<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
EV INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3679 52-2011193
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NO.)
</TABLE>
602 CECIL STREET
BUCHANAN, MICHIGAN 49107
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------
PAUL A. MCGUIRE
EV INTERNATIONAL, INC.
602 CECIL STREET
BUCHANAN, MICHIGAN 49107
(616) 695-2207
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
Copy to:
STEVEN OSTNER, ESQ.
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM OFFERING PROPOSED AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE PRICE PER MAXIMUM AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED SHARE(1) OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
11% Senior Subordinated Notes
due 2007, Series A.......... $100,000,000 100% $100,000,000 $30,304.00
============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL
THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 16, 1997
PROSPECTUS
EV INTERNATIONAL, INC.
OFFER TO EXCHANGE 11% SENIOR SUBORDINATED NOTES DUE 2007,
SERIES A FOR ANY AND ALL EXISTING NOTES (AS DEFINED BELOW)
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1997, UNLESS EXTENDED.
EV International, Inc., a Delaware corporation (the "Company"), hereby offers
(the "Exchange Offer"), upon the terms and subject to the conditions set forth
in this Prospectus (this "Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal") to exchange up to $100,000,000
aggregate principal amount of its 11% Senior Subordinated Notes due 2007, Series
A (the "New Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement of
which this Prospectus is a part, for a like principal amount of its issued and
outstanding 11% Senior Subordinated Notes due 2007 (the "Existing Notes"). The
New Notes and the Existing Notes, as the case may be, are referred to herein as
the "Notes". The Existing Notes were originally issued and sold in a transaction
that was exempt from registration under the Securities Act (the "Offering") and
resold to certain qualified institutional buyers in reliance on, and subject to
the restrictions imposed pursuant to, Rule 144A under the Securities Act ("Rule
144A"). The terms of the New Notes are identical in all material respects to the
terms of the Existing Notes for which they may be exchanged pursuant to the
Exchange Offer except that the New Notes will have been registered under the
Securities Act, and thus will not bear restrictive legends restricting their
transfer pursuant to the Securities Act.
Interest on each New Note issued pursuant to the Exchange Offer will accrue from
the last interest payment date on which interest was paid on the Existing Notes
surrendered in exchange therefor or, if no interest has been paid, from the
original date of issuance of the Existing Notes.
Interest on the Notes will be payable semi-annually on March 15 and September 15
of each year, commencing on September 15, 1997. The Notes will mature on March
15, 2007. Except as described below, the Company may not redeem the Notes prior
to March 15, 2002. On or after such date, the Company may redeem the Notes, in
whole or in part, at any time at the redemption prices set forth herein,
together with accrued and unpaid interest, if any, to the date of redemption. In
addition, at any time on or prior to March 15, 2000, the Company may, subject to
certain requirements, redeem up to 33 1/3% of the original aggregate principal
amount of the Notes with the Net Cash Proceeds (as defined) of one or more
Public Equity Offerings (as defined) at a redemption price equal to 111% of the
principal amount to be redeemed, together with accrued and unpaid interest, if
any, to the date of redemption, provided that at least 66 2/3% of the original
aggregate principal amount of the Notes remains outstanding after each such
redemption. The Notes will not be subject to any sinking fund requirement. Upon
the occurrence of a Change of Control (as defined), (i) the Company will have
the option at any time prior to March 15, 2002, to redeem the Notes, in whole,
at a redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium (as defined), together with accrued and unpaid interest, if
any, to the date of redemption, and (ii) if the Company does not redeem the
Notes, or if such Change of Control occurs on or after March 15, 2002, each
holder will have the right to require the Company to repurchase the Notes at a
price equal to 101% of the principal amount thereof, together with accrued and
unpaid interest, if any, to the date of repurchase. See "Description of Notes."
The Notes will be unsecured and will be subordinated to all existing and future
Senior Indebtedness (as defined) of the Company and will be effectively
subordinated to all obligations of the subsidiaries of the Company. The Notes
will rank pari passu with any future Senior Subordinated Indebtedness (as
defined) of the Company and will rank senior to all other Subordinated
Indebtedness (as defined) of the Company. The Notes will be unconditionally
guaranteed on an unsecured, senior subordinated basis by any future Domestic
Subsidiary that is a Significant Subsidiary (as defined) of the Company. The
Indenture permits the Company to incur additional indebtedness, including Senior
Indebtedness, subject to certain limitations. See "Description of Notes." As of
February 28, 1997, on a pro forma basis after giving effect to the Transactions
(as defined), to the issuance of the Notes (the "Offering") and the application
of the proceeds therefrom, the Company would have had outstanding $18.0 million
(exclusive of unused commitments) in aggregate amount of Senior Indebtedness
(all of which is secured) and no Senior Subordinated Indebtedness other than the
Notes. See "Description of Notes -- Ranking."
The Exchange Offer is not conditioned upon any minimum number of Existing Notes
being tendered. The Exchange Offer will expire at 5:00 p.m., New York City time,
on , 1997, unless extended by the Company (such date as it may be so
extended, the "Expiration Date"). The date of acceptance for exchange of the
Existing Notes (the "Exchange Date") will be the first business day following
the Expiration Date, upon surrender of the Existing Notes. Existing Notes
tendered pursuant to the Exchange Offer may be withdrawn at any time prior to
the Expiration Date; otherwise such tenders are irrevocable. New Notes to be
issued in exchange for properly tendered Existing Notes will be delivered
through the facilities of The Depository Trust Company by the Exchange Agent (as
defined) promptly after the acceptance thereof.
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1997.
<PAGE> 3
[ADD ART.]
2
<PAGE> 4
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission"), the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for the Existing Notes may be offered
for resale, resold and otherwise transferred by holders thereof (other than any
such holder which is (i) an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act, (ii) a broker-dealer who acquired Existing
Notes directly from the Company or (iii) a broker-dealer who acquired Existing
Notes as a result of market-making or other trading activities) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that (a) such New Notes are acquired in the ordinary
course of such holder's business, (b) at the time of the commencement of the
Exchange Offer such holder has no arrangement with any person to participate in
a distribution of the New Notes and (c) such holder is not engaged in, and does
not intend to engage in, a distribution of the New Notes. However, the
Commission has not considered the Exchange Offer in the context of a no-action
letter and therefore there can be no assurance that the Staff of the Commission
would make a similar determination with respect to the Exchange Offer as in such
other circumstances. Each holder of Existing Notes that desires to participate
in the Exchange Offer will be required to make certain representations described
in "The Exchange Offer -- Terms of the Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Existing Notes where such Existing Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. Any holder that
cannot rely upon such interpretations must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. See "The Exchange Offer" and "Plan of
Distribution."
The New Notes will be represented by one or more Global Securities
registered in the name of a nominee of The Depository Trust Company, as
Depositary. Beneficial interest in the Global Securities will be shown on, and
transfers will be effected only through, records maintained by the Depositary
and its participants. See "Description of New Notes -- Book-Entry, Delivery and
Form."
There has not previously been any public market for the New Notes. The
Company does not intend to list the New Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. There can be
no assurance that an active market for the New Notes will develop. Moreover, to
the extent that Existing Notes are tendered and accepted in the Exchange Offer,
a holder's ability to sell untendered, and tendered but unaccepted, Existing
Notes could be adversely affected. See "Risk Factors -- Lack of Established
Market for the Existing Notes."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay the expenses of the Exchange Offer. No dealer manager
is being utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE, NOR WILL THE COMPANY ACCEPT SURRENDER
FOR EXCHANGE FROM, HOLDERS OF EXISTING NOTES IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES AND BLUE SKY LAWS OF SUCH JURISDICTION.
------------------------
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement (which
term includes any amendments thereto, the "Registration Statement") on Form S-4
under the Securities Act, with respect to the New Notes offered hereby. As
permitted by the rules and regulations of the Commission, this Prospectus
3
<PAGE> 5
does not contain all of the information included in the Registration Statement
and the exhibits and schedules thereto. Statements contained in this Prospectus
as to the contents of any contract or other document referred to herein or
therein and filed as an exhibit to the Registration Statement are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. For further information with respect to the Company and the New
Notes, reference is hereby made to the Registration Statement and the exhibits
and schedules thereto.
The Company is not currently subject to the periodic reporting and other
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Pursuant to the Indenture, the Company has agreed to file
with the Commission and provide to the holders of the Notes annual reports and
the information, documents and other reports that are specified in Sections 13
and 15(d) of the Exchange Act. Reports, proxy statements and other information
may be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, 13th Floor, New York, New York 10048 and Suite 1400, Northwestern
Atrium Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material can also be obtained at prescribed rates by writing to
the Commission, Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549 and such material is contained on the worldwide web site maintained
by the Commission at http://www.sec.gov.
4
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information, risk factors and financial
statements, including the related notes, appearing elsewhere in this Prospectus.
Unless otherwise indicated herein or the context otherwise requires, references
to the "Company" or "EVI" shall mean EV International, Inc., a Delaware
corporation and its subsidiaries, including its predecessor companies. Unless
otherwise indicated, all references to fiscal years in this Prospectus are to
the fiscal years ending on the final day of February of each year. Altec
Lansing(R), Dynacord(R), Electro-Voice(R), Gauss(R), Klark-Teknik(R), Manifold
Technology(R), University Sound(R) and Vega(R) are registered trademarks of the
Company and DDA(TM), Midas(TM), Electro Sound(TM) and Merlin(TM) are trademarks
of the Company.
THE COMPANY
COMPANY OVERVIEW
EVI, founded in 1928, is one of the largest manufacturers and marketers of
high-quality, high-performance sound system products for the professional audio
market. The Company manufactures and markets a comprehensive range of products
worldwide for professional audio systems, including microphones, mixing
consoles, signal processors, amplifiers and loudspeaker systems. The Company's
brands, which include Electro-Voice, Altec Lansing, Midas and Vega, are widely
recognized and respected in the professional audio market. Since its founding,
the Company has developed a number of technological innovations which are now
commonly used throughout the industry and has received numerous industry awards,
including a 1996 Emmy for advances in wireless microphone technology. The
Company's net sales and EBITDA for the twelve months ended February 28, 1997
were $192.0 million and $22.3 million (before post-acquisition management fees),
respectively.
The Company's products are used in airports, theaters, sports arenas,
concert halls, cinemas, stadiums, convention centers, television and radio
broadcast studios, houses of worship and other venues where music or speech is
amplified. EVI products have been installed in a wide variety of large public
venues, including the Metropolitan Opera House at Lincoln Center, the Hong Kong
Convention Center, Camden Yards, Fenway Park and Disney theme parks, and are
used by professional musicians, including major concert and touring artists such
as Alanis Morissette, KISS, Elton John, Sting, Metallica and Hootie and the
Blowfish. In addition, the Company's microphones are widely used in the
television and radio broadcast industry, including by the major U.S. television
networks and many radio performers.
Products sold to the professional audio market are designed for all types
of commercial venues and all levels of professional musicians. These products
are distinguished from consumer audio products, which are generally not suited
for professional use, by the unique performance requirements and generally
higher price points of professional audio products. In addition, professional
audio products are typically sold through distribution channels targeted at
professional musicians and contractors who design sound systems for commercial
use. The professional audio market is highly fragmented, with only a few major
manufacturers and a larger number of smaller manufacturers, many of which have
limited product lines. The worldwide market for professional audio products
includes countries in the Americas, Europe and Asia, as well as many emerging
markets.
The Company targets three principal lines of business within the overall
professional audio market: (i) Fixed Installation, or permanently installed
sound systems in public venues; (ii) Professional Music Retail, or sound
products used by professional musicians and sold principally through retail
channels; and (iii) Concert/Recording/Broadcast, or sound products used in
professional concerts, recording projects and radio and television broadcast.
EVI targets the upper tier of these business lines in terms of performance,
quality and price.
5
<PAGE> 7
COMPETITIVE STRENGTHS
Management believes that the following competitive strengths have
contributed significantly to the Company's historical growth and serve as a
foundation for the Company's continued growth:
Leading Brand Names. The Company's brand names include Electro-Voice,
Dynacord, Altec Lansing, Klark-Teknik, Midas, University Sound, Vega, DDA, Gauss
and Electro Sound. Management believes that these brand names, which have earned
numerous technological and industry awards, are among the most recognized and
respected names in the high-end professional audio market. EVI products are used
by a wide variety of professional musicians, ranging from local and regional
bands to major touring artists and performers such as Gloria Estefan, Rod
Stewart and Aerosmith. In addition, the Company's products are critical to the
amplification of voice and sound in such major venues as Atlanta's Hartsfield
International Airport, Macy's Thanksgiving Day Parade, Chicago's Soldier Field
and numerous cinemas and houses of worship across the United States.
Technological Innovation. EVI has pioneered the development of a number of
new professional audio technologies now widely used in the industry and
continues its commitment to technological innovation through new product
research and development. In order to build on its position as a leader in
technological innovation, the Company has increased its spending on research and
development from $4.9 million in fiscal year 1992 (or approximately 2.9% of
total revenues) to $8.2 million for the twelve months ended February 28, 1997
(or approximately 4.3% of total revenues). Management estimates that new
products or product upgrades introduced during fiscal years 1995 or 1996
accounted for approximately 13% of the Company's sales in the twelve months
ended February 28, 1997. A focus of the Company's current research and
development is the application of digital technology, which is intended to
exploit the industry-wide transition from analog to digital processing. EVI is
currently bringing to market its first integrated digital signal processing
system, which broadens the Company's portfolio of approximately 20 other digital
products.
International Marketing and Distribution. The Company's products are
marketed in over 50 countries worldwide, which reduces the Company's dependence
on any single geographic market. In recent years, over 50% of the Company's
sales have been made internationally. Unlike many of its competitors, which use
independent foreign distributors that generally sell a variety of competing
products, the majority of the Company's foreign sales efforts are conducted
through its foreign distribution subsidiaries. This network allows the Company
to control its international sales, marketing and operations and provides the
Company with an excellent platform from which to pursue its strategy of
penetrating new markets and expanding its worldwide presence.
Focus on Relationship Marketing. Since 1983, the Company has formally
pursued a strategy of developing market presence by building and maintaining
long-term relationships with its customers (which typically exceed ten years in
duration) through a number of customer-oriented initiatives. For example, a
number of the largest customers serve on Company advisory councils and meet with
the Company annually to exchange ideas regarding product development, design and
marketing. In addition, the Company regularly conducts training seminars
worldwide that provide technical training and marketing support to its customers
and end users. These councils, seminars and other customer-oriented initiatives
are a key to its recognition as one of "the manufacturers with the best customer
relationships" (Sound and Communications 1996 Contractors Survey). This approach
to relationship marketing enables the Company to be more responsive to
customers' needs and to anticipate more accurately current trends in the market.
Comprehensive Product Offerings. The Company is one of only a few
manufacturers that produce and globally market a comprehensive line of products
for the professional audio market. Management believes that its broad range of
offerings enables it to compete more effectively against many of its competitors
who carry a more limited line of products because the Company's customers are
able to meet end users' requirements across a broader range of applications with
EVI products. In addition, the Company's volume discount incentives encourage
customers to concentrate their purchases on EVI products.
Integrated Manufacturing. EVI manufactures substantially all of the
products it sells and most of the active acoustic components that its products
contain, which distinguishes the Company from many of its
6
<PAGE> 8
competitors. This substantial level of manufacturing integration enables the
Company to reduce the time to market of new product introductions, provide
consistent, premium quality to customers and respond more effectively to
customer delivery and product feature requirements. Management believes these
factors result in a significant advantage over competitors, who outsource a
portion of their production.
BUSINESS STRATEGY
The Company's current strategy is to further increase revenues and improve
operating margins, thereby strengthening its position as a leading manufacturer
and distributor of products to the professional audio market. To achieve these
goals, the Company intends to: (i) enhance marketing efforts; (ii) expand
worldwide presence; (iii) increase operating efficiencies; and (iv) pursue
strategic acquisitions.
Enhance Marketing Efforts. The Company plans to stimulate demand for its
products and increase its brand equity by marketing directly to end users.
Currently, the Company's primary print advertising effort is directed to leading
trade magazines aimed at contractors, music retailers and distributors. A
strategic decision to influence end users as well as the Company's customers is
planned to begin in fiscal year 1998 with the objective of enhancing brand
awareness and brand equity of the Company's products among end users. Plans to
implement this strategy include advertising in consumer magazines, increased
public relations, direct mail, point-of-purchase campaigns, a Company web site
and increasing the frequency of product training programs.
