising in connection with court proceedings,
(a) in the nature of attachments, remedies and judgments,
PROVIDED that the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being
actively contested in good faith and by appropriate proceedings,
and
(b) securing appeal bonds, supersedeas bonds and other
similar Liens arising in connection with court proceedings
(including, without limitation, surety bonds and letters of
credit) or any other instrument serving a similar purpose,
PROVIDED that the aggregate amount so secured pursuant to this clause (iv)
shall not at any time exceed $2,500,000;
(v) reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions and other similar
title exceptions or encumbrances affecting real property, PROVIDED
they do not in the aggregate materially detract from the value of such
real property or materially interfere with their use in the ordinary
conduct of the owning Person's business;
(vi) any Lien on Property that is acquired or constructed by the
Company or any Restricted Subsidiary that secures Debt incurred by the
owner of such Property to pay for all or a portion of the related
purchase price or construction costs of such Property, PROVIDED that
(a) such Lien shall not extend to or cover any Property
other than Property acquired or constructed after the Closing
Date with the proceeds of the Debt secured thereby and shall not
secure Debt other than such Debt,
(b) such Lien shall be created within 12 months after the
acquisition or substantial completion of such Property, and
(c) such Lien shall secure Debt in an amount not exceeding
100% of the lesser of (1) the cost of acquisition or construction
of the Property to which such Debt relates and (2) the Fair
Market Value of the Property to which such Debt relates,
determined as the time of the incurrence of such Debt; and
(vii) Liens securing Debt other than those Liens permitted by
clause (i) through clause (vi) of this paragraph 6I, but only
(a) to the extent that Priority Debt would not exceed 15% of
Consolidated Tangible Net Worth, and
(b) if, immediately before, and after giving effect to, such
Liens and any concurrent transactions, no Default or Event of
Default exists or would exist.
A violation of this paragraph 6I will constitute an Event of Default,
whether or not any provision is made for an equal and ratable Lien
pursuant to paragraph 5G.
6J. PERMITTED INVESTMENTS. The Company will not, nor will it permit
any of its Restricted Subsidiaries to, make any Investment other than a
Permitted Investment or a Basket Investment.
6K. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not
permit any Restricted Subsidiary to, enter into any transaction, including,
without limitation, the purchase, sale or exchange of Property or the
rendering of any service, with any Affiliate, except in the ordinary course
of and pursuant to the reasonable requirements of the business of the
Company or such Restricted Subsidiary and upon fair and reasonable terms no
less favorable to the Company or such Restricted Subsidiary than would be
obtained in a comparable arm's- length transaction with a Person not an
Affiliate.
6L. DESIGNATION OF SUBSIDIARIES. Each Person which shall become a
Subsidiary for the first time after the Closing Date shall be a Restricted
Subsidiary unless, within 30 days after such Person shall first have become
a Subsidiary, the Company shall give written notice to all holders of the
Notes stating that such Person shall be an Unrestricted Subsidiary. Any
Person so designated as an Unrestricted Subsidiary may not thereafter be
redesignated as a Restricted Subsidiary without the approval of the
Required Holders.
6M. SUBSIDIARY GUARANTY. The Company will cause each Subsidiary that,
after the Closing Date, executes a guaranty of obligations outstanding
under the Bank Financing Agreements, to execute and deliver to each holder
of Notes, simultaneously with its execution and delivery of any such
guaranty of obligations under the Bank Credit Agreement, a copy of the
Joinder Agreement in the form attached to the Subsidiary Guaranty as Annex
2, duly executed by such Subsidiary. At such time as the Company shall have
(i) caused 65% of the Capital Stock of each of its PRC/HK Subsidiaries to
have been pledged to a collateral agent acceptable to the Required Holders
to secure all obligations of the Company under this Agreement, the Notes,
the 1998 Note Agreement and the Bank Financing Agreements pursuant to a
pledge agreement in form and substance satisfactory to the Required
Holders, and (ii) taken such action to perfect such pledge, and delivered
such additional documentation, as may be reasonably required by the
Required Holders, the Subsidiaries organized under the laws of Hong Kong
shall be deemed released from their respective Guarantees previously given
under the Subsidiary Guaranty, effective as of the date given, PROVIDED
that such Subsidiaries shall contemporaneously be released, or be deemed to
be released, from their respective Guarantees, if any, of the obligations
of the Company under the 1998 Note Agreement and the Bank Financing
Agreements.
6N. PRC/HK SUBSIDIARIES.
(i) PRC SUBSIDIARIES. The Company will not permit Combined
Adjusted PRC Assets, determined as of the last day of any fiscal
quarter or any fiscal year, to be greater than an amount equal to 20%
of Consolidated Tangible Net Worth determined as of such day.
(ii) PRC/HK SUBSIDIARIES. The Company will not permit Combined
Adjusted PRC/HK Assets, determined as of the last day of any fiscal
quarter or any fiscal year, to be greater than an amount equal to 40%
of Consolidated Tangible Net Worth determined as of such day.
As used in this paragraph 6N:
"COMBINED ADJUSTED PRC ASSETS" means the aggregate value of the assets
(net of reserves) of the PRC Subsidiaries, determined on a combined basis
(but not including intercompany receivables due to any PRC Subsidiary from
the Company or any Subsidiary that is a party to the Subsidiary Guaranty),
as reported in the consolidating financial statements referred to in clause
(i) and clause (ii) of paragraph 5A hereof.
"COMBINED ADJUSTED PRC/HK ASSETS" means the aggregate value of the
assets (net of reserves) of the PRC/HK Subsidiaries, determined on a
consolidated basis (but not including intercompany receivables due to any
PRC/HK Subsidiary from the Company or any Subsidiary that is a party to the
Subsidiary Guaranty but is not a PRC/HK Subsidiary), as reported in the
consolidating financial statements referred to in clause (i) and clause
(ii) of paragraph 5A hereof.
4.3 PARAGRAPH 10B. Paragraph 10B of the Existing Note Agreement is
hereby amended to modify in their entirety or add, each in their proper
alphabetical order, the following defined terms:
"AMENDMENT EFFECTIVE DATE" shall have the meaning assigned to the term
"Effective Date" in the Amendment Agreement, dated as of December 31, 1998,
which amends certain provisions of this Agreement.
"BANK CREDIT AGREEMENT" shall mean the Second Amended and Restated
Credit Agreement, dated as of June 18, 1998, among the Company, The Chase
Manhattan Bank, as administrative agent and as a lender, SunTrust Bank,
Central Florida, National Association, Marine Midland Bank, Harris Trust
and Savings Bank and First Union National Bank, as may be amended,
supplemented or modified from time to time, and any renewal, extension,
refunding, restructuring, replacement or refinancing thereof (whether with
the original administrative agent and lenders or another administrative
agent or agents and one or more other lenders, and whether provided under
the original Bank Credit Agreement or one or more other credit or other
agreements or indentures), but only to the extent that the aggregate
principal amount of the Debt incurred thereunder and the undrawn face
amount of all letters of credit issued thereunder do not exceed
$101,500,000 at any one time outstanding.
"BANK FINANCING AGREEMENTS" shall mean, collectively:
(a) the Bank Credit Agreement; and
(b) each of (i) the term loan agreement dated as of December 29,
1995, between the Company and The Chase Manhattan Bank ("Chase"),
relating to an outstanding term loan in a principal amount of not more
than $2,799,880, (ii) the mortgage note and mortgage dated as of July
3, 1991, relating to an outstanding mortgage financing provided by
Chase to the Company in a principal amount of not more than
$1,372,777, (iii) the mortgage note and mortgage dated as of October
4, 1993, relating to an outstanding mortgage financing provided by
Chase to the Company in a principal amount of not more than
$1,286,777, (iv) the loan agreement dated as of December 20, 1995,
between Recoton (Far East) Limited and Chase, relating to a credit
facility provided by Chase to Recoton (Far East) Limited and
guaranteed by the Company in a principal amount of not more than
HK$41,000,000 (which, as of the Amendment Effective Date, is not more
than US$5,300,000) and (v) all other payment obligations, now existing
or hereafter incurred, of the Company to Chase in a principal amount
not to exceed $5,000,000, in each case as such agreement, notes and
mortgages may be amended, supplemented or modified from time to time,
and any renewal, extension, refunding, restructuring, replacement or
refinancing thereof (whether with the original administrative agent
and lenders or another administrative agent or agents and one or more
other lenders, and whether provided under the original instruments and
agreements or one or more other credit or other agreements or
indentures), but only to the extent that the aggregate principal
amount of the Debt incurred thereunder and the undrawn face amount of
all letters of credit issued thereunder do not exceed the sum of
US$10,500,000 PLUS HK$41,000,000 at any one time outstanding.
"CAPITAL STOCK" shall mean 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" shall mean:
(i) direct obligations of the United States of America or
any agency thereof, maturing within one year of the date of
acquisition thereof;
(ii) commercial paper maturing within 270 days from the date
of acquisition and rated A-1 or P-1 (or the equivalent) or better
at the date of acquisition by Standard & Poor's or Moody's;
(iii) debt obligations of corporations organized under the
laws of the United States of America or any state thereof or
obligations of any state of the United States of America or any
municipality thereof, in each case maturing within one year from
the date of acquisition and rated AA or Aa (or the equivalent) or
better at the date of acquisition by Standard & Poor's or
Moody's;
(iv) certificates of deposit issued by an Acceptable Bank
and, in each case, maturing within one year of the date of
acquisition thereof, PROVIDED that such certificates of deposit
issued by banks deemed to be "Acceptable Banks" pursuant to the
proviso of the definition of "Acceptable Bank" shall not exceed
$2,500,000 in any one such deemed Acceptable Bank, or $5,000,000
in the aggregate for all such deemed Acceptable Banks, at any one
time;
(v) repurchase obligations of a Bank or any Acceptable Bank,
having a term of not more than 30 days with respect to Securities
issued or fully guaranteed or insured by the United States
Government;
(vi) 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 of America, by any
political subdivision or taxing authority of 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 Standard & Poor's or A by
Moody's;
(vii) Securities with maturities of one year or less from
the date of acquisition backed by standby letters of credit
issued by any Bank or Acceptable Bank; and
(viii) shares of money market mutual or similar funds which
invest exclusively in assets satisfying the requirements of
clauses (i) through (vii) of this definition.
As used in this definition,
"ACCEPTABLE BANK" means (i)(a) a commercial bank or trust company
organized in the United States of America and having combined capital,
surplus and undivided profits aggregating at least $500,000,000 or (b)
any other commercial bank having capital, surplus and undivided
profits of at least $1,000,000,000 and (ii) the long-term unsecured
debt obligations of which (or the long-term unsecured debt obligations
of the bank holding company owning all of the Capital Stock of such
bank) are rated "A" or higher by Standard & Poor's or "A2" or higher
by Moody's, PROVIDED that a commercial bank not organized in the
United States of America that satisfies the requirement set forth in
the foregoing clause (i)(b) but whose long-term unsecured debt
obligations (or the long-term unsecured debt obligations of the bank
holding company owning all of the Capital Stock of such bank) are not
rated by Standard & Poor's or Moody's shall be deemed to be an
"Acceptable Bank" if the Required Holders shall have consented in
writing to Investments in certificates of deposit issued by such bank.
"CONSOLIDATED ADJUSTED CASH FLOW" shall mean, for
any period, the sum of
(i) Consolidated Operating Income, PLUS
(ii) to the extent, and only to the extent, that such amount
was deducted in the computation of Consolidated Net Income for
such period, the aggregate amount of depreciation and
amortization of the Company and the Restricted Subsidiaries,
determined on a consolidated basis for such Persons.
