<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 30, 1998
THE CERPLEX GROUP, INC.
--------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 0-23602 33-0411354
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1382 Bell Avenue, Tustin, California 92780
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(Address of principal executive offices) (Zip Code)
(714) 258-5600
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(Registrant's telephone number including area code)
Not applicable
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
On January 30, 1998, Aurora Electronics, Inc., a Delaware
corporation ("Aurora") signed a definitive merger agreement with The Cerplex
Group, Inc., a Delaware corporation ("Cerplex"), creating one of the largest
independent companies in the parts support and services logistics market.
As a result of the merger, Cerplex would become a wholly-owned
subsidiary of Aurora, and the current equity holders of Cerplex would be
entitled to receive in a tax-free exchange approximately 25% of the
post-merger, fully-diluted common stock of Aurora, after giving effect to the
WCAS financing described below. Under the terms of the merger agreement, each
share of Cerplex common stock would convert into 1.076368 shares of Aurora
common stock.
The merger is subject to regulatory approvals and the
satisfaction of certain other conditions precedent, including securing
acceptable senior bank financing. No assurance can be given that such
conditions precedent will be achieved. The merger is expected to be completed
by the end of April 1998. Following the completion of the merger, Aurora will
change its name to The Cerplex Group, Inc. and the combined company will
operate under that name. Larry McTavish will be the Chairman and Chief
Executive Officer of the combined enterprises.
Subject to the merger, Aurora's principal stockholder, Welsh,
Carson, Anderson & Stowe VII, L.P. ("WCAS"), has agreed to provide additional
financing to Aurora in the form of $18 million of new preferred stock and $15
million of new subordinated debt, and to exchange approximately $11 million of
outstanding Aurora subordinated debt and accrued interest for $3.3 million of
new preferred stock. After giving effect to the merger and the WCAS financing,
WCAS would own approximately 69.2% of the fully-diluted common stock of Aurora.
The proceeds of the WCAS financing and the proposed new senior bank financing
would be used to repay approximately $30 million of outstanding senior bank
obligations of Cerplex. In addition, at the effective time of the merger,
approximately $18 million of outstanding subordinated notes of Cerplex, which
have been purchased by WCAS, would be cancelled and exchanged for $5.7 million
of the new subordinated notes of Aurora.
Aurora contemplates offering to all of its existing
stockholders the right to purchase a pro rata share of the new preferred stock
and new subordinated notes. The rights offering will be made only by means of
a prospectus. Any stockholder not electing to participate in this offering
would experience substantial dilution of its existing equity interest in
Aurora.
2
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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.
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2.1 Agreement of Merger dated as of August Incorporated herein by
30, 1993, by and among Cerplex reference to Exhibit 2.1 to the
Incorporated, Diversified Manufacturing Company's Registration
Services, Inc. ("DMS"), EMServe, Inc. Statement on Form S-1 (File No.
("EMServe"), InCirT Technology 33-75004) which was declared
Incorporated ("InCirT") and Testar, Inc. effective by the Commission on
("Testar"). April 8, 1994.
2.2 Agreement and Plan of Merger dated Incorporated herein by
November 12, 1993, between The Cerplex reference to Exhibit 2.2 to the
Group Subsidiary, Inc. and Registrant Company's Registration
(conformed copy to original). Statement on Form S-1 (File No.
33-75004) which was declared
effective by the Commission on
April 8, 1994.
2.3 Certificate of Ownership and Merger of Incorporated herein by
Registrant with and into The Cerplex reference to Exhibit 2.2 to the
Group Subsidiary, Inc. dated as of Company's Registration
November 12, 1993. Statement on Form S-1 (File No.
33-75004) which was declared
effective by the Commission on
April 8, 1994.
2.4 Asset Purchase Agreement effective Incorporated herein by
December 17, 1993 by and between Certech reference to Exhibit 2.4 to the
Technology, Inc., a wholly-owned Company's Registration
subsidiary of the Registrant ("Certech"), Statement on Form S-1 (File No.
and Spectradyne, Inc. ("Spectradyne"). 33-75004) which was declared
effective by the Commission on
April 8, 1994.
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NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING
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2.5 Purchase and Sale Agreement dated as of Incorporated herein by
July 29, 1994, by and among The Cerplex reference to Exhibit 2 to the
Group, Inc., Cerplex Limited, BT Repair Form 8-K filed July 29, 1994.
Services Limited and BT.
2.6 Contract for repair, calibration and Incorporated herein by
warehousing of certain items of BT reference to Exhibit 10 to the
Equipment dated as of July 29, 1994, Form 8-K filed July 29, 1994.
among The Cerplex Group and Cerplex
Limited and BT.
2.7 Formation and Contribution Agreement Incorporated herein by
effective December 1, 1994 by and among reference to Exhibit 2.7 to the
Modcomp/Cerplex L.P., Modular Computer Company's Annual Report on Form
Systems, Inc., Cerplex Subsidiary, Inc. 10-K for the fiscal year ended
and The Cerplex Group, Inc. January 1, 1995.
2.8 Contingent Promissory Note dated December Incorporated herein by
1, 1994 issued by Modcomp/Cerplex L.P. to reference to Exhibit 2.8 to the
Modular Computer Systems, Inc. Company's Annual Report on Form
10-K for the fiscal year ended
January 1, 1995.
2.9 Limited Partnership Agreement of Incorporated herein by
Modcomp/Cerplex L.P. effective December reference to Exhibit 2.8 to the
1, 1994. Company's Annual Report on Form
10-K for the fiscal year ended
January 1, 1995.
2.10 Put/Call Option Agreement effective Incorporated herein by
December 1, 1994 by and among Cerplex reference to Exhibit 2.8 to the
Subsidiary, Inc., The Cerplex Group, Company's Annual Report on Form
Inc., Modular Computer Systems, Inc. and 10-K for the fiscal year ended
Modcomp Joint Venture Inc. January 1, 1995.
2.11 Stock Purchase Agreement dated as of June Incorporated herein by
29, 1995 by and among The Cerplex Group, reference to Exhibit 2.11 to
Inc., Tu Nguyen and Phuc Le. the Company's Quarterly Report
on Form 10-Q for the quarter
ended October 1, 1995.
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2.12 Letter Agreement dated April 5, 1996 by Incorporated herein by
and among Modular Computer Systems, Inc., reference to Exhibit 2.12 to
Modcomp Joint Venture, Inc., AEG the Company's Annual Report on
Aktiengesellschaft, the Company, Cerplex Form 10-K for the fiscal year
Subsidiary, Inc. and Modcomp/Cerplex L.P. ended December 31, 1995.
2.13 Stock Purchase Agreement dated as of May Incorporated herein by
24, 1996, by and among The Cerplex Group, reference to Exhibit 2.13 to
Inc., Cerplex Limited, Rank Xerox - The the Company's Current Report on
Document Company SA and Rank Xerox Form 8-K dated May 24, 1996.
Limited (conformed copy to original).
2.14 Contract of Warranty dated as of May 24, Incorporated herein by
1996, by and among The Cerplex Group, reference to Exhibit 2.14 to
Inc., Cerplex Limited, Rank Xerox - The the Company's Current Report on
Document Company SA and Rank Xerox Form 8-K dated May 24, 1996.
Limited (conformed copy to the original).
2.15 Supply and Services Agreement dated as of Incorporated herein by
May 24, 1996, by and among The Cerplex reference to Exhibit 2.15 to
Group, Inc., Cerplex Limited, Rank Xerox the Company's Current Report on
- The Document Company SA and Rank Xerox Form 8-K dated May 24, 1996.
Limited (conformed copy to the original).
2.16 Stock Purchase Agreement dated March 28, Incorporated herein by
1997 relating to all of the outstanding reference to Exhibit 2.13 to
stock of Peripheral Computer Support, the Company's Annual Report on
Inc. among the Company, PCS Acquisition Form 10-K for the fiscal year
Co., Inc., and Lincolnshire Equity ended December 31, 1996.
Partners, L.P.
2.17 Asset Purchase Agreement dated August 6, Incorporated herein by
1997 by and among the Company, Cerplex reference to Exhibit 2.17 to
Subsidiary, Inc., Modcomp Joint Venture, the Company's Quarterly Report
Inc., Modcomp/Cerplex L.P. and CSP Inc. on Form 10-Q for the quarter
ended June 30, 1997.
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NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING
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2.18 Agreement and Plan of Merger dated as of Filed herein.
January 30, 1998 ("Merger Agreement")
among Aurora Electronics, Inc., a
Delaware corporation ("Aurora"),
Holly Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary
of Aurora ("Aurora Sub") and the Company.
4.1 Stock Purchase Agreement dated as of Incorporated herein by
November 19, 1993 by and among the reference to Exhibit 4.1 to the
Registrant, the stockholders of the Company's Registration
Registrant identified in Part A of Statement on Form S-1 (File No.
Schedule I thereto and the purchasers of 33-75004) which was declared
shares of the Registrant's Series A effective by the Commission on
Preferred Stock identified in Schedule I April 8, 1994.
thereto (including the Schedules thereto;
Exhibits omitted).
4.2 Registration Rights Agreement dated as of Incorporated herein by
November 19, 1993, by and among the reference to Exhibit 4.2 to the
Registrant, the investors listed on Company's Registration
Schedule A thereto and the security Statement on Form S-1 (File No.
holders of the Registrant listed on 33-75004) which was declared
Schedule B thereto, together with effective by the Commission on
Amendment No. 1. April 8, 1994.
4.3 Co-Sale Agreement dated as of November Incorporated herein by
19, 1993, by and among the Registrant, reference to Exhibit 4.3 to the
the managers listed on Schedule A thereto Company's Registration
and the investors listed on Schedule B Statement on Form S-1 (File No.
thereto. 33-75004) which was declared
effective by the Commission on
April 8, 1994.
4.4 Warrant Agreement dated as of November Incorporated herein by
19, 1993, by and among the Registrant and reference to Exhibit 4.4 to the
the purchasers listed in Annex 1 thereto. Company's Registration
Statement on Form S-1 (File No.
33-75004) which was declared
effective by the Commission on
April 8, 1994.
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NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING
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4.5 Placement Agent Warrant Purchase Incorporated herein by
Agreement dated as of November 19, 1993, reference to Exhibit 4.5 to the
between the Registrant and Donaldson, Company's Registration
Lufkin & Jenrette Securities Corporation. Statement on Form S-1 (File No.
33-75004) which was declared
effective by the Commission on
April 8, 1994.
4.6 Observation Rights Agreement dated as of Incorporated herein by
November 19, 1993, between the Registrant reference to Exhibit 4.6 to the
and certain stock purchasers. Company's Registration
Statement on Form S-1 (File No.
33-75004) which was declared
effective by the Commission on
April 8, 1994.
4.7 Observation Rights Agreement dated as of Incorporated herein by
November 19, 1993, between the Registrant reference to Exhibit 4.7 to the
and certain note purchasers. Company's Registration
Statement on Form S-1 (File No.
33-75004) which was declared
effective by the Commission on
April 8, 1994.
4.8 Note Purchase Agreement dated as of Incorporated herein by
November 19, 1993, by and among the reference to Exhibit 4.8 to the
Registrant and The Northwestern Mutual Company's Registration
Life Insurance Company, John Hancock Statement on Form S-1 (File No.
Mutual Life Insurance, Registrant and 33-75004) which was declared
Bank of Scotland London Nominees Limited. effective by the Commission on
April 8, 1994.
4.9 Amendment No. 2 to Registration Rights Incorporated herein by
Agreement dated as of April 6, 1994, by reference to Exhibit 4.9 to the
and among the Registrant and certain of Company's Registration
its Securities holders. Statement on Form S-1 (File No.
33-75004) which was declared
effective by the Commission on
April 8, 1994.
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NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING
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4.10 Amendment to Note Purchase Agreement, Incorporated herein by
dated as of October 27, 1994, by and reference to Exhibit 4.10 to
among the Company, Northwestern Mutual the Company's Annual Report on
Life Insurance Company, John Hancock Form 10-K for the fiscal year
Mutual Life Insurance Company and North ended March 31, 1995.
Atlantic Smaller Companies Trust P.L.C.
(collectively, the "Noteholders").
4.11 Waiver and Amendment Agreement dated Incorporated herein by
April 15, 1996 by and among Company, The reference to Exhibit 4.11 to
Northwestern Mutual Life Insurance the Company's Annual Report on
Company, John Hancock Mutual Life Form 10-K for the fiscal year
Insurance Company and North Atlantic ended December 31, 1995.
Smaller Companies Investment Trust PLC.
4.12 Warrant Agreement dated as of April 15, Incorporated herein by
1996 by and among Company, The reference to Exhibit 4.12 to
Northwestern Mutual Life Insurance the Company's Annual Report on
Company, John Hancock Mutual Life Form 10-K for the fiscal year
Insurance Company and North Atlantic ended December 31, 1995.
Smaller Companies Investment Trust PLC.
4.13 First Amendment to Warrant Agreement Incorporated herein by
dated April 15, 1996 by and among Company reference to Exhibit 4.13 to
and each of the holders of warrants the Company's Annual Report on
listed on Schedule A thereto, with Form 10-K for the fiscal year
respect to that certain Warrant Agreement ended December 31, 1995.
dated November 19, 1993.
4.14 First Amendment to Observation Rights Incorporated herein by
Agreement dated as of April 15, 1996 reference to Exhibit 4.14 to
between Company and certain note the Company's Annual Report on
purchasers. Form 10-K for the fiscal year
ended December 31, 1995.
4.15 Third Amendment to Registration Rights Incorporated herein by
Agreement dated as of April 15, 1996 by reference to Exhibit 4.15 to
and among Company, the investors of the Company's Annual Report on
Company listed on Schedule A thereto and Form 10-K for the fiscal year
the security holders of Company listed on ended December 31, 1995.
Schedule B thereto.
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NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING
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4.16 Warrant Agreement dated April 15, 1996 by Incorporated herein by
and among Company, Wells Fargo Bank, reference to Exhibit 4.16 to
National Association, Sumitomo Bank of the Company's Annual Report on
California, BHF Bank Aktiengesellschaft Form 10-K for the fiscal year
and Comerica Bank-California. ended December 31, 1995.
4.17 Stock Purchase Agreement dated June 10, Incorporated herein by
1996 by and among the Company and the reference to Exhibit 4.17 to
investors listed on Schedule A thereto. the Company's Quarterly Report
on Form 10-Q filed August 14,
1996.
4.18 Fourth Amendment to Registration Rights Incorporated herein by
Agreement dated June 10, 1996 by and reference to Exhibit 4.18 to
among Company, the investors listed on the Company's Quarterly Report
Schedule A thereto, the security holders on Form 10-Q filed August 14,
of Company listed on Schedule B thereto, 1996.
the banks listed on Schedule C thereto
and each of the parties listed on
Schedule D thereto.
4.19 Certificate of Designation of Preferences Incorporated herein by
of Series B Preferred Stock of The reference to Exhibit 3.3 to the
Cerplex Group, Inc. Company's Quarterly Report on
Form 10-Q filed August 14,
1996.
4.20 Waiver and Amendment Agreement dated Incorporated herein by
October 31, 1996 by and among the company reference to Exhibit 4.17 to
and the Noteholders. the Company's Annual Report on
Form 10-K for the fiscal year
ended December 31, 1996.
4.21 Waiver and Amendment Agreement dated Incorporated herein by
December 9, 1996 by and among the company reference to Exhibit 4.18 to
and the Noteholders. the Company's Annual Report on
Form 10-K for the fiscal year
ended December 31, 1996.
4.22 Side Letter dated March 28, 1997 by and Incorporated herein by
among the Company and the Noteholders. reference to Exhibit 4.19 to
the Company's Annual Report on
Form 10-K for the fiscal year
ended December 31, 1996.
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4.23 Amended and Restated Note Purchase Incorporated herein by
Agreement dated April 9, 1997 by and reference to Exhibit 4.20 to
among the Company and the Noteholders. the Company's Annual Report on
Form 10-K for the fiscal year
ended December 31, 1996.
4.24 Second Amendment to Warrant Agreement Incorporated herein by
dated April 9, 1997, by and among the reference to Exhibit 4.21 to
Company and each of the holders of the Company's Annual Report on
warrants listed on Schedule A thereto, Form 10-K for the fiscal year
which Second Amendment amends the Warrant ended December 31, 1996.
Agreement dated November 19, 1993 as
amended by the First Amendment to Warrant
Agreement dated April 15, 1996.
4.25 Second Amendment to Warrant Agreement Incorporated herein by
dated April 9, 1997 by and among the reference to Exhibit 4.22 to
Company and each of the holders of the Company's Annual Report on
warrants listed on Schedule A thereto, Form 10-K for the fiscal year
which Second Amendment amends the Warrant ended December 31, 1996.
Agreement dated April 15, 1996, as
amended by a Waiver and Amendment
Agreement dated October 31, 1996.
4.26 Amended and Restated Warrant Agreement Incorporated herein by
dated April 9, 1997 by and among the reference to Exhibit 4.23 to
Company; Wells Fargo Bank, National the Company's Annual Report on
Association; BHF-Bank Aktiengesellschaft; Form 10-K for the fiscal year
and Citibank, N.A. ended December 31, 1996.
4.27 Fifth Amendment to Registration Rights Incorporated herein by
Agreement dated as of April 9, 1997 by reference to Exhibit 4.27 to
and among the Company, the investors the Company's Quarterly Report
listed on Schedule A thereto, the on Form 10-Q for the quarter
security holders of the Company listed on ended June 30, 1997.
Schedule B thereto, the banks listed on
Schedule C thereto, and the parties
listed on Schedule D thereto.
4.28 Waiver Agreement dated as of June 30, Incorporated herein by
1997 among the Company and the reference to Exhibit 4.28 to
Noteholders. the Company's Quarterly Report
on Form 10-Q for the quarter
ended June 30, 1997.
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<TABLE>
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NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING
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4.29 Side letter dated July 10, 1997 by and Incorporated herein by
among the Company and the Noteholders. reference to Exhibit 4.29 to
the Company's Quarterly Report
on Form 10-Q for the quarter
ended June 30, 1997.
4.30 Side letter dated August 6, 1997 by and Incorporated herein by
among the Company and the Noteholders. reference to Exhibit 4.30 to
the Company's Quarterly Report
on Form 10-Q for the quarter
ended June 30, 1997.
4.31 Sixth Amendment to Registration Rights Incorporated herein by
Agreement dated as of August 20, 1997 by reference to Exhibit 4.31 to
and among the Company, the investors the Company's Current Report on
listed on Schedule A thereto, the Form 8-K dated August 27, 1997.
security holders of the Company listed on
Schedule B thereto, the banks listed on
Schedule C thereto, and the parties
listed on Schedule D thereto.
4.32 First Amendment Agreement dated as of Incorporated herein by
August 20, 1997, by and among the reference to Exhibit 4.32 to
Company, The Northwestern Mutual Life the Company's Current Report on
Insurance Company, John Hancock Mutual Form 8-K dated August 27, 1997.
Life Insurance Company and North Atlantic
Smaller Companies Investment Trust PLC.
4.33 Warrant Agreement dated as of August 20, Incorporated herein by
1997 by and between the Company, The reference to Exhibit 4.33 to
Northwestern Mutual Life Insurance the Company's Current Report on
Company, John Hancock Mutual Life Form 8-K dated August 27, 1997.
Insurance Company and North Atlantic
Smaller Companies Investment Trust PLC.
4.34 Third Amendment to Warrant Agreement Incorporated herein by
dated as of August 20, 1997, by and among reference to Exhibit 4.34 to
the Company and the Noteholders with the Company's Current Report on
respect to that certain Warrant Agreement Form 8-K dated August 27, 1997.
dated as of April 15, 1996 by and among
the Company and the Noteholders.
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4.35 Third Amendment to Warrant Agreement Incorporated herein by
dated as of August 20, 1997, by and among reference to Exhibit 4.35 to
the Company and the Noteholders with the Company's Current Report on
respect to that certain Warrant Agreement Form 8-K dated August 27, 1997.
dated as of November 19, 1993 by and
among the Company and the Noteholders.
4.36 Warrant Agreement dated as of August 20, Incorporated herein by
1997 by and between the Company and reference to Exhibit 4.36 to
Citibank, N.A. the Company's Current Report on
Form 8-K dated August 27, 1997.
4.37 Second Amendment to Observation Rights Incorporated herein by
Agreement dated August 20, 1997 by and reference to Exhibit 4.37 to
among the Company, the Northwestern the Company's Current Report on
Mutual Life Insurance Company and John Form 8-K dated August 27, 1997.
Hancock Mutual Life Insurance Company.
99.1 Press Release issued by Aurora and the Filed herein.
Company on February 2, 1998.
99.2 Irrevocable Proxy and Option Agreement Filed herein.
dated January 30, 1998 among the
Company and the stockholders listed
on the signature pages thereof
(Exhibit A to Merger Agreement).
99.3 Form of Affiliates Letter (Exhibit B Filed herein.
to Merger Agreement).
99.4 Stockholders Agreement dated January 30, Filed herein.
1998 between Welsh, Carson, Anderson &
Stowe VII, L.P., a Delaware limited
partnership ("WCAS"), Aurora and the
Company.
99.5 Interim Management Agreement dated Filed herein.
January 30, 1998 between the Company and
Aurora.
99.6 Securities Purchase and Exchange Filed herein.
Agreement dated January 30, 1998
("Securities Purchase and Exchange
Agreement") among Aurora, WCAS and the
other several purchasers named in Annex I
thereto and WCAS Capital Partners II, L.P.
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<TABLE>
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NUMBER DESCRIPTION OF EXHIBITS METHOD OF FILING
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<S> <C> <C>
99.7 Form of 10% Senior Subordinated Bridge Filed herein.
Note of Aurora Electronics, Inc. as payor
(Exhibit A-1 to Securities Purchase and
Exchange Agreement).
99.8 Form of 10% Senior Subordinated Note Due Filed herein.
December 31, 2004 of Aurora Electronics,
Inc. as payor (Exhibit A-2 to Securities
Purchase and Exchange Agreement).
99.9 Form of Certificate of Designations, Filed herein.
Preferences and Rights of Senior
Cumulative Convertible Preferred Stock of
Aurora Electronics, Inc. (Exhibit B to
Securities Purchase and Exchange
Agreement).
99.10 Form of Certificate of Amendment to the Filed herein.
Restated Certificate of Incorporation of
Aurora Electronics, Inc. (Exhibit C to
Securities Purchase and Exchange
Agreement).
99.11 Amended and Restated Registration Rights Filed herein.
Agreement dated January 30, 1998 among
Aurora and the several purchasers named
in Schedules I and II thereto (Exhibit D
to Securities Purchase and Exchange
Agreement).
99.12 10% Senior Subordinated Bridge Note of Filed herein.
Aurora Electronics, Inc. as payor.
99.13 Cerplex Note Purchase Agreement dated Filed herein.
January 30, 1998 ("Note Purchase
Agreement") between the Company and
Aurora.
99.14 10% Subordinated Note Due June 30, 1998 Filed herein.
of The Cerplex Group, Inc. as payor
(Exhibit A to Note Purchase Agreement).
99.15 Forbearance and Repayment Agreement dated
January 30, 1998 by and among the
Company, Aurora and Citibank, N.A.
99.16 Seventh Amendment to Credit Agreement and Filed herein.
Limited Waiver dated January 30, 1998 by
and among the Company, the financial
institution listed on the signature page
thereof ("Lender") and Citibank, N.A., as
successor to Wells Fargo Bank, National
Association, as administrative agent for
Lender.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 6, 1998
THE CERPLEX GROUP, INC.
By: /s/ Robert W. Hughes
----------------------------------------
Robert W. Hughes
Senior Vice President and Chief
Financial Officer
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit Description Page
------- ----------- ------------
<S> <C> <C>
2.18 Agreement and Plan of Merger dated as of
January 30, 1998 ("Merger Agreement")
among Aurora Electronics, Inc., a
Delaware corporation ("Aurora"),
Holly Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary
of Aurora ("Aurora Sub") and the Company.
99.1 Press Release issued by Aurora and the
Company on February 2, 1998.
99.2 Irrevocable Proxy and Option Agreement
dated January 30, 1998 among the
Company and the stockholders listed
on the signature pages thereof
(Exhibit A to Merger Agreement).
99.3 Form of Affiliates Letter (Exhibit B
to Merger Agreement).
99.4 Stockholders Agreement dated January 30,
1998 between Welsh, Carson, Anderson &
Stowe VII, L.P. a Delaware limited
partnership ("WCAS"), Aurora and the
Company.
99.5 Interim Management Agreement dated
January 30, 1998 between the Company and
Aurora.
99.6 Securities Purchase and Exchange
Agreement dated January 30, 1998
("Securities Purchase and Exchange
Agreement") among Aurora, WCAS and the
other several purchasers named in Annex I
thereto and WCAS Capital Partners II, L.P.
</TABLE>
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<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit Description Page
------- ----------- ------------
<S> <C> <C>
99.7 Form of 10% Senior Subordinated Bridge
Note of Aurora Electronics, Inc. as payor
(Exhibit A-1 to Securities Purchase and
Exchange Agreement).
99.8 Form of 10% Senior Subordinated Note Due
December 31, 2004 of Aurora Electronics,
Inc. as payor (Exhibit A-2 to Securities
Purchase and Exchange Agreement).
99.9 Form of Certificate of Designations,
Preferences and Rights of Senior
Cumulative Convertible Preferred Stock of
Aurora Electronics, Inc. (Exhibit B to
Securities Purchase and Exchange
Agreement).
99.10 Form of Certificate of Amendment to the
Restated Certificate of Incorporation of
Aurora Electronics, Inc. (Exhibit C to
Securities Purchase and Exchange
Agreement).
99.11 Amended and Restated Registration Rights
Agreement dated January 30, 1998 among
Aurora and the several purchasers named
in Schedules I and II thereto (Exhibit D
to Securities Purchase and Exchange
Agreement).
99.12 10% Senior Subordinated Bridge Note of
Aurora Electronics, Inc. as payor.
99.13 Cerplex Note Purchase Agreement dated
January 30, 1998 ("Note Purchase
Agreement") between the Company and
Aurora.
99.14 10% Subordinated Note Due June 30, 1998
of The Cerplex Group, Inc. as payor
(Exhibit A to Note Purchase Agreement).
99.15 Forbearance and Repayment Agreement dated
January 30, 1998 by and among the
Company, Aurora and Citibank, N.A.
99.16 Seventh Amendment to Credit Agreement and
Limited Waiver dated January 30, 1998 by
and among the Company, the financial
institution listed on the signature page
thereof ("Lender") and Citibank, N.A., as
successor to Wells Fargo Bank, National
Association, as administrative agent for
Lender.
</TABLE>
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<PAGE> 1
EXHIBIT 2.18
================================================================================
AGREEMENT AND PLAN OF MERGER
Among
AURORA ELECTRONICS, INC.
HOLLY ACQUISITION CORP.
and
THE CERPLEX GROUP, INC.
Dated as of January 30, 1998
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ARTICLE I.
THE MERGER
SECTION 1.01. The Merger . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.02. Effective Time . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.03. Closing . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II.
THE SURVIVING CORPORATION
SECTION 2.01. Certificate of Incorporation . . . . . . . . . . . . . 4
SECTION 2.02. By-Laws . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.03. Directors and Officers of Surviving
Corporation . . . . . . . . . . . . . . . . . 5
ARTICLE III.
CONVERSION OF SHARES
SECTION 3.01. Exchange Ratio . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.02. Exchange of Company Stock; Procedures . . . . . . . . . 7
SECTION 3.03. Dividends; Transfer Taxes; Escheat . . . . . . . . . . 8
SECTION 3.04. No Fractional Securities . . . . . . . . . . . . . . . 8
SECTION 3.05. Closing of Company Transfer Books . . . . . . . . . . . 9
SECTION 3.06. Further Assurances . . . . . . . . . . . . . . . . . . 9
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Organization . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.02. Capitalization . . . . . . . . . . . . . . . . . . . 10
SECTION 4.03. Company Subsidiaries . . . . . . . . . . . . . . . . 11
SECTION 4.04. Authority Relative to this Agreement . . . . . . . . 11
SECTION 4.05. Consents and Approvals; No Violations . . . . . . . . 12
SECTION 4.06. Reports and Financial Statements . . . . . . . . . . 13
SECTION 4.07. Absence of Certain Changes or Events;
Material Contracts . . . . . . . . . . . . . . . . 13
SECTION 4.08. Absence of Undisclosed Liabilities . . . . . . . . . 14
SECTION 4.09. No Default . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.10. Litigation . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.12. Title to Properties; Encumbrances . . . . . . . . . . 16
SECTION 4.13. Intellectual Property . . . . . . . . . . . . . . . . 16
SECTION 4.14. Compliance with Applicable Law . . . . . . . . . . . 18
SECTION 4.15. Information in Disclosure Documents
and Registration Statement . . . . . . . . . . . . 19
SECTION 4.16. Employee Benefit Plans; ERISA . . . . . . . . . . . . 19
SECTION 4.17. Environmental Laws and Regulations . . . . . . . . . 20
SECTION 4.18. Vote Required . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.19. Opinion of Financial Advisor . . . . . . . . . . . . 21
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SECTION 4.20. DGCL Section 203 . . . . . . . . . . . . . . . . . . 22
SECTION 4.21. Labor Matters . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.22. Severance Arrangements . . . . . . . . . . . . . . . 22
SECTION 4.23. Affiliate Transactions . . . . . . . . . . . . . . . 22
SECTION 4.24. Brokers . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 5.01. Organization . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.02. Capitalization . . . . . . . . . . . . . . . . . . . 23
SECTION 5.03. Parent Subsidiaries . . . . . . . . . . . . . . . . . 24
SECTION 5.04. Authority Relative to this Agreement . . . . . . . . 25
SECTION 5.05. Consents and Approvals; No Violations . . . . . . . . 25
SECTION 5.06. Reports and Financial Statements . . . . . . . . . . 26
SECTION 5.07. Absence of Certain Changes or Events . . . . . . . . 26
SECTION 5.08. Absence of Undisclosed Liabilities . . . . . . . . . 26
SECTION 5.09. No Default . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.10. Litigation . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.12. Compliance with Applicable Law . . . . . . . . . . . 28
SECTION 5.13. Information in Disclosure Documents
and Registration Statement . . . . . . . . . . . . 29
SECTION 5.14. Vote Required . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.15. Opinion of Financial Advisor . . . . . . . . . . . . 30
SECTION 5.16. Brokers . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VI.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.01. Conduct of Business by the Company
Pending the Merger . . . . . . . . . . . . . . . . 30
SECTION 6.02. Conduct of Business by Parent
Pending the Merger . . . . . . . . . . . . . . . . 32
SECTION 6.03. Conduct of Business of Sub . . . . . . . . . . . . . 33
ARTICLE VII.
ADDITIONAL AGREEMENTS
SECTION 7.01. Access and Information . . . . . . . . . . . . . . . 33
SECTION 7.02. No Solicitation . . . . . . . . . . . . . . . . . . . 33
SECTION 7.03. Registration Statement . . . . . . . . . . . . . . . 34
SECTION 7.04. Proxy Statements; Stockholder Approvals . . . . . . . 35
SECTION 7.05. Affiliates . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.06. Reasonable Efforts . . . . . . . . . . . . . . . . . 36
SECTION 7.07. Certain Agreements . . . . . . . . . . . . . . . . . 37
SECTION 7.08. Company Stock Options . . . . . . . . . . . . . . . . 37
SECTION 7.09. Settlement of Company Stock
Purchase Rights . . . . . . . . . . . . . . . . . . . 38
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SECTION 7.10. Public Announcements . . . . . . . . . . . . . . . . 39
SECTION 7.11. Directors' and Officers' Indemnification
and Insurance . . . . . . . . . . . . . . . . . . . 39
SECTION 7.12. Expenses . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 7.13. Supplemental Disclosure . . . . . . . . . . . . . . . 40
SECTION 7.14. Public Reporting; Continued Listing . . . . . . . . . 40
ARTICLE VIII.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 8.01. Conditions to Each Party's Obligation
to Effect the Merger . . . . . . . . . . . . . . . 41
SECTION 8.02. Conditions to Obligations of Parent and
Sub to Effect the Merger . . . . . . . . . . . . . 41
SECTION 8.03. Conditions to Obligation of the Company
to Effect the Merger . . . . . . . . . . . . . . . 43
ARTICLE IX.
TERMINATION
SECTION 9.01. Termination . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.02. Effect of Termination . . . . . . . . . . . . . . . . 45
ARTICLE X.
GENERAL PROVISIONS
SECTION 10.01. Amendment and Modification . . . . . . . . . . . . . 46
SECTION 10.02. Waiver . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 10.03. Survivability; Investigations . . . . . . . . . . . 47
SECTION 10.04. Notices . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 10.05. Descriptive Headings; Interpretation . . . . . . . . 48
SECTION 10.06. Entire Agreement; Assignment . . . . . . . . . . . . 48
SECTION 10.07. Governing Law; Jurisdiction . . . . . . . . . . . . 48
SECTION 10.08. Severability . . . . . . . . . . . . . . . . . . . . 48
SECTION 10.09. Counterparts . . . . . . . . . . . . . . . . . . . . 49
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Exhibits
Exhibit A Irrevocable Proxy and Option Agreement
Exhibit B Form of Affiliates Letter
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<CAPTION>
Term Section
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Acquiring Person . . . . . . . . . . . . . . . . . . . . . . . 9.01(d)
Acquisition Transaction . . . . . . . . . . . . . . . . . . . . . . 7.02
Affiliate Letters . . . . . . . . . . . . . . . . . . . . . . . 7.05(b)
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05(a)
Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . 4.14
Brobeck . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.03(d)
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.13(c)
Cerplex Credit Agreement . . . . . . . . . . . . . . . . . . . Preamble
Cerplex Note Purchase Agreement . . . . . . . . . . . . . . . . Preamble
Cerplex Subordinated Notes . . . . . . . . . . . . . . . . . . Preamble
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 3.02(b)
Chase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Chase Amendment . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Citibank . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.03
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.03
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Company Common Stock . . . . . . . . . . . . . . . . . . . . . Preamble
Company ERISA Affiliate . . . . . . . . . . . . . . . . . . . . 4.16(a)
Company Material Adverse Effect . . . . . . . . . . . . . . . . . . 4.01
Company Permits . . . . . . . . . . . . . . . . . . . . . . . . . . 4.14
Company Plans . . . . . . . . . . . . . . . . . . . . . . . . . 4.16(a)
Company Preferred Stock . . . . . . . . . . . . . . . . . . . . 3.01(b)
Company SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . 4.06
Company Stock . . . . . . . . . . . . . . . . . . . . . . . . . 3.01(b)
Company Stock Option . . . . . . . . . . . . . . . . . . . . . 3.01(d)
Company Stock Purchase Rights . . . . . . . . . . . . . . . . . 3.01(d)
Computer Software . . . . . . . . . . . . . . . . . . . . . . . 4.13(e)
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . 7.01
Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.05
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . 3.01(a)
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . 1.02
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . 4.17(a)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.16(b)
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.05
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . 3.02(a)
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . 3.01(a)
Forbearance Agreement . . . . . . . . . . . . . . . . . . . . . Preamble
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.06
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . 4.05
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.05
Intellectual Property . . . . . . . . . . . . . . . . . . . . . 4.13(a)
Interim Management Agreement . . . . . . . . . . . . . . . . . Preamble
Irrevocable Proxy and Option Agreement . . . . . . . . . . . . Preamble
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03
Maximum Amount . . . . . . . . . . . . . . . . . . . . . . . . 7.11(b)
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
</TABLE>
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NASD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.05
New Lender . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
New Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08
New Parent Preferred Stock . . . . . . . . . . . . . . . . . . Preamble
New Parent Senior Subordinated Notes . . . . . . . . . . . . . Preamble
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Parent Certificate of Amendment . . . . . . . . . . . . . . . . . . 5.14
Parent Common Stock . . . . . . . . . . . . . . . . . . . . . . Preamble
Parent Material Adverse Effect . . . . . . . . . . . . . . . . . . 5.01
Parent Permits . . . . . . . . . . . . . . . . . . . . . . . . . . 5.11
Parent Preferred Stock . . . . . . . . . . . . . . . . . . . . Preamble
Parent SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . 5.05
Parent Senior Subordinated Notes . . . . . . . . . . . . . . . Preamble
Parent Stock Options . . . . . . . . . . . . . . . . . . . . . 5.02(a)
Parent Stock Purchase Rights . . . . . . . . . . . . . . . . . 5.02(a)
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 4.15
Registration Statement . . . . . . . . . . . . . . . . . . . . . . 4.15
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.06
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . 4.05
Securities Purchase and Exchange Agreement . . . . . . . . . . Preamble
Senior Commitment . . . . . . . . . . . . . . . . . . . . . . . Preamble
Series A Preferred . . . . . . . . . . . . . . . . . . . . . . 4.02(a)
Series B Preferred . . . . . . . . . . . . . . . . . . . . . . 4.02(a)
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11(a)
Stockholders Agreement . . . . . . . . . . . . . . . . . . . . Preamble
Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Sub Common Stock . . . . . . . . . . . . . . . . . . . . . . . 3.01(c)
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . 3.01(b)
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . 1.01
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11(b)
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11(b)
WCAS VII . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 30, 1998, among
AURORA ELECTRONICS, INC., a Delaware corporation ("Parent"), HOLLY ACQUISITION
CORP., a Delaware corporation and a wholly-owned subsidiary of Parent ("Sub"),
and THE CERPLEX GROUP, INC., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company deem it advisable and in the best interests of their respective
stockholders that Sub merge with and into the Company (the "Merger") in
accordance with the terms of this Agreement and the General Corporation Law of
the State of Delaware (the "DGCL"), and, in furtherance thereof such Boards of
Directors have approved the Merger; and
WHEREAS, Parent, Sub and the Company desire that at the Effective
Time (as hereinafter defined) all outstanding shares of the capital stock of
the Company (excluding Dissenting Shares (as hereinafter defined) and all
shares of capital stock of the Company held as treasury shares) be converted
into the right to receive fully paid and nonassessable shares of Common Stock,
$.03 par value ("Parent Common Stock"), of Parent, and that all options and
other rights to purchase shares of the capital stock of the Company be
canceled, exchanged or assumed, in each case, as hereinafter provided; and
WHEREAS, Parent, Sub and the Company desire that, immediately
after the Effective Time and solely as a result of the Merger, the Company
shall continue as the surviving corporation, the separate existence of Sub
(except as it may be continued by operation of law) shall cease and Parent will
own all the issued and outstanding shares of the capital stock of the surviving
corporation; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Parent's willingness to enter
into this Agreement, certain holders of shares of the Common Stock, par value
$.001 per share (the "Company Common Stock"), of the Company who own in the
aggregate a majority of the outstanding shares of Company Common Stock are
entering into an agreement with Parent in the form attached hereto as Exhibit A
(the "Irrevocable Proxy and Option Agreement"), pursuant to which such
stockholders have agreed, among other things, (i) to grant irrevocable proxies
coupled with an interest to representatives of Parent to vote such shares of
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Company Common Stock in favor of the Merger, (ii) to grant Parent an option to
purchase such shares of Company Common Stock for the same number of shares as
such stockholders would receive in the Merger and (iii) not to transfer or
otherwise dispose of such shares of Company Common Stock or any interest
therein except pursuant to the Merger or such option, all on the terms and
subject to the conditions set forth therein; and
WHEREAS, Parent and certain holders of the capital stock of
Parent are entering into a Securities Purchase and Exchange Agreement of even
date herewith (the "Securities Purchase and Exchange Agreement"), pursuant to
which such stockholders have agreed at the Effective Time to (i) purchase
$15,000,000 principal amount of 10% Senior Subordinated Notes due 2004 (the
"New Parent Senior Subordinated Notes") of Parent, for cash equal to the
principal amount thereof (except that a portion of the purchase price payable
by Welsh, Carson, Anderson & Stowe VII, L.P. ("WCAS VII") shall be paid by
surrender or exchange of other indebtedness as provided therein), (ii) subject
to the rights offering referred to below, purchase up to 180,000 shares of
Senior Convertible Preferred Stock, $.01 par value ("New Parent Preferred
Stock") of Parent, for a cash purchase price of $100 per share, (iii) exchange
an aggregate $10 million principal amount of Parent's existing 10% Senior
Subordinated Notes due 2001 together with accrued interest thereon (the "Parent
Senior Subordinated Notes") for an aggregate 33,000 shares of New Parent
Preferred Stock and (iv) convert all outstanding shares of Convertible
Preferred Stock, $.01 par value ("Parent Preferred Stock") into Parent Common
Stock, on the terms and subject to the conditions set forth therein; and
WHEREAS, pursuant to a Stockholders Agreement of even date
herewith (the "Stockholders Agreement") among WCAS VII, Parent and the Company,
WCAS VII has agreed (i) to vote its shares of Parent Common Stock in favor of
approval of the Parent Certificate of Amendment (as defined herein), (ii)
subject to consummation of the Merger, to convert all outstanding shares of
Parent Preferred Stock into Parent Common Stock in accordance with the
Certificate of Incorporation of Parent, (iii) to make further assurances with
respect to Parent's obligations under this Agreement and the Securities
Purchase and Exchange Agreement and (iv) to grant together with Parent an
option to the Company to purchase certain securities of the Company held by
WCAS VII and Parent in the event this Agreement terminates and the Merger is
not consummated, all on the terms and subject to the conditions contained in
the Stockholders Agreement; and
WHEREAS, Parent wishes to afford its public stockholders the
right to participate in the purchase of New Parent Preferred Stock and the New
Parent Subordinated Notes on the same basis as the purchasers in the Securities
Purchase and Exchange Agreement and, to that end, proposes to offer to such
public
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holders a right to purchase their proportionate share, based on fully-diluted
holdings of Parent Common Stock, of the New Parent Preferred Stock and the New
Parent Subordinated Notes; and
WHEREAS, Parent and the Company are entering into an Interim
Management Agreement of even date herewith (the "Interim Management
Agreement"), providing for the chief executive officer of Parent to serve
jointly as the chief executive officer of the Company of Parent and the Company
during the period specified therein; and
WHEREAS, pursuant to a Note and Warrant Assignment and Transfer
Agreement of even date herewith (the "Cerplex Note Purchase Agreement"),
simultaneously with the execution and delivery hereof, WCAS VII is purchasing
for cash from the holders thereof (i) an aggregate $18,069,375 principal amount
of outstanding 9.50% Senior Subordinated Notes due 2001 together with accrued
interest thereon (the "Cerplex Subordinated Notes") of the Company,
representing all the issued and outstanding Cerplex Subordinated Notes and (ii)
certain warrants to purchase shares of Company Common Stock, all on the terms
and subject to the conditions set forth therein; and
WHEREAS, pursuant to a Forbearance Agreement of even date
herewith and a Seventh Amendment to Credit Agreement and Limited Waiver of even
date herewith (collectively, the "Forbearance Agreement"), Citibank, N.A.
("Citibank") is agreeing to the repayment of certain loans at a discount and to
waive certain defaults and forbear from enforcing certain of its rights under
the Credit Agreement dated as of October 12, 1994, as amended (the "Cerplex
Credit Agreement") among the Company, the lenders named therein and Wells Fargo
Bank, N.A., as Agent, pending consummation of the Merger and repayment of the
obligations of the Company under the Cerplex Credit Agreement, all on the terms
and subject to the conditions set forth in the Forbearance Agreement; and
WHEREAS, as a condition precedent to the Merger, Parent desires
to obtain proceeds from a new senior lender of at least $17,000,000 (the "New
Senior Loan") on terms acceptable to Parent; and
WHEREAS, pursuant to a letter agreement of even date herewith
(the "Chase Waiver"), The Chase Manhattan Bank, N.A. ("Chase") is consenting to
the New Senior Loan and agreeing to the subordination to the New Senior Loan of
Chase's currently outstanding loan pursuant to the Credit Agreement, dated as
of March 29, 1996, as amended, among Aurora Electronics Group, Inc., the
guarantors named therein, the lenders named therein, and Chase (formerly known
as Chemical Bank), as Agent, all on the terms and subject to the conditions set
forth in the Chase Amendment;
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NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.01. The Merger. In accordance with the provisions of
this Agreement and the DGCL, at the Effective Time (as defined in Section
1.02), Sub shall be merged with and into the Company, the separate existence of
Sub (except as it may be continued by operation of law) shall thereupon cease,
and the Company shall be the surviving corporation in the Merger (sometimes
hereinafter called the "Surviving Corporation") and shall continue its
corporate existence under the laws of the State of Delaware. The Merger shall
have the effects set forth in Section 259 of the DGCL.
SECTION 1.02. Effective Time. The Merger shall become effective
at the time of filing of, or at such later time specified in, a properly
executed Certificate of Merger, in the form required by and executed in
accordance with the DGCL, filed with the Secretary of State of the State of
Delaware in accordance with the provisions of Section 251 of the DGCL. Such
filing shall be made as soon as practicable after the Closing (as defined in
Section 1.03). When used in this Agreement, the term "Effective Time" shall
mean the date and time at which the Merger shall become effective.
SECTION 1.03. Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Reboul, MacMurray, Hewitt, Maynard & Kristol, 45 Rockefeller Plaza, New
York, New York, at 10:00 a.m., local time, on the day on which all of the
conditions set forth in Article VIII are satisfied or waived or on such other
date and at such other time and place as Parent and the Company shall agree
(such date, the "Closing Date").
ARTICLE II.
THE SURVIVING CORPORATION
SECTION 2.01. Certificate of Incorporation. The Certificate of
Incorporation of Sub in effect at the Effective Time shall be the Certificate
of Incorporation of the Surviving Corporation until amended in accordance with
applicable law, except that the name of the Surviving Corporation shall be "The
Cerplex Group, Inc."
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SECTION 2.02. By-Laws. The By-Laws of Sub as in effect at the
Effective Time shall be the By-Laws of the Surviving Corporation until amended
in accordance with applicable law.
SECTION 2.03. Directors and Officers of Surviving Corporation.
(a) The directors of Sub at the Effective Time shall be
the initial directors of the Surviving Corporation and shall hold office from
the Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the Certificate of
Incorporation or By-Laws of the Surviving Corporation or as otherwise provided
by law.
(b) The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Certificate of
Incorporation or By-Laws of the Surviving Corporation, or as otherwise provided
by law.
ARTICLE III.
CONVERSION OF SHARES
SECTION 3.01. Exchange Ratio. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof:
(a) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than (i) shares to
be canceled in accordance with Section 3.01(b) and (ii) shares of Company
Common Stock for which appraisal rights have been perfected in accordance with
Section 262 of the DGCL ("Dissenting Shares")) shall be converted into the
right to receive, subject to adjustment as provided in Section 3.01(f) below,
1.076368 (the "Exchange Ratio") shares of Parent Common Stock, payable upon the
surrender of the certificate formerly representing such share of Company Common
Stock.
(b) (i) All shares of Company Common Stock and all
shares of Preferred Stock, $.001 par value (the "Company Preferred Stock") of
the Company (collectively sometimes hereinafter referred to as "Company Stock")
that, in either case, are (x) held by the Company as treasury shares or (y)
owned by Parent or any wholly-owned Subsidiary of Parent, and (ii) all shares
of Preferred Stock issued and outstanding immediately prior to the Effective
Time, shall be canceled and retired and cease to exist, and no securities of
Parent or other consideration shall be delivered in exchange therefor. As used
in this Agreement, the
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term "Subsidiary", means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, a majority of whose
outstanding equity securities or other interests having by their terms ordinary
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party and/or one or more of
its Subsidiaries.
(c) Each share of Common Stock, par value $.01 per
share ("Sub Common Stock"), of Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value $.01 per share, of the Surviving
Corporation.
(d) Each outstanding option to purchase Company Common
Stock (each, a "Company Stock Option") under all stock option plans of the
Company shall be assumed by Parent as more specifically provided in Section
7.08 and each outstanding right, subscription, warrant, call, option or other
agreement or arrangement of any kind (collectively, "Company Stock Purchase
Rights") to purchase or otherwise to receive from the Company or any of its
Subsidiaries any of the outstanding authorized but unissued or treasury shares
of the capital stock or any other security of the Company or any of its
Subsidiaries shall be canceled or assumed, as applicable, by Parent as more
specifically provided in Section 7.09.
(e) The holders of Dissenting Shares, if any, shall be
entitled to payment by the Surviving Corporation of the appraised value of such
shares to the extent permitted by and in accordance with the provisions of
Section 262 of the DGCL; provided, however, that (i) if any holder of
Dissenting Shares shall, under the circumstances permitted by the DGCL,
subsequently deliver a written withdrawal of such holder's demand for appraisal
of such shares, or (ii) if any holder fails to establish such holder's
entitlement to rights to payment as provided in such Section 262, or (iii) if
neither any holder of Dissenting Shares nor the Surviving Corporation has filed
a petition demanding a determination of the value of all Dissenting Shares
within the time provided in such Section 262, such holder or holders (as the
case may be) shall forfeit such right to payment for such shares and such
shares shall thereupon be deemed to have been converted into Parent Common
Stock pursuant to Section 3.01(a) as of the Effective Time. The Surviving
Corporation shall be solely responsible for, and shall pay out of its own
funds, any amounts which become due and payable to holders of Dissenting
Shares, and such amounts shall not be paid directly or indirectly by Parent.
(f) It is understood that the parties intend for the
Exchange Ratio to result in a capital structure for Parent in which the holders
of all equity securities on a fully-diluted
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basis of the Company issued and outstanding at the Effective Time (including,
without limitation, Company Common Stock, Company Stock Options and the Company
Stock Purchase Rights listed on Schedule 4.02(a) which are not terminated prior
to the Effective Time) shall receive in the Merger equity securities of Parent
(including Parent Common Stock, Parent Stock Options (as hereinafter defined)
or Parent Stock Purchase Rights (as hereinafter defined), as the case may be)
constituting 25% of the Parent Common Stock on a fully-diluted basis after
giving effect to the Merger and the consummation of all transactions to be
consummated concurrently with the Merger (including the issuance of the New
Parent Preferred Stock, the cancellation of the Cerplex Warrants acquired
pursuant to the Cerplex Note Purchase Agreement and the cancellation of
warrants pursuant to the Forbearance Agreement), not including, for purposes of
such calculation, 50% of the shares of Parent Common Stock subject to then
outstanding Parent Stock Options and 50% of the then outstanding Parent Stock
Purchase Rights with an exercise price or conversion price greater than $2.50.
Accordingly, the parties agree to make such adjustments to the Exchange Ratio
as may be appropriate to give effect to the intent of the parties set forth
herein; provided, that such adjustments may be made no later than five (5)
business days prior to the Effective Time.
SECTION 3.02. Exchange of Company Stock; Procedures.
(a) Prior to the Closing Date, Parent shall designate a
bank or trust company reasonably acceptable to the Company to act as Exchange
Agent hereunder (the "Exchange Agent"). As soon as practicable after the
Effective Time, Parent shall deposit with or for the account of the Exchange
Agent stock certificates representing the number of shares of Parent Common
Stock issuable pursuant to Section 3.01 in exchange for outstanding shares of
Company Stock, which shares of Parent Common Stock shall be deemed to have been
issued at the Effective Time.
(b) As soon as practicable after the Effective Time,
Parent shall cause the Exchange Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Stock (the "Certificates") that were
converted pursuant to Section 3.01 into the right to receive shares of Parent
Common Stock (i) a form of letter of transmittal specifying that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent and (ii)
instructions for use in surrendering such Certificates in exchange for
certificates representing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter
of transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor (x) a certificate representing that number of
whole shares of
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Parent Common Stock which such holder has the right to receive pursuant to the
provisions of this Article III and (y) cash in lieu of any fractional shares of
Parent Common Stock to which such holder is entitled pursuant to Section 3.04,
after giving effect to any required tax withholdings, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Company Stock which is not registered in the transfer records of
the Company, a certificate representing the proper number of shares of Parent
Common Stock may be issued to a transferee if the Certificate representing such
Company Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer, and by evidence that any
applicable stock transfer taxes had been paid. Until surrendered as
contemplated by this Section 3.02(b), each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender a certificate representing shares of Parent Common Stock and cash in
lieu of any fractional shares of Parent Common Stock as contemplated by this
Article III.
SECTION 3.03. Dividends; Transfer Taxes; Escheat. No dividends
or distributions that are declared on shares of Parent Common Stock will be
paid to persons entitled to receive certificates representing shares of Parent
Common Stock hereunder until such persons surrender their Certificates. Upon
such surrender, there shall be paid to the person in whose name the
certificates representing such shares of Parent Common Stock shall be issued,
any dividends or distributions with respect to such shares of Parent Common
Stock which have a record date after the Effective Time and shall have become
payable between the Effective Time and the time of such surrender. In no event
shall the person entitled to receive such dividends or distributions be
entitled to receive interest thereon. Promptly following the date which is six
months after the Effective Time, the Exchange Agent shall deliver to Parent all
cash, certificates and other documents in its possession relating to the
transactions described in this Agreement, and any holders of Company Stock who
have not theretofore complied with this Article III and the letter of
transmittal shall look thereafter only to Parent for the shares of Parent
Common Stock, any dividends or distributions thereon, and any cash in lieu of
fractional shares thereof to which they are entitled pursuant to this Article
III. Notwithstanding the foregoing, neither the Exchange Agent nor any party
hereto shall be liable to a holder of Company Stock for any shares of Parent
Common Stock, any dividends or distributions thereon or any cash in lieu of
fractional shares thereof delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
SECTION 3.04. No Fractional Securities. No certificates or
scrip representing fractional shares of Parent Common Stock shall be issued
upon the surrender for exchange of Certificates,
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and such fractional interests shall not entitle the owner thereof to vote or to
any rights of a security holder. In lieu of any such fractional securities,
each holder of Company Stock who would otherwise have been entitled to a
fraction of a share of Parent Common Stock upon surrender of such holder's
Certificates will be entitled to receive sufficient funds to make a cash
payment (without interest) determined by multiplying (i) the fractional
interest to which such holder would otherwise be entitled (after taking into
account all shares of Company Stock then held of record by such holder) and
(ii) the average last sale price of shares of Parent Common Stock for the
twenty trading days immediately prior to the Effective Time or, if no such sale
takes place on such days, the average of the closing bid and asked prices
thereof for such days, in each case as officially reported on the principal
national securities exchange on which Parent Common Stock is then listed or
admitted to trading or on the OTC Bulletin Board. It is understood (x) that
the payment of cash in lieu of fractional shares of Parent Common Stock is
solely for the purpose of avoiding the expense and inconvenience to Parent of
issuing fractional shares and does not represent separately bargained-for
consideration and (y) that no holder of Company Stock will receive cash in lieu
of fractional shares of Parent Common Stock in an amount greater than the value
of one full share of Parent Common Stock.
SECTION 3.05. Closing of Company Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of shares of Company Stock shall thereafter be made. If, after the
Effective Time, Certificates are presented to the Parent, they shall be
canceled and exchanged as provided in this Article III.
SECTION 3.06. Further Assurances. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things
are necessary or desirable to vest, perfect or confirm of record or otherwise
in the Surviving Corporation its right, title or interest in, to or under any
of the rights, properties or assets of either of Sub or the Company acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of each of Sub and the Company or otherwise, all such deeds,
bills of sale, assignments and assurances and to take and do, in such names and
on such behalves or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out the purposes of this Agreement.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
SECTION 4.01. Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power to carry on its business as it is now
being conducted or presently proposed to be conducted. The Company is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified will not have a material adverse
effect, individually or in the aggregate, on the business, properties,
financial condition, results of operations or prospects of the Company and its
subsidiaries taken as a whole, or the ability of the Company to consummate the
Merger and the other transactions contemplated by this Agreement (a "Company
Material Adverse Effect").
SECTION 4.02. Capitalization.
(a) The authorized capital stock of the Company
consists of 60,000,000 shares of Company Common Stock and 5,000,000 shares of
Company Preferred Stock, of which 3,066,340 shares have been designated as
Series A Preferred Stock (the "Series A Preferred") and 8,000 shares have been
designated as Series B Preferred Stock (the "Series B Preferred"). As of
January 30, 1998, (i) 36,366,084 shares of Company Common Stock were issued and
outstanding, (ii) no shares of Series A Preferred were issued and outstanding,
(iii) no shares of Series B Preferred were issued and outstanding, (iv) Company
Stock Options to acquire 1,294,881 shares of Company Common Stock were
outstanding under all stock option plans of the Company, (v) 6,000,000 shares
of Company Common Stock were reserved for issuance pursuant to the Company
Stock Options and all other employee benefit plans of the Company and (vi)
4,705,119 shares of Company Common Stock were reserved for issuance upon the
exercise of outstanding Company Stock Purchase Rights. All of the issued and
outstanding shares of Company Common Stock are validly issued, fully paid and
nonassessable. Schedule 4.02(a) sets forth with respect to each Company Stock
Option and each Company Stock Purchase Right, the exercise price, the vesting
or exercisability schedule (as applicable), the expiration date and the number
of shares of Company Common Stock into which such Company Stock Option or
Company Stock Purchase Right, as the case may be, is exercisable.
(b) Except as disclosed in this Section 4.02 or as
set forth on Schedule 4.02(a), (i) there are no
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outstanding Company Stock Options or Company Stock Purchase Rights, (ii) there
is no outstanding security of any kind convertible into or exchangeable for
shares of capital stock of the Company, and (iii) there is no voting trust or
other agreement or understanding to which the Company or any of its
Subsidiaries is a party or is bound with respect to the voting of the capital
stock of the Company or any of its Subsidiaries.
(c) Except as set forth on Schedule 4.02(c), the
Company has not in any manner accelerated or provided for the acceleration or
the vesting or exercisability of, or otherwise modified the terms and
conditions applicable to, any of the Company Stock Options, whether set forth
in the governing stock option plans of the Company, a stock option grant, award
or other agreement or otherwise. Except as set forth on Schedule 4.02(c), none
of the awards, grants or other agreements pursuant to which Company Stock
Options were issued have provisions which accelerate the vesting or right to
exercise such options upon the execution of this Agreement (including the
documents attached as Exhibits hereto), the consummation of the transactions
contemplated hereby (or thereby) or any other "change of control" events.