Expand Worldwide Presence. The Company intends to increase its market
position by expanding its extensive distribution network and broadening its
product offerings in existing distribution channels. The Company is currently
focusing its expansion efforts on increasing sales in emerging markets,
including Argentina, Brazil, Chile, China, India and the former Soviet Union.
Management believes that its extensive experience in operating overseas
(including in emerging markets) and its network of foreign subsidiary
distributors provide a strong foundation for its future international expansion
and a significant competitive advantage.
Increase Operating Efficiencies. Management believes opportunities exist
to continue to reduce manufacturing costs and increase manufacturing
efficiencies and is planning to implement re-engineering programs at certain of
the Company's manufacturing facilities. Management estimates that planned
capital expenditures of approximately $2.9 million in fiscal years 1998 and 1999
will result in annual cost savings of approximately $1.8 million. For example,
the Company plans to establish a higher quality and more efficient electronics
production capability, which management expects will generate significant
operating savings and increase the Company's competitiveness in electronics
production. The Company continuously assesses its manufacturing operations to
control or reduce costs, and re-engineers production as necessary. The Company
also intends to continue its CARE process ("Customers Are the Real Employers"),
which utilizes total quality management principles to maximize operating
efficiencies.
Pursue Strategic Acquisitions. The professional audio industry is highly
fragmented, which management believes presents significant consolidation
opportunities. Subject to market conditions and the availability of financing,
the Company plans to pursue acquisition opportunities that complement and expand
its core businesses or that enable the Company to enter new markets. Management
believes that it can leverage the Company's production, distribution and
administrative capabilities to generate significant incremental revenue and cash
flow through strategic acquisitions. Since 1984, the Company has successfully
integrated six business acquisitions and eight brand names into its existing
operations.
7
<PAGE> 9
THE TRANSACTIONS
On February 10, 1997 (the "Acquisition Closing Date"), an acquisition
subsidiary wholly owned by Greenwich Street Capital Partners, L.P. ("GSCP") and
certain affiliated investors acquired from Mark IV Industries, Inc. ("Mark IV")
and one of its subsidiaries all of the issued and outstanding capital stock of
the Company (the "Acquisition") for an initial cash purchase price of $151.5
million, plus $4.9 million in estimated adjustments paid on the Closing Date
(subject to further post-closing adjustment). See "The Acquisition."
Additionally, on the same date the Company entered into a Transition Services
Agreement with Mark IV under which Mark IV provides certain financial and tax
accounting assistance and other services to the Company for a period of up to
twelve months from the Acquisition Closing Date. See "Relationships with Mark
IV--Transition Services Agreement."
Financing for the Acquisition, and the related fees and expenses, consisted
of (i) $57.6 million of equity capital (the "GSCP Equity Investment") provided
by GSCP and certain affiliated investors, (ii) a $60.0 million senior secured
credit facility (the "Senior Credit Facility"), consisting of (a) a $35.0
million term loan facility (the "Term Loan Facility"), all of which was drawn
down on the Acquisition Closing Date, and (b) a $25.0 million revolving credit
facility (the "Revolving Credit Facility"), none of which has been drawn, and
(iii) a $75.0 million senior subordinated credit facility issued as interim
financing (the "Senior Subordinated Facility"). The Acquisition, the financing
thereof (not including the Offering) and the payment of the related fees and
expenses are herein referred to as the "Transactions." See "The Acquisition" and
"Description of Credit Facilities--Senior Credit Facility."
The sources and uses of funds for the Transactions were as follows:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
---------------------
<S> <C>
Sources:
Senior Credit Facility:
Revolving Credit Facility(a)........................................... $ --
Term Loan Facility..................................................... 35.0
Senior Subordinated Facility............................................. 75.0
GSCP Equity Investment................................................... 57.6
------
Total Sources....................................................... $ 167.6
======
Uses:
Purchase price of the acquisition:
Initial purchase price................................................. $ 151.5
Additional purchase price paid on the Closing Date(b).................. 4.9
Transaction fees and expenses............................................ 10.4
Working capital.......................................................... 0.8
------
Total Uses.......................................................... $ 167.6
======
</TABLE>
- ---------------
(a) On the Acquisition Closing Date, borrowings of up to $13.8 million under the
Revolving Credit Facility were available for working capital and general
corporate purposes, after giving effect to borrowing base restrictions and
to the issuance of letters of credit totalling $3.8 million. See
"Description of Credit Facilities--Senior Credit Facility."
(b) Subject to further post-closing adjustment. See "The Acquisition."
USE OF PROCEEDS OF THE OFFERING
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds from the Offering (approximately $96 million) were used to repay (i)
all amounts outstanding under the Senior Subordinated Facility ($75.0 million,
plus accrued but unpaid interest) and (ii) $17.0 million of indebtedness
outstanding under the Term Loan Facility. The Company will use the balance of
such proceeds for working capital and general corporate purposes. See "Use of
Proceeds."
8
<PAGE> 10
OWNERSHIP
GSCP is a private direct equity investment fund organized in 1994 to
provide long-term capital for and make acquisitions in companies in a variety of
industries. GSCP invests in management buyouts, leveraged acquisitions,
international investment opportunities and minority investments. Upon completion
of the Acquisition, GSCP and its co-investors became the owners, indirectly, of
100% of the voting securities of the Company. See "Description of Capital
Stock." GSCP's significant portfolio investments include Marcus Cable Company,
L.P., Rifkin Acquisition Partners, L.L.L.P., Mercury Radio Communications, L.P.,
Seguros Comercial America, S.A. de C.V. and Telegroup, Inc. GSCP has recently
acquired control of Telex Communications Group, Inc.
THE EXCHANGE OFFERING
Registration Agreement..... The Existing Notes were issued on March 19, 1997 to
the initial purchasers (the "Initial Purchasers")
of the Existing Notes. The Initial Purchasers
resold the Existing Notes to certain qualified
institutional buyers in reliance on, and subject to
the restrictions imposed pursuant to, Rule 144A of
the Securities Act. In connection therewith, the
Company and the Initial Purchasers entered into the
Exchange and Registration Rights Agreement, dated
as of March 24, 1997 (the "Exchange and
Registration Rights Agreement"), providing, among
other things, for the Exchange Offer. See "The
Exchange Offer."
The Exchange Offer......... New Notes are being offered in exchange for an
equal principal amount of Existing Notes. As of the
date hereof, $100,000,000 aggregate principal
amount of Existing Notes is outstanding. Existing
Notes may be tendered only in integral multiples of
$1,000.
Resale of New Notes........ Based on interpretations by the Staff of the
Commission as set forth in no-action letters issued
to third parties, the Company believes that the New
Notes issued pursuant to the Exchange Offer may be
offered for resale, resold or otherwise transferred
by any holder thereof (other than any such holder
that is a broker-dealer or an "affiliate" of the
Company within the meaning of Rule 405 under the
Securities Act) without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that (i) such New
Notes are acquired in the ordinary course of
business, (ii) at the time of the commencement of
the Exchange Offer such holder has no arrangement
with any person to participate in a distribution of
the New Notes and (iii) such holder is not engaged
in, and does not intend to engage in, a
distribution of the New Notes. By tendering
Existing Notes in exchange for New Notes, each
holder will represent to the Company that: (i) it
is not such an affiliate of the Company, (ii) any
New Notes to be received by it will be acquired in
the ordinary course of business and (iii) at the
time of the commencement of the Exchange Offer it
had no arrangement with any person to participate
in a distribution of the New Notes and, if such
holder is not a broker-dealer, it is not engaged
in, and does not intend to engage in, a
distribution of New Notes. If a holder of Existing
Notes is unable to make the foregoing
representations, such holder may not rely on the
applicable interpretations of the Staff of the
Commission and must comply with the registration
and prospectus delivery requirements of the
Securities Act in connection with any secondary
resale transaction.
Each broker-dealer that receives New Notes for its
own account pursuant to the Exchange Offer must
acknowledge that it will deliver a
9
<PAGE> 11
prospectus in connection with any resale of such
New Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales
of New Notes where such Existing Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities. The Company has agreed that, starting
on the Expiration Date and ending on the close of
business 90 days after the Expiration Date, it will
make this Prospectus available to any participating
broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
To comply with the securities laws of certain
jurisdictions, it may be necessary to qualify for
sale or register the New Notes prior to offering or
selling such New Notes. The Company has agreed,
pursuant to the Registration Agreement and subject
to certain specified limitations therein, to
register or qualify the New Notes for offer or sale
under the securities or "blue sky" laws of such
jurisdictions as may be necessary to permit the
holders of New Notes to trade the New Notes without
any material restrictions or limitations under the
securities laws of the several states of the United
States.
Consequences of Failure to
Exchange Existing
Notes.................... Upon consummation of the Exchange Offer, subject to
certain limited exceptions, holders of Existing
Notes who do not exchange their Existing Notes for
New Notes in the Exchange Offer will no longer be
entitled to registration rights and will not be
able to offer or sell their Existing Notes, unless
such Existing Notes are subsequently registered
under the Securities Act (which, subject to certain
limited exceptions, the Company will have no
obligation to do), except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws. See "The Exchange Offer -- Terms of the
Exchange Offer" and "-- Consequences of Failure to
Exchange."
Expiration Date............ 5:00 p.m., New York City time, on , 1997 (30
calendar days following the commencement of the
Exchange Offer), unless the Exchange Offer is
extended, in which case the term "Expiration Date"
means the latest date and time to which the
Exchange Offer is extended.
Interest on the New
Notes.................... The New Notes will accrue interest at a rate of 11%
per annum from March 19, 1997, the issue date of
the Existing Notes. Interest on the New Notes is
payable on March 15 and September 15 of each year,
commencing on September 15, 1997.
Conditions to the
Exchange Offer........... The Exchange Offer is not conditioned upon any
minimum principal amount of Existing Notes being
tendered for exchange. However, the Exchange Offer
is subject to certain customary conditions, which
may be waived by the Company. See "The Exchange
Offer -- Conditions." Except for the requirements
of applicable federal and state securities laws,
there are no federal or state regulatory
requirements to be complied with or obtained by the
Company in connection with the Exchange Offer.
10
<PAGE> 12
Procedures for Tendering
Existing Notes........... Each holder of Existing Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with any other required documentation to the
Exchange Agent (as defined herein) at the address
set forth herein and effect a tender of Existing
Notes pursuant to the procedures for book-entry
transfer as provided for herein. See "The Exchange
Offer -- Procedures for Tendering" and "-- Book
Entry Transfer."
Guaranteed Delivery
Procedures............... Holders of Existing Notes who wish to tender their
Existing Notes and who cannot deliver their
Existing Notes and a properly completed Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent prior
to the Expiration Date may tender their Existing
Notes according to the guaranteed delivery
procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders of Existing Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the
Expiration Date. To withdraw a tender of Existing
Notes, a written or facsimile transmission notice
of withdrawal must be received by the Exchange
Agent at its address set forth herein under "The
Exchange Offer -- Exchange Agent" prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Existing
Notes and Delivery of New
Notes.................... Subject to certain conditions, any and all Existing
Notes that are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on
the Expiration Date will be accepted for exchange.
The New Notes issued pursuant to the Exchange Offer
will be delivered promptly following the Expiration
Date. See "The Exchange Offer -- Terms of the
Exchange Offer."
Certain U.S. Tax
Consequences............. The exchange of Existing Notes for New Notes should
not constitute a taxable exchange for U.S. federal
income tax purposes. See "Certain Federal Income
Tax Considerations."
Exchange Agent............. The Bank of New York is serving as exchange agent
(the "Exchange Agent") in connection with the
Exchange Offer.
Fees and Expenses.......... All expenses incident to the Company's consummation
of the Exchange Offer and compliance with the
Registration Agreement will be borne by the
Company. See "The Exchange Offer -- Fees and
Expenses."
Use of Proceeds............ There will be no cash proceeds payable to the
Company from the issuance of the New Notes pursuant
to the Exchange Offer. The proceeds from the sale
of the Existing Notes were used to repay amounts
outstanding under the Senior Subordinated Facility
and the Term Loan Facility. The Company will use
the balance of such proceeds for working capital
and general corporate purposes. See "Use of
Proceeds".
11
<PAGE> 13
SUMMARY OF TERMS OF NEW NOTES
The Exchange Offer relates to the exchange of up to $100,000,000 aggregate
principal amount of Existing Notes for an equal aggregate principal amount of
New Notes. New Notes will be entitled to the benefits of the same Indenture (as
defined therein) that governs the Existing Notes and will govern the New Notes.
The form and terms of the New Notes are identical in all material respects to
the form and terms of the Existing Notes, except that the New Notes will have
been registered under the Securities Act, and thus will not bear restrictive
legends restricting their transfer pursuant to the Securities Act. See
"Description of Notes."
Maturity................... March 15, 2007.
Interest Payment Dates..... March 15 and September 15 of each year, commencing
on September 15, 1997.
Sinking Fund............... None.
Optional Redemption........ Except as described below, the Company may not
redeem the Notes prior to March 15, 2002. On or
after such date, the Company may redeem the Notes,
in whole or in part, at the redemption prices set
forth herein together with accrued and unpaid
interest, if any, to the date of redemption. In
addition, at any time and from time to time on or
prior to March 15, 2000 the Company, at its option,
may redeem up to 33 1/3% of the original aggregate
principal amount of the Notes with the net cash
proceeds of one or more Public Equity Offerings (as
defined) by the Company following which there is a
Public Market (as defined), at a redemption price
equal to 111% of the principal amount of the Notes
to be redeemed, together with accrued and unpaid
interest, if any, to the date of redemption,
provided that at least 66 2/3% of the original
aggregate principal amount of the Notes remains
outstanding immediately after each such redemption.
See "Description of Notes -- Optional Redemption."
Change of Control.......... Upon the occurrence of a Change of Control (as
defined), (i) the Company will have the option at
any time prior to March 15, 2002, to redeem the
Notes, in whole, at a redemption price equal to
100% of the principal amount thereof plus the
Applicable Premium (as defined), together with
accrued and unpaid interest, if any, to the date of
redemption, and (ii) if the Company does not redeem
the Notes, or if such Change of Control occurs on
or after March 15, 2002, each holder will have the
right to require the Company to repurchase the
Notes held by such holder at a price equal to 101%
of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of
repurchase. See "Description of Notes -- Change of
Control."
Subsidiary Guarantees...... The Notes will be unconditionally guaranteed on an
unsecured, senior subordinated basis by each
Subsidiary of the Company (other than Foreign
Subsidiaries and Unrestricted Subsidiaries) that is
a Significant Subsidiary (as defined) created or
acquired after the Issue Date (collectively, the
"Note Guarantors"). See "Description of Credit
Facilities" and "Description of Notes -- Additional
Note Guarantors."
Ranking.................... The Notes will be unsecured and will be
subordinated in right of payment to all existing
and future Senior Indebtedness (as defined) of the
Company and will be effectively subordinated to all
obligations of the subsidiaries of the Company. The
Notes will rank pari passu with any future Senior
Subordinated Indebtedness (as defined) of the
Company and will rank senior to all other
subordinated indebtedness of the
12
<PAGE> 14
Company. The Note Guarantees will be general,
unsecured obligations of the Note Guarantors,
subordinated in right of payment to all existing
and future Guarantor Senior Indebtedness (as
defined) of the Note Guarantors. As of February 28,
1997, on a pro forma basis after giving effect to
the Transactions, the Offering and the application
of proceeds therefrom, the Company would have had
outstanding $18.0 million (exclusive of unused
commitments) of Senior Indebtedness (all of which
is secured) and no Senior Subordinated Indebtedness
other than the Notes. See "Description of
Notes -- Ranking."
Restrictive Covenants...... The indenture under which the Notes will be issued
(the "Indenture") will limit: (i) the incurrence of
additional Indebtedness (as defined) by the Company
and its Restricted Subsidiaries (as defined); (ii)
the layering of Indebtedness; (iii) the payment of
dividends on, and redemption of, capital stock of
the Company and its Restricted Subsidiaries and the
redemption of certain subordinated obligations of
the Company and its Restricted Subsidiaries; (iv)
investments; (v) sales of assets and Restricted
Subsidiary stock; (vi) certain transactions with
affiliates; (vii) the sale or issuance of preferred
stock of Restricted Subsidiaries; (viii) the
creation and existence of liens; and (ix)
consolidations, mergers and transfers of all or
substantially all of the Company's assets. The
Indenture will also prohibit certain restrictions
on distributions from Restricted Subsidiaries.
However, all of these limitations and prohibitions
are subject to a number of important qualifications
and exceptions.