"CONSOLIDATED CAPITAL EXPENDITURES" shall mean, for any period,
all expenditures by the Company and the Restricted Subsidiaries in
respect of the purchase or acquisition of fixed or capital assets
during such period, determined on a consolidated basis for such
Persons.
"CONSOLIDATED CURRENT LIABILITIES" shall mean, at any time, all
Current Liabilities of the Company and the Restricted Subsidiaries,
determined at such time on a consolidated basis for such Persons.
"CONSOLIDATED DEBT" shall mean, at any time, all Debt of the
Company and the Restricted Subsidiaries, determined at such time on a
consolidated basis for such Persons.
"CONSOLIDATED EBITDA" shall mean, for any period,
(i) Consolidated Net Income for such period, PLUS
(ii) without duplication and only to the extent deducted
from revenues in the determination of Consolidated Net Income for
such period, the sum of (a) income tax expense, (b) interest
expense, amortization or writeoffs of debt discount and debt
issuance costs and commissions, discounts and other fees and
charges associated with the issuance of Debt (including the
Notes), (c) depreciation and amortization expense and (d)
amortization of intangibles (including, but not limited to,
goodwill) and organization costs, MINUS
(iii) only to the extent included in the determination of
Consolidated Net Income for such period, the sum of (a) interest
income and (b) income tax credits, all determined on a
consolidated basis.
"CONSOLIDATED FIXED CHARGES" shall mean, for any period, the sum
of
(i) Consolidated Interest Expense for such period, PLUS
(ii) Consolidated Lease Expense for such period, PLUS
(iii) required amortization of Debt for such period and
discount or premium relating to any such Debt for such period,
whether expensed or capitalized.
"CONSOLIDATED LEASE EXPENSE" shall mean, for any period, the
aggregate amount of fixed and contingent rentals payable by the
Company and the Restricted Subsidiaries during such period with
respect to leases of real and personal property (excluding Capitalized
Lease Obligations), determined on a consolidated basis for such
Persons.
"CONSOLIDATED NET WORTH" shall mean, at any time, all amounts
which would be included under shareholders' equity on a consolidated
balance sheet of the Company and the Restricted Subsidiaries
determined on a consolidated basis in accordance with GAAP at such
time.
"CONSOLIDATED SENIOR DEBT" shall mean, at any time, all Senior
Debt of the Company and the Restricted Subsidiaries, determined at
such time on a consolidated basis for such Persons.
"CONSOLIDATED TOTAL CAPITALIZATION" shall mean, at any time, the
sum of (a) Consolidated Net Worth PLUS (b) Consolidated Debt at such
time.
"CURRENT LIABILITIES" shall mean, with respect to any Person at
any date of determination, an amount equal to the sum of (a) all
liabilities of such Person which, in accordance with GAAP, would be
classified on a consolidated balance sheet of such Person as current
liabilities, PLUS (b) without duplication, all Debt of such Person for
borrowed money outstanding under a revolving credit or similar
agreement, notwithstanding that it obligates the lender or lenders to
extend credit over a period of more than one year.
"DOLLARS"; "$"; and "US$" means, in each case, the lawful money
of the United States of America.
"FIXED CHARGE TOTAL DEBT COVERAGE RATIO" shall mean, as of the
end of each fiscal quarter of the Company, for the period of twelve
consecutive calendar months ending on such date, the ratio of
(i) (a) Consolidated EBITDA for such period, MINUS
(b) an amount equal to the excess, if any, of (1)
Consolidated Capital Expenditures during such period over
(2) the amount by which Consolidated Funded Debt (excluding
Funded Debt in respect of Revolving Credit Loans (as defined
in the Bank Credit Agreement), but including the current
maturities of Consolidated Funded Debt) shall have increased
during such period, to
(ii) Consolidated Fixed Charges for such period.
"HK$" means the lawful money of Hong Kong.
"NET CASH PROCEEDS" means, in connection with any issuance or
sale of Capital Stock (other than the issuance or sale of Capital
Stock pursuant to the exercise of stock options issued to employees or
consultants of the Company or any of the Restricted Subsidiaries) or
debt securities or instruments, the cash proceeds received from such
issuance, net of attorneys' fees, investment banking fees,
accountants' fees, underwriting discounts and commissions and other
customary fees and expenses actually incurred in connection therewith.
"1998 NOTE AGREEMENT" means the Note Purchase Agreement, dated as
of September 1, 1998, between the Company and The Prudential Insurance
Company of America, as may be amended, modified, supplemented or
restated from time to time.
"PRC/HK SUBSIDIARIES" shall mean, collectively, Subsidiaries
organized under the laws of the People's Republic of China and
Subsidiaries organized under the laws of Hong Kong.
"PRIORITY DEBT" shall mean the sum of (a) all Debt secured by
Liens other than Liens permitted by clause (i) through clause (v),
inclusive, of paragraph 6I hereof, PLUS (b) with duplication, all Debt
of Restricted Subsidiaries (other than Debt (i) owing to the Company
or to other Restricted Subsidiaries, or (ii) which constitutes
"Guarantied Obligations" (as defined in the Sharing Agreement) subject
to the intercreditor sharing provisions of the Sharing Agreement).
"RATE DECREASE EVENT" shall have the meaning assigned to it in
paragraph 4G of this Agreement.
"SENIOR DEBT" shall mean, with respect to any Person, at any
time, all Debt of such Person other than Subordinated Debt.
"SHARING AGREEMENT" shall mean, the First Amended and Restated
Sharing Agreement, dated as of September 1, 1998, among the banks
listed on the signature pages thereof, the holders of the Notes listed
on the signature pages thereof, the holder of the Adjustable Rate
Senior Notes Due September 1, 2008 of the Company listed on the
signature pages thereof, and The Chase Manhattan Bank, as
Administrative Agent for the Banks under the Bank Credit Agreement.
"SUBORDINATED DEBT" shall mean, with respect to any Person, at
any time, without duplication: (a) all Debt of such Person which is
subordinated to the prior payment in full of the obligations of (i)
the Company under this Agreement and the Notes and (ii) the Restricted
Subsidiaries under the Subsidiary Guaranty, as the case may be, in
each case in a manner acceptable to the Required Holders as evidenced
by their prior written approval, and all other terms and conditions of
which are satisfactory to the Required Holders as evidenced by their
prior written approval; and (b) not more than $35,000,000 in aggregate
principal amount of the Company's Senior Subordinated Notes due 2004
issued in a private sale on the Amendment Effective Date.
4.4 PARAGRAPH 10B. Paragraph 10B of the Existing Note Agreement is
hereby amended to delete therefrom the following defined terms: "ADJUSTED
CONSOLIDATED CURRENT DEBT"; "EXCESS CURRENT DEBT"; "EXCESS CURRENT DEBT
MEASURING PERIOD"; "CONSOLIDATED CURRENT DEBT"; and "RATE INCREASE EVENT".
5. AFFIRMATION OF OBLIGATIONS.
Except as expressly amended by this Agreement, (a) no terms or
provisions of any agreement are modified or changed by this Agreement, (b) the
terms and provisions of the Transaction Documents shall continue in full force
and effect and (c) the terms and provisions of the Transaction Documents are
hereby ratified, confirmed and approved in all respects.
6. MISCELLANEOUS.
6.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and
shall inure to the benefit of, the successors and assigns of the parties hereto
and the holders from time to time of the Notes.
6.2 FEES AND EXPENSES. On the Effective Date, the Company shall pay
all reasonable costs and expenses of the Noteholders relating to this Agreement,
including, but not limited to, the statement for reasonable fees and
disbursements of the Noteholders' special counsel presented to the Company on or
prior to the Effective Date. The Company will also pay, upon receipt of any
statement thereof, each additional statement for reasonable fees and
disbursements of the Noteholders' special counsel rendered after the Effective
Date in connection with this Agreement. The obligations of the Company under
this Section 6.2 shall survive the termination of this Agreement.
6.3 SURVIVAL. All warranties, representations, certifications and
covenants made by the Company in this Agreement or in any certificate or other
instrument delivered by it or on its behalf under this Agreement shall be
considered to have been relied upon by the Noteholders and shall survive the
execution of this Agreement, regardless of any investigation made by or on
behalf of any Noteholder. All such statements made herein or in any such
certificate or other instrument shall constitute warranties and representations
of the Company under this Agreement and the Amended Note Agreement.
6.4 GOVERNING LAW. This Agreement shall be construed, interpreted and
enforced in accordance with, and governed by, the laws of the State of New York,
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.
6.5 SECTION HEADINGS, ETC. The titles of the Sections hereof appear as
a matter of convenience only, do not constitute a part hereof and shall not
affect the construction hereof. The words "herein," "hereof," "hereunder" and
"hereto" refer to this Agreement as a whole and not to any particular Section or
other subdivision. References to Sections are, unless otherwise specified,
references to Sections of this Agreement. References to Annexes and Exhibits
are, unless otherwise specified, references to Annexes and Exhibits attached to
this Agreement.
6.6 DUPLICATE ORIGINALS; EXECUTION IN COUNTERPART. Two or more
duplicate originals of this Agreement may be signed by the parties, each of
which shall be an original but all of which together shall constitute one and
the same instrument. This Agreement may be executed in one or more counterparts
and shall be effective when at least one counterpart shall have been executed by
each party to this Agreement, and each set of counterparts which, collectively,
show execution by each such party to this Agreement shall constitute one
duplicate original.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. NEXT PAGE IS SIGNATURE
PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on their behalf by a duly authorized officer or agent thereof, as
the case may be, as of the date first above written.
RECOTON CORPORATION
By /s/ Arnold Kezsbom
---------------------------------------
Name: Arnold Kezsbom
Title: Vice President - Financial
Planning
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By /s/ Charles Y. King
---------------------------------------
Name: Charles Y. King
Title: Vice President
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By /s/ Daniel C. Budde
---------------------------------------
Name: Daniel C. Budde
Title: Senior Investment Officer
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
By /s/ Daniel C. Budde
---------------------------------------
Name: Daniel C. Budde
Title: Authorized Officer
<PAGE>
The decision to participate in this investment, any representations made herein
by the participant, and any actions taken hereunder by the participant has/have
been made solely at the direction of the investment fiduciary who has sole
investment discretion with respect to this investment.
MELLON BANK, N.A., solely in its capacity
as Trustee for the LONG-TERM INVESTMENT
TRUST, (as directed by John Hancock
Mutual Life Insurance Company), and not
in its individual capacity
By /s/ Bernadette Rist
-------------------------------------
Name: Bernadette Rist
Title: Authorized Signatory
INVESTORS PARTNER LIFE INSURANCE COMPANY
By /s/ Daniel C. Budde
-------------------------------------
Name: Daniel C. Budde
Title: Authorized Signatory
The decision to participate in this investment, any representations made herein
by the participant, and any actions taken hereunder by the participant has/have
been made solely at the direction of the investment fiduciary who has sole
investment discretion with respect to this investment.
MELLON BANK, N.A., solely in its capacity
as Trustee for the LONG-TERM INVESTMENT
TRUST, (as directed by John Hancock
Mutual Life Insurance Company), and not
in its individual capacity
By /s/ Bernadette Rist
------------------------------------
Name: Bernadette Rist
Title: Authorized Signatory
LUCENT TECHNOLOGIES INC.