SECTION 4.03. Company Subsidiaries. Schedule 4.03(a) contains a
complete and accurate list of all Subsidiaries of the Company. Each Subsidiary
of the Company that is a corporation, is duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation. Each
Subsidiary of the Company that is a partnership is duly formed and validly
existing under the laws of its jurisdiction of formation. Each Subsidiary of
the Company has the corporate power or the partnership power, as the case may
be, to carry on its business as it is now being conducted or presently proposed
to be conducted. Each Subsidiary of the Company is duly qualified as a foreign
corporation or a foreign partnership, as the case may be, authorized to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified will
not have a Company Material Adverse Effect. All of the outstanding shares of
capital stock of the Subsidiaries of the Company that are corporations are
validly issued, fully paid and nonassessable. Except as set forth in Schedule
4.03(b), all of the outstanding shares of capital stock of, or other ownership
interests in, each other Subsidiary of the Company are directly owned by the
Company or a Subsidiary of the Company free and clear of any liens, pledges,
security interests, claims, charges or other encumbrances of any kind
whatsoever ("Liens").
SECTION 4.04. Authority Relative to this Agreement. The Company
has the requisite corporate power and authority to execute and deliver this
Agreement, the Interim Management
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Agreement and the Forbearance Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated on its part hereby have been duly authorized by the Company's
Board of Directors and, except for the approval of its stockholders to be
sought at the stockholders meeting contemplated by Section 7.04(a) with respect
to this Agreement, no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or for the Company to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with
its terms.
SECTION 4.05. Consents and Approvals; No Violations. Except as
set forth in Schedule 4.05 or as otherwise stated herein, neither the
execution, delivery and performance of this Agreement, the Interim Management
Agreement or the Forbearance Agreement by the Company, nor the consummation by
the Company of the transactions contemplated hereby or thereby, will (i) con-
flict with or result in any breach of any provisions of the charter, by-laws or
other organizational documents of the Company or any of its Subsidiaries, (ii)
require a filing with, or a permit, authorization, consent or approval of, any
federal, state, local or foreign court, arbitral tribunal, administrative
agency or commission or other governmental or other regulatory authority or
administrative agency or commission (a "Governmental Entity"), except in
connection with or in order to comply with the applicable provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), state
securities or "blue sky" laws, the By-Laws of the National Association of
Securities Dealers (the "NASD") and the filing and recordation of a Certificate
of Merger as required by the DGCL, (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, or
result in the creation of any Liens on any property or asset of the Company or
any of its Subsidiaries pursuant to, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, contract, agreement or other
instrument or obligation (each, a "Contract") to which the Company or any of
its Subsidiaries is a party or by which any of them or any of their properties
or assets may be bound or (iv) violate any law, order, writ, injunction,
decree, statute, rule or regulation of any Governmental Entity applicable to
the Company, any of its Subsidiaries or any of their properties or assets,
except, in the case of clauses (ii), (iii) and (iv), where the failure to make
such filing or obtain such authorization, consent or approval would not have,
or where such violations, breaches or defaults or
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Liens would not have, in any such case, a Company Material Adverse Effect.
SECTION 4.06. Reports and Financial Statements. Except as set
forth in Schedule 4.06, the Company has timely filed all reports required to be
filed with the Securities and Exchange Commission (the "SEC") pursuant to the
Exchange Act or the Securities Act since January 1, 1995 (collectively, the
"Company SEC Reports"), and has previously made available to Parent true and
complete copies of all such Company SEC Reports. Such Company SEC Reports, as
of their respective dates except to the extent that such Company SEC Reports
were subsequently amended or restated, complied in all material respects with
the applicable requirements of the Securities Act and the Exchange Act, as the
case may be, and none of such Company SEC Reports contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
that such Company SEC Reports were subsequently amended or restated, the
financial statements of the Company included in the Company SEC Reports have
been prepared in accordance with United States generally accepted accounting
principles ("GAAP") consistently applied throughout the periods indicated
(except as otherwise noted therein or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of
unaudited statements to normal recurring year-end adjustments and any other
adjustments described therein) the consolidated financial position of the
Company and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of operations and cash flows of the Company and its
consolidated Subsidiaries for the periods then ended. Since December 31, 1996,
there has been no change in any of the significant accounting (including tax
accounting) policies, practices or procedures of the Company or any of its
consolidated Subsidiaries.
SECTION 4.07. Absence of Certain Changes or Events; Material
Contracts. Except as set forth on Schedule 4.07 or in the Company SEC Reports
filed and publicly available prior to the date of this Agreement, since
September 30, 1997, (i) neither the Company nor any of its Subsidiaries has
conducted its business and operations other than in the ordinary course and
consistent with past practices, or taken any actions that, if it had been in
effect, would have violated or been inconsistent with the provisions of Section
6.01 in such manner as to result in a Company Material Adverse Effect and (ii)
there has not been any material adverse change in the business, properties,
financial condition, results of operations or prospects of the Company and each
of its Subsidiaries taken as a whole. Except as set forth on Schedule 4.07,
the transactions contemplated by this Agreement will not require the consent
from or the giving of notice to a third party
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pursuant to the terms, conditions or provisions of any material Contract to
which the Company or any of its Subsidiaries is a party.
SECTION 4.08. Absence of Undisclosed Liabilities. Except for
liabilities or obligations which are accrued or reserved against in the
Company's financial statements (or reflected in the notes thereto) included in
the Company SEC Reports or which were incurred after September 30, 1997 in the
ordinary course of business and consistent with past practice, and except as
set forth on Schedule 4.08, none of the Company and its Subsidiaries has any
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of a nature required by GAAP to be reflected in a consolidated balance sheet or
reflected in the notes thereto) or which would have a Company Material Adverse
Effect.
SECTION 4.09. No Default. Except as set forth on Schedule 4.09,
neither the Company nor any Subsidiary of the Company is in default or
violation (and no event has occurred which with notice or the lapse of time or
both would constitute a default or violation) of any term, condition or
provision of (i) its charter, by-laws or comparable organizational documents,
(ii) any Contract to which the Company or any of its Subsidiaries is a party or
by which they or any of their properties or assets may be bound, or (iii) any
order, writ, injunction, decree, statute, rule or regulation of any
Governmental Entity applicable to the Company or any of its Subsidiaries,
except, in the cases of clauses (ii) and (iii), for defaults or violations
which would not have a Company Material Adverse Effect.
SECTION 4.10. Litigation. Except for litigation disclosed in
the notes to the financial statements included in the Company SEC Reports or
set forth in Schedule 4.10 hereto, there is no suit, action, proceeding or
investigation pending of which the Company has received notice or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries, the outcome of which, in the reasonable judgment of the
Company, is likely to have a Company Material Adverse Effect; nor is there any
judgment, decree, injunction, ruling or order of any Governmental Entity
outstanding against the Company or any of its Subsidiaries having, or which is
reasonably likely to have, a Company Material Adverse Effect.
SECTION 4.11. Taxes.
(a) The Company has heretofore delivered or will make
available to Parent true, correct and complete copies of the consolidated
federal, state, local and foreign income, franchise sales and other Tax Returns
(as hereinafter defined) filed by the Company and the Company Subsidiaries for
each of the Company's fiscal years ended December 31, 1996, 1995, 1994, 1993
and 1992
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inclusive. Except as set forth on Schedule 4.11, the Company has duly filed,
and each Subsidiary has duly filed, all material federal, state, local and
foreign income, franchise, sales and other Tax Returns required to be filed by
the Company or any of its Subsidiaries. All such Tax Returns are true, correct
and complete, in all material respects, and the Company and each of its
Subsidiaries have duly paid, all Taxes (as hereinafter defined) shown on such
Tax Returns and have made adequate provision for payment of all accrued but
unpaid material Taxes anticipated in respect of all periods since the periods
covered by such Tax Returns. Except as set forth on Schedule 4.11, all
material deficiencies assessed as a result of any examination of Tax Returns of
the Company or any of its Subsidiaries by federal, state, local or foreign tax
authorities have been paid or reserved on the financial statements of the
Company in accordance with GAAP consistently applied, and true, correct and
complete copies of all revenue agent's reports, "30-day letters," or "90-day
letters" or similar written statements proposing or asserting any Tax
deficiency against the Company or any of its Subsidiaries for any open year
have been heretofore delivered to Parent. The Company has heretofore delivered
or promptly will make available to Parent true, correct and complete copies of
all written tax-sharing agreements and written descriptions of all such
unwritten agreements or arrangements to which the Company or any of its
Subsidiaries is a party. Except as set forth in Schedule 4.11, no material
issue has been raised during the past five years by any federal, state, local
or foreign taxing authority which, if raised with regard to any other period
not so examined, could reasonably be expected to result in a proposed material
deficiency for any other period not so examined. Except as disclosed in
Schedule 4.11 hereof, neither the Company nor any of its Subsidiaries has
granted any extension or waiver of the statutory period of limitations
applicable to any claim for any material Taxes. The consolidated federal
income tax returns of the Company and its Subsidiaries have been examined by
and settled with the Internal Revenue Service (the "Service"), or the statute
of limitations has expired, for all years through 1993. Except as set forth in
Schedule 4.11, (i) neither the Company nor any of its Subsidiaries is a party
to any agreement, contract or arrangement that would result, separately or in
the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code; (ii) no consent has been filed under
Section 341(f) of the Code with respect to any of the Company or the
Subsidiaries of the Company; (iii) neither the Company nor any of the
Subsidiaries of the Company has participated in, or cooperated with, an
international boycott within the meaning of Section 999 of the Code; and (iv)
neither the Company nor any of the Subsidiaries of the Company has issued or
assumed any corporate acquisition indebtedness, as defined in Section 279(b) of
the Code. The Company and each Subsidiary of the Company have complied (and
until the Effective Time will comply) in all material respects with all
applicable laws, rules and regulations
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relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441 and 1442 of the Code
or similar provisions under any foreign laws) and have, within the time and in
the manner prescribed by law, withheld from employee wages and paid over to the
proper governmental authorities all amounts required to be so withheld and paid
over under all applicable laws.
(b) For purposes of this Agreement, the term "Taxes"
shall mean all taxes, charges, fees, levies, duties, imposts or other
assessments, including, without limitation, income, gross receipts, excise,
property, sales, use, transfer, gains, license, payroll, withholding, capital
stock and franchise taxes, imposed by the United States, or any state, local or
foreign government or subdivision or agency thereof, including any interest,
penalties or additions thereto. For purposes of this Agreement, the term "Tax
Return" shall mean any report, return or other information or document required
to be supplied to a taxing authority in connection with Taxes.
SECTION 4.12. Title to Properties; Encumbrances. Except as
described in the following sentence or as set forth in Schedule 4.12, each of
the Company and its Subsidiaries has good, valid and marketable title to, or a
valid leasehold interest in, all of its respective material properties and
assets (real, personal and mixed, tangible and intangible), including, without
limitation, all the properties and assets reflected in the consolidated balance
sheet of the Company and its Subsidiaries as of September 30, 1997 included in
the Company's Quarterly Report on Form 10-Q for the period ended on such date
(except for properties and assets disposed of in the ordinary course of
business and consistent with past practices since September 30, 1997). None of
such properties or assets are subject to any Liens (whether absolute, accrued,
contingent or otherwise), except (i) as specifically set forth in the Company
SEC Reports or in Schedule 4.12 and (ii) minor imperfections of title and
encumbrances, if any, which are not substantial in amount, do not materially
detract from the value of the property or assets subject thereto and do not
impair the operations of any of the Company and its Subsidiaries.
SECTION 4.13. Intellectual Property.
(a) Except as set forth on Schedule 4.13, the Company and
its Subsidiaries are the sole and exclusive owners of all material patents,
patent applications, patent rights, trademarks, trademark rights, trade names,
trade name rights, copyrights, service marks, trade secrets, registrations for
and applications for registration of trademarks, service marks and copyrights,
technology and know how, rights in Computer Software (as hereinafter defined)
and other proprietary rights and information and all technical and user manuals
and documentation made
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or used in connection with any of the foregoing, used or held for use in
connection with the businesses of the Company or any of its Subsidiaries as
currently conducted (collectively, the "Intellectual Property"), free and clear
of all Liens except as set forth on Schedule 4.13 and except minor
imperfections of title and encumbrances, if any, which are not substantial in
amount, do not materially detract from the value of the Intellectual Property
subject thereto and do not impair the operations of any of the Company and its
Subsidiaries.
(b) Each of the Company and its Subsidiaries owns or in
the case of material Intellectual Property licensed from a third party, to the
knowledge of the Company has the right to use all of the material Intellectual
Property used by it or held for use by it in connection with its business. To
the knowledge of the Company, there are no conflicts with or infringements of
any Intellectual Property by any third party. To the knowledge of the Company,
the conduct of the businesses of the Company and its Subsidiaries as currently
conducted (collectively, the "Business") does not conflict with or infringe in
any way any proprietary right of any third party, which conflict or
infringement would have a Company Material Adverse Effect or restrict in any
material fashion the conduct of such Business, and there is no claim, suit,
action or proceeding pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries (i) alleging any such conflict
or infringement with any third party's proprietary rights, or (ii) challenging
the ownership, use, validity or enforceability of the Intellectual Property.
(c) The material Computer Software used by the Company
or any of its Subsidiaries in the conduct of the Business is either: (i) owned
by the Company or such Subsidiary of the Company, as the case may be, as the
result of internal development by an employee of the Company or such Subsidiary
of the Company; (ii) developed on behalf of the Company or any of its
Subsidiaries by a consultant or contractor and all ownership rights therein
have been assigned or otherwise transferred to or vested in the Company or such
Subsidiary of the Company, as the case may be; or (iii) licensed or acquired
from a third party pursuant to a written license, assignment, or other Contract
which is in full force and effect and of which neither the Company nor any of
its Subsidiaries is in material breach. Except as set forth on Schedule 4.13,
(x) no third party has had access to any of the source code for any of the
Computer Software described in clause (i) or (ii) hereof and (iii) no act has
been done or omitted to be done by the Company or any of its Subsidiaries to
impair or dedicate to the Public or entitle any Governmental Entity to hold
abandoned any of such Computer Software.
(d) For purposes of this Agreement, the term "Computer
Software" shall mean (i) any and all computer programs
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consisting of sets of statements and instructions to be used directly or
indirectly in computer software or firmware, (ii) databases and compilations,
including without limitation any and all data and collections of data, whether
machine readable or otherwise, (iii) all versions of the foregoing (x)
including without limitation all screen displays and designs thereof, and all
component modules of source code or object code or natural language code
therefor, and (y) whether recorded on papers, magnetic media or other
electronic or non-electronic device, (iv) all descriptions, flow-charts and
other work product used to design, plan, organize and develop any of the
foregoing, and (v) all documentation, including without limitation all
technical and user manuals and training materials, relating to the foregoing.
SECTION 4.14. Compliance with Applicable Law. Except as set
forth on Schedule 4.14 or as disclosed in the Company SEC Reports, (i) the
Company and its Subsidiaries hold, and are in compliance with the terms of, all
permits, licenses, exemptions, orders and approvals of all Governmental
Entities necessary for the current and proposed conduct of their respective
businesses ("Company Permits"), except for failures to hold or to comply with
such permits, licenses, exemptions, orders and approvals which would not have a
Company Material Adverse Effect, (ii) no fact exists or event has occurred, and
no action or proceeding is pending or, to the Company's knowledge, threatened,
that has a reasonable possibility of resulting in a revocation, nonrenewal,
termination, suspension or other material impairment of any material Company
Permits, (iii) the businesses of the Company and its Subsidiaries are not being
conducted in violation of any applicable law, ordinance, regulation, judgment,
decree or order of any Governmental Entity ("Applicable Law"), except for
violations or possible violations which do not and are not reasonably likely to
have a Company Material Adverse Effect, and (iv) to the knowledge of the
Company, (x) no investigation or review by any Governmental Entity with respect
to the Company or its Subsidiaries is pending or threatened and (y) no
Governmental Entity has indicated an intention to conduct the same, other than,
in each case, those which the Company reasonably believes will not have a
Company Material Adverse Effect.
SECTION 4.15. Information in Disclosure Documents and
Registration Statement. None of the information to be supplied by the Company
for inclusion in (i) the Registration Statement to be filed with the SEC by
Parent on Form S-4 under the Securities Act for the purpose of registering the
shares of Parent Common Stock to be issued in connection with the Merger (the
"Registration Statement") or (ii) the joint proxy statement to be distributed
in connection with Parent's and the Company's meetings of stockholders with
respect to this Agreement (the "Proxy Statement") will, in the case of the
Registration Statement and any post-effective amendment thereof, at the time it
becomes effective or is filed, as the case may be, and, in any such case, at
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the Effective Time, or, in the case of the Proxy Statement or any amendments
thereof or supplements thereto, at the time of the mailing of the Proxy
Statement and any amendments or supplements thereto, and at the time of the
meeting of stockholders of the Company to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The Proxy Statement will comply as to form in all material
respects with the applicable provisions of the Exchange Act, and the rules and
regulations promulgated thereunder, except that no representation is made by
the Company with respect to statements made therein based on information
supplied by Parent or its representatives for inclusion in the Proxy Statement
or with respect to information concerning Parent or any of its Subsidiaries
included or incorporated by reference in the Proxy Statement.
SECTION 4.16. Employee Benefit Plans; ERISA.
(a) Schedule 4.16 hereto sets forth a true and complete
list of each material employee benefit plan, arrangement or agreement that is
maintained, or was maintained at any time during the five (5) calendar years
preceding the date of this Agreement (the "Company Plans"), by the Company or
by any United States trade or business, whether or not incorporated (a "Company
ERISA Affiliate"), which together with the Company would be deemed a "single
employer" within the meaning of Section 414(b) and (c) of the Code.
(b) Each of the Company Plans that is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") is and
has been in compliance with ERISA and the Code in all material respects; each
of the Company Plans intended to be "qualified" within the meaning of Section
401(a) of the Code has received an IRS determination letter regarding its tax-
qualified status; no Company Plan has an accumulated or waived funding
deficiency within the meaning of Section 412 of the Code; neither the Company
nor any Company ERISA Affiliate has incurred, directly or indirectly, any
material liability (including any material contingent liability) to or on
account of a Company Plan pursuant to Title IV of ERISA; no proceedings have
been instituted to terminate any Company Plan that is subject to Title IV of
ERISA; no "reportable event," as such term is defined in Section 4043(b) of
ERISA, has occurred with respect to any Company Plan subject to Title IV of
ERISA; and no condition exists that presents a material risk to the Company or
any Company ERISA Affiliate of incurring a material liability to or on account
of a Company Plan pursuant to Title IV of ERISA.
(c) The current value of the assets of each of the
Company Plans that are subject to Title IV of ERISA, based
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upon the actuarial assumptions (to the extent reasonable) presently used by the
Company Plans, exceeds the present value of the accrued benefits under each
such Company Plan; no Company Plan is a multiemployer plan (within the meaning
of Section 4001(a)(3) of ERISA) and no Company Plan is a multiple employer plan
as defined ia Section 413 of the Code; and all material contributions or other
amounts payable by the Company as of the Effective Time with respect to each
Company Plan in respect of current or prior plan years have been either paid or
accrued on the balance sheet of the Company. To the best knowledge of the
Company, there are no material pending, threatened or anticipated claims (other
than routine claims for benefits) by, on behalf of or against any of the
Company Plans or any trusts related thereto.
(d) Neither the Company nor any Company ERISA
Affiliate, nor any Company Plan, nor any trust created thereunder, nor any
trustee or administrator thereof has engaged in a transaction in connection
with which the Company or any Company ERISA Affiliate, any Company Plan, any
such trust, or any trustee or administrator thereof, or any party dealing with
any Company Plan or any such trust could be subject to either a material civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax
imposed pursuant to Section 4975 or 4976 of the Code. No Company Plan provides
death or medical benefits (whether or not insured), with respect to current or
former employees of the Company or any Company ERISA Affiliate beyond their
retirement or other termination of service other than (i) coverage mandated by
applicable law or (ii) death benefits under any "employee pension plan," as
that term is defined in Section 3(2) of ERISA).
SECTION 4.17. Environmental Laws and Regulations.
(a) Except as set forth on Schedule 4.17 and except for
matters which would not, individually or in the aggregate, be reasonably
expected to result in a Company Material Adverse Effect: (i) the Company and
its Subsidiaries are and have been in compliance with, and there are no
outstanding allegations by any person or entity that the Company or its
Subsidiaries has not been in compliance with, all applicable laws, rules,
regulations, common law, ordinances, decrees, orders or other binding legal
requirements relating to pollution (including the treatment, storage and
disposal of wastes and the remediation or releases and threatened releases of
materials), the preservation of the environment, and the exposure to materials
in the environment or work place ("Environmental Laws") and (ii) the Company
and its Subsidiaries currently hold all permits, licenses, registrations and
other governmental authorizations (including exemptions, waivers, and the like)
and financial assurance required under Environmental Laws for the Company and
its Subsidiaries to operate their businesses as currently conducted.
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(b) Except as set forth on Schedule 4.17, (i) to the
knowledge of the Company, there is no friable asbestos-containing material in
or on any real property currently owned, leased or operated by the Company or
its Subsidiaries and (ii) there are and have been no underground storage tanks
(whether or not required to be registered under any applicable law), dumps,
landfills, lagoons, surface impoundments, injection wells or other land
disposal units in or on any property currently owned, leased or operated by the
Company or its Subsidiaries.
(c) Except as set forth on Schedule 4.17, (i) neither
the Company nor its Subsidiaries has received (or, to the knowledge of the
Company, is expected to receive) (x) any written communication from any person
stating or alleging that any of them may be a potentially responsible party
under any Environmental Law (including, without limitation, the Federal
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
a amended) with respect to any actual or alleged environmental contamination
nor (y) any request for information under any Environmental Law from any
Governmental Entity with respect to any actual or alleged material
environmental contamination; and (ii) none of the Company, its Subsidiaries or
any Governmental Entity is conducting or has conducted (or, to the knowledge of
the Company, is threatening to conduct) any environmental remediation or
investigation which could result in a material liability of the Company or its
Subsidiaries under any Environmental Law.
SECTION 4.18. Vote Required. The affirmative vote of (i) the
holders of a majority of the outstanding shares of capital stock of the Company
entitled to vote thereon, consisting of the Company Common Stock present in
person or represented by proxy at the stockholders' meeting of the Company
described in Section 7.04(a) (provided that the shares so present or repre-
sented constitute a majority of the outstanding shares of Company Common Stock)
is the only vote of the holders of any class or series of the Company's capital
stock necessary to approve the Merger. The Board of Directors of the Company
(at a meeting duly called and held) has unanimously (i) approved this
Agreement, the Forbearance Agreement and the Interim Management Agreement, (ii)
determined that the transactions contemplated hereby and thereby are fair to
and in the best interests of the holders of Company Stock and (iii) determined
to recommend this Agreement, the Merger and the other transactions contemplated
hereby to such holders for approval and adoption.
SECTION 4.19. Opinion of Financial Advisor. The Company has
received the opinion of Chanin and Company LLC, dated the date hereof,
substantially to the effect that the consideration to be received in the Merger
by the holders of Company Common Stock is fair to such holders from a financial
point of view.
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SECTION 4.20. DGCL Section 203. Prior to the date hereof, the
Company has elected, in accordance with the provisions of Section 203(b) of the
DGCL, not to be governed by Section 203 of the DGCL.
SECTION 4.21. Labor Matters. Except as set forth in Schedule
4.21, neither the Company nor any of its Subsidiaries is a party to, or bound
by, any collective bargaining agreement, contract or other understanding with a
labor union or labor organization and, to the knowledge of the Company, there
is no activity, involving any employees of the Company or its Subsidiaries
seeking to certify a collective bargaining unit or engaging in any other
organizational activity.
SECTION 4.22. Severance Arrangements. Except as set forth on
Schedule 4.22 hereto, neither the Company nor any of its subsidiaries is party
to any agreement with any employee (i) the benefits of which (including,
without limitation, severance benefits) are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving the
Company or any of its Subsidiaries of the nature of any of the transactions
contemplated by this Agreement, the Merger or the Interim Management Agreement
or (ii) providing severance benefits in excess of those generally available
under the Company's severance policies as in effect on the date hereof (which
are described on Schedule 4.22), or which are conditioned upon a change of
control, after the termination of employment of such employees regardless of
the reason for such termination of employment, and neither the Company nor any
of its Subsidiaries is a party to any employment agreement or compensation
guarantee extending for a period longer than one year from the date hereof.
Schedule 4.22 sets forth all employment agreements and compensation guarantees,
regardless of duration, to which the Company or any of its Subsidiaries is a
party.
SECTION 4.23. Affiliate Transactions. Except as set forth in
Schedule 4.23 or as disclosed in the Company SEC Reports, there are no material
Contracts that are still in force or effect (oral or written) between the
Company or any of its Subsidiaries, on the one hand, and any (i) officer or
director of the Company or any of its Subsidiaries, (ii) record or beneficial
owner of five percent or more of the voting securities of the Company or (iii)
affiliate (as such term is defined in Regulation 12b-2 promulgated under the
Exchange Act) of any such officer, director or beneficial owner, on the other
hand.
SECTION 4.24. Brokers. Except as set forth in Schedule 4.24
hereto, no broker, finder or financial advisor is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger or the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
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ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
SECTION 5.01. Organization. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power to carry on its business as it is now
being conducted or presently proposed to be conducted. Parent is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities make such qualification necessary, except
where the failure to be so qualified will not have a material adverse effect
individually or in the aggregate, on the business, properties, financial
condition, results of operations or prospects of Parent and its Subsidiaries
taken as a whole or on the ability of Parent to consummate the Merger and the
other transactions contemplated by this Agreement (a "Parent Material Adverse
Effect"). Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Sub has not engaged in any
business (other than in connection with this Agreement and the transactions
contemplated hereby) since the date of its incorporation.
SECTION 5.02. Capitalization.
(a) The authorized capital stock of Parent consists of
50,000,000 shares of Parent Common Stock, and 1,000,000 shares of Preferred
Stock, par value $.01 per share of Parent, of which 400,000 shares have been
designated Convertible Preferred Stock, 25,000 shares have been designated
Series B Convertible Preferred Stock, 25,000 shares have been designated Series
C Convertible Preferred Stock and 20,000 shares have been designated Series D
Convertible Preferred Stock. As of January 30, 1998, (i) 6,847,583 shares of
Parent Common Stock were issued and outstanding, (ii) 470,000 shares of Parent
Preferred Stock were issued and outstanding, (iii) options to acquire 4,311,599
shares of Parent Common Stock (the "Parent Stock Options") were outstanding
under all stock option plans of Parent, (iv) 5,209,887 shares of Parent Common
Stock were reserved for issuance pursuant to the Parent Stock Options and all
other employee benefit plans of Parent, (v) 30,000,000 shares of Parent Common
Stock were reserved for issuance upon the conversion of the outstanding Parent
Preferred Stock and (vi) 3,700,000 shares of Parent Company Stock were reserved
for issuance upon the exercise of all outstanding rights, subscriptions,
warrants, calls, options or other agreements or arrangements of any kind
(collectively, the "Parent Stock Purchase Rights") to purchase or
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<PAGE> 30
otherwise receive from Parent any of the outstanding authorized but unissued or
treasury shares of the capital stock or any other security of Parent. All of
the outstanding shares of capital stock of Parent are, and the shares of Parent
Common Stock issuable in exchange for shares of Company Common Stock and
Company Preferred Stock at the Effective Time in accordance with this Agreement
will be, when so issued, duly authorized, validly issued, fully paid and
nonassessable. Schedule 5.02 sets forth with respect to each Parent Stock
Option and Parent Stock Purchase Right, the exercise price, the vesting or
exercisability schedule (as applicable), the expiration date and the number of
shares of Parent Common Stock into which such Parent Stock Option or Parent
Stock Purchase Right, as the case may be, is exercisable.
(b) The authorized capital stock of Sub consists of
1,000 shares of Sub Common Stock, of which 1,000 shares, as of the date hereof,
were issued and outstanding. All of such outstanding shares are owned by
Parent, and are validly issued, fully paid and nonassessable.
(c) Except as disclosed in this Section 5.02 or as set
forth on Schedule 5.02, (i) there are no outstanding Parent Stock Options or
Parent Stock Purchase Rights, (ii) there is no outstanding security of any kind
convertible into or exchangeable for such capital stock and (iii) there is no
voting trust or other agreement or understanding to which Parent or Sub is a
party or is bound with respect to the voting of the capital stock of Parent or
Sub.
SECTION 5.03. Parent Subsidiaries. Schedule 5.03(a) contains a
complete and accurate list of all Subsidiaries of Parent. Each Subsidiary of
Parent that is a corporation is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each Subsidiary
of Parent that is a partnership is duly formed and validly existing under the
laws of its jurisdiction of formation. Each Subsidiary of Parent has the
corporate power or the partnership power, as the case may be, to carry on its
business as it is now being conducted or presently proposed to be conducted.
Each Subsidiary of Parent is duly qualified as a foreign corporation or a
foreign partnership, as the case may be, authorized to do business, and is in
good standing, in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified will not have a Parent
Material Adverse Effect. All of the outstanding shares of capital stock of the
Subsidiaries of Parent that are corporations are validly issued, fully paid and
nonassessable. Except as set forth in Schedule 5.03(b), all of the outstanding
shares of capital stock of, or other ownership interests in, each other
Subsidiary of
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Parent are directly owned by Parent or a Subsidiary of Parent free and clear of
any Liens.
SECTION 5.04. Authority Relative to this Agreement. Each of
Parent and Sub has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by each of Parent and Sub and the
consummation by Parent and Sub of the transactions contemplated on its part
hereby have been duly authorized by their respective Boards of Directors, and
by Parent as the sole stockholder of Sub, and, except for the approval of
Parent's stockholders to be sought at the stockholders meeting contemplated by
Section 7.04(b), no other corporate proceedings on the part of Parent or Sub
are necessary to authorize this Agreement or for Parent and Sub to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Sub and constitutes a valid and
binding agreement of each of Parent and Sub, enforceable against Parent and Sub
in accordance with its terms.
SECTION 5.05. Consents and Approvals; No Violations. Except as
set forth in Schedule 5.05 or as otherwise stated herein, neither the
execution, delivery and performance of this Agreement by Parent or Sub, nor the
consummation by Parent or Sub of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provisions of the Certificate of
Incorporation or By-Laws of Parent or of Sub, (ii) require a filing with, or a
permit, authorization, consent or approval of, any Governmental Entity except
in connection with or in order to comply with the applicable provisions of the
HSR Act, the Securities Act, the Exchange Act, state laws relating to
takeovers, if applicable, state securities or "blue sky" laws, the By-Laws of
NASD and other exchanges on which the shares of Parent Common Stock are listed,
and the filing and recordation of a Certificate of Merger as required by the
DGCL, (iii) result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or result in the creation of
a Lien on any property or asset of Parent or any of its Subsidiaries pursuant
to, any of the terms, conditions or provisions of any Contract to which Parent
or Sub is a party or by which either of them or any of their properties or
assets may be bound or (iv) violate any law, order, writ, injunction, decree,
statute, rule or regulation of any Governmental Entity applicable to Parent,
Sub or any of their properties or assets, except, in the case of clauses (ii),
(iii) and (iv), where the failure to make such filing or obtain such
authorization, consent or approval would not have, or where such violations,
breaches or defaults or Liens would not have, in any such case, a Parent
Material Adverse Effect.
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SECTION 5.06. Reports and Financial Statements. Except as set
forth in Schedule 5.06, Parent has timely filed all reports required to be
filed with the SEC pursuant to the Exchange Act or the Securities Act since
January 1, 1995 (collectively, the "Parent SEC Reports"), and has previously
made available to the Company true and complete copies of all such Parent SEC
Reports. Such Parent SEC Reports, as of their respective dates except to the
extent that such Parent SEC Reports were amended or restated, complied in all
material respects with the applicable requirements of the Securities Act and
the Exchange Act, as the case may be, and none of such SEC Reports contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Except
to the extent that such Parent SEC Reports were amended or restated, the
financial statements of Parent included in the Parent SEC Reports have been
prepared in accordance with GAAP consistently applied throughout the periods
indicated (except as otherwise noted therein or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly present (subject,
in the case of unaudited statements, to normal, recurring year-end adjustments
and any other adjustments described therein) the consolidated financial
position of Parent and its consolidated Subsidiaries as at the dates thereof
and the consolidated results of operations and cash flows of Parent and its
consolidated Subsidiaries for the periods then ended. Since December 31, 1996,
there have been no changes in any of the significant accounting (including tax
accounting) policies, practices or procedures of the Parent or any of its
consolidated Subsidiaries.
SECTION 5.07. Absence of Certain Changes or Events. Except as
set forth in Schedule 5.07 or in the Parent SEC Reports since September 30,
1997, Parent has not conducted its business and operations other than in the
ordinary course and consistent with past practices, or taken any actions, that
if it had been in effect, would have violated Section 6.02 in such a manner as
to result in a Parent Material Adverse Effect.
SECTION 5.08. Absence of Undisclosed Liabilities. Except for
liabilities or obligations which are accrued or reserved against in Parent's
financial statements (or reflected in the notes thereto) included in the Parent
SEC Reports or which were incurred after September 30, 1997 in the ordinary
course of business and consistent with past practice, and except as set forth
in Schedule 5.08, none of Parent and its Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected in a consolidated balance sheet (or reflected
in the notes thereto) or which would have a Parent Material Adverse Effect.
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SECTION 5.09. No Default. Neither Parent nor any Subsidiary of
Parent is in default or violation (and no event has occurred which with notice
or the lapse of time or both would constitute a default or violation) of any
term, condition or provision of (i) its charter, by-laws or comparable
organizational documents, (ii) Contracts to which Parent or its Subsidiaries is
a party or by which they or any of their properties or assets may be bound, or
(iii) any order, writ, injunction, decree, statute, rule or regulation of any
Governmental Entity applicable to Parent or any of its Subsidiaries, except, in
the case of causes (ii) and (iii) above, for defaults or violations which would
not have a Parent Material Adverse Effect.
SECTION 5.10. Litigation. Except for litigation disclosed in
the notes to the financial statements included in the Parent SEC Reports, there
is no suit, action, proceeding or investigation pending of which Parent has
received notice or, to the knowledge of Parent, threatened against or affecting
Parent or any of its Subsidiaries, the outcome of which, in the reasonable
judgment of Parent, is likely to have a Parent Material Adverse Effect; nor is
there any judgment, decree, injunction, ruling or order of any Governmental
Entity outstanding against Parent or any of its Subsidiaries having, or which
is reasonably likely to have, a Parent Material Adverse Effect.
SECTION 5.11. Taxes. Parent has heretofore delivered or will
make available to the Company true correct and complete copies of the
consolidated federal, state, local and foreign income, franchise, sales and
other Tax Returns filed by Parent and its Subsidiaries for each of the Parent's
fiscal years ended December 31, 1996, 1995, 1994, 1993 and 1992 inclusive.
Except as set forth on Schedule 5.11, Parent has duly filed, and each of its
Subsidiaries has duly filed, all material federal, state, local and foreign
income, franchise, sales and other Tax Returns required to be filed by Parent
or the Subsidiaries of Parent. All such Tax Returns are true, correct and
complete, in all material respects, and Parent and the Subsidiaries of Parent
have duly paid all Taxes shown on such Tax Returns and have paid or made
adequate provision for payment of all accrued but unpaid material Taxes in
respect of all periods since the periods covered by such Tax Returns. Except
as set forth on Schedule 5.11, all material deficiencies assessed as a result
of any examination of Tax Returns of Parent or the Subsidiaries of Parent by
federal, state, local or foreign tax authorities have been paid or reserved on
the financial statements of Parent in accordance with GAAP consistently
applied, and true, correct and complete copies of all revenue agent's reports,
"30-day letters," or "90-day letters" or similar written statements proposing
or asserting any Tax deficiency against Parent or the Subsidiaries of Parent
for any open year have been heretofore delivered to the Company. Except as set
forth on Schedule 5.11, no material issue has been raised during the past five
years by any federal, state,
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local or foreign taxing authority which, if raised with regard to any other
period not so examined, could reasonably be expected to result in a proposed
material deficiency for any other period not so examined. Except as disclosed
in Schedule 5.11, neither Parent nor any of its Subsidiaries has granted any
extension or waiver of the statutory period of limitations applicable to any
claim for any material Taxes. The consolidated federal income tax returns of
Parent and the Subsidiaries of Parent have been examined by and settled with
the Service, or the statute of limitations has expired, for all years through
1993. Except as set forth on Schedule 5.11, neither Parent nor any Subsidiary
of Parent (i) is a party to any agreement, contract or arrangement that would
result, separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code; (ii) has filed a
consent under Section 341(f) of the Code with respect to any of Parent or the
Subsidiaries of Parent; (iii) has participated in, or cooperated with, an
international boycott within the meaning of Section 999 of the Code; or (iv)
has issued or assumed any corporate acquisition indebtedness, as defined in
Section 279(b) of the Code. Parent and each of the Subsidiaries of Parent have
complied (and until the Effective Time will comply) in all material respects
with all applicable laws, rules and regulations relating to the payment and
withholding of Taxes (including, without limitation, withholding of Taxes
pursuant to Sections 1441 and 1442 of the Code or similar provisions under any
foreign laws) and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper governmental authori-
ties all amounts required to be so withheld and paid over under all applicable
laws.
SECTION 5.12. Compliance with Applicable Law. Except as
disclosed in the Parent SEC Reports, (i) Parent and its Subsidiaries hold, and
are in compliance with the terms of, all permits, licenses, exemptions, orders
and approvals of all Governmental Entities necessary for the current or
proposed conduct of their respective businesses ("Parent Permits"), except for
failures to hold or to comply with such permits, licenses, exemptions, orders
and approvals which would not have a Parent Material Adverse Effect, (ii) no
fact exists or event has occurred, and no action or proceeding is pending or,
to Parent's knowledge, threatened, that has a reasonable possibility of
resulting in a revocation, non-renewal, termination, suspension or other
material impairment of any material Parent Permits, (iii) the businesses of
Parent and its Subsidiaries are not being conducted in violation of any
Applicable Law (including ERISA and Environmental Laws), except for violations
or possible violations which do not and are not reasonably likely to have a
Parent Material Adverse Effect, and (iv) to the knowledge of Parent, (x) no
investigation or review by any Governmental Entity with respect to Parent or
its Subsidiaries is pending or threatened and (y) no Governmental Entity has
indicated an intention to
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conduct the same, other than, in each case, those which Parent reasonably
believes will not have a Parent Material Adverse Effect.
SECTION 5.13. Information in Disclosure Documents and
Registration Statement. None of the information to be supplied by Parent or
Sub for inclusion in (i) the Registration Statement or (ii) the Proxy Statement
will, in the case of the Registration Statement and any post-effective
amendment thereto, at the time it becomes effective or is filed, as the case
may be, and, in any case, at the Effective Time, or, in the case of the Proxy
Statement or any amendments thereof or supplements thereto, at the time of the
mailing of the Proxy Statement and any amendments or supplements thereto, and
at the time of the meeting of stockholders of Parent to be held in connection
with the Merger, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Registration Statement, including all amendments
thereto, and the Proxy Statement will comply as to form in all material
respects with the applicable provisions of the Securities Act and the Exchange
Act, and the rules and regulations promulgated thereunder, except that no
representation is made by Parent with respect to statements made therein based
on information supplied by the Company or its representatives for inclusion in
the Registration Statement or the Proxy Statement or with respect to
information concerning the Company or any of its Subsidiaries included or
incorporated by reference in the Registration Statement or the Proxy Statement.
SECTION 5.14. Vote Required. The affirmative vote of (i) the
holders of a majority of the shares of Parent Common Stock, voting together as
a single class with the holders of the Parent Preferred Stock (with such Parent
Preferred Stock holders being entitled to one vote for each share of Parent
Common Stock into which such shares of Parent Preferred Stock so held would be
convertible on the record date set for the vote), and (ii) the holders of a
majority of the outstanding shares of Parent Preferred Stock, voting as a
separate class, are the only votes of the holders of any class or series of
Parent capital stock necessary to approve the amendment to Parent's Certificate
of Incorporation (the "Parent Certificate of Amendment") necessary to authorize
a sufficient number of shares of Parent Common Stock for issuance in the Merger
and for issuance upon the conversion of the New Parent Preferred Stock. The
affirmative vote of Parent, as the sole stockholder of all outstanding shares
of Sub Common Stock, is the only vote of the holders of any class or series of
Sub capital stock necessary to approve the Merger. The Board of Directors of
Parent (at a meeting duly called and held) has by the unanimous vote of the
directors (w) approved this Agreement, the Securities Purchase and Exchange
Agreement, the Interim Management Agreement and the Chase Waiver, (x)
determined
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that the transactions contemplated hereby and thereby are fair to and in the
best interests of the holders of Parent Common Stock, (y) approved the Parent
Certificate of Amendment and determined to submit the Parent Certificate of
Amendment to such holders for approval and adoption and (z) caused Parent, as
the sole stockholder of Sub, to approve and adopt this Agreement. The Board of
Directors of Sub (by unanimous written consent) has approved this Agreement.
SECTION 5.15. Opinion of Financial Advisor. Parent has received
the opinion of Dain Rauscher Incorporated, dated January 28, 1998,
substantially to the effect that the transactions contemplated hereby are fair
to the stockholders of Parent (other than WCAS VII and its affiliates) from a
financial point of view as a whole.
SECTION 5.16. Brokers. Except as set forth on Schedule 5.16
hereto, no broker, finder or financial advisor is entitled to any brokerage
finder's or other fee or commission in connection with the Merger or the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Sub.
ARTICLE VI.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.01. Conduct of Business by the Company Pending the
Merger. Prior to the Effective Time, unless Parent shall otherwise agree in
writing, or as otherwise expressly contemplated by this Agreement (including
Schedule 6.01 hereto) or resulting from joint management of the Company and
Parent pursuant to the Interim Management Agreement:
(a) the Company shall conduct, and cause each of its
Subsidiaries to conduct, its business only in the ordinary and usual course
consistent with past practice, and the Company shall use, and cause each of its
Subsidiaries to use, its reasonable efforts consistent with past practice to
preserve intact its present business organization, keep available the services
of its present officers and key employees, and preserve the goodwill of those
having business relationships with it;
(b) the Company shall not, nor shall it permit any of
its Subsidiaries to, (i) amend its charter, by-laws or other organizational
documents, (ii) split, combine or reclassify any shares of its outstanding
capital stock, (iii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property (other than payments to the
Company by a Subsidiary) or (iv) directly or indirectly redeem or otherwise
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acquire any shares of its capital stock or shares of the capital stock of any
of its Subsidiaries;
(c) the Company shall not, nor shall it permit any of
its Subsidiaries to, (i) authorize for issuance, issue or sell or agree to
issue or sell any shares of, or Rights to acquire or convertible into any
shares of, its capital stock or shares of the capital stock of any of its
Subsidiaries (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise), except for the
issuance of shares of Company Common Stock upon the exercise of Company Stock
Options or Company Stock Purchase Rights outstanding on the date of this
Agreement and disclosed in Section 4.02 hereof; (ii) merge or consolidate with
another entity; (iii) acquire or purchase an equity interest in or a
substantial portion of the assets of another corporation, partnership or other
business organization or otherwise acquire any assets outside the ordinary and
usual course of business and consistent with past practice or otherwise enter
into any material contract, commitment or transaction outside the ordinary and
usual course of business consistent with past practice; (iv) sell, lease,
license, waive, release, transfer, encumber or otherwise dispose of any
material amount of its assets outside the ordinary and usual course of business
and consistent with past practice; (v) incur, assume or prepay any material
indebtedness or any other material liabilities other than in the ordinary
course of business and consistent with past practice; (vi) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person other than a
Subsidiary of the Company, in each case in the ordinary course of business and
consistent with past practice; (vii) make any loans, advances or capital
contributions to, or investments in, any other person, other than to
Subsidiaries of the Company; (viii) authorize or make capital expenditures in
excess of the amounts currently budgeted therefor and disclosed to Parent; (ix)
permit any insurance policy naming the Company or any Subsidiary of the Company
as a beneficiary or a loss payee to be canceled or terminated other than in the
ordinary course of business; or (x) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(d) the Company shall not, nor shall it permit its
Subsidiaries to, (i) adopt, enter into, terminate or amend (except as may be
required by Applicable Law) any Company Plan or other arrangement for the
current or future benefit or welfare of any director, officer or current or
former employee, (ii) increase in any manner the compensation or fringe
benefits of, or pay any bonus to, any director, officer or employee (except for
increases in salaried compensation in the ordinary course of business
consistent with past practice), or (iii) take any action to fund or in any
other way secure, or to accelerate or otherwise
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remove restrictions with respect to, the payment of compensation or benefits
under any employee plan, agreement, contract, arrangement or other Company Plan
(including the Company Stock Options); and
(e) the Company shall not, nor shall it permit its
Subsidiaries to, take any action with respect to, or make any material change
in, its accounting or tax policies or procedures.
SECTION 6.02. Conduct of Business by Parent Pending the Merger.
Prior to the Effective Time, unless the Company shall otherwise agree in
writing, or as otherwise expressly contemplated by this Agreement or resulting
from joint management of the Company pursuant to the Interim Management
Agreement:
(a) the business of Parent shall be conducted, and
Parent shall cause each of its Subsidiaries to conduct its business, only in
the ordinary and usual course consistent with past practice, and Parent shall
use, and Parent shall cause each of its Subsidiaries to use, its reasonable
efforts to preserve intact its present business organization, to keep available
the services of its respective present officers and key employees, and preserve
the goodwill of those having business relationships with it;
(b) Parent shall not, nor shall it permit any of its
Subsidiaries to, (i) amend its charter (other than, in the case of Parent, to
increase the number of authorized shares of Parent Common Stock and to create
the New Parent Preferred Stock), By-Laws or other organizational documents;
(ii) split, combine or reclassify any shares of its outstanding capital stock;
(iii) declare, set aside or pay any dividend or other distribution payable in
cash, stock or property (other than payments to Parent by a Subsidiary or
regular dividends on the Parent Preferred Stock); or (iv) directly or
indirectly redeem or otherwise acquire any shares of its capital stock or
shares of the capital stock of any of its Subsidiaries;
(c) Parent shall not, nor shall it permit any of its
Subsidiaries to, (i) authorize for issuance, issue or sell or agree to issue or
sell any shares of, or Rights to acquire or convertible into any shares of, its
capital stock or shares of capital stock of any of its Subsidiaries (whether
through the issuance or granting of options, warrants, commitments, subscrip-
tions, rights to purchase or otherwise), except for (w) the issuance of shares
of Parent Common Stock (A) upon the exercise of Parent Stock Options or other
Rights outstanding on the date of this Agreement and disclosed in Section 5.02
hereof, (B) upon the exercise of Parent Stock Options or Parent Stock Purchase
Rights outstanding as of the date of this Agreement or Parent Stock Options
described in the immediately following clause (x), or (C) upon the conversion
of the Parent Preferred Stock in
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accordance with its present terms, (x) the issuance of Parent Stock Options
pursuant to existing employee benefit plans or arrangements in a manner
consistent with past practice, (y) the issuance of New Parent Preferred Stock
pursuant to the Securities Purchase and Exchange Agreement and the Parent
Rights Offering and (z) the issuance of Parent Common Stock upon conversion of
New Parent Preferred Stock in accordance with its terms, or (ii) merge or
consolidate with any other entity, other than the merger of Sub into the
Company or the merger of any Subsidiary of Parent into Parent or any Subsidiary
of Parent; and
(d) neither Parent nor Sub shall take any action with
respect to, or make any material change in, its accounting or tax policies or
procedures.
SECTION 6.03. Conduct of Business of Sub. During the period
from the date of this Agreement to the Effective Time, Sub shall not engage in
any activities of any nature except as provided in or contemplated by this
Agreement. It is understood that Sub was formed by Parent solely for the
purpose of effecting the Merger, and that Sub will have no material assets and
no material liabilities prior to the Merger.
ARTICLE VII.
ADDITIONAL AGREEMENTS
SECTION 7.01. Access and Information. Each of the Company and
Parent shall (and shall cause its Subsidiaries and its and their respective
officers, directors, employees, auditors and agents to) afford to the other and
to the other's officers, employees, financial advisors, legal counsel,
accountants, consultants and other representatives reasonable access during
normal business hours throughout the period prior to the Effective Time to all
of its books and records and its properties, plants and personnel and, during
such period, each shall furnish promptly to the other a copy of each report,
schedule and other document filed or received by it pursuant to the
requirements of federal securities laws, provided that no investigation
pursuant to this Section 7.01 shall affect any representations or warranties
made herein or the conditions to the obligations of the respective parties to
consummate the Merger. Unless otherwise required by law, each party agrees
that it (and its Subsidiaries and its and their respective representatives)
shall hold in confidence all non-public information so acquired in accordance
with the terms of the Confidentiality Agreement, dated December 9, 1997,
between Parent and the Company (the "Confidentiality Agreement").
SECTION 7.02. No Solicitation. Prior to the Effective Time, the
Company agrees that neither it, any of its Subsidiaries
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or its affiliates, nor any of the respective directors, officers, employees,
agents or representatives of the foregoing will, directly or indirectly,
solicit, initiate or encourage (including by way of furnishing or disclosing
non-public information) any inquiries or the making of any proposal with
respect to any merger, consolidation or other business combination involving
the Company or any Subsidiary of the Company or the acquisition of all or any
significant assets or capital stock of the Company or any Subsidiary of the
Company taken as a whole (an "Acquisition Transaction") or negotiate, explore
or otherwise engage in discussions with any person (other than Parent and its
representatives) with respect to any Acquisition Transaction or enter into any
agreement, arrangement or understanding with respect to any such Acquisition
Transaction or which would require it to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by this Agreement;
provided, however, that the Company may, in response to an unsolicited written
proposal from a third party, furnish information to and engage in discussions
with such third party, in each case only if the Board of Directors of the
Company determines in good faith by a majority vote, after consultation with
its financial advisors and based upon the advice of outside legal counsel to
the Company, that failing to take such action would result in a breach of the
fiduciary duties of the Board of Directors. The Company agrees that as of the
date hereof, its Subsidiaries and affiliates, and the respective directors,
officers, employees, agents and representatives of the foregoing, shall
promptly cease and cause to be terminated any existing activities, discussions
or negotiations with any person (other than Parent and its representatives)
conducted heretofore with respect to any Acquisition Transaction. The Company
agrees to immediately advise Parent in writing of any inquiries or proposals
received by, any such information requested from, or any such negotiations or
discussions sought to be initiated or continued with, any of the Company, its
Subsidiaries or affiliates, or any of the respective directors, officers,
employees, agents or representatives of the foregoing, in each case from each
person (other than Parent and its representatives) with respect to an
Acquisition Transaction, and the terms thereof, including the identity of such
third party, and to update on an ongoing basis or upon Parent's request, the
status thereof, as well as any actions taken or other developments pursuant to
this Section 7.02.
SECTION 7.03. Registration Statement. As promptly as
practicable, Parent and the Company shall in consultation with each other
prepare and file with the SEC the Proxy Statement and Parent in consultation
with the Company shall prepare and file with the SEC the Registration
Statement. Each of Parent and the Company shall use its reasonable best
efforts to have the Registration Statement declared effective. Parent shall
also use its reasonable best efforts to take any action required to be taken
under state securities or "blue sky" laws in connection with the
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issuance of the shares of Parent Common Stock pursuant to this Agreement and
the Merger. The Company shall furnish Parent with all information concerning
the Company and its Subsidiaries and the holders of its capital stock and shall
take such other action as Parent may reasonably request in connection with the
Registration Statement and the issuance of shares of Parent Common Stock. If
at any time prior to the Effective Time any event or circumstance relating to
Parent, any Subsidiary of Parent, the Company, any Subsidiary of the Company,
or their respective officers or directors, is discovered by such party which
should be set forth in an amendment or a supplement to the Registration
Statement or Proxy Statement, such party shall promptly inform the other
thereof and take appropriate action in respect thereof.
SECTION 7.04. Proxy Statements; Stockholder Approvals.
(a) The Company, acting through its Board of Directors,
shall, subject to and in accordance with applicable law and its Certificate of
Incorporation and By-Laws, promptly and duly call, give notice of, convene and
hold as soon as practicable following the date upon which the Registration
Statement becomes effective, a meeting of the holders of Company Common Stock
for the purpose of voting to approve and adopt this Agreement and the
transactions contemplated hereby, and, subject to the fiduciary duties of the
Board of Directors of the Company under applicable law as advised by outside
legal counsel, recommend approval and adoption of this Agreement and the
transactions contemplated hereby, by the stockholders of the Company entitled
to vote thereon and include in the Proxy Statement such recommendation and take
all reasonable and lawful action to solicit and obtain such approval.
(b) Parent, acting through its Board of Directors,
shall, subject to and in accordance with applicable law and its Certificate of
Incorporation and By-Laws, promptly and duly call, give notice of, convene and
hold as soon as practicable following the date upon which the Registration
Statement becomes effective, a meeting of the holders of Parent Common Stock
and Parent Preferred Stock for the purpose of voting to approve the Parent
Certificate of Amendment.
(c) Parent and the Company, as promptly as practicable
(or with such other timing as they mutually agree), shall cause the definitive
Proxy Statement to be mailed to their stockholders.
(d) At or prior to the Closing, each of Parent and the
Company shall deliver to the other a certificate of its Secretary setting forth
the voting results from its stockholder meeting.
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SECTION 7.05. Affiliates.
(a) At least 45 days prior to the Effective Time, the
Company shall cause to be delivered to Parent a list identifying all persons
who were, in its reasonable judgment, at the record date for its stockholders'
meeting convened in accordance with Section 7.04 hereof, "affiliates" of the
Company as that term is used in paragraphs (c) and (d) of Rule 145 under the
Securities Act (the "Affiliates").
(b) The Company shall use its best efforts to cause
each person who is identified as one of its Affiliates in its list referred to
in Section 7.05(a) above to deliver to Parent (with a copy to the Company), at
least 30 days prior to the Effective Time, a written agreement, in the form
attached here as Exhibit B (the "Affiliate Letters").
(c) If any Affiliate of the Company refuses to provide
an Affiliate Letter, Parent may place appropriate legends on the certificates
evidencing the shares of Parent Common Stock to be received by such Affiliate
pursuant to the terms of this Agreement and to issue appropriate stop transfer
instructions to the transfer agent for shares of Parent Common Stock to the
effect that the shares of Parent Common Stock received by such Affiliate
pursuant to this Agreement only may be sold, transferred or otherwise conveyed
(i) pursuant to an effective registration statement under the Securities Act,
(ii) in compliance wit Rule 145 promulgated under the Securities Act, or (iii)
pursuant to another exemption under the Securities Act.
SECTION 7.06. Reasonable Efforts. Subject to the terms and
conditions herein provided, and with the understanding that time is of the
essence, each of the parties hereto agrees to use its reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
the Securities Purchase and Exchange Agreement, the Cerplex Note Purchase
Agreement, and the Note and Warrant Assignment and Transfer Agreement, and
fulfill the conditions set forth in Article VIII hereof, including, without
limitation, (i) the obtaining of all necessary waivers, consents and approvals
and (ii) the effecting of all necessary registrations and filings; provided,
however, that the foregoing shall not require either party hereto to waive any
condition to its obligation to effect the Merger set forth herein or obtain
from any of its stockholders any guarantees of its obligations or any undertak-
ings with respect thereto similar in purpose or effect other than as provided
herein or in such agreements. Without limiting the generality of the
foregoing, as promptly as practicable, the Company, Parent and Sub shall make
all filings and submissions under the HSR Act as may be reasonably required to
be made in
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connection with this Agreement and the transactions contemplated hereby.
Subject to the Confidentiality Agreements, the Company will furnish to Parent
and Sub, and Parent and Sub will furnish to the Company, such information and
assistance as the other may reasonably request in connection with the
preparation of any such filings or submissions. Subject to the Confidentiality
Agreements, the Company will provide Parent and Sub, and Parent and Sub will
provide the Company, with copies of all material written correspondence,
filings and communications (or memoranda setting forth the substance thereof)
between such party or any of its representatives and any Governmental Entity,
with respect to the obtaining of any waivers, consent or approvals and the
making of any registrations or filings, in each case that is necessary to
consummate the Merger and the other transactions contemplated hereby. In case
at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers or
directors of Parent and the Surviving Corporation shall take all such necessary
action.
SECTION 7.07. Certain Agreements. Concurrently herewith, and as
an essential inducement for Parent's entering into this Agreement, (i) Parent
is entering into the Irrevocable Proxy and Option Agreement with certain
holders of the Company Common Stock, (ii) Parent is entering into the
Securities Purchase and Exchange Agreement with the several purchasers named
therein, (iii) Parent and the Company are entering into the Interim Management
Agreement, (iv) WCAS VII is entering into the Cerplex Note Purchase Agreement
with the several noteholders named therein, (v) the Company and Citibank are
entering into the Forbearance Agreement, (vi) Parent has obtained the Senior
Commitment from the New Lender and (vii) Parent is entering into the Chase
Amendment with Chase.
SECTION 7.08. Company Stock Options. At the Effective Time,
each of the Company Stock Options which is outstanding immediately prior to the
Effective Time shall be assumed by Parent and converted automatically into an
option to purchase shares of Parent Common Stock (a "New Option") in an amount
and at an exercise price determined as provided below:
(a) the number of shares of Parent Common Stock to be
subject to the New Option shall be equal to the product of the number of shares
of Company Common Stock remaining subject (as of immediately prior to the
Effective Time) to the original option and the Exchange Ratio, provided that
any fractional shares of Parent Common Stock resulting from such multiplication
shall be rounded down to the nearest share; and
(b) the exercise price per share of Parent Common Stock
under the New Option shall be equal to the exercise price per share of Company
Common Stock under the original option
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divided by the Exchange Ratio, provided that such exercise price shall be
rounded down to the nearest cent.