See "Description of Notes -- Certain Covenants" and
"-- Merger and Consolidation."
RISK FACTORS
Prospective investors should carefully consider all of the information set
forth in this Prospectus, in particular, should evaluate the specific factors
set forth under "Risk Factors" for risks involved with an investment in the
Notes.
13
<PAGE> 15
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table sets forth summary financial data of the Company for
each of the five fiscal years during the period ended February 28, 1997. The
statement of operations and balance sheet data set forth below are derived from
and should be read in conjunction with the Company's consolidated financial
statements and notes thereto included elsewhere in this Prospectus. The
statement of operations data set forth below with respect to fiscal years ended
February 28, 1994 and 1995, and February 29, 1996 are derived from and should be
read in conjunction with the Company's consolidated financial statements and
notes thereto included elsewhere in this Prospectus which have been audited by
Coopers & Lybrand L.L.P., independent public accountants. The statement of
operations data for the period from March 1, 1996 through February 10, 1997 and
for the period from February 11, 1997 through February 28, 1997 and the balance
sheet data as of February 28, 1997 have been audited by Arthur Andersen LLP. The
data presented for fiscal year ended February 28, 1993 are derived from the
unaudited consolidated financial statements and include, in the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the data for such period. The pro forma financial
data have been derived from the Unaudited Pro Forma Financial Information and
the related notes thereto included elsewhere in this Prospectus. The pro forma
information does not purport to represent what the Company's results would have
actually been if the Transactions, the Offering and the application of the
proceeds therefrom had occurred on the dates indicated nor does such information
purport to project the results of the Company for any future period. The summary
financial data below should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," "Unaudited Pro
Forma Financial Information," "Selected Historical and Pro Forma Financial
Information" and the audited financial statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR BASIS OF ACCOUNTING NEW BASIS OF ACCOUNTING
-------------------------------------------------- -------------------------
PERIOD FROM PERIOD FROM
FISCAL YEAR ENDED THE LAST DAY OF MARCH 1, 1996, FEBRUARY 11,
FEBRUARY, THROUGH 1997, THROUGH PRO FORMA
--------------------------------- FEBRUARY 10, FEBRUARY 28, FISCAL
1993 1994 1995 1996 1997 1997 1997 (a)
------ ------ ------ ------ -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................... $176.7 $173.6 $185.3 $195.5 $177.1 $14.9 $ 192.0
Cost of products sold............... 117.9 115.6 125.3 134.5 121.4 10.1 131.5
------ ------ ------ ------ ------ ----- ------
Gross profit........................ 58.8 58.0 60.0 61.0 55.7 4.8 60.6
Selling and administration.......... 29.4 28.5 29.4 30.0 28.4 1.7 31.3
Research and development............ 5.5 5.5 6.3 8.2 7.7 0.5 8.2
Depreciation and amortization....... 4.5 4.4 4.8 5.1 5.1 0.3 5.9
------ ------ ------ ------ ------ ----- ------
Operating income(b)................. 19.4 19.6 19.5 17.7 14.5 2.3 15.2
Interest expense.................... -- -- -- -- -- 0.8 13.3
Other income........................ -- -- -- 0.4(c) -- -- --
------ ------ ------ ------ ------ ----- ------
Income before income taxes.......... 19.4 19.6 19.5 18.1 14.5 1.5 1.9
Income tax provision................ 7.4 7.3 7.5 7.1 6.2 0.7 1.4
------ ------ ------ ------ ------ ----- ------
Net income.......................... $ 12.0 $ 12.3 $ 12.0 $ 11.0 $ 8.3 $ 0.8 $ 0.5
====== ====== ====== ====== ====== ===== ======
OTHER FINANCIAL DATA:
EBITDA(d)........................... $ 23.9 $ 24.0 $ 24.3 $ 22.8 $ 19.6 $ 2.7 $ 21.1
EBITDA margin(e).................... 13.5% 13.8% 13.1% 11.7% 11.1% 17.9% 11.0%
Capital expenditures................ $ 1.6 $ 2.6 $ 4.6 $ 3.7 $ 3.3 $ 0.1 $ 3.4
Cash interest expense(f)............ -- -- -- -- -- 0.6 $ 12.5
Ratio of EBITDA to cash interest
expense........................... -- -- -- -- -- -- 1.7
Ratio of EBITDA minus capital
expenditures to cash interest
expense........................... -- -- -- -- -- -- 1.4
</TABLE>
<TABLE>
<CAPTION>
AS OF FEBRUARY 28, 1997
----------------------------
HISTORICAL PRO FORMA
----------------- ---------
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital............................................................... $77.5 $ 81.4
Total assets.................................................................. 208.1 210.9
Total debt.................................................................... 110.1 118.0
Stockholder's equity.......................................................... 58.4 55.3
</TABLE>
See Notes to Summary Historical and Pro Forma Financial Information.
14
<PAGE> 16
NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(a) The pro forma statement of income data for the fiscal year ended February
28, 1997 give effect to (i) the Acquisition and (ii) the Offering (and
application of proceeds therefrom) as though each had occurred as of the
first day of the fiscal year. The pro forma balance sheet data as of
February 28, 1997 give effect to the Offering (and application of proceeds
therefrom) as though it had occurred as of February 28, 1997.
(b) Represents income from operations before other income and provision for
interest and taxes.
(c) Represents a one-time gain on the sale of land in Germany.
(d) EBITDA represents earnings before interest expense, other income, income
taxes, depreciation and amortization. EBITDA is included because management
understands that such information is considered by certain investors to be
an additional basis on which to evaluate the Company's ability to pay
interest, repay debt and make capital expenditures. Excluded from EBITDA are
interest, other income, income taxes, depreciation and amortization, each of
which can significantly affect the Company's results of operations and
liquidity and should be considered in evaluating the Company's financial
performance. EBITDA is not intended to represent and should not be
considered more meaningful than, or an alternative to, measures of operating
performance as determined in accordance with generally accepted accounting
principles.
(e) Represents EBITDA as a percentage of net sales.
(f) Represents the interest expense exclusive of bank agency fees and
amortization of deferred financing costs.
15
<PAGE> 17
RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering their Existing Notes for New Notes, holders of Existing Notes should
consider carefully the following factors, which are generally applicable to the
Existing Notes and the New Notes.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS
As a result of the Transactions, the Company is highly leveraged, with
indebtedness that is substantial in relation to its stockholder's equity. After
giving pro forma effect to the Offering and the application of proceeds
therefrom, the Company's aggregate outstanding indebtedness would have been
$118.0 million as of February 28, 1997 and the Company's shareholder's equity
would have been $55.3 million as of the same date. The Senior Credit Facility
will permit the Company to incur or guarantee certain additional indebtedness,
subject to certain limitations. See "Selected Historical and Pro Forma Financial
Information" and "Description of Credit Facilities -- Senior Credit Facility."
The Company's high degree of leverage could have important consequences,
including but not limited to the following: (i) the Company's ability to obtain
additional financing for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes may be impaired in the future; (ii)
a substantial portion of the Company's cash flow from operations must be
dedicated to the payment of principal and interest on its indebtedness, thereby
reducing the funds available to the Company for other purposes; and (iii) the
Company's flexibility to adjust to changing market conditions and ability to
withstand competitive pressures could be limited, and the Company may be more
vulnerable to a downturn in general economic conditions or its business or may
be unable to carry out capital spending that is important to its growth
strategy.
The Company's ability to repay or to refinance its obligations with respect
to its indebtedness will depend on its financial and operating performance,
which, in turn, is subject to prevailing economic and competitive conditions and
to certain financial, business and other factors, many of which are beyond the
Company's control. These factors could include operating difficulties, increased
operating costs, product prices, the response of competitors, regulatory
developments, and delays in implementing strategic projects. The Company's
ability to meet its debt service and other obligations may depend in significant
part on the extent to which the Company can implement successfully its business
strategy. There can be no assurance that the Company will be able to implement
fully its strategy or that the anticipated results of its strategy will be
realized. See "Business -- Strategy."
If the Company's cash flow and capital resources are insufficient to fund
its debt service obligations, the Company may be forced to reduce or delay
capital expenditures, sell assets, seek to obtain additional equity capital or
restructure its debt. There can be no assurance that the Company's cash flow and
capital resources will be sufficient for payment of interest on and principal of
its indebtedness in the future, or that any such alternative measures would be
successful or would permit the Company to meet its scheduled debt service
obligations. In addition, because the Company's obligations under the Senior
Credit Facility will bear interest at floating rates, an increase in interest
rates could adversely affect, among other things, the Company's ability to meet
its debt service obligations. In the absence of sufficient cash flow or capital
resources, the Company could face substantial liquidity problems and might be
required to dispose of material assets or operations to meet its debt service
and other obligations, and there can be no assurance as to whether the Company's
lenders would consent thereto, or as to the timing of such sales or the proceeds
which the Company could realize therefrom.
SUBORDINATION OF NOTES
The payment of principal of and interest on, and any premium or other
amounts owing in respect of, the Notes will be subordinated to the prior payment
in full of all existing and future Senior Indebtedness of the Company, including
all amounts owing or guaranteed under the Senior Credit Facility. Consequently,
in the event of a bankruptcy, liquidation, dissolution, reorganization or
similar proceeding with respect to the Company, assets of the Company will be
available to pay obligations on the Notes only after all Senior
16
<PAGE> 18
Indebtedness of the Company has been paid in full, and there can be no assurance
that there will be sufficient assets to pay amounts due on any or all of the
Notes.
EVI Audio Holding, Inc. ("Holding"), the Company's direct parent company,
has guaranteed the Company's obligations under the Senior Credit Facility. The
Indenture will permit the Company and Holding to incur or have outstanding
certain secured indebtedness, including indebtedness under the Senior Credit
Facility. See "Description of Senior Credit Facilities -- Senior Credit
Facility -- Security, Guarantees." Accordingly, if an event of default occurs
under the Senior Credit Facility the lenders thereunder will have a prior right
to the assets of the Company and the assets of Holding, and may foreclose upon
such collateral to the exclusion of the holders of the Notes, notwithstanding
the existence of an event of default with respect thereto. In such event, such
assets would first be used to repay in full amounts outstanding under the Senior
Credit Facility, resulting in all or a portion of the Company's assets and the
assets of Holding being unavailable to satisfy the claims of the holders of the
Notes and other unsecured indebtedness.
RESTRICTIVE FINANCING COVENANTS
The Senior Credit Facility contains a number of significant covenants that,
among other things, restrict the ability of the Company and its subsidiaries to:
(i) dispose of assets; (ii) incur additional indebtedness; (iii) incur guarantee
obligations; (iv) prepay other indebtedness or amend certain other debt
instruments; (v) pay dividends; (vi) create liens on assets; (vii) enter into
sale and leaseback transactions; (viii) make investments, loans or advances;
(ix) make acquisitions; (x) engage in mergers or consolidations; (xi) change the
business conducted by the Company; (xii) make capital expenditures; or (xiii)
engage in certain transactions with affiliates, and otherwise restrict certain
corporate activities. In addition, under the Senior Credit Facility the Company
is required to comply with specified financial ratios and tests, including
minimum fixed charge coverage ratios, maximum leverage ratios and minimum EBITDA
requirements. See "Description of Credit Facilities -- Senior Credit Facility."
The Senior Credit Facility also has certain cross-default provisions, which
are triggered if, among other factors, Holding or any of its subsidiaries
defaults in the payment of any principal of or interest on any indebtedness in
excess of $1.0 million. There can be no assurance that these requirements will
be met in the future. The Company's ability to comply with these covenant
requirements may be affected by events beyond its control, including prevailing
economic, financial and industry conditions. The breach of any such covenants or
restrictions could result in a default under the Senior Credit Facility that
would permit the lenders thereunder to declare all amounts outstanding
thereunder to be immediately due and payable, together with accrued and unpaid
interest, and the commitments of the lenders under the Revolving Credit Facility
to make further extensions of credit thereunder could be terminated.
CHANGE OF CONTROL
The occurrence of certain of the events that would constitute a Change of
Control may result in a default, or otherwise require repayment of indebtedness
under both the Notes and the Senior Credit Facility. In addition, the Senior
Credit Facility prohibits the repayment of indebtedness of the Notes by the
Company in such an event, unless and until such time as the indebtedness under
the Senior Credit Facility is repaid in full. The Company's failure to make such
repayments in such instances would result in a default under both the Notes and
the Senior Credit Facility. The inability to repay the indebtedness under the
Senior Credit Facility, if accelerated, would also constitute an event of
default under the Indenture, which could have materially adverse consequences to
the Company and to the holders of the Notes. Future indebtedness of the Company
may also contain restrictions or repayment requirements with respect to certain
events or transactions that could constitute a Change of Control. In the event
of a Change of Control, there can be no assurance that the Company would have
sufficient assets to satisfy all of its obligations under the Notes or the
Senior Credit Facility. See "Description of Notes -- Change of Control."
17
<PAGE> 19
FRAUDULENT TRANSFER CONSIDERATIONS
The incurrence by the Company of indebtedness, such as the Notes, to
finance or refinance the Acquisition may be subject to review under federal
bankruptcy law or relevant state fraudulent conveyance laws if a bankruptcy case
or lawsuit is commenced by or on behalf of unpaid creditors of the Company.
Under these laws, if, in a bankruptcy or reorganization case or a lawsuit by or
on behalf of unpaid creditors of the Company, a court were to find that, at the
time the Company incurred indebtedness, (i) the Company incurred such
indebtedness with the intent of hindering, delaying or defrauding current or
future creditors or (ii) (a) the Company received less than reasonably
equivalent value or fair consideration for incurring such indebtedness and (b)
the Company (1) was insolvent or was rendered insolvent by reason of any of the
Transactions, including the incurrence of the indebtedness to fund the
Acquisition, (2) was engaged, or about to engage, in a business or transaction
for which its assets constituted unreasonably small capital, (3) intended to
incur, or believed that it would incur, debts beyond its ability to pay as such
debts matured (as all of the foregoing terms are defined in or interpreted under
the relevant fraudulent transfer or conveyance statutes) or (4) was a defendant
in an action for money damages, or had a judgment for money damages docketed
against it (if, in either case, after final judgment the judgment is
unsatisfied), then such court could avoid or subordinate the amounts owing under
the Notes to presently existing and future indebtedness of the Company and take
other actions detrimental to the holders of the Notes.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law of the jurisdiction that is being applied in any
such proceeding. Generally, however, the Company would be considered insolvent
if, at the time it incurred the indebtedness, either (i) the sum of its debts
(including contingent liabilities) is greater than its assets, at a fair
valuation, or (ii) the present fair saleable value of its assets is less than
the amount required to pay the probable liability on its total existing debts
and liabilities (including contingent liabilities) as they become absolute and
matured. There can be no assurance as to what standards a court would use to
determine whether the Company was solvent at the relevant time, or whether,
whatever standard was used, the Notes would not be avoided or further
subordinated on another of the grounds set forth above. In rendering their
opinions in connection with the initial borrowings and the issuance of the
Notes, counsel for the Company and counsel for the lenders will not express any
opinion as to the applicability of Federal or State fraudulent transfer and
conveyance laws.
The Company believes that at the time the indebtedness constituting the
Notes will initially be incurred by the Company, the Company (i) was (a) neither
insolvent nor rendered insolvent thereby, (b) in possession of sufficient
capital to run its businesses effectively and (c) incurring debts within its
ability to pay as the same mature or become due and (ii) had sufficient assets
to satisfy any probable money judgment against it in any pending action. In
reaching the foregoing conclusions, the Company has relied upon its analyses of
internal cash flow projections and estimated values of assets and liabilities of
the Company. There can be no assurance, however, that a court passing on such
questions would reach the same conclusions.
CHANGING TECHNOLOGY
Technological innovation and leadership are among the important factors in
competing successfully in the professional audio market. The Company's future
results will depend in part upon its ability to make timely and cost-effective
enhancements and additions to its technology and to introduce new products that
meet customer demands, including products utilizing digital technology, which
are increasingly being introduced in the professional audio industry. The
success of current and new product offerings is dependent on several factors,
including proper identification of customer needs, technological development,
cost, timely completion and introduction, differentiation from offerings of the
Company's competitors and market acceptance. Maintaining flexibility to respond
to technological and market dynamics may require substantial expenditures. There
can be no assurance that the Company will successfully identify and develop new
products in a timely manner, that products or technologies developed by others
will not render the Company's products obsolete or noncompetitive or that
constraints on the Company's financial resources will not adversely affect its
ability to develop and implement technological advances. See
"Business -- Product Development."