MASTER PENSION TRUST
BY: JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY, as
Investment Advisor
By /s/ Daniel C. Budde
-------------------------------------
Name: Daniel C. Budde
Title: Authorized Signatory
EXHIBIT 5
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT (this "AGREEMENT"), dated as of December 31, 1998,
to the Note Purchase Agreement (as amended and in effect prior to the amendments
effected hereby, the "EXISTING NOTE AGREEMENT" and, immediately after giving
effect to the such amendments, the "AMENDED NOTE AGREEMENT"), dated as of
September 1, 1998, between Recoton Corporation, a New York corporation (the
"COMPANY"), and the purchaser (together with its successors and assigns, the
"NOTEHOLDER") of the Adjustable Rate Senior Notes Due September 1, 2008 issued
thereunder, is entered into as of December 31, 1998 by the Company and the
Noteholder.
PRELIMINARY STATEMENT:
Certain Events of Default may exist as of the date hereof
(collectively, the ""EXISTING EVENTS OF DEFAULT"). As a result of any such
Existing Events of Default, the Required Holders would have the right under the
Existing Note Agreement to exercise various rights and remedies, including,
without limitation, the right to declare all of the Notes to be immediately due
and payable, together with interest accrued thereon and the Yield-Maintenance
Amount, if any, with respect to each Note. The Company has requested that the
Noteholder consent to the amendment of certain provisions of the Existing Note
Agreement (to become retroactively effective as of December 31, 1998) in order
to eliminate any such Existing Events of Default. Subject to the terms and
conditions of this Agreement, the Noteholder is willing to amend the Existing
Note Agreement as set forth herein.
AGREEMENT:
1. DEFINED TERMS.
All capitalized terms used but not specifically defined in this
Agreement have the respective meanings assigned to them in, or pursuant to the
provisions of, the Existing Note Agreement. As used in this Agreement, the term
"TRANSACTION DOCUMENTS" means, collectively, each of this Agreement, the Amended
Note Agreement, the Notes and the Subsidiary Guaranty.
2. REPRESENTATIONS AND WARRANTIES.
The Company warrants and represents to the Noteholder that as of the
Effective Date (as defined below):
2.1 ORGANIZATION; POWER AND AUTHORITY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York, and is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is required by law,
other than those jurisdictions as to which the failure to be so qualified or in
good standing could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the business, condition (financial
or otherwise) or operations of the Company and the Subsidiaries taken as a
whole. The Company has the corporate power and authority to own or hold under
lease the properties it purports to own or hold under lease, to transact the
business it transacts and proposes to transact, to execute and deliver this
Agreement and to perform the provisions of the Transaction Documents.
2.2 AUTHORIZATION, ETC. This Agreement has been duly authorized by all
necessary corporate action on the part of the Company, and each of the
Transaction Documents constitutes a legal, valid and binding obligation of the
Company and each of the Subsidiaries party thereto, enforceable against the
Company and such Subsidiaries, as the case may be, in accordance with its terms,
except as such enforceability may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (b) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
2.3 DISCLOSURE. None of the written statements, documents or other
written materials (including, without limitation, the financial statements and
related certificates most recently provided to the Noteholder pursuant to
paragraph 5A of the Existing Note Agreement) furnished by, or on behalf of, the
Company to the Noteholder in connection with the negotiation, execution and
delivery of this Agreement contain any untrue statement of a material fact or
omit a material fact necessary to make the statements contained therein or
herein not misleading in light of the circumstances in which they were made.
There is no fact which the Company has not disclosed to the Noteholder which
materially affects adversely or, so far as the Company can now foresee, will
materially affect adversely the business, prospects, profits, Properties or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole, or the ability of the Company to perform its obligations set forth in
the Transaction Documents.
2.4 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution,
delivery and performance by the Company of this Agreement will not:
(a) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any
Property of the Company or any Subsidiary under, any indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other agreement or instrument to
which the Company or any Subsidiary is bound or by which the Company
or any Subsidiary or any of their respective properties may be bound
or affected;
(b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of
any court, arbitrator or governmental body applicable to the Company
or any Subsidiary; or
(c) violate any provision of any statute or other rule or
regulation of any governmental body applicable to the Company or any
Subsidiary.
Neither the Company nor any of the Subsidiaries is a party to, or
otherwise subject to any provision contained in, any instrument evidencing Debt
of the Company or such Subsidiary, any agreement relating thereto or any other
contract or agreement (including its charter) which limits the amount of, or
otherwise imposes restrictions on the incurring of, Debt of the Company of the
type to be evidenced by the Notes except as set forth in the agreements listed
in ANNEX 1 hereto.
2.5 GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or
authorization of, or registration, filing or declaration with, any court or
administrative or governmental body is required in connection with the
execution, delivery or performance by the Company of this Agreement.
2.6 LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as set forth on ANNEX 2, there are no actions, suits
or proceedings pending or, to the knowledge of the Company, threatened
against or affecting the Company or any Subsidiary or any Property of
the Company or any Subsidiary in any court or before any arbitrator of
any kind or before or by any governmental body that, individually or
in the aggregate, could reasonably be expected to have a material
adverse effect on the business, condition (financial or otherwise) or
operations of the Company and the Subsidiaries taken as a whole.
(b) After giving effect to the amendments to be effected by
Section 4, neither the Company nor any Subsidiary is in default under
any term of any agreement or instrument to which it is a party or by
which it is bound (except for any defaults that may exist under the
agreements listed in Annex 1 hereto, which will be cured or waived on
the Effective Date), or any order, judgment, decree or ruling of any
court, arbitrator or governmental body or is in violation of any
applicable law, ordinance, rule or regulation (including, without
limitation, all federal, state, local and regional statutes, laws,
ordinances and judicial or administrative orders, judgments, rulings
and regulations relating to the protection of the environment) of any
court or administrative or governmental body, which default or
violation, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on the business, condition
(financial or otherwise) or operations of the Company and the
Subsidiaries taken as a whole.
2.7 NO DEFAULTS. No event has occurred and is continuing and no
condition exists which, upon the effectiveness of the amendments provided for in
this Agreement, would constitute a Default or Event of Default.
2.8 YEAR 2000. The Company has reviewed the areas within its business
and operations (and that of the Subsidiaries) which could be adversely affected
by the "Year 2000 Problem" (that is, the risk that computer applications, as
well as embedded microchips in non- computing devices used by the Company and
the Subsidiaries, may be unable to recognize and properly perform date-sensitive
functions involving certain dates prior to and any date after December 31,
1999). The Company has developed or is developing programs to address its "Year
2000 Problem" on a timely basis. Based on such review and program and on current
information available to it, the Company believes that its "Year 2000 Problem"
will not result in a material adverse effect on the business, condition
(financial or otherwise) or operations of the Company and the Subsidiaries taken
as a whole.
3. CONDITIONS PRECEDENT
Each of the amendments to be effected by Section 4 shall become
retroactively effective, as of December 31, 1998, at such time as the Company
and the Noteholder shall have executed and delivered this Agreement (the time
and date of such execution and delivery is referred to herein as the "EFFECTIVE
DATE"); the willingness of the Noteholder to execute and deliver this Agreement
is contingent on the satisfaction of each of the following conditions (which
shall be deemed to have been satisfied upon such execution and delivery;
however, no such deemed satisfaction shall affect the provisions of Section 6.3
hereof):
3.1 CONSENT OF NOTEHOLDER. The Company and the Noteholder shall have
executed and delivered a counterpart of this Agreement.
3.2 WARRANTIES AND REPRESENTATIONS TRUE; COMPLIANCE WITH THIS
AGREEMENT.
(a) WARRANTIES AND REPRESENTATIONS TRUE. The warranties and
representations contained in Section 2 shall be true on the Effective
Date with the same effect as though made on and as of that date.
(b) COMPLIANCE WITH THIS AGREEMENT. The Company shall have
performed and complied with all agreements and conditions contained
herein that are required to be performed or complied with by the
Company on or prior to the Effective Date, and such performance and
compliance shall remain in effect on the Effective Date.
3.3 OPINION OF COUNSEL. The Noteholder shall have received from
Stroock & Stroock & Lavan LLP, regular counsel for the Company, a favorable
opinion satisfactory to the Noteholder and substantially in the form of EXHIBIT
A.
3.4 OFFICER'S CERTIFICATES. The Noteholder shall have received:
(a) a certificate dated the Effective Date and signed by a
Responsible Officer, substantially in the form of EXHIBIT B; and
(b) a certificate dated the Effective Date and signed by the
Secretary or an Assistant Secretary of the Company, substantially in
the form of EXHIBIT C.
3.5 SUBSIDIARY CONSENTS. Each of the Subsidiaries party to the
Subsidiary Guaranty shall have executed and delivered a consent to this
Agreement in the form attached hereto as EXHIBIT D.
3.6 BANK AGREEMENT. The Company shall have delivered to the Noteholder
a true and correct copy of the Bank Credit Agreement, as amended and in effect
on the Effective Date, which shall be in form and substance satisfactory to the
Noteholder, and shall include an executed copy of an acceptable waiver of any
violations of covenants contained in the Bank Credit Agreement. No "Default" or
"Event of Default" under, and as defined in, the Bank Credit Agreement shall
exist on the Effective Date.
3.7 1997 NOTE PURCHASE AGREEMENT. The Company shall have delivered to
the Noteholder a true and correct copy of an amendment to the Company's several
Note Purchase Agreements, each dated as of January 6, 1997 (collectively, as
amended, the "1997 NOTE PURCHASE AGREEMENT"), pursuant to which it issued
$75,000,000 in aggregate principal amount of its Adjustable Rate Senior Notes
Due January 6, 2007, which amendment shall be in form and substance satisfactory
to the Noteholder. No "Default" or "Event of Default" under, and as defined in,
the 1997 Note Purchase Agreement shall exist on the Effective Date.
3.8 SUBORDINATED DEBT ISSUANCE. The Company shall have issued
$35,000,000 in aggregate principal amount of its Senior Subordinated Notes due
2004 in a private sale on the Effective Date. The Company shall have delivered
to the Noteholder a true and correct copy of the securities purchase agreement
under which such senior subordinated notes are issued, as in effect on the
Effective Date, which shall be in form and substance satisfactory to the
Noteholder.
3.9 FEE. In consideration of the amendments set forth herein, the
Company shall have paid to the Noteholder a fee in an amount equal to 0.50% of
the outstanding principal amount of the Notes held by the Noteholder as of the
date hereof.
3.10 EXPENSES. All fees and disbursements required to be paid pursuant
to Section 6.2 shall have been paid in full, including, but not limited to, the
statement for reasonable fees and disbursements of Hebb & Gitlin, the
Noteholder's special counsel, presented to the Company on or prior to the
Effective Date.
3.11 PROCEEDINGS SATISFACTORY. All proceedings taken in connection
with the execution and delivery of this Agreement and the transactions
contemplated hereby shall be satisfactory to the Noteholder and its special
counsel; and the Noteholder and its special counsel shall have received copies
of such documents and papers as they may reasonably request in connection
therewith.
4. AMENDMENTS TO EXISTING NOTE AGREEMENT.
Each of the Company and the Noteholder hereby consents and agrees to
the amendments to the Existing Note Agreement set forth in this Section 4.
4.1 PARAGRAPH 4G. Paragraph 4G of the Existing Note Agreement is
hereby amended and restated in its entirety as follows:
"4G. INTEREST PAYMENTS.