The adjustment provided herein with respect to any Options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be and is intended
to be effected in a manner which is consistent with Section 424(a) of the Code.
After the Effective Time, each New Option shall be exercisable and shall vest
upon the same terms and conditions as were applicable to the related Company
Stock Option immediately prior to the Effective Time, except that all
references to the Company shall be deemed to be references to Parent. Parent
shall file with the SEC a Registration Statement on Form S-8 (or other
appropriate form) or a post-effective amendment to the Registration Statement
and shall take any action required to be taken under state securities "blue
sky" laws for purposes of registering all shares of Parent Common Stock
issuable after the Effective Time upon exercise of the New Options, and use all
reasonable efforts to have such registration statement or post-effective
amendment become effective with respect thereto as promptly as practicable
after the Effective Time.
SECTION 7.09. Settlement of Company Stock Purchase Rights.
(a) At the Effective Time, each of the warrants to
purchase Company Common Stock set forth on Schedule 4.02(a) hereto which are
outstanding and which are not being canceled or terminated pursuant to the
Forbearance Agreement or the Stockholders Agreement shall be assumed by Parent
and converted automatically into a warrant to purchase shares of Parent Common
Stock (a "New Warrant") in an amount and at an exercise price determined as
provided below:
(i) the number of shares of Parent Common Stock
to be subject to the New Warrant shall be equal to the product of the
number of shares of Company Common Stock remaining subject (as of
immediately prior to the Effective Time) to the original warrant and the
Exchange Ratio, provided that any fractional shares of Parent Common
Stock resulting from such multiplication shall be rounded to the nearest
share; and
(ii) the exercise price per share of Parent
Common Stock under the New Warrant shall be equal to the exercise price
per share of Company Common Stock under the original warrant divided by
the Exchange Ratio, provided that such exercise price shall be rounded
to the nearest cent.
After the Effective Time, each New Warrant shall be exercisable and shall vest
upon the same terms and conditions as were applicable
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to the related Company warrant immediately prior to the Effective Time, except
that all references to the Company shall be deemed to be references to Parent.
(b) At the Effective Time, each outstanding Company
Stock Purchase Right not listed on Schedule 4.02(a) shall be canceled and
retired and cease to exist, and no securities of Parent or other consideration
shall be delivered in exchange therefor.
SECTION 7.10. Public Announcements. Each of Parent, Sub, and
the Company agrees that it will not issue any press release or otherwise make
any public statement with respect to this Agreement (including the Exhibits
hereto) or the transactions contemplated hereby (or thereby) without the prior
consent of the other party, which consent shall not be unreasonably withheld or
delayed; provided, however, that such disclosure can be made without obtaining
such prior consent if (i) the disclosure is required by law or by obligations
imposed pursuant to any listing agreement with any national securities exchange
and (ii) the party making such disclosure has first used its reasonable
best efforts to consult with (but not obtain the consent of) the other party
about the form and substance of such disclosure.
SECTION 7.11. Directors' and Officers' Indemnification and
Insurance.
(a) All rights to indemnification, advancement of
litigation expenses and limitation of personal liability existing in favor of
the directors and officers of the Company under the provisions existing on the
date hereof in the Company's Certificate of Incorporation, By-Laws or by
contract shall, with respect to any matter existing or occurring at or prior to
the Effective Time (including the transactions contemplated by this Agreement),
survive the Effective Time, and, as of the Effective Time, the Surviving
Corporation and Parent shall assume all obligations of the Company in respect
thereof as to any claim or claims asserted prior to or within a six-year period
immediately after the Effective Time.
(b) For a period of three years after the Effective
Time, the Surviving Corporation and Parent shall cause to be maintained in
effect the current policies of directors and officers' liability insurance
maintained by the Company (provided that the Surviving Corporation and Parent
may substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are no less advantageous to former
officers and directors of the Company with respect to claims arising from facts
or events which occurred before the Effective Time); provided, however, that in
no event shall the Surviving Corporation or Parent be required to expend
pursuant to this Section 7.11(b) more than an amount equal to 150% of current
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annual premiums paid by the Company for such insurance (the "Maximum Amount")
(which premiums the Company represents and warrants to be approximately
$312,000 in the aggregate).
(c) The obligations under this Section 7.11 shall be
transferred to, and assumed in writing by, the successor entity in the event of
a sale of substantially all of the assets, merger or recapitalization of Parent
during the applicable time periods referenced herein.
SECTION 7.12. Expenses. Except as otherwise set forth in
Section 9.02(b), whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement (including the Exhibits
hereto) and the transactions contemplated hereby (and thereby) shall be paid by
the party incurring such expenses, except that (i) the filing fee in connection
with filings under the HSR Act, (ii) the expenses incurred in connection with
printing the Registration Statement and the Proxy Statement and (iii) the
filing fee with the SEC relating to the Registration Statement or the Proxy
Statement will be shared equally by Parent and the Company. In the event the
Merger is consummated, Parent shall cause the Company to pay, at the Closing
and in accordance with agreements entered into by the Company, the fees and
expenses incurred by the Company in connection with the transactions
contemplated hereby that are listed in Schedule 7.12.
SECTION 7.13. Supplemental Disclosure. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence, of any event of which such party is aware
the occurrence, or non-occurrence, of which would result in the breach of (x)
any representation or warranty by such party contained in this Agreement or (y)
any covenant, condition or agreement by such party contained in this Agreement
and (ii) any failure of the Company or Parent, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 7.13 shall not have any effect for the purpose of
determining the satisfaction of the conditions set forth in Article VIII of
this Agreement or otherwise limit or affect the remedies available hereunder to
any party.
SECTION 7.14. Public Reporting; Continued Listing. Parent shall
use its best efforts (i) to maintain the registration of its Common Stock under
Section 12 of the 1934 Act, (ii) to make and keep public information available
as those terms are understood and defined in SEC Rule 144 and (iii) to maintain
the listing of its Common Stock on the OTC Bulletin Board, in each case for a
minimum of three years from the Effective Time.
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<PAGE> 47
ARTICLE VIII.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 8.01. Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) HSR Approval. Any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the Department of
Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of this transaction, which action shall have not been withdrawn or
terminated.
(b) Stockholder Approval. This Agreement and the
transactions contemplated hereby shall have been approved and adopted by (i)
the requisite vote (as described in Section 4.18) of the stockholders of the
Company and (ii) by the requisite vote (as described in Section 5.14) of the
stockholders of Parent, in each case, in accordance with applicable law.
(c) Registration Statement. The Registration Statement
shall have been declared effective under the Securities Act and shall not be
the subject of any stop order or proceeding by the SEC seeking a stop order.
(d) No Order. No Governmental Entity (including a
federal or state court) of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which materially restricts, prevents or
prohibits consummation of the Merger or any transaction contemplated by this
Agreement; provided, however, that the parties shall use their reasonable best
efforts to cause any such decree, judgment, injunction or other order to be
vacated or lifted.
(e) Approvals. Other than the filing of Merger
documents in accordance with the DGCL, all authorizations, consents, waivers,
orders or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any Governmental Entity, the failure of which to
obtain, make or occur would have a material adverse effect at or after the
Effective Time on (i) Parent or (ii) the Surviving Corporation shall have been
obtained, been filed or have occurred.
SECTION 8.02. Conditions to Obligations of Parent and Sub to
Effect the Merger. The obligations of Parent and Sub to effect the Merger
shall be subject to the satisfaction at or
41
<PAGE> 48
prior to the Effective Time of the following additional conditions, unless
waived in writing by Parent:
(a) Representations and Warranties. All repre-
sentations and warranties of the Company that are qualified with reference to a
Company Material Adverse Effect or materiality shall be true and correct in all
respects and all representations and warranties that are not so qualified shall
be true and correct in all material respects, in each case as of the date of
this Agreement, except to the extent such representations and warranties speak
as of an earlier date.
(b) Performance of Obligations of the Company. Each of
the Company and its Subsidiaries shall have performed in all material respects
all obligations (including those under Section 7.13) required to be performed
by it under this Agreement at or prior to the Effective Time, and Parent shall
have received a certificate signed on behalf of the Company by a proper officer
of the Company to such effect.
(c) Tax Opinion of Counsel. Parent shall have received
an opinion of Hughes & Luce LLP, tax counsel to Parent, in form and substance
reasonably satisfactory to Parent, dated as of the Effective Time,
substantially to the effect that the Merger will constitute a reorganization
for federal income tax purposes within the meaning of Section 368(a) of the
Code and that, accordingly, no gain or loss will be recognized by the Company,
Parent or Sub as a result of the Merger.
(d) Letters of Resignation. Parent and Sub shall have
received letters of resignation addressed to the Company from the members of
the Company's Board of Directors and letters of resignation addressed to each
of the Company's Subsidiaries from the members of such Subsidiary's board of
directors, which resignations shall be effective as of the Effective Time.
(e) Dissenting Shares. The aggregate number of shares
of Company Common Stock into which all Dissenting Shares are convertible shall
not constitute more than 5% of the number of shares of Company Common Stock
outstanding as of immediately prior to the Effective Time (calculated assuming
full conversion of all then issued and outstanding shares of Company Preferred
Stock but no other dilution).
(f) Debt Financing. Parent shall have obtained at
least $17,000,000 of proceeds from the New Senior Loan on terms reasonably
acceptable to Parent, as determined in good faith by Parent.
(g) Repayment of Indebtedness. Citibank shall have
complied with the Forbearance Agreement in all material respects and the
Company shall have satisfied in full its obligations
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<PAGE> 49
under the Cerplex Credit Agreement, the Liens granted thereunder shall have
been discharged and the Cerplex Credit Agreement shall have been terminated.
SECTION 8.03. Conditions to Obligation of the Company to Effect
the Merger. The obligation of the Company to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
additional conditions, unless waived in writing by the Company:
(a) Representations and Warranties. All repre-
sentations and warranties of Parent contained in this Agreement that are
qualified with reference to a Parent Material Adverse Effect or materiality
shall be true and correct in all respects and all representations and
warranties that are not so qualified shall be true and correct in all material
respects as of the date of this Agreement, and, except to the extent such
representations and warranties speak as of an earlier date.
(b) Performance of Obligations of Parent and Sub. Each
of Parent and Sub shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Effective Time, and the Company shall have received a certificate signed on
behalf of Parent by the chief executive officer or the chief financial officer
of Parent to such effect.
(c) Tax Opinion of Counsel. The Company shall have
received an opinion of Brobeck, Phleger & Harrison, LLP ("Brobeck") in form and
substance reasonably satisfactory to the Company, dated as of the Effective
Time, substantially to the effect that the Merger will constitute a
reorganization for federal income tax purposes within the meaning of Section
368(a) of the Code and that accordingly:
(i) no gain or loss will be recognized by the
stockholders of the Company who exchange their Company Stock solely for
shares of Parent Common Stock pursuant to the Merger (except to the
extent that cash is received in lieu of a fractional share interest);
(ii) the aggregate basis of the shares of Parent
Common Stock received by stockholders of the Company in the Merger will
be the same as the aggregate basis of the Company Stock surrendered in
exchange therefor (reduced by any amount allocable to a fractional share
interest for which cash is received);
(iii) the holding period of the shares of Parent
Common Stock received by stockholders of the Company in the Merger will
include the period during which the shares of Company Stock surrendered
in exchange
43
<PAGE> 50
therefor were held, provided such shares were held as a capital asset at
the Effective Time; and
(iv) no gain or loss will be recognized by the
Company, Parent or Sub as a result of the Merger.
In rendering such opinion Brobeck may require and rely upon
representations contained in certificates of officers of Parent, Sub and the
Company, certain principal stockholders and others; provided, however, that the
condition set forth in this Section 8.03(c) shall be deemed satisfied if
Brobeck is unable to render such opinion solely by reason of any of the holders
of the Company Common Stock refusing or failing to provide Brobeck with
requested representations.
(d) Directors. Parent shall have appointed William A.
Klein and Robert Finzi to Parent's Board of Directors.
(e) Debt Financing. Parent shall have obtained at
least $17,000,000 of proceeds in respect of the New Senior Loan and the
Securities Purchase and Exchange Agreement shall have been consummated.
ARTICLE IX.
TERMINATION
SECTION 9.01. Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after approval by the
stockholders of Parent or the Company:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company, if (i) the Merger
shall not have been consummated before June 30, 1998, or (ii) the approval of
the stockholders of the Company required by Section 4.18 hereof shall not have
been obtained at a meeting duly convened therefor or any adjournment thereof;
provided that in the case of any such termination pursuant to this Section
9.01(b), the failure to so consummate the Merger by such date or to obtain such
stockholder approval shall not have been caused by the action or failure to act
of the party (or its Subsidiaries) seeking to terminate this Agreement, which
action or failure to act constitutes a breach of this Agreement);
(c) by either Parent or the Company, if any permanent
injunction or action by any Governmental Entity of competent jurisdiction
preventing the consummation of the Merger shall have become final and
nonappealable; provided, however, that the party seeking to terminate this
Agreement pursuant to
44
<PAGE> 51
this Section 9.01(c) shall have used all reasonable efforts to remove such
injunction or overturn such action;
(d) by Parent, if (i) there has been breach of any
representations or warranties of the Company set forth herein the effect of
which is a Company Material Adverse Effect, (ii) there has been a breach in any
material respect of any of the covenants or agreements set forth in this
Agreement on the part of the Company, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by Parent to the Company, or (iii) the Board of Directors of the Company
(x) withdraws or amends or modifies in a manner adverse to Parent or Sub its
recommendation or approval in respect of this Agreement or the Merger, (y)
makes any recommendation with respect to an Acquisition Transaction (including
making no recommendation or stating an inability to make a recommendation),
other than a recommendation to reject such Acquisition Transaction, or (z)
takes any material action that would be prohibited by Section 7.02; and
(e) by the Company, if (i) there has been a breach of
any representations or warranties of Parent set forth herein the effect of
which is a Parent Material Adverse Effect, (ii) there has been a breach in any
material respect of any of the covenants or agreements set forth in this
Agreement on the part of Parent, which breach is not curable or, if curable, is
not cured within 30 days after written notice of such breach is given by the
Company to Parent or (iii) such termination is necessary to allow the Company
to enter into an Acquisition Transaction that its Board of Directors has
determined in good faith, by a majority vote after consultation with its
financial advisors and based upon the advice of outside legal counsel to the
Company, is more favorable to the stockholders of the Company than the Merger
contemplated by this Agreement (provided that the termination described in this
clause (iii) shall not be effective unless and until the Company shall have
paid to Parent in full the fee and expense reimbursement described in Section
9.02(b)).
SECTION 9.02. Effect of Termination.
(a) In the event of termination of this Agreement
pursuant to this Article IX, the Merger shall be deemed abandoned and this
Agreement shall forthwith become void, without liability on the part of any
party hereto, except as provided in this Section 9.02, Section 7.01 and Section
7.12, and except that nothing herein shall relieve any party from liability for
any breach of this Agreement.
(b) If (x) Parent shall have terminated this Agreement
pursuant to Section 9.01(d)(iii), (y) the Company shall have terminated this
Agreement pursuant to Section 9.01(e)(iii) or (z) either (1) Parent or the
Company shall have terminated
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<PAGE> 52
this Agreement pursuant to Section 9.01(b)(ii) or (2) Parent shall have
terminated this Agreement pursuant to Section 9.01(d)(ii) and, prior to or
within one (1) year after any termination described in this clause (z), the
Company (or any of its Subsidiaries) shall have directly or indirectly entered
into a definitive agreement for, or shall have consummated, an Acquisition
Transaction, then, in any of such cases, the Company shall pay Parent (A) a
termination fee of one million dollars ($1,000,000), plus (B) an amount, not in
excess of five hundred thousand dollars ($500,000), equal to Parent's actual,
documented out-of-pocket expenses directly attributable to the negotiation and
execution of this Agreement and the transactions contemplated hereby and the
Merger; provided, however, that no fee or expense reimbursement shall be paid
pursuant to this Section 9.02(b) if Parent shall be in material breach of its
obligations hereunder. Any fees or amounts payable under this Section 9.02(b)
shall be paid in same day funds no later than (i) two business days after a
termination described in clause (x) of this Section 9.02(b), (ii) concurrently
with a termination described in clause (y) of this Section 9.02(b) or (ii)
concurrently with the consummation of such Acquisition Transaction, in the case
of a termination described in clause (z) of this Section 9.02(b).
ARTICLE X.
GENERAL PROVISIONS
SECTION 10.01. Amendment and Modification. At any time prior to
the Effective Time, this Agreement may be amended, modified or supplemented
only by written agreement (referring specifically to this Agreement) of Parent,
Sub and the Company with respect to any of the terms contained herein;
provided, however, that after any approval and adoption of this Agreement by
the stockholders of Parent or the Company, no such amendment, modification or
supplementation shall be made which under applicable law requires the approval
of such stockholders, without the further approval of such stockholders.
SECTION 10.02. Waiver. At any time prior to the Effective Time,
Parent and Sub, on the one hand, and the Company, on the other hand, may (i)
extend the time for the performance of any of the obligations or other acts of
the other, (ii) waive any inaccuracies in the representations and warranties of
the other contained herein or in any documents delivered pursuant hereto and
(iii) waive compliance by the other with any of the agreements or conditions
contained herein which may legally be waived. Any such extension or waiver
shall be valid only if set forth in an instrument in writing specifically
referring to this Agreement and signed on behalf of such party.
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<PAGE> 53
SECTION 10.03. Survivability; Investigations. The respective
representations and warranties of Parent and the Company contained herein or in
any certificates or other documents delivered prior to or as of the Effective
Time (i) shall not be deemed waived or otherwise affected by any investigation
made by any party hereto and (ii) shall not survive beyond the Effective Time.
The covenants and agreements of the parties hereto (including the Surviving
Corporation after the Merger) shall survive the Effective Time without
limitation (except for those which, by their terms, contemplate a shorter
survival period).
SECTION 10.04. Notices. All notices and other communications
hereunder shall be in writing and shall be delivered personally or by next-day
courier or telecopied with confirmation of receipt, to the parties at the a
dresses specified below (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof). Any such notice shall be effective upon
receipt, if personally delivered or telecopied, or one day after delivery to a
courier for next-day delivery.
(a) If to Parent or Sub, to:
Aurora Electronics, Inc.
9477 Waples Street, Suite 250
San Diego, California 92121
Telecopy Number: (619) 552-8942
Attention: Chief Executive Officer
with copies to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Telecopy Number: (212) 841-5725
Attention: William J. Hewitt, Esq.
(b) if to the Company, to:
The Cerplex Group, Inc.
1382 Bell Avenue
Tustin, California 92780
Telecopy Number: (714) 258-0730
Attention: William A. Klein
47
<PAGE> 54
with copies to:
Brobeck Phleger & Harrison LLP
4675 MacArthur Court, Suite 1000
Newport Beach, California 92660
Telecopy Number: (714) 752-7522
Attention: Frederic A. Randall, Jr., Esq.
SECTION 10.05. Descriptive Headings; Interpretation. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any why the meaning or interpretation of this Agreement.
References in this Agreement to Sections, Schedules, Exhibits or Articles mean
a Section, Schedule, Exhibit or Article of this Agreement unless otherwise
indicated. References to this Agreement shall be deemed to include the
Exhibits and Schedules hereto, unless the context otherwise requires. The term
"person" shall mean and include an individual, a partnership, a joint venture,
a corporation, a trust, a Governmental Entity or an unincorporated
organization.
SECTION 10.06. Entire Agreement; Assignment. This Agreement
(including the Schedules, Exhibits and other documents and instruments referred
to herein), together with the Irrevocable Proxy and Option Agreement and the
Confidentiality Agreements, constitute the entire agreement and supersede all
other prior agreements and understandings, both written and oral, among the
parties or any of them, with respect to the subject matter hereof. This
Agreement is not intended to confer upon any person not a party hereto any
rights or remedies hereunder except with respect to the obligations to the
individuals and entities under Section 7.11 and the obligations to individuals
and entities under Section 7.14. This Agreement shall not be assigned by
operation of law or otherwise; provided that Parent or Sub may assign its
rights and obligations hereunder to a direct or indirect subsidiary of Parent,
but no such assignment shall relieve Parent or Sub, as the case may be, of its
obligations hereunder.
SECTION 10.07. Governing Law; Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware without giving effect to the provisions thereof relating to conflicts
of law. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the Court of Chancery in the State of Delaware in any action,
suit or proceeding arising in connection with this Agreement, and agrees that
any such action, suit or proceeding shall be brought only in such court (and
waives any objection based on forum non conveniens or any other objection to
venue therein).
SECTION 10.08. Severability. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect against a party hereto,
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<PAGE> 55
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby and such
invalidity, illegality or unenforceability shall only apply as to such party in
the specific jurisdiction where such judgment shall be made.
SECTION 10.09. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement.
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<PAGE> 56
IN WITNESS WHEREFORE, each of Parent, Sub and the Company has caused
this Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
AURORA ELECTRONICS, INC.
By: /s/ JIM C. COWART
----------------------------
Name: Jim C. Cowart
Title: Chairman
HOLLY ACQUISITION CORP.
By: /s/ JIM C. COWART
----------------------------
Name: Jim C. Cowart
Title: Chairman
THE CERPLEX GROUP, INC.
By: /s/ WILLIAM A. KLEIN
----------------------------
Name: William A. Klein
Title: Chairman
<PAGE> 1
EXHIBIT 99.1
Contact: John Thompson, President
F. Wayne Withers, Senior Vice President and Chief
Financial Officer
Aurora Electronics, Inc.
Tel: (619) 552-1213
Stephen J. Hopkins, Chief Executive Officer
The Cerplex Group, Inc.
Tel: (714) 258-5301
For Immediate Release
Aurora Electronics, Inc. and
The Cerplex Group, Inc. Announce Merger;
Aurora Names McTavish as New Chairman and CEO
SAN DIEGO, CA, February 2, 1998. Aurora Electronics, Inc.
(OTC Bulletin Board: AURU) and The Cerplex Group, Inc. (OTC Bulletin Board:
CPLX) announced today that they have signed a definitive merger agreement,
creating one of the largest independent companies in the parts support and
service logistics market.
As a result of the merger, Cerplex would become a wholly-owned
subsidiary of Aurora, and the current equity holders of Cerplex would be
entitled to receive in a tax-free exchange approximately 25% of the
post-merger, fully-diluted common stock of Aurora, after giving effect to the
WCAS financing described below. Under the terms of the agreement, each share
of Cerplex common stock would convert into 1.076368 shares of Aurora common
stock.
The merger is subject to regulatory approvals and the
satisfaction of certain other conditions precedent, including securing
acceptable senior bank financing. No assurance can be given that such
conditions precedent will be achieved. The merger is expected to be completed
by the end of April 1998. Following the completion of the merger, Aurora will
change its name to The Cerplex Group, Inc. and the combined company will
operate under that name.
Aurora also announced today that Larry McTavish will be
appointed its Chairman and Chief Executive Officer, replacing Jim C. Cowart,
who will serve on an interim basis as Vice-Chairman, and John Thompson,
respectively. Following the merger with Cerplex, Mr. McTavish would continue
as Chairman and Chief Executive Officer of the combined enterprise.
Subject to the merger, Aurora's principal stockholder, Welsh,
Carson, Anderson & Stowe (WCAS), has agreed to provide
<PAGE> 2
additional financing to Aurora, in the form of $18 million of new preferred
stock and $15 million of new subordinated debt, and to exchange approximately
$11 million of outstanding Aurora subordinated debt and accrued interest for
$3.3 million of new preferred stock. After giving effect to the merger and the
WCAS financing, WCAS would own approximately 69.2% of the fully-diluted common
stock of Aurora. The proceeds of the WCAS financing and the proposed new
senior bank financing would be used to repay approximately $30 million of
outstanding senior bank obligations of Cerplex. In addition, at the effective
time of the merger, approximately $18 million of outstanding subordinated notes
of Cerplex, which have been purchased by WCAS, would be cancelled and exchanged
for $5.7 million of the new subordinated notes of Aurora.
Aurora contemplates offering to all of its existing
stockholders the right to purchase a pro rata share of the new preferred stock
and new subordinated notes. The rights offering will be made only by means of
a prospectus. Any stockholder not electing to participate in this offering
would experience substantial dilution of its existing equity interest in
Aurora.
With headquarters in San Diego, California, Aurora provides
computer OEMs and service organizations with spare parts support and
electronics recycling services. Based in Tustin, California, Cerplex is a
leading independent depot repair, parts and logistics organization, offering a
complete portfolio of asset utilization and service management solutions
primarily for OEMs, third party maintainers and multivendor service
organizations.
Statements in this press release that are not historical facts
constitute forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that these
forward-looking statements are inherently uncertain. Actual performance and
results may differ materially from those projected in the forward-looking
statements due to important risk factors including, without limitation, the
possibility that the merger transaction announced today might not be
consummated or, if consummated, provide the benefits to the parties and the
securityholders of the combined enterprise projected herein. Additional
information concerning risk factors that could cause actual results to differ
materially from those projected in the forward-looking statements is contained
in Aurora's and Cerplex's respective filings with the Securities and Exchange
Commission. These forward- looking statements represent the companies'
judgement and estimates as of the date of this press release. Aurora and
Cerplex assume no obligation to update such estimates except as required by the
Rules and Regulations of the Securities and Exchange Commission.
<PAGE> 1
EXHIBIT 99.2
IRREVOCABLE PROXY AND OPTION AGREEMENT
Each undersigned stockholder of THE CERPLEX GROUP, INC., a
Delaware corporation (the "Company"), hereby irrevocably appoints Larry
McTavish and Richard H. Stowe, and each of them, or any other designee of
AURORA ELECTRONICS, INC., a Delaware corporation ("Parent"), the
attorneys-in-fact and proxies of such stockholder, each with full power of
substitution:
(a) to attend any meeting (whether annual or special or both)
of the stockholders of the Company, including any adjournment or
postponement thereof, on behalf of such stockholder, and at such
meeting, with respect to all shares of common and preferred stock of
the Company owned by such stockholder on the date hereof or acquired
hereafter that are entitled to vote at such meeting or over which such
stockholder has voting power (with the exception of Whitman Partners,
L.P. ("Whitman Partners") who makes such agreement with respect to
2,478,773 shares of the Company's Common Stock, $.001 par value
("Company Common Stock") held by such stockholder (hereinafter, the
"Whitman Shares")) and any and all other shares of common or preferred
stock of the Company or other securities issued on or after the date
hereof in respect of any such shares, including, without limitation,
the shares of Company Common Stock indicated following such
stockholder's signature at the end of this proxy and option:
(i) to vote in favor of the Merger (as such term
is defined in the Agreement and Plan of Merger (the "Merger
Agreement") among the Company, Parent and Holly Acquisition
Corp. ("Sub") dated as of the date hereof) as set forth in the
Merger Agreement or on substantially the same terms, and
otherwise to act with respect to such shares as each such
attorney and proxy or his substitute shall deem necessary or
appropriate for such purpose; and
(ii) to vote and otherwise act with respect to
such shares in such a manner as each such attorney and proxy
or his substitute shall deem proper, with respect to (x)
proposals or offers (other than the Merger) relating to (1)
any proposed sale, lease or other disposition of all or a
substantial amount of the assets of the Company or any of its
subsidiaries (as defined in the Merger Agreement), (2) any
proposed merger, consolidation or other combination of the
Company or any of its subsidiaries with any other entity, (3)
any sale, lease or other disposition of the shares of any
subsidiary of the Company or (4) any other proposed action of
the Company or any of its subsidiaries requiring stockholder
approval that would conflict with or violate the Company's
representations, covenants or obligations under the Merger
Agreement, adversely affect the Company's ability to
consummate the transactions contemplated thereby or otherwise
impede, interfere with or discourage the Merger (each of the
actions described in (1) - (4) above, an "Acquisition
Proposal"), and (y) any procedural matters presented at any
such meeting at which any action is scheduled to be taken with
respect to the Merger or any Acquisition Proposal;
<PAGE> 2
(b) to execute and deliver one or more consents in
writing (pursuant to Section 228 of the General Corporation Law of the
State of Delaware (the "GCL")) in lieu of such meeting or adjournment
thereof;
(c) if no meeting of stockholders is scheduled in
accordance with the Merger Agreement, or any such meeting is canceled
or adjourned, and no action is taken by written consent in lieu
thereof, to call a special stockholders meeting of the Company or to
act by written consent for the purpose of (i) approving the Merger or
any action with respect thereto, (ii) taking action with respect to
any Acquisition Proposal or (iii) replacing any or all members of the
Board of Directors of the Company with such persons as may be
designated by such attorneys and proxies or their substitutes to the
extent permitted under the GCL and the Certificate of Incorporation of
the Company; and
(d) to waive for the term of this proxy and option any
and all rights of such stockholder to exercise any rights as an
objecting stockholder under Section 262 of the GCL, subject to the
right to receive the consideration as specifically provided in the
Merger Agreement.
Each undersigned stockholder hereby grants Parent the
irrevocable right and option (the "Option") to purchase all shares of Company
Common Stock (or, in the case of Whitman Partners, any of the Whitman Shares)
and warrants to purchase such shares, owned by such stockholder on the date
hereof or acquired hereafter (and any and all other shares of Company Common
Stock or other securities issued on or after the date hereof in respect of any
such shares or warrants or in respect of any options to purchase shares of
Company Common Stock), for the same consideration as such stockholder would
receive in the Merger pursuant to the Merger Agreement. The Option may be
exercised in whole as to all the undersigned stockholders, but not in part as
to any or all of such stockholders, at any time after the expiration of any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and after the earlier to occur of (a) the date the
Board of Directors of the Company votes not to approve the Merger or the Merger
Agreement, or otherwise withdraws or modifies its recommendation of the Merger
and the Merger Agreement or recommends or accepts any other Acquisition
Proposal, (b) the date the Merger Agreement terminates, other than as a result
of a breach by either of Parent or Sub of any of the representations or
warranties made by it or any of its obligations thereunder, and (c) the date
the proxy contained herein is determined by any court to be invalid or
unenforceable.
Each undersigned stockholder agrees (a) (i) to take all action
necessary to call, or cause the Company to call, a meeting of the stockholders
of the Company, to be held no later than twenty-one business days after the
date on which the Registration Statement on Form S-4 with respect to the shares
of Parent Common Stock to be issued in the Merger is declared effective, for
the purpose of approving the Merger and shall use its best efforts to cause
such meeting to be held on its scheduled date, or (ii) to take such action by
written consent in lieu thereof as is necessary to effect such approval; (b)
not to deposit any of its shares of Company Common Stock (or, in the case of
Whitman Partners, any of the
2
<PAGE> 3
Whitman Shares) into a voting trust or enter into a voting agreement with
respect to such shares; (c) not to sell, transfer or otherwise dispose of or
pledge or otherwise encumber, any shares of Company Common Stock or options or
warrants to purchase such shares owned by such stockholder (or, in the case of
Whitman Partners, any of the Whitman Shares), unless the purchaser or
transferee of such shares or rights agrees in writing (a copy of which shall be
delivered by such stockholder to Parent) prior to such sale, transfer or
disposition to be bound by and subject to the provisions contained in this
proxy and option; and (d) not, in its capacity as stockholder, to solicit,
initiate, encourage, endorse, support (including, by providing information) or
participate in any discussions regarding, any Acquisition Proposal.
Each undersigned stockholder affirms that this proxy and
option is issued in connection with the Merger Agreement to facilitate the
transactions contemplated thereunder and in consideration of Parent entering
into the Merger Agreement and as such is coupled with an interest and is
irrevocable. This proxy and option will terminate upon the earlier to occur of
(a) the closing of the transactions described in the Merger Agreement and (b)
the termination of the Merger Agreement in accordance with its terms. For
purposes of this proxy and option, any notice of any stockholders' meeting and
any written consent shall be deemed delivered to such attorneys and proxies and
their substitutes when delivered to Parent in accordance with the Merger
Agreement, and any written consent shall be deemed delivered to the Company
when delivered to it in accordance with the Merger Agreement.
By execution and delivery of this proxy and option to the
designees of Parent, each undersigned stockholder confirms that such
stockholder has received a copy of a substantially final form of the Merger
Agreement, and that all other information deemed necessary by such stockholder
concerning the Merger, the Merger Agreement and the transactions contemplated
thereunder or any other matters considered by such stockholder to be relevant
to the its decision to execute this proxy and option has been made available to
such stockholder.
All authority herein conferred or agreed to be conferred shall
survive the death, dissolution, liquidation or incapacity of any undersigned
stockholder and any obligation of any undersigned stockholder hereunder shall
be binding upon the heirs, personal representatives, successors and assigns of
such undersigned stockholder. This proxy and option revokes any and all other
proxies and options heretofore granted by each and any undersigned stockholder
to vote or otherwise to act with respect to any of the shares to which this
proxy and option relates. No undersigned stockholder will give any subsequent
proxy or option (and such proxy or option if given will be deemed not to be
effective) with respect to such shares that purports to grant authority within
the scope of the authority hereby conferred, except on the express condition
that such proxy or option shall not be effective unless and until this proxy
and option shall have terminated in accordance with its terms. This proxy
shall be governed by the internal laws of the State of Delaware.
Each undersigned stockholder acknowledges that money damages
would be both incalculable and an insufficient remedy for any breach of this
proxy and option by it, and that any such breach would cause Parent and Sub
irreparable harm. Accordingly, each undersigned stockholder agrees that in the
event of any breach or threatened breach of this
3
<PAGE> 4
proxy and option, Parent, in addition to any other remedies at law or in equity
it may have, shall be entitled, without the requirement of posting a bond or
other security, to equitable relief, including injunctive relief and specific
performance.
The invalidity or unenforceability of any provision of this
proxy and option in any jurisdiction shall not affect the validity or
enforceability of any other provision of this proxy and option in such
jurisdiction, or the validity or enforceability of any provision of this proxy
and option in any other jurisdiction.
Each undersigned stockholder represents and warrants that, as
of the date hereof, such stockholder owns or possesses voting power with
respect to the number of shares of Company Common Stock set forth following
such stockholder's name below. Each undersigned stockholder (with the
exception of Whitman Partners) represents and warrants that, as of the date
hereof, such stockholder owns the number of shares of Company Common Stock,
options to purchase shares of Company Common Stock and warrants to purchase of
Company Common Stock set forth following such stockholder's name below.
Whitman Partners represents and warrants that, as of the date hereof, such
stockholder owns not less than 2,478,773 shares of Company Common Stock.
4
<PAGE> 5
For the convenience of the parties, this proxy and option
agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Dated: January 30, 1998
____________________________________________
WILLIAM A. KLEIN
[4,710,383 shares of Company Common Stock]
KLEIN INVESTMENTS FAMILY LIMITED PARTNERSHIP
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
[2,442,599 shares of Company Common Stock]
THE KLEIN FOUNDATION
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
[180,000 shares of Company Common Stock]
KLEIN 1994 CHARITABLE REMAINDER TRUST
By: ______________________________________
William A. Klein, Trustee
[1,271,299 shares of Company Common Stock]
<PAGE> 6
____________________________________________
RICHARD C. DAVIS
[845,871 shares of Company Common Stock]
SPROUT GROWTH II, L.P.
By: DLJ Capital Corporation, Managing
General Partner
By: _____________________________________
Robert Finzi, Attorney-in-Fact
[8,410,398 shares of Company Common Stock]
DLJ CAPITAL CORPORATION
By: _______________________________________
Robert Finzi, Attorney-in-Fact
[856,268 shares of Company Common Stock]
____________________________________________
ROBERT FINZI
[3,500 shares of Company Common Stock]
____________________________________________
MYRON KUNIN
[952,642 shares of Company Common Stock]
____________________________________________
JEROME JACOBSON
[17,605 shares of Company Common Stock]
<PAGE> 7
WHITMAN PARTNERS L.P.
By: Whitman Capital, Inc., its general partner
By: ___________________________________
Douglas Whitman
Title: ___________________________________
[2,478,773 shares of Company Common Stock]
Accepted and Agreed to
as of the date noted above:
AURORA ELECTRONICS, INC.
By_______________________________
Name:
Title:
<PAGE> 1
EXHIBIT 99.3
FORM OF AFFILIATES LETTER
_________ __, 1998
Aurora Electronics, Inc.
9477 Waples Street, Suite 150
San Diego, California 92121
Ladies and Gentlemen:
This letter agreement (this "Agreement") is being delivered in
accordance with Section 7.05(b) of the Agreement and Plan of Merger, dated as
of January 30, 1998 (the "Merger Agreement"), among Aurora Electronics, Inc., a
Delaware corporation ("Parent"), Holly Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Sub"), and The Cerplex
Group, Inc., a Delaware corporation (the "Company"). The Merger Agreement
provides, among other things, for the merger of Sub with and into the Company
(the "Merger"), pursuant to which each share of the outstanding Common Stock,
par value $.001 per share ("Company Common Stock"), of the Company will be
converted into the right to receive a number of shares of Common Stock, par
value $.03 per share ("Parent Common Stock"), of Parent on the basis described
in the Merger Agreement.
The undersigned understands that as of the date of this letter
he, she or it may be deemed to be an "affiliate" of the Company (an
"Affiliate") as such term is used in paragraphs (c) and (d) of Rule 145 of the
General Rules and Regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as
amended (the "Securities Act").
1. The undersigned hereby represents, warrants, covenants and agrees as
follows:
(a) The undersigned has full power to execute
this Agreement and to make the representations, warranties, covenants and
agreements herein and to perform the undersigned's obligations hereunder.
(b) The undersigned is the beneficial or record
owner of all the shares of Company Common Stock and (ii) the options, warrants
or other rights exercisable for or convertible into shares of Company Stock
(collectively, the "Rights") indicated
<PAGE> 2
immediately below the undersigned's signature and address on the last page of
this Agreement (all such shares and Rights, including any hereafter acquired,
the "Company Shares"). Except for the Company Shares, the undersigned does not
beneficially or of record own any shares of Company Common Stock or any Rights
or other equity securities of the Company.
(c) The undersigned will not sell, transfer or
otherwise dispose of or offer or agree to sell, transfer or dispose of (any of
the foregoing, a "Disposition") any of the shares of Parent Common Stock issued
to the undersigned in the Merger in exchange for the Company Shares (the
"Parent Shares") in violation of the Securities Act or the Rules and
Regulations.
(d) The undersigned has carefully read this
Agreement and the Merger Agreement and discussed with the undersigned's counsel
or counsel for the Company the requirements of such documents and other
applicable limitations upon the undersigned's ability to make any Disposition
of the Parent Shares.
(e) The undersigned understands that the issuance
of Parent Common Stock pursuant to the Merger will be registered with the SEC
under the Securities Act on a Registration Statement on Form S-4 and that,
because at the time the Merger is submitted to a vote of the stockholders of
the Company, the undersigned may be deemed to be an Affiliate of the Company
and the distribution by the undersigned of any shares of Parent Common Stock
has not been registered under the Securities Act, the undersigned may not make
any Disposition of the Parent Shares unless (i) such Disposition has been
registered under the Securities Act, (ii) such Disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by the
SEC under the Securities Act, or (iii) Parent has received an opinion of
counsel, which opinion and counsel shall be reasonably acceptable to Parent, to
the effect that such Disposition is otherwise exempt from registration under
the Securities Act.
(f) Except as provided in the registration rights
agreement to be executed between the undersigned and Parent, the undersigned
understands that Parent is under no obligation to register any Disposition of
Parent Shares by the undersigned or on the undersigned's behalf under the
Securities Act or to take any other action necessary in order to make
compliance with an exemption from such registration available to the
undersigned.
(g) The undersigned understands that stop
transfer instructions will be given to all transfer agents for the Parent
Common Stock and that there will placed on the certificates evidencing the
Parent Shares, or any replacements or substitutions therefor, a legend stating
in substance:
2
<PAGE> 3
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE
ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT
DATED [ ], 1998 BETWEEN THE REGISTERED HOLDER
HEREOF AND AURORA ELECTRONICS, INC., A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF
AURORA ELECTRONICS, INC.
(h) The undersigned also understands that unless
a Disposition of the Parent Shares has been registered under the Securities Act
or is made in conformity with the provisions of Rule 145, Parent reserves the
right to put the following legend on the certificates evidencing any of the
Parent Shares issued to any transferee of the undersigned:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES
IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933 APPLIES. THE SHARES MAY
NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933.
(i) It is understood and agreed that the legends
set forth in Sections 1(g) and 1(h) above shall be removed by delivery of
substitute certificates without such legend if the undersigned has delivered to
Parent an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to Parent, or a letter from the staff of the SEC, to the effect
that such legend is not required for purposes of the Rules and Regulations or
the Securities Act.
2. The undersigned further understands and agrees that
the representations, warranties, covenants and agreements of the undersigned
set forth herein are for the benefit of Parent, the Company and the surviving
corporation in the Merger and will be relied upon by such entities and their
respective counsel and accountants.
3. This Agreement will be binding upon and enforceable
against administrators, executors, representatives, heirs, legatees and
devisees of the undersigned and any pledgees holding the Company Shares as
collateral. If the Merger Agreement is terminated in accordance with its terms
prior to the Effective Time (as defined in the Merger Agreement), this
Agreement will thereupon automatically terminate.
3
<PAGE> 4
Very truly yours,
-------------------------------
Name:
Address:
----------------------
-------------------------------
-------------------------------
Shares owned beneficially or of record:
total Shares, consisting of:
------
shares of Company Common Stock; and
------
shares of Company Common Stock
------
subject to options, warrants or other
rights exercisable within 60 days.
Agreed to and accepted:
AURORA ELECTRONICS, INC.
By:
--------------------------
Name:
Title:
THE CERPLEX GROUP, INC.
By:
--------------------------
Name:
Title:
4
<PAGE> 1
EXHIBIT 99.4
STOCKHOLDERS AGREEMENT
Agreement dated as of January 30, 1998 between WELSH, CARSON,
ANDERSON & STOWE VII, L.P., a Delaware limited partnership (the "Stockholder"),
AURORA ELECTRONICS, INC., a Delaware corporation ("Parent") and THE CERPLEX
GROUP, INC., a Delaware corporation (the "Company").
WHEREAS, pursuant to an Agreement and Plan of Merger of even
date herewith (the "Merger Agreement") among Parent, Holly Acquisition Corp., a
newly organized wholly-owned Delaware subsidiary of Parent ("Sub"), and the
Company, Parent desires to acquire the Company through the merger (the
"Merger") of Sub with and into the Company;
WHEREAS the Stockholder beneficially owns approximately 74% of
the outstanding voting stock of Parent, consisting of 433,319 shares of
Convertible Preferred Stock, $.01 par value ("Parent Preferred Stock"), of
Parent;
WHEREAS Parent desires to amend its Restated Certificate of
Incorporation pursuant to a Certificate of Amendment substantially in the form
of Exhibit A hereto (the "Parent Certificate of Amendment") to authorize, among
other things, additional shares of Common Stock, $.03 par value ("Parent Common
Stock"), of Parent that are contemplated to be issued in the Merger;
WHEREAS the Stockholder is willing to agree to vote in favor
of the Parent Certificate of Amendment at any meeting of the stockholders of
the Parent called for such purpose and to execute and deliver any written
consent approving the Parent Certificate of Amendment in lieu of such meeting;
WHEREAS, subject to the consummation of the Merger and the
transactions contemplated by the Securities Purchase and Exchange Agreement of
even date herewith (the "Securities Purchase and Exchange Agreement"), among
Parent, the several purchasers named in Annex I thereto (including the
Stockholder), and WCAS Capital Partners II, L.P., a Delaware limited
partnership, the Stockholder is willing to convert all the outstanding shares
of Parent Preferred Stock owned by it into Parent Common Stock on the terms and
subject to the conditions set forth therein; and
WHEREAS, in the event the Merger Agreement terminates in
accordance with its terms without consummation of the Merger contemplated
thereby, (i) the Stockholder is willing to grant the Company an option to
purchase (A) an aggregate $18,069,375 principal amount of Amended and Restated
Senior Subordinated Notes due November 19, 2001 (collectively, the "Cerplex
Subordinated Notes"), of the Company and (B) warrants (collectively, the
<PAGE> 2
"Cerplex Warrants") to purchase an aggregate 1,500,096 shares of Common Stock,
$.001 par value, of the Company, for a price equal to the consideration paid by
the Stockholder for said Notes and Warrants pursuant to the Note and Warrant
Assignment and Transfer Agreement, dated of even date herewith, among the
several note and warrant holders named in Schedule I thereto and the
Stockholder, and (ii) Parent is willing to grant the Company an option to
purchase all outstanding Subordinated Notes due June 30, 1998 (the "Cerplex
Bridge Notes") purchased by Parent pursuant the Note Purchase Agreement of even
date herewith between Parent and the Company at a price equal to the principal
amount of the Cerplex Bridge Notes plus accrued interest thereon;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, the parties hereto hereby
agree as follows:
SECTION 1. Voting Agreement.
(a) From and after the date hereof, at any meeting (whether
annual or special or both) of the stockholders of Parent, including any
adjournment or postponement thereof, the Stockholder agrees, with respect to
all shares of Parent Common Stock and Parent Preferred Stock owned by such
Stockholder on the date hereof or acquired hereafter that are entitled to vote
at such meeting or over which such Stockholder has voting power (and any and
all other shares of Parent Common Stock or Parent Preferred Stock or other
securities issued on or after the date hereof in respect or upon conversion of
any such shares), (i) to vote in favor of the Parent Certificate of Amendment,
(ii) to execute and deliver one or more consents in writing (pursuant to
Section 228 of the General Corporation Law of the State of Delaware (the
"GCL")) in lieu of such meeting or adjournment thereof, and (iii) if no meeting
of stockholders is scheduled in accordance with the Merger Agreement, or any
such meeting is canceled or adjourned, and no action is taken by written
consent in lieu thereof, to call a special meeting of stockholders of Parent or
to act by written consent for the purpose of approving the Parent Certificate
of Amendment or any action with respect thereto.
SECTION 2. Further Assurances. Subject to the terms and
conditions herein provided, the Stockholder agrees to (i) perform its
obligations under the Securities Purchase and Exchange Agreement in accordance
with the terms thereof, provided, however, that the foregoing shall not require
the Stockholder to waive any condition to its obligation to close set forth
therein, (ii) continue to guarantee the obligations under the Credit Agreement
dated as of March 29, 1996, as amended, among Aurora Electronics Group, Inc.,
The Chase Manhattan Bank, as Agent
2
<PAGE> 3
thereunder (the "Agent"), the guarantors named therein and the lenders named
therein, in accordance with the terms of the Amended and Restated Guarantee,
dated as of December 23, 1997 (the "Chase Guarantee") made by the Stockholders
in favor of the Agent, and (iii) to forbear exercising any rights under the
Cerplex Subordinated Notes through June 30, 1998 (or, if earlier, until the
expiration of the Option Period (as defined below)) and (iv) to use its
reasonable best efforts to cause Parent to take all actions, and to cause
Parent to do all things, that Parent has agreed to do or perform, pursuant to
the Merger Agreement, the Securities Purchase and Exchange Agreement, the
Cerplex Note Purchase Agreement and the Cerplex Note, subject to the terms and
conditions set forth in such agreements. Subject to the terms and conditions
herein provided, with respect to the Cerplex Subordinated Notes the Stockholder
further agrees, and the Company and the Stockholder hereby amend Section
4.1(b)(ii) of each of those separate Amended and Restated Note Purchase
Agreements, each dated as of April 9, 1997, as amended by the First Amendment
Agreement dated as of August 20, 1997 to provide, that on any interest payment
date commencing with the February 19, 1998 interest payment date until the
sooner to occur of (i) June 30, 1998, (ii) the expiration of the Option Period
and (iii) payment in full in cash of all indebtedness and termination of all
obligations to provide financial accommodations under that certain Credit
Agreement dated as of October 12, 1994 between the Company, the lender listed
on the signature page thereof and Citibank, N.A., the Company may satisfy its
obligation to pay interest on each Cerplex Subordinated Note (each, a "Note")
by adding an additional principal amount to the then outstanding principal
amount of such Note equal to the aggregate amount of the interest payment in
respect of such Note that is due on such interest payment date.
Notwithstanding the foregoing provisions of this Section 2, it is understood
and agreed that the Stockholder in performing its obligations under this
Section 2 in no circumstances (except as and to the extent specifically
provided in the Securities Purchase and Exchange Agreement and under the Chase
Guarantee and the Chase Letter) shall be required (x) to expend any monies,
guarantee any obligations, deliver any assets, institute any litigation or
otherwise make any undertakings with respect thereto similar in purpose or
effect or (y) cause Parent to waive any condition to its obligation to
consummate the transactions contemplated by the Merger Agreement, the
Securities Purchase and Exchange Agreement, the Cerplex Note Purchase Agreement
and the Cerplex Note.
SECTION 3. Conversion of Parent Preferred Stock. Subject to,
and simultaneously with, the consummation of the Merger and the transactions
contemplated by the Securities Purchase and Exchange Agreement, the Stockholder
agrees to convert into Parent Common Stock in accordance with the Certificate
of Incorporation of Parent all outstanding shares of Parent Preferred Stock
owned of record or beneficially by it immediately
3
<PAGE> 4
prior to the transactions contemplated by the Securities Purchase and Exchange
Agreement. The number of shares of Parent Common Stock held by, or issuable
to, the Stockholder pursuant to the exercise of all warrants, convertible
securities and other rights (including, without limitation, antidilution
rights) is as set forth in Section 5.02 of the Merger Agreement and Schedule
5.02 thereto, and there are no outstanding antidilution rights other than those
waived pursuant to Section 6 below.
SECTION 4. Company's Option to Repurchase Certain Securities.
The Stockholder and Parent agree that in the event that the Merger Agreement is
terminated in accordance with its terms and the Merger is not consummated, the
Company shall have the right and option, for a period of 30 days after the
termination of the Merger Agreement (the "Option Period"), to purchase from (i)
the Stockholder, all (but not less than all) of the Cerplex Subordinated Notes
and the Cerplex Warrants for an aggregate purchase price equal to $5,784,458 in
cash and/or (ii) from Parent, all (but not less than all) the outstanding
Cerplex Bridge Notes for a purchase price equal to the principal amount thereof
plus all interest accrued thereon to the date of payment. The Company shall
exercise such right and option to purchase such securities by mailing a written
notice (a "Notice of Election") to the Stockholder or Parent, as the case may
be, within the Option Period. If a Notice of Election shall have been received
as aforesaid by the Stockholder or Parent, the Stockholder or Parent, as the
case may be, shall sell the subject securities to the Company as set forth
above. The closing of any such sale shall take place at the offices of Reboul,
MacMurray, Hewitt, Maynard & Kristol, 45 Rockefeller Plaza, New York, New York
10111, no later than 30 days following the expiration of the Option Period, or
such other place and earlier date as may be agreed by all parties to said
transaction. At such closing (i) the Stockholder shall deliver the Cerplex
Subordinated Notes and Cerplex Warrants to be sold, and/or (ii) Parent shall
deliver the Cerplex Bridge Notes to be sold, as the case may be, in any such
case duly endorsed for transfer, against receipt of the purchase price therefor
by certified or official bank check or by wire transfer of immediately
available funds to the accounts specified by the Stockholder or Parent.
SECTION 5. Duration of Agreement. This Agreement shall
terminate upon the earliest to occur of (i) June 30, 1998, (ii) the
consummation of the Merger and (iii) the termination of the Merger Agreement in
accordance with its terms; provided, however, that the option contained in
Section 4 hereof shall terminate at the end of the Option Period, in accordance
with the provisions of such Section 4.
4
<PAGE> 5
SECTION 6. Certain Waivers. The Stockholder hereby agrees to
waive:
(i) any adjustment in the Conversion Price (as defined in
the Certificate of Designations, Preferences and Rights of Convertible
Preferred Stock of Parent) of the Convertible Preferred Stock that
might otherwise have operated by virtue of the issuance by Parent on
August 14, 1997, of 775,194 shares of Parent Common Stock in
settlement of a certain class action complaint;
(ii) any adjustment in the respective Exercise Prices (as
defined in the applicable Warrant) of the Warrants (as defined below)
that might otherwise operate by virtue of the issuance by Parent of
the shares of Parent Common Stock that are contemplated to be issued
in the Merger; and
(iii) any rights to purchase Convertible Preferred Stock
pursuant to Section 4.01 of the Amended and Restated Financial Support
Agreement, dated as of July 31, 1997, among Parent, the Stockholder
and the other parties named therein.
For the purposes of this Agreement, the term "Warrants" shall mean (i) the
Common Stock Purchase Warrant, dated September 30, 1996, issued by Parent to
the Stockholder, (ii) the Common Stock Purchase Warrant, dated January 27,
1997, issued by Parent to the Stockholder, (iii) the Common Stock Purchase
Warrant, dated June 6, 1997, issued by Parent to the Stockholder and (iv) the
Common Stock Purchase Warrant, dated July 31, 1997, issued by Parent to the
Stockholder, in each case as the same may have been amended from time to time.
SECTION 7. Termination of Cerplex Warrants. Effective
immediately preceding the consummation of the Merger, the Cerplex Warrants (and
any shares issued upon exercise thereof) shall terminate, shall be of no force
or effect and shall not be deemed outstanding for the purpose of calculating
the Exchange Ratio in the Merger Agreement.
SECTION 8. Headings. Headings of articles, sections and
paragraphs of this Agreement are inserted for convenience of reference only and
shall not affect the interpretation or be deemed to constitute a part hereof.
SECTION 9. Severability. In the event that any one or more
of the provisions contained in this Agreement or in any other instrument
referred to herein shall, for any reason, be held to be invalid, illegal or
unenforceable, such illegality, invalidity or unenforceability shall not affect
any other provisions of this Agreement.
5
<PAGE> 6
SECTION 10. Benefits of Agreement; Assignment of Rights by
the Company. Nothing expressed by or mentioned in this Agreement is intended
or shall be construed to give any person other than the parties hereto and
their respective successors and permitted assigns any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective successors and permitted assigns. Notwithstanding
the foregoing, it is understood and agreed that the Company may assign its
right and option to purchase securities pursuant to Section 4 hereof to a third
party or parties by delivering a written notice of assignment to the
Stockholder and Parent during the Option Period.
SECTION 11. Notices. Any notice or other communications
required or permitted hereunder shall be deemed to be sufficient and received
if contained in a written instrument delivered in person or by courier or duly
sent by first class certified mail, postage prepaid, or by facsimile addressed
to such party at the address or facsimile number set forth below:
(1) if to the Company, to it at:
The Cerplex Group, Inc.
1382 Bell Avenue
Tustin, California 92780
Attn: William A. Klein
(2) if to the Stockholder, to it at:
Welsh, Carson, Anderson & Stowe
320 Park Avenue, Suite 2500
New York, New York 10022
Attn: Thomas E. McInerney
(3) if to Parent, to it at:
Aurora Electronics, Inc.
9477 Waples Street, Suite 250
San Diego, California 92121
Attn: Chief Executive Officer
or, in any case, at such other address or facsimile number as shall have been
furnished in writing by such party to the other party hereto. All such
notices, requests, consents and other communications shall be deemed to have
been received (a) in the case of personal or courier delivery, on the date of
such delivery, (b) in the case of mailing, on the fifth business day following
the date of such mailing and (c) in the case of facsimile, when received.
6
<PAGE> 7
SECTION 12. Modification. Neither this Agreement nor any
provision hereof may be modified, changed, discharged or terminated except by
an instrument in writing signed by the Company and the Stockholder.
SECTION 13. Counterparts. This Agreement may be executed in
any number of counterparts, and each such counterpart hereof shall be deemed to
be an original instrument, but all such counterparts together shall constitute
but one agreement.
SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, ENFORCEABLE UNDER, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF DELAWARE.
7
<PAGE> 8
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement as of the day and year first above written.
WELSH, CARSON, ANDERSON &
STOWE VII, L.P.
By WCAS VII Partners, L.P.,
General Partner
By /s/ THOMAS E. MCINERNEY
---------------------------
General Partner
THE CERPLEX GROUP, INC.
By /s/ WILLIAM A. KLEIN
--------------------------
Name: William A. Klein
Title: Chairman
AURORA ELECTRONICS, INC.
By /s/ JIM C. COWART
--------------------------
Name: Jim C. Cowart
Title: Chairman
<PAGE> 1
EXHIBIT 99.5
INTERIM MANAGEMENT AGREEMENT
INTERIM MANAGEMENT AGREEMENT, dated as of January 30, 1998,
between The Cerplex Group, Inc., a Delaware corporation ("Cerplex"), and Aurora
Electronics, Inc., a Delaware corporation ("Aurora").
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of January 30, 1998 (the "Merger Agreement"), between Cerplex, Aurora and Holly
Acquisition Corp., a Delaware corporation and a newly-formed subsidiary of
Aurora ("Sub"), Sub will merge with and into Cerplex (the "Merger"), with the
result that Cerplex will become a wholly-owned subsidiary of Aurora; and
WHEREAS, George L. McTavish ("McTavish") has been designated
the Chairman and Chief Executive Officer of Aurora and, following the
consummation of the Merger, will also be the Chairman and Chief Executive
Officer of Cerplex; and
WHEREAS, the Merger Agreement provides that the consummation
of the Merger is subject to certain conditions; and
WHEREAS, Cerplex and Aurora desire to make certain
arrangements regarding the joint management of Cerplex and Aurora during the
period (the "Interim Period") from the Effective Date (as defined below)
through the date of consummation of the Merger;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereby agree as follows:
1. For purposes of this Agreement, the "Effective Date"
shall mean the date on which any waiting period applicable to the consummation
of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, shall have expired or been terminated, and no action shall have
been instituted by the Department of Justice or Federal Trade Commission, as of
such date, challenging or seeking to enjoin the consummation of this
transaction, which action shall have not been withdrawn or terminated.
2. Cerplex agrees to implement as of the Effective Date
an interim organization chart mutually acceptable to the parties.