18
<PAGE> 20
RISKS RELATING TO GROWTH
The Company's business strategy includes plans for pursuing growth in
certain foreign markets. See "Business -- Strategy." The Company's international
prospects could be adversely affected by factors such as reversals or delays in
the opening of foreign markets, exchange controls and other trade regulation,
currency and political risks, taxation and economic and market conditions in
targeted foreign markets. There can be no assurance as to the extent, if at all,
that the Company's plans to pursue growth in international markets will be
successful. The Company's business strategy also includes plans to pursue growth
through strategic acquisitions. See "Business -- Strategy." The Senior Credit
Facility prohibits making certain acquisitions in an aggregate amount over $7.5
million and incurring additional indebtedness greater than 65% of the purchase
price of any such acquisition. In addition, acquisitions that the Company may
make or enter into will involve risks, including the successful integration and
management of acquired technology, operations and personnel. The integration of
acquired businesses may also lead to the loss of key employees of the acquired
companies and diversion of management attention from ongoing business concerns.
There can be no assurance that any acquisition will be made, that the Company
will be able to obtain additional financing needed to finance such transactions
and, if any acquisitions are so made, that they will be successful.
INTELLECTUAL PROPERTY RIGHTS
Among the Company's significant assets are its intellectual property
rights. The Company relies on a combination of copyright, trademark and patent
laws to protect these assets, and to a significant degree, on trade secrets,
confidentiality procedures and contractual provisions which may afford more
limited legal protections. In addition, the laws of some foreign jurisdictions
may provide less protection than the laws of the United States for the Company's
proprietary rights.
The Company has not registered its significant trademarks in all foreign
jurisdictions in which it does business and there can be no assurance that
attempts at registration in every foreign jurisdiction would be successful. The
Company is aware that, in certain foreign jurisdictions, unaffiliated third
parties have applied for and/or obtained registrations for marks identical with
or similar to the Company's marks. Use or registration of the Company's
trademarks by the Company in such jurisdictions may be prohibited, and the
Company's business may be materially adversely affected thereby. In addition,
unauthorized use of the Company's intellectual property could have a material
adverse effect on the Company, and there can be no assurance that the Company's
legal remedies would adequately compensate it for the damages to its business
caused by such use.
The Company does not believe that any of its products currently infringe
upon the proprietary rights of third parties in any material respect. There can
be no assurance, however, that third parties will not claim infringement by the
Company with respect to current or future products. Any such claim, with or
without merit, could result in substantial costs and diversion of management
resources, and a successful claim could restrict or block the Company's ability
to manufacture, distribute or license its products or otherwise have a material
adverse effect on the financial condition and results of operations of the
Company.
ENVIRONMENTAL MATTERS
The Company and its operations are subject to extensive and changing U.S.
federal, state and local and foreign environmental laws and regulations,
including, but not limited to, laws and regulations that impose liability on
responsible parties to remediate, or contribute to the costs of remediating,
current or formerly owned or leased sites or other sites where solid or
hazardous wastes or substances were disposed of or released into the
environment. These remediation requirements may be imposed without regard to
fault or legality at the time of the disposal or release. The Company believes
that it currently conducts its operations, and in the past has operated its
business, in substantial compliance with applicable environmental laws and
regulations. From time to time, however, operations of the Company have
resulted, and may result in the future, in non-compliance or liability with
respect to such laws and regulations.
The Company (or, for certain sites, Mark IV, on behalf of the Company) has
undertaken or currently is undertaking remediation of contamination at certain
of its currently or formerly owned sites (some of which
19
<PAGE> 21
are unrelated to the audio business) and the Company has agreed it is a de
minimis responsible party at a number of other such sites which have been
designated as Superfund sites under U.S. environmental laws. The Company
recently had Phase I Environmental Site Assessment and Compliance Reviews
conducted by a third-party environmental consultant at all of its manufacturing
sites and is aware of environmental conditions at certain of such sites that
require or may require remediation or continued monitoring. Mark IV has agreed
to indemnify the Company for the costs of remediation or monitoring at all the
Superfund sites and certain other sites. See "Business -- Environmental" and
"Relationships with Mark IV -- Purchase Agreement."
There can be no assurance that the Company's estimated environmental
expenditures, which the Company believes to be reasonable, will cover in full
the actual amounts of environmental obligations the Company does incur, that
Mark IV will pay in full the indemnified environmental liabilities when they are
incurred, that new or existing environmental laws will not affect the Company in
currently unforeseen ways or that present or future activities undertaken by the
Company will not result in additional environmentally related expenditures.
However, the Company does not believe that the costs to the Company of
environmental compliance under current laws and regulations will have a material
adverse effect on the financial condition or results of operations of the
Company. See "Business -- Environmental."
DEPENDENCE ON KEY PERSONNEL
On May 6, 1997, the employment of Messrs. Pabst, Bolstetter and Graham, who
had been, respectively, the Chief Executive Officer and President, Vice
President-Finance and Vice President-Administration of the Company, was
terminated. The success of the Company depends in large part on the Company's
ability to find suitable replacements and retain such replacements and other
highly qualified management personnel. There can be no assurance that the
Company will be successful in hiring or retaining key personnel. The Company has
entered into employment agreements with certain of its senior managers in
connection with the Transactions. See "Management -- Employment Agreements."
COMPETITION
The professional audio market is highly competitive and fragmented. Certain
of the Company's competitors are substantially larger than the Company and have
financial and other resources greater than those of the Company. There can be no
assurance that the Company will continue to compete effectively against existing
competitors or new competitors that may enter its market in the future. See
"Business -- Competition."
CURRENCY AND OTHER RISKS ATTENDANT TO INTERNATIONAL OPERATIONS
The Company has substantial assets located outside of the United States and
a substantial portion of the Company's sales and earnings are attributable to
operations conducted abroad and to export sales. In the year ended February 28,
1997, over 50% of the Company's gross revenues consisted of sales made outside
the United States, predominantly in Western Europe and Asia. The Company's
international operations subject the Company to certain risks, including
increased exposure to currency exchange rate fluctuations. The Company plans to
hedge a portion of its foreign currency exposure by incurring liabilities,
including bank debt, denominated in the local currencies of those countries
where its subsidiaries are located and plans to develop systems to manage and
control its currency risk exposure. The Company's international operations also
subject it to certain other risks, including adverse political or economic
developments in the foreign countries in which it conducts business, foreign
governmental regulation, dividend restrictions, tariffs and potential adverse
tax consequences, including payment of taxes in jurisdictions that have higher
tax rates than does the United States. Although the Company's international
operations have generally been profitable in the past, there can be no assurance
that one or more of these factors will not have a material adverse effect on the
Company's financial position or results of operations in the future.
CONTROL OF THE COMPANY
All of the outstanding shares of the Company's Common Stock are currently
owned by Holding and all of the outstanding shares of Holding are owned by EVI
Audio, LLC, which is controlled by GSCP. Accordingly,
20
<PAGE> 22
GSCP controls the Company and has the power to elect all of the Company's
directors, appoint new management and approve any action requiring the approval
of the holders of the Company's Common Stock, including adopting amendments to
the Company's Certificate of Incorporation and approving mergers or sales of
substantially all of the Company's assets. From time to time GSCP considers
possible combinations or dispositions of its portfolio companies as a means of
optimizing investment value. GSCP is an affiliate of Travelers Group Inc., which
wholly owns the general partner of GSCP's general partner. See "Management" and
"Ownership of Capital Stock."
GST Acquisition Corp., a controlled affiliate of GSCP, recently acquired
control of Telex Communications Group, Inc. ("Telex") for total consideration of
approximately $375 million, including the refinancing of $100 million of Telex's
outstanding debt, subject to post-closing adjustment. Telex designs,
manufactures and markets sophisticated audio, wireless and multimedia
communications devices to commercial, professional and individual markets. The
Company and Telex do not currently have a business relationship, and although it
is possible that they, together with GSCP, may explore building such a
relationship or combining their businesses, there are no current plans or other
arrangements to do so.
RISKS ARISING FROM THE ACQUISITION
The Company has had no prior operating history as a stand-alone entity and
prior to the consummation of the Acquisition, the business of the Company was
conducted as a part of the business of Mark IV. The Company is not able to rely
on Mark IV for financial support or for other services, except as provided in
agreements entered into as part of the Acquisition. See "Relationships with Mark
IV." The loss of certain of the rights and benefits provided under these
agreements prior to their scheduled termination dates could have a material
adverse effect on the Company's business.
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The New Notes are new securities for which there presently is no market.
Although the Initial Purchasers have informed the Company that they currently
intend to make a market in the New Notes, the Initial Purchasers are not
obligated to do so and any such market making may be discontinued at any time
without notice. In addition, such market making activity may be limited during
the pendency of the Exchange Offer. Accordingly, there can be no assurance as to
the development or liquidity of any market for the New Notes. The Company does
not intend to apply for listing of the New Notes on any securities exchange or
for quotation of the New Notes through the National Association of Securities
Dealers Automated Quotation System. See "Plan of Distribution."
The liquidity of, and trading market for, the New Notes also may be
adversely affected by general declines in the market or by declines in the
market for similar securities. Such declines may adversely affect such liquidity
and trading markets independent of the financial performance of, and prospects
for, the Company.
USE OF PROCEEDS
There will be no cash proceeds payable to the Company from the issuance of
the New Notes pursuant to the Exchange Offer. Net proceeds from the Offering
(approximately $96 million) were used to repay (i) all amounts outstanding under
the Senior Subordinated Facility ($75.0 million, plus accrued but unpaid
interest) and (ii) $17.0 million of indebtedness outstanding under the Term Loan
Facility. The Company will use the balance of such proceeds for working capital
and general corporate purposes.
The Term Loan Facility has a maturity date of August 10, 2002. At February
28, 1997, the interest rate on the Term Loan Facility was 8.17%. The borrowings
under the Senior Subordinated Facility have an initial maturity date of February
10, 1998. In the event that the amount owing thereunder is not paid in full on
or after such date, the lenders under such facility are required to extend the
maturity of such borrowings until February 10, 2007. At February 28, 1997, the
interest rate on such borrowings was 12.25%.
21
<PAGE> 23
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
February 28, 1997 and on a pro forma basis to give effect to the Offering and
the application of the proceeds therefrom. See "Use of Proceeds." This table
should be read in conjunction with "Unaudited Pro Forma Financial Information,"
"Selected Historical and Pro Forma Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and the notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
FEBRUARY 28, 1997
------------------------------
AS ADJUSTED FOR
HISTORICAL THE OFFERING
---------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Debt:
Revolving Credit Facility(a)................................... $ -- $ --
Term Loan Facility(b).......................................... 35,000 18,000
Senior Subordinated Facility................................... 75,000 --
11% Senior Subordinated Notes due 2007......................... -- 100,000
-------- --------
Total Debt............................................. 110,000 118,000
-------- --------
Common stockholder's equity:
Common Stock, $.01 par value, 1,000 shares authorized; 110 shares
outstanding.................................................... -- --
Capital in excess of par value................................... 57,600 57,600
Retained earnings (deficit)(c)................................... 841 (2,259)
Cumulative translation adjustment................................ (49) (49)
-------- --------
Total common stockholder's equity................................ 58,392 55,292
-------- --------
Total capitalization............................................. $ 168,392 $ 173,292
======== ========
</TABLE>
- ---------------
(a) Borrowings of up to $25.0 million under the Revolving Credit Facility are
available for working capital and general corporate purposes, including up
to $10.0 million for letters of credit ($3.8 million of which were issued on
the Acquisition Closing Date). On a pro forma basis, after giving effect to
the Transactions, the Offering, the application of proceeds therefrom, the
issuance of letters of credit and borrowing base limitations, the Company's
unused availability under the Revolving Credit Facility would have totaled
approximately $13.8 million. See "Description of Credit Facilities--Senior
Credit Facility."
(b) The Term Loan Facility will mature in the year 2002 and requires quarterly
principal payments through that year. See "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity" and "Description of Credit Facilities--Senior Credit
Facility."
(c) Reflects the write off of $4.2 million of deferred financing costs directly
related to the Senior Subordinated Facility and $1.0 million of the Term
Loan Facility that was refinanced with the proceeds of the Offering and the
related income tax benefit of $2.1 million.
22
<PAGE> 24
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following pro forma consolidated financial statements (the "Pro Forma
Financial Statements") include the unaudited pro forma consolidated statement of
income for the fiscal year ended February 28, 1997 (the "Pro Forma Consolidated
Statements of Income"), and the unaudited pro forma consolidated balance sheet
as of February 28, 1997 (the "Pro Forma Consolidated Balance Sheet").
The Pro Forma Consolidated Statement of Income is based on the audited
consolidated statements of income of the Company for the period March 1, 1996 to
February 10, 1997 and February 11, 1997 to February 28, 1997 and are adjusted to
give effect to the Transactions as though they had occurred as of the first day
of the period presented. The Pro Forma Consolidated Statement of Income reflects
pro forma adjustments to give effect to (i) the Acquisition and (ii) the
Offering and the application of the proceeds therefrom.
The Pro Forma Consolidated Balance Sheet is based upon the audited
consolidated balance sheet of the Company at February 28, 1997 and is adjusted
to give effect to the Offering as though it had occurred as of February 28,
1997. The Acquisition was accounted for by the purchase method of accounting.
The purchase price paid for the Acquisition is subject to adjustment in the
event that the Company's working capital, cash flow and net intercompany
transfers of cash between Mark IV and its affiliates (other than the Company and
its subsidiaries), on the one hand, and the Company and its subsidiaries, on the
other hand, as calculated based on the audited financial statements as of and
for the ten-month period ended December 31, 1996, differ from amounts estimated
by Mark IV as of the Acquisition Closing Date, which amounts were based upon
available unaudited financial information at that date. The Sellers provided a
draft of the audited financial information on May 9, 1997 and have requested a
further purchase price payment of $405, which may be disputed.
The Pro Forma Financial Statements and the accompanying notes should be
read in conjunction with the Company's historical consolidated financial
statements and related notes thereto included elsewhere in this Prospectus.
The Pro Forma Financial Statements do not purport to be indicative of the
Company's financial condition or the results that would have actually been
obtained had such transactions been consummated as of the assumed dates and for
the periods presented, nor are they indicative of the Company's results of
operation or financial condition for any future period or date.
23
<PAGE> 25
EV INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF FEBRUARY 28, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
OFFERING ADJUSTED
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Current Assets
Cash................................................. $ 7,044 $ 3,900(a) $ 10,944
Accounts receivable.................................. 42,856 -- 42,856
Inventory............................................ 51,141 -- 51,141
Deferred tax asset................................... 2,907 -- 2,907
Other current assets................................. 5,019 -- 5,019
-------- -------- --------
Total Current Assets......................... 108,967 3,900 112,867
Property and Equipment, net............................ 31,411 -- 31,411
Deferred Financing Costs............................... 6,216 (5,200)(b) 5,116
4,100(b)
Cost in Excess of Net Assets Acquired.................. 60,513 -- 60,513
Other Assets........................................... 1,008 -- 1,008
-------- -------- --------
Total Assets................................. $ 208,115 $ 2,800 $ 210,915
-------- -------- --------
Current Liabilities
Accounts payable..................................... $ 15,250 $ -- $ 15,250
Current maturities of long-term debt................. 1,000 -- 1,000
Compensation related liabilities..................... 6,726 -- 6,726
Income taxes payable................................. 997 -- 997
Other accrued liabilities............................ 7,456 -- 7,456
-------- -------- --------
Total Current Liabilities.................... 31,429 -- 31,429
Senior Subordinated Credit Facility.................... 75,000 (75,000)(a)
Term Loan.............................................. 34,000 (17,000)(a) 17,000
Senior Subordinated Notes.............................. -- 100,000(a) 100,000
Deferred Taxes and Other Liabilities................... 9,294 (2,100)(c) 7,194
-------- -------- --------
Total Liabilities............................ 149,723 5,900 155,623
Stockholder's Equity
Common stock......................................... -- -- --
Capital in excess of par value....................... 57,600 -- 57,600
Retained earnings (deficit).......................... 841 (3,100)(b) (2,259)
Cumulative translation adjustment.................... (49) -- (49)
-------- -------- --------
Total Stockholder's Equity................... 58,392 (3,100) 55,292
-------- -------- --------
Total Liabilities & Stockholder's Equity..... $ 208,115 $ 2,800 $ 210,915
======== ======== ========
</TABLE>
See Notes to the Unaudited Pro Forma Consolidated Balance Sheet.