Interest (computed on the basis of a 360-day year of twelve
30-day months) shall accrue on the unpaid principal balance of the
Notes, from the date of each Note, and shall be payable to the holders
thereof quarterly on the first day of September, December, March and
June in each year (each an "INTEREST PAYMENT DATE"), commencing with
the Interest Payment Date next succeeding the date of such Note, until
the principal thereof shall have become due and payable, at the rate
of:
(i) PRIOR TO JANUARY 1, 1999 -- if such time is prior to
January 1, 1999, 8.52% per annum, and on any overdue payment
(including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any
Yield-Maintenance Amount at the Applicable Default Interest Rate;
and
(ii) ON AND AFTER JANUARY 1, 1999 -- if such time is on or
after January 1, 1999 and prior to the occurrence of the Rate
Decrease Event,
(a) 9.52% per annum, PROVIDED that the Rate Decrease
Event shall not have occurred, and
(b) if such time is on or after the occurrence of the
Rate Decrease Event, 9.02% per annum,
and on any overdue payment (including any overdue prepayment)
of principal, any overdue payment of interest and any overdue payment
of any Yield-Maintenance Amount at the Applicable Default Interest
Rate. If the Rate Decrease Event shall occur, it shall be effective as
of the date of occurrence of the Rate Decrease Event.
The term "RATE DECREASE EVENT" shall mean the receipt by the
Company of not less than $75,000,000 of Net Cash Proceeds from the
issuance and public sale of either or both of (A) its Capital Stock
and (B) not more than $150,000,000 in aggregate principal amount of
subordinated debt securities, pursuant to documentation and upon terms
and conditions satisfactory to each holder of the Notes, as evidenced
by the holders' prior written approval thereof."
4.2 PARAGRAPH 6. Paragraph 6 of the Existing Note Agreement is hereby
amended and restated in its entirety as follows:
6. NEGATIVE COVENANTS.
6A. LINE OF BUSINESS. The Company will not, and will not permit
any Restricted Subsidiary to, engage in any material business if, as a
result thereof, the business and operations of the Company and its
Restricted Subsidiaries would not be in or directly related to the
consumer electronics industry or activities that are ancillary,
incidental or necessary to such business, PROVIDED that the Company
and the Restricted Subsidiaries may acquire businesses that have
operations unrelated to the consumer electronics industry if, with
respect to each such acquisition, (i) the assets in respect of such
unrelated operations (the "UNRELATED ASSETS") constitute less than 50%
of consolidated total assets of any such business and contribute less
than 50% to consolidated operating income of any such business and
(ii) the Investment in such Unrelated Assets shall be permitted by the
provisions of paragraph 6F hereof.
6B. QUICK ASSETS RATIO. The Company will not permit the ratio of
(i) the sum of (a) cash and Cash Equivalents of the Company
and the Restricted Subsidiaries on the last day of any fiscal
quarter of the Company set forth below, PLUS (b) accounts
receivable (less provision for doubtful accounts) of the Company
and the Restricted Subsidiaries on such date, to
(ii) Consolidated Current Liabilities on such date
to be less than the ratio set forth opposite such fiscal
quarter below:
=============================================================================
FISCAL QUARTER ENDING RATIO
=============================================================================
December 31, 1998 0.80 to 1.00
- ------------------------------------------------------------------------------
March 31 in each year 1.00 to 1.00
- ------------------------------------------------------------------------------
June 30 in each year 0.80 to 1.00
- ------------------------------------------------------------------------------
September 30 in each year 0.80 to 1.00
- ------------------------------------------------------------------------------
December 31 in each year after 1998 1.00 to 1.00
==============================================================================
Notwithstanding the foregoing, if the Rate Decrease Event shall have
occurred, the Company shall not permit the ratio of clause (i) to clause
(ii) above to be less than 1.00 to 1.00 on the last day of any fiscal
quarter of the Company.
6C. DEBT.
(i) TOTAL DEBT. The Company will not permit Consolidated Debt at
any time to exceed the lesser of:
(a) 65% of Consolidated Total Capitalization; and
(b) 500% of Consolidated EBITDA for the period of four
consecutive complete fiscal quarters of the Company then most
recently ended.
(ii) SENIOR DEBT. The Company will not permit Consolidated Senior
Debt at any time to exceed the lesser of:
(a) (1) prior to the Amendment Effective Date, 65% of
Consolidated Total Capitalization at such time, (2) on or
subsequent to the Amendment Effective Date and prior to the Rate
Decrease Event, 55% of Consolidated Total Capitalization at such
time, or (3) on or subsequent to the Rate Decrease Event, 50% of
Consolidated Total Capitalization at such time; and
(b) (1) prior to the 6th day following the occurrence of the
Rate Decrease Event,
(A) for the period commencing on
December 31, 1998 and ending on June 29, 1999,
450% of Consolidated EBITDA for the period of four
consecutive complete fiscal quarters of the
Company then most recently ended,
(B) for the period commencing on June
30, 1999 and ending on December 30, 1999, 425% of
Consolidated EBITDA for the period of four
consecutive complete fiscal quarters of the
Company then most recently ended, and
(C) at all times on and after December
31, 1999, 400% of Consolidated EBITDA for the
period of four consecutive complete fiscal
quarters of the Company then most recently ended,
or
(2) on or after the 6th day following the
occurrence of the Rate Decrease Event, 350% of Consolidated
EBITDA for the period of four consecutive complete fiscal
quarters of the Company then most recently ended.
(iii) PRIORITY DEBT. The Company will not permit Priority
Debt at any time to exceed 15% of Consolidated Tangible Net Worth.
6D. COVERAGE RATIOS.
(i) INTEREST EXPENSE COVERAGE. The Company will not permit the
ratio of
(a) Consolidated Adjusted Cash Flow for any period of four
consecutive complete fiscal quarters of the Company to
(b) Consolidated Interest Expense for such period
to be less than 2.50 to 1.00.
(ii) FIXED CHARGE COVERAGE. The Company will not permit the Fixed
Charge Total Debt Coverage Ratio on the last day of any fiscal quarter
to be less than 1.25 to 1.00.
6E. NET WORTH. The Company will not at any time permit Consolidated
Tangible Net Worth to be less than the sum of
(i) $100,000,000, PLUS
(ii) the sum of the Annual Net Worth Increase Amounts for all
fiscal years ended after December 31, 1998, PLUS
(iii) the amount of Net Cash Proceeds received by the Company at
such time from the issuance of Capital Stock of the Company in
connection with its first public offering of Capital Stock of the
Company subsequent to the Amendment Effective Date to Persons other
than Affiliates, employees or consultants of the Company or any of the
Restricted Subsidiaries, PLUS
(iv) the remainder (but not less than zero) of
(a) the aggregate amount of Net Cash Proceeds from all
issuances of Capital Stock of the Company completed at such time,
other than, and subsequent to, the issuance of Capital Stock
referred to in the preceding clause (iii), MINUS
(b) the portion of such Net Cash Proceeds used by the
Company or any Restricted Subsidiary to acquire Intangible Assets
at or prior to such time (PROVIDED, that in any case where the
Company or any Restricted Subsidiary shall utilize any such Net
Cash Proceeds to finance the acquisition of any Person or
business, the portion of such Net Cash Proceeds used by the
Company or such Restricted Subsidiary to acquire Intangible
Assets shall be deemed to be equal to the amount, if any, of the
increase in Consolidated Intangible Assets directly resulting
from such acquisition).
As used in this paragraph 6E:
"ANNUAL NET WORTH INCREASE AMOUNT" means, for any fiscal year of
the Company ended after December 31, 1998, the greater of (a) 50% of
Consolidated Net Income for such fiscal year and (b) $0.
"CONSOLIDATED INTANGIBLE ASSETS" means, at any time, the net book
value of all Intangible Assets of the Company and its Restricted
Subsidiaries, as such net book value would be reflected on a balance
sheet of the Company prepared at such time on a consolidated basis in
accordance with GAAP.
6F. RESTRICTED INVESTMENTS AND RESTRICTED PAYMENTS. The Company
will not, and will not permit any Restricted Subsidiary to, make any
Basket Investment, or declare, make, set apart any funds or other
Property for, or incur any liability to make, any Restricted Payment
unless:
(i) immediately after, and after giving effect to such
Basket Investment or such Restricted Payment, the aggregate
amount of all Basket Investments outstanding at such time PLUS
all Restricted Payments declared or made on or after the 1997
Closing Date would not exceed the sum of
(a) $5,000,000, PLUS
(b) 50% (or minus 100% in the case of a loss) of
Consolidated Net Income for the period commencing on January
1, 1997 and ending on and including the last day of the
fiscal quarter of the Company most recently ended as of the
date such Basket Investment is made or such Restricted
Payment is declared or made; and
(ii) immediately before, and after giving effect to,
such Basket Investment or such Restricted Payment and any
concurrent transactions, no Default or Event of Default
exists or would exist.
6G. MERGERS AND CONSOLIDATIONS. The Company will not, and
will not permit any Restricted Subsidiary to, merge or
consolidate with or into any other Person, or convey, transfer,
spin-off or lease all or substantially all of its assets in a
single transaction or series of transactions to any Person,
except that:
(i) any such Restricted Subsidiary may merge or
consolidate with or into, or convey, transfer or spin-off
all or substantially all of its assets to, the Company
(provided that the Company is the continuing or surviving
corporation), another Restricted Subsidiary or any Person
that concurrently with such merger, consolidation,
conveyance, transfer or spin-off becomes a Restricted
Subsidiary, and
(ii) the Company may merge or consolidate with or into,
or convey, transfer or spin-off all or substantially all of
its assets to, another corporation, PROVIDED that
(a) the successor formed by such consolidation or
the survivor of such merger or the Person that acquires by
conveyance, transfer or spin-off all or substantially all of
the assets of the Company as an entirety, as the case may be
(the "SUCCESSOR CORPORATION"), shall be a solvent
corporation organized and existing under the laws of the
United States of America, any state thereof or the District
of Columbia,
(b) if the Company is not the Successor
Corporation, the Successor Corporation shall have executed
and delivered to each holder of Notes its assumption of the
due and punctual performance and observance of each covenant
and condition of this Agreement and the Notes pursuant to
such agreements and instruments as shall be reasonably
satisfactory to the Required Holders, and the Company shall
have caused to be delivered to each holder an opinion, in
form and substance satisfactory to the Required Holders, of
independent counsel reasonably satisfactory to the Required
Holders, to the effect that all agreements or instruments
effecting such assumption are enforceable in accordance with
their terms and comply with the terms hereof, and
(c) immediately after, and immediately after
giving effect to, such transaction, no Default or Event of
Default would exist.
6H. TRANSFERS OF PROPERTY; SUBSIDIARY STOCK.