3. (a) William A. Klein ("Klein") shall continue as
Chairman of the Board of Directors of Cerplex and shall have such duties set
forth in the By-laws of Cerplex in effect on the date
<PAGE> 2
hereof and shall report directly to the Board of Directors of Cerplex.
(b) On the Effective Date, Stephen J. Hopkins
("Hopkins") shall resign as Chief Executive Officer of Cerplex and shall work
with Cerplex as a consultant. In that capacity, Hopkins shall report directly
to the Chief Executive Officer of Cerplex.
(c) On the Effective Date, McTavish shall be
appointed and shall serve as Chief Executive Officer of Cerplex and shall
report directly to the Board of Directors of Cerplex. During the Interim
Period, McTavish shall be furnished notice of and be entitled to attend all
meetings of the Board of Directors of Cerplex.
4. Cerplex shall reimburse Aurora for the costs incurred
by Aurora in making Aurora's employees other than McTavish available to Cerplex
during the Interim Period in fulfillment of the purposes of this Agreement.
Such reimbursement shall be computed pro rata based upon the fraction of the
Aurora employees' business time devoted to Cerplex under this Agreement. Such
reimbursement shall be calculated as follows: (i) Aurora employee's hourly rate
(computed as annual salary divided by 2000 hours), plus (ii) fringe benefits
charged at a rate to be determined, multiplied by (iii) the number of hours
worked for Cerplex. Reimbursement by Cerplex to Aurora shall be made not later
than the fifteenth day of each calendar month for the preceding month based
upon appropriate documentation to be provided by Aurora not later than the
fifth business day each calendar month. All such reimbursements shall be made
pursuant to a plan formulated by McTavish and subject to review by Klein and
the Cerplex Board of Directors from time to time. Cerplex shall reimburse
Aurora for McTavish's salary during the Interim Period pro rata based upon time
spent on Cerplex matters, such amount to be paid on the fifteenth day of each
month.
5. Cerplex shall indemnify and hold harmless Aurora,
McTavish, and those other Aurora employees who render services to Cerplex
during the Interim Period under this Agreement from and against any claims or
liabilities asserted against them relating to their services to Cerplex
hereunder (and Cerplex hereby forever releases Aurora and such persons from any
claims by or liabilities to Cerplex arising from or relating to such services),
provided that (i) such claims or liabilities did not result from acts or
omissions (x) not in good faith or (y) which involve intentional misconduct or
a knowing violation of law and (ii) such services were rendered in a manner
reasonably believed to be in or not opposed to the best interests of Cerplex.
This obligation of Cerplex shall survive the termination of this Agreement.
2
<PAGE> 3
6. During the Interim Period, McTavish and those other
Aurora employees made available to Cerplex pursuant to this Agreement shall use
their best efforts to (i) avoid doing anything to the competitive disadvantage
of Cerplex vis-a-vis Aurora and (ii) not use to the advantage of Aurora any
confidential information of Cerplex obtained while serving in these capacities.
The parties hereto acknowledge that, in the event the Merger Agreement is
terminated, their obligations with respect to confidential information of
Cerplex or Aurora (as the case may be) shall be governed by Section 7.01 of the
Merger Agreement.
7. During the Interim Period, Cerplex shall be managed
in accordance with Sections 2 and 3 above, subject to the direction of
Cerplex's Board of Directors. To the extent that it does not conflict with the
terms of this Agreement, the Engagement Letter, dated as of June 30, 1997, as
amended, between Cerplex and Nightingale & Associates, LLC, shall continue in
full force and effect during the Interim Period.
8. During the Interim Period, Aurora shall continue to
be managed by its executives, subject to the direction of Aurora's Board of
Directors.
9. Aurora and Cerplex each recognize that their
respective companies are marginally competitive with each other and that some
of the services offered by of them overlap with services offered by the other
and are thus potentially detrimental to the other company. Accordingly, Aurora
and Cerplex agree that during the Interim Period, neither company will
undertake a major change of market strategy or product offering to the
detriment of the other without first disclosing and discussing such changes
with the other company. In addition, in order to facilitate coordination of
the activities of Cerplex and Aurora during the Interim Period, McTavish shall
use his reasonable best efforts to keep Klein reasonably informed of Aurora's
continuing marketing activities.
10. This Agreement shall terminate upon the earlier to
occur of (a) the consummation of the Merger, or (b) the termination of the
Merger Agreement as contemplated therein, except that the provisions of
Sections 4 and 5 hereof shall survive any such termination.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the date first above written.
AURORA ELECTRONICS, INC.
By: /s/ JIM C. COWART
-----------------------------
Name: Jim C. Cowart
Title: Chairman
THE CERPLEX GROUP, INC.
By: /s/ WILLIAM A. KLEIN
-----------------------------
Name: William A. Klein
Title: Chairman
4
<PAGE> 1
EXHIBIT 99.6
================================================================================
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
Among
AURORA ELECTRONICS, INC.
THE SEVERAL PURCHASERS NAMED IN ANNEX I HERETO
and
WCAS CAPITAL PARTNERS II, L.P.
Dated as of January 30, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.01 Purchase and Sale of the Bridge Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.02 Purchase and Sale of the Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 1.03 Purchase and Sale of the Aurora
Preferred Stock to WCAS CP II . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 1.04 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF AURORA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.01 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.02 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.03 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.04 Authorization of Agreements, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.05 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.06 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.07 Actions Pending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.08 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.09 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF
THE PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.01 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.02 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.03 Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.01 Conditions Precedent to the Obligations
of the Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.02 Condition Precedent to the Obligations
of Aurora . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE V. TERMINATION AND ABANDONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.01 Termination and Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.02 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.01 Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.02 Survival of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.03 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.04 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.05 Entire Agreement; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.06 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.07 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
TESTIMONIUM
</TABLE>
i
<PAGE> 3
INDEX TO ANNEXES
Annex Description
ANNEX I The Purchasers
INDEX TO EXHIBITS
Exhibit Description
EXHIBIT A-1 Form of Aurora Bridge Notes
EXHIBIT A-2 Form of Aurora Senior Subordinated Notes
EXHIBIT B Form of Certificate of Designation
EXHIBIT C Form of Certificate of Amendment
EXHIBIT D Form of Amended and Restated Registration Rights
Agreement
EXHIBIT E Form of Opinion of Hughes & Luce
INDEX TO SCHEDULES
Schedule Description
2.02 Subsidiaries
2.03 Subscriptions, Warrants, Etc.
2.07 Undisclosed Liabilities
2.09 Certain Changes
ii
<PAGE> 4
SECURITIES PURCHASE AND EXCHANGE AGREEMENT dated as of January
30, 1998, among AURORA ELECTRONICS, INC., a Delaware corporation ("Aurora"),
Welsh, Carson, Anderson & Stowe VII, L.P., a Delaware limited partnership
("WCAS VII"), and the other several Purchasers named in Annex I hereto
(collectively the "Purchasers") and WCAS Capital Partners II, L.P., a Delaware
limited partnership ("WCAS CP II" and, collectively with the Purchasers the
"Participants").
WHEREAS, pursuant to an Agreement and Plan of Merger of even
date herewith (the "Merger Agreement") among Aurora, Holly Acquisition Corp., a
newly organized wholly-owned Delaware subsidiary of Aurora ("Sub"), and The
Cerplex Group, Inc., a Delaware corporation ("Cerplex"), Aurora desires to
acquire Cerplex through the merger (the "Merger") of Sub with and into Cerplex;
and
WHEREAS, pursuant to an Irrevocable Proxy and Option Agreement
of even date herewith (the "Option Agreement"), certain stockholders of Cerplex
who own in the aggregate a majority of the outstanding shares of Cerplex
entitled to vote have agreed, among other things, (i) to grant irrevocable
proxies coupled with an interest to representatives of Aurora to vote their
shares of Cerplex in favor of the Merger, (ii) to grant to Aurora an option to
purchase their Cerplex shares for the consideration to be received by them in
the Merger, and (iii) not to transfer or otherwise dispose of their Cerplex
shares or any interest therein except pursuant to the Merger or such option,
all on the terms and subject to the conditions contained in the Option
Agreement; and
WHEREAS, pursuant to a Stockholders Agreement of even date
herewith (the "Stockholders Agreement") among WCAS VII, Aurora and Cerplex,
WCAS VII has agreed (i) to vote its shares of Aurora in favor of approval of
the Certificate of Amendment (as defined herein), (ii) subject to consummation
of the Merger, to convert all currently outstanding shares of convertible
preferred stock of Aurora into Common Stock, $.01 par value ("Aurora Common
Stock"), (iii) to make further assurances to Cerplex with respect to Aurora's
obligations under the Merger Agreement and this Agreement and (iv) to grant,
together with Parent, an option to Cerplex to purchase certain securities of
Cerplex held by WCAS VII and Aurora in the event the Merger Agreement
terminates and the Merger is not consummated in accordance with the Certificate
of Incorporation of Aurora, all on the terms and subject to the conditions
contained in the Stockholders Agreement; and
WHEREAS WCAS CP II holds $10,000,000 principal amount of
Aurora's 10% Senior Subordinated Notes Due September 30, 2001 (the "CP II
Notes") together with accrued interest thereon, being all the issued and
outstanding CP II Notes; and
<PAGE> 5
WHEREAS, on December 5, 1997, in order to alleviate Aurora's
working capital shortage, the Purchasers purchased an aggregate $2,800,000
principal amount of Aurora's 10% Senior Subordinated Demand Notes (the "Demand
Notes") for cash in the amount of $2,800,000; and
WHEREAS, pursuant to a Note and Warrant Assignment and
Transfer Agreement of even date herewith (the "Cerplex Note Purchase
Agreement"), simultaneously with the execution and delivery hereof, WCAS VII is
purchasing (i) an aggregate $18,069,275 principal amount of 9.50% Senior
Subordinated Notes due 2001 (the "Cerplex Subordinated Notes") of Cerplex,
representing all the issued and outstanding Cerplex Subordinated Notes,
together with accrued interest thereon, and (ii) certain warrants (the "Cerplex
Warrants") to purchase shares of Common Stock, $.001 par value ("Cerplex Common
Stock") of Cerplex for cash at a price equal to 30% of the sum of the principal
amount of, and accrued interest on, the Cerplex Subordinated Notes (such price
being hereinafter called the "Cerplex Note and Warrant Purchase Price"); and
WHEREAS, pursuant to a Forbearance Agreement of even date
herewith and a Seventh Amendment to Credit Agreement and Limited Waiver
Agreement of even date herewith (the "Forbearance Agreement"), Citibank, N.A.
has agreed to waive certain defaults and forbear from enforcing certain of its
rights under the Credit Agreement dated as of October 12, 1994, as amended (the
"Cerplex Credit Agreement"), among Cerplex, the lenders named therein and Wells
Fargo Bank, N.A., as Agent, pending consummation of the Merger and repayment of
the obligations of Cerplex under the Cerplex Credit Agreement, all on the terms
and subject to the conditions set forth in the Forbearance Agreement; and
WHEREAS, Aurora desires to obtain proceeds from a new Senior
lender of at least $17,000,000 (the "New Senior Loan") on terms acceptable to
Aurora; and
WHEREAS, pursuant to a letter agreement of even date herewith
(the "Chase Waiver"), The Chase Manhattan Bank N.A. ("Chase") is consenting to
the New Senior Loan and to the subordination to the New Senior Loan of Chase's
currently outstanding loan pursuant to the Credit Agreement dated as of March
29, 1996, as amended (the "Existing Aurora Credit Agreement"), among Aurora
Electronics Group, Inc., the guarantors named therein, the lenders named
therein, and Chase (formerly known as Chemical Bank), as Agent, all on the
terms and subject to the conditions set forth in the Chase Waiver; and
WHEREAS, in order to provide for the working capital needs of
Aurora and for other purposes, WCAS VII is willing, between the date hereof and
the consummation of the Merger, upon the terms and subject to the conditions
herein provided (i) on the date hereof, to purchase $3,200,000 principal amount
of
2
<PAGE> 6
Aurora's 10% Subordinated Bridge Notes in the form annexed hereto as Exhibit
A-1 (the "Bridge Notes"), and (ii) from time to time between the date hereof
and the consummation of the Merger, to purchase up to an additional $2,000,000
aggregate principal amount of Bridge Notes; and
WHEREAS, Aurora wishes to issue and sell (i) subject to the
rights offering referred to below, to the Purchasers, severally and not
jointly, up to an aggregate 15,000 units (the "Units") each consisting of (x)
$1,000 principal amount of Aurora's 10% Senior Subordinated Notes Due 2004 (the
"Aurora Senior Subordinated Notes"), in the form annexed hereto as Exhibit A-2,
and (y) 12 shares of Senior Convertible Preferred Stock, par value $1 per share
("Aurora Preferred Stock"), having the terms set forth in the form of
Certificate of Designations annexed hereto as Exhibit B, for a purchase price
of $2,200 per Unit payable in cash or by surrender or exchange of other
indebtedness of Aurora or Cerplex as hereinafter provided; and (ii) to WCAS CP
II an aggregate 33,000 shares of Aurora Preferred Stock in exchange for
surrender for cancellation of the CP II Notes and all interest accrued thereon;
and
WHEREAS Aurora wishes to afford to its public stockholders the
right to participate in the purchase of the Units on the same basis as the
Purchasers and, to that end, proposes to offer to such holders rights to
purchase their proportionate share of the Units based on fully-diluted holdings
of Aurora Common Stock; and
WHEREAS the Purchasers and WCAS CP II are willing, on the
terms and subject to the conditions herein set forth, to purchase such Units
and Aurora Preferred Stock, including without limitation, in the case of the
Purchasers, any Units offered to but not subscribed for by the public holders
of Aurora Common Stock; and
WHEREAS, in order to provide sufficient Aurora Common Stock to
permit conversion of the Aurora Preferred Stock, Aurora wishes to increase the
authorized Aurora Common Stock from 50 million shares to 300 million shares,
pursuant to a Certificate of Amendment in the form annexed hereto as Exhibit C
(the "Certificate of Amendment"); and
WHEREAS, in connection with the Merger, (i) the Participants
and Aurora wish to amend and restate the Registration Rights Agreement dated as
of March 29, 1996, among Aurora and the other parties named therein, as
heretofore amended, pursuant to the Amended and Restated Registration Rights
Agreement substantially in the form annexed hereto as Exhibit D (the "Restated
Registration Rights Agreement"), to include among the shares entitled to
registration thereunder the shares of Aurora Common Stock issuable upon
conversion of shares of Aurora Preferred
3
<PAGE> 7
Stock and shares issued to certain affiliates of Cerplex in the Merger;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereby agree as follows:
ARTICLE I.
THE CLOSING
SECTION 1.01 Purchase and Sale of the Bridge Notes.
(a) Purchase and Sale on the Date Hereof. Simultaneously
with the execution and delivery hereof, Aurora is executing and delivering to
WCAS VII $3,200,000 principal amount of the Bridge Notes, dated the date hereof
and registered in the name of WCAS VII. Receipt of such Bridge Notes is hereby
acknowledged by WCAS VII. In consideration of such Bridge Notes, and against
delivery thereof as aforesaid, WCAS VII is transferring to Aurora the sum of
$3,200,000 by wire transfer. Receipt of such wire transfer is hereby
acknowledged by Aurora.
(b) Purchases and Sales Between the Date Hereof and the
Closing Date.
(i) Subject to the terms and conditions set forth herein,
from time to time prior to the Closing Date (as hereinafter defined),
or the earlier termination of this Agreement, on a date (a "Drawdown
Date") designated by Aurora to WCAS VII upon not less than five days'
prior written notice (a "Bridge Notice"), Aurora shall execute and
deliver to WCAS VII additional Bridge Notes, dated such Drawdown Date
and registered in the name of WCAS VII, in a principal amount that,
taken together with any such additional Bridge Notes theretofore so
executed and delivered pursuant to this paragraph (b), does not exceed
$2,000,000 (or such higher limit, if any, as WCAS VII shall, in its
sole discretion, agree). Any Bridge Notice delivered hereunder shall
be executed by the principal financial officer of Aurora and shall
specify that the proceeds of such purchase and sale are to be relent
to Cerplex for working capital purposes.
(ii) As payment in full for the additional Bridge Notes being
purchased by it hereunder on any Drawdown Date, and against delivery
of such Notes as aforesaid, WCAS VII shall deliver to Aurora on each
Drawdown Date a certified or official bank check in New York Clearing
House funds payable to the order of Aurora in the amount of the
principal amount of additional Bridge Notes so being purchased by it,
or
4
<PAGE> 8
shall transfer such sum to the account of Aurora by wire transfer.
SECTION 1.02 Purchase and Sale of the Units.
(a) Subject to the terms and conditions set forth herein, on
the Closing Date, Aurora shall execute and deliver to each Purchaser the number
of Units (consisting of Aurora Senior Subordinated Notes and certificates
representing shares of Aurora Preferred Stock registered in the name of such
Purchaser) set forth opposite such Purchaser's name in Annex I hereto.
(b) Anything in paragraph (a) above to the contrary
notwithstanding, in the event that (A) the Rights Offering shall have become
effective as herein contemplated and (B) holders of Aurora Common Stock (or
transferees of stock purchase rights granted to such holders pursuant to the
Rights Offering) shall have elected to purchase Units pursuant thereto and
shall have complied with the requirements for payment therefor, the number of
Units to be purchased by each Purchaser shall be reduced pro tanto (subject to
rounding to the nearest one-tenth of a Unit), so that the aggregate number of
Units purchased by all the Purchasers shall be 15,000 minus the number of Units
so purchased by such holders.
(c) As payment in full for the Units being purchased by it on
the Closing Date, and against delivery thereof as aforesaid, each Purchaser
other than WCAS VII shall on the Closing Date:
(i) surrender to Aurora for cancellation a Demand Note, in the
principal amount set forth opposite the name of such Purchaser in
Annex I hereto, together with interest accrued thereon to the Closing
Date; and
(ii) deliver to Aurora a certified or official bank check in New York
Clearing House funds payable to the order of Aurora in an amount equal
to $2,200 times the number of Units to be purchased by such Purchaser
hereunder, as may be reduced pursuant to Section 1.02(b) above, less
the amount of principal and interest surrendered under clause (i)
above).
(d) As payment in full for the Units being purchased by WCAS
VII on the Closing Date, and against delivery thereof as aforesaid, WCAS VII
shall on the Closing Date:
(i) surrender to Aurora for cancellation a Demand Note, in the
principal amount set forth opposite the name of WCAS VII in Annex I
hereto, together with interest accrued thereon to the Closing Date;
and
5
<PAGE> 9
(ii) surrender to Aurora for cancellation each Bridge Note issued
hereunder to WCAS VII, together with interest accrued thereon to the
Closing Date; and
(iii) deliver to Aurora the Cerplex Subordinated Notes and the Cerplex
Warrants, duly endorsed for transfer, it being understood that such
securities will be valued for such purpose at the Cerplex Note and
Warrant Purchase Price; and
(iv) deliver to Aurora a certified or official bank check in New York
Clearing House funds payable to the order of Aurora in an amount equal
to $2,200 times the number of Units to be purchased by WCAS VII
hereunder, as may be reduced pursuant to Section 2.01(b) above, less
(A) the amount of principal and interest surrendered under clauses (i)
and (ii) above and (B) the Cerplex Note and Warrant Purchase Price.
SECTION 1.03 Purchase and Sale of the Aurora Preferred Stock
to WCAS CP II.
(a) Subject to the terms and conditions set forth herein, on
the Closing Date Aurora shall issue and sell to WCAS CP II, and WCAS CP II
shall purchase from Aurora, 33,000 shares of Aurora Preferred Stock (such
shares, together with the shares included in the Units being purchased by the
Purchasers pursuant to Section 1.02 above, being herein referred to
collectively as the "Aurora Preferred Shares") in consideration for the
surrender by WCAS CP II of $10,000,000 principal amount of CP II Notes
(together with accrued interest thereon). Aurora shall issue and deliver to
WCAS CP II a stock certificate or certificates in definitive form, registered
in the name of WCAS CP II, evidencing the Aurora Preferred Shares being
purchased by it hereunder.
(b) As payment in full for the Aurora Preferred Shares
being purchased by it hereunder, and against delivery of the stock certificate
or certificates therefor as aforesaid, WCAS CP II shall surrender to Aurora the
CP II Notes, duly endorsed for transfer, with all signatures guaranteed.
SECTION 1.04 Closing Date. The closing of the transactions
contemplated hereby shall take place at the offices of Reboul, MacMurray,
Hewitt, Maynard & Kristol, 45 Rockefeller Plaza, New York, New York 10111, at
10 a.m., New York time, on the Effective Date of the Merger, or at such other
date and time prior to the Merger as may be mutually agreed upon among the
majority of the Participants and Aurora (such date and time of closing being
herein called the "Closing Date").
6
<PAGE> 10
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF AURORA
Aurora represents and warrants to, and agrees with, the
Participants as follows:
SECTION 2.01 Organization and Qualification. Aurora is a
corporation validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own or lease
and operate its properties and assets and to carry on its business as it is now
being conducted. Aurora is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the character
of its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the properties, assets, financial condition,
prospects, operating results or business of Aurora and its subsidiaries, taken
as a whole (a "Material Adverse Effect").
SECTION 2.02 Subsidiaries. (a) Except as set forth on
Schedule 2.02 hereto, neither Aurora nor any of its subsidiaries owns of record
or beneficially, directly or indirectly, (i) any shares of outstanding capital
stock or securities convertible into capital stock of any other corporation or
(ii) any participating interest in any partnership, joint venture or other
non-corporate business enterprise. Each subsidiary of Aurora is a corporation
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to own or
lease and operate its properties and assets and to carry on its business as it
is now being conducted. Each subsidiary of Aurora is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction in which the character of its properties owned or leased or the
nature of its activities makes such qualification necessary, except where the
failure to be so qualified would not have a Material Adverse Effect. All the
outstanding shares of capital stock of Aurora's subsidiaries are duly
authorized, validly issued, fully paid and nonassessable and, except as set
forth on Schedule 2.02, are owned by Aurora or by a wholly-owned subsidiary of
Aurora, free and clear of any liens, claims, charges, restrictions, rights of
others, security interests, prior assignments or other encumbrances
(collectively, "Claims"), and there are no proxies, voting or transfer
agreements or understandings outstanding with respect to any such shares.
(b) For purposes of this Agreement, the term
"subsidiary", when used with respect to Aurora, shall mean any corporation or
other business entity, a majority of whose outstanding equity securities is at
the time owned, directly or indirectly, by Aurora and/or one or more other
subsidiaries of Aurora.
7
<PAGE> 11
SECTION 2.03 Capitalization.
(a) The authorized capital stock of Aurora consists of (i)
50,000,000 shares of Common Stock and (ii) 1,000,000 shares of Preferred Stock,
$.01 par value ("Preferred Stock"), of Aurora of which 400,000 shares have been
designated Convertible Preferred Stock, 25,000 shares have been designated
Series B Convertible Preferred Stock, 25,000 shares have been designated Series
C Convertible Preferred Stock and 20,000 shares have been designated Series D
Convertible Preferred Stock. As of the date hereof, 6,847,583 shares of Common
Stock, 400,000 shares of Convertible Preferred Stock, 25,000 shares of Series B
Convertible Preferred Stock, 25,000 shares of Series C Convertible Preferred
Stock and 20,000 shares of Series D Convertible Preferred Stock are issued and
outstanding, all of which were duly authorized and validly issued and are fully
paid and nonassessable.
(b) Upon the filing with the Secretary of State of the
State of Delaware of a Certificate of Designations in the form attached hereto
as Exhibit B and a Certificate of Amendment in the form attached hereto as
Exhibit C, 213,000 shares of Preferred Stock shall be designated as authorized
Senior Convertible Preferred Stock, and the authorized Aurora Common Stock
shall be 300 million shares.
(c) Except as set forth in Aurora's SEC Filings or on
Schedule 2.03 hereto, as of the date hereof, no subscription, warrant, option,
convertible security, stock appreciation or other right (contingent or other)
to purchase or acquire any shares of any class of capital stock of Aurora or
any of its subsidiaries is authorized or outstanding and (except as otherwise
expressly contemplated by this Agreement) there is not any commitment of Aurora
or any of its subsidiaries to issue any shares, warrants, options or other such
rights or to distribute to holders of any class of its capital stock any
evidences of indebtedness or assets. Schedule 2.03 sets forth a complete and
correct list of the number of warrants or options, including a listing of the
vesting schedules thereof, held by each person with respect to the outstanding
capital stock of Aurora.
(d) Except as set forth on Schedule 2.03, neither Aurora nor
any of its subsidiaries has any obligation (contingent or other) to purchase,
redeem or otherwise acquire any shares of its capital stock or any interest
therein or to pay any dividend or make any other distribution in respect
thereof.
SECTION 2.04 Authorization of Agreements, Etc. (a) Each of
(i) the execution and delivery by Aurora of this Agreement, (ii) the
performance by Aurora of its obligations hereunder, (iii) the issuance, sale
and delivery by Aurora of the Aurora Preferred Shares and the Aurora Senior
Subordinated Notes,
8
<PAGE> 12
and (iv) the issuance and delivery of the shares of Aurora Common Stock
issuable upon the conversion of the Aurora Preferred Shares (collectively, the
"Conversion Shares") have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, the Certificate of Incorporation or By-laws of
Aurora, or, subject to the receipt of required consents from the lenders under
the Existing Aurora Credit Agreement, any provision of any indenture, agreement
or other instrument to which Aurora or any of its properties or assets is
bound, or conflict with, result in a breach of or constitute (with due notice
or lapse of time or both) a default under any such indenture, agreement or
other instrument, or result in the creation or imposition of any Claim in favor
of any third person upon any of the assets of Aurora or any of its
subsidiaries.
(b) The Aurora Preferred Shares have been duly authorized by
Aurora and, when sold and paid for in accordance with this Agreement, will be
validly issued, fully paid and nonassessable shares of Aurora Preferred Stock.
The Conversion Shares, when issued and delivered upon the conversion of the
Aurora Preferred Shares, will be duly authorized, validly issued, fully paid
and nonassessable shares of Aurora Common Stock. Neither the issuance, sale
and delivery of the Aurora Preferred Shares to the Participants hereunder, nor
the issuance and delivery of the Conversion Shares, is subject to any
preemptive rights of stockholders of Aurora or to any right of first refusal or
other similar right in favor of any person.
SECTION 2.05 Validity. This Agreement has been duly executed
and delivered by Aurora and constitutes the legal, valid and binding obligation
of Aurora, enforceable against Aurora in accordance with its terms.
SECTION 2.06 SEC Filings. Aurora has filed all forms,
reports and documents required to be filed with the SEC since September 30,
1992, and Aurora has made available to the Participants, as filed with the SEC,
complete and accurate copies of (i) the Annual Report of Aurora on Form 10-K
for the year ended September 30, 1997, and (ii) all other reports, statements
and registration statements (including Current Reports on Form 8-K) filed by
Aurora with the SEC since September 30, 1992, in each case including all
amendments and supplements (collectively, "Aurora's SEC Filings"). Aurora's
SEC Filings (including, without limitation, any financial statements or
schedules included therein) (i) were prepared in compliance with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, and the rules and regulations thereunder, as the case may
be, and (ii) did not at the time of filing (or if amended, supplemented or
superseded by a filing prior to the date hereof, on the date of that filing)
contain any untrue statement of a material fact or omit to state a material
fact required to
9
<PAGE> 13
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
SECTION 2.07 Actions Pending. Except (i) for any actions,
suits, investigations or proceedings which individually do not involve claims
against Aurora or any of its subsidiaries for more than $25,000, or (ii) as set
forth in Aurora's SEC Filings, there is no action, suit, investigation or
proceeding pending or, to the best knowledge of Aurora, threatened against or
affecting Aurora, or any of its properties or rights, before any court or by or
before any governmental body or arbitration board or tribunal. There is no
judgment, decree, injunction or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against Aurora.
SECTION 2.08 Compliance with Law. Neither Aurora nor any of
its subsidiaries is in default in any respect under any order or decree of any
court, governmental authority, arbitrator or arbitration board or tribunal or
under any laws, ordinances, governmental rules or regulations to which Aurora
or any of such subsidiaries or any of their respective properties or assets is
subject, except where such default would not have a Material Adverse Effect.
SECTION 2.09 Brokers. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by
Aurora directly with the Participants, without the intervention of any other
person on behalf of Aurora in such manner as to give rise to any valid claim by
any other person against the Participants for a finder's fee, brokerage
commission or similar payment.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE PARTICIPANTS
Each Participant represents and warrants to, and agrees with,
Aurora as follows:
SECTION 3.01 Authorization. The execution, delivery and
performance by such Participant of this Agreement and the purchase and receipt
by such Participant of the Aurora Preferred Shares and the Aurora Senior
Subordinated Notes, as the case may be, being acquired by it hereunder, have
been duly authorized by all requisite action on the part of such Participant,
and will not violate any provision of law, any order of any court or other
agency of government, the charter or other governing documents of such
Participant, or any provision of any indenture, agreement or other instrument
by which such Participant or any of such Participant's properties or assets are
bound, or conflict with,
10
<PAGE> 14
result in a breach of or constitute (with due notice or lapse of time or both)
a default under any such indenture, agreement or other instrument, or result in
any Claim upon any of the properties or assets of such Participant.
SECTION 3.02 Validity. This Agreement has been duly executed
and delivered by such Participant and constitutes the legal, valid and binding
obligation of such Participant, enforceable against such Participant in
accordance with its terms.
SECTION 3.03 Investment Representations.
(a) Such Participant is acquiring the Bridge Notes or the
Units, as the case may be, being purchased by such Participant hereunder for
such Participant's own account, for investment, and not with a view toward the
resale or distribution thereof.
(b) Such Participant understands that he, she or it, as
the case may be, must bear the economic risk of such Participant's investment
for an indefinite period of time.
(c) Such Participant is able to fend for itself in the
transactions contemplated by this Agreement and such Participant has the
ability to bear the economic risks of the investment in the Bridge Notes or the
Units, as the case may be, being purchased hereunder for an indefinite period
of time. Such Participant further acknowledges that he, she or it, as the case
may be, has received copies of Aurora SEC Filings and has had the opportunity
to ask questions of, and receive answers from, officers of Aurora with respect
to the business and financial condition of Aurora and the terms and conditions
of the offering of the Bridge Notes or the Units, as the case may be, and to
obtain additional information necessary to verify such information or can
acquire it without unreasonable effort or expense.
(d) Such Participant has such knowledge and experience in
financial and business matters that such Participant is capable of evaluating
the merits and risks of its investment in the Bridge Notes or the Units, as the
case may be. Such Participant further represents that such Participant that is
a limited partnership has not been formed solely for the purpose of purchasing
the Bridge Notes or the Units, as the case may be.
(e) If such Participant is a limited partnership, such
Participant represents that it has been organized and is existing as a limited
partnership under the laws of the State of Delaware.
11
<PAGE> 15
ARTICLE IV.
CONDITIONS PRECEDENT
SECTION 4.01 Conditions Precedent to the Obligations of the
Participants. The obligations of the Participants hereunder are, at their
option, subject to the satisfaction, on or before the Closing Date, and, in the
case of paragraphs (d) and (e) below, the obligations of WCAS VII on each
Drawdown Date, of the following conditions:
(a) Consummation of Merger. The Merger shall have become
effective under the General Corporation Law of the State of Delaware.
(b) Certificate of Designations. The Certificate of
Amendment and the Certificate of Designations shall have become legally
effective with the Secretary of State of the State of Delaware.
(c) New Senior Loan. Aurora shall have obtained at least
$17,000,000 of proceeds from the New Senior Loan on terms reasonably acceptable
to WCAS VII, as determined in good faith by WCAS VII.
(d) Opinion of Counsel. The Participants shall have
received from Hughes & Luce L.L.P., counsel for Aurora, an opinion dated the
Closing Date, in the form annexed hereto as Exhibit E.
(e) No Order. No governmental entity (including a federal
or state court) of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which materially restricts, prevents or prohibits
consummation of any transaction contemplated by this Agreement; provided,
however, that the parties shall use their reasonable best efforts to cause any
such decree, judgment, injunction or other order to be vacated or lifted.
SECTION 4.02 Condition Precedent to the Obligations of
Aurora. The obligations of Aurora hereunder on the Closing Date are subject to
the due filing with the Secretary of State of the State of Delaware and the
legal effectiveness of the Certificate of Incorporation and the Certificate of
Designations on or prior to the Closing Date.
12
<PAGE> 16
ARTICLE V.
TERMINATION AND ABANDONMENT
SECTION 5.01 Termination and Abandonment. This Agreement may
be terminated and the transactions contemplated hereby may be abandoned by a
majority in interest of the Participants (i) if the Effective Time of the
Merger shall not have occurred on or prior to June 30, 1998 and (ii) if the
Merger Agreement has terminated.
SECTION 5.02 Effect of Termination. In the event of
termination of this Agreement pursuant to this Article V, this Agreement shall
forthwith become void, without liability on the part of any party hereto,
except that nothing herein shall relieve any party from liability for any
breach of this Agreement.
ARTICLE VI.
MISCELLANEOUS
SECTION 6.01 Expenses, Etc. Aurora shall reimburse the
Participants or pay on their behalf any reasonable fees and expenses incurred
by them or any of them in connection with the negotiation and preparation of
this Agreement and the related documents contemplated hereby. For purposes
hereof, the "fees and expenses incurred by the Participants" shall include,
without limitation, the fees, disbursements and expenses of counsel,
accountants, financial advisors and other experts retained by the Participants
in connection with this Agreement and the transactions contemplated hereby.
SECTION 6.02 Survival of Agreements. All covenants,
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement and the issuance, sale and delivery of
the Aurora Preferred Shares pursuant hereto, notwithstanding any investigation
made at any time by or on behalf of any party hereto. All statements contained
in any certificate or other instrument delivered by Aurora hereunder shall be
deemed to constitute representations and warranties made by Aurora.
SECTION 6.03 Parties in Interest. All covenants and
agreements contained in this Agreement by or on behalf of any party hereto
shall bind and inure to the benefit of the respective successors and assigns of
such party hereto whether so expressed or not.
SECTION 6.04 Notices. Any notice or other communications
required or permitted hereunder shall be deemed to be
13
<PAGE> 17
sufficient if contained in a written instrument delivered in person or duly
sent by first class certified mail, postage prepaid, by nationally recognized
overnight courier, or by telecopy addressed to such party at the address or
telecopy number set forth below or such other address or telecopy number as may
hereafter be designated in writing by the addressee to the addressor listing
all parties:
if to Aurora, to:
Aurora Electronics, Inc.
9477 Waples Street, Suite 150
San Diego, California 92121
Telecopy Number: (619) 552-8942
Attention: President
with a copy to:
Hughes & Luce, L.L.P.
1717 Main Street
Dallas, Texas 75201
Telecopy Number: (214) 939-6100
Attention: Alan J. Bogdanow, Esq.
Kenneth G. Hawari, Esq.
if to any Participant, to:
Welsh, Carson, Anderson & Stowe
320 Park Avenue, Suite 2500
New York, New York 10022-6815
Telecopy Number: (212) 893-9575
Attention: Richard H. Stowe
Thomas E. McInerney
with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Telecopy Number: (212) 841-5725
Attention: William J. Hewitt, Esq.
Othon A. Prounis, Esq.
or, in any case, at such other address or addresses as shall have been
furnished in writing by such party to the other parties hereto. All such
notices, requests, consents and other communications shall be deemed to have
been received (a) in the case of personal delivery, on the date of such
delivery, (b) in the case of mailing, on the fifth business day following the
date of such mailing, (c) in the case of delivery by overnight courier, on the
business day following the date of delivery to such courier, and (d) in the
case of telecopy, when received.
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<PAGE> 18
SECTION 6.05 Entire Agreement; Assignment. This Agreement
(including the Schedules and Exhibits hereto) and the Registration Rights
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and may not be amended or modified nor any provisions
waived except in a writing signed by Aurora and the Participants. This
Agreement shall not be assigned by operation of law of otherwise without the
consent of the other parties hereto.
SECTION 6.06 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 6.07 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
15
<PAGE> 19
IN WITNESS WHEREOF, Aurora and the Participants have executed
this Agreement as of the day and year first above written.
AURORA ELECTRONICS, INC.
By /s/ JIM C. COWART
---------------------------------
WELSH, CARSON, ANDERSON & STOWE VII, L.P.
By WCAS VII Partners, L.P.,
General Partner
By /s/ LAURA VANBUREN
--------------------------------
General Partner
WCAS CAPITAL PARTNERS II, L.P.
By WCAS CP II Partners,
General Partner
By /s/ LAURA VANBUREN
--------------------------------
General Partner
WCAS INFORMATION PARTNERS, L.P.
By WCAS Info Partners,
General Partner
By /s/ LAURA VANBUREN
--------------------------------------
Attorney-in-fact
Bruce K. Anderson
Russell L. Carson
Anthony J. de Nicola
Thomas E. McInerney
James B. Hoover
Robert A. Minicucci
Andrew M. Paul
Paul B. Queally
Richard H. Stowe
Laura M. VanBuren
Patrick J. Welsh
By /s/ LAURA VANBUREN
----------------------------------------
Laura M. VanBuren
Individually and
as Attorney-in-Fact
<PAGE> 20
Annex I
-------
<TABLE>
<CAPTION>
===============================================================================================================================
MAXIMUM
PRINCIPAL AMOUNT OF MAXIMUM NUMBER OF AGGREGATE
MAXIMUM AURORA SENIOR SHARES OF AURORA PURCHASE PRICE PRINCIPAL AMOUNT
NAME OF PURCHASER NUMBER OF UNITS SUBORDINATED NOTES PREFERRED STOCK OF UNITS OF DEMAND NOTE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Welsh, Carson, Anderson & 14,253.2 $14,253,200 171,040 $31,357,200 $2,660,600
Stowe VII, L.P.
- -------------------------------------------------------------------------------------------------------------------------------
WCAS Information Partners, 194.5 194,500 2,334 427,900 36,300
L.P.
- -------------------------------------------------------------------------------------------------------------------------------
Patrick J. Welsh 77.7 77,700 932 170,900 14,500
- -------------------------------------------------------------------------------------------------------------------------------
Russell L. Carson 116.8 116,800 1,401 256,900 21,800
- -------------------------------------------------------------------------------------------------------------------------------
Bruce K. Anderson 116.8 116,800 1,401 256,900 21,800
- -------------------------------------------------------------------------------------------------------------------------------
Richard H. Stowe 58.4 58,400 701 128,500 10,900
- -------------------------------------------------------------------------------------------------------------------------------
Andrew M. Paul 39.1 39,100 469 86,000 7,300
- -------------------------------------------------------------------------------------------------------------------------------
Thomas E. McInerney 68.0 68,000 816 149,600 12,700
- -------------------------------------------------------------------------------------------------------------------------------
Laura VanBuren 3.7 3,700 45 8,200 700
- -------------------------------------------------------------------------------------------------------------------------------
James B. Hoover 19.3 19,300 231 42,400 3,600
- -------------------------------------------------------------------------------------------------------------------------------
Robert A. Minicucci 31.1 31,100 373 68,400 5,800
- -------------------------------------------------------------------------------------------------------------------------------
Anthony J. de Nicola 15.5 15,500 186 34,100 2,900
- -------------------------------------------------------------------------------------------------------------------------------
Paul B. Queally 5.9 5,900 71 13,000
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL 15,000.0 $15,000,000 180,000 $33,000,000 $2,800,000
===============================================================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 99.7
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THAT ACT
OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
AURORA ELECTRONICS, INC.
10% Senior Subordinated Bridge Note
$[ ] , 1998
AURORA ELECTRONICS, INC., a Delaware corporation (hereinafter
called the "Company"), for value received, hereby promises to pay to [WELSH,
CARSON ANDERSON & STOWE VII, L.P. ("WCAS VII")] or registered assigns, the
principal sum of [ ] DOLLARS ($[ ]) ON ANY DATE ON OR AFTER
JULY 1, 1998 ON DEMAND (subject to applicable restrictions set forth in Section
14 hereof), and to pay interest (computed on the basis of a 360-day year
consisting of twelve 30-day months) from the date hereof on the unpaid
principal amount hereof at the rate of 10% per annum semi-annually in arrears
on June 30 and December 31 of each year (each said day being an "Interest
Payment Date"), commencing on June 30, 1998, until the principal amount hereof
shall have become due and payable, whether on demand or by acceleration or
otherwise, and thereafter at the rate of 12% per annum on any overdue principal
amount and (to the extent permitted by applicable law) on any overdue interest
until paid.
All payments of principal and interest on this Note shall be
in such coin or currency of the United States of America as at the time of
payment shall be legal tender for payment of public and private debts.
If any payment on this Note is due on a day which is not a
Business Day, it shall be due on the next succeeding Business Day. For
purposes of this Note, "Business Day" shall mean any day other than a Saturday,
Sunday or a legal holiday or day on which banks are authorized or required to
be closed in Chicago or New York.
1. The Note. This Note is issued pursuant to and is subject
to the terms and provisions of the Securities Purchase and Exchange Agreement
dated as of January 30, 1998 (the "Purchase Agreement"), among the Company,
WCAS VII, WCAS Capital Partners II, L.P.("WCAS CP II") and the several
purchasers named on Schedule I thereto and the terms of this Note include those
stated in the Purchase Agreement. As used herein, the term "Note" or "Notes"
includes this 10% Senior Subordinated Bridge Note of the Company,
<PAGE> 2
any additional 10% Senior Subordinated Bridge Note or Notes issued pursuant to
the Purchase Agreement and any 10% Senior Subordinated Bridge Note or Notes
subsequently issued upon exchange or transfer hereof or thereof.
2. Transfer, Etc. of Notes. The Company shall keep at its
office or agency maintained as provided in paragraph (a) of Section 8 a
register in which the Company shall provide for the registration of this Note
and for the registration of transfer and exchange of this Note. The holder of
this Note may, at its option, and either in person or by its duly authorized
attorney, surrender the same for registration of transfer or exchange at the
office or agency of the Company maintained as provided in Section 8 and,
without expense to such holder (except for taxes or governmental charges
imposed in connection therewith), receive in exchange therefor a Note or Notes
each in such denomination or denominations (in integral multiples of $100,000)
as such holder may request, dated as of the date to which interest has been
paid on the Note or Notes so surrendered for transfer or exchange, for the same
aggregate principal amount as the then unpaid principal amount of the Note or
Notes so surrendered for transfer or exchange, and registered in the name of
such person or persons as may be designated by such holder. Every Note
presented or surrendered for registration of transfer or exchange shall be duly
endorsed, or shall be accompanied by a written instrument of transfer,
satisfactory in form to the Company, duly executed by the holder of such Note
or its attorney duly authorized in writing. Every Note so made and delivered
in exchange for such Note shall in all other respects be in the same form and
have the same terms as such Note. No transfer or exchange of any Note shall be
valid (x) unless made in the foregoing manner at such office or agency and (y)
unless registered under the Securities Act of 1933, as amended, or any
applicable state securities laws or unless an exemption from such registration
is available.
3. Loss, Theft, Destruction or Mutilation of Note. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Note, and, in the case of any such loss, theft or
destruction, upon receipt of an affidavit of loss and an indemnity reasonably
acceptable in form and substance to the Company from the holder thereof, or, in
the case of any such mutilation, upon surrender and cancellation of this Note,
the Company will make and deliver, in lieu of this Note, a new Note of like
tenor and unpaid principal amount and dated as of the date to which interest
has been paid on this Note.
4. Persons Deemed Owners; Holders. The Company may deem and
treat the person in whose name this Note is registered as the owner and holder
of this Note for the purpose of receiving payment of principal of and interest
on this Note and for all other purposes whatsoever, whether or not this Note
shall be overdue. With respect to any Note at any time outstanding, the term
2
<PAGE> 3
"holder," as used herein, shall be deemed to mean the person in whose name such
Note is registered as aforesaid at such time.
5. Prepayments.
(a) Optional Prepayment. Subject to any applicable
restrictions contained in the Credit Agreement (as hereinafter defined), upon
notice given as provided in Section 5(b), the Company may, at its option,
prepay this Note, without premium or penalty, as a whole at any time or in part
from time to time in principal amounts which shall be integral multiples of
$100,000, together with any accrued and unpaid interest thereon through the
date of such prepayment.
(b) Notice of Prepayment. The Company shall give written
notice of any prepayment of this Note or any portion hereof pursuant to Section
5(a) not less than 20 nor more than 60 days prior to the date fixed for such
prepayment. Such notice of prepayment and all other notices to be given to the
holder of this Note shall be given by registered or certified mail to the
person in whose name this Note is registered at its address designated on the
register maintained by the Company on the date of mailing such notice of
prepayment or other notice. Upon notice of prepayment being given as
aforesaid, the Company covenants and agrees that it will prepay, on the date
therein fixed for prepayment, this Note or the portion hereof, as the case may
be, so called for prepayment, at the prepayment price determined in accordance
with Section 5(a) hereof. A prepayment of less than all of the outstanding
principal amount of this Note shall not relieve the Company of its obligation
to make scheduled payments of interest payable in respect of the principal
remaining outstanding on the Interest Payment Dates.
(c) Allocation of All Payments. In the event of any partial
payment of less than all of the interest then due on the Notes then outstanding
or any prepayment, purchase, redemption or retirement of less than all of the
outstanding Notes, the Company will allocate the amount of interest so to be
paid and the principal amount so to be prepaid, purchased, redeemed or retired
to each Note in proportion, as nearly as may be, to the aggregate principal
amount of all Notes then outstanding.
(d) Interest After Date Fixed for Prepayment. If this Note
or a portion hereof is called for prepayment as herein provided, this Note or
such portion shall cease to bear interest on and after the date fixed for such
prepayment unless, upon presentation for such purpose, the Company shall fail
to pay this Note or such portion, as the case may be, in which event this Note
or such portion, as the case may be, and, so far as may be lawful, any overdue
installment of interest, shall bear interest on and after the date fixed for
such prepayment and until paid at the rate per annum provided herein.
3
<PAGE> 4
(e) Surrender of Note; Notation Thereon. Upon any prepayment
of a portion of the principal amount of this Note, the holder hereof, at its
option, may require the Company to execute and deliver at the expense of the
Company (other than for transfer taxes, if any), upon surrender of this Note, a
new Note registered in the name of such person or persons as may be designated
by such holder for the principal amount of this Note then remaining unpaid,
dated as of the date to which the interest has been paid on the principal
amount of this Note then remaining unpaid, or may present this Note to the
Company for notation hereon of the payment of the portion of the principal
amount of this Note so prepaid.
6. Offer to Repurchase Upon a Change of Control. Subject to
any applicable restrictions in the Credit Agreement with respect to paragraph
(a) below:
(a) Upon the occurrence of a Change of Control (as
hereinafter defined), the holder of this Note shall have the right, at such
holder's option, to require the Company to repurchase all or any part of such
holder's Note in amounts which shall be in multiples of $100,000 (pursuant to
the offer described below) of the Notes outstanding, in any such event, at a
purchase price equal to 101% of the principal amount thereof so to be
repurchased, plus accrued and unpaid interest, if any, to the date of purchase
(a "Change of Control Payment"). Within 10 Business Days after the Company
knows, or reasonably should know, of the occurrence of any Change of Control,
the Company shall make an irrevocable, unconditional offer (except that such
offer may be conditioned upon the closing of the transaction constituting the
Change of Control) (a "Change of Control Offer") to all holders of the Notes to
purchase all of the Notes for cash in an amount equal to the Change of Control
Payment by sending written notice (the "Change of Control Notice") of such
Change of Control Offer to each holder by registered or certified mail to the
person in whose name the Note is registered at its address maintained by the
Company on the date of the mailing of such notice. The Change of Control
Notice shall contain all instructions and materials required by applicable law
and shall contain or make available to the holder other information material to
such holder's decision to tender this Note pursuant to the Change of Control
Offer. The Change of Control Notice, which shall govern the terms of the
Change of Control Offer, shall state:
(i) that the Change of Control Offer is being made pursuant
to this Section 6, and that all Notes validly tendered will be accepted
for payment;
(ii) the Change of Control Payment (including the amount of
accrued and unpaid interest) and the purchase date, which will be no
later than 30 days from the date such notice is mailed (the "Change of
Control Payment Date");
4
<PAGE> 5
(iii) that any Note not validly tendered will continue to
accrue interest;
(iv) that, unless the Company defaults in the payment of the
Change of Control Payment, any Note accepted for payment pursuant to
the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date;
(v) that holders electing to have a Note, or portion thereof,
purchased pursuant to a Change of Control Offer will be required to
surrender the Note to the Company at the address specified in the
notice not later than the close of business on the Business Day prior
to the Change of Control Payment Date;
(vi) that holders will be entitled to withdraw their election
if the Company receives, not later than the close of business on the
second Business Day prior to the Change of Control Payment Date, a
telegram, facsimile transmission or letter setting forth the name of
the holder, the principal amount of the Note delivered for purchase
and a statement that such holder is withdrawing its election to have
such principal amount of Note purchased; and
(vii) that holders whose Notes are being purchased only in
part will be issued a new Note equal in principal amount to the
unpurchased portion of the Note surrendered, which unpurchased portion
must be equal to $100,000 in principal amount or an integral multiple
thereof.
On or before the Change of Control Payment Date, the Company
shall (i) accept for payment the Notes or portions thereof validly tendered
pursuant to the Change of Control Offer prior to the close of business on the
Change of Control Payment Date, (ii) promptly mail to the holders of Notes so
accepted payment in an amount equal to the Change of Control Payment (including
accrued and unpaid interest) for such Notes, and the Company shall promptly
mail or deliver to such holders a new Note equal in principal amount to any
unpurchased portion of the Note surrendered; provided, that each such new Note
will be in a principal amount of $100,000 or an integral multiple thereof. Any
Notes not so accepted shall be promptly mailed or delivered by the Company to
the holder thereof.
(b) In the event of a Change of Control, the Company will
promptly but in no event later than 30 days after the Change of Control, in
good faith, (i) obtain any required consent of the holders of any Senior
Indebtedness (as defined herein) to permit the Change of Control Offer and the
Change of Control Payment contemplated by this Section 6, or (ii) repay some or
all of such Senior Indebtedness to the extent necessary (including, if
necessary, payment in full of such Senior Indebtedness and payment
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<PAGE> 6
of any prepayment premiums, fees, expenses or penalties) to permit the Change
of Control Offer and the Change of Control Payment contemplated hereby without
such consent. Failure to comply with the foregoing shall not relieve the
Company from its obligations pursuant to paragraph (a) above.
(c) For purposes of this Note "Change of Control" means (i)
the sale, lease or transfer, whether direct or indirect, of all or
substantially all of the assets of the Company and its subsidiaries, taken as a
whole, in one transaction or a series of related transactions, to any "person"
or "group" (other than the WCAS Group), (ii) the liquidation or dissolution of
the Company or the adoption of a plan of liquidation or dissolution of the
Company, (iii) the acquisition of "beneficial ownership" by any "person" or
"group" (other than the WCAS Group) of voting stock of the Company representing
more than 50% of the voting power of all outstanding shares of such voting
stock, whether by way of merger or consolidation or otherwise, or (iv) during
any period of two consecutive years, the failure of those individuals who at
the beginning of such period constituted the Company's Board of Directors
(together with any new directors whose election or appointment by such Board or
whose nomination for election or appointment by the shareholders of the Company
was approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) to constitute a majority of
the Company's Board of Directors then in office; provided, however, that in no
event shall a foreclosure on any collateral pledged by the Company in respect
of obligations arising under or in connection with the Credit Agreement
constitute a Change of Control.
For purposes of this Section 6 and Section 7, (i) the terms
"person" and "group" shall have the meaning set forth in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether
or not applicable, (ii) the term "beneficial owner" shall have the meaning set
forth in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not
applicable, except that a person shall be deemed to have "beneficial ownership"
of all shares that any such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time or upon the
occurrence of certain events, (iii) any "person" or "group" will be deemed to
beneficially own any voting stock of the Company so long as such person or
group beneficially owns, directly or indirectly, in the aggregate a majority of
the voting stock of a registered holder of the voting stock of the Company, and
(iv) the term "WCAS Group" shall mean WCAS VII, WCAS CP II, any general
partners thereof and any other investment limited partnerships or other
investment entities under common control therewith.
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<PAGE> 7
7. Special Mandatory Prepayments.
(a) Subject to any applicable restrictions contained in the
Credit Agreement, within 5 days after the consummation of:
(i) any sale, transfer, lease, sale and leaseback or other
disposition by the Company to any person of all or any part of its
property or assets, in any case in a single transaction or a series of
related transactions (other than any of the foregoing for fair value
of property that (x) is of inventory in the ordinary course of
business or (y) is of worn-out or obsolete assets); or
(ii) the issuance (other than by dividend) of any capital
stock or other ownership interest of the Company pursuant to offerings
registered under the Securities Act of 1933, as amended (the
"Securities Act");
the Company shall be required to prepay the indebtedness outstanding under the
Notes in an amount equal to 100% of the gross cash proceeds received by the
Company from such transaction less all legal expenses, customary commissions
and other fees and expenses incurred and all federal, state, local and foreign
taxes assessed in connection therewith.
(b) Subject to any applicable restrictions contained in the
Credit Agreement, if there shall exist any Excess Cash Flow (as defined in
paragraph (c) hereof) for any fiscal year, a mandatory prepayment (an "Excess
Cash Flow Prepayment") of the indebtedness outstanding under the Notes shall be
made on the date (the "Excess Cash Flow Prepayment Date") which is 105 days
after the end of such fiscal year, in an amount equal to one hundred percent
(100%) of such Excess Cash Flow.
(c) "Excess Cash Flow" means, for any fiscal period of the
Company, an amount which, on a combined basis in conformity with GAAP, is equal
to:
(i) the excess of
the sum (without duplication) of the following amounts:
(A) net income for such fiscal period;
(B) expenses for such fiscal period for depreciation,
amortization and other similar non-cash charges, to the extent
that the same are deducted from net revenues in determining
net income for such fiscal period;
(C) the difference between (1) the amount of taxes
imposed on the Company deducted from net revenues to determine
net income for such fiscal period and (2) the
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<PAGE> 8
amount of taxes actually paid by the Company during such fiscal
period; and
(D) the difference between (1) any extraordinary or
non-recurring items of expense deducted from net revenues to
determine net income for such fiscal period and (2) the
aggregate amount of all cash payments made by the Company
during such period on account of extraordinary or
non-recurring items of expense, whether or not accrued in such
period;
over
the sum (without duplication) of the following
amounts:
(1) the aggregate amount during such fiscal period of
scheduled payments of principal on (x) the Notes, (y) the
indebtedness under the Credit Agreement and (z) any
indebtedness permitted under the Credit Agreement;
(2) the amount of actual payments by the Company in cash
during such fiscal period for capital expenditures; and
(3) the difference between (1) any extraordinary or
non-recurring items of income added to net revenues to
determine net income and (2) the aggregate amount of all cash
receipts received by the Company during such period on account
of extraordinary or non-recurring items of income, whether or
not accrued in such period;
(ii) plus (in the case of a decrease) or minus (in the case of an
increase) the change in the amount of working capital as at the end of
such fiscal period as compared with the amount of working capital as
at the end of the immediately preceding fiscal period.
Each of the foregoing items shall be computed in accordance with GAAP
consistently applied.
8. Covenants Relating to the Notes. Unless approved by its
Board of Directors including the affirmative vote of a director designated by
WCAS VII, the Company covenants and agrees that so long as the Notes shall be
outstanding and, in the case of paragraphs (k) through (n) below, so long as
five million dollars ($5,000,000) of aggregate principal amount of the Notes is
outstanding:
(a) Maintenance of Office. The Company will maintain an
office or agency in such place in the United States of America as the Company
may designate in writing to the registered holder of
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<PAGE> 9
this Note, where this Note may be presented for registration of transfer and
for exchange as herein provided, where notices and demands to or upon the
Company in respect of this Note may be served and where this Note may be
presented for payment. Until the Company otherwise notifies the holder hereof,
said office shall be the principal office of the Company located at 9477 Waples
Street, San Diego, California 92121.
(b) Payment of Taxes. The Company will promptly pay and
discharge or cause to be paid and discharged, before the same shall become in
default, all material lawful taxes and assessments imposed upon the Company or
any of its subsidiaries or upon the income and profits of the Company or any of
its subsidiaries, or upon any property, real, personal or mixed, belonging to
the Company or any of its subsidiaries, or upon any part thereof by the United
States or any State thereof, as well as all material lawful claims for labor,
materials and supplies which, if unpaid, would become a lien or charge upon
such property or any part thereof; provided, however, that neither the Company
nor any of its subsidiaries shall be required to pay and discharge or to cause
to be paid and discharged any such tax, assessment, charge, levy or claim so
long as both (x) the Company has established adequate reserves for such tax,
assessment, charge, levy or claim and (y)(i) the Company or a subsidiary shall
be contesting the validity thereof in good faith by appropriate proceedings or
(ii) the Company shall, in its good faith judgment, deem the validity thereof
to be questionable and the party to whom such tax, assessment, charge, levy or
claim is allegedly owed shall not have made written demand for the payment
thereof.
(c) Corporate Existence. The Company will do or cause to
be done all things necessary and lawful to preserve and keep in full force and
effect (i) its corporate existence and the corporate existence of each of its
subsidiaries and (ii) the material rights and franchises of the Company and
each of its subsidiaries under the laws of the United States or any state
thereof, or, in the case of subsidiaries organized and existing outside the
United States, under the laws of the applicable jurisdiction; provided,
however, that nothing in this paragraph (c) shall prevent the abandonment or
termination of any rights or franchises of the Company, or the liquidation or
dissolution of, or a sale, transfer or disposition (whether through merger,
consolidation, sale or otherwise) of all or any substantial part of the
property and assets of, any subsidiary or the abandonment or termination of the
corporate existence, rights and franchises of any subsidiary if such
abandonment, termination, liquidation, dissolution, sale, transfer or
disposition is, in the good faith business judgment of the Company, in the best
interests of the Company and not disadvantageous to the holder of this Note.