24
<PAGE> 26
EV INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) To reflect (i) the net proceeds of the Offering of $95.9 million after
deducting discounts and estimated fees and expenses related thereto of $4.1
million and (ii) the application of such net proceeds to the repayment of the
Senior Subordinated Facility and a portion of the Term Loan Facility. The
balance of the proceeds will be used for working capital and general corporate
purposes.
(b) To reflect (i) deferred financing costs of $4.1 million associated with
the Offering and (ii) the writeoff of deferred financing costs of $5.2
associated with the Senior Subordinated Facility and the Term Loan Facility. Of
the unamortized deferred financing costs of $6.2 million, $4.2 million was
related to the Senior Subordinated Facility, all of which was written-off, and
$2.0 million was related to the Term Loan Facility, $1.0 million of which was
written-off.
(c) To reflect the income tax benefit of $2.1 million related to the
write-off of the deferred financing costs described in note (b).
25
<PAGE> 27
EV INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED FEBRUARY 28, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FEBRUARY 11,
1997
MARCH 1, 1996 TO PRO FORMA ADJUSTMENTS
TO FEBRUARY 28, ------------------------- FULL YEAR
FEBRUARY 10, 1997 1997 FULL YEAR ACQUISITION OFFERING PRO FORMA
----------------- ------------ --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Sales....................... $ 177,130 $ 14,916 $ 192,046 $ -- $ -- $ 192,046
Operating costs:
Costs of products sold........ 121,380 10,081 131,461 -- -- 131,461
Selling and administration.... 28,408 1,705 30,113 1,213(a) -- 31,326
Research and development...... 7,712 454 8,166 -- -- 8,166
Depreciation and
amortization............... 5,083 331 5,414 490(b) -- 5,904
-------- ------- -------- ------- ------- --------
Total operating
costs............... 162,583 12,571 175,154 1,703 -- 176,857
-------- ------- -------- ------- ------- --------
Operating income.............. 14,547 2,345 16,892 (1,703) -- 15,189
Interest Expense................ -- 843 843 1,471(c) (843)(d) 13,256
200(c) 11,000(d)
175(c) 410(d)
Foreign Exchange Losses......... -- 10 10 -- -- 10
-------- ------- -------- ------- ------- --------
Income before taxes........... 14,547 1,492 16,039 (3,548) (10,567) 1,924
Provision for income taxes...... 6,200 651 6,851 (1,223)(c) (4,227)(e) 1,401
-------- ------- -------- ------- ------- --------
Net income............ $ 8,347 $ 841 $ 9,188 $(2,325) $ (6,340) $ 523
======== ======= ======== ======= ======= ========
Other data:
EBITDA(f)....................... $ 23,306 $ 21,093
EBITDA margin(g)................ 12.1% 11.0%
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Income.
26
<PAGE> 28
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(a) Reflects management fees to be charged to the Company by Greenwich
Street Capital Partners, Inc. plus incremental future corporate costs to be
incurred by the Company as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 28, 1997
-----------------
<S> <C>
Management fee to be charged to the Company.................. $ 750
Less portion included in historical financial statements..... (37)
Estimate of incremental future corporate costs............... 500
------
Additional selling, general, and administrative expenses..... $ 1,213
======
</TABLE>
Estimated future corporate costs principally reflect senior management
personnel, corporate staff positions, costs associated with public reporting
requirements and other costs for services previously provided by Mark IV which
the Company will incur on a stand alone basis. For a period not to exceed twelve
months following the Acquisition, Mark IV is providing certain services to the
Company and its affiliates that it provided to the Company prior to the
Acquisition Closing Date. These services include accounting assistance and tax
planning and consultation. In addition, until a transfer of certain pension plan
assets is completed, Mark IV will continue to hold such assets and to cause its
record keeper and administrator to continue to service in such roles with
respect to such assets. Actual costs incurred on a stand-alone basis may differ
from costs reflected in the Pro Forma Financial Statements.
(b) Reflects additional amortization of goodwill incurred by the Company as
a result of the allocation of the excess of the purchase price over identified
tangible and intangible net assets acquired (the excess purchase price of $27.7
million together with the existing net goodwill balance of $29.9 million is
being amortized over 40 years).
(c) Reflects interest expense associated with the financing for the
Acquisition, net of amounts to be repaid or written off in connection with the
Offering (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 28, 1997
-----------------
<S> <C>
Interest on the Term Loan Facility of $18.0 million at an
assumed weighted average interest rate of 8.17% per
annum...................................................... $ 1,471
Amortization of deferred financing costs related to the
above...................................................... 200
Bank agency and commitment fees.............................. 175
------
Total.............................................. $ 1,846
======
</TABLE>
(d) To reflect the incremental interest expense resulting from the Offering
(in thousands):
<TABLE>
<S> <C>
Elimination of interest on the Senior Subordinated Facility........ $ (453)
Elimination of interest on the Term Loan Facility.................. (148)
Elimination of amortization of deferred financing cost related to
the above........................................................ (234)
Elimination of bank agency and commitment fees..................... (8)
Interest on the Notes at a rate of 11.00% per annum................ 11,000
Amortization of deferred financing costs related to the Offering... 410
-------
Total.................................................... $10,567
=======
</TABLE>
(e) Reflects the pro forma provision for income taxes associated with pro
forma adjustments. The nondeductibility of the goodwill arising on the
Acquisition has a significant impact on the Company's effective tax rate.
(f) EBITDA represents earnings before interest expense, other income,
income taxes, depreciation and amortization. EBITDA data is included because
management understands that such information is considered by certain investors
an additional basis on which to evaluate the Company's ability to pay interest,
repay debt
27
<PAGE> 29
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME -- (CONTINUED)
and make capital expenditures. Excluded from EBITDA are interest, other income,
income taxes, depreciation and amortization, each of which can significantly
affect the Company's results of operations and liquidity and should be
considered in evaluating the Company's financial performance. EBITDA is not
intended to represent and should not be considered more meaningful than, or an
alternative to, measures of operating performance as determined in accordance
with generally accepted accounting principles.
(g) EBITDA margin represents EBITDA as a percentage of net sales.
28
<PAGE> 30
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table sets forth summary financial data of the Company for
each of the five fiscal years during the period ended February 28, 1997. The
statement of operations and balance sheet data set forth below are derived from
and should be read in conjunction with the Company's consolidated financial
statements and notes thereto included elsewhere in this Prospectus. The
statement of operations data set forth below with respect to fiscal years ended
February 28, 1994 and 1995, and February 29, 1996 have been audited by Coopers &
Lybrand L.L.P., independent public accountants. The statement of operations data
for the period from March 1, 1996 through February 10, 1997 and for the period
from February 11, 1997 through February 28, 1997 and the balance sheet data as
of February 28, 1997 have been audited by Arthur Andersen LLP. The data
presented for fiscal year ended February 28, 1993 are derived from the unaudited
consolidated financial statements and include, in the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the data for such period. The pro forma financial data have been
derived from the Unaudited Pro Forma Financial Information and the related notes
thereto included elsewhere in this Prospectus. The pro forma information does
not purport to represent what the Company's results would have actually been if
the Transactions, the Offering and the application of the proceeds therefrom had
occurred on the dates indicated nor does such information purport to project the
results of the Company for any future period. The summary financial data below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Unaudited Pro Forma Financial
Information," "Selected Historical and Pro Forma Financial Information" and the
audited financial statements and notes thereto included elsewhere in this
Prospectus.
29
<PAGE> 31
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PREDECESSOR BASIS OF ACCOUNTING NEW BASIS OF ACCOUNTING
-------------------------------------------------- ------------------------------
PERIOD FROM PERIOD FROM
FISCAL YEAR ENDED THE MARCH 1, 1996, FEBRUARY 11, 1997,
LAST DAY OF FEBRUARY, THROUGH THROUGH PRO FORMA
--------------------------------- FEBRUARY 10, FEBRUARY 28, FISCAL
1993 1994 1995 1996 1997 1997 1997(a)
------ ------ ------ ------ -------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales....................... $176.7 $173.6 $185.3 $195.5 $177.1 $ 14.9 $ 192.0
Cost of products sold........... 117.9 115.6 125.3 134.5 121.4 10.1 131.5
------ ------ ------ ------ ------ ------ ------
Gross profit.................... 58.8 58.0 60.0 61.0 55.7 4.8 60.6
Selling and administration...... 29.4 28.5 29.4 30.0 28.4 1.7 31.3
Research and development........ 5.5 5.5 6.3 8.2 7.7 0.5 8.2
Depreciation and amortization... 4.5 4.4 4.8 5.1 5.1 0.3 5.9
------ ------ ------ ------ ------ ------ ------
Operating income(b)............. 19.4 19.6 19.5 17.7 14.5 2.3 15.2
Interest expense................ -- -- -- -- -- 0.8 13.3
Other income.................... -- -- -- 0.4(c) -- -- --
------ ------ ------ ------ ------ ------ ------
Income before income taxes...... 19.4 19.6 19.5 18.1 14.5 1.5 1.9
Income tax provision............ 7.4 7.3 7.5 7.1 6.2 0.7 1.4
------ ------ ------ ------ ------ ------ ------
Net income...................... $ 12.0 $ 12.3 $ 12.0 $ 11.0 $ 8.3 $ 0.8 $ 0.5
====== ====== ====== ====== ====== ====== ======
OTHER FINANCIAL DATA:
EBITDA(d)....................... $ 23.9 $ 24.0 $ 24.3 $ 22.8 $ 19.6 $ 2.7 $ 21.1
EBITDA margin(e)................ 13.5% 13.8% 13.1% 11.7% 11.1% 17.9% 11.0%
Capital expenditures............ $ 1.6 $ 2.6 $ 4.6 $ 3.7 $ 3.3 $ 0.1 $ 3.4
Cash interest expense(f)........ -- -- -- -- -- 0.6 $ 12.5
Ratio of EBITDA to cash interest
expense....................... -- -- -- -- -- -- 1.7x
Ratio of EBITDA minus capital
expenditures to cash interest
expense....................... -- -- -- -- -- -- 1.4x
Ratio of earnings to fixed
charges(g).................... -- -- -- -- -- -- 1.0x
</TABLE>
<TABLE>
<CAPTION>
AS OF FEBRUARY 28, 1997
------------------------
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital................................................................. $ 77.5 $ 81.4
Total assets.................................................................... 208.1 210.9
Total debt...................................................................... 110.1 118.0
Stockholder's equity............................................................ 58.4 55.3
</TABLE>
See Notes to Selected Historical and Pro Forma Financial Information.
30
<PAGE> 32
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(a) The pro forma statement of income data for the fiscal year ended
February 28, 1997 give effect to (i) the Acquisition and (ii) the Offering (and
application of proceeds therefrom) as though each had occurred as of the first
day of the fiscal year. The pro forma balance sheet data as of February 28, 1997
give effect to the Offering (and application of proceeds therefrom) as though it
had occurred as of February 28, 1997.
(b) Represents income from operations before other income and provision for
interest and taxes.
(c) Represents a one-time gain on the sale of land in Germany.
(d) EBITDA represents earnings before interest expense, other income,
income taxes, depreciation and amortization. EBITDA is included because
management understands that such information is considered by certain investors
to be an additional basis on which to evaluate the Company's ability to pay
interest, repay debt and make capital expenditures. Excluded from EBITDA are
interest, other income, income taxes, depreciation and amortization, each of
which can significantly affect the Company's results of operations and liquidity
and should be considered in evaluating the Company's financial performance.
EBITDA is not intended to represent and should not be considered more meaningful
than, or an alternative to, measures of operating performance as determined in
accordance with generally accepted accounting principles.
(e) Represents EBITDA as a percentage of net sales.
(f) Represents the interest expense exclusive of bank agency fees and
amortization of deferred financing costs.
(g) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes and fixed charges. Fixed
charges consist of interest expense on all indebtedness, amortization of
deferred financing costs and one third of rental expense on operating leases
(the portion deemed representative of the interest factor).
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<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations covers periods before completion of the Offering. The
results of operations for the fiscal year ended February 28, 1997 are based on
the Company's statement of income for the period ended February 10, 1997, under
the predecessor basis of accounting, and the Company's statement of income for
the eighteen-day period ended February 28, 1997, under the new basis of
accounting, which includes adjustments giving effect to the Acquisition under
the purchase method of accounting. The impact of the new basis of accounting in
the period ended February 28, 1997 on the results of operations for the fiscal
year ended February 28, 1997 was not significant. However, the results of
operations for the fiscal year ended February 28, 1997 was not significant.
However, the results of operations for periods subsequent to February 28, 1997,
will not be comparable to prior periods due to the Company's significant new
financing arrangements and as a result of the Acquisition. See "Capitalization,"
"The Acquisition" and "Description of Credit Facilities." For further discussion
relating to the impact that the Transactions may have on the Company, see "Risk
Factors," "Selected Historical and Pro Forma Financial Information," "Unaudited
Pro Forma Financial Information" and the Consolidated Financial Statements and
notes thereto included elsewhere in this Offering Memorandum.
OVERVIEW
The Company is one of the largest manufacturers and worldwide marketers of
high-quality, high-performance sound systems products for the professional audio
market, manufacturing microphones, mixing consoles, signal processors,
amplifiers and loudspeaker systems.
The Company targets three principal business lines within the professional
audio market: Fixed Installation, Professional Music Retail and
Concert/Recording/Broadcast. See "Business -- Industry Overview." The Fixed
Installation business line, which management estimates accounted for
approximately 40% of the Company's fiscal year 1996 sales, has continued to
achieve steady growth, partially fueled by sales in emerging markets. The
Professional Music Retail line, which by management estimates accounted for
approximately 35% of the Company's sales in fiscal year 1996, has experienced
moderate growth. Within the Concert/Recording/Broadcast business line, which
management estimates represents approximately 15% of the Company's sales, sales
to concert applications have grown rapidly in recent years, due in large part to
the Company's introduction in 1993 and 1995, respectively, of the Midas XL3 and
XL4 mixing consoles and the demand for certain Electro-Voice loudspeaker systems
featuring Manifold Technology aimed at the concert touring market.
Over 50% of the Company's sales are made internationally. Sales in non-U.S.
countries, particularly throughout the Pacific region, China and South America,
have grown steadily during the reported period.
The Company manufactures most of the products it sells and most of the
active acoustic components that its products contain. The Company does its own
die casting, produces fiberglass horns and buys certain electrical components,
magnets, lumber and plastics. See "Business--Manufacturing." The Company's costs
and expenses include cost of sales, selling and administrative and research and
development expenses. Cost of sales includes product costs (material, direct
labor and manufacturing overhead) and variable selling costs, such as freight
and commissions paid to sales representatives. Selling and administration
expenses include costs of the Company's sales and marketing forces, advertising
and other promotional expenses, and other general and administrative functions.
Overall, the Company's business is not subject to significant seasonal
fluctuations. In general, sales during the fourth fiscal quarter are the
strongest, due to annual major trade shows during that period and preparation
for the spring-through-fall touring season. Sales during the summer period are
the weakest due to vacation periods in Europe.
Management does not believe that inflation has had a material impact on its
financial position or results of operations during the periods covered by the
Consolidated Financial Statements included herein. The
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<PAGE> 34
Company has generally been able to effect price increases equal to, or
moderately exceeding, the inflationary increase in costs.
The Company maintains assets and/or operations in a number of foreign
jurisdictions, the most significant of which are Germany, the United Kingdom,
Japan and Hong Kong. As a result, it has direct and continuing exposure to both
positive and negative foreign currency adjustments. The Company plans to hedge a
portion of its foreign currency exposure by incurring liabilities, including
bank debt, denominated in the local currencies of those countries where its
subsidiaries are located and plans to develop systems to manage and control its
currency risk exposure.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
historical income statement data for the Company expressed as a percentage of
net sales:
<TABLE>
<CAPTION>
FOR THE LAST DAY OF FEBRUARY,
-----------------------------------
1994 1995 1996 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Statement of Operations:
Net sales........................................... 100.0% 100.0% 100.0% 100.0%
Cost of products sold............................... 66.6 67.6 68.8 68.5
----- ----- ----- -----
Gross profit........................................ 33.4 32.4 31.2 31.5
Selling and administration.......................... 16.4 15.9 15.3 15.7
Research and development............................ 3.2 3.4 4.2 4.3
----- ----- ----- -----
EBITDA(a)........................................... 13.8 13.1 11.7 11.5
Depreciation and amortization....................... 2.5 2.6 2.6 2.8
----- ----- ----- -----
Operating income.................................... 11.3% 10.5% 9.1% 8.7%
===== ===== ===== =====
</TABLE>
- ---------------
(a) EBITDA represents earnings before interest expense, other income, income
taxes, depreciation and amortization. EBITDA is included because management
understands that such information is considered by certain investors to be
an additional basis on which to evaluate the Company's ability to pay
interest, repay debt and make capital expenditures. Excluded from EBITDA are
interest, other income, income taxes, depreciation and amortization, each of
which can significantly affect the Company's results of operations and
liquidity and should be considered in evaluating the Company's financial
performance. EBITDA is not intended to represent and should not be
considered more meaningful than, or an alternative to, measures of operating
performance as determined in accordance with generally accepted accounting
principles.