(i) TRANSFERS OF PROPERTY. The Company will not, and will
not permit any Restricted Subsidiary to, sell, lease as lessor,
transfer or otherwise dispose of any Restricted Subsidiary Stock,
except pursuant to clause (ii) of this paragraph 6H, or any other
Property (collectively, "TRANSFERS") except for:
(a) any Transfer made in compliance with paragraph 6G
hereof or any Transfer of Unrelated Assets;
(b) Transfers of inventory, payments to vendors and
suppliers, payments of compensation (including, without
limitation, salaries, bonuses, options, insurance, benefits,
payments pursuant to employment agreements and other
perquisites), and other similar payments, in each case in
the ordinary course of business of the Company or such
Restricted Subsidiary;
(c) any Transfer of Property by a Restricted Subsidiary
to the Company or any other Restricted Subsidiary;
(d) any other Transfer at any time of any Property to a
Person, other than an Affiliate (whether effected in a
single transaction or in a series of related transactions)
not otherwise permitted under clauses (a) through (c),
inclusive, of this paragraph 6H(i) (for purposes of this
clause (d), a "CURRENT TRANSFER"), if each of the following
conditions would be satisfied with respect to such Transfer:
(1) the consideration received in respect of such
current Transfer is an amount not less than that reasonably
obtainable in a comparable arm's-length transaction or
series of transactions with a Person that is not an
Affiliate of the Company or any Subsidiary, with neither the
seller nor the buyer being under any compulsion to sell or
buy, respectively,
(2) immediately after giving effect to such
current Transfer, no Default or Event of Default would
exist,
(3) the sum of
(A) the net book value of the Property
that is the subject of such current Transfer, PLUS
(B) the aggregate net book value of all
other items of Property of the Company and the
Restricted Subsidiaries that were the subject of
prior Transfers under this clause (d) consummated
during the period beginning on the first day of
the four consecutive complete fiscal quarters of
the Company then most recently ended and ending
immediately prior to the time of such current
Transfer,
would not exceed 20% of Consolidated Total Assets,
determined as at the beginning of such period, and
(4) the sum of
(A) the contribution (expressed as a
percentage and exclusive of losses) to
Consolidated Operating Income of such Property,
plus
(B) the contribution (expressed as a
percentage and exclusive of losses) to
Consolidated Operating Income of all other items
of Property of the Company and the Restricted
Subsidiaries that were the subject of prior
Transfers under this clause (d) consummated during
the period beginning on the first day of the four
consecutive complete fiscal quarters of the
Company then most recently ended and ending
immediately prior to the time of such current
Transfer,
would not exceed 20% of Consolidated Operating Income for
the four consecutive complete fiscal quarters of the Company
then most recently ended;
PROVIDED that the net book value or the contribution to Consolidated
Operating Income of any item of Property shall be excluded for
purposes of clause (3) and clause (4) of this paragraph 6H(i)(d) if,
prior to consummation of any Transfer, the Company gives written
notice (a "REINVESTMENT NOTICE") to all holders of Notes that, within
12 months after such Transfer, the entire proceeds of such Transfer,
net of ordinary and reasonable transaction costs and expenses incurred
in connection with such Transfer, will be applied by the Company or
such Restricted Subsidiary to the purchase of Capital Assets of the
Company or any Restricted Subsidiary to be used in the business of the
Company, as described in paragraph 6A hereof; PROVIDED further that
such exclusions only apply to the extent that the aggregate net book
value of all Property so excluded at any one time shall not exceed 25%
of Consolidated Tangible Net Worth and the sum of the contributions to
Consolidated Operating Income (expressed as a percentage, with each
such contribution being determined as of the date of Transfer of the
Property generating such contribution) of all Property so excluded at
any one time shall not exceed 25%.
If the Company shall fail to apply the proceeds of any Transfer in
accordance with a Reinvestment Notice given in respect thereof, such
failure shall constitute an Event of Default.
(ii) TRANSFERS OF SUBSIDIARY STOCK. The Company will not,
and will not permit any Restricted Subsidiary to, Transfer any shares
of the stock (or any warrants, rights or options to purchase stock or
other Securities exchangeable for or convertible into stock) of a
Restricted Subsidiary (such stock, warrants, rights, options and other
Securities herein called "RESTRICTED SUBSIDIARY STOCK"), nor will any
Restricted Subsidiary issue, sell or otherwise dispose of any shares
of its own Restricted Subsidiary Stock, PROVIDED that the foregoing
restrictions do not apply to:
(a) the issuance by a Restricted Subsidiary of shares
of its own Restricted Subsidiary Stock to the Company or
another Restricted Subsidiary;
(b) Transfers by the Company or a Restricted Subsidiary
of shares of Restricted Subsidiary Stock to the Company or
another Restricted Subsidiary;
(c) the issuance by a Restricted Subsidiary of
directors' qualifying shares or shares to holders (who hold
for the benefit of the Company or a Restricted Subsidiary)
to meet statutory requirements for domestic holdings or
minimum numbers of stockholders;
(d) the Transfer of all of the Restricted
Subsidiary Stock of a Restricted Subsidiary owned by the
Company and the other Restricted Subsidiaries if:
(1) such Transfer satisfies the
requirement of paragraph 6H(i)(d) hereof (for
purposes of such paragraph, the net book value of
such Restricted Subsidiary Stock being deemed to
be the aggregate net book value of all assets of
such Restricted Subsidiary);
(2) in connection with such Transfer,
the entire investment (whether represented by
stock, Debt, claims or otherwise) of the Company
and the other Restricted Subsidiaries in such
Restricted Subsidiary is Transferred to a Person
other than the Company or a Restricted Subsidiary
not simultaneously being disposed of;
(3) the Restricted Subsidiary being
disposed of has no continuing investment in any
other Restricted Subsidiary not simultaneously
being disposed of or in the Company; and
(4) immediately before and after the
consummation of such Transfer, and after giving
effect thereto, no Default or Event of Default
would exist;
(e) Transfers of Unrelated Assets consisting of
Restricted Subsidiary Stock if the requirements set forth in
subclauses (2), (3) and (4) of the foregoing clause (d) have
been satisfied; and
(f) Transfers by the Company or a Restricted
Subsidiary of shares of Restricted Subsidiary Stock of any
PRC/HK Subsidiaries, PROVIDED such Transfer is made to a
collateral agent in accordance with the provisions of
paragraph 6M hereof.
(iii) NOTICES WITH RESPECT TO Transfers. The Company shall
give written notice to each holder of Notes at least ten days prior to
the consummation of any Transfer that would give rise to a potential
prepayment obligation under paragraph 4E hereof specifying:
(a) the anticipated consummation date of the
related Transfer; and
(b) an estimate of the net proceeds to be received
for the Property subject to such Transfer.
6I. LIENS. The Company will not, and it will not permit any
Restricted Subsidiary to, create, assume or suffer to exist any Lien
upon any of its Property, whether now owned or hereafter acquired,
except:
(i) Liens outstanding on the 1997 Closing Date and listed in
Part 6I(i) of Annex 3 hereto, Liens securing the obligations
evidenced by the Notes and Liens granted by the Company or any
Restricted Subsidiary with respect to any PRC/HK Subsidiaries
pursuant to paragraph 6M hereof;
(ii) Liens incurred or deposits made in the ordinary course
of business,
(a) in connection with workers' compensation,
unemployment insurance, social security and other like laws,
(b) to secure the performance of letters of credit,
bids, tenders, sales contracts, surety and performance bonds
(of a type other than set forth in clause (iv) of this
paragraph 6I) and other ordinary course obligations not
incurred in connection with the borrowing of money, the
obtaining of advances or the payment of the deferred
purchase price of Property, and
(c) in respect of statutory obligations or claims or
demands of materialmen, mechanics, carriers, warehousemen,
landlords and other like Persons, PROVIDED that the
obligations secured by such Liens shall not be in default
and the title of the Company or the Restricted Subsidiary,
as the case may be, to, and its right to use, the Property
subject to such Lien, is not materially adversely affected
thereby;
(iii) Liens for taxes not yet due or that are being actively
contested in good faith by appropriate proceedings;
(iv) Liens, arising in connection with court proceedings,
(a) in the nature of attachments, remedies and
judgments, PROVIDED that the execution or other enforcement
of such Liens is effectively stayed and the claims secured
thereby are being actively contested in good faith and by
appropriate proceedings, and
(b) securing appeal bonds, supersedeas bonds and other
similar Liens arising in connection with court proceedings
(including, without limitation, surety bonds and letters of
credit) or any other instrument serving a similar purpose,
PROVIDED that the aggregate amount so secured pursuant to this
clause (iv) shall not at any time exceed $2,500,000;
(v) reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions and other similar
title exceptions or encumbrances affecting real property, PROVIDED
they do not in the aggregate materially detract from the value of such
real property or materially interfere with their use in the ordinary
conduct of the owning Person's business;
(vi) any Lien on Property that is acquired or constructed by the
Company or any Restricted Subsidiary that secures Debt incurred by the
owner of such Property to pay for all or a portion of the related
purchase price or construction costs of such Property, PROVIDED that
(a) such Lien shall not extend to or cover any Property
other than Property acquired or constructed after the 1997
Closing Date with the proceeds of the Debt secured thereby and
shall not secure Debt other than such Debt,
(b) such Lien shall be created within 12 months after the
acquisition or substantial completion of such Property, and
(c) such Lien shall secure Debt in an amount not exceeding
100% of the lesser of (1) the cost of acquisition or construction
of the Property to which such Debt relates and (2) the Fair
Market Value of the Property to which such Debt relates,
determined as the time of the incurrence of such Debt; and
(vii) Liens securing Debt other than those Liens permitted by
clause (i) through clause (vi) of this paragraph 6I, but only
(a) to the extent that Priority Debt would not exceed 15% of
Consolidated Tangible Net Worth, and
(b) if, immediately before, and after giving effect to, such
Liens and any concurrent transactions, no Default or Event of
Default exists or would exist.
A violation of this paragraph 6I will constitute an Event of Default,
whether or not any provision is made for an equal and ratable Lien
pursuant to paragraph 5G.
6J. PERMITTED INVESTMENTS. The Company will not, nor will it permit
any of its Restricted Subsidiaries to, make any Investment other than a
Permitted Investment or a Basket Investment.
6K. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not
permit any Restricted Subsidiary to, enter into any transaction, including,
without limitation, the purchase, sale or exchange of Property or the
rendering of any service, with any Affiliate, except in the ordinary course
of and pursuant to the reasonable requirements of the business of the
Company or such Restricted Subsidiary and upon fair and reasonable terms no
less favorable to the Company or such Restricted Subsidiary than would be
obtained in a comparable arm's- length transaction with a Person not an
Affiliate.
6L. DESIGNATION OF SUBSIDIARIES. Each Person which shall become a
Subsidiary for the first time after the Closing Date shall be a Restricted
Subsidiary unless, within 30 days after such Person shall first have become
a Subsidiary, the Company shall give written notice to all holders of the
Notes stating that such Person shall be an Unrestricted Subsidiary. Any
Person so designated as an Unrestricted Subsidiary may not thereafter be
redesignated as a Restricted Subsidiary without the approval of the
Required Holders.
6M. SUBSIDIARY GUARANTY. The Company will cause each Subsidiary that,
after the Closing Date, executes a guaranty of obligations outstanding
under the Bank Financing Agreements, to execute and deliver to each holder
of Notes, simultaneously with its execution and delivery of any such
guaranty of obligations under the Bank Credit Agreement, a copy of the
Joinder Agreement in the form attached to the Subsidiary Guaranty as Annex
2, duly executed by such Subsidiary. If the dissolution process with
respect to any Inactive Subsidiary shall be abandoned or otherwise cease,
the Company shall promptly, but in any event within not less than fifteen
(15) days after such abandonment or cessation, cause such Inactive
Subsidiary to execute and deliver to each holder of Notes a copy of the
Joinder Agreement in the form attached to the Subsidiary Guaranty as Annex
2, duly executed by such Inactive Subsidiary. At such time as the Company
shall have (i) caused 65% of the Capital Stock of each of its PRC/HK
Subsidiaries to have been pledged to a collateral agent acceptable to the
Required Holders to secure all obligations of the Company under this
Agreement, the Notes, the 1997 Note Agreement and the Bank Financing
Agreements pursuant to a pledge agreement in form and substance
satisfactory to the Required Holders, and (ii) taken such action to perfect
such pledge, and delivered such additional documentation, as may be
reasonably required by the Required Holders, the Subsidiaries organized
under the laws of Hong Kong shall be deemed released from their respective
Guarantees previously given under the Subsidiary Guaranty, effective as of
the date given, PROVIDED that such Subsidiaries shall contemporaneously be
released, or be deemed to be released, from their respective Guarantees, if
any, of the obligations of the Company under the 1997 Note Agreement and
the Bank Financing Agreements.