(d) Maintenance of Property. The Company will at all times
maintain and keep, or cause to be maintained and kept, in
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<PAGE> 10
good repair, working order and condition (reasonable wear and tear excepted)
all significant properties of the Company and its subsidiaries used in the
conduct of the Business, and will from time to time make or cause to be made
all needful and proper repairs, renewals, replacements, betterments and
improvements thereto, so that the Business may be conducted at all times in the
ordinary course consistent with past practice.
(e) Insurance. The Company will, and will cause each of its
subsidiaries to, (i) keep adequately insured, by financially sound and
reputable insurers, all property of a character usually insured by corporations
engaged in the same or a similar business similarly situated against loss or
damage of the kinds customarily insured against by such corporations and (ii)
carry, with financially sound and reputable insurers, such other insurance
(including without limitation liability insurance) in such amounts as are
available at reasonable expense and to the extent believed advisable in the
good faith business judgment of the Company.
(f) Keeping of Books. The Company will at all times keep,
and cause each of its subsidiaries to keep, proper books of record and account
in which proper entries will be made of its transactions in accordance with
generally accepted accounting principles consistently applied.
(g) Transactions with Affiliates. The Company shall not
enter into, or permit any of its subsidiaries to enter into, any transaction
with any of its or any subsidiary's officers, directors, employees or any
person related by blood or marriage to any such person or any entity in which
any such person owns any beneficial interest, except for (i) normal employment
arrangements, benefit programs and employee incentive option programs on
reasonable terms, (ii) any transaction approved by the Board of Directors of
the Company in accordance with the provisions of Section 144 of the Delaware
General Corporation Law, or otherwise permitted by such Section, (iii) customer
transactions in the ordinary course of business and on arm's length terms and
(iv) the transactions contemplated by the Purchase Agreement.
(h) Notice of Certain Events. The Company shall,
immediately after it becomes aware of the occurrence of (i) any Event of
Default (as hereinafter defined) or any event which, upon notice or lapse of
time or both, would constitute such an Event of Default, or (ii) any action,
suit or proceeding at law or in equity or by or before any governmental
instrumentality or agency which, if adversely determined, would materially
impair the right of the Company to carry on its business substantially as now
or then conducted, or would have a material adverse effect on the properties,
assets, financial condition, prospects, operating results or business of the
Company and its subsidiaries taken as a whole, give notice to the holder of
this Note, specifying the nature of such event.
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(i) Payment of Principal and Interest on the Note. The
Company will use its best efforts, subject to the provisions of applicable
credit arrangements (including the Credit Agreement), contractual obligations
of the Company and/or its subsidiaries and any applicable law restricting the
same, to provide funds from its subsidiaries to the Company, by dividend,
advance or otherwise, sufficient to permit payment by the Company of the
principal of and interest on this Note in accordance with its terms. Subject
to any applicable provisions in the Credit Agreement and documents executed and
delivered in connection therewith, the Company will not, and will not permit
any subsidiary to, directly or indirectly create or otherwise cause to exist
any encumbrance or restriction on the ability of any subsidiary to pay
dividends or make any other distributions to the Company or any wholly-owned
subsidiary of the Company in respect of its capital stock.
(j) Consolidation, Merger and Sale. The Company will not
consolidate or merge with or into, or sell or otherwise dispose of all or
substantially all of its property in one or more related transactions to, any
other corporation or other entity, unless:
(i) The Company is the surviving corporation or the
entity formed by or surviving any such consolidation or merger (if
other than the Company) or to which such sale or other disposition
shall have been made is a corporation organized or existing under the
laws of the United States of any state thereof or the District of
Columbia;
(ii) the surviving corporation or other entity (if other
than the Company) shall expressly and effectively assume in writing
the due and punctual payment of the principal of and interest on this
Note, according to its tenor, and the due and punctual performance and
observance of all the terms, covenants, agreements and conditions of
this Note to be performed or observed by the Company to the same
extent as if such surviving corporation had been the original maker of
this Note;
(iii) the Company or such other corporation or other entity
shall not otherwise be in default in the performance or observance of
any covenant, agreement or condition of this Note or the Purchase
Agreement; and
(iv) the holder of this Note shall have received, in connection
therewith, an opinion of counsel for the Company (or other counsel
satisfactory to the holder), in form and substance satisfactory to the
holder, to the effect that any such consolidation, merger, sale or
conveyance and any such assumption complies with the provisions of
this paragraph (j).
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<PAGE> 12
Notwithstanding anything to the contrary herein, in no event shall a
foreclosure on any collateral pledged by the Company in respect of obligations
arising under or in connection with the Credit Agreement be deemed to
constitute a violation of the Company's obligations pursuant to this paragraph
(j).
(k) Limitation on Indebtedness and Disqualified Stock.
The Company will not, and will not permit any of its subsidiaries to, (i) incur
or permit to remain outstanding any indebtedness for money borrowed
("Indebtedness"), except (A) Senior Indebtedness (as defined in Section 14),
(B) Indebtedness existing on the date of original issuance of this Note, (C)
Indebtedness permitted to be incurred under the Credit Agreement as in effect
from time to time after the original issuance of this Note (other than
Indebtedness that is subordinate or junior in right of payment (to any extent)
to any Senior Indebtedness and senior or pari passu in right of payment (to any
extent) to the Notes), or (D) in the event that the Credit Agreement has
terminated, Indebtedness permitted to be incurred under any successor credit
agreement of the Company with respect to Senior Indebtedness, or if there
exists no such credit agreement, such Indebtedness as may be mutually agreed
upon by the Company and the holders of a majority of the aggregate principal
amount of the Notes then outstanding, or (ii) issue any capital stock
("Disqualified Stock") of the Company or any of its subsidiaries (other than
the Convertible Preferred Stock (as hereinafter defined)) which by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event, matures, or is
mandatorily redeemable, whether pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in whole or in
part, on or prior to December 31, 2005.
(l) Restricted Payments. The Company will not, and will not
permit any of its subsidiaries to: (i) declare or pay any dividends on, or make
any other distribution or payment on account of, or redeem, retire, purchase or
otherwise acquire, directly or indirectly, any shares of any class of stock of
the Company, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in
cash, property or in obligations of the Company or any of its subsidiaries,
except for (X) distributions of shares of the same class or of a different
class of stock pro rata to all holders of shares of a class of stock, (Y) the
payment of cash dividends on account of the Company's 7% Senior Cumulative
Convertible Preferred Stock, $.01 par value (the "Convertible Preferred
Stock"), or (Z) dividends, distributions or payments by any subsidiary to the
Company or to any wholly-owned subsidiary of the Company, or (ii), except as
permitted under the Credit Agreement, make any payments of principal of, or
retire, redeem, purchase or otherwise acquire any Indebtedness other than any
Senior Indebtedness or the Notes (such declarations, payments, purchases,
redemptions, retirements,
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<PAGE> 13
acquisitions or distributions being herein called "Restricted Payments").
(m) Limitation on Liens. The Company shall not, and shall
not permit any of its subsidiaries to, directly or indirectly, create, incur,
assume or otherwise cause or suffer to exist any lien, pledge , charge,
security interest or encumbrance (collectively, "Liens") on any asset now owned
or hereafter acquired, or on any income or profits therefrom or assign or
convey any right to receive income therefrom, except for (i) Liens permitted
under the Credit Agreement, (ii) liens for current taxes not yet due, (iii)
landlord's liens, (iv) purchase money liens and (v) workman's, materialman's,
warehouseman's and similar liens arising by law or statute.
(n) Inspection of Property. The Company will permit the
holder hereof to visit and inspect any of the properties of the Company and any
other subsidiaries and their books and records and to discuss the affairs,
finances and accounts of any of such corporations with the principal officers
of the Company and such subsidiaries and their independent public accountants,
all at such reasonable times and as often as such holders may reasonably
request.
9. Modification by Holders; Waiver. The Company may, with the
written consent of the holders of not less than a majority in principal amount
of the Notes then outstanding, modify the terms and provisions of this Note or
the rights of the holders of this Note or the obligations of the Company
hereunder, and the observance by the Company of any term or provision of this
Note may be waived with the written consent of the holders of not less than a
majority in principal amount of the Notes then outstanding.
Any such modification or waiver shall apply equally to each
holder of the Notes and shall be binding upon them, upon each future holder of
any Note and upon the Company, whether or not such Note shall have been marked
to indicate such modification or waiver, but any Note issued thereafter shall
bear a notation referring to any such modification or waiver. Promptly after
obtaining the written consent of the holders as herein provided, the Company
shall transmit a copy of such modification or waiver to the holders of the
Notes at the time outstanding.
10. Events of Default. If any one or more of the following
events, herein called "Events of Default," shall occur (for any reason
whatsoever, and whether such occurrence shall, on the part of the Company or
any of its subsidiaries, be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of a court of competent jurisdiction or any order, rule or
regulation of any administrative or other governmental authority) and such
Event of Default shall be continuing:
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(i) default shall be made in the payment of the principal
of this Note when and as the same shall become due and payable,
whether on demand (to the extent demand is permitted to be made under
Section 14 hereof) or at a date fixed for prepayment or repurchase
(including default of any optional prepayment in accordance with the
requirements of Section 5, any Change of Control Payment in accordance
with the requirements of Section 6 or any special mandatory prepayment
in accordance with the requirements of Section 7, as the case may be)
or by acceleration or otherwise; or
(ii) default shall be made in the payment of any installment of
interest on this Note according to its terms when and as the same
shall become due and payable; or
(iii) default shall be made in the due observance or performance
of any covenant, condition or agreement on the part of the Company
contained herein in Section 8(j); or
(iv) default shall be made in the due observance or performance
of any other covenant, condition or agreement on the part of the
Company to be observed or performed pursuant to the terms hereof or of
the Purchase Agreement, and such default shall continue for 10 days
after written notice thereof, specifying such default and requesting
that the same be remedied; or
(v) any representation or warranty made by or on behalf of the
Company herein or in the Purchase Agreement shall prove to have been
false or incorrect in any material respect on the date on or as of
which made; or
(vi) the entry of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Company or any
of its subsidiaries in any involuntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar
laws, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Company or any of
its subsidiaries for any substantial part of any of their property or
ordering the winding-up or liquidation of any of their affairs and the
continuance of any such decree or order unstayed and in effect for a
period of 30 consecutive days; or
(vii) the commencement by the Company or any of its subsidiaries
of a voluntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or any other applicable federal or
state bankruptcy, insolvency or other similar laws, or the consent by
any of them to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other
similar official)
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of the Company or any of its subsidiaries for any substantial part of
any of their property, or the making by any of them of any general
assignment for the benefit of creditors, or the failure of the Company
or of any of its subsidiaries generally to pay its debts as such debts
become due, or the taking of corporate action by the Company or any of
its subsidiaries in furtherance of or which might reasonably be
expected to result in any of the foregoing; or
(viii) a default or an event of default as defined in any
instrument evidencing or under which the Company or any of its
subsidiaries has outstanding at the time any Indebtedness in excess of
$500,000 in aggregate principal amount shall occur and as a result
thereof the maturity of any such Indebtedness shall have been
accelerated so that the same shall have become due and payable prior
to the date on which the same would otherwise have become due and
payable and such acceleration shall not have been rescinded or
annulled within 20 days; or
(ix) final judgment (not reimbursed by insurance policies of the
Company or any of its subsidiaries) for the payment of money in excess
of $500,000 shall be rendered against the Company or any of its
subsidiaries and the same shall remain undischarged for a period of 30
days during which execution shall not be effectively stayed;
then the holders of at least 33-1/3% in aggregate principal amount of the Notes
at the time outstanding may, at their option, by a notice in writing to the
Company declare this Note to be, and this Note shall thereupon be and become
immediately due and payable together with interest accrued thereon, without
diligence, presentment, demand, protest or further notice of any kind, all of
which are expressly waived by the Company to the extent permitted by law.
At any time after any declaration of acceleration has been
made as provided in this Section 10, the holders of a majority in principal
amount of the Notes then outstanding may, by notice to the Company, rescind
such declaration and its consequences, provided, however, that no such
rescission shall extend to or affect any subsequent default or Event of Default
or impair any right consequent thereon.
Without limiting the foregoing, the Company hereby waives any
right to trial by jury in any legal proceeding related in any way to this Note
and agrees that any such proceeding may, if the holder so elects, be brought
and enforced in the Supreme Court of the State of New York for New York County
or the United States District Court for the Southern District of New York and
the Company hereby waives any objection to jurisdiction or venue in any such
proceeding commenced in such court. The Company further agrees that any
process required to be served on it for purposes of
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<PAGE> 16
any such proceeding may be served on it, with the same effect as personal
service on it within the State of New York, by registered mail addressed to it
at its office or agency set forth in paragraph (a) of Section 8 for purposes of
notices hereunder.
11. Suits for Enforcement. Subject to the provisions of
Section 14 of this Note, in case any one or more of the Events of Default
specified in Section 10 of this Note shall happen and be continuing (subject to
any applicable cure period expressly set forth herein), the holder of this Note
may proceed to protect and enforce its rights by suit in equity, action at law
and/or by other appropriate proceeding, whether for the specific performance of
any covenant or agreement contained in this Note or in aid of the exercise of
any power granted in this Note, or may proceed to enforce the payment of this
Note or to enforce any other legal or equitable right of the holder of this
Note.
In case of any default under this Note, the Company will pay
to the holder hereof reasonable collection costs and reasonable attorneys'
fees, to the extent actually incurred.
12. Remedies Cumulative. No remedy herein conferred upon the
holder of this 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 given hereunder or now or hereafter existing at law or in equity
or by statute or otherwise.
13. Remedies Not Waived. No course of dealing between the
Company and the holder of this Note or any delay on the part of the holder
hereof in exercising any rights hereunder shall operate as a waiver of any
right of the holder of this Note.
14. Subordination. (a) Anything contained in this Note
to the contrary notwithstanding, the indebtedness evidenced by the Notes shall
be subordinate and junior, to the extent set forth in the following paragraphs
(A), (B), (C) and (D), to all Senior Indebtedness of the Company. "Senior
Indebtedness" shall mean the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on, and
all reasonable fees, reimbursement and indemnity obligations, and all other
obligations arising in connection with, any indebtedness for borrowed money of
the Company, contingent or otherwise, now outstanding or created, incurred,
issued, assumed or guaranteed in the future, for which, in the case of any
particular indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
indebtedness shall not be subordinate in right of payment to any other
indebtedness of the Company. Without limiting the generality of the foregoing,
Senior Indebtedness shall include all
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Obligations (under and as defined in the Credit Agreement); notwithstanding the
foregoing, Senior Indebtedness shall include only such Obligations until such
time as the same are paid in full in cash and all obligations to provide
financial accommodations under the Credit Agreement have terminated. For
purposes of this Note, "Credit Agreement" shall mean, collectively, (i) the
Credit Agreement, dated as of March 29, 1996, as amended or otherwise modified,
among the Company and other Guarantors named therein, the Lenders named therein
and The Chase Manhattan Bank N.A., as Agent (the "Agent"), and (ii) the senior
credit facility contemplated by Section 4.01(c) of the Purchase Agreement,
together with any agreement entered into in connection with the restatement,
renewal, extension, restructuring, refunding or refinancing of the obligations
under such credit agreements.
(A) In the event of any insolvency, bankruptcy,
liquidation, reorganization or other similar proceedings, or any
receivership proceedings in connection therewith, relative to the
Company or its creditors or its property, 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 Indebtedness shall first be paid in full
in cash and all obligations to provide financial accommodations under
the Credit Agreement have terminated, before any payment, whether on
account of principal, interest or otherwise, is made upon the Notes.
(B) In any of the proceedings referred to in paragraph
(A) above, any payment or distribution of any kind or character,
whether in cash, property, stock or obligations which may be payable
or deliverable in respect of the Notes shall be paid or delivered
directly to the holders of Senior Indebtedness for application in
payment thereof, unless and until all Senior Indebtedness shall have
been paid in full in cash and all obligations to provide financial
accommodations under the Credit Agreement have terminated.
(C) No payment shall be made, directly or indirectly, on
account of the Notes (i) upon maturity of any Senior Indebtedness
obligation, by lapse of time, acceleration (unless waived), or
otherwise, unless and until all principal thereof and interest thereon
and all other obligations in respect thereof shall first be paid in
full in cash and all obligations to provide financial accommodations
under the Credit Agreement have terminated, or (ii) upon the happening
of any default in payment of any principal of, premium, if any, or
interest on or any other amounts payable in respect of Senior
Indebtedness when the same becomes due and payable whether at maturity
or at a date fixed for prepayment or by declaration or otherwise (a
"Senior Payment Default"), unless and until
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<PAGE> 18
such Senior Payment Default shall have been cured or waived or shall
have ceased to exist.
(D) Upon the happening of an event of default with
respect to any Senior Indebtedness permitting (after notice or lapse
of time or both) one or more holders of such Senior Indebtedness (or,
in the case of the Credit Agreement, the Agent) to declare such Senior
Indebtedness due and payable prior to the date on which it is
otherwise due and payable (a "Nonmonetary Default"), upon the
occurrence of (i) receipt by the holders of the Notes of written
notice from the holders of said Senior Indebtedness (or, in the case
of the Credit Agreement, the Agent) of a Nonmonetary Default (any such
notice, a "Blockage Notice"), or (ii) if such Nonmone- tary Default
results from the acceleration of the Notes, the date of such
acceleration; then (x) the Company will not make, directly or
indirectly, to the holder of the Notes any payment of any kind of or
on account of all or any part of the Notes; (y) the holders of the
Notes will not accept from the Company any payment of any kind of or
on account of all or any part of the Notes and (z) the holders of the
Notes may not take, demand, receive, sue for, accelerate or commence
any remedial proceedings with respect to any amount payable under the
Notes, unless and until in each case described in clauses (x), (y) and
(z) all such Senior Indebtedness shall have been paid in full in cash
and all obligations to provide financial accommodations under the
Credit Agreement have terminated; provided, however, that if such
Nonmonetary Default shall have occurred and be continuing for a period
(a "Blockage Period") commencing on the earlier of the date of receipt
of such Blockage Notice or the date of the acceleration of the Notes
and ending 179 days thereafter (it being understood that not more than
one Blockage Period may be commenced with respect to the Notes during
any period of 360 consecutive days), and during such Blockage Period
(i) such Nonmonetary Default shall not have been cured or waived, (ii)
the holder of such Senior Indebtedness (or, in the case of the Credit
Agreement, the Agent) shall not have made a demand for payment and
commenced an action, suit or other proceeding against the Company and
(iii) none of the events described in subsection (A) above shall have
occurred, then (to the extent not otherwise prohibited by subsections
(A), (B) or (C) above) the Company may, not less than 10 days after
receipt by the holders of such Senior Indebtedness or the Agent, as
the case may be, of written notice to such effect from the holders of
the Notes, make and the holders of the Notes may accept from the
Company all past due and current payments of any kind of or on account
of the Notes, and such holder may demand, receive, retain, sue for or
otherwise seek enforcement or collection of all amounts payable on
account of principal of or interest on the Notes.
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<PAGE> 19
(b) Subject to the payment in full in cash of all Senior
Indebtedness as aforesaid and the termination of all obligations to provide
financial accommodations under the Credit Agreement, the holders of the Notes
shall be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions of any kind or character, whether in cash,
property, stock or obligations, which may be payable or deliverable to the
holders of Senior Indebtedness, until the principal of, and interest on, the
Notes shall be paid in full in cash, and, as between the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the Notes, no
such payment or distribution made to the holders of Senior Indebtedness by
virtue of this Section 14 which otherwise would have been made to the holder of
the Notes shall be deemed a payment by the Company on account of the Senior
Indebtedness, it being understood that the provisions of this Section 14 are
and are intended solely for the purposes of defining the relative rights of the
holders of the Notes, on the one hand, and the holder of the Senior
Indebtedness, on the other hand. Subject to the rights, if any, under this
Section 14 of holders of Senior Indebtedness to receive cash, property, stock
or obligations otherwise payable or deliverable to the holders of the Notes,
nothing herein shall either impair, as between the Company and the holder of
the Notes, the obligation of the Company, which is unconditional and absolute,
to pay to the holder thereof the principal thereof and interest thereon in
accordance with its terms or prevent (except as otherwise specified therein)
the holders of the Notes from exercising all remedies otherwise permitted by
applicable law or hereunder upon default hereunder.
(c) If any payment or distribution of any character or any
security, whether in cash, securities or other property, shall be received by
any holders of the Notes in contravention of any of the terms hereof or before
all the Senior Indebtedness obligations have been paid in full in cash and all
obligations to provide financial accommodations under the Credit Agreement have
terminated, such payment or distribution or security shall be received in trust
for the benefit of, and shall be paid over or delivered and transferred to, the
holders of the Senior Indebtedness at the time outstanding in accordance with
the priorities then existing among such holders for application to the payment
of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all
such Senior Indebtedness in full in cash. In the event of the failure of any
such holder to endorse or assign any such payment, distribution or security,
each holder of any Senior Indebtedness is hereby irrevocably authorized to
endorse or assign the name.
(d) The rights under these subordination provisions of the
holders of any Senior Indebtedness as against any holders of the Notes shall
remain in full force and effect without regard to, and shall not be impaired or
affected by:
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<PAGE> 20
(i) any act or failure to act on the part of the Company; or
(ii) any extension or indulgence in respect of any payment or
prepayment of any Senior Indebtedness or any part thereof or in
respect of any other amount payable to any holder of any Senior
Indebtedness; or
(iii) any amendment, modification or waiver of, or addition or
supplement to, or deletion from, or compromise, release, consent or
other action in respect of, any of the terms of any Senior
Indebtedness or any other agreement which may be made relating to any
Senior Indebtedness; or
(iv) any exercise or non-exercise by the holder of any Senior
Indebtedness of any right, power, privilege or remedy under or in
respect of such Senior Indebtedness or these subordination provisions
or any waiver of any such right, power, privilege or remedy or of any
default in respect of such Senior Indebtedness or these subordination
provisions or any receipt by the holder of any Senior Indebtedness of
any security, or any failure by such holder to perfect a security
interest in, or any release by such holder of, any security for the
payment of such Senior Indebtedness; or
(v) any merger or consolidation of the Company or any of its
subsidiaries into or with any other person, or any sale, lease or
transfer of any or all of the assets of the Company or any of its
subsidiaries to any other person; or
(vi) absence of any notice to, or knowledge by, any holder of
any claim hereunder of the existence or occurrence of any of the
matters or events set forth in the foregoing clauses (i) through (v);
or
(vii) any other circumstance.
(e) The holders of the Notes unconditionally waive (i) notice
of any of the matters referred to in Section 14(d); (ii) all notices which may
be required, whether by statute, rule of law or otherwise, to preserve intact
any rights of any holder of any Senior Indebtedness, including, without
limitation, any demand, presentment and protest, proof of notice of nonpayment
under any Senior Indebtedness or the Credit Agreement, and notice of any
failure on the part of the Company to perform and comply with any covenant,
agreement, term or condition of any Senior Indebtedness, (iii) any right to the
enforcement, assertion or exercise by any holder of any Senior Indebtedness of
any right, power, privilege or remedy conferred in such Senior Indebtedness or
otherwise, (iv) any requirements of diligence on the part of any holder of any
of the Senior Indebtedness, (v) any requirement on the part of any holder of
any Senior Indebtedness to mitigate damages resulting from any
20
<PAGE> 21
default under such Senior Indebtedness and (vi) any notice of any sale,
transfer or other disposition of any Senior Indebtedness by any holder thereof.
(f) The obligations of the holder under these subordination
provisions shall continue to be effective, or be reinstated, as the case may
be, if at any time any payment in respect of any Senior Indebtedness, or any
other payment to any holder of any Senior Indebtedness in its capacity as such,
is rescinded or must otherwise be restored or returned by the holder of such
Senior Indebtedness upon the occurrence of any proceeding referred to in
paragraph 14(a)(A) or upon or as a result of the appoint of a receiver,
intervenor or conservator of, or trustee or similar officer for, the Company or
any substantial part of its property or otherwise, all as though such payment
had not been made.
(g) Notwithstanding anything to the contrary herein, the
Company shall not at any time offer (and the holder hereof shall not at any
time accept) (i) any pledge of collateral or (ii) any guaranty by any parent or
subsidiary of the Company, in each case with respect to the obligations of the
Company under this Note.
15. Covenants Bind Successors and Assigns. All the covenants,
stipulations, promises and agreements in this Note contained by or on behalf of
the Company shall bind its successors and assigns, whether so expressed or not.
16. Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of New York.
17. Headings. The headings of the sections and paragraphs of
this Note are inserted for convenience only and do not constitute a part of
this Note.
18. Third Party Beneficiaries. The provisions of Section 14
are intended to be for the benefit of, and shall be enforceable directly by
each holder of, the Senior Indebtedness.
21
<PAGE> 22
IN WITNESS WHEREOF, Aurora Electronics, Inc. has caused this
Note to be signed in its corporate name by one of its officers thereunto duly
authorized and to be dated as of the day and year first above written.
AURORA ELECTRONICS, INC.
By:
--------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 99.8
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THAT ACT
OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
AURORA ELECTRONICS, INC.
10% Senior Subordinated Note
Due December 31, 2004
$[ ] , 1998
AURORA ELECTRONICS, INC., a Delaware corporation (hereinafter
called the "Company"), for value received, hereby promises to pay to [WELSH,
CARSON ANDERSON & STOWE VII, L.P. ("WCAS VII")] or registered assigns, the
principal sum of [ ] DOLLARS ($[ ]) as follows: on each of
December 31, 2002, 2003 and 2004, the lesser of [ ] and the
aggregate principal amount hereof then outstanding. In addition, the Company
hereby promises to pay to WCAS VII, or registered assigns, interest (computed
on the basis of a 360-day year consisting of twelve 30-day months) from the
date hereof on the unpaid principal amount hereof at the rate of 10% per annum
semi-annually in arrears on June 30 and December 31 of each year (each said day
being an "Interest Payment Date"), commencing on June 30, 1998, until the
principal amount hereof shall have become due and payable, whether at maturity
or by acceleration or otherwise, and thereafter at the rate of 12% per annum on
any overdue principal amount and (to the extent permitted by applicable law) on
any overdue interest until paid.
All payments of principal and interest on this Note shall be in such
coin or currency of the United States of America as at the time of payment
shall be legal tender for payment of public and private debts.
If any payment on this Note is due on a day which is not a
Business Day, it shall be due on the next succeeding Business Day. For
purposes of this Note, "Business Day" shall mean any day other than a Saturday,
Sunday or a legal holiday or day on which banks are authorized or required to
be closed in Chicago or New York.
1. The Note. This Note is issued pursuant to and is
subject to the terms and provisions of the Securities Purchase and Exchange
Agreement dated as of January 30, 1998 (the "Purchase Agreement"), among the
Company, WCAS VII, WCAS Capital Partners II, L.P.("WCAS CP II") and the several
purchasers named on Schedule I
<PAGE> 2
thereto and the terms of this Note include those stated in the Purchase
Agreement. As used herein, the term "Note" or "Notes" includes the 10% Senior
Subordinated Note due December 31, 2005 of the Company originally so issued and
any 10% Senior Subordinated Note or Notes due December 31, 2004 subsequently
issued upon exchange or transfer thereof.
2. Transfer, Etc. of Notes. The Company shall keep at
its office or agency maintained as provided in paragraph (a) of Section 8 a
register in which the Company shall provide for the registration of this Note
and for the registration of transfer and exchange of this Note. The holder of
this Note may, at its option, and either in person or by its duly authorized
attorney, surrender the same for registration of transfer or exchange at the
office or agency of the Company maintained as provided in Section 8 and,
without expense to such holder (except for taxes or governmental charges
imposed in connection therewith), receive in exchange therefor a Note or Notes
each in such denomination or denominations (in integral multiples of $100,000)
as such holder may request, dated as of the date to which interest has been
paid on the Note or Notes so surrendered for transfer or exchange, for the same
aggregate principal amount as the then unpaid principal amount of the Note or
Notes so surrendered for transfer or exchange, and registered in the name of
such person or persons as may be designated by such holder. Every Note
presented or surrendered for registration of transfer or exchange shall be duly
endorsed, or shall be accompanied by a written instrument of transfer,
satisfactory in form to the Company, duly executed by the holder of such Note
or its attorney duly authorized in writing. Every Note so made and delivered
in exchange for such Note shall in all other respects be in the same form and
have the same terms as such Note. No transfer or exchange of any Note shall be
valid (x) unless made in the foregoing manner at such office or agency and (y)
unless registered under the Securities Act of 1933, as amended, or any
applicable state securities laws or unless an exemption from such registration
is available.
3. Loss, Theft, Destruction or Mutilation of Note. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Note, and, in the case of any such loss, theft or
destruction, upon receipt of an affidavit of loss and an indemnity reasonably
acceptable in form and substance to the Company from the holder thereof, or, in
the case of any such mutilation, upon surrender and cancellation of this Note,
the Company will make and deliver, in lieu of this Note, a new Note of like
tenor and unpaid principal amount and dated as of the date to which interest
has been paid on this Note.
4. Persons Deemed Owners; Holders. The Company may deem
and treat the person in whose name this Note is registered as the owner and
holder of this Note for the purpose of receiving payment of principal of and
interest on this Note and for all other
2
<PAGE> 3
purposes whatsoever, whether or not this Note shall be overdue. With respect
to any Note at any time outstanding, the term "holder," as used herein, shall
be deemed to mean the person in whose name such Note is registered as aforesaid
at such time.
5. Prepayments.
(a) Optional Prepayment. Subject to any applicable
restrictions contained in the Credit Agreement (as hereinafter defined), upon
notice given as provided in Section 5(b), the Company may, at its option,
prepay this Note, without premium or penalty, as a whole at any time or in part
from time to time in principal amounts which shall be integral multiples of
$100,000, together with any accrued and unpaid interest thereon through the
date of such prepayment. Such prepayments shall be applied in inverse order of
maturity.
(b) Notice of Prepayment. The Company shall give written
notice of any prepayment of this Note or any portion hereof pursuant to Section
5(a) not less than 20 nor more than 60 days prior to the date fixed for such
prepayment. Such notice of prepayment and all other notices to be given to the
holder of this Note shall be given by registered or certified mail to the
person in whose name this Note is registered at its address designated on the
register maintained by the Company on the date of mailing such notice of
prepayment or other notice. Upon notice of prepayment being given as
aforesaid, the Company covenants and agrees that it will prepay, on the date
therein fixed for prepayment, this Note or the portion hereof, as the case may
be, so called for prepayment, at the prepayment price determined in accordance
with Section 5(a) hereof. A prepayment of less than all of the outstanding
principal amount of this Note shall not relieve the Company of its obligation
to make scheduled payments of interest payable in respect of the principal
remaining outstanding on the Interest Payment Dates.
(c) Allocation of All Payments. In the event of any
partial payment of less than all of the interest then due on the Notes then
outstanding or any prepayment, purchase, redemption or retirement of less than
all of the outstanding Notes, the Company will allocate the amount of interest
so to be paid and the principal amount so to be prepaid, purchased, redeemed or
retired to each Note in proportion, as nearly as may be, to the aggregate
principal amount of all Notes then outstanding.
(d) Interest After Date Fixed for Prepayment. If this
Note or a portion hereof is called for prepayment as herein provided, this Note
or such portion shall cease to bear interest on and after the date fixed for
such prepayment unless, upon presentation for such purpose, the Company shall
fail to pay this Note or such portion, as the case may be, in which event this
Note or such portion, as the case may be, and, so far as may be lawful, any
overdue installment of interest, shall bear interest on and after
3
<PAGE> 4
the date fixed for such prepayment and until paid at the rate per annum
provided herein.
(e) Surrender of Note; Notation Thereon. Upon any
prepayment of a portion of the principal amount of this Note, the holder
hereof, at its option, may require the Company to execute and deliver at the
expense of the Company (other than for transfer taxes, if any), upon surrender
of this Note, a new Note registered in the name of such person or persons as
may be designated by such holder for the principal amount of this Note then
remaining unpaid, dated as of the date to which the interest has been paid on
the principal amount of this Note then remaining unpaid, or may present this
Note to the Company for notation hereon of the payment of the portion of the
principal amount of this Note so prepaid.
6. Offer to Repurchase Upon a Change of Control.
Subject to any applicable restrictions in the Credit Agreement with respect to
paragraph (a) below:
(a) Upon the occurrence of a Change of Control (as
hereinafter defined), the holder of this Note shall have the right, at such
holder's option, to require the Company to repurchase all or any part of such
holder's Note in amounts which shall be in multiples of $100,000 (pursuant to
the offer described below) of the Notes outstanding, in any such event, at a
purchase price equal to 101% of the principal amount thereof so to be
repurchased, plus accrued and unpaid interest, if any, to the date of purchase
(a "Change of Control Payment"). Within 10 Business Days after the Company
knows, or reasonably should know, of the occurrence of any Change of Control,
the Company shall make an irrevocable, unconditional offer (except that such
offer may be conditioned upon the closing of the transaction constituting the
Change of Control) (a "Change of Control Offer") to all holders of the Notes to
purchase all of the Notes for cash in an amount equal to the Change of Control
Payment by sending written notice (the "Change of Control Notice") of such
Change of Control Offer to each holder by registered or certified mail to the
person in whose name the Note is registered at its address maintained by the
Company on the date of the mailing of such notice. The Change of Control
Notice shall contain all instructions and materials required by applicable law
and shall contain or make available to the holder other information material to
such holder's decision to tender this Note pursuant to the Change of Control
Offer. The Change of Control Notice, which shall govern the terms of the
Change of Control Offer, shall state:
(i) that the Change of Control Offer is being made
pursuant to this Section 6, and that all Notes validly tendered will
be accepted for payment;
(ii) the Change of Control Payment (including the amount of
accrued and unpaid interest) and the purchase date, which
4
<PAGE> 5
will be no later than 30 days from the date such notice is mailed (the
"Change of Control Payment Date");
(iii) that any Note not validly tendered will continue to
accrue interest;
(iv) that, unless the Company defaults in the payment of the
Change of Control Payment, any Note accepted for payment pursuant to
the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date;
(v) that holders electing to have a Note, or portion
thereof, purchased pursuant to a Change of Control Offer will be
required to surrender the Note to the Company at the address specified
in the notice not later than the close of business on the Business Day
prior to the Change of Control Payment Date;
(vi) that holders will be entitled to withdraw their
election if the Company receives, not later than the close of business
on the second Business Day prior to the Change of Control Payment
Date, a telegram, facsimile transmission or letter setting forth the
name of the holder, the principal amount of the Note delivered for
purchase and a statement that such holder is withdrawing its election
to have such principal amount of Note purchased; and
(vii) that holders whose Notes are being purchased only in
part will be issued a new Note equal in principal amount to the
unpurchased portion of the Note surrendered, which unpurchased portion
must be equal to $100,000 in principal amount or an integral multiple
thereof.
On or before the Change of Control Payment Date, the Company
shall (i) accept for payment the Notes or portions thereof validly tendered
pursuant to the Change of Control Offer prior to the close of business on the
Change of Control Payment Date, (ii) promptly mail to the holders of Notes so
accepted payment in an amount equal to the Change of Control Payment (including
accrued and unpaid interest) for such Notes, and the Company shall promptly
mail or deliver to such holders a new Note equal in principal amount to any
unpurchased portion of the Note surrendered; provided, that each such new Note
will be in a principal amount of $100,000 or an integral multiple thereof. Any
Notes not so accepted shall be promptly mailed or delivered by the Company to
the holder thereof.
(b) In the event of a Change of Control, the Company will
promptly but in no event later than 30 days after the Change of Control, in
good faith, (i) obtain any required consent of the holders of any Senior
Indebtedness (as defined herein) to permit the Change of Control Offer and the
Change of Control Payment
5
<PAGE> 6
contemplated by this Section 6, or (ii) repay some or all of such Senior
Indebtedness to the extent necessary (including, if necessary, payment in full
of such Senior Indebtedness and payment of any prepayment premiums, fees,
expenses or penalties) to permit the Change of Control Offer and the Change of
Control Payment contemplated hereby without such consent. Failure to comply
with the foregoing shall not relieve the Company from its obligations pursuant
to paragraph (a) above.
(c) For purposes of this Note "Change of Control" means (i)
the sale, lease or transfer, whether direct or indirect, of all or
substantially all of the assets of the Company and its subsidiaries, taken as a
whole, in one transaction or a series of related transactions, to any "person"
or "group" (other than the WCAS Group), (ii) the liquidation or dissolution of
the Company or the adoption of a plan of liquidation or dissolution of the
Company, (iii) the acquisition of "beneficial ownership" by any "person" or
"group" (other than the WCAS Group) of voting stock of the Company representing
more than 50% of the voting power of all outstanding shares of such voting
stock, whether by way of merger or consolidation or otherwise, or (iv) during
any period of two consecutive years, the failure of those individuals who at
the beginning of such period constituted the Company's Board of Directors
(together with any new directors whose election or appointment by such Board or
whose nomination for election or appointment by the shareholders of the Company
was approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) to constitute a majority of
the Company's Board of Directors then in office; provided, however, that in no
event shall a foreclosure on any collateral pledged by the Company in respect
of obligations arising under or in connection with the Credit Agreement
constitute a Change of Control.
For purposes of this Section 6 and Section 7, (i) the terms
"person" and "group" shall have the meaning set forth in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether
or not applicable, (ii) the term "beneficial owner" shall have the meaning set
forth in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not
applicable, except that a person shall be deemed to have "beneficial ownership"
of all shares that any such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time or upon the
occurrence of certain events, (iii) any "person" or "group" will be deemed to
beneficially own any voting stock of the Company so long as such person or
group beneficially owns, directly or indirectly, in the aggregate a majority of
the voting stock of a registered holder of the voting stock of the Company, and
(iv) the term "WCAS Group" shall mean WCAS VII, WCAS CP II, any general
partners thereof and any other investment limited partnerships or other
investment entities under common control therewith.
6
<PAGE> 7
7. Special Mandatory Prepayments.
(a) Subject to any applicable restrictions contained in the
Credit Agreement, within 5 days after the consummation of:
(i) any sale, transfer, lease, sale and leaseback or
other disposition by the Company to any person of all or any part of
its property or assets, in any case in a single transaction or a
series of related transactions (other than any of the foregoing for
fair value of property that (x) is of inventory in the ordinary course
of business or (y) is of worn-out or obsolete assets); or
(ii) the issuance (other than by dividend) of any capital
stock or other ownership interest of the Company pursuant to offerings
registered under the Securities Act of 1933, as amended (the
"Securities Act");
the Company shall be required to prepay the indebtedness outstanding under the
Notes in an amount equal to 100% of the gross cash proceeds received by the
Company from such transaction less all legal expenses, customary commissions
and other fees and expenses incurred and all federal, state, local and foreign
taxes assessed in connection therewith. Partial prepayments of the Notes
pursuant to this paragraph (a) shall be applied to the then remaining
installments of principal in inverse order of maturity.
(b) Subject to any applicable restrictions contained in
the Credit Agreement, if there shall exist any Excess Cash Flow (as defined in
paragraph (c) hereof) for any fiscal year, a mandatory prepayment (an "Excess
Cash Flow Prepayment") of the indebtedness outstanding under the Notes shall be
made on the date (the "Excess Cash Flow Prepayment Date") which is 105 days
after the end of such fiscal year, in an amount equal to one hundred percent
(100%) of such Excess Cash Flow. Partial prepayments of indebtedness pursuant
to this paragraph (b) shall be applied in inverse order of maturity
(c) "Excess Cash Flow" means, for any fiscal period of
the Company, an amount which, on a combined basis in conformity with GAAP, is
equal to:
(i) the excess of
the sum (without duplication) of the following
amounts:
(A) net income for such fiscal period;
(B) expenses for such fiscal period for depreciation,
amortization and other similar non-cash charges, to
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<PAGE> 8
the extent that the same are deducted from net revenues in
determining net income for such fiscal period;
(C) the difference between (1) the amount of
taxes imposed on the Company deducted from net revenues to
determine net income for such fiscal period and (2) the amount
of taxes actually paid by the Company during such fiscal
period; and
(D) the difference between (1) any extraordinary or
non-recurring items of expense deducted from net revenues to
determine net income for such fiscal period and (2) the
aggregate amount of all cash payments made by the Company
during such period on account of extraordinary or
non-recurring items of expense, whether or not accrued in such
period;
over
the sum (without duplication) of the following
amounts:
(1) the aggregate amount during such fiscal
period of scheduled payments of principal on (x) the Notes,
(y) the indebtedness under the Credit Agreement and (z) any
indebtedness permitted under the Credit Agreement;
(2) the amount of actual payments by the Company
in cash during such fiscal period for capital expenditures;
and
(3) the difference between (1) any extraordinary
or non-recurring items of income added to net revenues to
determine net income and (2) the aggregate amount of all cash
receipts received by the Company during such period on account
of extraordinary or non-recurring items of income, whether or
not accrued in such period;
(ii) plus (in the case of a decrease) or minus (in the case of an
increase) the change in the amount of working capital as at the end of
such fiscal period as compared with the amount of working capital as
at the end of the immediately preceding fiscal period.
Each of the foregoing items shall be computed in accordance with GAAP
consistently applied.
8. Covenants Relating to the Notes. Unless approved by its
Board of Directors including the affirmative vote of a director designated by
WCAS VII, the Company covenants and agrees that so long as the Notes shall be
outstanding and, in the case of paragraphs (k) through (n) below, so long as
five million dollars
8
<PAGE> 9
($5,000,000) of aggregate principal amount of the Notes is outstanding:
(a) Maintenance of Office. The Company will maintain an
office or agency in such place in the United States of America as the Company
may designate in writing to the registered holder of this Note, where this Note
may be presented for registration of transfer and for exchange as herein
provided, where notices and demands to or upon the Company in respect of this
Note may be served and where this Note may be presented for payment. Until the
Company otherwise notifies the holder hereof, said office shall be the
principal office of the Company located at 9477 Waples Street, San Diego,
California 92121.
(b) Payment of Taxes. The Company will promptly pay and
discharge or cause to be paid and discharged, before the same shall become in
default, all material lawful taxes and assessments imposed upon the Company or
any of its subsidiaries or upon the income and profits of the Company or any of
its subsidiaries, or upon any property, real, personal or mixed, belonging to
the Company or any of its subsidiaries, or upon any part thereof by the United
States or any State thereof, as well as all material lawful claims for labor,
materials and supplies which, if unpaid, would become a lien or charge upon
such property or any part thereof; provided, however, that neither the Company
nor any of its subsidiaries shall be required to pay and discharge or to cause
to be paid and discharged any such tax, assessment, charge, levy or claim so
long as both (x) the Company has established adequate reserves for such tax,
assessment, charge, levy or claim and (y)(i) the Company or a subsidiary shall
be contesting the validity thereof in good faith by appropriate proceedings or
(ii) the Company shall, in its good faith judgment, deem the validity thereof
to be questionable and the party to whom such tax, assessment, charge, levy or
claim is allegedly owed shall not have made written demand for the payment
thereof.
(c) Corporate Existence. The Company will do or cause to
be done all things necessary and lawful to preserve and keep in full force and
effect (i) its corporate existence and the corporate existence of each of its
subsidiaries and (ii) the material rights and franchises of the Company and
each of its subsidiaries under the laws of the United States or any state
thereof, or, in the case of subsidiaries organized and existing outside the
United States, under the laws of the applicable jurisdiction; provided,
however, that nothing in this paragraph (c) shall prevent the abandonment or
termination of any rights or franchises of the Company, or the liquidation or
dissolution of, or a sale, transfer or disposition (whether through merger,
consolidation, sale or otherwise) of all or any substantial part of the
property and assets of, any subsidiary or the abandonment or termination of the
corporate existence, rights and franchises of any subsidiary if such
abandonment, termination, liquidation, dissolution, sale, transfer
9
<PAGE> 10
or disposition is, in the good faith business judgment of the Company, in the
best interests of the Company and not disadvantageous to the holder of this
Note.
(d) Maintenance of Property. The Company will at all
times maintain and keep, or cause to be maintained and kept, in good repair,
working order and condition (reasonable wear and tear excepted) all significant
properties of the Company and its subsidiaries used in the conduct of the
Business, and will from time to time make or cause to be made all needful and
proper repairs, renewals, replacements, betterments and improvements thereto,
so that the Business may be conducted at all times in the ordinary course
consistent with past practice.
(e) Insurance. The Company will, and will cause each of
its subsidiaries to, (i) keep adequately insured, by financially sound and
reputable insurers, all property of a character usually insured by corporations
engaged in the same or a similar business similarly situated against loss or
damage of the kinds customarily insured against by such corporations and (ii)
carry, with financially sound and reputable insurers, such other insurance
(including without limitation liability insurance) in such amounts as are
available at reasonable expense and to the extent believed advisable in the
good faith business judgment of the Company.
(f) Keeping of Books. The Company will at all times
keep, and cause each of its subsidiaries to keep, proper books of record and
account in which proper entries will be made of its transactions in accordance
with generally accepted accounting principles consistently applied.
(g) Transactions with Affiliates. The Company shall not
enter into, or permit any of its subsidiaries to enter into, any transaction
with any of its or any subsidiary's officers, directors, employees or any
person related by blood or marriage to any such person or any entity in which
any such person owns any beneficial interest, except for (i) normal employment
arrangements, benefit programs and employee incentive option programs on
reasonable terms, (ii) any transaction approved by the Board of Directors of
the Company in accordance with the provisions of Section 144 of the Delaware
General Corporation Law, or otherwise permitted by such Section, (iii) customer
transactions in the ordinary course of business and on arm's length terms and
(iv) the transactions contemplated by the Purchase Agreement.
(h) Notice of Certain Events. The Company shall,
immediately after it becomes aware of the occurrence of (i) any Event of
Default (as hereinafter defined) or any event which, upon notice or lapse of
time or both, would constitute such an Event of Default, or (ii) any action,
suit or proceeding at law or in equity or by or before any governmental
instrumentality or agency which, if adversely determined, would materially
impair the right of the
10
<PAGE> 11
Company to carry on its business substantially as now or then conducted, or
would have a material adverse effect on the properties, assets, financial
condition, prospects, operating results or business of the Company and its
subsidiaries taken as a whole, give notice to the holder of this Note,
specifying the nature of such event.
(i) Payment of Principal and Interest on the Note. The
Company will use its best efforts, subject to the provisions of applicable
credit arrangements (including the Credit Agreement), contractual obligations
of the Company and/or its subsidiaries and any applicable law restricting the
same, to provide funds from its subsidiaries to the Company, by dividend,
advance or otherwise, sufficient to permit payment by the Company of the
principal of and interest on this Note in accordance with its terms. Subject
to any applicable provisions in the Credit Agreement and documents executed and
delivered in connection therewith, the Company will not, and will not permit
any subsidiary to, directly or indirectly create or otherwise cause to exist
any encumbrance or restriction on the ability of any subsidiary to pay
dividends or make any other distributions to the Company or any wholly-owned
subsidiary of the Company in respect of its capital stock.
(j) Consolidation, Merger and Sale. The Company will not
consolidate or merge with or into, or sell or otherwise dispose of all or
substantially all of its property in one or more related transactions to, any
other corporation or other entity, unless:
(i) the Company is the surviving corporation or the
entity formed by or surviving any such consolidation or merger (if
other than the Company) or to which such sale or other disposition
shall have been made is a corporation organized or existing under the
laws of the United States of any state thereof or the District of
Columbia;
(ii) the surviving corporation or other entity (if other
than the Company) shall expressly and effectively assume in writing
the due and punctual payment of the principal of and interest on this
Note, according to its tenor, and the due and punctual performance and
observance of all the terms, covenants, agreements and conditions of
this Note to be performed or observed by the Company to the same
extent as if such surviving corporation had been the original maker of
this Note;
(iii) the Company or such other corporation or other entity
shall not otherwise be in default in the performance or observance of
any covenant, agreement or condition of this Note or the Purchase
Agreement; and
(iv) the holder of this Note shall have received, in
connection therewith, an opinion of counsel for the Company
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<PAGE> 12
(or other counsel satisfactory to the holder), in form and substance
satisfactory to the holder, to the effect that any such consolidation,
merger, sale or conveyance and any such assumption complies with the
provisions of this paragraph (j).
Notwithstanding anything to the contrary herein, in no event shall a
foreclosure on any collateral pledged by the Company in respect of obligations
arising under or in connection with the Credit Agreement be deemed to
constitute a violation of the Company's obligations pursuant to this paragraph
(j).
(k) Limitation on Indebtedness and Disqualified Stock.
The Company will not, and will not permit any of its subsidiaries to, (i) incur
or permit to remain outstanding any indebtedness for money borrowed
("Indebtedness"), except (A) Senior Indebtedness (as defined in Section 14),
(B) Indebtedness existing on the date of original issuance of this Note, (C)
Indebtedness permitted to be incurred under the Credit Agreement as in effect
from time to time after the original issuance of this Note (other than
Indebtedness that is subordinate or junior in right of payment (to any extent)
to any Senior Indebtedness and senior or pari passu in right of payment (to any
extent) to the Notes), or (D) in the event that the Credit Agreement has
terminated, Indebtedness permitted to be incurred under any successor credit
agreement of the Company with respect to Senior Indebtedness, or if there
exists no such credit agreement, such Indebtedness as may be mutually agreed
upon by the Company and the holders of a majority of the aggregate principal
amount of the Notes then outstanding, or (ii) issue any capital stock
("Disqualified Stock") of the Company or any of its subsidiaries (other than
the Convertible Preferred Stock (as hereinafter defined)) which by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event, matures, or is
mandatorily redeemable, whether pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in whole or in
part, on or prior to December 31, 2005.
(l) Restricted Payments. The Company will not, and will not
permit any of its subsidiaries to: (i) declare or pay any dividends on, or make
any other distribution or payment on account of, or redeem, retire, purchase or
otherwise acquire, directly or indirectly, any shares of any class of stock of
the Company, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in
cash, property or in obligations of the Company or any of its subsidiaries,
except for (X) distributions of shares of the same class or of a different
class of stock pro rata to all holders of shares of a class of stock, (Y) the
payment of cash dividends on account of the Company's 7% Senior Cumulative
Convertible Preferred Stock, $.01 par value (the "Convertible Preferred
Stock"), or (Z) dividends, distributions or payments by any subsidiary to the
Company or to any wholly-owned subsidiary of the Company, or (ii),
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<PAGE> 13
except as permitted under the Credit Agreement, make any payments of principal
of, or retire, redeem, purchase or otherwise acquire any Indebtedness other
than any Senior Indebtedness or the Notes (such declarations, payments,
purchases, redemptions, retirements, acquisitions or distributions being herein
called "Restricted Payments").
(m) Limitation on Liens. The Company shall not, and shall
not permit any of its subsidiaries to, directly or indirectly, create, incur,
assume or otherwise cause or suffer to exist any lien, pledge , charge,
security interest or encumbrance (collectively, "Liens") on any asset now owned
or hereafter acquired, or on any income or profits therefrom or assign or
convey any right to receive income therefrom, except for (i) Liens permitted
under the Credit Agreement, (ii) liens for current taxes not yet due, (iii)
landlord's liens, (iv) purchase money liens and (v) workman's, materialman's,
warehouseman's and similar liens arising by law or statute.
(n) Inspection of Property. The Company will permit the
holder hereof to visit and inspect any of the properties of the Company and any
other subsidiaries and their books and records and to discuss the affairs,
finances and accounts of any of such corporations with the principal officers
of the Company and such subsidiaries and their independent public accountants,
all at such reasonable times and as often as such holders may reasonably
request.
9. Modification by Holders; Waiver. The Company may,
with the written consent of the holders of not less than a majority in
principal amount of the Notes then outstanding, modify the terms and provisions
of this Note or the rights of the holders of this Note or the obligations of
the Company hereunder, and the observance by the Company of any term or
provision of this Note may be waived with the written consent of the holders of
not less than a majority in principal amount of the Notes then outstanding.
Any such modification or waiver shall apply equally to each
holder of the Notes and shall be binding upon them, upon each future holder of
any Note and upon the Company, whether or not such note shall have been marked
to indicate such modification or waiver, but any Note issued thereafter shall
bear a notation referring to any such modification or waiver. Promptly after
obtaining the written consent of the holders as herein provided, the Company
shall transmit a copy of such modification or waiver to the holders of the Notes
at the time outstanding.
10. Events of Default. If any one or more of the
following events, herein called "Events of Default," shall occur (for any
reason whatsoever, and whether such occurrence shall, on the part of the
Company or any of its subsidiaries, be voluntary or involuntary or come about
or be effected by operation of law or
13
<PAGE> 14
pursuant to or in compliance with any judgment, decree or order of a court of
competent jurisdiction or any order, rule or regulation of any administrative
or other governmental authority) and such Event of Default shall be continuing:
(i) default shall be made in the payment of the principal
of this Note when and as the same shall become due and payable,
whether at maturity or at a date fixed for prepayment or repurchase
(including default of any optional prepayment in accordance with the
requirements of Section 5, any Change of Control Payment in accordance
with the requirements of Section 6 or any special mandatory prepayment
in accordance with the requirements of Section 7, as the case may be)
or by acceleration or otherwise; or
(ii) default shall be made in the payment of any installment
of interest on this Note according to its terms when and as the same
shall become due and payable; or
(iii) default shall be made in the due observance or
performance of any covenant, condition or agreement on the part of the
Company contained herein in Section 8(j); or
(iv) default shall be made in the due observance or
performance of any other covenant, condition or agreement on the part
of the Company to be observed or performed pursuant to the terms hereof
or of the Purchase Agreement, and such default shall continue for 10
days after written notice thereof, specifying such default and
requesting that the same be remedied; or
(v) any representation or warranty made by or on behalf
of the Company herein or in the Purchase Agreement shall prove to have
been false or incorrect in any material respect on the date on or as
of which made; or
(vi) the entry of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Company or any of
its subsidiaries in any involuntary case under the federal bankruptcy
laws, as now constituted or hereafter amended, or any other applicable
federal or state bankruptcy, insolvency or other similar laws, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or any of its
subsidiaries for any substantial part of any of their property or
ordering the winding-up or liquidation of any of their affairs and the
continuance of any such decree or order unstayed and in effect for a
period of 30 consecutive days; or
(vii) the commencement by the Company or any of its
subsidiaries of a voluntary case under the federal bankruptcy laws, as
now constituted or hereafter amended, or any other
14
<PAGE> 15
applicable federal or state bankruptcy, insolvency or other similar
laws, or the consent by any of them to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or any of its
subsidiaries for any substantial part of any of their property, or the
making by any of them of any general assignment for the benefit of
creditors, or the failure of the Company or of any of its subsidiaries
generally to pay its debts as such debts become due, or the taking of
corporate action by the Company or any of its subsidiaries in
furtherance of or which might reasonably be expected to result in any
of the foregoing; or
(viii) a default or an event of default as defined in any
instrument evidencing or under which the Company or any of its
subsidiaries has outstanding at the time any Indebtedness in excess of
$500,000 in aggregate principal amount shall occur and as a result
thereof the maturity of any such Indebtedness shall have been
accelerated so that the same shall have become due and payable prior
to the date on which the same would otherwise have become due and
payable and such acceleration shall not have been rescinded or
annulled within 20 days; or
(ix) final judgment (not reimbursed by insurance policies of
the Company or any of its subsidiaries) for the payment of money in
excess of $500,000 shall be rendered against the Company or any of its
subsidiaries and the same shall remain undischarged for a period of 30
days during which execution shall not be effectively stayed;
then the holders of at least 33-1/3% in aggregate principal amount of the Notes
at the time outstanding may, at their option, by a notice in writing to the
Company declare this Note to be, and this Note shall thereupon be and become
immediately due and payable together with interest accrued thereon, without
diligence, presentment, demand, protest or further notice of any kind, all of
which are expressly waived by the Company to the extent permitted by law.
At any time after any declaration of acceleration has been
made as provided in this Section 10, the holders of a majority in principal
amount of the Notes then outstanding may, by notice to the Company, rescind
such declaration and its consequences, provided, however, that no such
rescission shall extend to or affect any subsequent default or Event of Default
or impair any right consequent thereon.
Without limiting the foregoing, the Company hereby waives any
right to trial by jury in any legal proceeding related in any way to this Note
and agrees that any such proceeding may, if the holder so elects, be brought
and enforced in the Supreme Court of the State of New York for New York County
or the United States
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<PAGE> 16
District Court for the Southern District of New York and the Company hereby
waives any objection to jurisdiction or venue in any such proceeding commenced
in such court. The Company further agrees that any process required to be
served on it for purposes of any such proceeding may be served on it, with the
same effect as personal service on it within the State of New York, by
registered mail addressed to it at its office or agency set forth in paragraph
(a) of Section 8 for purposes of notices hereunder.
11. Suits for Enforcement. Subject to the provisions of
Section 14 of this Note, in case any one or more of the Events of Default
specified in Section 10 of this Note shall happen and be continuing (subject to
any applicable cure period expressly set forth herein), the holder of this Note
may proceed to protect and enforce its rights by suit in equity, action at law
and/or by other appropriate proceeding, whether for the specific performance of
any covenant or agreement contained in this Note or in aid of the exercise of
any power granted in this Note, or may proceed to enforce the payment of this
Note or to enforce any other legal or equitable right of the holder of this
Note.
In case of any default under this Note, the Company will pay
to the holder hereof reasonable collection costs and reasonable attorneys'
fees, to the extent actually incurred.
12. Remedies Cumulative. No remedy herein conferred upon
the holder of this 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 given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.
13. Remedies Not Waived. No course of dealing between
the Company and the holder of this Note or any delay on the part of the holder
hereof in exercising any rights hereunder shall operate as a waiver of any
right of the holder of this Note.