YEAR ENDED FEBRUARY 28, 1997 COMPARED TO YEAR ENDED FEBRUARY 29, 1996
Net Sales. Net sales decreased $3.5 million, or 1.8%, from $195.5 million
in the fiscal year ended February 29, 1996 to $192.0 million in the fiscal year
ended February 28, 1997. During the comparable periods, net sales to customers
in the United States remained flat at $88.2 million, and net sales to customers
outside the United States decreased $3.4 million, or 3.2%, from $107.3 million
to $103.9 million. Principal factors accounting for the overall decrease in
sales included the relative strengthening of the U.S. dollar against certain
European currencies, the termination by the Company of several unauthorized
exporters in the U.S., the Company's decision to cease production of certain
low-margin items under its University Sound brand and the effect of business
dislocations due to a fire at the Company's Swiss facility. These factors were
offset in part by increased sales in the Pacific region, Argentina and Brazil
and an out-of-cycle price increase introduced at the end of fiscal 1996.
Gross Profit. Gross profit decreased $0.4 million, or 0.7%, from $61.0
million during the fiscal year ended February 29, 1996 to $60.6 million for the
fiscal year ended February 28, 1997. As a percentage of net sales, gross profit
increased from 31.2% to 31.5% during the same periods. Principal factors for
this gross
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<PAGE> 35
margin improvement included sales of high-margin loudspeaker systems and
products into foreign markets, a reduction of sales of certain low-margin
University Sound products, manufacturing cost reductions during the second and
third quarters of fiscal 1997 and the continuing effects of the out-of-cycle
price increase. This was offset in part by product mix shifts and unfavorable
currency exchange rates.
Selling and Administration. Selling and administration expenses increased
by $0.1 million, or 0.4%, from $30.0 million during the fiscal year ended
February 29, 1996 to $30.1 million during the fiscal year ended February 28,
1997. As a percentage of net sales, selling and administration expenses
increased from 15.3% to 15.7%. These expenses increased slightly because the
Company has not yet realized the full benefit of its continuing effort to lower
expenses and to streamline support functions, including the consolidation of
certain selling and administration functions from Oklahoma City, Oklahoma into
Buchanan, Michigan and from Ipsach, Switzerland into Straubing, Germany.
Research and Development. Research and development expenses remained flat
at $8.2 million during the fiscal years ended the last day of February 1997 and
1996. As a percent of net sales, research and development expenses increased
from 4.2% to 4.3% during the same period. The Company continues to emphasize the
development of digital technologies, systems and products.
Income Taxes. The Company's provision for income taxes as a percentage of
income before provision for taxes was 42.7% for the fiscal year ended February
28, 1997 compared to 39.2% for the fiscal year ended February 29, 1996. The
higher rate principally relates to the amortization of nondeductible goodwill
recorded as a result of the Acquisition and certain other nondeductible
expenses.
YEAR ENDED FEBRUARY 29, 1996 COMPARED TO YEAR ENDED FEBRUARY 28, 1995
Net Sales. Net sales increased $10.2 million, or 5.5%, from $185.3 million
in the fiscal year ended February 28, 1995 to $195.5 million in the fiscal year
ended February 29, 1996. During the comparable periods, net sales to customers
in the United States decreased $2.6 million, or 3.1%, from $91.0 million to
$88.2 million, and net sales to customers outside the United States increased
$13.0 million, or 13.8%, from $94.3 million to $107.3 million. Principal factors
accounting for the overall sales increase were new product introductions in the
Klark-Teknik and Midas lines, improved effectiveness brought about by the
streamlining of the Company's worldwide marketing functions and strong sales in
Australia and Japan. There were also foreign currency shifts in Germany, Japan
and the United Kingdom during the period that were favorable to the Company.
Offsetting this in part were monetary policies in China that tightened the
availability of hard currency, the weakness of the Mexican economy, and slow
sales of products in the Vega line.
Gross Profit. Gross profit increased $1.0 million, or 1.7%, from $60.0
million in the fiscal year ended February 28, 1995 to $61.0 million in the
fiscal year ended February 29, 1996. As a percent of net sales, gross profit
decreased from 32.4% to 31.2% during the same periods. This margin decrease
resulted from the Company's aggressive pricing strategy, which was implemented
to maintain foreign market position and to defend market share from unauthorized
imports.
Selling and Administration. Selling and administration expenses increased
by $0.6 million, or 2.0%, from $29.4 million during the fiscal year ended
February 28, 1995 to $30.0 million during the fiscal year ended February 29,
1996. As a percent of net sales, selling and administration expenses decreased
from 15.9% to 15.3% during the same periods. This percentage decrease was the
result of the Company's continuing efforts to maintain tight control on expenses
and to integrate support functions.
Research and Development. Research and development expenses increased by
$1.9 million, or 30.2% from $6.3 million during the fiscal year ended February
28, 1995 to $8.2 million during the fiscal year ended February 29, 1996. As a
percent of net sales, research and development expenses increased from 3.4% to
4.2% during the same periods. The dollar-base increase reflected the Company's
increased commitment to the development of digital products.
Income Taxes. The Company's provision for income taxes as a percentage of
income before provision for taxes increased to 39.2% for the fiscal year ended
February 29, 1996 from 38.5% for the fiscal year ended
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<PAGE> 36
February 28, 1995. The higher rate in fiscal 1996 was primarily the result of
increased income in foreign jurisdictions with higher statutory tax rates than
in the U.S.
YEAR ENDED FEBRUARY 28, 1995 COMPARED TO YEAR ENDED FEBRUARY 28, 1994
Net Sales. Net sales increased $11.7 million, or 6.7%, from $173.6 million
in the fiscal year ended February 28, 1994 to $185.3 million in the fiscal year
ended February 28, 1995. During the comparable periods, net sales to customers
in the United States increased $5.8 million, or 6.8%, from $85.2 million to
$91.0 million, and net sales to customers outside the United States increased
$5.9 million, or 6.7%, from $88.4 million to $94.3 million. The general sales
increase was the result of new product introductions in the Altec Lansing and
Electro-Voice lines including the successful Electro-Voice SX200 and Altec
Lansing DTS loudspeaker systems, strong economies in the Pacific region which
resulted in an increase in the sale of fixed installation products and a
strengthening of certain European currencies versus the dollar.
Gross Profit. Gross profit increased $2.0 million, or 3.4%, from $58.0
million in the fiscal year ended February 28, 1994 to $60.0 million in the
fiscal year ended February 28, 1995. As a percent of net sales, gross profit
decreased from 33.4% to 32.4% during the same periods. A contributor to this
decrease was the weakening of the dollar against a number of foreign currencies.
Also, during this period, in order to protect its foreign market position in
certain soft foreign economies and to protect its distributors, the Company
decentralized its price discounting policy to give greater flexibility to local
managers to offer selective price discounts.
Selling and Administration Expenses. Selling and administration expenses
increased by $0.9 million, or 3.2%, from $28.5 million during the fiscal year
ended February 28, 1994 to $29.4 million during the fiscal year ended February
28, 1995. As a percent of net sales, selling and administration expenses
decreased from 16.4% to 15.9% during the same periods. This percentage decrease
was due to the Company's ability to leverage existing selling and administration
facilities to support incremental sales growth, and its continuing effort to
reduce expenses by integrating administration functions of certain of its
manufacturing facilities and other steps.
Research and Development. Research and development expenses increased by
$0.8 million, or 14.5%, from $5.5 million in the year ended February 28, 1994 to
$6.3 million in the fiscal year ended February 28, 1995 due to the Company's
increased focus on developing digital technology. As a percent of net sales,
research and development expenses increased from 3.2% to 3.4% during the same
periods.
Income Taxes. The Company's provision for income taxes as a percentage of
income before provision for taxes was 38.5% for the fiscal year ended February
28, 1995 compared to 37.2% in the fiscal year ended February 28, 1994. The
higher rate in fiscal 1995 was primarily the result of increased income in
foreign jurisdictions with higher statutory tax rates than in the U.S.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise primarily from debt service on
indebtedness incurred in connection with the Acquisition and the Offering,
working capital and capital expenditure requirements. The Company incurred
substantial indebtedness in connection with the Acquisition. See "Description of
Credit Facilities" and "Description of Notes." On a pro forma basis, as of
February 28, 1997, the Company would have had outstanding approximately $118.0
million of indebtedness, consisting of $100.0 million of Notes and $18.0 million
under the Term Loan Facility. Prior to the consummation of the Acquisition, the
Company operated as a division of Mark IV and substantially all of its cash
needs were historically funded through interest-free cash requisitions from Mark
IV.
Principal and interest payments under the Senior Credit Facility and the
Notes represent significant liquidity requirements for the Company. Pursuant to
the Term Loan Facility and after giving effect to the Offering and application
of proceeds therefrom, including the prepayment of $17.0 million of the Term
Loan Facility with the proceeds of the Offering, the Company will be required to
make principal payments totaling approximately $1.0 million, $2.0 million, $3.0
million, $3.6 million, $4.3 million and $4.1 million in each of
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<PAGE> 37
fiscal year 1998, 1999, 2000, 2001, 2002 and 2003. In addition, under the terms
of the Senior Credit Facility, the Company will be required to make mandatory
prepayments with (i) the debt portion of any payments received from Mark IV
pursuant to the purchase price adjustment (see "The Acquisition"), (ii)
non-ordinary asset sale proceeds, (iii) any additional indebtedness and equity
proceeds (with certain exceptions) and (iv) with 75% of the excess cash flow of
the Company and its subsidiaries for each fiscal year commencing on May 31, 1998
and each May 31 thereafter. Outstanding balances under the Senior Credit
Facility will bear interest at floating rates based upon the interest rate
option selected by the Company; therefore, the Company's financial condition is
and will continue to be affected by changes in prevailing interest rates.
The Company's investing activities consist mainly of capital expenditures
to maintain facilities, to acquire machines or tooling, to update certain
manufacturing processes and to improve efficiency. Capital expenditures totaled
$3.4 million, $3.7 million, $4.6 million and $2.6 million for fiscal years 1997,
1996, 1995 and 1994, respectively. The increase in capital spending in fiscal
1995 over the prior year reflects the Company's investment to expand its speaker
cabinet manufacturing capability. Management estimates that total capital
spending for fiscal 1998 will be approximately $5.5 million. This reflects an
anticipated increase in the levels of discretionary spending to increase
capacity and initiate operating efficiencies. Included in this amount, there is
approximately $3.3 million that management estimates is required for maintenance
levels of capital expenditures. The Company's ability to make capital
expenditures is subject to certain restrictions under the Senior Credit
Facility.
Net cash provided by operating activities in the fiscal year ended February
28, 1997 was $4.9 million, as compared to net cash provided by operating
activities of $0.4 million in the fiscal year ended February 28, 1996. This
increase primarily reflects improvements in operating income and working capital
management, particularly in receivables and inventories. Net cash provided by
operating activities in fiscal year 1996 was $0.4 million, as compared to net
cash provided by operating activities of $8.4 million in fiscal year 1995. This
decrease resulted primarily from higher receivables and inventory levels
associated with increased sales levels.
The Company relies mainly on internally generated funds and, to the extent
necessary, borrowings under the Revolving Credit Facility and foreign working
capital lines, to meet its liquidity needs. Availability under the Revolving
Credit Facility as of February 28, 1997 was $13.8 million and availability under
the foreign working capital lines as of February 28, 1997 was $4.4 million.
Amounts available under the Revolving Credit Facility are subject to borrowing
base availability and may be used for working capital and general corporate
purposes, including letters of credit, subject to certain limitations. In
addition, the Senior Credit Facility limits the Company from making acquisitions
in an aggregate amount over $7.5 million and incurring significant additional
debt to finance acquisitions. See "Description of Credit Facilities."
Management believes that cash generated from operations, together with
amounts available under the Revolving Credit Facility and the working capital
lines, will be adequate to meet its debt service and principal payment
requirements, capital expenditure needs and working capital requirements for the
foreseeable future. However, no assurance can be given in this regard and
working capital requirements may change. The Company's high degree of leverage
could have important consequences on its future operating performance. See "Risk
Factors -- Substantial Leverage and Debt Service Obligations." In addition, the
Company's ability to service or refinance the Notes and to extend or refinance
the Senior Credit Facility will be subject to future economic conditions and
financial, business and other factors, many of which are beyond the Company's
control.
36
<PAGE> 38
BUSINESS
GENERAL
EVI, founded in 1928, is one of the largest manufacturers and marketers of
high-quality, high-performance sound system products for the professional audio
market. The Company manufactures and markets a comprehensive range of products
worldwide for professional audio systems, including microphones, mixing
consoles, signal processors, amplifiers and loudspeaker systems. The Company's
brands, which include Electro-Voice, Altec Lansing, Midas and Vega, are widely
recognized and respected in the professional audio market. Since its founding,
the Company has developed a number of technological innovations which are now
commonly used throughout the industry and has received numerous industry awards,
including a 1996 Emmy for advances in wireless microphone technology.
The Company's products are used in airports, theaters, sports arenas,
concert halls, cinemas, stadiums, convention centers, television and radio
broadcast studios, houses of worship and other venues where music or speech is
amplified. EVI products have been installed in a wide variety of larger public
venues, including the Metropolitan Opera House at Lincoln Center, the Hong Kong
Convention Center, Camden Yards, Fenway Park and Disney theme parks, and are
used by professional musicians, including major concert and touring artists such
as Alanis Morissette, KISS, Elton John, Sting, Metallica and Hootie and the
Blowfish. In addition, the Company's microphones are widely used in the
television and radio broadcast industry, including by the major U.S. television
networks and many radio performers.
Products sold to the professional audio market are designed for all types
of commercial venues and all levels of professional musicians. These products
are distinguished from consumer audio products, which are generally not suited
for professional use, by the unique performance requirements and generally
higher price points of professional audio products. In addition, professional
audio products are typically sold through distribution channels targeted at
professional musicians and contractors who design sound systems for commercial
use. The professional audio market is highly fragmented, with only a few major
manufacturers and a larger number of smaller manufacturers, many of which have
limited product lines. The worldwide market for professional audio products
includes countries in the Americas, Europe and Asia, as well as many emerging
markets.
The Company has its principal executive offices at 602 Cecil Street,
Buchanan, Michigan, 49107, telephone number (616) 695-2207.
INDUSTRY OVERVIEW
The Company targets three principal lines of business within the overall
professional audio market: (i) Fixed Installation, or permanently installed
sound systems in public venues; (ii) Professional Music Retail, or sound
products used by professional musicians and sold principally through retail
channels; and (iii) Concert/Recording/Broadcast, or sound products used in
professional concerts, recording projects and radio and television broadcast.
EVI targets the upper tier of these business lines in terms of performance,
quality and price.
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<PAGE> 39
[CHART]
Fixed Installation. Fixed Installation encompasses permanently installed
sound systems in airports, sports arenas, theaters, concert halls, cinemas,
stadiums, convention centers, houses of worship and other venues where music or
speech is amplified. Within the Fixed Installation line of business there are
varying requirements, ranging from concert halls and theaters, which need the
highest quality of fidelity output and broad frequency response, to mass transit
facilities and office buildings, where sound communication is important but need
not be full-range output. The products sold for each type of installation vary
widely in characteristics and price; however, management estimates that the
majority of Fixed Installation contracts generally generate less than $25,000 of
product sales. In this business line, sales for fiscal year 1997 were made to
over 700 customers and prices for the Company's products range from $65 for a
basic microphone to $110,000 for a large-scale, multi-functional mixing console.
The Company's products in the Fixed Installation line of business are sold
through professional audio contractors and distributors. For example, in the
high growth area of cinema sound, the Company's products are purchased by seven
of the ten largest movie theater chains (by number of screens) in the U.S.