6N. PRC/HK SUBSIDIARIES.
(i) PRC SUBSIDIARIES. The Company will not permit Combined
Adjusted PRC Assets, determined as of the last day of any fiscal
quarter or any fiscal year, to be greater than an amount equal to 20%
of Consolidated Tangible Net Worth determined as of such day.
(ii) PRC/HK SUBSIDIARIES. The Company will not permit Combined
Adjusted PRC/HK Assets, determined as of the last day of any fiscal
quarter or any fiscal year, to be greater than an amount equal to 40%
of Consolidated Tangible Net Worth determined as of such day.
As used in this paragraph 6N:
"COMBINED ADJUSTED PRC ASSETS" means the aggregate value of the assets
(net of reserves) of the PRC Subsidiaries, determined on a combined basis
(but not including intercompany receivables due to any PRC Subsidiary from
the Company or any Subsidiary that is a party to the Subsidiary Guaranty),
as reported in the consolidating financial statements referred to in clause
(i) and clause (ii) of paragraph 5A hereof.
"COMBINED ADJUSTED PRC/HK ASSETS" means the aggregate value of the
assets (net of reserves) of the PRC/HK Subsidiaries, determined on a
consolidated basis (but not including intercompany receivables due to any
PRC/HK Subsidiary from the Company or any Subsidiary that is a party to the
Subsidiary Guaranty but is not a PRC/HK Subsidiary), as reported in the
consolidating financial statements referred to in clause (i) and clause
(ii) of paragraph 5A hereof.
4.3 PARAGRAPH 10B. Paragraph 10B of the Existing Note Agreement is
hereby amended to modify in their entirety or add, each in their proper
alphabetical order, the following defined terms:
"AMENDMENT EFFECTIVE DATE" shall have the meaning assigned to the term
"Effective Date" in the Amendment Agreement, dated as of December 31, 1998,
which amends certain provisions of this Agreement.
"BANK CREDIT AGREEMENT" shall mean the Second Amended and Restated
Credit Agreement, dated as of June 18, 1998, among the Company, The Chase
Manhattan Bank, as administrative agent and as a lender, SunTrust Bank,
Central Florida, National Association, Marine Midland Bank, Harris Trust
and Savings Bank and First Union National Bank, as may be amended,
supplemented or modified from time to time, and any renewal, extension,
refunding, restructuring, replacement or refinancing thereof (whether with
the original administrative agent and lenders or another administrative
agent or agents and one or more other lenders, and whether provided under
the original Bank Credit Agreement or one or more other credit or other
agreements or indentures), but only to the extent that the aggregate
principal amount of the Debt incurred thereunder and the undrawn face
amount of all letters of credit issued thereunder do not exceed
$101,500,000 at any one time outstanding.
"BANK FINANCING AGREEMENTS" shall mean, collectively:
(a) the Bank Credit Agreement; and
(b) each of (i) the term loan agreement dated as of December 29,
1995, between the Company and The Chase Manhattan Bank ("CHASE"),
relating to an outstanding term loan in a principal amount of not more
than $2,799,880, (ii) the mortgage note and mortgage dated as of July
3, 1991, relating to an outstanding mortgage financing provided by
Chase to the Company in a principal amount of not more than
$1,372,777, (iii) the mortgage note and mortgage dated as of October
4, 1993, relating to an outstanding mortgage financing provided by
Chase to the Company in a principal amount of not more than
$1,286,777, (iv) the loan agreement dated as of December 20, 1995,
between Recoton (Far East) Limited and Chase, relating to a credit
facility provided by Chase to Recoton (Far East) Limited and
guaranteed by the Company in a principal amount of not more than
HK$41,000,000 (which, as of the Amendment Effective Date, is not more
than US$5,300,000) and (v) all other payment obligations, now existing
or hereafter incurred, of the Company to Chase in a principal amount
not to exceed $5,000,000, in each case as such agreement, notes and
mortgages may be amended, supplemented or modified from time to time,
and any renewal, extension, refunding, restructuring, replacement or
refinancing thereof (whether with the original administrative agent
and lenders or another administrative agent or agents and one or more
other lenders, and whether provided under the original instruments and
agreements or one or more other credit or other agreements or
indentures), but only to the extent that the aggregate principal
amount of the Debt incurred thereunder and the undrawn face amount of
all letters of credit issued thereunder do not exceed the sum of
US$10,500,000 PLUS HK$41,000,000 at any one time outstanding.
"CAPITAL STOCK" shall mean 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" shall mean:
(i) direct obligations of the United States of America or any
agency thereof, maturing within one year of the date of acquisition
thereof;
(ii) commercial paper maturing within 270 days from the date of
acquisition and rated A-1 or P-1 (or the equivalent) or better at the
date of acquisition by Standard & Poor's or Moody's;
(iii) debt obligations of corporations organized under the laws
of the United States of America or any state thereof or obligations of
any state of the United States of America or any municipality thereof,
in each case maturing within one year from the date of acquisition and
rated AA or Aa (or the equivalent) or better at the date of
acquisition by Standard & Poor's or Moody's;
(iv) certificates of deposit issued by an Acceptable Bank and, in
each case, maturing within one year of the date of acquisition
thereof, PROVIDED that such certificates of deposit issued by banks
deemed to be "Acceptable Banks" pursuant to the proviso of the
definition of "Acceptable Bank" shall not exceed $2,500,000 in any one
such deemed Acceptable Bank, or $5,000,000 in the aggregate for all
such deemed Acceptable Banks, at any one time;
(v) repurchase obligations of a Bank or any Acceptable Bank,
having a term of not more than 30 days with respect to Securities
issued or fully guaranteed or insured by the United States Government;
(vi) 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 of America, by any political
subdivision or taxing authority of 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
Standard & Poor's or A by Moody's;
(vii) Securities with maturities of one year or less from the
date of acquisition backed by standby letters of credit issued by any
Bank or Acceptable Bank; and
(viii) shares of money market mutual or similar funds which
invest exclusively in assets satisfying the requirements of clauses
(i) through (vii) of this definition.
As used in this definition,
"ACCEPTABLE BANK" means (i)(a) a commercial bank or trust company
organized in the United States of America and having combined capital,
surplus and undivided profits aggregating at least $500,000,000 or (b)
any other commercial bank having capital, surplus and undivided
profits of at least $1,000,000,000 and (ii) the long-term unsecured
debt obligations of which (or the long-term unsecured debt obligations
of the bank holding company owning all of the Capital Stock of such
bank) are rated "A" or higher by Standard & Poor's or "A2" or higher
by Moody's, PROVIDED that a commercial bank not organized in the
United States of America that satisfies the requirement set forth in
the foregoing clause (i)(b) but whose long-term unsecured debt
obligations (or the long-term unsecured debt obligations of the bank
holding company owning all of the Capital Stock of such bank) are not
rated by Standard & Poor's or Moody's shall be deemed to be an
"Acceptable Bank" if the Required Holders shall have consented in
writing to Investments in certificates of deposit issued by such bank.
"CONSOLIDATED ADJUSTED CASH FLOW" shall mean, for any period, the
sum of
(i) Consolidated Operating Income, PLUS
(ii) to the extent, and only to the extent, that such amount was
deducted in the computation of Consolidated Net Income for such
period, the aggregate amount of depreciation and amortization of the
Company and the Restricted Subsidiaries, determined on a consolidated
basis for such Persons.
"CONSOLIDATED CAPITAL EXPENDITURES" shall mean, for any period,
all expenditures by the Company and the Restricted Subsidiaries in
respect of the purchase or acquisition of fixed or capital assets
during such period, determined on a consolidated basis for such
Persons.
"CONSOLIDATED CURRENT LIABILITIES" shall mean, at any time, all
Current Liabilities of the Company and the Restricted Subsidiaries,
determined at such time on a consolidated basis for such Persons.
"CONSOLIDATED DEBT" shall mean, at any time, all Debt of the
Company and the Restricted Subsidiaries, determined at such time on a
consolidated basis for such Persons.
"CONSOLIDATED EBITDA" shall mean, for any period,
(i) Consolidated Net Income for such period, PLUS
(ii) without duplication and only to the extent deducted
from revenues in the determination of Consolidated Net Income for
such period, the sum of (a) income tax expense, (b) interest
expense, amortization or writeoffs of debt discount and debt
issuance costs and commissions, discounts and other fees and
charges associated with the issuance of Debt (including the
Notes), (c) depreciation and amortization expense and (d)
amortization of intangibles (including, but not limited to,
goodwill) and organization costs, MINUS
(iii) only to the extent included in the determination of
Consolidated Net Income for such period, the sum of (a) interest
income and (b) income tax credits, all determined on a
consolidated basis.
"CONSOLIDATED FIXED CHARGES" shall mean, for any period, the sum
of
(i) Consolidated Interest Expense for such period, PLUS
(ii) Consolidated Lease Expense for such period, PLUS
(iii) required amortization of Debt for such period and
discount or premium relating to any such Debt for such period,
whether expensed or capitalized.
"CONSOLIDATED LEASE EXPENSE" shall mean, for any period, the
aggregate amount of fixed and contingent rentals payable by the
Company and the Restricted Subsidiaries during such period with
respect to leases of real and personal property (excluding Capitalized
Lease Obligations), determined on a consolidated basis for such
Persons.
"CONSOLIDATED NET WORTH" shall mean, at any time, all amounts
which would be included under shareholders' equity on a consolidated
balance sheet of the Company and the Restricted Subsidiaries
determined on a consolidated basis in accordance with GAAP at such
time.
"CONSOLIDATED SENIOR DEBT" shall mean, at any time, all Senior
Debt of the Company and the Restricted Subsidiaries, determined at
such time on a consolidated basis for such Persons.
"CONSOLIDATED TOTAL CAPITALIZATION" shall mean, at any time, the
sum of (a) Consolidated Net Worth PLUS (b) Consolidated Debt at such
time.
"CURRENT LIABILITIES" shall mean, with respect to any Person at
any date of determination, an amount equal to the sum of (a) all
liabilities of such Person which, in accordance with GAAP, would be
classified on a consolidated balance sheet of such Person as current
liabilities, PLUS (b) without duplication, all Debt of such Person for
borrowed money outstanding under a revolving credit or similar
agreement, notwithstanding that it obligates the lender or lenders to
extend credit over a period of more than one year.
"DOLLARS"; "$"; and "US$" means, in each case, the lawful money
of the United States of America.
"FIXED CHARGE TOTAL DEBT COVERAGE RATIO" shall mean, as of the
end of each fiscal quarter of the Company, for the period of twelve
consecutive calendar months ending on such date, the ratio of
(i) (a) Consolidated EBITDA for such period, MINUS
(b) an amount equal to the excess, if any, of (1)
Consolidated Capital Expenditures during such period over
(2) the amount by which Consolidated Funded Debt (excluding
Funded Debt in respect of Revolving Credit Loans (as defined
in the Bank Credit Agreement), but including the current
maturities of Consolidated Funded Debt) shall have increased
during such period, to
(ii) Consolidated Fixed Charges for such period.
"NET CASH PROCEEDS" means, in connection with any issuance or
sale of Capital Stock (other than the issuance or sale of Capital
Stock pursuant to the exercise of stock options issued to employees or
consultants of the Company or any of the Restricted Subsidiaries) or
debt securities or instruments, the cash proceeds received from such
issuance, net of attorneys' fees, investment banking fees,
accountants' fees, underwriting discounts and commissions and other
customary fees and expenses actually incurred in connection therewith.