14. Subordination. (a) Anything contained in this Note
to the contrary notwithstanding, the indebtedness evidenced by the Notes shall
be subordinate and junior, to the extent set forth in the following paragraphs
(A), (B), (C) and (D), to all Senior Indebtedness of the Company. "Senior
Indebtedness" shall mean the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on, and
all reasonable fees, reimbursement and indemnity obligations, and all other
obligations arising in connection with, any indebtedness for borrowed money of
the Company, contingent or otherwise, now outstanding or created, incurred,
issued, assumed or guaranteed in the future, for which, in the case of any
particular indebtedness, the instrument creating or evidencing the same or
16
<PAGE> 17
pursuant to which the same is outstanding expressly provides that such
indebtedness shall not be subordinate in right of payment to any other
indebtedness of the Company. Without limiting the generality of the foregoing,
Senior Indebtedness shall include all Obligations (under and as defined in the
Credit Agreement); notwithstanding the foregoing, Senior Indebtedness shall
include only such Obligations until such time as the same are paid in full in
cash and all obligations to provide financial accommodations under the Credit
Agreement have terminated. For purposes of this Note, "Credit Agreement" shall
mean, collectively, (i) the Credit Agreement, dated as of March 29, 1996, as
amended or otherwise modified, among the Company and other Guarantors named
therein, the Lenders named therein and The Chase Manhattan Bank N.A., as Agent
(the "Agent"), and (ii) the senior credit facility contemplated by Section
4.01(c) of the Purchase Agreement, together with any agreement entered into in
connection with the restatement, renewal, extension, restructuring, refunding
or refinancing of the obligations under such credit agreements.
(A) In the event of any insolvency, bankruptcy,
liquidation, reorganization or other similar proceedings, or any
receivership proceedings in connection therewith, relative to the
Company or its creditors or its property, 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 Indebtedness shall first be paid in full
in cash and all obligations to provide financial accommodations under
the Credit Agreement have terminated, before any payment, whether on
account of principal, interest or otherwise, is made upon the Notes.
(B) In any of the proceedings referred to in paragraph
(A) above, any payment or distribution of any kind or character,
whether in cash, property, stock or obligations which may be payable
or deliverable in respect of the Notes shall be paid or delivered
directly to the holders of Senior Indebtedness for application in
payment thereof, unless and until all Senior Indebtedness shall have
been paid in full in cash and all obligations to provide financial
accommodations under the Credit Agreement have terminated.
(C) No payment shall be made, directly or indirectly, on
account of the Notes (i) upon maturity of any Senior Indebtedness
obligation, by lapse of time, acceleration (unless waived), or
otherwise, unless and until all principal thereof and interest thereon
and all other obligations in respect thereof shall first be paid in
full in cash and all obligations to provide financial accommodations
under the Credit Agreement have terminated, or (ii) upon the happening
of any default in payment of any principal of, premium, if any, or
interest on or any other amounts payable in respect of Senior
17
<PAGE> 18
Indebtedness when the same becomes due and payable whether at maturity
or at a date fixed for prepayment or by declaration or otherwise (a
"Senior Payment Default"), unless and until such Senior Payment
Default shall have been cured or waived or shall have ceased to exist.
(D) Upon the happening of an event of default with
respect to any Senior Indebtedness permitting (after notice or lapse
of time or both) one or more holders of such Senior Indebtedness (or,
in the case of the Credit Agreement, the Agent) to declare such Senior
Indebtedness due and payable prior to the date on which it is
otherwise due and payable (a "Nonmonetary Default"), upon the
occurrence of (i) receipt by the holders of the Notes of written
notice from the holders of said Senior Indebtedness (or, in the case
of the Credit Agreement, the Agent) of a Nonmonetary Default (any such
notice, a "Blockage Notice"), or (ii) if such Nonmone- tary Default
results from the acceleration of the Notes, the date of such
acceleration; then (x) the Company will not make, directly or
indirectly, to the holder of the Notes any payment of any kind of or
on account of all or any part of the Notes; (y) the holders of the
Notes will not accept from the Company any payment of any kind of or
on account of all or any part of the Notes and (z) the holders of the
Notes may not take, demand, receive, sue for, accelerate or commence
any remedial proceedings with respect to any amount payable under the
Notes, unless and until in each case described in clauses (x), (y) and
(z) all such Senior Indebtedness shall have been paid in full in cash
and all obligations to provide financial accommodations under the
Credit Agreement have terminated; provided, however, that if such
Nonmonetary Default shall have occurred and be continuing for a period
(a "Blockage Period") commencing on the earlier of the date of receipt
of such Blockage Notice or the date of the acceleration of the Notes
and ending 179 days thereafter (it being understood that not more than
one Blockage Period may be commenced with respect to the Notes during
any period of 360 consecutive days), and during such Blockage Period
(i) such Nonmonetary Default shall not have been cured or waived, (ii)
the holder of such Senior Indebtedness (or, in the case of the Credit
Agreement, the Agent) shall not have made a demand for payment and
commenced an action, suit or other proceeding against the Company and
(iii) none of the events described in subsection (A) above shall have
occurred, then (to the extent not otherwise prohibited by subsections
(A), (B) or (C) above) the Company may, not less than 10 days after
receipt by the holders of such Senior Indebtedness or the Agent, as
the case may be, of written notice to such effect from the holders of
the Notes, make and the holders of the Notes may accept from the
Company all past due and current payments of any kind of or on account
of the Notes, and such holder may demand, receive, retain, sue
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<PAGE> 19
for or otherwise seek enforcement or collection of all amounts payable
on account of principal of or interest on the Notes.
(b) Subject to the payment in full in cash of all Senior
Indebtedness as aforesaid and the termination of all obligations to provide
financial accommodations under the Credit Agreement, the holders of the Notes
shall be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions of any kind or character, whether in cash,
property, stock or obligations, which may be payable or deliverable to the
holders of Senior Indebtedness, until the principal of, and interest on, the
Notes shall be paid in full in cash, and, as between the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the Notes, no
such payment or distribution made to the holders of Senior Indebtedness by
virtue of this Section 14 which otherwise would have been made to the holder of
the Notes shall be deemed a payment by the Company on account of the Senior
Indebtedness, it being understood that the provisions of this Section 14 are
and are intended solely for the purposes of defining the relative rights of the
holders of the Notes, on the one hand, and the holder of the Senior
Indebtedness, on the other hand. Subject to the rights, if any, under this
Section 14 of holders of Senior Indebtedness to receive cash, property, stock
or obligations otherwise payable or deliverable to the holders of the Notes,
nothing herein shall either impair, as between the Company and the holder of
the Notes, the obligation of the Company, which is unconditional and absolute,
to pay to the holder thereof the principal thereof and interest thereon in
accordance with its terms or prevent (except as otherwise specified therein)
the holders of the Notes from exercising all remedies otherwise permitted by
applicable law or hereunder upon default hereunder.
(c) If any payment or distribution of any character or any
security, whether in cash, securities or other property, shall be received by
any holders of the Notes in contravention of any of the terms hereof or before
all the Senior Indebtedness obligations have been paid in full in cash and all
obligations to provide financial accommodations under the Credit Agreement have
terminated, such payment or distribution or security shall be received in trust
for the benefit of, and shall be paid over or delivered and transferred to, the
holders of the Senior Indebtedness at the time outstanding in accordance with
the priorities then existing among such holders for application to the payment
of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all
such Senior Indebtedness in full in cash. In the event of the failure of any
such holder to endorse or assign any such payment, distribution or security,
each holder of any Senior Indebtedness is hereby irrevocably authorized to
endorse or assign the name.
(d) The rights under these subordination provisions of the
holders of any Senior Indebtedness as against any holders of
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<PAGE> 20
the Notes shall remain in full force and effect without regard to, and shall
not be impaired or affected by:
(i) any act or failure to act on the part of the Company; or
(ii) any extension or indulgence in respect of any payment or
prepayment of any Senior Indebtedness or any part thereof or in
respect of any other amount payable to any holder of any Senior
Indebtedness; or
(iii) any amendment, modification or waiver of, or addition or
supplement to, or deletion from, or compromise, release, consent or
other action in respect of, any of the terms of any Senior
Indebtedness or any other agreement which may be made relating to any
Senior Indebtedness; or
(iv) any exercise or non-exercise by the holder of any Senior
Indebtedness of any right, power, privilege or remedy under or in
respect of such Senior Indebtedness or these subordination provisions
or any waiver of any such right, power, privilege or remedy or of any
default in respect of such Senior Indebtedness or these subordination
provisions or any receipt by the holder of any Senior Indebtedness of
any security, or any failure by such holder to perfect a security
interest in, or any release by such holder of, any security for the
payment of such Senior Indebtedness; or
(v) any merger or consolidation of the Company or any of its
subsidiaries into or with any other person, or any sale, lease or
transfer of any or all of the assets of the Company or any of its
subsidiaries to any other person; or
(vi) absence of any notice to, or knowledge by, any holder of any
claim hereunder of the existence or occurrence of any of the matters
or events set forth in the foregoing clauses (i) through (v); or
(vii) any other circumstance.
(e) The holders of the Notes unconditionally waive (i) notice
of any of the matters referred to in Section 14(d); (ii) all notices which may
be required, whether by statute, rule of law or otherwise, to preserve intact
any rights of any holder of any Senior Indebtedness, including, without
limitation, any demand, presentment and protest, proof of notice of nonpayment
under any Senior Indebtedness or the Credit Agreement, and notice of any
failure on the part of the Company to perform and comply with any covenant,
agreement, term or condition of any Senior Indebtedness, (iii) any right to the
enforcement, assertion or exercise by any holder of any Senior Indebtedness of
any right, power, privilege or remedy conferred in such Senior Indebtedness or
otherwise, (iv) any
20
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requirements of diligence on the part of any holder of any of the Senior
Indebtedness, (v) any requirement on the part of any holder of any Senior
Indebtedness to mitigate damages resulting from any default under such Senior
Indebtedness and (vi) any notice of any sale, transfer or other disposition of
any Senior Indebtedness by any holder thereof.
(f) The obligations of the holder under these
subordination provisions shall continue to be effective, or be reinstated, as
the case may be, if at any time any payment in respect of any Senior
Indebtedness, or any other payment to any holder of any Senior Indebtedness in
its capacity as such, is rescinded or must otherwise be restored or returned by
the holder of such Senior Indebtedness upon the occurrence of any proceeding
referred to in paragraph 14(a)(A) or upon or as a result of the appoint of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Company or any substantial part of its property or otherwise, all as though
such payment had not been made.
(g) Notwithstanding anything to the contrary herein, the
Company shall not at any time offer (and the holder hereof shall not at any
time accept) (i) any pledge of collateral or (ii) any guaranty by any parent or
subsidiary of the Company, in each case with respect to the obligations of the
Company under this Note.
15. Covenants Bind Successors and Assigns. All the
covenants, stipulations, promises and agreements in this Note contained by or
on behalf of the Company shall bind its successors and assigns, whether so
expressed or not.
16. Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of New York.
17. Headings. The headings of the sections and
paragraphs of this Note are inserted for convenience only and do not constitute
a part of this Note.
18. Third Party Beneficiaries. The provisions of Section
14 are intended to be for the benefit of, and shall be enforceable directly by
each holder of, the Senior Indebtedness.
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<PAGE> 22
IN WITNESS WHEREOF, Aurora Electronics, Inc. has caused this Note to
be signed in its corporate name by one of its officers thereunto duly
authorized and to be dated as of the day and year first above written.
AURORA ELECTRONICS, INC.
By:____________________
Name:
Title:
<PAGE> 1
EXHIBIT 99.9
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SENIOR CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
AURORA ELECTRONICS, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
-------------------------------------------
AURORA ELECTRONICS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies
that, pursuant to authority vested in the Board of Directors of the Corporation
by Article Fourth of the Restated Certificate of Incorporation, as amended, of
the Corporation, the following resolution was adopted as of by the
Board of Directors of the Corporation pursuant to Section 141 of the Delaware
General Corporation Law:
"RESOLVED that, pursuant to authority vested in the Board of
Directors of the Corporation by Article Fourth of the Corporation's Restated
Certificate of Incorporation, as amended, of the total authorized number of
1,000,000 shares of Preferred Stock, par value $.01 per share, of the
Corporation, there shall be designated a series of 213,000 shares which shall
be issued in and constitute a single series to be known as "7% Senior
Cumulative Convertible Preferred Stock" (hereinafter called the "Senior
Preferred Stock"). The shares of Senior Preferred Stock shall have the voting
powers, designations, preferences and other special rights, and qualifications,
limitations and restrictions thereof set forth below:
1. Dividends. (a) The holders of shares of Senior
Preferred Stock shall be entitled to receive, out of funds legally available
for such purpose, cash dividends at the rate of $7.00 per share per annum, and
no more, payable as provided herein. Such dividends shall be cumulative and
shall accrue from and after the date of issue whether or not declared and
whether or not there are any funds of the Corporation legally available for the
payment of dividends. Accrued but unpaid dividends shall not bear interest.
The Board of Directors of the Corporation may fix a record date for the
determination of holders of Senior Preferred Stock entitled to receive payment
of a dividend de- clared
<PAGE> 2
thereon, which record date shall be no more than 60 days prior to the date
fixed for the payment thereof.
(b) As long as any shares of Senior Preferred Stock shall
remain outstanding, in no event shall any dividend be declared or paid upon,
nor shall any distribution be made upon, any Junior Capital Stock (as defined
herein), other than a dividend or distribution payable solely in shares of
common stock of the Corporation, nor shall any shares of Junior Capital Stock
be purchased or redeemed by the Corporation, nor shall any moneys be paid to or
made available for a sinking fund for the purchase or redemption of shares of
any Junior Capital Stock, unless, in each such case, (i) full cumulative
dividends on the outstanding shares of Senior Preferred Stock shall have been
declared and paid and (ii) any arrears or defaults in any redemption of shares
of Senior Preferred Stock shall have been cured. The term "Junior Capital
Stock" as used herein means any shares of capital stock of the Corporation,
including the Corporation's Common Stock, par value $.03 per share (the "Common
Stock"), and the Corporation's Convertible Preferred Stock (including Series B,
Series C and Series D thereof), par value $.01 per share (the "Junior Preferred
Stock"), other than shares of the Corporation's capital stock permitted to rank
on a parity with or senior to the Senior Preferred Stock pursuant to paragraph
6 hereof.
2. Redemption. The shares of Senior Preferred Stock
shall be redeemable as follows:
(a) Mandatory Redemption. (1) Except as and to the extent
expressly prohibited by applicable law, the Corporation shall redeem (i) one
half of the outstanding shares of Senior Preferred Stock on December 31, 2006
and (ii) all of the remaining shares of Senior Preferred Stock on December 31,
2007 (in the manner and with the effect provided in subparagraphs 2(c) through
2(e) below).
(b) Redemption at the Option of the Holder. Upon the
occurrence of any of the following (each a "Change of Control"):
(i) the sale, lease or transfer, whether direct or
indirect, of all or substantially all the assets of the Corporation
and its subsidiaries, taken as a whole, in one transaction or a series
of related transactions, to any person or group other than the WCAS
Group (as hereinafter defined), or
(ii) the acquisition of beneficial ownership by any person
or group other than the WCAS Group, of voting stock of the Corporation
representing more than 50% of the voting power of all outstanding
shares of such voting stock, whether by way of merger or consolidation
or otherwise,
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<PAGE> 3
then each holder of any share or shares of Senior Preferred Stock shall have
the right, at such holder's option, to require the Corporation to redeem (a
"Redemption at the Option of the Holder"), any or all of such holder's shares
of Senior Preferred Stock (any such redemption of less than all a holder's
shares to be in integral multiples of 1,000 shares) on or prior to the
effective date of such Change of Control, at a redemption price of $100 plus
all accrued but unpaid dividends to which the holders of the Senior Preferred
Stock are then entitled pursuant to paragraph 1 above as of such date. Such
option shall be exercised by written notice to the Corporation given within
fifteen days of the date of receipt of the Redemption Notice (as defined
herein) to be delivered pursuant to paragraph 2(c) below.
For purposes of this Certificate of Designations: (i) the
terms "person" and "group" shall have the meaning set forth in paragraph
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), whether or not applicable, (ii) the term "beneficial owner" shall have
the meaning set forth in Rules 13d-3 and 13d-5 under the Exchange Act, whether
or not applicable, except that a person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time or upon
the occurrence of certain events, (iii) any "person" or "group" will be deemed
to beneficially own any voting stock of the Corporation so long as such person
or group beneficially owns, directly or indirectly, in the aggregate a majority
of the voting stock of a registered holder of the voting stock of the
Corporation, and (iv) the term "WCAS Group" shall mean Welsh, Carson, Anderson
& Stowe VII, L.P., a Delaware limited partnership ("WCAS VII"), WCAS Capital
Partners II, L.P., a Delaware limited partnership ("WCAS CP II"), any general
partners thereof and any other investment limited partnerships or other
investment entities under common control therewith.
Any date on which any shares of Senior Preferred Stock are to
be redeemed as provided in this paragraph 2 is hereinafter called a "Senior
Preferred Redemption Date." The price at which any shares of Senior Preferred
Stock are to be redeemed as herein provided is hereinafter called the "Senior
Preferred Redemption Price."
(c) Notice of Redemption. At least 20 days (and not more
than 60 days) prior to any Senior Preferred Redemption Date (which in the case
of any Redemption at the Option of the Holder shall be prior to the effective
date of any Change of Control), written notice thereof (a "Senior Preferred
Redemption Notice") shall be mailed, by first class or registered mail, postage
prepaid, to each holder of record of Senior Preferred Stock, at his, her or its
address last shown on the records of the transfer agent of the Senior Preferred
Stock (or the records of the
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<PAGE> 4
Corporation, if it serves as its own transfer agent). The Senior Preferred
Redemption Notice shall set forth (i) the Senior Preferred Redemption Date,
(ii) the Senior Preferred Redemption Price, (iii) in the case of a Mandatory
Redemption, the total number of shares to be redeemed from all holders and the
number of shares to be redeemed from such holder, and (iv) in the case of a
Redemption at the Option of the Holder, a description of the events which will,
upon the occurrence thereof, constitute a Change of Control, including a
summary description of the terms thereof, and such holder's right to exercise
its option to require a redemption under paragraph 2(b) hereof. In the case of
a Mandatory Redemption, the Senior Preferred Redemption Notice shall call upon
such holder to surrender to the Corporation, in the manner and at the place
designated, his, her or its certificate or certificates representing any shares
of Senior Preferred Stock to be redeemed.
(d) Redeemed or Otherwise Acquired Shares to be Retired.
On or prior to a Senior Preferred Redemption Date, all holders of shares of
Senior Preferred Stock to be redeemed shall surrender their certificates
representing such shares to the Corporation, in the manner and at the place
designated in the Senior Preferred Redemption Notice, and against such
surrender the Senior Preferred Redemption Price of such shares shall be paid to
the order of the person whose name appears on each such certificate as the
owner thereof. Each surrendered certificate shall be canceled. From and after
the Senior Preferred Redemption Date, unless there shall have been a default in
payment of the Senior Preferred Redemption Price, all rights of the holders of
the shares of redeemed Senior Preferred Stock as holders of such shares of
Senior Preferred Stock (except the right to receive the Senior Preferred
Redemption Price without interest against surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall
not thereafter be transferred on the books of the Corporation (or its transfer
agent, if any) or be deemed to be outstanding for any purpose whatsoever.
(e) Shares to be Redeemed or Purchased. If the funds of
the Corporation legally available for redemption of Senior Preferred Stock on
any Senior Preferred Redemption Date are insufficient, after redemption of any
other shares ranking senior thereto, to redeem the full number of shares of
Senior Preferred Stock to be redeemed on such date, those funds which are
legally available shall be used to redeem the maximum possible number of such
shares of Senior Preferred Stock ratably from each holder whose shares are
otherwise required to be redeemed. At any time thereafter when additional
funds of the Corporation become legally available for the redemption of Senior
Preferred Stock, such funds will be used, at the end of the next succeeding
fiscal quarter, to redeem the balance of the shares which the Corporation
4
<PAGE> 5
was theretofore obligated to redeem, ratably on the basis set forth in the
preceding sentence.
3. Liquidation, Dissolution or Winding Up. (a) In the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, the holders of shares of Senior Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, before any payment shall be
made to the holders of any shares of Junior Capital Stock by reason of their
ownership thereof, an amount equal to $100 per share of Senior Preferred Stock,
plus all accrued but unpaid dividends to which the holders of the Senior
Preferred Stock are then entitled pursuant to paragraph 1 above as of such
date, and no more. If upon any such liquidation, dissolution or winding up of
the Corporation the remaining assets of the Corporation available for
distribution to its stockholders (after making all distributions to which
holders of capital stock ranking senior to the Senior Preferred Stock shall be
entitled) shall be insufficient to pay the holders of shares of Senior
Preferred Stock the full amount to which they shall be entitled pursuant to
this paragraph 3(a), the holders of shares of Senior Preferred Stock, and any
other shares ranking on a parity therewith, shall share ratably in any
distribution of the remaining assets and funds of the Corporation in proportion
to the respective amounts which would otherwise be payable in respect of the
shares of Senior Preferred Stock held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in full.
(b) After the payment of all amounts required to be paid
pursuant to paragraph 3(a) to the holders of shares of Senior Preferred Stock,
and any other shares ranking on a parity therewith, upon the dissolution,
liquidation or winding up of the Corporation, the holders of shares of Junior
Capital Stock then outstanding shall share in any distribution of the remaining
assets and funds of the Corporation in the manner provided by law, in the
Restated Certificate of Incorporation of the Corporation, as amended, or as
provided in any pertinent Certificate of Designations of the Corporation, as
the case may be.
(c) No Change of Control shall be deemed to be a
liquidation, dissolution or winding up of the Corporation for purposes of this
paragraph 3.
4. Conversion. The shares of Senior Preferred Stock
shall be convertible as follows:
(a) Right to Convert. Subject to the terms and
conditions of this paragraph 4, the holder of any share or shares of Senior
Preferred Stock shall have the right, at his, her or its option, at any time,
to convert any such shares of Senior Preferred Stock (except that upon any
liquidation of the Corporation
5
<PAGE> 6
the right of conversion shall terminate as to all shares at the close of
business 15 days after notice thereof has been given to the holders of Senior
Preferred Stock as provided in paragraph 4(h) hereof) into such number of fully
paid and nonassessable whole shares of Common Stock as is obtained by (i)
multiplying the number of shares of Senior Preferred Stock so to be converted
by $100, (ii) adding the Additional Conversion Amount (as defined in paragraph
4(c) herein), if any, and (iii) dividing the result by the conversion price of
$0.25 or, if there has been an adjustment of the conversion price, by the
conversion price as last adjusted and in effect at the date any share or shares
of Senior Preferred Stock are surrendered for conversion (such price, or such
price as last adjusted, being referred to herein as the "Senior Preferred
Conversion Price"). Such right of conversion shall be exercised by the holder
thereof by giving written notice that the holder elects to convert a stated
number of shares of Senior Preferred Stock into Common Stock and by surrender
of a certificate or certificates for the shares so to be converted to the
Corporation at its principal office (or such other office or agency of the
Corporation as the Corporation may designate by notice in writing to the holder
or holders of the Senior Preferred Stock) at any time during its usual business
hours on the date set forth in such notice, together with a statement of the
name or names (with address), subject to compliance with applicable laws to the
extent such designation shall involve a transfer, in which the certificate or
certificates for shares of Common Stock shall be issued.
(b) Issuance of Certificates; Time Conversion Effected.
Promptly after the receipt by the Corporation of the written notice referred to
in paragraph 4(a) above and surrender of the certificate or certificates for
the share or shares of the Senior Preferred Stock to be converted, the
Corporation shall issue and deliver, or cause to be issued and delivered, to
the holder, registered in such name or names as such holder may direct, subject
to compliance with applicable laws to the extent such designation shall involve
a transfer, a certificate or certificates for the number of whole shares of
Common Stock issuable upon the conversion of such share or shares of Senior
Preferred Stock. To the extent permitted by law, such conversion shall be
deemed to have been effected and the Senior Preferred Conversion Price shall be
determined as of the close of business on the date on which such written notice
shall have been received by the Corporation and the certificate or certificates
for such share or shares shall have been surrendered as aforesaid, and at such
time the rights of the holder of such share or shares of Senior Preferred Stock
shall cease, and the person or persons in whose name or names any certificate
or certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record of
the shares represented thereby.
6
<PAGE> 7
(c) Fractional Shares; Dividends; Partial Conversion.
(i) No fractional shares shall be issued upon conversion
of the Senior Preferred Stock into Common Stock and the number of
shares of Common Stock to be issued shall be rounded to the nearest
whole share. If any fractional interest in a share of Common Stock
would, except for the provisions of this paragraph 4(c), be
deliverable upon any such conversion, the Corporation, in lieu of
delivering the fractional share thereof, shall pay to the holder
surrendering the Senior Preferred Stock for conversion an amount in
cash equal to the current fair market value of such fractional
interest as determined in good faith by the Board of Directors of the
Corporation.
(ii) Upon the conversion of any shares of Senior Preferred
Stock, the Corporation will pay the holder thereof, out of funds
legally available for such purpose, any accrued but unpaid dividends
thereon to the date of such conversion. In the event that the
Corporation is for any reason unable to pay some or all of such
accrued but unpaid dividends, any amount not so paid shall (for
purposes of paragraph 4(a) hereof) constitute the "Additional
Conversion Amount." No other payment or adjustment shall be made upon
any conver- sion on account of the Senior Preferred Stock so converted
or the Common Stock issued upon such conversion.
(iii) In case the number of shares of Senior Preferred
Stock represented by the certificate or certificates surrendered
pursuant to paragraph 4(a) exceeds the number of shares converted, the
Corporation shall, upon such conversion, execute and deliver to the
holder thereof, at the expense of the Corporation, a new certificate
or certificates for the number of shares of Senior Preferred Stock
represented by the certificate or certificates surrendered which are
not to be converted.
(d) Adjustment of Price Upon Issuance of Common Shares.
Except as provided in paragraph 4(e) hereof, if and whenever (after the date
the shares of Senior Preferred Stock shall have been issued and be outstanding)
the Corporation shall issue or sell, or is, in accordance with subparagraphs
(d)(i) through (d)(vii), deemed to have issued or sold, any shares of its
Common Stock without consideration or for a consideration per share less than
the Senior Preferred Conversion Price in effect immediately prior to the time
of such issue or sale, then, forthwith upon such issue or sale, the Senior
Preferred Conversion Price shall be adjusted to the price (calculated to the
nearest cent) determined by dividing (x) an amount equal to the sum of (A) the
number of shares of Common Stock outstanding immediately prior to such issue or
sale (including as outstanding all shares of Common Stock issuable upon
conversion of outstanding
7
<PAGE> 8
Senior Preferred Stock or upon conversion of outstanding Convertible Securities
(as defined in subparagraph (i) below)) multiplied by the then existing Senior
Preferred Conversion Price, and (B) the consideration, if any, received by the
Corporation upon such issue or sale, by (y) the total number of shares of
Common Stock outstanding immediately after such issue or sale (including as
outstanding all shares of Common Stock issuable upon conversion of outstanding
Senior Preferred Stock or outstanding Convertible Securities, in each case
without giving effect to any adjustment in the number of shares so issuable by
reason of such issue and sale).
No adjustment of the Senior Preferred Conversion Price,
however, shall be made in an amount less than $.01 per share, and any such
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any
adjustments so carried forward shall amount to $.01 per share or more.
For purposes of this paragraph 4(d), the following
subparagraphs (i) through (vii) shall also be applicable:
(i) Issuance of Rights or Options. Subject to paragraph
4(e) hereof, in case at any time the Corporation shall in any manner
grant (whether directly or by assumption in a merger or otherwise) any
rights to subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock (other than shares of Senior
Preferred Stock) or securities convertible into or exchangeable for
Common Stock (such rights or options being herein called "Options" and
such convertible or exchangeable stock or securities being herein
called "Convertible Securities") whether or not such Options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon conversion
or exchange of such Convertible Securities (determined by dividing (A)
the total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to the
Corporation upon the exercise of all such Options, plus, in the case
of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion
or exchange thereof, by (B) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable
upon the exercise of such Options) shall be less than the Senior
Preferred Conversion Price in effect immediately prior to the time of
the granting of such Options, then the total maximum number of shares
8
<PAGE> 9
of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed
to have been issued for such price per share as of the date of
granting of such Options and thereafter shall be deemed to be
outstanding. Except as otherwise provided in subparagraph (iii)
below, no adjustment of the Senior Preferred Conversion Price shall be
made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such Options or upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible
Securities.
(ii) Issuance of Convertible Securities. Subject to
paragraph 4(e) hereof, in case the Corporation shall in any manner
issue (whether directly or by assumption in a merger or otherwise) or
sell any Convertible Securities, whether or not the rights to exchange
or convert thereunder are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (A) the total amount received or
receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (B) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Senior Preferred
Conversion Price in effect immediately prior to the time of such issue
or sale, then the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible
Securities shall be deemed to have been issued for such price per
share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding, provided
that (x) except as otherwise provided in subparagraph (iii) below, no
adjustment of the Senior Preferred Conversion Price shall be made upon
the actual issue of such Common Stock upon conversion or exchange of
such Convertible Securities, and (y) if any such issue or sale of such
Convertible Securities is made upon exercise of any Option to purchase
any such Convertible Securities for which adjustments of the Senior
Preferred Conversion Price have been or are to be made pursuant to
other provisions of this paragraph 4(d), no further adjustment of the
Senior Preferred Conversion Price shall be made by reason of such
issue or sale.
(iii) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase
price provided for in any Option referred to in subparagraph (i), the
additional consideration, if any, payable upon the conversion or
exchange of any Convertible
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<PAGE> 10
Securities referred to in subparagraph (i) or (ii), or the rate at
which any Convertible Securities referred to in subparagraph (i) or
(ii) are convertible into or exchangeable for Common Stock shall
change at any time (in each case other than under or by reason of
provisions designed to protect against dilution), the Senior Preferred
Conversion Price in effect at the time of such event shall forthwith
be readjusted to the Senior Preferred Conversion Price which would
have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at
the time initially granted, issued or sold; and on the expiration of
any such Option or the termination of any such right to convert or
exchange such Convertible Securities, the Senior Preferred Conversion
Price then in effect hereunder shall forthwith be increased to the
Senior Preferred Conversion Price which would have been in effect at
the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to
such expiration or termination, never been issued, and the Common
Stock issuable thereunder shall no longer be deemed to be outstanding.
If the purchase price provided for in any such Option referred to in
subparagraph (i) or the rate at which any Convertible Securities
referred to in subparagraph (i) or (ii) are convertible into or
exchangeable for Common Stock shall be reduced at any time under or by
reason of provisions with respect thereto designed to protect against
dilution, then, in case of the delivery of Common Stock upon the
exercise of any such Option or upon conversion or exchange of any such
Convertible Securities, the Senior Preferred Conversion Price then in
effect hereunder shall forthwith be adjusted to such respective amount
as would have been obtained had such Option or Convertible Securities
never been issued as to such Common Stock and had adjustments been
made upon the issuance of the shares of Common Stock delivered as
aforesaid, but only if as a result of such adjustment the Senior
Preferred Conversion Price then in effect hereunder is thereby
reduced.
(iv) Stock Dividends. In case the Corporation shall
declare a dividend or make any other distribution upon the Common
Stock of the Corporation payable in Common Stock, Options or
Convertible Securities, the Senior Preferred Conversion Price shall be
reduced as if the Corporation had subdivided its outstanding shares of
Common Stock into a greater number of shares, as provided in
subparagraph 4(d)(v) hereof.
(v) Subdivision or Combination of Stock. In case the
Corporation shall at any time subdivide its outstanding shares of
Common Stock into a greater number of shares, the
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<PAGE> 11
Senior Preferred Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Common Stock of the Corporation shall be
combined into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination shall be proportionately
increased.
(vi) Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or
sold for cash, the consideration received therefor shall be deemed to
be the amount received by the Corporation therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection
therewith. In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration
as determined in good faith by the Board of Directors of the
Corporation, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith. The amount of consideration
deemed to be received by the Corporation pursuant to the foregoing
provisions of this subparagraph (vi) upon any issuance and/or sale of
shares of Common Stock, Options or Convertible Securities, pursuant to
an established compensation plan of the Corporation, to directors,
officers or employees of the Corporation in connection with their
employment shall be increased by the amount of any tax benefit
realized by the Corporation as a result of such issuance and/or sale,
the amount of such tax benefit being the amount by which the Federal
and/or state income or other tax liability of the Corporation shall be
reduced by reason of any deduction or credit in respect of such
issuance and/or sale. In case any Options shall be issued in
connection with the issue and sale of other securities of the
Corporation, together comprising one integral transaction in which no
specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued without
consideration.
(vii) Record Date. In case the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling
them (A) to receive a dividend or other distribution payable in Common
Stock, Options or Convertible Securities, or (B) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such
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<PAGE> 12
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(e) Certain Issues of Stock Excepted. Anything herein to
the contrary notwithstanding, the Corporation shall not make any adjustment of
the Senior Preferred Conversion Price in the case of (i) the issuance of shares
of Common Stock upon conversion of Senior Preferred Stock; (ii) the issuance of
Options or shares of Common Stock to employees of the Corporation or its
subsidiaries, either directly or pursuant to Options, pursuant to plans or
arrangements approved by the Board of Directors of the Corporation; (iii) the
issuance of shares of Common Stock in respect of any Convertible Securities or
Options issued by the Corporation prior to the date of this Certificate of
Designations; (iv) the issuance of Common Stock or Options or Convertible
Securities as consideration in the acquisition by assumption or otherwise by
the Corporation of substantially all of the assets of any other entity or more
than 50% of the voting power of any other entity, including by way of merger or
consolidation; or (v) the issuance of Options or Convertible Securities (or the
shares of Common Stock issuable upon conversion or exercise thereof) to banks
or other lenders as consideration for providing debt financing to the
Corporation.
(f) Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation (a
"Reorganization") shall be effected in such a way (including, without
limitation, by way of consolidation or merger) that holders of Common Stock
shall be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such Reorganization, lawful
and adequate provision (in form satisfactory to the holders of a majority of
the then outstanding shares of Senior Preferred Stock) shall be made whereby
each holder of a share or shares of Senior Preferred Stock shall thereafter
have the right to re- ceive, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock of the Corporation
immediately theretofore receivable upon the conversion of such share or shares
of the Senior Preferred Stock, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore so receivable had such Reorganization not taken
place, and in any such case appropriate provision shall be made with respect to
the rights and interests of such holder to the end that the provisions hereof
(including without limitation provisions for adjustments of the Senior
Preferred Conversion Price) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights (including an immediate
adjustment, by reason of such Reorganization, of the Senior Preferred
Conversion Price to the value for the Common
12
<PAGE> 13
Stock reflected by the terms of such Reorganization if the value so reflected
is less than the Senior Preferred Conversion Price in effect immediately prior
to such Reorganization). In the event of a merger or consolidation of the
Corporation as a result of which a greater or lesser number of shares of common
stock (or other equity interests, of the case may be) of the surviving
corporation or business entity are issuable to holders of Common Stock of the
Corporation outstanding immediately prior to such merger or consolidation, the
Senior Preferred Conversion Price in effect immediately prior to such merger or
consolidation shall be adjusted in the same manner as though there were a
subdivision or combination of the outstanding shares of Common Stock of the
Corporation. The Corporation will not effect any Change of Control unless
prior to the consummation thereof the acquiring corporation or other business
entity, or successor corporation or other business entity (if other than the
Corporation) resulting from such Change of Control, as the case may be, shall
assume by written instrument (in form reasonably satisfactory to the holders of
a majority of the shares of Senior Preferred Stock at the time outstanding)
executed and mailed or delivered to each holder of a share or shares of Senior
Preferred Stock at the last address of such holder appearing on the books of
the Corporation (or its transfer agent, if any), the obligation to deliver to
such holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to receive.
(g) Notice of Adjustment. Upon any adjustment of the
Senior Preferred Conversion Price, then and in each such case the Corporation
shall give written notice thereof, by first class mail, postage prepaid,
addressed to each holder of shares of Senior Preferred Stock at the address of
such holder as shown on the books of the Corporation (or its transfer agent, if
any), which notice shall state the Senior Preferred Conversion Price resulting
from such adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(h) Other Notices. In case at any time:
(i) the Corporation shall declare any dividend upon its
Common Stock payable in cash or stock or make any other distribution
to the holders of its Common Stock;
(ii) the Corporation shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of stock of
any class or other rights;
(iii) there shall be any Reorganization or Change of
Control or the Corporation shall become aware of any event or events
that could reasonably be expected to result in a Reorganization or
Change of Control; or
13
<PAGE> 14
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, addressed to each holder of any shares of Senior
Preferred Stock at the address of such holder as shown on the books of the
Corporation (or its transfer agent, if any), (A) at least 15 days' prior
written notice of the date on which the books of the Corporation (or its
transfer agent) 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 or Change of Control, and (B) in the case of
any such Reorganization or Change of Control, at least 15 days' prior written
notice of the date when the same shall take place. Such notice in accordance
with the foregoing clause (A) 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 (B) 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 or Change of Control, as the case
may be.
(i) Conversion at Corporation's Option. All outstanding
shares of Senior Preferred Stock shall, on or after June 30, 1999, at the
option of the Corporation, be automatically converted into Common Stock if at
any time (i) the Corporation shall effect a firm commitment public offering of
Common Stock or Convertible Securities registered pursuant to the Securities
Act of 1933, as amended, resulting in proceeds to the Corporation and/or
selling stockholders of not less than $20,000,000, after deduction of
underwriting discounts and commissions but before deduction of other expenses
of issuance, and in which the offering price to the public (or, in the case of
a sale of Convertible Securities, the price per share of Common Stock payable
upon conversion thereof) is greater than the Senior Preferred Conversion Price
or (ii) the average closing sales price of Common Stock on one or more national
securities exchanges on which the Common Stock is listed or quoted by NASDAQ or
the OTC Bulletin Board over any period of twenty consecutive trading days
equals or exceeds 300% of the Senior Preferred Conversion Price and the average
daily trading volume for the Common Stock over such period equals or exceeds
10,000,000 shares per week (as adjusted for stock splits, stock dividends and
other recapitalizations after the date of the first issuance of Senior
Preferred Stock). Such conversion shall be effected at the time of and subject
to the closing of the sale of such shares of Common Stock or on the first
trading day succeeding such trading period, as the case may be.
14
<PAGE> 15
(j) Stock to be Reserved. The Corporation will at all
times reserve and keep available out of its authorized but unissued Common
Stock, solely for the purpose of issuance upon the conversion of the Senior
Preferred Stock as herein provided, such number of shares of Common Stock as
shall then be issuable upon the conversion of all outstanding shares of Senior
Preferred Stock. All shares of Common Stock which shall be so issued shall be
duly and validly issued and fully paid and nonassessable and free from all
taxes, liens and charges arising out of or by reason of the issue thereof, and,
without limiting the generality of the foregoing, the Corporation covenants
that it will from time to time take all such action as may be requisite to
assure that the par value per share of the Common Stock is at all times equal
to or less than the effective Senior Preferred Conversion Price. The
Corporation will take all such action within its control as may be necessary on
its part to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirements
of any national securities exchange upon which the Common Stock of the
Corporation may be listed. The Corporation will not take any action which
results in any adjustment of the Senior Preferred Conversion Price if after
such action the total number of shares of Common Stock issued and outstanding
and thereafter issuable upon exercise of all options and conversion of
Convertible Securities, including upon conversion of the Senior Preferred
Stock, would exceed the total number of shares of Common Stock then authorized
by the Corporation's Restated Certificate of Incorporation.
(k) No Reissuance of Senior Preferred Stock. Shares of
Senior Preferred Stock that are converted into shares of Common Stock as
provided herein shall not be reissued.
(l) Issue Tax. The issuance of certificates for shares
of Common Stock upon conversion of the Senior Preferred Stock shall be made
without charge to the holders thereof for any issuance tax in respect thereof,
provided that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Senior Preferred
Stock which is being converted.
(m) Closing of Books. The Corporation will at no time
close its transfer books against the transfer of any Senior Preferred Stock or
of any shares of Common Stock issued or issuable upon the conversion of any
shares of Senior Preferred Stock in any manner which interferes with the timely
conversion of such Senior Preferred Stock.
(n) Definition of Common Stock. As used in this
paragraph 4, the term "Common Stock" shall mean and include the Corporation's
authorized Common Stock, par value $.03 per share,
15
<PAGE> 16
as constituted on the date of filing of this Certificate of Designations and
shall also include any capital stock of any class of the Corporation thereafter
authorized that shall not be limited to a fixed sum or percentage of par value
in respect of the rights of the holders thereof to participate in dividends or
in the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided, however, that such
term, when used to describe the securities receivable upon conversion of shares
of the Senior Preferred Stock of the Corporation, shall include only shares
designated as Common Stock of the Corporation on the date of filing of this
Certificate of Designations, any shares resulting from any combination or
subdivision thereof referred to in subparagraph (v) of paragraph 4(d), or in
case of any reorganization or reclassification of the outstanding shares
thereof, the stock, securities or assets provided for in paragraph 4(f).
5. Voting. Except as otherwise provided by law or in
paragraph 6 below, the holders of Senior Preferred Stock shall vote together
with the holders of Common Stock on all matters to be voted on by the
stockholders of the Corporation, and each holder of Senior Preferred Stock
shall be entitled to one vote for each share of Common Stock that would be
issuable to such holder upon the conversion of all the shares of Senior
Preferred Stock held by such holder on the record date for the determination of
stockholders entitled to vote.
6. Restrictions. So long as any shares of Senior
Preferred Stock are outstanding (except, with respect to clause (i) below, so
long as at least 25,000 shares of Senior Preferred Stock are outstanding),
without the consent of the holders of a majority of the Senior Preferred Stock
at the time outstanding given in person or by proxy, either in writing or at a
special meeting called for that purpose at which the holders of the Senior
Preferred Stock shall vote separately as a class, the Corporation may not (i)
effect, validate or permit a Change of Control; (ii) effect or validate the
amendment, alteration or repeal of any provision hereof which would amend or
repeal the dividend, voting, conversion, redemption or liquidation rights of
the Senior Preferred Stock set forth herein; (iii) effect or validate the
amendment, alteration or repeal of any provision of the Restated Certificate of
Incorporation or the By- laws of the Corporation; or (iv) (A) create or
authorize any additional class or series of stock ranking senior to or on a
parity with the Senior Preferred Stock as to dividends or as to rights upon
redemption, liquidation, dissolution or winding up, or (B) increase the
authorized number of shares of the Senior Preferred Stock or of any other class
or series of capital stock of the Corporation ranking senior to or on a parity
with the Senior Preferred Stock as to dividends or as to rights upon
redemption, liquidation, dissolution or winding up, whether any such creation
or authorization or increase shall be by means of amendment
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<PAGE> 17
hereof, amendment of the Restated Certificate of Incorporation of the
Corporation, Certificate of Designations or amendment thereof, merger,
consolidation or otherwise.
7. Reacquired Shares. Any shares of Senior Preferred Stock,
which are redeemed or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof
and the number of authorized shares of Senior Preferred Stock shall be reduced
accordingly.
IN WITNESS WHEREOF, this Certificate of Designations has been
executed by the Corporation by its Chairman and Chief Executive Officer this
____ day of __________, 1998.
AURORA ELECTRONICS, INC.
By
--------------------------
Chairman and Chief
Executive Officer
<PAGE> 1
EXHIBIT 99.10
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
AURORA ELECTRONICS, INC.
---------------------------
AURORA ELECTRONICS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies
as follows:
FIRST: That the following resolutions were duly adopted by
the Board of Directors of the Corporation, setting forth a proposed amendment
to the Restated Certificate of Incorporation of the Corporation, declaring such
amendment to be advisable and directing that such amendment be submitted to the
stockholders of the Corporation for their approval. The resolutions are as
follows:
"RESOLVED, that as further contemplated by the Merger
Agreement, there is hereby adopted an amendment to the Corporation's
Restated Certificate of Incorporation pursuant to which the authorized
capital stock of the Corporation shall be changed from 51,000,000
shares, consisting of 50,000,000 shares of Common Stock, $.03 par
value ("Common Stock"), and 1,000,000 shares of Preferred Stock, $.01
par value ("Preferred Stock"), to 301,000,000 shares, consisting of
300,000,000 shares of Common Stock and 1,000,000 shares of Preferred
Stock, and, in connection with such change, paragraph (A) of Article
FOURTH of the Corporation's Restated Certificate of Incorporation
shall be amended to read in its entirety as follows:
'(A) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is 301,000,000 shares,
consisting of 300,000,000 shares of Common Stock, $.03 par value and
1,000,000 shares of Preferred Stock, $.01 par value.'
FURTHER RESOLVED, that the Board of Directors of the
Corporation hereby declares that the foregoing amendment to
<PAGE> 2
the Corporation's Restated Certificate of Incorporation is desirable
and in the best interests of the Corporation, and hereby recommends
that the amendment be submitted to the stockholders of the Corporation
for their approval pursuant to Section 242(b) of the General
Corporation Law of the State of Delaware."
SECOND: That thereafter the amendment to the Restated
Certificate of Incorporation of the Corporation effected by this Certificate
was duly authorized by the written consent of the holders of not less than a
majority of the outstanding shares of capital stock of the Corporation entitled
to vote thereon, after having been declared advisable by the Board of Directors
of the Corporation, all in accordance with the provisions of Sections 228 and
242 of the General Corporation Law of the State of Delaware.
2
<PAGE> 3
IN WITNESS WHEREOF, AURORA ELECTRONICS, INC. has caused this
Certificate to be signed by Lary McTavish, its Chief Executive Officer, who
hereby acknowledges under penalties of perjury that the facts herein stated are
true and that this Certificate is his act and deed, as of the day of
1998.
AURORA ELECTRONICS, INC.
By
---------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 99.11
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
, 1998
To the several persons named
in Schedules I and II hereto
Ladies and Gentlemen:
This Amended and Restated Registration Rights Agreement amends
and restates in its entirety the Registration Rights Agreement, dated as of
March 29, 1996 (as amended from time to time, the "Original Registration Rights
Agreement"), among Aurora Electronics, Inc., a Delaware corporation (the
"Company"), and the several persons named therein. This will confirm that
(a) with respect to the several persons named as Purchasers in
the Securities Purchase Agreement dated as of February 21, 1996, as
amended (the "Original Purchase Agreement"), among the Company, Welsh,
Carson, Anderson & Stowe VII, L.P., a Delaware limited partnership
("WCAS VII"), WCAS Capital Partners II, L.P., a Delaware limited
partnership ("WCAS CP II"), and the several persons named therein, in
consideration of (i) the purchase by WCAS VII and the several persons
(other than WCAS CP II) named in Schedule I hereto (collectively, the
"Original Preferred Share Purchasers") from the Company of 400,000
shares (the "Original Preferred Shares") of Convertible Preferred
Stock, $.01 par value ("Original Convertible Preferred Stock"), of the
Company, and (ii) the purchase by WCAS CP II of (x) the Company's 10%
Senior Subordinated Note due September 30, 2001, in the principal
amount of $10,000,000, and (y) 607,211 shares (the "Original Common
Shares") of Common Stock, $.03 par value ("Common Stock"), of the
Company, all on the terms and subject to the conditions set forth in
the Original Purchase Agreement,
(b) with respect to each of WCAS VII and WCAS CP II only
(sometimes collectively referred to as the "Guarantors"), in
consideration of the issuance, on behalf of Aurora Electronics Group,
Inc., a California corporation and wholly-owned subsidiary of the
Company ("AEG"), of certain guarantees which have been amended and
restated pursuant to the Amended and Restated Guarantee, dated as of
December 23, 1997, among the Guarantors and The Chase Manhattan Bank
N.A. (formerly known as Chemical Bank), a New York banking
corporation,
<PAGE> 2
as agent, and in connection with the issuance to the Guarantors of
warrants to purchase Common Stock (the "WCAS Warrants"), pursuant to
such guarantees and the Amended and Restated Financial Support
Agreement, dated as of July 31, 1997 among the Company, AEG, and the
Guarantors,
(c) with respect to those certain Original Preferred Share
Purchasers party, together with the Company, to the Series B
Convertible Preferred Stock Purchase Agreement, dated as of August 14,
1997, the Series C Convertible Preferred Stock Purchase Agreement,
dated as of October 2, 1997, and the Series D Convertible Preferred
Stock Purchase Agreement, dated as of October 24, 1997 (collectively,
the "Subsequent Preferred Share Purchase Agreements"), in
consideration of the purchase by such certain Original Preferred Share
Purchasers of (i) 25,000 shares (the "Series B Preferred Shares") of
Series B Convertible Preferred Stock, $.01 par value ("Series B
Convertible Preferred Stock"), of the Company, (ii) 25,000 shares (the
"Series C Preferred Shares") of Series C Convertible Preferred Stock,
$.01 par value ("Series C Convertible Preferred Stock"), of the
Company, and (iii) 20,000 shares (the "Series D Preferred Shares") of
Series D Convertible Preferred Stock, $.01 par value ("Series D
Convertible Preferred Stock"), of the Company, each such purchase on
the terms and subject to the conditions set forth in the respective
Subsequent Preferred Share Purchase Agreement, all of which Series B
Preferred Shares, Series C Preferred Shares, and Series D Preferred
Shares, have been converted, together with the Original Preferred
Shares, into an aggregate [ ] shares of Common Stock (the
"Subsequent Common Shares") pursuant to the provisions of the
Stockholders Agreement dated as of January 30, 1998 among WCAS VII,
the Company and The Cerplex Group, Inc., a Delaware corporation
("Cerplex"),
(d) with respect to WCAS CP II and those certain Original
Preferred Share Purchasers party, together with the Company, to the
Securities Purchase and Exchange Agreement, dated as of January 30,
1998 (the "Securities Purchase and Exchange Agreement"), in
consideration of the purchase by WCAS CP II and such certain Original
Preferred Share Purchasers of an aggregate 213,000 shares (the "Senior
Preferred Shares") of Senior Convertible Preferred Stock, $.01 par
value ("Senior Preferred Stock"), of the Company, on the terms and
subject to the conditions set forth in the Securities Purchase and
Exchange Agreement,
(e) with respect to WCAS VII, in consideration of your
agreement to exchange certain warrants to purchase 1,500,096 shares of
common stock, $.001 par value ("Cerplex Common Stock"), of Cerplex,
for warrants to purchase [ ] shares of Common Stock from the
Company (such warrants,
<PAGE> 3
together with the WCAS Warrants, are hereinafter referred to
collectively as, the "Warrants"), all on the terms and subject to the
conditions set forth in the Agreement and Plan of Merger, dated as of
January 30, 1998 (the "Merger Agreement"), among the Company, Holly
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary
of the Company, and Cerplex, and
(f) with respect to the several persons named in Schedule II
hereto (collectively, the "Schedule II Holders"), in consideration of
(i) the Schedule II Holders' agreement to exchange [ ] shares of
Cerplex Common Stock for an aggregate [ ] shares of Common Stock
(the "Schedule II Common Shares") from the Company, all on the terms
and subject to the conditions set forth in the Merger Agreement, (ii)
the Schedule II Holders' consent to the transactions contemplated by
the Merger Agreement and (iii) the Schedule II Holders' irrevocable
waiver hereby of any and all rights granted to them pursuant to the
Registration Rights Agreement, dated as of November 19, 1993, among
Cerplex and the investors and the stockholders of Cerplex listed
therein, as amended from time to time (the "Cerplex Registration
Rights Agreement"), and the Schedule II Holders' termination hereby of
the Cerplex Registration Rights Agreement,
the Company hereby covenants and agrees with each of you, and with each
subsequent holder of Covered Stock (as defined herein) as follows:
1. Certain Definitions. As used herein, the following
terms shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
"Common Shares" means the Original Common Shares, the
Subsequent Common Shares and the Schedule II Common Shares.
"Conversion Shares" means the shares of Common Stock issuable
upon conversion of any of the Senior Preferred Shares or upon exercise
of any of the Warrants.
"Covered Stock" means the Restricted Stock and the Schedule II
Common Shares.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, 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.
3
<PAGE> 4
"Registration Expenses" means the expenses so described in
Section 8 hereof.
"Restricted Stock" means the shares of capital stock of the
Company, the certificates for which are required to bear the legend
set forth in Section 2 hereof; provided, however, that Restricted
Stock shall not include any Schedule II Common Shares.
"Securities Act" means the Securities Act of 1933, as amended,
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.
"Selling Expenses" means the expenses so described in Section
8 hereof.
2. Restrictive Legend. Each certificate representing
the Common Shares, each certificate representing the Senior Preferred Shares,
each certificate representing the Conversion Shares, each certificate
representing the Warrants, and each certificate issued upon exchange,
adjustment or transfer of any of the foregoing, other than in a public sale or
as otherwise permitted by the last paragraph of Section 3 hereof, shall be
stamped or otherwise imprinted with a legend substantially in the following
form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE
BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE."
3. Notice of Proposed Transfer. Prior to any proposed
transfer of any Covered Stock (other than under the circumstances described in
Sections 4, 5 or 6 hereof), the holder thereof shall give written notice to the
Company of its intention to effect such transfer. Each such notice shall
describe the manner of the proposed transfer and, if requested by the Company,
shall be accompanied by an opinion of counsel reasonably satisfactory to the
Company (it being agreed that Reboul, MacMurray, Hewitt, Maynard & Kristol is
and shall be satisfactory) to the effect that the proposed transfer of Covered
Stock may be effected without registration under the Securities Act, whereupon
the holder of such Covered Stock shall be entitled to transfer such Covered
Stock in accordance with the terms of its notice. Each certificate for Covered
Stock transferred as above provided shall bear the legend set forth in Section
2, unless (i) such transfer is in accordance with the provisions of Rule 144
(or any other rule permitting public sale without registration under the
Securities Act) or (ii) the opinion of counsel referred to above is to the
further effect that the transferee and any subsequent
4
<PAGE> 5
transferee (other than an affiliate of the Company) would be entitled to
transfer such securities in a public sale without registration under the
Securities Act.
The foregoing restrictions on transferability of Covered Stock
shall terminate as to any particular shares of Covered Stock when such shares
shall have been effectively registered under the Securities Act and sold or
otherwise disposed of in accordance with the intended method of disposition by
the seller or sellers thereof set forth in the registration statement
concerning such shares. Whenever a holder of Covered Stock is able to
demonstrate to the Company (and its counsel) that the provisions of Rule 144(k)
of the Securities Act are available to such holder without limitation, such
holder of Covered Stock shall be entitled to receive from the Company, without
expense, a new certificate not bearing the restrictive legend set forth in
Section 2.
4. Required Registration.
(a) Subject to the provisions of paragraph (e) below, at
any time the holders of Restricted Stock constituting at least a majority of
the Restricted Stock outstanding at such time may request the Company to
register under the Securities Act all or any portion of the Restricted Stock
held by such requesting holder or holders for sale in the manner specified in
such notice; provided, however, that the only securities which the Company
shall be required to register pursuant hereto shall be shares of Common Stock;
and provided, further, however, that, in any underwritten public offering
contemplated by Section 4, 5 or 6 hereof, the holders of the Warrants shall be
entitled to sell such Warrants to the underwriters for exercise and the sale of
the shares of Common Stock issued upon such exercise. For the purposes of
calculating the number of outstanding shares of Restricted Stock for purposes
of this Section 4(a) and Section 13(d) hereof, holders of Senior Preferred
Shares and the Warrants shall be treated as the holders of the number of
Conversion Shares then issuable upon conversion of the Senior Preferred Shares
and exercise of the Warrants.
(b) Promptly following receipt of any notice under this
Section 4, the Company shall notify any holders of Restricted Stock from whom
notice has not been received and all other holders of Covered Stock, and shall
use its best efforts to register under the Securities Act, for public sale in
accordance with the method of disposition specified in such notice from such
requesting holders, the number of shares of Restricted Stock specified in such
notice (and the number of shares of Covered Stock specified in any notices
received from other such holders of Covered Stock within 30 days after their
receipt of such notice from the Company); provided, however, that if the
proposed method of disposition specified by the requesting holders of
Restricted Stock shall be an underwritten public offering, the
5
<PAGE> 6
number of shares of Covered Stock to be included in such an offering may be
reduced (first, pro rata among the requesting holders of Schedule II Common
Shares based on the number of Schedule II Common Shares so requested to be
registered, and second, pro rata among the requesting holders of Restricted
Stock based on the number of shares of Restricted Stock so requested to be
registered) if and to the extent that the managing underwriter shall be of the
opinion that such inclusion would adversely affect the marketing of the Covered
Stock to be sold. If such method of disposition shall be an underwritten
public offering, the Company may designate the managing underwriter of such
offering, subject to the approval of the selling holders of a majority of the
Restricted Stock included in the offering, which approval shall not be
unreasonably withheld. Notwithstanding anything to the contrary contained
herein, the obligation of the Company under this Section 4 shall be deemed
satisfied only when a registration statement covering all shares of Covered
Stock specified in notices received as aforesaid, for sale in accordance with
the method of disposition specified by the requesting holders of Restricted
Stock, shall have become effective and, if such method of disposition is a firm
commitment underwritten public offering, all such shares shall have been sold
pursuant thereto.
(c) In the event that the Board of Directors of the
Company determines in good faith that the filing of a registration statement
pursuant hereto would be detrimental to the Company, the Board of Directors may
defer such filing for a period not to exceed sixty (60) days. The Board of
Directors may not effect more than one such deferral during any twelve-month
period. The Board of Directors agrees to promptly notify all holders of
Covered Stock of any such deferral, and shall provide to such holders a
reasonably complete explanation therefor.
(d) The Company shall be entitled to include in any
registration statement referred to in this Section 4, for sale in accordance
with the method of disposition specified by the requesting holders, shares of
Common Stock to be sold by the Company for its own account, except to the
extent that, in the opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering), such inclusion would
adversely affect the marketing of the Covered Stock to be sold. Except as
provided in this paragraph (d), the Company will not effect any other
registration of its Common Stock, whether for its own account or that of other
holders, from the date of receipt of a notice from requesting holders of
Restricted Stock pursuant to this Section 4 until the completion of the period
of distribution of the registration contemplated thereby.