The market for Fixed Installation products is generally driven by new
construction and upgrades of existing installations. In the United States, new
uses of audio products are spurring growth. More dynamic sound and music,
requiring more sophisticated audio products, are increasingly being used in
cinemas, religious services and sporting events. Abroad, the development of
infrastructure and upgrade of existing facilities, such as auditoriums, public
places, theaters and sports facilities, in emerging economies is also a source
of increasing demand. Another source of growth in the Fixed Installation
business line is the U.S. cinema market, where the number of U.S. movie screens
is forecast to grow by approximately 12% during the years 1995 through 2000.
Many cinemas update their sound amplification systems to realize fully the new
sound technology in motion pictures. Management believes that houses of worship
are another important source of retrofits. Historically, sound technology has
been used in houses of worship to provide sound reinforcement to the sermon. In
contemporary worship services, the sermon is increasingly complemented by music
that demands more sophisticated sound. In general, management believes that
public awareness of the enhanced abilities of audio equipment increase demand
for improved sound output.
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<PAGE> 40
Management estimates that net sales by the Company for products used in the
Fixed Installation line of business were approximately 40% of net sales in
fiscal year 1997.
Professional Music Retail. Professional Music Retail products are used
mainly by musicians for live performance, recording and reproduction of
recording material and are generally sold directly to end users through
specialized retail stores that market to musicians, bands and local
entertainment venues. Professional Music Retail products appeal to performers
seeking an improved level of sound system performance, reliability and quality.
The Company's Professional Music Retail products generally range from $85 for a
basic microphone to $1,800 for a loudspeaker system and are sold through its
sales representatives and distributors to retail outlets.
The demand for Professional Music Retail products is driven primarily by an
increase in both the number of new users and the number of users upgrading to
take advantage of enhanced sound technology. Most of the end users targeted in
this business line are 18 to 30 years old. Management believes that the expected
growth in the 12-to-25-year-old population should increase future demand for
Professional Music Retail products. In addition, sales are also driven by demand
for smaller and lighter weight products which are easier to perform with and
transport.
Management estimates that net sales by the Company of Professional Music
Retail products were approximately 35% of net sales in fiscal year 1997.
Concert/Recording/Broadcast. The Concert/Recording/Broadcast lines of
business include sound systems for musical concerts and theater productions,
sound recording and radio and television broadcast and production. The Company's
sales of these products are generally made through its distributors and
retailers or directly to touring companies. The Company's
Concert/Recording/Broadcast products range from $65 for a basic microphone to
$110,000 for a large scale, multi-functional mixing console. Management believes
that sales in the Concert/Recording/Broadcast line of business to established,
high-profile touring companies influence and stimulate purchases of products by
smaller groups and lesser known professional musicians. Management estimates
that the Company produces over 50% of the microphones used for electronic news
gathering by major U.S. television networks and radio station personalities
including Rush Limbaugh and Paul Harvey.
Concert/Recording/Broadcast demand is driven by a combination of the
factors that determine growth in the Fixed Installation and Professional Music
Retail lines of business, including technological improvement and an increase in
product applications. For example, most professional sporting events now include
musical performances that require increased sound quality and amplification.
Management believes that audiences have become increasingly accustomed to
improved sound quality while event producers and live musicians have become
accustomed to more advanced technology. The demand for smaller, lighter weight
products is another driver of growth as such products reduce operating costs for
touring applications. In addition, an increase in popularity of remote
electronic news gathering is driving the demand for wired and wireless
microphones as well as portable broadcast mixers.
Management estimates that net sales by the Company of
Concert/Recording/Broadcast products were approximately 15% of net sales in
fiscal year 1997.
Other Applications. The Company also produces hand-held microphones and
earphones for field and aircraft communications, both military and civilian, and
equipment for high-speed duplication of audio tapes. In addition, the Company
sells its components to original equipment manufacturers for incorporation into
their products. Management estimates that net sales by the Company of products
used for other applications were approximately 10% of net sales in fiscal year
1997.
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<PAGE> 41
COMPETITIVE STRENGTHS
Management believes that the following competitive strengths have
contributed significantly to the Company's historical growth and serve as a
foundation for the Company's continued growth:
Leading Brand Names. The Company's brand names include Electro-Voice,
Dynacord, Altec Lansing, Klark-Teknik, Midas, University Sound, Vega, DDA, Gauss
and Electro Sound. Management believes that these brand names, which have earned
numerous technological and industry awards, are among the most recognized and
respected names in the high-end professional audio market. EVI products are used
by a wide variety of professional musicians, ranging from local and regional
bands to major touring artists and performers such as Gloria Estefan, Rod
Stewart and Aerosmith. In addition, the Company's products are critical to the
amplification of voice and sound in such major venues as Atlanta's Hartsfield
Airport, Macy's Thanksgiving Day Parade, Chicago's Soldier Field and numerous
cinemas and houses of worship across the United States.
Technological Innovation. EVI has pioneered the development of a number of
new professional audio technologies now widely used in the industry and
continues its commitment to technological innovation through new product
research and development. In order to build on its position as a leader in
technological innovation, the Company has increased its spending on research and
development from $4.9 million in fiscal year 1992 (or approximately 2.9% of
total revenues) to $8.2 million for fiscal year 1997 (or approximately 4.3% of
total revenues). Management estimates that new products or product upgrades
introduced during fiscal years 1995 or 1996 accounted for approximately 13% of
the Company's sales in fiscal year 1996. A focus of the Company's current
research and development is the application of digital technology, which is
intended to exploit the industry-wide transition from analog to digital
processing. EVI is currently bringing to market its first integrated digital
signal processing system, which broadens the Company's portfolio of
approximately 20 other digital products.
International Marketing and Distribution. The Company's products are
marketed in over 50 countries worldwide, which reduces the Company's dependence
on any single geographic market. In recent years, over 50% of the Company's
sales have been made internationally. Unlike many of its competitors, which use
independent foreign distributors that generally sell a variety of competing
products, the majority of the Company's foreign sales efforts are conducted
through its foreign distribution subsidiaries. This network allows the Company
to control its international sales, marketing and operations and provides the
Company with an excellent platform from which to pursue its strategy of
penetrating new markets and expanding its worldwide presence.
Focus on Relationship Marketing. Since 1983, the Company has formally
pursued a strategy of developing market presence by building and maintaining
long-term relationships with its customers, (which typically exceed ten years in
duration) through a number of customer-oriented initiatives. For example, a
number of the largest customers serve on Company advisory councils and meet with
the Company annually to exchange ideas regarding product development, design and
marketing. In addition, the Company regularly conducts training seminars
worldwide that provide technical training and marketing support to its customers
and end users. These councils, seminars and other customer-oriented initiatives
are a key to its recognition as one of "the manufacturers with the best customer
relationships" (Sound and Communications 1996 Contractors Survey). This approach
to relationship marketing enables the Company to be more responsive to
customers' needs and to anticipate more accurately current trends in the market.
Comprehensive Product Offerings. The Company is one of only a few
manufacturers that produce and globally market a comprehensive line of products
for the professional audio market. Management believes that its broad range of
offerings enables it to compete more effectively against many of its competitors
who carry a more limited line of products because the Company's customers are
able to meet EVI end users' requirements across a broader range of applications
from among EVI products. In addition, the Company's volume discount incentives
encourage customers to concentrate their purchases on EVI products.
Integrated Manufacturing. EVI manufactures substantially all of the
products it sells and most of the active acoustic components that its products
contain, which distinguishes the Company from many of its competitors. This
substantial level of manufacturing integration enables the Company to reduce the
time to
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<PAGE> 42
market of new product introductions, provide consistent, premium quality to
customers and respond more effectively to customer delivery and product feature
requirements. Management believes these factors result in a significant
advantage over competitors, who outsource a portion of their production.
BUSINESS STRATEGY
The Company's current strategy is to further increase revenues and improve
operating margins, thereby strengthening its position as a leading manufacturer
and distributor of products to the professional audio market. To achieve these
goals, the Company intends to: (i) enhance marketing efforts; (ii) expand
worldwide presence; (iii) increase operating efficiencies; and (iv) pursue
strategic acquisitions.
Enhance Marketing Efforts. The Company plans to stimulate demand for its
products and increase its brand equity by marketing directly to end users.
Currently, the Company's primary print advertising effort is directed to leading
trade magazines aimed at contractors, music retailers and distributors. A
strategic decision to influence end users as well as the Company's customers is
planned to begin in fiscal year 1998 with the objective of enhancing brand
awareness and brand equity of the Company's products among end users. Plans to
implement this strategy include advertising in consumer magazines, increased
public relations, direct mail, point-of-purchase campaigns, a Company web site
and increasing the frequency of product training programs.
Expand Worldwide Presence. The Company intends to increase its market
position by expanding its extensive distribution network and broadening its
product offerings in existing distribution channels. The Company is currently
focusing its expansion efforts on increasing sales in emerging markets,
including Argentina, Brazil, Chile, China, India and the former Soviet Union.
Management believes that its extensive experience in operating overseas
(including in emerging markets) and its network of foreign subsidiary
distributors provide a strong foundation for its future international expansion
and a significant competitive advantage.
Increase Operating Efficiencies. Management believes opportunities exist
to continue to reduce manufacturing costs and increase manufacturing
efficiencies and is planning to implement re-engineering programs at certain of
the Company's manufacturing facilities. Management estimates that planned
capital expenditures of approximately $2.9 million for fiscal years 1998 and
1999 will result in annual cost savings of approximately $1.8 million. For
example, the Company plans to establish a higher quality and more efficient
electronics production capability, which management expects will generate
significant operating savings and increase the Company's competitiveness in
electronics production. The Company continuously assesses its manufacturing
operations to control or reduce costs, and re-engineers production as necessary.
The Company also intends to continue its CARE process ("Customers Are the Real
Employers"), which utilizes total quality management principles to maximize
operating efficiencies.
Pursue Strategic Acquisitions. The professional audio industry is highly
fragmented, which management believes presents significant consolidation
opportunities. Subject to market conditions and the availability of financing,
the Company plans to pursue acquisition opportunities that complement and expand
its core businesses or that enable the Company to enter new markets. Management
believes that it can leverage the Company's production, distribution and
administrative capabilities to generate significant incremental revenue and cash
flow through strategic acquisitions. Since 1984, the Company has successfully
integrated six business acquisitions and eight brand names into its existing
operations.
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<PAGE> 43
BRANDS AND PRODUCTS
The Company has built a broad and diverse product line through the
development of new products and the selective acquisition of product lines. The
following table sets forth the Company's primary product offerings and brands
and the business lines to which they relate. Management estimates that worldwide
sales of its Electro-Voice brand accounted for approximately half of its net
sales in fiscal year 1997 and that the balance of net sales are approximately
evenly split among the Company's other brands.
<TABLE>
<CAPTION>
BRAND PRIMARY PRODUCTS BUSINESS LINE
- -------------------- ------------------------------------------ ------------------------------
<S> <C> <C>
Electro-Voice Microphones, mixing consoles, signal Fixed Installation
processors and amplifiers, loudspeaker Professional Music Retail
systems Concert/Recording/Broadcast
Other Applications
Dynacord Mixing consoles, signal processors and Fixed Installation
amplifiers, loudspeaker systems Professional Music Retail
Altec Lansing Mixing consoles, signal processors and Fixed Installation
amplifiers, loudspeaker systems
Klark-Teknik Signal processors Fixed Installation
Concert/Recording/Broadcast
Midas Mixing consoles Concert/Recording/Broadcast
University Sound Microphones, signal processors and Fixed Installation
amplifiers, loudspeaker systems
Vega Wireless microphones Fixed Installation
Professional Music Retail
Concert/Recording/Broadcast
Other Applications
DDA Mixing consoles Fixed Installation
Concert/Recording/Broadcast
Gauss/Electro-Sound High-speed audio tape duplicating Other Applications
equipment
</TABLE>
Microphones. Microphones are the most common method of converting audible
sound waves into electrical signals that can be processed, modified and
amplified. Microphones come in a variety of sizes and shapes, from handheld or
mounted models of all sizes to very small models meant to be hidden from view.
The Company also produces wireless microphones under the Vega brand name that
use radio instead of cable. The technology employed in the Company's wireless
microphones results in audio quality that, management believes, is
indistinguishable from that of a wired microphone. While targeted to the needs
of the working professional in broadcast and production, concert sound, live
theater, theme parks and related applications, Vega's advanced technology is
also used in government surveillance operations. Vega's wireless microphone
received an Emmy award in 1996 for advances in broadcast wireless technology.
Mixing Consoles. The primary function of a mixing console is to accept
input of electrical signals from a number of microphone sources, such as
multiple singers and instruments in a band, and blend them together to achieve
the desired balance of sound output. Other sound inputs can be fed into a mixing
console as well, such as recorded music. A mixing console also serves as the
center of a sound system, as it sends the electrical signals it receives back
out to the other components of the system. The Company's top-end mixing consoles
are marketed under the Midas brand name, which are used mainly for touring
applications. The Company also sells mixing consoles under the DDA brand.
Signal Processors and Amplifiers. Signal processors modify sound signals
to increase or decrease volume or mix them with other sound signals. The signal
processor with which most people are familiar is the bass and treble adjustment,
or "tone control." In a professional signal processor, the tone control may be
divided into 31 or more bands, allowing separate adjustment of each. The
controls used to effect these
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<PAGE> 44
adjustments are called "equalizers." Another familiar signal processor is called
the reverberation unit, which can adjust a signal to make a sound seem as if it
were performed in a large hall. Yet another function of a signal processor is to
provide signal delay so that sound arrives at the same time for an entire
audience whether they sit in the back or front of a venue. The Company markets
signal processors under the Dynacord and Klark-Teknik names, and was one of the
first manufacturers, in 1987, to introduce a reasonably priced signal processor
using digital technology.
The level of signal output from mixing consoles or signal processors is too
low to drive loudspeakers and must be increased by amplifiers. The Company
produces amplifiers under the Altec Lansing, Dynacord and Electro-Voice brands,
many of which contain built-in digital signal processors necessary to achieve
low-frequency output that is often missing in non-digital amplifiers.
Loudspeaker Systems. Loudspeaker systems convert the electrical signals
created from audible sound waves back into sound audible to the human ear. In a
large professional sound system, specialized loudspeakers called horns direct
sound to parts of the audience so that the level of sound in a large venue can
be equalized. The Company produces its high-end loudspeakers under the
Electro-Voice and Altec Lansing names. Certain of these products use
technologies developed by the Company, including "Constant Directivity" and
"Variable Intensity", which help deliver uniform frequency and level of output
across an audience, and Manifold Technology, which delivers louder output. See
"--Product Development." Management believes that its University Sound
loudspeaker is the only such product in the industry currently offering a
Constant Directivity paging speaker, which delivers uniform frequency response
in voice and background music applications.
High-Speed Audio Tape Duplicating Equipment. The Company is a leading
manufacturer of equipment used in commercial duplication of cassette tapes for
both consumer and professional markets and has been at the forefront of
increasing the speed of these products. These products are produced under the
Company's Gauss brand name.
The following diagram illustrates the use of the Company's products in a
complete professional audio system:
CUSTOMER RELATIONSHIPS
Management believes that the contractors, distributors and retailers to
which it sells its products play a significant role in promoting its products.
Since 1983, the Company has formally pursued a strategy of developing market
presence by building and maintaining long-term relationships with its customers.
A number of EVI's largest customers serve on the Company's "Blue Ribbon" and
contractor councils and meet with the Company annually to exchange ideas about
product development, design and marketing. These councils provide a valuable
platform for the exchange of ideas between customers and the Company. The
Company was recently recognized as one of the manufacturers with the best
customer relationships by Sound and Communications 1996 Contractors Survey and
enjoys customer relationships that typically exceed ten years in duration.
Proactive customer service and support is an important element of the
Company's sales strategy. The Company's customer service capability is designed
to enhance loyalty and brand image by building customer understanding of product
application, capability and quality. The Company maintains a staff of technical
support specialists at its headquarters to provide direct technical support to
both customers and end users. Telephone support is augmented by in-field
technical seminars conducted by marketing personnel trained in
43
<PAGE> 45
educating customers on product features, installation techniques and
computer-aided system design programs for fixed installations. In addition, the
Company operates service stations at all its main distribution locations and has
relationships with a network of over 300 independently owned service stations
worldwide, which provide product repairs.
MARKETING AND SALES
Marketing. The Company's marketing, sales and business development
activities are divided into three regions -- the Americas, Europe and the
Pacific. Each region is structured with a business development team or teams
whose mission is to identify and pursue growth opportunities within the assigned
territory. This structure permits the Company to set worldwide strategies
centrally, but to implement them locally through marketing managers with the
same business practices, language and culture as the customers being served. The
Company believes that the proximity of the customer and the manager also results
in improved response time to customer inquiries and orders. As of February 28,
1997, the Company's sales and marketing organization included 238 employees in
nine countries worldwide and an independent commissioned sales force of 80
individuals.