"PRC/HK SUBSIDIARIES" shall mean, collectively, Subsidiaries
organized under the laws of the People's Republic of China and
Subsidiaries organized under the laws of Hong Kong.
"PRIORITY DEBT" shall mean the sum of (a) all Debt secured by
Liens other than Liens permitted by clause (i) through clause (v),
inclusive, of paragraph 6I hereof, PLUS (b) with duplication, all Debt
of Restricted Subsidiaries (other than Debt (i) owing to the Company
or to other Restricted Subsidiaries, or (ii) which constitutes
"Guarantied Obligations" (as defined in the Sharing Agreement) subject
to the intercreditor sharing provisions of the Sharing Agreement).
"RATE DECREASE EVENT" shall have the meaning assigned to it in
paragraph 4G of this Agreement.
"SENIOR DEBT" shall mean, with respect to any Person, at any
time, all Debt of such Person other than Subordinated Debt.
"SHARING AGREEMENT" shall mean, the First Amended and Restated
Sharing Agreement, dated as of September 1, 1998, among the banks
listed on the signature pages thereof, the holders of the Notes listed
on the signature pages thereof, the holder of the Adjustable Rate
Senior Notes Due September 1, 2008 of the Company listed on the
signature pages thereof, and The Chase Manhattan Bank, as
Administrative Agent for the Banks under the Bank Credit Agreement.
"SUBORDINATED DEBT" shall mean, with respect to any Person, at
any time, without duplication: (a) all Debt of such Person which is
subordinated to the prior payment in full of the obligations of (i)
the Company under this Agreement and the Notes and (ii) the Restricted
Subsidiaries under the Subsidiary Guaranty, as the case may be, in
each case in a manner acceptable to the Required Holders as evidenced
by their prior written approval, and all other terms and conditions of
which are satisfactory to the Required Holders as evidenced by their
prior written approval; and (b) not more than $35,000,000 in aggregate
principal amount of the Company's Senior Subordinated Notes due 2004
issued in a private sale on the Amendment Effective Date.
4.4 PARAGRAPH 10B. Paragraph 10B of the Existing Note Agreement is
hereby amended to delete therefrom the following defined terms: "ADJUSTED
CONSOLIDATED CURRENT DEBT"; "BANK DEBT PREPAYMENT DATE"; "EXCESS CURRENT DEBT";
"EXCESS CURRENT DEBT MEASURING PERIOD"; and "CONSOLIDATED CURRENT DEBT".
5. AFFIRMATION OF OBLIGATIONS.
Except as expressly amended by this Agreement, (a) no terms or
provisions of any agreement are modified or changed by this Agreement, (b) the
terms and provisions of the Transaction Documents shall continue in full force
and effect and (c) the terms and provisions of the Transaction Documents are
hereby ratified, confirmed and approved in all respects.
6. MISCELLANEOUS.
6.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and
shall inure to the benefit of, the successors and assigns of the parties hereto
and the holders from time to time of the Notes.
6.2 FEES AND EXPENSES. On the Effective Date, the Company shall pay
all reasonable costs and expenses of the Noteholder relating to this Agreement,
including, but not limited to, the statement for reasonable fees and
disbursements of the Noteholder's special counsel presented to the Company on or
prior to the Effective Date. The Company will also pay, upon receipt of any
statement thereof, each additional statement for reasonable fees and
disbursements of the Noteholder's special counsel rendered after the Effective
Date in connection with this Agreement. The obligations of the Company under
this Section 6.2 shall survive the termination of this Agreement.
6.3 SURVIVAL. All warranties, representations, certifications and
covenants made by the Company in this Agreement or in any certificate or other
instrument delivered by it or on its behalf under this Agreement shall be
considered to have been relied upon by the Noteholder and shall survive the
execution of this Agreement, regardless of any investigation made by or on
behalf of the Noteholder. All such statements made herein or in any such
certificate or other instrument shall constitute warranties and representations
of the Company under this Agreement and the Amended Note Agreement.
6.4 GOVERNING LAW. This Agreement shall be construed, interpreted and
enforced in accordance with, and governed by, the laws of the State of New York,
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.
6.5 SECTION HEADINGS, ETC. The titles of the Sections hereof appear as
a matter of convenience only, do not constitute a part hereof and shall not
affect the construction hereof. The words "herein," "hereof," "hereunder" and
"hereto" refer to this Agreement as a whole and not to any particular Section or
other subdivision. References to Sections are, unless otherwise specified,
references to Sections of this Agreement. References to Annexes and Exhibits
are, unless otherwise specified, references to Annexes and Exhibits attached to
this Agreement.
6.6 DUPLICATE ORIGINALS; EXECUTION IN COUNTERPART. Two or more
duplicate originals of this Agreement may be signed by the parties, each of
which shall be an original but all of which together shall constitute one and
the same instrument. This Agreement may be executed in one or more counterparts
and shall be effective when at least one counterpart shall have been executed by
each party to this Agreement, and each set of counterparts which, collectively,
show execution by each such party to this Agreement shall constitute one
duplicate original.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. NEXT PAGE IS SIGNATURE PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on their behalf by a duly authorized officer or agent thereof, as
the case may be, as of the date first above written.
RECOTON CORPORATION
By /s/ Arnold Kezsbom
--------------------------------
Name: Arnold Kezsbom
Title: Vice President - Finanical
Planning
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By /s/ Charles Y. King
--------------------------------
Name: Charles Y. King
Title: Vice President
EXHIBIT 6
AMENDMENT
AMENDMENT, dated as of December 31, 1998 (this "AMENDMENT"), to the
Second Amended and Restated Credit Agreement, dated as of June 18, 1998 (as
heretofore amended, the "CREDIT AGREEMENT") among RECOTON CORPORATION, a New
York corporation (the "BORROWER"), the several banks and other financial
institutions from time to time parties thereto (the "LENDERS") and THE CHASE
MANHATTAN BANK, as Administrative Agent for the Lenders (in such capacity, the
"ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to
make, and have made, certain loans and other extensions of credit to the
Borrower; and
WHEREAS, the Borrower has requested, and, upon this Amendment becoming
effective, the Lenders have agreed, that certain provisions of the Credit
Agreement be amended in the manner provided for in this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the
premises contained herein, the parties hereto hereby agree as follows:
SECTION I.I. AMENDMENTS
1.1. AMENDMENTS TO SUBSECTION 1.1. (a) Subsection 1.1 of the Credit
Agreement is hereby amended by inserting, in the appropriate alphabetical order,
the following new definitions:
"CONSOLIDATED TOTAL CAPITALIZATION": at any time, the sum of
Consolidated Net Worth on such date and Consolidated Indebtedness on such
date.
"HONG KONG SUBSIDIARIES": any Subsidiary of the Borrower that is
organized under the laws of Hong Kong.
"INTEREST COVERAGE RATIO": for any period, the ratio of (a) EBITDA for
such period to (b) Consolidated Interest Expense for such period.
"PRIORITY DEBT": the sum (without duplication) of (a) all Indebtedness
of the Borrower and its Subsidiaries secured by Liens other than Liens
permitted by clauses (a) through (f) and (j) and (l) of subsection 7.3 and
(b) all Indebtedness of Subsidiaries (other than Indebtedness (i) owing to
the Borrower or other Subsidiaries that are Guarantors or (ii) in respect
of Guarantee Obligations subject to the intercreditor sharing provisions of
the Sharing Agreement).
"SENIOR DEBT TO CAPITALIZATION RATIO": at any time, the ratio of (a)
all Senior Indebtedness of the Borrower and its Subsidiaries outstanding on
such date plus all Senior Guarantee Obligations of the Borrower and its
Subsidiaries in respect of Indebtedness of other Persons outstanding on
such date to (b) Consolidated Total Capitalization on such date.
"SHARING AGREEMENT": the First Amended and Restated Sharing Agreement
dated as of September 1, 1998, among the Lenders and the holders of Senior
Notes.
"TOTAL DEBT TO CAPITALIZATION RATIO": at any time, the ratio of (a)
all Indebtedness of the Borrower and its Subsidiaries outstanding on such
date plus all Guarantee Obligations of the Borrower and its Subsidiaries in
respect of Indebtedness of other Persons outstanding on such date to (b)
Consolidated Total Capitalization on such date.
(b) Subsection 1.1 of the Credit Agreement is hereby amended by
deleting therefrom the definition of "Senior Notes" and inserting in lieu
thereof the following new definition of "Senior Notes":
"SENIOR NOTES": collectively, the Adjustable Rate Senior Notes of the
Borrower due January 6, 2007 and the Adjustable Rate Senior Notes of the
Borrower due September 1, 2008.
1.2. AMENDMENT TO SECTION 4. Section 4 of the Credit Agreement is
hereby amended by inserting therein a new subsection 4.18 as follows:
"4.18 YEAR 2000 MATTERS" 4.18 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, will be completed by June 30, 1999. 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."
1.3. AMENDMENT TO SUBSECTION 6.9. Subsection 6.9 of the Credit
Agreement is hereby amended by inserting, at the end thereof, the following new
sentence:
"At such time as the Borrower shall have (i) caused 65% of
each class of the Capital Stock of each PRC Subsidiary and Hong Kong
Subsidiary to have been pledged to a collateral agent acceptable to the
Required Lenders to secure PARI PASSU the obligations of the Borrower
(x) under this Agreement, (y) in respect of the Senior Notes and (z) in
respect of any other senior payment obligations of the Borrower to
Chase, pursuant to a pledge agreement in form and substance
satisfactory to the Required Lenders, and (ii) taken such action to
perfect such pledge, and delivered such additional documentation with
respect thereto (including acceptable legal opinions) as may be
reasonably required by the Required Lenders, then, upon delivery by the
Administrative Agent to the Borrower of a written notice confirming the
completion of the matters specified in the foregoing clauses (i) and
(ii), any Hong Kong Subsidiaries that are Guarantors shall be deemed
released from their obligations under the Guarantee, effective as of
the date given."
1.4. AMENDMENT TO SUBSECTION 7.1. Effective as of the date of this
Amendment, subsection 7.1 is hereby amended by deleting such subsection in its
entirety and inserting in lieu thereof the following new subsection 7.1
(provided, however, that solely for the purposes of calculating compliance with
subsection 7.1(h) for the period ending December 31, 1998, such calculation
shall be made as if the Subordinated Indebtedness contemplated pursuant to
section 1.6 of this Amendment had been issued and sold on December 31, 1998):
"7.1 FINANCIAL CONDITION COVENANTS.
(a) QUICK ASSETS RATIO. Permit at the end of any fiscal quarter set
forth below, the ratio of (x) the sum of (i) cash and Cash Equivalents of
the Borrower and its Subsidiaries at such time plus (ii) the amount shown
on a consolidated balance sheet of the Borrower and its Subsidiaries at
such time as accounts receivable (less provision for doubtful accounts) at
such time to (y) Consolidated Current Liabilities at such time to be less
than the ratio set forth opposite such period below:
FISCAL QUARTERS ENDING: RATIO
December 31, 1998 0.80 to 1.00
March 31 in each year 1.00 to 1.00
June 30 in each year 0.80 to 1.00
September 30 in each year 0.80 to 1.00
December 31 in each year other than 1998 1.00 to 1.00
(b) MAINTENANCE OF TANGIBLE NET WORTH. Permit Consolidated Tangible
Net Worth (i) on December 31, 1998 to be less than $100,000,000 or (ii) at
any time thereafter, to be less than the sum of (w) $100,000,000 plus (x)
an amount equal to the sum of 50% of Consolidated Net Income (but only if
positive) for each fiscal year ending after December 31, 1998 plus (y) an
amount equal to the Net Cash Proceeds from the first public offering of
Capital Stock of the Borrower after December 31, 1998 plus (z) an amount
equal to the sum (but only if positive) of (A) the aggregate amount of Net
Cash Proceeds from all issuances of Capital Stock of the Borrower other
than, and subsequent to, the issuance of Capital Stock referred to in the
preceding clause (y) minus (B) the portion of such Net Cash Proceeds used
by the Borrower or any Subsidiary to acquire Consolidated Intangibles (it
being understood that in any case where the Borrower or any Subsidiary
shall utilize any such Net Cash Proceeds to finance the acquisition of any
Person or business, the portion of such Net Cash Proceeds used by the
Borrower or such Subsidiary to acquire Consolidated Intangibles shall be
deemed to be equal to the amount, if any, of the increase in the amount of
Consolidated Intangibles directly resulting from such acquisition).