(e) Notwithstanding anything to the contrary contained
herein, the Company shall be obligated to register Restricted Stock (and, to
the extent specified in notices by the holders of Schedule II Common Shares, in
accordance with the provisions of
6
<PAGE> 7
paragraph (b) above, Schedule II Common Shares) pursuant to this Section 4 on
two occasions only.
5. Form S-3 Registration.
(a) If the Company shall receive from any holder or
holders of Restricted Stock a written request or requests that the Company
effect a registration on Form S-3 and any related qualification or compliance
with respect to Restricted Stock owned by such holder or holders, the
reasonably anticipated aggregate price to the public of which would exceed
$1,000,000, the Company will:
(i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all
other holders of Covered Stock; and
(ii) as soon as is reasonably practicable, use its best
efforts to effect such registration (including, without limitation,
the execution of an undertaking to file post-effective amendments,
appropriate qualifications under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations
issued under the Securities Act and any other government requirements
or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such
holder's or holders' Restricted Stock as is specified in such request,
together with all or such portion of the Covered Stock of any holder
or holders joining in such request as are specified in a written
request given within 30 days after receipt of such written notice from
the Company; provided, however that the Company shall not be obligated
to effect any such registration, qualification or compliance pursuant
to this Section 5 (A) more than once in any 180-day period, or (B) if
the Company is not entitled to use Form S-3; and provided, further,
that the only securities which the Company shall be required to
register pursuant hereto shall be shares of Common Stock. Subject to
the foregoing, the Company shall file a registration statement
covering the Covered Stock so requested to be registered as soon as is
reasonably practicable after receipt of the request or requests of the
holders of the Restricted Stock.
(b) Notwithstanding anything to the contrary contained
herein, the Company shall be obligated to register Restricted Stock (and, to
the extent specified in notices by the holders of Schedule II Common Shares in
accordance with the provisions of paragraph (a)(ii) above, Schedule II Common
Shares) pursuant to this Section 5 on two occasions only.
6. Incidental Registration. If the Company at any time
(other than pursuant to Section 4 or 5 hereof) proposes to
7
<PAGE> 8
register any of its Common Stock under the Securities Act for sale to the
public, whether for its own account or for the account of other security
holders or both (except with respect to registration statements on Form S-4 or
Form S-8 or another form not available for registering the Covered Stock for
sale to the public), it will give written notice at such time to all holders of
outstanding Covered Stock of its intention to do so. Upon the written request
of any such holder, given within 30 days after receipt of any such notice by
the Company, to register any of its Covered Stock (which request shall state
the intended method of disposition thereof), the Company will use its best
efforts to cause the Covered Stock as to which registration shall have been so
requested to be included in the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent requisite to
permit the sale or other disposition by the holder (in accordance with its
written request) of such Covered Stock so registered; provided that nothing
herein shall prevent the Company from abandoning or delaying such registration
at any time; provided, further, that the only securities which the Company
shall be required to register shall be shares of Common Stock. In the event
that any registration pursuant to this Section 6 shall be, in whole or in part,
an underwritten public offering of Common Stock, any request by a holder
pursuant to this Section 6 to register Covered Stock shall specify that either
(i) such Covered Stock is to be included in the underwriting on the same terms
and conditions as the shares of Common Stock otherwise being sold through
underwriters in connection with such registration or (ii) such Covered Stock is
to be sold in the open market without any underwriting, on terms and conditions
comparable to those normally applicable to offerings of common stock in
reasonably similar circumstances. The number of shares of Covered Stock to be
included in an underwriting in accordance with clause (i) above may be reduced
pro rata among the requesting holders of Covered Stock based upon the number of
shares of Covered Stock so requested to be registered, if and to the extent
that the managing underwriter shall be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that if any shares are to be included in such
underwriting for the account of any person other than the Company, the shares
to be so included shall be subject first to reduction before the shares of
Covered Stock are reduced pro rata.
Notwithstanding anything to the contrary contained in this
Section 6, in the event that there is a firm commitment underwritten public
offering of securities of the Company pursuant to a registration covering
Covered Stock and a holder of Covered Stock does not elect to sell his Covered
Stock to the underwriters of the Company's securities in connection with such
offering, such holder shall refrain from selling such Covered Stock so
registered pursuant to this Section 6 during the period of distribution of the
Company's securities by such underwriters
8
<PAGE> 9
and the period in which the underwriting syndicate participates in the after
market; provided, however, that such holder shall, in any event, be entitled to
sell its Covered Stock commencing on the 90th day after the effective date of
such registration statement or, if later, on such date (but in no event later
than the 180th day after such effective date) as contractual "lock-up"
restrictions imposed by the underwriters shall expire or be released.
7. Registration Procedures. If and whenever the Company
is required by the provisions of Section 4, 5 or 6 hereof to use its best
efforts to effect the registration of any of the Covered Stock under the
Securities Act, the Company will, as expeditiously as possible:
(a) prepare (and afford counsel for the selling holders
reasonable opportunity to review and comment thereon) and file with
the Commission a registration statement on the most appropriate form
adequate for the purposes thereof with respect to such securities and
use its best efforts to cause such registration statement to become
and remain effective for the period of the distribution contemplated
thereby (to be determined as hereinafter provided);
(b) prepare (and afford counsel for the selling holders
reasonable opportunity to review and comment thereon) 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 for the period
specified in paragraph (a) above and to comply with the provisions of
the Securities Act with respect to the disposition of all Covered
Stock covered by such registration statement in accordance with the
sellers' intended method of disposition set forth in such registration
statement for such period;
(c) furnish to each seller and to each underwriter such
number of copies of the registration statement and the prospectus
included therein (including each preliminary prospectus) as such
persons may reasonably request in order to facilitate the public sale
or other disposition of the Covered Stock covered by such registration
statement;
(d) use its best efforts to register or qualify the
Covered Stock covered by such registration statement under the
securities or blue sky laws of such jurisdictions as the sellers of
Covered Stock or, in the case of an underwritten public offering, the
managing underwriter, shall reasonably request (provided that the
Company will not be required to (i) qualify generally to do business
in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (d), (ii) subject itself to taxation in
any
9
<PAGE> 10
such jurisdiction or (iii) consent to general service of process in
any such jurisdiction);
(e) immediately notify each seller under such
registration statement and each underwriter, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus contained 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 light of the
circumstances then existing (following which notification the sellers
agree to discontinue sales of their Covered Stock covered by such
registration statement until such misstatement or omission shall have
been remedied);
(f) use all reasonable efforts (if the offering is
underwritten) to furnish, at the request of any seller, on the date
that Covered Stock is delivered to the underwriters for sale pursuant
to such registration: (i) an opinion of counsel representing the
Company for the purposes of such registration, addressed to the
underwriters and to such seller and dated such date, stating that such
registration statement has become effective under the Securities Act
and that (A) to the best knowledge of such counsel, no stop order
suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, (B) the registration statement,
the related prospectus, and each amendment or supplement thereof
comply as to form in all material respects with the requirements of
the Securities Act and the applicable rules and regulations of the
Commission thereunder (except that such counsel need express no
opinion as to financial statements, the notes thereto, and the
financial schedules and other financial and statistical data contained
therein), and (C) to such other effects as may reasonably be requested
by counsel for the underwriters or by such seller or its counsel and
which are customary in underwritings of the type being undertaken, and
(ii) a letter dated such date from the independent public accountants
retained by the Company, addressed to the underwriters, stating that
they are independent public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration
statement or the prospectus, or any amendment or supplement thereof,
comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information
as to the period ending no more than five business days prior to the
date of such letter) with respect to the registration in respect of
which such letter
10
<PAGE> 11
is being given as such underwriters or seller may reasonably request;
and
(g) make available for inspection by each seller, any
underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent
retained by such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration
statement and permit such seller, attorney, accountant or agent to
participate in the preparation of such registration statement.
For purposes of paragraphs (a) and (b) above and of Section 4(d) hereof, the
period of distribution of Covered Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Covered Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Covered Stock covered thereby or
six months after the effective date thereof.
In connection with each registration hereunder, the selling
holders of Covered Stock will furnish to the Company in writing such
information with respect to themselves and the proposed distribution by them as
shall be reasonably necessary in order to assure compliance with federal and
applicable state securities laws.
In connection with each registration pursuant to Sections 4, 5
and 6 hereof covering an underwritten public offering, the Company agrees to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between major
underwriters and companies of the Company's size and investment stature;
provided, however, that such agreement shall not contain any such provision
applicable to the Company which is inconsistent with the provisions hereof, and
provided, further, that the time and place of the closing under said agreement
shall be as mutually agreed upon among the Company, such managing underwriter
and the selling holders of Covered Stock.
8. Expenses. All expenses incurred by the Company in
complying with Sections 4, 5 and 6 hereof, including without limitation all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees of the
National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars and fees and expenses of one counsel for the
11
<PAGE> 12
sellers of Covered Stock, but excluding any Selling Expenses, are herein called
"Registration Expenses." All underwriting discounts and selling commissions
applicable to the sale of Covered Stock are herein called "Selling Expenses."
The Company will pay all Registration Expenses in connection
with each registration statement filed pursuant to Section 4, 5 or 6 hereof.
All Selling Expenses in connection with any registration statement filed
pursuant to Section 4, 5 or 6 hereof shall be borne by the participating
sellers in proportion to the number of shares sold by each, or by such persons
other than the Company (except to the extent the Company shall be a seller) as
they may agree.
9. Indemnification. In the event of a registration of
any of the Covered Stock under the Securities Act pursuant to Section 4, 5 or 6
hereof, the Company will indemnify and hold harmless each seller of such
Covered Stock thereunder and each underwriter of Covered Stock thereunder and
each other person, if any, who controls such seller or underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such seller or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions 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 Covered Stock was registered under the Securities Act pursuant to
Section 4, 5 or 6, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the 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 will reimburse each such seller, each such underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case if and to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished by such seller, such underwriter or such controlling
person in writing specifically for use in such registration statement or
prospectus.
In the event of a registration of any of the Covered Stock
under the Securities Act pursuant to Section 4, 5 or 6 hereof, each seller of
such Covered Stock thereunder, severally and not jointly, will indemnify and
hold harmless the Company and each person, if any, who controls the Company
within the meaning of the Securities Act, each officer of the Company who signs
the registration statement, each director of the Company, each
12
<PAGE> 13
underwriter and each person who controls any underwriter within the meaning of
the Securities Act, against all losses, claims, damages or liabilities, joint
or several, to which the Company or such officer, director, underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement under
which such Covered Stock was registered under the Securities Act pursuant to
Section 4, 5 or 6, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the 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 will reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that such seller will be
liable hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with information pertaining to such seller, as such,
furnished in writing to the Company by such seller specifically for use in such
registration statement or prospectus; and provided, further, that the liability
of each seller hereunder shall be limited to the proceeds (net of underwriting
discounts and commissions) received by such seller from the sale of Covered
Stock covered by such registration statement.
Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party
hereunder, notify the indemnifying party in writing thereof, but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party other than under this Section 9. In
case any such action shall be brought against any indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 9 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying
13
<PAGE> 14
party and the indemnified party shall have reasonably concluded that there may
be reasonable defenses available to it which are different from or additional
to those available to the indemnifying party, or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of
the indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by
the indemnifying party as incurred.
Notwithstanding the foregoing, any indemnified party shall
have the right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party shall have failed to retain counsel for the
indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that the indemnifying party shall not, in connection with any
action or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by
reason of such settlement.
If the indemnification provided for in the first two
paragraphs of this Section 9 is unavailable or insufficient to hold harmless an
indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions in respect thereof referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Company, on the one hand, and
the underwriters and the sellers of such Covered Stock, on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or actions as well as any other relevant equitable
considerations, including the failure to give any notice under the third
paragraph of this Section 9. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact relates to information supplied by the Company, on
the one hand, or the underwriters and the sellers of such Covered Stock, on the
other, and to the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and each of you agree that it would not be just and equitable if contributions
pursuant
14
<PAGE> 15
to this paragraph were determined by pro rata allocation (even if all of the
sellers of such Covered Stock were treated as one entity for such purpose) or
by any other method of allocation which did not take account of the equitable
considerations referred to above in this paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or action in respect thereof, referred to above in this paragraph, shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this paragraph, the sellers of
such Covered Stock shall not be required to contribute any amount in excess of
the amount, if any, by which the total price at which the Common Stock sold by
each of them was offered to the public exceeds the amount of any damages which
they would have otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the Securities Act),
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
The indemnification of underwriters provided for in this
Section 9 shall be on such other terms and conditions as are at the time
customary and reasonably required by such underwriters. In that event, the
indemnifica- tion of the sellers of Covered Stock in such underwriting shall at
the sellers' request be modified to conform to such terms and conditions.
10. Changes in Common Stock. If, and as often as, there
are any changes in the Common Stock by way of stock split, stock dividend,
combination or reclassification, or through merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions hereof, as may be required, so that
the rights and privileges granted hereby shall continue with respect to the
Common Stock as so changed.
11. Representations and Warranties of the Company. The
Company represents and warrants to you as follows:
(a) The execution, delivery and performance of this
Agreement by the Company have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order
of any court or other agency of government, the Restated Certificate
of Incorporation or By-laws of the Company, or any provision of any
indenture, agreement or other instrument to which it or any of its
properties or assets is bound, or conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien,
15
<PAGE> 16
charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(b) This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, subject to
consider- ations of public policy in the case of the indemnification
provisions hereof.
12. Rule 144 Reporting. The Company agrees with you as
follows:
(a) The Company shall make and keep public information
available, as those terms are understood and defined in Rule 144(c)(1)
or (c)(2), whichever is applicable, under the Securities Act, at all
times from and after the date it is first required to do so.
(b) The Company shall file with the Commission in a
timely manner all reports and other documents as the Commission may
prescribe under Section 13(a) or 15(d) of the Exchange Act at all
times during which the Company is subject to such reporting
requirements of the Exchange Act.
(c) The Company shall furnish to such holder of Covered
Stock forthwith upon request (i) a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 (at any
time from and after the date it first becomes subject to such
reporting requirements) and of the Securities Act and the Exchange Act
(at any time during which it is subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly
report of the Company and (iii) such other reports and documents so
filed as a holder may reasonably request to avail itself of any rule
or regulation of the Commission allowing a holder of Covered Stock to
sell any such securities without registration.
13. Miscellaneous.
(a) All covenants and agreements contained in this
Agreement 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
whether so expressed or not. Without limiting the generality of the foregoing,
the registration rights conferred herein on the holders of Covered Stock shall
inure to the benefit of any and all subsequent holders from time to time of the
Covered Stock for so long as the certificates representing the Covered Stock
shall be required to bear the legend specified in Section 2 hereof.
(b) All notices, requests, consents and other
communications hereunder shall be in writing and shall be mailed by
16
<PAGE> 17
first class registered mail, postage prepaid, addressed as follows:
if to the Company, to it at:
Aurora Electronics, Inc.
9477 Waples Street
Suite 150
San Diego, California 92121
Attention: President
with a copy to:
Hughes & Luce L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attention: Kenneth G. Hawari, Esq.
if to any original holder of Restricted Stock, to such holder at the
address as set forth under such holder's name in Annex I to the
Original Purchase Agreement;
if to any original holder of Schedule II Common Shares, to such holder
at the address as set forth under such holder's name in Schedule II
hereto;
if to any subsequent holder of Covered Stock, to such holder at such
address as may have been furnished to the Company in writing by such
holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Covered Stock)
or to the holders of Covered Stock (in the case of the Company).
(c) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(d) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof. This Agreement may not be modified
or amended except in a writing signed by the Company and the holders of not
less than a majority of the Covered Stock then outstanding, provided that no
modification or amendment shall deprive any holder of Covered Stock of any
material right under this Agreement without such holder's consent. The Company
will not grant any registration rights to any other person without the written
consent of the holders of a majority of the Covered Stock then outstanding if
such rights could reasonably be expected to conflict with, or be on a parity
with, the rights of holders of Covered Stock granted under this Agreement.
17
<PAGE> 18
(e) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
18
<PAGE> 19
Please indicate your acceptance of the foregoing by signing
and returning the enclosed counterpart of this letter, whereupon this letter
(herein sometimes called "this Agreement") shall be a binding agreement between
the Company and you.
Very truly yours,
AURORA ELECTRONICS, INC.
By
------------------------------
Name:
Title:
AGREED TO AND ACCEPTED
as of the date first
above written.
WELSH, CARSON, ANDERSON & STOWE VII, L.P.
By WCAS VII Partners, L.P., General Partner
By:
------------------------------
WCAS CAPITAL PARTNERS II, L.P.
By WCAS CP II Partners, General Partner
By:
------------------------------
WCAS INFORMATION PARTNERS, L.P.
By WCAS Info Partners, General Partner
By:
------------------------------
<PAGE> 20
THE HARVEY CASH TRUST
By:
------------------------------
Trustee
- ---------------------------------
Jim C. Cowart
CHEMICAL EQUITY ASSOCIATES,
A California Limited Partnership
By Chemical Venture Partners,
General Partner
By:
------------------------------
Bruce K. Anderson
Russell L. Carson
Anthony J. de Nicola
James B. Hoover
Thomas E. McInerney
Robert A. Minicucci
Andrew M. Paul
Paul B. Queally
Richard H. Stowe
Laura M. VanBuren
Patrick J. Welsh
By:
------------------------------
Laura M. VanBuren
Individually and
as Attorney-in-Fact
[Add signature blocks for Schedule II holders]
<PAGE> 21
SCHEDULE I
Welsh, Carson, Anderson & Stowe VII, L.P.
WCAS Capital Partners II, L.P.
WCAS Information Partners, L.P.
The Harvey Cash Trust
Jim C. Cowart
Chemical Equity Associates
Bruce K. Anderson
Russell L. Carson
Anthony J. de Nicola
James B. Hoover
Thomas E. McInerney
Robert A. Minicucci
Andrew M. Paul
Paul B. Queally
Richard H. Stowe
Laura M. VanBuren
Patrick J. Welsh
<PAGE> 22
SCHEDULE II
[NAME]
[ADDRESS]
<PAGE> 1
EXHIBIT 99.12
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THAT ACT
OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
AURORA ELECTRONICS, INC.
10% Senior Subordinated Bridge Note
$3,200,000 January 30, 1998
AURORA ELECTRONICS, INC., a Delaware corporation (hereinafter
called the "Company"), for value received, hereby promises to pay to WELSH,
CARSON ANDERSON & STOWE VII, L.P. ("WCAS VII") or registered assigns, the
principal sum of THREE MILLION TWO HUNDRED THOUSAND DOLLARS ($3,200,000) ON ANY
DATE ON OR AFTER JULY 1, 1998 ON DEMAND (subject to applicable restrictions set
forth in Section 14 hereof), and to pay interest (computed on the basis of a
360-day year consisting of twelve 30-day months) from the date hereof on the
unpaid principal amount hereof at the rate of 10% per annum semi-annually in
arrears on June 30 and December 31 of each year (each said day being an
"Interest Payment Date"), commencing on June 30, 1998, until the principal
amount hereof shall have become due and payable, whether on demand or by
acceleration or otherwise, and thereafter at the rate of 12% per annum on any
overdue principal amount and (to the extent permitted by applicable law) on any
overdue interest until paid.
All payments of principal and interest on this Note shall be
in such coin or currency of the United States of America as at the time of
payment shall be legal tender for payment of public and private debts.
If any payment on this Note is due on a day which is not a
Business Day, it shall be due on the next succeeding Business Day. For
purposes of this Note, "Business Day" shall mean any day other than a Saturday,
Sunday or a legal holiday or day on which banks are authorized or required to
be closed in Chicago or New York.
1. The Note. This Note is issued pursuant to and is
subject to the terms and provisions of the Securities Purchase and Exchange
Agreement dated as of January 30, 1998 (the "Purchase Agreement"), among the
Company, WCAS VII, WCAS Capital Partners II, L.P.("WCAS CP II") and the several
purchasers named on Schedule I thereto and the terms of this Note include those
stated in the Purchase Agreement. As used herein, the term "Note" or "Notes"
includes this 10% Senior Subordinated Bridge Note of the Company, any
additional 10% Senior Subordinated Bridge Note or Notes issued
<PAGE> 2
pursuant to the Purchase Agreement and any 10% Senior Subordinated Bridge Note
or Notes subsequently issued upon exchange or transfer hereof or thereof.
2. Transfer, Etc. of Notes. The Company shall keep at
its office or agency maintained as provided in paragraph (a) of Section 8 a
register in which the Company shall provide for the registration of this Note
and for the registration of transfer and exchange of this Note. The holder of
this Note may, at its option, and either in person or by its duly authorized
attorney, surrender the same for registration of transfer or exchange at the
office or agency of the Company maintained as provided in Section 8 and,
without expense to such holder (except for taxes or governmental charges
imposed in connection therewith), receive in exchange therefor a Note or Notes
each in such denomination or denominations (in integral multiples of $100,000)
as such holder may request, dated as of the date to which interest has been
paid on the Note or Notes so surrendered for transfer or exchange, for the same
aggregate principal amount as the then unpaid principal amount of the Note or
Notes so surrendered for transfer or exchange, and registered in the name of
such person or persons as may be designated by such holder. Every Note
presented or surrendered for registration of transfer or exchange shall be duly
endorsed, or shall be accompanied by a written instrument of transfer,
satisfactory in form to the Company, duly executed by the holder of such Note
or its attorney duly authorized in writing. Every Note so made and delivered
in exchange for such Note shall in all other respects be in the same form and
have the same terms as such Note. No transfer or exchange of any Note shall be
valid (x) unless made in the foregoing manner at such office or agency and (y)
unless registered under the Securities Act of 1933, as amended, or any
applicable state securities laws or unless an exemption from such registration
is available.
3. Loss, Theft, Destruction or Mutilation of Note. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Note, and, in the case of any such loss, theft or
destruction, upon receipt of an affidavit of loss and an indemnity reasonably
acceptable in form and substance to the Company from the holder thereof, or, in
the case of any such mutilation, upon surrender and cancellation of this Note,
the Company will make and deliver, in lieu of this Note, a new Note of like
tenor and unpaid principal amount and dated as of the date to which interest
has been paid on this Note.
4. Persons Deemed Owners; Holders. The Company may deem
and treat the person in whose name this Note is registered as the owner and
holder of this Note for the purpose of receiving payment of principal of and
interest on this Note and for all other purposes whatsoever, whether or not
this Note shall be overdue. With respect to any Note at any time outstanding,
the term
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"holder," as used herein, shall be deemed to mean the person in whose name such
Note is registered as aforesaid at such time.
5. Prepayments.
(a) Optional Prepayment. Subject to any applicable
restrictions contained in the Credit Agreement (as hereinafter defined), upon
notice given as provided in Section 5(b), the Company may, at its option,
prepay this Note, without premium or penalty, as a whole at any time or in part
from time to time in principal amounts which shall be integral multiples of
$100,000, together with any accrued and unpaid interest thereon through the
date of such prepayment.
(b) Notice of Prepayment. The Company shall give written
notice of any prepayment of this Note or any portion hereof pursuant to Section
5(a) not less than 20 nor more than 60 days prior to the date fixed for such
prepayment. Such notice of prepayment and all other notices to be given to the
holder of this Note shall be given by registered or certified mail to the
person in whose name this Note is registered at its address designated on the
register maintained by the Company on the date of mailing such notice of
prepayment or other notice. Upon notice of prepayment being given as
aforesaid, the Company covenants and agrees that it will prepay, on the date
therein fixed for prepayment, this Note or the portion hereof, as the case may
be, so called for prepayment, at the prepayment price determined in accordance
with Section 5(a) hereof. A prepayment of less than all of the outstanding
principal amount of this Note shall not relieve the Company of its obligation
to make scheduled payments of interest payable in respect of the principal
remaining outstanding on the Interest Payment Dates.
(c) Allocation of All Payments. In the event of any
partial payment of less than all of the interest then due on the Notes then
outstanding or any prepayment, purchase, redemption or retirement of less than
all of the outstanding Notes, the Company will allocate the amount of interest
so to be paid and the principal amount so to be prepaid, purchased, redeemed or
retired to each Note in proportion, as nearly as may be, to the aggregate
principal amount of all Notes then outstanding.
(d) Interest After Date Fixed for Prepayment. If this
Note or a portion hereof is called for prepayment as herein provided, this Note
or such portion shall cease to bear interest on and after the date fixed for
such prepayment unless, upon presentation for such purpose, the Company shall
fail to pay this Note or such portion, as the case may be, in which event this
Note or such portion, as the case may be, and, so far as may be lawful, any
overdue installment of interest, shall bear interest on and after the date
fixed for such prepayment and until paid at the rate per annum provided herein.
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(e) Surrender of Note; Notation Thereon. Upon any
prepayment of a portion of the principal amount of this Note, the holder
hereof, at its option, may require the Company to execute and deliver at the
expense of the Company (other than for transfer taxes, if any), upon surrender
of this Note, a new Note registered in the name of such person or persons as
may be designated by such holder for the principal amount of this Note then
remaining unpaid, dated as of the date to which the interest has been paid on
the principal amount of this Note then remaining unpaid, or may present this
Note to the Company for notation hereon of the payment of the portion of the
principal amount of this Note so prepaid.
6. Offer to Repurchase Upon a Change of Control.
Subject to any applicable restrictions in the Credit Agreement with respect to
paragraph (a) below:
(a) Upon the occurrence of a Change of Control (as
hereinafter defined), the holder of this Note shall have the right, at such
holder's option, to require the Company to repurchase all or any part of such
holder's Note in amounts which shall be in multiples of $100,000 (pursuant to
the offer described below) of the Notes outstanding, in any such event, at a
purchase price equal to 101% of the principal amount thereof so to be
repurchased, plus accrued and unpaid interest, if any, to the date of purchase
(a "Change of Control Payment"). Within 10 Business Days after the Company
knows, or reasonably should know, of the occurrence of any Change of Control,
the Company shall make an irrevocable, unconditional offer (except that such
offer may be conditioned upon the closing of the transaction constituting the
Change of Control) (a "Change of Control Offer") to all holders of the Notes to
purchase all of the Notes for cash in an amount equal to the Change of Control
Payment by sending written notice (the "Change of Control Notice") of such
Change of Control Offer to each holder by registered or certified mail to the
person in whose name the Note is registered at its address maintained by the
Company on the date of the mailing of such notice. The Change of Control
Notice shall contain all instructions and materials required by applicable law
and shall contain or make available to the holder other information material to
such holder's decision to tender this Note pursuant to the Change of Control
Offer. The Change of Control Notice, which shall govern the terms of the
Change of Control Offer, shall state:
(i) that the Change of Control Offer is being made
pursuant to this Section 6, and that all Notes validly tendered will
be accepted for payment;
(ii) the Change of Control Payment (including the amount
of accrued and unpaid interest) and the purchase date, which will be
no later than 30 days from the date such notice is mailed (the "Change
of Control Payment Date");
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(iii) that any Note not validly tendered will continue to
accrue interest;
(iv) that, unless the Company defaults in the payment of
the Change of Control Payment, any Note accepted for payment pursuant
to the Change of Control Offer shall cease to accrue interest after
the Change of Control Payment Date;
(v) that holders electing to have a Note, or portion
thereof, purchased pursuant to a Change of Control Offer will be
required to surrender the Note to the Company at the address specified
in the notice not later than the close of business on the Business Day
prior to the Change of Control Payment Date;
(vi) that holders will be entitled to withdraw their
election if the Company receives, not later than the close of business
on the second Business Day prior to the Change of Control Payment
Date, a telegram, facsimile transmission or letter setting forth the
name of the holder, the principal amount of the Note delivered for
purchase and a statement that such holder is withdrawing its election
to have such principal amount of Note purchased; and
(vii) that holders whose Notes are being purchased only in
part will be issued a new Note equal in principal amount to the
unpurchased portion of the Note surrendered, which unpurchased portion
must be equal to $100,000 in principal amount or an integral multiple
thereof.
On or before the Change of Control Payment Date, the Company
shall (i) accept for payment the Notes or portions thereof validly tendered
pursuant to the Change of Control Offer prior to the close of business on the
Change of Control Payment Date, (ii) promptly mail to the holders of Notes so
accepted payment in an amount equal to the Change of Control Payment (including
accrued and unpaid interest) for such Notes, and the Company shall promptly
mail or deliver to such holders a new Note equal in principal amount to any
unpurchased portion of the Note surrendered; provided, that each such new Note
will be in a principal amount of $100,000 or an integral multiple thereof. Any
Notes not so accepted shall be promptly mailed or delivered by the Company to
the holder thereof.
(b) In the event of a Change of Control, the Company will
promptly but in no event later than 30 days after the Change of Control, in
good faith, (i) obtain any required consent of the holders of any Senior
Indebtedness (as defined herein) to permit the Change of Control Offer and the
Change of Control Payment contemplated by this Section 6, or (ii) repay some or
all of such Senior Indebtedness to the extent necessary (including, if
necessary, payment in full of such Senior Indebtedness and payment
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<PAGE> 6
of any prepayment premiums, fees, expenses or penalties) to permit the Change
of Control Offer and the Change of Control Payment contemplated hereby without
such consent. Failure to comply with the foregoing shall not relieve the
Company from its obligations pursuant to paragraph (a) above.
(c) For purposes of this Note "Change of Control" means (i)
the sale, lease or transfer, whether direct or indirect, of all or
substantially all of the assets of the Company and its subsidiaries, taken as a
whole, in one transaction or a series of related transactions, to any "person"
or "group" (other than the WCAS Group), (ii) the liquidation or dissolution of
the Company or the adoption of a plan of liquidation or dissolution of the
Company, (iii) the acquisition of "beneficial ownership" by any "person" or
"group" (other than the WCAS Group) of voting stock of the Company representing
more than 50% of the voting power of all outstanding shares of such voting
stock, whether by way of merger or consolidation or otherwise, or (iv) during
any period of two consecutive years, the failure of those individuals who at
the beginning of such period constituted the Company's Board of Directors
(together with any new directors whose election or appointment by such Board or
whose nomination for election or appointment by the shareholders of the Company
was approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) to constitute a majority of
the Company's Board of Directors then in office; provided, however, that in no
event shall a foreclosure on any collateral pledged by the Company in respect
of obligations arising under or in connection with the Credit Agreement
constitute a Change of Control.
For purposes of this Section 6 and Section 7, (i) the terms
"person" and "group" shall have the meaning set forth in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether
or not applicable, (ii) the term "beneficial owner" shall have the meaning set
forth in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not
applicable, except that a person shall be deemed to have "beneficial ownership"
of all shares that any such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time or upon the
occurrence of certain events, (iii) any "person" or "group" will be deemed to
beneficially own any voting stock of the Company so long as such person or
group beneficially owns, directly or indirectly, in the aggregate a majority of
the voting stock of a registered holder of the voting stock of the Company, and
(iv) the term "WCAS Group" shall mean WCAS VII, WCAS CP II, any general
partners thereof and any other investment limited partnerships or other
investment entities under common control therewith.
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7. Special Mandatory Prepayments.
(a) Subject to any applicable restrictions contained in
the Credit Agreement, within 5 days after the consummation of:
(i) any sale, transfer, lease, sale and leaseback or
other disposition by the Company to any person of all or any part of
its property or assets, in any case in a single transaction or a
series of related transactions (other than any of the foregoing for
fair value of property that (x) is of inventory in the ordinary course
of business or (y) is of worn-out or obsolete assets); or
(ii) the issuance (other than by dividend) of any capital
stock or other ownership interest of the Company pursuant to offerings
registered under the Securities Act of 1933, as amended (the
"Securities Act");
the Company shall be required to prepay the indebtedness outstanding under the
Notes in an amount equal to 100% of the gross cash proceeds received by the
Company from such transaction less all legal expenses, customary commissions
and other fees and expenses incurred and all federal, state, local and foreign
taxes assessed in connection therewith.
(b) Subject to any applicable restrictions contained in
the Credit Agreement, if there shall exist any Excess Cash Flow (as defined in
paragraph (c) hereof) for any fiscal year, a mandatory prepayment (an "Excess
Cash Flow Prepayment") of the indebtedness outstanding under the Notes shall be
made on the date (the "Excess Cash Flow Prepayment Date") which is 105 days
after the end of such fiscal year, in an amount equal to one hundred percent
(100%) of such Excess Cash Flow.
(c) "Excess Cash Flow" means, for any fiscal period of
the Company, an amount which, on a combined basis in conformity with GAAP, is
equal to:
(i) the excess of
the sum (without duplication) of the following
amounts:
(A) net income for such fiscal period;
(B) expenses for such fiscal period for
depreciation, amortization and other similar non- cash
charges, to the extent that the same are deducted from net
revenues in determining net income for such fiscal period;
(C) the difference between (1) the amount of
taxes imposed on the Company deducted from net revenues to
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<PAGE> 8
determine net income for such fiscal period and (2) the amount
of taxes actually paid by the Company during such fiscal
period; and
(D) the difference between (1) any extraordinary
or non-recurring items of expense deducted from net revenues
to determine net income for such fiscal period and (2) the
aggregate amount of all cash payments made by the Company
during such period on account of extraordinary or non-
recurring items of expense, whether or not accrued in such
period;
over
the sum (without duplication) of the following
amounts:
(1) the aggregate amount during such fiscal
period of scheduled payments of principal on (x) the Notes,
(y) the indebtedness under the Credit Agreement and (z) any
indebtedness permitted under the Credit Agreement;
(2) the amount of actual payments by the Company
in cash during such fiscal period for capital expenditures;
and
(3) the difference between (1) any extraordinary
or non-recurring items of income added to net revenues to
determine net income and (2) the aggregate amount of all cash
receipts received by the Company during such period on account
of extraordinary or non-recurring items of income, whether or
not accrued in such period;
(ii) plus (in the case of a decrease) or minus (in the case of an
increase) the change in the amount of working capital as at the end of
such fiscal period as compared with the amount of working capital as
at the end of the immediately preceding fiscal period.
Each of the foregoing items shall be computed in accordance with GAAP
consistently applied.
8. Covenants Relating to the Notes. Unless approved by
its Board of Directors including the affirmative vote of a director designated
by WCAS VII, the Company covenants and agrees that so long as the Notes shall
be outstanding and, in the case of paragraphs (k) through (n) below, so long as
five million dollars ($5,000,000) of aggregate principal amount of the Notes is
outstanding:
(a) Maintenance of Office. The Company will maintain an
office or agency in such place in the United States of America as
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<PAGE> 9
the Company may designate in writing to the registered holder of this Note,
where this Note may be presented for registration of transfer and for exchange
as herein provided, where notices and demands to or upon the Company in respect
of this Note may be served and where this Note may be presented for payment.
Until the Company otherwise notifies the holder hereof, said office shall be
the principal office of the Company located at 9477 Waples Street, San Diego,
California 92121.
(b) Payment of Taxes. The Company will promptly pay and
discharge or cause to be paid and discharged, before the same shall become in
default, all material lawful taxes and assessments imposed upon the Company or
any of its subsidiaries or upon the income and profits of the Company or any of
its subsidiaries, or upon any property, real, personal or mixed, belonging to
the Company or any of its subsidiaries, or upon any part thereof by the United
States or any State thereof, as well as all material lawful claims for labor,
materials and supplies which, if unpaid, would become a lien or charge upon
such property or any part thereof; provided, however, that neither the Company
nor any of its subsidiaries shall be required to pay and discharge or to cause
to be paid and discharged any such tax, assessment, charge, levy or claim so
long as both (x) the Company has established adequate reserves for such tax,
assessment, charge, levy or claim and (y)(i) the Company or a subsidiary shall
be contesting the validity thereof in good faith by appropriate proceedings or
(ii) the Company shall, in its good faith judgment, deem the validity thereof
to be questionable and the party to whom such tax, assessment, charge, levy or
claim is allegedly owed shall not have made written demand for the payment
thereof.
(c) Corporate Existence. The Company will do or cause to
be done all things necessary and lawful to preserve and keep in full force and
effect (i) its corporate existence and the corporate existence of each of its
subsidiaries and (ii) the material rights and franchises of the Company and
each of its subsidiaries under the laws of the United States or any state
thereof, or, in the case of subsidiaries organized and existing outside the
United States, under the laws of the applicable jurisdiction; provided,
however, that nothing in this paragraph (c) shall prevent the abandonment or
termination of any rights or franchises of the Company, or the liquidation or
dissolution of, or a sale, transfer or disposition (whether through merger,
consolidation, sale or otherwise) of all or any substantial part of the
property and assets of, any subsidiary or the abandonment or termination of the
corporate existence, rights and franchises of any subsidiary if such
abandonment, termination, liquidation, dissolution, sale, transfer or
disposition is, in the good faith business judgment of the Company, in the best
interests of the Company and not disadvantageous to the holder of this Note.
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(d) Maintenance of Property. The Company will at all
times maintain and keep, or cause to be maintained and kept, in good repair,
working order and condition (reasonable wear and tear excepted) all significant
properties of the Company and its subsidiaries used in the conduct of the
Business, and will from time to time make or cause to be made all needful and
proper repairs, renewals, replacements, betterments and improvements thereto,
so that the Business may be conducted at all times in the ordinary course
consistent with past practice.
(e) Insurance. The Company will, and will cause each of
its subsidiaries to, (i) keep adequately insured, by financially sound and
reputable insurers, all property of a character usually insured by corporations
engaged in the same or a similar business similarly situated against loss or
damage of the kinds customarily insured against by such corporations and (ii)
carry, with financially sound and reputable insurers, such other insurance
(including without limitation liability insurance) in such amounts as are
available at reasonable expense and to the extent believed advisable in the
good faith business judgment of the Company.
(f) Keeping of Books. The Company will at all times
keep, and cause each of its subsidiaries to keep, proper books of record and
account in which proper entries will be made of its transactions in accordance
with generally accepted accounting principles consistently applied.
(g) Transactions with Affiliates. The Company shall not
enter into, or permit any of its subsidiaries to enter into, any transaction
with any of its or any subsidiary's officers, directors, employees or any
person related by blood or marriage to any such person or any entity in which
any such person owns any beneficial interest, except for (i) normal employment
arrangements, benefit programs and employee incentive option programs on
reasonable terms, (ii) any transaction approved by the Board of Directors of
the Company in accordance with the provisions of Section 144 of the Delaware
General Corporation Law, or otherwise permitted by such Section, (iii) customer
transactions in the ordinary course of business and on arm's length terms and
(iv) the transactions contemplated by the Purchase Agreement.
(h) Notice of Certain Events. The Company shall,
immediately after it becomes aware of the occurrence of (i) any Event of
Default (as hereinafter defined) or any event which, upon notice or lapse of
time or both, would constitute such an Event of Default, or (ii) any action,
suit or proceeding at law or in equity or by or before any governmental
instrumentality or agency which, if adversely determined, would materially
impair the right of the Company to carry on its business substantially as now
or then conducted, or would have a material adverse effect on the properties,
assets, financial condition, prospects, operating results or business of the
Company and its subsidiaries taken as a whole, give
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notice to the holder of this Note, specifying the nature of such event.
(i) Payment of Principal and Interest on the Note. The
Company will use its best efforts, subject to the provisions of applicable
credit arrangements (including the Credit Agreement), contractual obligations
of the Company and/or its subsidiaries and any applicable law restricting the
same, to provide funds from its subsidiaries to the Company, by dividend,
advance or otherwise, sufficient to permit payment by the Company of the
principal of and interest on this Note in accordance with its terms. Subject
to any applicable provisions in the Credit Agreement and documents executed and
delivered in connection therewith, the Company will not, and will not permit
any subsidiary to, directly or indirectly create or otherwise cause to exist
any encumbrance or restriction on the ability of any subsidiary to pay
dividends or make any other distributions to the Company or any wholly-owned
subsidiary of the Company in respect of its capital stock.
(j) Consolidation, Merger and Sale. The Company will not
consolidate or merge with or into, or sell or otherwise dispose of all or
substantially all of its property in one or more related transactions to, any
other corporation or other entity, unless:
(i) the Company is the surviving corporation or the
entity formed by or surviving any such consolidation or merger (if
other than the Company) or to which such sale or other disposition
shall have been made is a corporation organized or existing under the
laws of the United States of any state thereof or the District of
Columbia;
(ii) the surviving corporation or other entity (if other
than the Company) shall expressly and effectively assume in writing
the due and punctual payment of the principal of and interest on this
Note, according to its tenor, and the due and punctual performance and
observance of all the terms, covenants, agreements and conditions of
this Note to be performed or observed by the Company to the same
extent as if such surviving corporation had been the original maker of
this Note;
(iii) the Company or such other corporation or other entity
shall not otherwise be in default in the performance or observance of
any covenant, agreement or condition of this Note or the Purchase
Agreement; and
(iv) the holder of this Note shall have received, in
connection therewith, an opinion of counsel for the Company (or other
counsel satisfactory to the holder), in form and substance
satisfactory to the holder, to the effect that any such consolidation,
merger, sale or conveyance and any such assumption complies with the
provisions of this paragraph (j).
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Notwithstanding anything to the contrary herein, in no event shall a
foreclosure on any collateral pledged by the Company in respect of obligations
arising under or in connection with the Credit Agreement be deemed to
constitute a violation of the Company's obligations pursuant to this paragraph
(j).
(k) Limitation on Indebtedness and Disqualified Stock.
The Company will not, and will not permit any of its subsidiaries to, (i) incur
or permit to remain outstanding any indebtedness for money borrowed
("Indebtedness"), except (A) Senior Indebtedness (as defined in Section 14),
(B) Indebtedness existing on the date of original issuance of this Note, (C)
Indebtedness permitted to be incurred under the Credit Agreement as in effect
from time to time after the original issuance of this Note (other than
Indebtedness that is subordinate or junior in right of payment (to any extent)
to any Senior Indebtedness and senior or pari passu in right of payment (to any
extent) to the Notes), or (D) in the event that the Credit Agreement has
terminated, Indebtedness permitted to be incurred under any successor credit
agreement of the Company with respect to Senior Indebtedness, or if there
exists no such credit agreement, such Indebtedness as may be mutually agreed
upon by the Company and the holders of a majority of the aggregate principal
amount of the Notes then outstanding, or (ii) issue any capital stock
("Disqualified Stock") of the Company or any of its subsidiaries (other than
the Convertible Preferred Stock (as hereinafter defined)) which by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event, matures, or is
mandatorily redeemable, whether pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in whole or in
part, on or prior to December 31, 2005.
(l) Restricted Payments. The Company will not, and will
not permit any of its subsidiaries to: (i) declare or pay any dividends on, or
make any other distribution or payment on account of, or redeem, retire,
purchase or otherwise acquire, directly or indirectly, any shares of any class
of stock of the Company, whether now or hereafter outstanding, or make any
other distribution in respect thereof, either directly or indirectly, whether
in cash, property or in obligations of the Company or any of its subsidiaries,
except for (X) distributions of shares of the same class or of a different
class of stock pro rata to all holders of shares of a class of stock, (Y) the
payment of cash dividends on account of the Company's 7% Senior Cumulative
Convertible Preferred Stock, $.01 par value (the "Convertible Preferred
Stock"), or (Z) dividends, distributions or payments by any subsidiary to the
Company or to any wholly-owned subsidiary of the Company, or (ii), except as
permitted under the Credit Agreement, make any payments of principal of, or
retire, redeem, purchase or otherwise acquire any Indebtedness other than any
Senior Indebtedness or the Notes (such declarations, payments, purchases,
redemptions, retirements,
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acquisitions or distributions being herein called "Restricted Payments").
(m) Limitation on Liens. The Company shall not, and
shall not permit any of its subsidiaries to, directly or indirectly, create,
incur, assume or otherwise cause or suffer to exist any lien, pledge , charge,
security interest or encumbrance (collectively, "Liens") on any asset now owned
or hereafter acquired, or on any income or profits therefrom or assign or
convey any right to receive income therefrom, except for (i) Liens permitted
under the Credit Agreement, (ii) liens for current taxes not yet due, (iii)
landlord's liens, (iv) purchase money liens and (v) workman's, materialman's,
warehouseman's and similar liens arising by law or statute.
(n) Inspection of Property. The Company will permit the
holder hereof to visit and inspect any of the properties of the Company and any
other subsidiaries and their books and records and to discuss the affairs,
finances and accounts of any of such corporations with the principal officers
of the Company and such subsidiaries and their independent public accountants,
all at such reasonable times and as often as such holders may reasonably
request.
9. Modification by Holders; Waiver. The Company may,
with the written consent of the holders of not less than a majority in
principal amount of the Notes then outstanding, modify the terms and provisions
of this Note or the rights of the holders of this Note or the obligations of
the Company hereunder, and the observance by the Company of any term or
provision of this Note may be waived with the written consent of the holders of
not less than a majority in principal amount of the Notes then outstanding.
Any such modification or waiver shall apply equally to each
holder of the Notes and shall be binding upon them, upon each future holder of
any Note and upon the Company, whether or not such Note shall have been marked
to indicate such modification or waiver, but any Note issued thereafter shall
bear a notation referring to any such modification or waiver. Promptly after
obtaining the written consent of the holders as herein provided, the Company
shall transmit a copy of such modification or waiver to the holders of the
Notes at the time outstanding.
10. Events of Default. If any one or more of the
following events, herein called "Events of Default," shall occur (for any
reason whatsoever, and whether such occurrence shall, on the part of the
Company or any of its subsidiaries, be voluntary or involuntary or come about
or be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of a court of competent jurisdiction or any order,
rule or regulation of any administrative or other governmental authority) and
such Event of Default shall be continuing:
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(i) default shall be made in the payment of the principal
of this Note when and as the same shall become due and payable,
whether on demand (to the extent demand is permitted to be made under
Section 14 hereof) or at a date fixed for prepayment or repurchase
(including default of any optional prepayment in accordance with the
requirements of Section 5, any Change of Control Payment in accordance
with the requirements of Section 6 or any special mandatory prepayment
in accordance with the requirements of Section 7, as the case may be)
or by acceleration or otherwise; or
(ii) default shall be made in the payment of any
installment of interest on this Note according to its terms when and
as the same shall become due and payable; or
(iii) default shall be made in the due observance or
performance of any covenant, condition or agreement on the part of the
Company contained herein in Section 8(j); or
(iv) default shall be made in the due observance or
performance of any other covenant, condition or agreement on the part
of the Company to be observed or performed pursuant to the terms
hereof or of the Purchase Agreement, and such default shall continue
for 10 days after written notice thereof, specifying such default and
requesting that the same be remedied; or
(v) any representation or warranty made by or on behalf
of the Company herein or in the Purchase Agreement shall prove to have
been false or incorrect in any material respect on the date on or as
of which made; or
(vi) the entry of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Company or any
of its subsidiaries in any involuntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar
laws, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Company or any of
its subsidiaries for any substantial part of any of their property or
ordering the winding-up or liquidation of any of their affairs and the
continuance of any such decree or order unstayed and in effect for a
period of 30 consecutive days; or
(vii) the commencement by the Company or any of its
subsidiaries of a voluntary case under the federal bankruptcy laws, as
now constituted or hereafter amended, or any other applicable federal
or state bankruptcy, insolvency or other similar laws, or the consent
by any of them to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or
other similar official)
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<PAGE> 15
of the Company or any of its subsidiaries for any substantial part of
any of their property, or the making by any of them of any general
assignment for the benefit of creditors, or the failure of the Company
or of any of its subsidiaries generally to pay its debts as such debts
become due, or the taking of corporate action by the Company or any of
its subsidiaries in furtherance of or which might reasonably be
expected to result in any of the foregoing; or
(viii) a default or an event of default as defined in any
instrument evidencing or under which the Company or any of its
subsidiaries has outstanding at the time any Indebtedness in excess of
$500,000 in aggregate principal amount shall occur and as a result
thereof the maturity of any such Indebtedness shall have been
accelerated so that the same shall have become due and payable prior
to the date on which the same would otherwise have become due and
payable and such acceleration shall not have been rescinded or
annulled within 20 days; or
(ix) final judgment (not reimbursed by insurance policies
of the Company or any of its subsidiaries) for the payment of money in
excess of $500,000 shall be rendered against the Company or any of its
subsidiaries and the same shall remain undischarged for a period of 30
days during which execution shall not be effectively stayed;
then the holders of at least 33-1/3% in aggregate principal amount of the Notes
at the time outstanding may, at their option, by a notice in writing to the
Company declare this Note to be, and this Note shall thereupon be and become
immediately due and payable together with interest accrued thereon, without
diligence, presentment, demand, protest or further notice of any kind, all of
which are expressly waived by the Company to the extent permitted by law.
At any time after any declaration of acceleration has been
made as provided in this Section 10, the holders of a majority in principal
amount of the Notes then outstanding may, by notice to the Company, rescind
such declaration and its consequences, provided, however, that no such
rescission shall extend to or affect any subsequent default or Event of Default
or impair any right consequent thereon.
Without limiting the foregoing, the Company hereby waives any
right to trial by jury in any legal proceeding related in any way to this Note
and agrees that any such proceeding may, if the holder so elects, be brought
and enforced in the Supreme Court of the State of New York for New York County
or the United States District Court for the Southern District of New York and
the Company hereby waives any objection to jurisdiction or venue in any such
proceeding commenced in such court. The Company further agrees that any
process required to be served on it for purposes of
15
<PAGE> 16
any such proceeding may be served on it, with the same effect as personal
service on it within the State of New York, by registered mail addressed to it
at its office or agency set forth in paragraph (a) of Section 8 for purposes of
notices hereunder.
11. Suits for Enforcement. Subject to the provisions of
Section 14 of this Note, in case any one or more of the Events of Default
specified in Section 10 of this Note shall happen and be continuing (subject to
any applicable cure period expressly set forth herein), the holder of this Note
may proceed to protect and enforce its rights by suit in equity, action at law
and/or by other appropriate proceeding, whether for the specific performance of
any covenant or agreement contained in this Note or in aid of the exercise of
any power granted in this Note, or may proceed to enforce the payment of this
Note or to enforce any other legal or equitable right of the holder of this
Note.
In case of any default under this Note, the Company will pay
to the holder hereof reasonable collection costs and reasonable attorneys'
fees, to the extent actually incurred.
12. Remedies Cumulative. No remedy herein conferred upon
the holder of this 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 given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.
13. Remedies Not Waived. No course of dealing between
the Company and the holder of this Note or any delay on the part of the holder
hereof in exercising any rights hereunder shall operate as a waiver of any
right of the holder of this Note.
14. Subordination. (a) Anything contained in this Note
to the contrary notwithstanding, the indebtedness evidenced by the Notes shall
be subordinate and junior, to the extent set forth in the following paragraphs
(A), (B), (C) and (D), to all Senior Indebtedness of the Company. "Senior
Indebtedness" shall mean the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on, and
all reasonable fees, reimbursement and indemnity obligations, and all other
obligations arising in connection with, any indebtedness for borrowed money of
the Company, contingent or otherwise, now outstanding or created, incurred,
issued, assumed or guaranteed in the future, for which, in the case of any
particular indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
indebtedness shall not be subordinate in right of payment to any other
indebtedness of the Company. Without limiting the generality of the foregoing,
Senior Indebtedness shall include all
16
<PAGE> 17
Obligations (under and as defined in the Credit Agreement); notwithstanding the
foregoing, Senior Indebtedness shall include only such Obligations until such
time as the same are paid in full in cash and all obligations to provide
financial accommodations under the Credit Agreement have terminated. For
purposes of this Note, "Credit Agreement" shall mean, collectively, (i) the
Credit Agreement, dated as of March 29, 1996, as amended or otherwise modified,
among the Company and other Guarantors named therein, the Lenders named therein
and The Chase Manhattan Bank N.A., as Agent (the "Agent"), and (ii) the senior
credit facility contemplated by Section 4.01(c) of the Purchase Agreement,
together with any agreement entered into in connection with the restatement,
renewal, extension, restructuring, refunding or refinancing of the obligations
under such credit agreements.
(A) In the event of any insolvency, bankruptcy,
liquidation, reorganization or other similar proceedings, or any
receivership proceedings in connection therewith, relative to the
Company or its creditors or its property, 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 Indebtedness shall first be paid in full
in cash and all obligations to provide financial accommodations under
the Credit Agreement have terminated, before any payment, whether on
account of principal, interest or otherwise, is made upon the Notes.
(B) In any of the proceedings referred to in paragraph
(A) above, any payment or distribution of any kind or character,
whether in cash, property, stock or obligations which may be payable
or deliverable in respect of the Notes shall be paid or delivered
directly to the holders of Senior Indebtedness for application in
payment thereof, unless and until all Senior Indebtedness shall have
been paid in full in cash and all obligations to provide financial
accommodations under the Credit Agreement have terminated.
(C) No payment shall be made, directly or indirectly, on
account of the Notes (i) upon maturity of any Senior Indebtedness
obligation, by lapse of time, acceleration (unless waived), or
otherwise, unless and until all principal thereof and interest thereon
and all other obligations in respect thereof shall first be paid in
full in cash and all obligations to provide financial accommodations
under the Credit Agreement have terminated, or (ii) upon the happening
of any default in payment of any principal of, premium, if any, or
interest on or any other amounts payable in respect of Senior
Indebtedness when the same becomes due and payable whether at maturity
or at a date fixed for prepayment or by declaration or otherwise (a
"Senior Payment Default"), unless and until
17
<PAGE> 18
such Senior Payment Default shall have been cured or waived or shall
have ceased to exist.
(D) Upon the happening of an event of default with
respect to any Senior Indebtedness permitting (after notice or lapse
of time or both) one or more holders of such Senior Indebtedness (or,
in the case of the Credit Agreement, the Agent) to declare such Senior
Indebtedness due and payable prior to the date on which it is
otherwise due and payable (a "Nonmonetary Default"), upon the
occurrence of (i) receipt by the holders of the Notes of written
notice from the holders of said Senior Indebtedness (or, in the case
of the Credit Agreement, the Agent) of a Nonmonetary Default (any such
notice, a "Blockage Notice"), or (ii) if such Nonmone- tary Default
results from the acceleration of the Notes, the date of such
acceleration; then (x) the Company will not make, directly or
indirectly, to the holder of the Notes any payment of any kind of or
on account of all or any part of the Notes; (y) the holders of the
Notes will not accept from the Company any payment of any kind of or
on account of all or any part of the Notes and (z) the holders of the
Notes may not take, demand, receive, sue for, accelerate or commence
any remedial proceedings with respect to any amount payable under the
Notes, unless and until in each case described in clauses (x), (y) and
(z) all such Senior Indebtedness shall have been paid in full in cash
and all obligations to provide financial accommodations under the
Credit Agreement have terminated; provided, however, that if such
Nonmonetary Default shall have occurred and be continuing for a period
(a "Blockage Period") commencing on the earlier of the date of receipt
of such Blockage Notice or the date of the acceleration of the Notes
and ending 179 days thereafter (it being understood that not more than
one Blockage Period may be commenced with respect to the Notes during
any period of 360 consecutive days), and during such Blockage Period
(i) such Nonmonetary Default shall not have been cured or waived, (ii)
the holder of such Senior Indebtedness (or, in the case of the Credit
Agreement, the Agent) shall not have made a demand for payment and
commenced an action, suit or other proceeding against the Company and
(iii) none of the events described in subsection (A) above shall have
occurred, then (to the extent not otherwise prohibited by subsections
(A), (B) or (C) above) the Company may, not less than 10 days after
receipt by the holders of such Senior Indebtedness or the Agent, as
the case may be, of written notice to such effect from the holders of
the Notes, make and the holders of the Notes may accept from the
Company all past due and current payments of any kind of or on account
of the Notes, and such holder may demand, receive, retain, sue for or
otherwise seek enforcement or collection of all amounts payable on
account of principal of or interest on the Notes.
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<PAGE> 19
(b) Subject to the payment in full in cash of all Senior
Indebtedness as aforesaid and the termination of all obligations to provide
financial accommodations under the Credit Agreement, the holders of the Notes
shall be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions of any kind or character, whether in cash,
property, stock or obligations, which may be payable or deliverable to the
holders of Senior Indebtedness, until the principal of, and interest on, the
Notes shall be paid in full in cash, and, as between the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the Notes, no
such payment or distribution made to the holders of Senior Indebtedness by
virtue of this Section 14 which otherwise would have been made to the holder of
the Notes shall be deemed a payment by the Company on account of the Senior
Indebtedness, it being understood that the provisions of this Section 14 are
and are intended solely for the purposes of defining the relative rights of the
holders of the Notes, on the one hand, and the holder of the Senior
Indebtedness, on the other hand. Subject to the rights, if any, under this
Section 14 of holders of Senior Indebtedness to receive cash, property, stock
or obligations otherwise payable or deliverable to the holders of the Notes,
nothing herein shall either impair, as between the Company and the holder of
the Notes, the obligation of the Company, which is unconditional and absolute,
to pay to the holder thereof the principal thereof and interest thereon in
accordance with its terms or prevent (except as otherwise specified therein)
the holders of the Notes from exercising all remedies otherwise permitted by
applicable law or hereunder upon default hereunder.
(c) If any payment or distribution of any character or
any security, whether in cash, securities or other property, shall be received
by any holders of the Notes in contravention of any of the terms hereof or
before all the Senior Indebtedness obligations have been paid in full in cash
and all obligations to provide financial accommodations under the Credit
Agreement have terminated, such payment or distribution or security shall be
received in trust for the benefit of, and shall be paid over or delivered and
transferred to, the holders of the Senior Indebtedness at the time outstanding
in accordance with the priorities then existing among such holders for
application to the payment of all Senior Indebtedness remaining unpaid, to the
extent necessary to pay all such Senior Indebtedness in full in cash. In the
event of the failure of any such holder to endorse or assign any such payment,
distribution or security, each holder of any Senior Indebtedness is hereby
irrevocably authorized to endorse or assign the name.
