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
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
2
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
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
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
5
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.
6
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
7
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
8
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.
9
10
(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
10
11
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).
11
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,
12
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:
13
14
(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)
14
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
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
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
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.
18
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
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
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
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