(c) FIXED CHARGE COVERAGE. Permit the Fixed Charge Total Debt Coverage
Ratio as of the end of any fiscal quarter to be less than 1.25 to 1.00.
(d) TOTAL DEBT LEVERAGE RATIO. Permit the Total Debt Leverage Ratio at
any time to be greater than 5.00 to 1.00.
(e) SENIOR DEBT LEVERAGE RATIO. Permit the Senior Debt Leverage Ratio
at any time during any fiscal quarter set forth below to be greater than
the amount set forth opposite such fiscal quarter below:
FISCAL QUARTERS ENDING: RATIO
December 31, 1998 4.50 to 1.00
March 31, 1999 4.50 to 1.00
June 30, 1999 4.25 to 1.00
September 30, 1999 4.25 to 1.00
December 31, 1999 and thereafter 4.00 to 1.00
(f) INTEREST COVERAGE RATIO. Permit the Interest Coverage Ratio for
any period of four consecutive fiscal quarters to be less than 2.50 to
1.00.
(g) TOTAL DEBT TO CAPITALIZATION RATIO. Permit the Total Debt to
Capitalization Ratio at any time to be greater than 0.65 to 1.00.
(h) SENIOR DEBT TO CAPITALIZATION RATIO. Permit the Senior Debt to
Capitalization Ratio at any time to be greater than 0.55 to 1.00.
(i) PRIORITY DEBT. Permit Priority Debt at any time to exceed 15% of
Consolidated Tangible Net Worth."
1.5. FURTHER AMENDMENT TO SUBSECTION 7.1. Notwithstanding the
provisions of subsection 1.3 of this Amendment, effective as of the date upon
which the Borrower receives aggregate Net Cash Proceeds of at least $75,000,000
from the issuance and sale of Capital Stock and/or Subordinated Indebtedness,
subsection 7.1 shall be further amended as follows:
(a) by deleting subsection 7.1(a) in its entirety and inserting in
lieu thereof the following new subsection 7.1(a):
"(a) QUICK ASSETS RATIO. Permit at the end of any fiscal quarter set
forth below, the ratio of (x) the sum of (i) cash and Cash Equivalents of
the Borrower and its Subsidiaries at such time plus (ii) the amount shown
on a consolidated balance sheet of the Borrower and its Subsidiaries at
such time as accounts receivable (less provision for doubtful accounts) at
such time to (y) Consolidated Current Liabilities at such time to be less
than the ratio set forth opposite such period below:
FISCAL QUARTERS ENDING: RATIO
December 31, 1998 0.80 to 1.00
March 31, 1999 and thereafter 1.00 to 1.00";
(b) by deleting subsection 7.1(e) in its entirety and inserting in
lieu thereof the following new subsection 7.1(e):
"(e) SENIOR DEBT LEVERAGE RATIO. Permit the Senior Debt Leverage Ratio
at any time during any fiscal quarter set forth below to be greater than
the amount set forth opposite such fiscal quarter below:
FISCAL QUARTERS ENDING: RATIO
December 31, 1998 4.50 to 1.00
March 31, 1999 4.50 to 1.00
June 30, 1999 and thereafter 3.50 to 1.00";
(c) by deleting subsection 7.1(h) in its entirety and inserting in
lieu thereof the following new subsection 7.1(h):
"(h) SENIOR DEBT TO CAPITALIZATION RATIO. Permit the Senior Debt to
Capitalization Ratio at any time during any fiscal quarter set forth below
to be greater than the ratio set forth opposite such fiscal quarter below:
FISCAL QUARTERS ENDING: RATIO
December 31, 1998 0.55 to 1.00
March 31, 1999 0.55 to 1.00
June 30, 1999 and thereafter 0.50 to 1.00".
1.6. AMENDMENT TO SUBSECTION 7.2. Subsection 7.2(i) of the Credit
Agreement is hereby amended by deleting such subsection in its entirety and
inserting in lieu thereof the following new subsection 7.2(i):
"(i) Subordinated Indebtedness of the Borrower in an amount not to
exceed $150,000,000."
1.7. AMENDMENT TO SUBSECTION 7.3. Subsection 7.3(l) of the Credit
Agreement is hereby amended by inserting, at the end thereof but before the
period ("."), the following: "and any Liens granted by the Borrower or any
Subsidiary with respect to the PRC Subsidiaries and Hong Kong Subsidiaries
pursuant to subsection 6.9 hereof".
1.8. AMENDMENT TO SUBSECTION 7.6. Subsection 7.6 of the Credit
Agreement is hereby amended by deleting such subsection in its entirety and
inserting in lieu thereof the following new subsection 7.6:
"7.6 FAR EAST SUBSIDIARIES. (a) Permit on the last day of any
fiscal quarter the sum of the Total Assets (as reported on the
consolidating financial statements referred to in subsection 6.1) of
the PRC Subsidiaries (less any such amount attributable to accounts
receivable due to any PRC Subsidiary from the Borrower or any
Subsidiary of the Borrower that is a Guarantor) to be greater than an
amount equal to 20% of Consolidated Tangible Net Worth determined as of
such day.
(b) Permit on the last day of any fiscal quarter the sum of
the Total Assets (as reported on the consolidating financial statements
referred to in subsection 6.1) of the PRC Subsidiaries and the Hong
Kong Subsidiaries (collectively, the "Far East Subsidiaries") (less any
such amount attributable to accounts receivable due to any Far East
Subsidiary from the Borrower or any Subsidiary of the Borrower that is
a Guarantor and not a Far East Subsidiary) to be greater than an amount
equal to 40% of Consolidated Tangible Net Worth determined as of such
day."
1.9. CONSENT TO TERMS OF SUBORDINATED INDEBTEDNESS. The Lenders hereby
consent to the terms and conditions of the Subordinated Indebtedness and the
Subordinated Guarantee Obligations relating thereto substantially in the form of
the January 29, 1999 draft of the Securities Purchase Agreement with respect
thereto, such Subordinated Indebtedness to be issued and sold by the Borrower in
an aggregate principal amount of $35,000,000.
SECTION II. MISCELLANEOUS
2.1. REPRESENTATIONS AND WARRANTIES. On and as of the date hereof
and after giving effect to this Amendment, the Borrower hereby confirms,
reaffirms and restates the representations and warranties set forth in Section 4
of the Credit Agreement MUTATIS MUTANDIS, except to the extent that such
representations and warranties expressly relate to a specific earlier date in
which case the Borrower hereby confirms, reaffirms and restates such
representations and warranties as of such earlier date, PROVIDED that the
references to the Credit Agreement in such representations and warranties shall
be deemed to refer to the Credit Agreement as amended prior to the date hereof
and pursuant to this Amendment.
2.2. EFFECTIVENESS. This Amendment shall become effective as of the
date hereof upon:
(a) receipt by the Administrative Agent of counterparts of this
Amendment duly executed and delivered by each of the Borrower, the
Administrative Agent and the Required Lenders;
(b) receipt by the Administrative Agent of an executed legal opinion
of Stroock & Stroock & Lavan LLP, counsel to the Borrower and the other
Loan Parties, substantially in the form of ANNEX A attached hereto;
(c) the Borrower having issued and sold Subordinated Indebtedness as
contemplated by subsection 1.6 of this Amendment in an aggregate principal
amount of $35,000,000;
(d) receipt by the Administrative Agent of amendments or waivers to
the Note Purchase Agreements with respect to the Senior Notes in form and
substance satisfactory to the Required Lenders; and
(e) receipt by the Administrative Agent of an amendment fee of
$125,000, to be shared pro rata among the Lenders.
2.3. CONTINUING EFFECT; NO OTHER AMENDMENTS. Except as expressly set
forth in this Amendment, all of the terms and provisions of the Credit Agreement
are and shall remain in full force and effect and the Borrower shall continue to
be bound by all of such terms and provisions. The amendments provided for herein
are limited to the specific subsections of the Credit Agreement specified herein
and shall not constitute an amendment of, or an indication of the Administrative
Agent=s or the Lenders= willingness to amend or waive, any other provisions of
the Credit Agreement or the same subsections for any other date or purpose.
2.4. SEVERABILITY. Any provision of this Amendment 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
unenfor ceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
2.5. INTEGRATION. This Amendment represents the agreement of the
Borrower and the Administrative Agent with respect to the subject matter hereof
and thereof, and there are no promises, undertakings, representations or
warranties by the Administrative Agent relative to the subject matter hereof and
thereof not expressly set forth or referred to herein.
2.6. EXPENSES. The Borrower agrees to pay and reimburse the
Administrative Agent for all its reasonable costs and expenses incurred in
connection with the preparation and delivery of this Amendment, including,
without limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent.
2.7. COUNTERPARTS. This Amendment may be executed by one or more of
the parties to this Amendment 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. A set of the copies of this Amendment
signed by the parties hereto shall be delivered to the Borrower and the
Administrative Agent.
2.8. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment 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: Executive Vice
President-Operations
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By /S/ C. F. MATTHIESSEN
-----------------------------------
Name: C. F. Matthiessen
Title: Vice President
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By: /S/ WILLIAM C. BARR
------------------------------------
Name: William C. Barr
Title: First Vice President
HARRIS TRUST AND SAVINGS BANK
By:--------------------------------------
Name:
Title:
<PAGE>
MARINE MIDLAND BANK
By: /S/ THOMAS J. DIONIAN
-----------------------------------
Name: Thomas J. Dionian
Title: Vice President
FIRST UNION NATIONAL BANK
By: /S/ TIMOTHY N. HYSLOP
-----------------------------------
Name: Timothy N. Hyslop
Title: Senior Vice President
<PAGE>
THE UNDERSIGNED GUARANTORS HEREBY CONSENT AND AGREE TO THE
FOREGOING AGREEMENT AS OF THE DATE HEREOF:
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
Recoton Italia s.r.l.,
an Italian corporation
By: /S/ Jeremy Mermagen
--------------------------------
Name: Jeremy Mermagen
Title: Director
Recoton Canada Ltd., a Canadian
corporation
By: /S/ STUART MONT
--------------------------------
Name: Stuart Mont
Title: President
Recoton (Far East) Limited, a Hong Kong
corporation
STD Holding Limited, a Hong Kong
corporation
STD Electronic International Limited, a
Hong Kong corporation
STD Manufacturing Limited, a Hong Kong
corporation
STD Plastic Industrial Limited, a Hong Kong
corporation
STD Trading Limited, a Hong Kong
corporation
Peak Hero Limited, a Hong Kong corporation
Ever Smart Management Limited, a Hong Kong
corporation
By: /S/ Robert L. Borchardt
--------------------------------
Name: Robert L. Borchardt
Title: Director