(d) The rights under these subordination provisions of
the holders of any Senior Indebtedness as against any holders of the Notes
shall remain in full force and effect without regard to, and shall not be
impaired or affected by:
19
<PAGE> 20
(i) any act or failure to act on the part of the Company;
or
(ii) any extension or indulgence in respect of any payment
or prepayment of any Senior Indebtedness or any part thereof or in
respect of any other amount payable to any holder of any Senior
Indebtedness; or
(iii) any amendment, modification or waiver of, or addition
or supplement to, or deletion from, or compromise, release, consent or
other action in respect of, any of the terms of any Senior
Indebtedness or any other agreement which may be made relating to any
Senior Indebtedness; or
(iv) any exercise or non-exercise by the holder of any
Senior Indebtedness of any right, power, privilege or remedy under or
in respect of such Senior Indebtedness or these subordination
provisions or any waiver of any such right, power, privilege or remedy
or of any default in respect of such Senior Indebtedness or these
subordination provisions or any receipt by the holder of any Senior
Indebtedness of any security, or any failure by such holder to perfect
a security interest in, or any release by such holder of, any security
for the payment of such Senior Indebtedness; or
(v) any merger or consolidation of the Company or any of
its subsidiaries into or with any other person, or any sale, lease or
transfer of any or all of the assets of the Company or any of its
subsidiaries to any other person; or
(vi) absence of any notice to, or knowledge by, any holder
of any claim hereunder of the existence or occurrence of any of the
matters or events set forth in the foregoing clauses (i) through (v);
or
(vii) any other circumstance.
(e) The holders of the Notes unconditionally waive (i)
notice of any of the matters referred to in Section 14(d); (ii) all notices
which may be required, whether by statute, rule of law or otherwise, to
preserve intact any rights of any holder of any Senior Indebtedness, including,
without limitation, any demand, presentment and protest, proof of notice of
nonpayment under any Senior Indebtedness or the Credit Agreement, and notice of
any failure on the part of the Company to perform and comply with any covenant,
agreement, term or condition of any Senior Indebtedness, (iii) any right to the
enforcement, assertion or exercise by any holder of any Senior Indebtedness of
any right, power, privilege or remedy conferred in such Senior Indebtedness or
otherwise, (iv) any requirements of diligence on the part of any holder of any
of the Senior Indebtedness, (v) any requirement on the part of any holder of
any Senior Indebtedness to mitigate damages resulting from any
20
<PAGE> 21
default under such Senior Indebtedness and (vi) any notice of any sale,
transfer or other disposition of any Senior Indebtedness by any holder thereof.
(f) The obligations of the holder under these
subordination provisions shall continue to be effective, or be reinstated, as
the case may be, if at any time any payment in respect of any Senior
Indebtedness, or any other payment to any holder of any Senior Indebtedness in
its capacity as such, is rescinded or must otherwise be restored or returned by
the holder of such Senior Indebtedness upon the occurrence of any proceeding
referred to in paragraph 14(a)(A) or upon or as a result of the appoint of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Company or any substantial part of its property or otherwise, all as though
such payment had not been made.
(g) Notwithstanding anything to the contrary herein, the
Company shall not at any time offer (and the holder hereof shall not at any
time accept) (i) any pledge of collateral or (ii) any guaranty by any parent or
subsidiary of the Company, in each case with respect to the obligations of the
Company under this Note.
15. Covenants Bind Successors and Assigns. All the
covenants, stipulations, promises and agreements in this Note contained by or
on behalf of the Company shall bind its successors and assigns, whether so
expressed or not.
16. Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of New York.
17. Headings. The headings of the sections and
paragraphs of this Note are inserted for convenience only and do not constitute
a part of this Note.
18. Third Party Beneficiaries. The provisions of Section
14 are intended to be for the benefit of, and shall be enforceable directly by
each holder of, the Senior Indebtedness.
21
<PAGE> 22
IN WITNESS WHEREOF, Aurora Electronics, Inc. has caused this Note to
be signed in its corporate name by one of its officers thereunto duly
authorized and to be dated as of the day and year first above written.
AURORA ELECTRONICS, INC.
By: /s/ JIM C. COWART
----------------------
Name: Jim C. Cowart
Title: Chairman
<PAGE> 1
EXHIBIT 99.13
CERPLEX NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT, dated as of January 30, 1998, between
THE CERPLEX GROUP, INC., a Delaware corporation (the "Company"), and AURORA
ELECTRONICS, INC., a Delaware corporation (the "Purchaser").
WHEREAS, pursuant to an Agreement and Plan of Merger of even
date herewith (the "Merger Agreement"), among the Company, the Purchaser and
Holly Acquisition Corp., a newly organized wholly-owned Delaware subsidiary of
the Purchaser ("Sub"), the Purchaser desires to acquire the Company through the
merger of Sub with and into the Company; and
WHEREAS, in connection with the transactions contemplated by
the Merger Agreement, the Purchaser and certain stockholders of the Purchaser
have entered into a Securities Purchase and Exchange Agreement, dated the date
hereof (the "Securities Purchase and Exchange Agreement"), pursuant to which
the Purchaser has agreed, among other things, to sell to such stockholders, and
such stockholders have agreed to purchase from the Purchaser, up to $15,000,000
aggregate principal amount of Senior Subordinated Notes of the Purchaser (the
"Purchaser Notes"), on the terms and subject to the conditions set forth in the
Securities Purchase and Exchange Agreement; and
WHEREAS the Company desires to issue and sell to the
Purchaser, and the Purchaser desires to purchase from the Company, a 10%
Subordinated Note due June 30, 1998 of the Company, in the aggregate principal
amount of $2,000,000, on the terms and subject to the conditions hereinafter
set forth; and
WHEREAS, pursuant to the Securities Purchase and Exchange
Agreement, it is understood and agreed that a portion of the proceeds of the
sale of the Purchaser Notes shall be used by the Purchaser to purchase the Note
(as hereinafter defined) from the Company; and
WHEREAS, as an inducement to the Purchaser to enter into this
Agreement and to purchase the Note on the Closing Date (as hereinafter
defined), the Purchaser has granted to the Company an option to repurchase the
Note, on the terms and subject to the conditions set forth in a Stockholders
Agreement, dated the date hereof (the "Stockholders Agreement"), among the
Purchaser, the Company and Welsh, Carson, Anderson & Stowe VII, L.P.;
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I.
PURCHASE AND SALE OF THE NOTE
SECTION 1.001 Purchase and Sale of the Note. Subject to the
terms and conditions set forth herein, on the Closing Date:
(i) the Company shall execute, sell and deliver to the
Purchaser, and the Purchaser shall purchase from the Company, a 10%
Subordinated Note of the Company, substantially in the form attached
hereto as Exhibit A, dated the Closing Date, issued in the name of the
Purchaser and in the original principal amount of $2,000,000 (said
note, together with any notes issued in exchange or substitution
therefor, being hereinafter collectively called the "Note"); and
(ii) as payment in full for the Note being purchased by it
hereunder as aforesaid, the Purchaser shall pay to the Company the sum
of $2,000,000 by wire transfer of immediately available funds to an
account designated by the Company.
SECTION 1.002 Closing Date. The closing of the purchase and
sale of the Note shall take place at the offices of Reboul, MacMurray, Hewitt,
Maynard & Kristol, 45 Rockefeller Plaza, New York, New York 10111, on January
30, 1998, or on such other date and at such time as may be mutually agreed upon
between the Purchaser and the Company (such date and time of the closing being
herein called the "Closing Date").
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
SECTION 2.001 Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchaser as follows:
(a) Organization and Corporate Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. The Company has the corporate power and
authority (i) to own and hold its properties and carry on its business as
currently conducted and (ii) to execute, deliver and perform this Agreement and
the Note.
(b) Authorization of Agreements, Etc. The execution and
delivery by the Company of this Agreement and the Note and
2
<PAGE> 3
the performance by the Company of its respective obligations hereunder and
thereunder have been duly authorized by all requisite corporate action and will
not violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or By-laws of the Company, or any
provision of any indenture, agreement or other instrument to which the Company
or any of its properties or assets is bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument, or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
(c) Validity. This Agreement has been duly executed and
delivered by the Company and constitutes, and the Note when executed and
delivered by the Company against payment therefor as provided in this Agreement
will constitute, legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
subject, as to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws from time to time in effect
affecting the enforcement of creditors' rights generally and to general
principles of equity.
(d) Governmental Approvals. Subject to the accuracy of
the representations and warranties of the Purchaser set forth in Section 2.02,
no registration or filing with, or consent or approval of, or other action by,
any Federal, state or other governmental agency or instrumentality is or will
be necessary for the valid execution, delivery and performance of this
Agreement and the Note.
SECTION 2.002 Representations and Warranties of the
Purchaser. The Purchaser hereby represents and warrants to the Company as
follows:
(i) the Purchaser is acquiring the Note, for its own account,
for investment, and not with a view toward the resale or distribution
thereof;
(ii) the Purchaser understands that it must bear the economic
risk of its investment for an indefinite period of time because the
Note is not registered under the Securities Act of 1933, as amended
(the "Securities Act") or any applicable state securities laws, and
may not be resold unless subsequently registered under the Securities
Act and such other laws or unless an exemption from such registration
is available;
(iii) the Purchaser is able to fend for itself in the
transactions contemplated by this Agreement and has the
3
<PAGE> 4
ability to bear the economic risks of its investment in the Note for
an indefinite period of time; and
(iv) the Purchaser has such knowledge and experience in
financial and business matters that it is capable of evaluating the
merits and risks of its investment in the Note, that it is an
"accredited investor" as such term is defined in Rule 501 of
Regulation D of the Securities and Exchange Commission under the
Securities Act and that it has not been formed solely for the purpose
of acquiring the Note being purchased by it hereunder.
ARTICLE III.
CONDITIONS PRECEDENT
SECTION 3.001. Conditions Precedent to the Obligations of the
Purchaser. The obligation of the Purchaser to purchase the Note hereunder is,
at its option, subject to the satisfaction, on or before the Closing Date, of
each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects on and as
of the Closing Date as though made at and as of that date, and, if the
Closing Date is other than the date of this Agreement, the Company
shall have delivered to the Purchaser a certificate to that effect.
(b) All Proceedings To Be Satisfactory. All proceedings
to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Purchaser and its
counsel, and the Purchaser and its counsel shall have received all
such counterpart originals or certified or other copies of such
documents as it or they may reasonably request.
(c) Stockholders Agreement. The Company shall have
executed and delivered the Stockholders Agreement.
SECTION 3.002. Conditions Precedent to the Obligations of the
Company. The obligations of the Company hereunder are, at its option, subject
to the satisfaction, on or before the Closing Date, of the following
conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Purchaser contained in this
Agreement shall be true and correct in all material respects on and as
of the Closing Date as though made at and
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<PAGE> 5
as of that date, and, if the Closing Date is other than the date of
this Agreement, the Purchaser shall have delivered to the Company a
certificate to that effect.
(b) All Proceedings To Be Satisfactory. All proceedings to
be taken by the Purchaser in connection with the transactions
contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Company and its
counsel, and the Company and its counsel shall have received all such
counterpart originals or certified or other copies of such documents
as they may reasonably request.
ARTICLE IV.
MISCELLANEOUS
SECTION 4.001. Expenses, Etc. Each party hereto will pay its
own expenses in connection with the transactions contemplated hereby, including
the fees and expenses of legal counsel.
SECTION 4.002 Survival of Agreements. All covenants,
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement and the execution, sale and delivery
of the Note.
SECTION 4.003. Execution in Counterparts. For the convenience
of the parties, this Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
SECTION 4.004. Notices. Any notice or other communications
required or permitted hereunder shall be deemed to be sufficient if contained
in a written instrument delivered in person or duly sent by national overnight
courier service, by first class certified mail, postage prepaid, or by
facsimile addressed to such party at the address or facsimile number set forth
below:
If to the Company, to:
The Cerplex Group, Inc.
1382 Bell Avenue
Tustin, California 92780
Facsimile: (714) 258-0730
Attention: Mr. William A. Klein
5
<PAGE> 6
with a copy to:
Brobeck, Phleger & Harrison, LLP
4675 MacArthur Court
Suite 1000
Newport Beach, California 92660-1846
Facsimile: (714) 752-7522
Attention: Frederic A. Randall, Jr., Esq.
If to the Purchaser, to:
Aurora Electronics, Inc.
9477 Waples Street
San Diego, California 92121
Facsimile: (619) 552-1213
Attention: Mr. Wayne Withers
with copies to:
Welsh, Carson, Anderson & Stowe
320 Park Avenue
Suite 2500
New York, New York 10022
Facsimile: (212) 893-9575
Attention: Mr. Thomas E. McInerney
and:
Reboul, MacMurray, Hewitt
Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Facsimile: (212) 841-5725
Attention: William J. Hewitt, Esq.
or to such other address or facsimile number as each party hereto shall have
designated by notice in writing to the other party hereto.
SECTION 4.005. Entire Agreement. This Agreement and the Note
constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral and written, between the parties hereto with respect to the subject matter
hereof. No representation, warranty, promise, inducement or statement of
intention has been made by either party which is not embodied in this Agreement
or the Note, and neither party shall be bound by, or be liable for, any alleged
representation, warranty, promise, inducement or statement of intention not
embodied herein.
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<PAGE> 7
SECTION 4.006. Applicable Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 4.007. Binding Effect; Benefits. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
SECTION 4.008. Assignability. Neither this Agreement nor any
of the parties' rights or obligations hereunder shall be assignable by either
party hereto without the prior written consent of the other party hereto.
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<PAGE> 8
IN WITNESS WHEREOF, the Company and the Purchaser have
executed this Agreement as of the day and year first above written.
THE CERPLEX GROUP, INC.
By: /s/ WILLIAM A. KLEIN
-------------------------------
Name: William A. Klein
Title: Chairman
AURORA ELECTRONICS, INC.
By: /s/ JIM C. COWART
-------------------------------
Name: Jim C. Cowart
Title: Chairman
<PAGE> 1
EXHIBIT 99.14
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS EITHER REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
THE CERPLEX GROUP, INC.
10% Subordinated Note
Due June 30, 1998
Registered Tustin, California
R-001 January 30, 1998
$2,000,000
THE CERPLEX GROUP, INC., a Delaware corporation (hereinafter
called the "Company"), for value received, hereby promises to pay to AURORA
ELECTRONICS, INC., a Delaware corporation, or its registered assigns, the
principal sum of TWO MILLION DOLLARS ($2,000,000) on June 30, 1998 (the
"Maturity Date"), and to pay interest (computed on the basis of a 360-day year
consisting of twelve 30-day months) from the date hereof on the unpaid stated
principal sum hereof at the rate of 10% per annum, payable on the Maturity
Date, and thereafter at the rate of 12% per annum on any overdue principal
amount and (to the extent permitted by applicable law) on any overdue interest
until paid.
All payments of principal and interest on this Note shall be
in such coin or currency of the United States of America as at the time of
payment shall be legal tender for payment of public and private debts, and
shall be made at the offices of the person deemed the holder hereof in
accordance with Section 4 below.
For purposes of this Note, "Business Day" shall mean any day
other than a Saturday, Sunday or a legal holiday under the laws of the State of
New York.
1. NOTES. This Note is issued pursuant to a Note
Purchase Agreement, dated as of January 30, 1998 (the "Note Purchase
Agreement"), between the Company and Aurora Electronics, Inc. As used herein,
the term "Note" or "Notes" includes the 10% Subordinated Note of the Company
originally so issued and any 10% Subordinated Note or Notes subsequently issued
upon exchange or transfer thereof.
<PAGE> 2
2. TRANSFER, ETC. OF NOTE. The Company shall keep at
its office or agency maintained as provided in Section 8(a) a register in which
the Company shall provide for the registration of this Note and for the
registration of transfer and exchange of this Note. The holder of this Note
may, at its option, and either in person or by duly authorized attorney,
surrender the same for registration of transfer or exchange at the office or
agency of the Company maintained as provided in Section 8(a), and, without
expense to such holder (except for taxes or governmental charges imposed in
connection therewith), receive in exchange therefor a Note or Notes each in
such denomination or denominations as the holder hereof may request, dated as
of the date to which interest has been paid on this Note so surrendered for
transfer or exchange, for the same aggregate principal sum as the then unpaid
principal sum of this Note so surrendered for transfer or exchange, and
registered in the name of such person or persons as may be designated by the
holder hereof. This Note, when presented or surrendered for registration of
transfer or exchange, shall be duly endorsed, or shall be accompanied by a
written instrument of transfer, satisfactory in form to the Company, duly
executed by the holder of this Note or his attorney duly authorized in writing.
Every Note so made and delivered in exchange for this Note shall in all other
respects be in the same form and have the same terms as this Note. No transfer
or exchange of this Note shall be valid unless made in the foregoing manner at
such office or agency.
3. LOSS, THEFT, DESTRUCTION OR MUTILATION OF NOTE. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Note, and, in the case of any such loss, theft or
destruction, upon receipt of an affidavit of loss and indemnity from the holder
hereof reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Note, the Company will make
and deliver, in lieu of this Note, a new Note of like tenor and unpaid
principal amount and dated as of the date to which interest has been paid on
this Note.
4. PERSON DEEMED OWNER; HOLDER. The Company may deem
and treat the person in whose name this Note is registered as the owner and
holder of this Note for the purpose of receiving payment of principal of and
interest on this Note and for all other purposes whatsoever, whether or not
this Note shall be overdue.
5. OPTIONAL PREPAYMENTS. The Company may, at its
option, prepay all or any portion of this Note, at the principal amount hereof
so to be prepaid, together with interest accrued thereon to the date of such
prepayment.
<PAGE> 3
6. NOTICES. All notices to be given to the holder of
this Note by the Company shall be given by registered or certified mail to the
person in whose name this Note is registered at its address designated on the
register maintained by the Company on the date of mailing such notice.
7. SURRENDER OF NOTE; NOTATION THEREON. Upon any
prepayment of a portion of the principal amount of this Note, the holder
hereof, at its option, may require the Company to execute and deliver at the
expense of the Company (except for taxes or governmental charges imposed in
connection therewith), upon surrender of this Note, a new Note registered in
the name of such person or persons as may be designated by such holder for the
principal amount of this Note then remaining unpaid, dated as of the date to
which interest has been paid on the principal amount of this Note then
remaining unpaid, or may present this Note to the Company for notation hereon
of the payment of the portion of the principal amount of this Note so prepaid.
8. COVENANTS. The Company covenants and agrees that, so
long as this Note shall be outstanding:
(a) Maintenance of Office. The Company will maintain an
office or agency in such place in the United States of America as the
Company may designate in writing to the registered holder hereof,
where this Note may be presented for registration of transfer and
exchange as herein provided, where notices and demands to or upon the
Company in respect of this Note may be served and where, at the option
of the holder hereof, this Note may be presented for payment. Until
the Company otherwise notifies the holder of this Note, said office
shall be the principal office of the Company at 1382 Bell Avenue,
Tustin, California 92870.
(b) Corporate Existence. The Company will do or cause to
be done all things necessary and lawful to preserve and keep in full
force and effect its corporate existence, rights and franchises and
the corporate existence, rights and franchises of each of its
subsidiaries; provided, however, that nothing in this paragraph (b)
shall prevent the abandonment or termination of any rights or
franchises of the Company, or the liquidation or dissolution of, or a
sale, transfer or disposition (whether through merger, consolidation,
sale or otherwise) of all or any substantial part of the property and
assets of, any subsidiary or the abandonment or termination of the
corporate existence, rights and franchises of any subsidiary if such
abandonment, termination, liquidation, dissolution, sale, transfer or
disposition is, in the good faith business judgment of the Company, in
the best interests of the Company and is not disadvantageous in any
material respect to the holder of this Note.
3
<PAGE> 4
(c) Notice of Default. If any one or more events which
constitute, or which with notice or lapse of time or both would
constitute, an Event of Default under Section 10 of this Note shall
occur, the Company shall, immediately after it becomes aware that any
such event has occurred, give notice to the holder of this Note,
specifying the nature of such event.
9. AMENDMENTS, MODIFICATIONS AND WAIVERS. This Note may
not be amended or modified nor any provision hereof waived except in a writing
signed by the Company and the holder of this Note.
10. EVENTS OF DEFAULT. If any one or more of the
following events, herein called Events of Default, shall occur, for any reason
whatsoever, and whether such occurrence shall, on the part of the Company or
any subsidiary, be voluntary or involuntary, or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of a court of competent jurisdiction or any order, rule or regulation of
any administrative or other governmental authority, and such Event of Default
shall be continuing:
(a) the Company shall not pay any principal of this Note
when and as the same shall become due and payable, whether at maturity
or at a date fixed for prepayment or by acceleration or otherwise; or
(b) the Company shall not pay all accrued interest on
this Note on the Maturity Date, or shall not pay any interest when due
in connection with any prepayment or repayment of principal of this
Note, and such non-payment shall continue for a period of 10 Business
Days; or
(c) the Company shall fail to duly perform or observe any
other covenant, condition or agreement to be observed or performed by
it pursuant to the terms hereof and such failure shall continue for 30
days after written notice from the holder hereof specifying such
failure and requesting that the same be remedied; or
(d) any representation or warranty made by the Company in
the Note Purchase Agreement shall prove to have been false or
incorrect on the date on or as of which made in any respect material
to the transactions contemplated by such Agreement; or
(e) the entry of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Company or any
subsidiary in an involuntary case under the federal bankruptcy laws,
as now constituted or hereafter
4
<PAGE> 5
amended, or any other applicable federal or state bankruptcy,
insolvency or other similar laws, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Company or any subsidiary or for any substantial part
of any of their property, or ordering the winding-up or liquidation of
any of their affairs and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; or
(f) the commencement by the Company or any subsidiary of
a voluntary case under the federal bankruptcy laws, as now constituted
or hereafter amended, or any other applicable federal or state
bankruptcy, insolvency or other similar laws, or the consent by any of
them to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Company or any subsidiary or for any
substantial part of their property, or the making by any of them of
any assignment for the benefit of creditors, or the failure of the
Company or any subsidiary generally to pay its debts as such debts
become due; or
(g) default as defined in any instrument evidencing or
under which the Company or any subsidiary has outstanding at the time
any indebtedness for money borrowed in excess of $2,000,000 in
aggregate principal amount shall occur and as a result thereof the
maturity of any such indebtedness shall have been accelerated so that
the same shall have become due and payable prior to the date on which
the same would otherwise have become due and payable and such
acceleration shall not have been rescinded or annulled within 30 days;
or
(h) final judgment for the payment of money in excess of
$200,000 shall be rendered against the Company or a subsidiary and the
same shall remain undischarged for a period of 60 days during which
execution shall not be effectively stayed;
then, the holder of this Note may, at its option, by notice to the Company,
declare this Note to be, and this Note shall thereupon be and become, forthwith
due and payable together with interest accrued hereon without presentment,
demand, protest or further notice of any kind, all of which are expressly
waived to the extent permitted by law.
At any time after any declaration of acceleration of this Note
has been made as provided in this Section 10, the holder of this Note may, by
notice to the Company, rescind such declaration and its consequences, if all
other defaults and Events of Default (other than nonpayments of principal and
interest that have become due solely by reason of acceleration) shall have been
remedied or cured or shall have been waived pursuant to this paragraph;
provided, however, that no such rescission shall extend to or affect any
subsequent default or Event of Default or impair any right consequent thereon.
5
<PAGE> 6
11. SUITS FOR ENFORCEMENT. In case any one or more of
the Events of Default specified in Section 10 of this Note shall occur and be
continuing, the holder of this Note may proceed to protect and enforce its
rights by suit in equity, action at law and/or by other appropriate proceeding,
whether for the specific performance of any covenant or agreement contained in
this Note or in aid of the exercise of any power granted in this Note, or may
proceed to enforce the payment of this Note or to enforce any other legal or
equitable right of the holder of this Note.
In case of any default under this Note, the Company will pay
to the holder hereof such amounts as shall be sufficient to cover the
reasonable costs and expenses of the holder hereof due to said default,
including, without limitation, collection costs and reasonable attorneys' fees,
to the extent actually incurred.
12. REMEDIES CUMULATIVE. No remedy herein conferred upon
the holder of this 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 given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.
13. REMEDIES NOT WAIVED. No course of dealing between
the Company and the holder of this Note or any delay on the part of the holder
hereof in exercising any rights hereunder shall operate as a waiver of any
right of any holder of this Note.
14. SUBORDINATION.
(a) Anything contained in this Note to the contrary
notwithstanding, the indebtedness evidenced by this Note and any obligations
arising in connection herewith shall be subordinate and junior, to the extent
set forth in this Section 14, to all Senior Indebtedness of the Company.
"Senior Indebtedness" shall mean the principal of, premium, if any, interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on, and
all fees, reimbursements, indemnity obligations (including any fees,
reimbursements or indemnity obligations accruing subsequent to the filing of a
petition of bankruptcy, whether or not such fees, reimbursements or indemnity
obligations constitute an allowed claim under applicable law) and other
obligations arising in connection with, the Credit Agreement (as defined below)
and any other indebtedness for borrowed money of the Company, contingent or
otherwise, now outstanding or created, incurred, issued, assumed or guaranteed
in the future, other than indebtedness as to which the instrument creating or
6
<PAGE> 7
evidencing the same or pursuant to which the same is outstanding expressly
provides that such indebtedness is subordinate in right of payment to all other
indebtedness of the Company. For purposes of this Note, "Credit Agreement"
shall mean the Credit Agreement, dated as of October 12, 1994, as amended,
among the Company, the Lenders named therein and Citibank, N.A., as successor
to Wells Fargo Bank, National Association, as Administrative Agent (the
"Agent"), together with any agreement entered into in connection with the
restatement, renewal, extension, restructuring, refunding or refinancing of the
Obligations.
(A) In the event of any insolvency, bankruptcy,
liquidation, reorganization, assignment for the benefit of creditors
or other similar proceedings, or any receivership proceedings in
connection therewith, relative to the Company or its creditors or its
property, 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
Indebtedness shall first be paid in full in cash before any direct or
indirect payment or distribution, whether on account of principal,
interest or otherwise, is made upon this Note.
(B) In any of the proceedings referred to in paragraph
(A) above, any payment or distribution of any kind or character,
whether in cash, property, stock or obligations which may be payable
or deliverable in respect of this Note shall be paid or delivered
directly to the holder of Senior Indebtedness for application in
payment thereof, unless and until all Senior Indebtedness shall have
been paid in full in cash.
(C) No direct or indirect payments or distributions by or
on behalf of the Company on or with respect to this Note (whether
pursuant to the terms of this Note or upon acceleration or otherwise,
or the payment of principal of or interest on this Note) shall be made
until all Senior Indebtedness has been paid in full in cash and all
obligations to provide financial accommodations under the Credit
Agreement.
(b) Until and unless the Senior Indebtedness is indefeasibly
paid in full in cash, the holder of this Note shall not be subrogated to any
rights or claims of the holders of the Senior Indebtedness. Subject to the
indefeasible payment in full in cash of all Senior Indebtedness as aforesaid,
the holder of this Note shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of any kind or
character, whether in cash, property, stock or obligations, which may be
payable or deliverable to the holders of Senior Indebtedness, until the
principal of, and interest on, this Note shall be paid in full in cash, and, as
between the Company, its creditors other than the holders of Senior
Indebtedness, and the holder of this Note, no such payment or distribution made
to the holders of Senior Indebtedness by virtue of
7
<PAGE> 8
this Section 14 which otherwise would have been made to the holder of this Note
shall be deemed a payment by the Company on account of the Senior Indebtedness,
it being understood that the provisions of this Section 14 are and are intended
solely for the purposes of defining the relative rights of the holder of this
Note, on the one hand, and the holders of Senior Indebtedness, on the other
hand. Subject to the rights, if any, under this Section 14 of holders of
Senior Indebtedness to receive cash, property, stock or obligations otherwise
payable or deliverable to the holder of this Note, nothing herein shall either
impair, as between the Company and the holder of this Note, the obligation of
the Company, which is unconditional and absolute, to pay to the holder of this
Note the principal hereof and interest hereon in accordance with the terms
hereof or prevent (except as otherwise specified therein) the holder of this
Note from exercising all remedies otherwise permitted by applicable law or
hereunder upon default hereunder.
(c) If any payment or distribution of any character, whether
in cash, property, stock or obligations, shall be received by the holder of
this Note in contravention of any of the terms hereof or before the Senior
Indebtedness has been indefeasibly paid in full in cash and all obligations to
provide financial accommodations under the Credit Agreement have terminated,
such payment or distribution shall be received in trust for the benefit of, and
shall be paid over or delivered and transferred to, the holders of the Senior
Indebtedness at the time outstanding in accordance with the priorities then
existing among such holders for application to the payment of all Senior
Indebtedness remaining unpaid, to the extent necessary to pay all such Senior
Indebtedness in full in cash. In the event of the failure of any such holder
to endorse or assign any such payment or distribution, each holder of any
Senior Indebtedness is hereby irrevocably authorized to endorse or assign the
name.
(d) The rights under these subordination provisions of the
holders of any Senior Indebtedness as against the holder of this Note shall
remain in full force and effect without regard to, and shall not be impaired or
affected by:
(i) any act or failure to act on the part of the Company;
or
(ii) any extension or indulgence in respect of any payment
or prepayment of any Senior Indebtedness or any part thereof or in
respect of any other amount payable to any holder of any Senior
Indebtedness; or
(iii) any amendment, modification or waiver of, or addition
or supplement to, or deletion from, or compromise, release, consent or
other action in respect of, any of the terms of any Senior
Indebtedness or any other agreement which may be made relating to any
Senior Indebtedness; or
8
<PAGE> 9
(iv) any exercise or non-exercise by the holder of any
Senior Indebtedness of any right, power, privilege or remedy under or
in respect of such Senior Indebtedness or these subordination
provisions or any waiver of any such right, power, privilege or remedy
or of any default in respect of such Senior Indebtedness or these
subordination provisions or any receipt by the holder of any Senior
Indebtedness of any security, or any failure by such holder to perfect
a security interest in, or any release by such holder of, any security
for the payment of such Senior Indebtedness; or
(v) any merger or consolidation of the Company or any of
its subsidiaries into or with any other person, or any sale, lease or
transfer of any or all of the assets of the Company or any of its
subsidiaries to any other person; or
(vi) absence of any notice to, or knowledge by, any holder
of any claim hereunder of the existence or occurrence of any of the
matters or events set forth in the foregoing clauses (i) through (v);
or
(vii) any other circumstance.
(e) The holder of this Note unconditionally waives (i)
notice of any of the matters referred to in Section 14(d), (ii) all notices
which may be required, whether by statute, rule of law or otherwise, to
preserve intact any rights of any holder of any Senior Indebtedness, including,
without limitation, any demand, presentment and protest, proof of notice of
nonpayment under any Senior Indebtedness or the Credit Agreement, and notice of
any failure on the part of the Company to perform and comply with any covenant,
agreement, term or condition of any Senior Indebtedness, (iii) any right to the
enforcement, assertion or exercise by any holder of any Senior Indebtedness of
any right, power, privilege or remedy conferred in such Senior Indebtedness or
otherwise, (iv) any requirements of diligence on the part of any holder of any
of the Senior Indebtedness, (v) any requirement on the part of any holder of
any Senior Indebtedness to mitigate damages resulting from any default under
such Senior Indebtedness, (vi) any marshalling by the holders of the Senior
Indebtedness and (vii) any notice of any sale, transfer or other disposition of
any Senior Indebtedness by any holder thereof.
(f) The obligations of the holder of this Note under
these subordination provisions shall continue to be effective, or be
reinstated, as the case may be, if at any time any payment in respect of any
Senior Indebtedness, or any other payment to any holder of any Senior
Indebtedness in its capacity as such, is rescinded or must otherwise be
restored or returned by the holder of such Senior Indebtedness upon the
occurrence of any proceeding referred to in paragraph (a)(A) hereof or upon or
as a result of the appoint of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Company or any substantial
9
<PAGE> 10
part of its property or otherwise, all as though such payment had not been
made.
(g) Notwithstanding anything to the contrary herein, the
Company shall not at any time offer (and the holder hereof shall not at any
time accept) (i) any pledge of collateral or (ii) any guaranty by any parent or
subsidiary of the Company, in each case with respect to the obligations of the
Company under this Note.
(h) If payment of this Note is accelerated by the holder
hereof pursuant to Section 10 because of an Event of Default, then the Company
shall promptly notify the Agent under the Credit Agreement of such
acceleration.
15. COVENANTS BIND SUCCESSORS AND ASSIGNS. All the
covenants, stipulations, promises and agreements in this Note contained by or
on behalf of the Company shall bind its successors and assigns, whether so
expressed or not.
16. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
17. HEADINGS. The headings of the Sections and
paragraphs of this Note are inserted for convenience only and do not constitute
a part of this Note.
10
<PAGE> 11
IN WITNESS WHEREOF, THE CERPLEX GROUP, INC. has caused this
Note to be signed in its corporate name by one of its officers thereunto duly
authorized and to be dated as of the day and year first above written.
THE CERPLEX GROUP, INC.
By:
-------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 99.15
FORBEARANCE AND REPAYMENT AGREEMENT
FORBEARANCE AND REPAYMENT AGREEMENT, dated as of January 30, 1998 (the
"Forbearance Agreement"), by and among The Cerplex Group, Inc., a Delaware
corporation ("Company"), Aurora Electronics, Inc. ("Purchaser") and Citibank,
N.A. (the "Holder"). Capitalized terms used and not otherwise defined herein
shall have the meaning given such terms in that certain Credit Agreement dated
as of October 12, 1994, by and among Company, as Borrower, the lenders listed
therein, as Lenders, and Wells Fargo Bank, National Association, as
Administrative Agent, as amended to date (as so amended, the "Credit
Agreement").
WHEREAS, pursuant to the Credit Agreement, the Lenders (and their
successors in interest, from time to time) made loans (the "Loans") to Company
and the Holder has succeeded to all right, title and interest in the Loans, the
outstanding principal amount of and accrued and unpaid interest on which, as of
the date hereof, are set forth in Exhibit A hereto;
WHEREAS, as of the date hereof, the Holder also holds warrants
("Warrants") to purchase Company Common Stock, the number of which are set
forth on Exhibit A hereto;
WHEREAS, Company and Purchaser and certain affiliates of Purchaser are
negotiating an Agreement and Plan of Merger (the "Merger Agreement") which
contemplates, among other things, a merger of Company and a wholly-owned
subsidiary of Purchaser (the "Merger"), a loan by Purchaser to Company of not
less than $2,000,000 (which loan shall be evidenced by a Note Purchase
Agreement of even date with the Merger Agreement (the "Note Purchase
Agreement")) and a recapitalization of Company, including the repayment of the
Loans and cancellation of the Warrants pursuant to the terms hereof; and
WHEREAS, as a condition to the Purchaser and Company continuing to
negotiate the Merger Agreement and entering into the Merger Agreement, Company
and the Purchaser desire that the Holder agree, and in order to induce the
Purchaser and Company to continue such negotiations and so enter into the
Merger Agreement, the Holder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
REPAYMENT OF LOAN; CANCELLATION OF WARRANTS
1.1 Repayment of Loans. Subject to the terms and conditions of
this Agreement, in the event that the Merger Agreement and the Note Purchase
Agreement are executed by the respective parties to such agreements on or prior
to January 31, 1998, Company shall have
<PAGE> 2
received cash proceeds in an amount equal to at least $2,000,000 on or prior to
February 2, 1998 ("Step 1"), funds in an amount not less than $2,000,000 are
transferred on or prior to February 2, 1998 by Purchaser to Company pursuant to
the Note Purchase Agreement and payment of the Purchase Price (as defined
below) is made on or prior to April 30, 1998, Company agrees to pay, and the
Holder agrees to accept, as full repayment of the outstanding principal amount
of the Loans under the Credit Agreement and as full consideration for
cancellation of the Warrants an amount equal to the sum of (i) 98.5% of the
outstanding principal amount of the Loans as of the Closing Date, plus (ii) all
accrued and unpaid interest thereon as of the Closing Date, plus (iii) all
accrued and unpaid fees, expenses and other amounts payable under the Credit
Agreement as of the Closing Date, including, without limitation, the $62,500
final installment of the restructure fee and the $200,000 amendment fee (the
"Purchase Price"). In the event that Step 1 does not occur on or prior to
January 31, 1998 or in the event the Purchase Price is not paid on or prior to
April 30, 1998, this Agreement shall be of no further force and effect. The
Purchase Price shall be payable in cash in immediately available funds.
1.2 Effect of Purchase. Upon payment of the Purchase Price, all
commitments to lend under the Credit Agreement shall terminate and all of the
Holder's Warrants shall be cancelled. In addition, all other rights of the
Holder with respect to Company, other than those rights that by their express
terms survive the termination of the commitments under the Credit Agreement,
shall be terminated, including but not limited to, the Holder's rights under
(i) that certain Registration Rights Agreement dated as of November 19, 1993,
by and among Company, the investors listed on Schedule A thereto and the
security holders of Company listed on Schedule B thereto, as amended to date
(as so amended, the "Registration Rights Agreement"); and (ii) the Credit
Agreement.
1.3 Time and Place of Closing. The closing of the transactions
contemplated hereunder (the "Closing") shall take place at the offices of
Brobeck, Phleger & Harrison LLP in Newport Beach, California on April 30, 1998
(the "Closing Date"), or at such other time and place as the parties shall
mutually agree upon.
1.4 Conditions Precedent. The obligations of Holder hereunder are
subject to the satisfaction of the following conditions:
(a) The Merger Agreement shall be in form and substance
reasonably satisfactory to Holder. Holder shall have received a fully executed
or conformed copy of the Merger Agreement and the Merger Agreement shall be in
full force and effect and no provision thereof shall have been modified or
waived in any respect determined by Holder to be material.
(b) The Purchaser and Company shall have executed the
Note Purchase Agreement providing for a loan to Company of an amount equal to
at least $2,000,000 on or prior to January 31, 1998, and Company shall have
received cash proceeds in an amount equal to at least $2,000,000 on or prior to
February 2, 1998, from the issuance of subordinated indebtedness to the
Purchaser, in either case pursuant to documentation in form and substance
reasonably satisfactory to Holder.
2
<PAGE> 3
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Except where specifically indicated that a representation and/or
warranty is being given by a specific party, each of the parties represents and
warrants to the other parties that as to itself:
2.1 Organization and Standing. In the case of each of Purchaser
and Company, (a) it is a corporation, duly organized and existing under, and by
virtue of, the laws of the state of its incorporation and is in good standing
under such laws and (b) it has the requisite corporate power to own and operate
its properties and assets, and to carry on its business as presently conducted
and as proposed to be conducted, and (c) it is duly qualified to do business
and is in good standing in each jurisdiction in which the character of the
business conducted by it or the location of the properties owned or leased by
it make such qualification necessary, except for jurisdictions in which the
failure to so qualify would not have a material adverse effect on its business.
In the case of the Holder, (a) it is a national banking association, duly
organized under the laws of the United States, and (b) it has the requisite
power and authority to own its properties and assets, and to carry on its
business as presently conducted.
2.2 Power. In the case of Purchaser and Company, it has all
requisite legal and corporate power and authority to execute and deliver this
Agreement and to carry out and perform its obligations under the terms of this
Agreement. In the case of Holder, it has all requisite legal power and
authority to execute and deliver this Agreement and to carry out and perform
its obligations under the terms of this Agreement.
2.3 Title. In the case of the Holder, it has all right, title and
interest in the Loans and the Warrants, free and clear of all encumbrances.
2.4 All Obligations and Securities. In the case of the Holder,
(a) other than the Warrants, the Holder does not own, either directly or
indirectly, any securities issued by Company, (b) as of the date hereof, the
Loans, accrued interest thereon, fees in an aggregate amount of $200,000 and
reimbursement for outstanding attorneys' fees and other amounts (in an
aggregate amount equal to approximately $100,000) constitute all amounts owed
by Company under the Credit Agreement, and (c) Company has no obligations to
the Holder other than obligations arising pursuant to the Registration Rights
Agreement, the Warrant Agreement, the Warrants and the Credit Agreement.
2.5 Absence of Default.
(a) As of the date hereof and after giving effect to that
certain Seventh Amendment to Credit Agreement and Limited Waiver by and between
Company and Holder, there exists no Event of Default or Potential Event of
Default under the Credit Agreement.
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<PAGE> 4
(b) Except with respect to the matters disclosed to
Holder prior to the date hereof, all representations and warranties contained
in the Credit Agreement and the other Loan Documents are true, correct and
complete in all material respects on and as of the date hereof except to the
extent such representations and warranties specifically relate to an earlier
date, in which case they were true, correct and complete in all material
respects on and as of such earlier date.
ARTICLE III
COVENANTS OF THE PARTIES
3.1 Restriction on Exercise. Until and unless this Agreement has
been terminated, the Holder shall not exercise any of its Warrants.
3.2 Restriction on Transfer. Until and unless this Agreement has
been terminated, the Holder shall not, without the prior written consent of
Company, offer to sell, sell, contract to sell, or otherwise dispose of any
Warrants until and unless the transferee of such Warrants has agreed in writing
to be bound by the terms of this Forbearance Agreement, and Company has
consented in writing to such transfer (which consent shall not be unreasonably
withheld).
3.3 Confidentiality. The Holder agrees to keep confidential the
existence and the terms of this Agreement and any information it obtains, from
time to time, regarding the Merger Agreement and the transactions contemplated
thereby.
3.4 Further Assurances. Subject to the conditions to consummation
of the Merger set forth in the Merger Agreement, each party agrees to use its
commercially reasonable efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement. If any further
action is necessary or desirable to carry out the purposes of this Agreement,
each party shall use its commercially reasonable efforts to take, or cause to
be taken, all such action as promptly as practicable.
3.5 Legal Fees. If, upon payment of the Purchase Price and after
payment of any outstanding legal fees to counsel for Holder in connection with
this Forbearance Agreement and the transactions contemplated hereby, there is
any amount remaining of the funds on deposit with counsel for Holder as
required by Section 6.20 of the Credit Agreement, Holder shall cause counsel to
Holder to promptly refund to Company the balance of any such amount.
ARTICLE IV
MISCELLANEOUS
4.1 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate
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<PAGE> 5
counterparts, each of which when executed and delivered shall be deemed to be
an original but all of which taken together shall constitute one and the same
instrument.
4.2 Termination. This Agreement shall terminate if the Closing
does not occur on or before April 30, 1998 and shall be of no further force or
effect thereafter.
4.3 Assignment. Except as set forth in Section 3.2 hereof, this
Agreement shall not be assigned by any party by operation of law or otherwise
without the prior written consent of each of the other parties hereto.
4.4 Specific Performance. Each of the parties hereto acknowledges
that a breach by it of any agreement contained in this Agreement will cause the
other party to sustain damage for which it would not have an adequate remedy at
law for money damages, and therefore each of the parties hereto agrees that in
the event of any such breach the aggrieved party shall be entitled to the
remedy of specific performance of such agreement and injunctive and other
equitable relief in addition to any other remedy to which it may be entitled,
at law or in equity.
4.5 Binding Upon Successors. This Agreement is binding upon and
will inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
4.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, without
giving effect to the principles of conflicts of law.
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<PAGE> 6
IN WITNESS WHEREOF, Company, the Purchaser and the Holder have caused
this Agreement to be duly executed as of the date first above written.
THE CERPLEX GROUP, INC.
By: ____________________________________
Name:
Title:
AURORA ELECTRONICS, INC.
By: ____________________________________
Name:
Title:
CITIBANK, N.A.
By: ____________________________________
Name:
Title:
6
<PAGE> 7
EXHIBIT A
Credit Agreement Loans
<TABLE>
<S> <C> <C>
1. Term Loan (as of 1/30/98):
Principal Outstanding: 25,320,602.21
Interest Outstanding: 340,685.19
2. Revolver Loans (as of 1/30/98):
Principal Outstanding: 4,886,984.14
Interest Outstanding: 68,769.42
</TABLE>
Warrants:
WR-9 Issued on August 20, 1997 for 2,137,188 shares of Common Stock
A-1
<PAGE> 1
EXHIBIT 99.16
E X E C U T I O N C O P Y
THE CERPLEX GROUP, INC.
SEVENTH AMENDMENT
TO CREDIT AGREEMENT AND LIMITED WAIVER
This SEVENTH AMENDMENT TO CREDIT AGREEMENT AND LIMITED WAIVER
(this "AMENDMENT") is dated as of January 30, 1998 and entered into by and among
THE CERPLEX GROUP, INC., a Delaware corporation ("COMPANY"), the FINANCIAL
INSTITUTION LISTED ON THE SIGNATURE PAGES HEREOF ("LENDER") and CITIBANK, N.A.,
as successor to Wells Fargo Bank, National Association, as administrative agent
for Lenders ("ADMINISTRATIVE AGENT"), and, for purposes of Section 5 hereof,
CERTECH Technology, Inc., Cerplex Mass., Inc., Cerplex Limited, Apex Computer
Company, Cerplex Subsidiary, Inc. and Modcomp Joint Venture, Inc. (collectively,
"GUARANTORS"), and is made with reference to that certain Credit Agreement dated
as of October 12, 1994, as amended by that certain First Amendment to Credit
Agreement and Limited Waiver dated as of April 15, 1996, that certain Second
Amendment to Credit Agreement and Limited Waiver dated as of November 30, 1996,
that certain Third Amendment to Credit Agreement dated as of April 9, 1997, that
certain Fourth Amendment to Credit Agreement and Limited Waiver dated as of May
30, 1997, that certain Fifth Amendment to Credit Agreement and Limited Waiver
dated as of June 30, 1997 and that certain Sixth Amendment to Credit Agreement
and Consent dated as of August 6, 1997 (as so amended, the "CREDIT AGREEMENT"),
by and among Company, Lender and Administrative Agent. Capitalized terms used
herein without definition shall have the same meanings herein as set forth in
the Credit Agreement.
RECITALS
WHEREAS, Company and Lender have agreed to amend certain
provisions of the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
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<PAGE> 2
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
SECTION 1.1 AMENDMENTS TO SECTION 1: DEFINITIONS.
A. Subsection 1.1 of the Credit Agreement is hereby amended by adding the
following definition in appropriate alphabetical order:
"'CONSOLIDATED ADJUSTED EBITDA' means, for any period, the sum of
the amounts for such period of (i) Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) the provision for taxes based on
income, (iv) total depreciation expense, and (v) total amortization
expense, all of the foregoing as determined on a consolidated basis for
Company and its Subsidiaries in conformity with GAAP."
SECTION 1.2 AMENDMENTS TO SECTION 7: COMPANY'S NEGATIVE COVENANTS.
A. Subsection 7.5 of the Credit Agreement is hereby amended to read in
its entirety as follows:
"Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, declare, order, pay, make or set apart any
sum for any Restricted Junior Payment; provided that Subsidiaries of
Company may declare and pay dividends to Company."
B. Subsection 7.6 of the Credit Agreement is hereby amended by adding the
following as new subsection 7.6G thereof:
"G. MINIMUM EBITDA. Company shall not permit Consolidated Adjusted
EBITDA for any period set forth below to be less than the correlative
amount indicated:
<TABLE>
<CAPTION>
Minimum Consolidated
Month Adjusted EBITDA
----- ---------------
<S> <C>
January 1, 1998 through January 31, 1998 $ 300,000
January 1, 1998 through February 28, 1998 $ 900,000
January 1, 1998 through March 31, 1998 $1,900,000"
</TABLE>
2
<PAGE> 3
SECTION 1.3 AMENDMENTS TO SECTION 8: EVENTS OF DEFAULT.
A. Section 8 of the Credit Agreement is hereby amended by adding the word
"or" at the end of subsection 8.14 thereof and adding the following as new
subsection 8.15 thereof:
"8.15 MERGER.
(i) Company shall fail to file preliminary proxy
materials with the Securities and Exchange Commission regarding
the proposed merger with Holly Acquisition Corp., a Delaware
corporation ("HOLLY"), on or prior to April 1, 1998, (ii) Company
shall fail to mail definitive proxy materials to its stockholders
regarding the proposed merger with Holly or prior to April 20,
1998, (iii) Company, Holly or Aurora Electronics, Inc., a Delaware
corporation, shall terminate the agreement with respect to the
proposed merger or (iv) Company shall fail to make the required
Hart Scott Rodino filing on or prior to April 1, 1998; or"
SECTION 1.4 AMENDMENTS TO EXHIBITS AND SCHEDULES.
A. Exhibit V of the Credit Agreement is hereby amended by adding
the following thereto:
"K. CONSOLIDATED ADJUSTED EBITDA
1. Consolidated Net Income: $_________
2. Consolidated Interest
Expense: $_________
3. The provision for taxes based
on income: $_________
4. Total depreciation expense: $_________
5. Total amortization expense: $_________
6. Consolidated Adjusted EBITDA
(1+2+3+4+5): $_________
7. Minimum Consolidated Adjusted EBITDA required under
subsection 7.6G: $_________"
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<PAGE> 4
SECTION 2. WAIVER
Subject to the terms and conditions set forth herein and in
reliance on the representations of Company herein contained:
(i) Lender hereby waives compliance with the provisions of subsection 7.1
of the Credit Agreement to the extent necessary to permit Company to incur
unsecured Subordinated Indebtedness to Aurora Electronics, Inc., a Delaware
corporation ("Aurora"), in an amount not to exceed $10,000,000; provided such
Subordinated Indebtedness provides for no current cash payments of interest,
principal or any other amounts and is subordinated in right of payment to the
Obligations in full in cash pursuant to documentation containing maturities,
subordination provisions and other terms in form and substance satisfactory to
Administrative Agent and Lender.
(ii) Lender hereby waives compliance with the provisions of subsections
7.6A, 7.6B, 7.6D, 7.6E and 7.6F of the Credit Agreement for the fiscal quarter
of Company ended December 31, 1997 and subsection 7.6C of the Credit Agreement
for the period from and including December 31, 1997 to and excluding April 30,
1998; provided, however, that such waiver shall be of no further force and
effect in the event that (a) the Merger Agreement is terminated, (b) the holders
of any Subordinated Indebtedness of Company or any of its Subsidiaries demand
payment of any amount in respect of such Subordinated Indebtedness or (c) any
payment of principal, interest or any other amount is made by Company in respect
of any Subordinated Indebtedness of Company or any of its Subsidiaries.
(iii) Lender hereby waives compliance with the provisions of subsection
7.7 of the Credit Agreement to the extent necessary to (a) permit Company to
execute an Agreement and Plan of Merger among Company, Aurora and Holly
Acquisition Corp. in form and substance satisfactory to Lender (the "MERGER
AGREEMENT") and (b) permit Company to consummate the merger contemplated thereby
provided that simultaneously with the consummation of such merger all principal,
interest, fees, expenses and other amounts owing to Lender are paid in full in
accordance with the terms of the Credit Agreement or that certain Repayment
Agreement dated as of January 30, 1998 among Company, Aurora and Citibank, N.A.,
as the case may be.
SECTION 3. CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective only upon the satisfaction
of all of the following conditions precedent (the date of satisfaction of such
conditions being referred to herein as the "SEVENTH AMENDMENT EFFECTIVE DATE"):
A. On or before the Seventh Amendment Effective Date, Administrative
Agent shall have received for Lender counterparts hereof duly executed on behalf
of Company, Administrative Agent, Lender and each Guarantor.
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<PAGE> 5
B. Administrative Agent shall have received:
1. Resolutions of Company's Board of Directors approving and
authorizing the execution, delivery, and performance of this Amendment,
certified as of the Seventh Amendment Effective Date by its corporate
secretary or an assistant secretary as being in full force and effect
without modification or amendment; and
2. Signature and incumbency certificates of the officers of
Company executing this Amendment.
C. On or before the Seventh Amendment Effective Date, Lender and its
counsel shall have received duly executed copies of an agreement, in form and
substance reasonably satisfactory to Lender, providing that no interest on the
Subordinated Notes shall be made in cash until all principal, interest, fees,
expenses and other amounts are paid under the Credit Agreement.
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, Company represents and
warrants to Lender that the following statements are true, correct and complete:
A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate
power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this
Amendment and the performance of the Amended Agreement have been duly authorized
by all necessary corporate action on the part of Company, as the case may be.
C. NO CONFLICT. The execution and delivery by Company of this Amendment
and the performance of the Amended Agreement do not and will not (i) violate any
provision of any law or any governmental rule or regulation applicable to
Company or any of its Subsidiaries, the Certificate or Articles of Incorporation
or Bylaws of Company or any of its Subsidiaries or any order, judgment or decree
of any court or other agency of government binding on Company or any of its
Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any Contractual Obligation of
Company or any of its Subsidiaries, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of Company or any of
its Subsidiaries (other than any Liens created under any of the Loan Documents
in favor of Administrative Agent on behalf of Lender), or (iv) require any
approval of stockholders or any approval or consent of any Person under any
Contractual Obligation of Company or any of its Subsidiaries.
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<PAGE> 6
D. GOVERNMENTAL CONSENTS. The execution and delivery by Company of this
Amendment and the performance by Company of the Amended Agreement do not and
will not require any registration with, consent or approval of, or notice to, or
other action to, with or by, any federal, state or other governmental authority
or regulatory body.
E. BINDING OBLIGATION. This Amendment and the Amended Agreement have been
duly executed and delivered by Company and are the legally valid and binding
obligations of Company, enforceable against Company in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT AGREEMENT.
The representations and warranties contained in Section 5 of the Credit
Agreement, other than subsection 5.14, are and will be true, correct and
complete in all material respects on and as of the Seventh Amendment Effective
Date to the same extent as though made on and as of that date, except to the
extent such representations and warranties specifically relate to an earlier
date, in which case they were true, correct and complete in all material
respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event of Default or a Potential Event of Default.
H. SUBORDINATED NOTES. As of the date hereof, the Subordinated Notes are
owned beneficially and of record by Welsh, Carson, Anderson & Stowe VII,
L.P.
SECTION 5. ACKNOWLEDGEMENT AND CONSENT
Company is a party to the Company Collateral Documents, in each
case as amended through the Seventh Amendment Effective Date, pursuant to which
Company has created Liens in favor of Administrative Agent on certain Collateral
to secure the Obligations. Guarantors are a party to the Guaranty and the
Subsidiary Collateral Documents, in each case as amended through the First
Amendment Effective Date, pursuant to which each Guarantor has (i) guarantied
the Obligations and (ii) created Liens in favor of Administrative Agent on
certain Collateral to secure the obligations of such Guarantor under the
Guaranty. Company and Guarantors are collectively referred to herein as the
"CREDIT SUPPORT PARTIES", and the Guaranty, the Company Collateral Documents and
the Subsidiary Collateral Documents are collectively referred to herein as the
"CREDIT SUPPORT DOCUMENTS".
Each Credit Support Party hereby acknowledges that it has reviewed
the terms and provisions of the Credit Agreement and this Amendment and consents
to the amendment of the Credit Agreement effected pursuant to this Amendment.
Each Credit Support Party hereby confirms that each Credit Support Document to
which it is a party or
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<PAGE> 7
otherwise bound and all Collateral encumbered thereby will continue to guaranty
or secure, as the case may be, to the fullest extent possible the payment and
performance of all "Obligations," "Guarantied Obligations" and "Secured
Obligations," as the case may be (in each case as such terms are defined in the
applicable Credit Support Document), including, without limitation, the payment
and performance of all such "Obligations," "Guarantied Obligations" or "Secured
Obligations," as the case may be, in respect of the Obligations of Company now
or hereafter existing under or in respect of the Amended Agreement and the Notes
defined therein.
Each Credit Support Party acknowledges and agrees that any of the
Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in the
Amended Agreement and the Credit Support Documents to which it is a party or
otherwise bound are true, correct and complete in all material respects on and
as of the Seventh Amendment Effective Date to the same extent as though made on
and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
Each Credit Support Party (other than Company) acknowledges and
agrees that (i) notwithstanding the conditions to effectiveness set forth in
this Amendment, such Credit Support Party is not required by the terms of the
Credit Agreement or any other Loan Document to consent to the amendments to the
Credit Agreement effected pursuant to this Amendment and (ii) nothing in the
Credit Agreement, this Amendment or any other Loan Document shall be deemed to
require the consent of such Credit Support Party to any future amendments to the
Credit Agreement. SECTION 6. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
1. On and after the Seventh Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the "Credit
Agreement", "thereunder", "thereof" or words of like import referring to
the Credit Agreement shall mean and be a reference to the Amended
Agreement.
2. Without limiting the generality of the provisions of subsection
10.6 of the Credit Agreement, the waiver set forth herein shall be
limited precisely as written and relates solely to the noncompliance by
Company with the provisions of subsections 7.1, 7.6A, 7.6B, 7.6C, 7.6D,
7.6E, 7.6F and 7.7 of the Credit
7
<PAGE> 8
Agreement in the manner and to the extent described above. Nothing in
this Amendment shall be deemed to:
(a) constitute a waiver of compliance by Company with
respect to (i) subsection 7.1, 7.6A, 7.6B, 7.6C, 7.6D, 7.6E, 7.6F
or 7.7 of the Credit Agreement in any other instance or (ii) any
other term, provision or condition of the Credit Agreement or any
other instrument or agreement referred to therein; or
(b) prejudice any right or remedy that Administrative Agent
or any Lender may now have (except to the extent such right or
remedy was based upon existing defaults that will not exist after
giving effect to this Amendment) or may have in the future under
or in connection with the Credit Agreement or any other instrument
or agreement referred to therein.
3. Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
B. FEES AND EXPENSES. Company acknowledges that all costs, fees and
expenses as described in subsection 10.2 of the Credit Agreement incurred by
Administrative Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.
C. HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
THE CERPLEX GROUP, INC.
By:________________________________________
Title:_____________________________________
CERTECH TECHNOLOGY, INC. (for purposes of
Section 5 only) as a Credit Support Party
By:________________________________________
Title:_____________________________________
CERPLEX MASS., INC. (for purposes of
Section 5 only) as a Credit Support Party
By:________________________________________
Title:_____________________________________
CERPLEX LIMITED (for purposes of Section 5
only) as a Credit Support Party
By:________________________________________
Title:_____________________________________
APEX COMPUTER COMPANY (for purposes of
Section 5 only) as a Credit Support Party
By:________________________________________
Title:_____________________________________
CITIBANK, N.A., INDIVIDUALLY AND AS
ADMINISTRATIVE AGENT
By:________________________________________
Title:_____________________________________
S-1