Sales. The Company sells its products through several channels. In the
United States, the Company employs independent, commissioned sales
representatives who sell to (i) sound contractors, who typically design and
install integrated sound systems, (ii) music retailers that sell directly to
individuals, bands or small establishments, (iii) independent distributors which
in turn sell to sound contractors or music retailers and (iv) in a few
circumstances, end users that generally are large institutional customers,
original equipment manufacturers or the U.S. military. Abroad, the Company sells
products through both Company-employed and independent, commissioned sales
representatives (a) in nine foreign locations where the Company has established
distribution facilities and (b) through more than 50 independent foreign
distributors. No single customer accounted for more than 5% of the Company's
total net sales in fiscal year 1997. In Hong Kong, China and Germany, the
Company also serves as a sound contractor.
Unlike many of its competitors, which use independent foreign distributors
that generally sell a variety of competing products, the majority of the
Company's foreign sales are conducted through its eight foreign distribution
subsidiaries. Company-owned facilities are located in Germany, Japan, Hong Kong,
China, Canada, France, Switzerland, Australia and the United Kingdom and have
been in place for an average of 13 years. This network allows the Company
greater control over its international sales and marketing and provides an
excellent platform from which to pursue its strategy of penetrating new markets
and expanding its worldwide presence.
In limited instances, the Company sells directly to end users. Often the
end user is a rental company that rents equipment for varying uses, including
touring concerts and public address equipment for local events. The Company also
sells directly to large institutional customers such as the Walt Disney Company,
Club Med Resorts and the United States military. In addition, the Company sells
certain of its products directly to original equipment manufacturers for
inclusion in their products and systems. Specifically, several of the Company's
Electro-Voice and Vega brand products are sold to other audio system
manufacturers such as Zeck of Germany and Yamaha of Japan for use as components
in their products and systems. Management estimates that these sales were less
than 5% of the Company's net sales in fiscal 1997. The Company also licenses the
Altec Lansing name for use in consumer loudspeaker systems.
The Company plans to increase its brand equity and stimulate demand for its
products by marketing directly to end users, who often make the actual
purchasing decisions. Currently, the Company's primary print advertising effort
is directed to leading trade magazines aimed at contractors and distributors. A
strategic decision to influence the end user as well as the Company's customers
is planned for fiscal year 1998 with the objective of enhancing brand awareness
and brand equity among end users. Implementation plans include space advertising
in consumer magazines, increased public relations, direct mail, point of
purchase campaigns, a Company web site and increasing the number and frequency
of product training programs. The Company also exhibits its products at all
major industry trade shows worldwide.
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<PAGE> 46
PRODUCT DEVELOPMENT
Management believes the Company is a strong product innovator. The Company
has introduced numerous technologies that are used throughout the audio
industry, including Constant Directivity and Variable Intensity horns, Manifold
Technology in loudspeaker systems, the application of Neodymium in loudspeaker
systems and microphone magnets and Titanium in compression driver diaphragms.
The concept of Constant Directivity in horn design was introduced to
professional audio by Electro-Voice, Incorporated in the 1970's. Constant
directivity is a characteristic of horn performance that distributes frequencies
evenly over the coverage pattern of the horn. Variable Intensity is a
characteristic of horn performance that distributes sound pressure (the level of
the sound) evenly over the coverage pattern of the horn. In combination,
Constant Directivity and Variable Intensity provide accurate and uniform sound
throughout the listening area. Manifold Technology is the practice of coupling
multiple loudspeakers to a single acoustic horn resulting in significantly
higher sound pressure as compared to the case of one loudspeaker and one horn.
The advantages of Manifold Technology are the elimination of interferences often
found when using multiple sources and a considerably smaller size and lower
weight per unit of sound pressure. The technology is employed mainly in
loudspeaker systems used by concert musicians. The Company believes it was the
first to employ neodymium (N-DYM), a rare-earth element, in lieu of conventional
magnets in the manufacture of loudspeaker systems and microphones. This
innovation resulted in products achieving higher acoustic output and lighter
weight than previously possible. Titanium diaphragms represent an improvement
over conventional aluminum compression driver diaphragms because they have a
higher strength-to-weight ratio. Lighter weight diaphragms produce extended high
frequencies more efficiently than heavier ones.
Over the past 30 years, the Company's products have received a number of
awards from industry publications and other sources. These awards are based in
part on subjective criteria and accordingly should not be attributed undue
significance. The Company's most prominent awards are listed below:
<TABLE>
<CAPTION>
YEAR
AWARDED BRAND AND PRODUCT TYPE AWARD SOURCE
-------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
1996.................. Midas XL4 mixing Sound product of the Theatre Crafts
console year International
1996.................. Midas XL200 mixing Best front-of-house LiveSound!
console theater console International Awards
1996.................. Klark-Teknik DN510 Best noise gate LiveSound!
noise gate International Awards
1996.................. Klark-Teknik DN728 Best digital delay LiveSound!
digital delay line International Awards
1996.................. Klark-Teknik DN4000 Product excellence Plasa Awards UK
parametric equalizer
and delay
1996.................. Vega wireless Emmy for advances in National Academy of
microphone broadcast wireless Television Arts and
technology Sciences
1996.................. EV dX34 digital sound Best digital crossover LiveSound!
system controller International Awards
1996.................. Klark-Teknik DN500 Best dynamics control LiveSound!
signal processor International Awards
1996.................. Electro-Voice MT4 Best arena LiveSound!
loudspeakers loudspeakers International Awards
1995.................. Midas XL3 mixing Best live performance LIVE! Awards
console mixing console
1995.................. Midas XL4 mixing Best front-of-house LiveSound!
console concert console International Awards
1995.................. Klark-Teknik 3600 Best digital LiveSound!
equalizer programmable equalizer International Awards
</TABLE>
45
<PAGE> 47
<TABLE>
<CAPTION>
YEAR
AWARDED BRAND AND PRODUCT TYPE AWARD SOURCE
-------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
1995.................. Electro-Voice 27 N/D Best percussion LiveSound!
microphone microphone International Awards
1994.................. Klark-Teknik DN410 Best parametric LiveSound!
equalizer equalizer International Awards
1994.................. Klark-Teknik DN360 Best graphic equalizer LiveSound!
equalizer International Awards
1994.................. Electro-Voice Delta Best club loudspeakers LiveSound!
Max loudspeakers International Awards
1993.................. Vega VegaNet control Sound product of the LDI
system year
1989.................. Electro-Voice Blue Ribbon Contractor US Army
headsets, handsets, Award Communications --
microphones and Electronics
speakers Communications Award
1988.................. Electro-Voice Sound Equipment Performance Magazine
Manufacturer of the
Year
1987.................. Electro-Voice N/D 757 Most innovative Music and Sound Awards
microphone product
1963.................. Electro-Voice Oscar for scientific Academy of Motion
microphone and technical Picture Arts and
achievement Sciences
</TABLE>
The Company has over 200 product development projects planned or currently
in progress. Of these, approximately 40 are designed to yield new technological
developments, including numerous applications of digital technology, which are
intended to exploit the industry-wide transition from analog to digital
processing. Other research and development projects principally are for design
maintenance or to achieve product enhancements that have been requested by
customers, both of which are important activities in sustaining the Company's
product lines. Because the Company produces a comprehensive range of products,
management believes the Company has the capacity to integrate easily
technologies from one product line to another product line, which ultimately
leads to new products that are often less expensive, lighter or otherwise more
desirable.
In professional audio products there is a growing trend toward broader use
of digital technology, which is more flexible and easier to manipulate than
analog technology. The Company offered its first digital product, a digital
signal processor, in 1987. During the intervening years, the Company has
introduced increasingly complex additional digital processing and control
products for a growing range of applications. These products have generally been
specialized signal processing components intended to fulfill a specific role in
a sound system. In the past, the high cost of digital devices has made it
impractical to utilize the technology fully. Recently, the cost of digital
devices has decreased, and such devices have become more powerful, which has
enabled designers to develop products that more fully integrate digital
functions into a sound system. The first of the Company's fully integrated
digital products, an integrated signal processing, routing and control system to
be marketed under the name Merlin, is currently being tested in selected
customer installations.
As of February 28, 1997, the Company's research and development
organization consisted of 153 employees located in seven locations around the
world, including 80 engineers, each of whom specializes in a certain type of
product and application. In fiscal 1994, 1995, 1996 and 1997, research and
development expenses were $5.5 million, $6.3 million, $8.2 million and $8.2
million, respectively. Work involving applications of digital technology is
expected to represent approximately 22% of the Company's research and
development expenditures in fiscal year 1997.
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<PAGE> 48
MANUFACTURING
The Company manufactures most of the products it sells, and most of the
active acoustic components that they contain. This is done in eleven facilities
located in the United States, Germany and the United Kingdom. Manufacturing
processes are substantially integrated and, in addition to the assembly
processes more typically found among the Company's competitors, include die
casting, fiberglass plastics molding, transformer and coil winding, sheet metal
stamping and forming, metal machining, cabinet fabrication, painting and
plating. The Company purchases certain electrical components, magnets, lumber
and plastics.
Management believes that the Company's integrated manufacturing
capabilities are important factors in maintaining and improving the quality,
performance, availability and cost of EVI products, and decreasing the time to
market of new product introductions. Management also believes that the Company
can respond more effectively to changing customer delivery and product feature
requirements by doing the majority of its own manufacturing and that this gives
it an advantage over many of its competitors. The Company continuously assesses
its manufacturing operations to control or reduce costs.
The Company is planning to implement re-engineering programs in certain of
its manufacturing facilities. Management estimates that planned capital
expenditures of approximately $2.9 million for fiscal years 1998 and 1999 will
result in annual cost savings of approximately $1.8 million. For example, the
Company plans to establish a higher quality and more efficient electronics
assembly capability, which management believes will generate operating savings.
The Company plans to achieve this by installing an automated printed circuit
board insertion operation, an automated finishing system and an automated
carousel stock room.
The Company also sells under its brand names a limited number of finished
products purchased from outside suppliers, including certain electronic products
and loudspeaker systems, where low cost is an essential attribute of the
product. In addition, certain other finished products of non-Company brands are
purchased to supplement the offerings of the Company's distribution operations
in Japan, Hong Kong, Switzerland, Australia and France.
FACILITIES
The following table lists the Company's principal operating facilities:
<TABLE>
<CAPTION>
OWNED/ SIZE
LOCATION LEASED (SQUARE FEET) FACILITY TYPE
- ----------------------------------- ------- ------------- -----------------------------------
<S> <C> <C> <C>
UNITED STATES:
Buchanan, MI....................... Owned 144,000 Corporate
Headquarters/Manufacturing/
Sales/Marketing/Administration/
Distribution/Service Center
Buchanan, MI....................... Owned 28,500 Research & Development
Buchanan, MI....................... Leased 9,600 Sales/Marketing/Distribution/Service
Center
Oklahoma City, OK.................. Owned 143,000 Manufacturing/Research &
Development/Distribution/Service
Center
Austin, TX......................... Leased 95,000 Manufacturing/Distribution
Newport, TN........................ Owned 49,000 Manufacturing
Sevierville, TN.................... Owned 44,000 Manufacturing
Newport, TN........................ Leased 40,000 Distribution
Sun Valley, CA..................... Owned 27,000 Manufacturing/Sales/Marketing/
Administration/Research &
Development/Distribution/Service
Center
El Monte, CA....................... Leased 23,000 Manufacturing/Sales/Marketing/
Administration/Research &
Development/Distribution/Service
Center
Sun Valley, CA..................... Leased 20,600 Distribution
Mishawaka, IN...................... Leased 20,000 Manufacturing
</TABLE>
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<PAGE> 49
<TABLE>
<CAPTION>
OWNED/ SIZE
LOCATION LEASED (SQUARE FEET) FACILITY TYPE
- ----------------------------------- ------- ------------- -----------------------------------
<S> <C> <C> <C>
INTERNATIONAL:
Straubing, Germany................. Owned 95,000 Manufacturing/Sales/Marketing/
Administration/Research &
Development/Distribution/Service
Center
Straubing, Germany................. Leased 10,700 Warehouse
Hohenwarth, Germany................ Leased 7,600 Manufacturing
Kidderminster, England............. Leased 35,000 Manufacturing/Sales/Marketing/
Administration/Research &
Development/Distribution/Service
Center
Hounslow, England.................. Leased 8,000 Research & Development
Kowloon, Hong Kong................. Leased 18,300 Sales/Marketing/Administration/
Distribution/Service Center
Tokyo, Japan....................... Leased 14,800 Sales/Marketing/Administration/
Distribution/Service Center
Osaka, Japan....................... Leased 1,200 Sales/Marketing
Nagoya, Japan...................... Leased 500 Sales/Marketing
Gananoque, Canada.................. Owned 16,000 Sales/Marketing/Administration/
Distribution/Service Center
Sydney, Australia.................. Leased 8,000 Sales/Marketing/Administration/
Distribution/Service Center
Ipsach, Switzerland................ Leased 3,400 Sales/Marketing/Administration/
Distribution/Service Center
Paris, France...................... Leased 3,500 Sales/Marketing/Administration/
Distribution/Service Center
Guangzhou, China................... Leased 280 Sales/Marketing
</TABLE>
The Company is committed to achieving International Organization for
Standardization ("ISO") certification at all its principal manufacturing
facilities. The Sevierville, Tennessee and Kidderminster, England facilities
have been certified under ISO 9002 and the Straubing, Germany facility has been
certified under ISO 9001. The Company's Buchanan, Michigan and Newport,
Tennessee facilities are well into the certification process and expect
certification in 1997.
EMPLOYEES
As of February 28, 1997, the Company employed 1,754 persons worldwide, of
which 1,073 were employed in the United States, 202 were employed in the United
Kingdom, 326 were employed in Germany and 153 were employed in other countries.
On a functional basis, approximately 1,264 were employed in manufacturing, 153
in research and development, 238 in sales and marketing and 99 in administration
and finance.
As of February 28, 1997 the Company employed approximately 904 unionized
employees, of whom approximately 605 were in the United States and 263 were in
Germany. In the United States, employees at the Company's manufacturing
facilities in Newport, Tennessee; Sevierville, Tennessee; Buchanan, Michigan;
and Oklahoma City, Oklahoma are covered by collective bargaining agreements that
expire in June 1998, July 1998, June 1997 and June 1997, respectively. The
Company believes that there are no significant impediments to renewing the
collective bargaining agreements due to expire in June 1997. The Company is in
the process of negotiating an initial collective bargaining agreement at its
Mishawaka, Indiana manufacturing facility. It is anticipated that these
negotiations will be concluded by September, 1997. There are no material
grievances pending with respect to any union employees. The Company has not
experienced any work stoppages in recent years and believes that its
relationship with its employees has been good.
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<PAGE> 50
INTELLECTUAL PROPERTY
Among the Company's significant assets are its intellectual property
rights. See "-- Brands and Products." The Company relies on a combination of
copyright, trademark and patent laws to protect these assets, and to a
significant degree, on trade secrets, confidentiality procedures and contractual
provisions which may afford more limited legal protections. The Company has not
registered its significant trademarks in all foreign jurisdictions in which it
does business, although management believes that the Company's most significant
marks generally have been registered in the jurisdictions where their sales are
the strongest. The Company does not believe that any of its products currently
infringe upon the proprietary rights of third parties in any material respect.
As a result of the Acquisition, the Company restructured and renamed most
of its subsidiaries. The Company's corporate name is EV International, Inc. and
it is currently doing business under the name "EVI Audio."
ENVIRONMENTAL REGULATION
The Company and its operations are subject to extensive and changing U.S.
federal, state and local and foreign environmental laws and regulations,
including, but not limited to, laws and regulations that impose liability on
responsible parties to remediate, or contribute to the costs of remediating,
current or formerly owned or leased sites or other sites where solid or
hazardous wastes or substances were disposed of or released into the
environment. These remediation requirements may be imposed without regard to
fault or legality at the time of the disposal or release. The Company believes
that it currently conducts its operations, and in the past has operated its
business, in substantial compliance with applicable environmental laws and
regulations. From time to time, however, operations of the Company have
resulted, and may result in the future, in non-compliance or liability with
respect to such laws and regulations.
The Company recently had Phase I Environmental Site Assessment and
Compliance Reviews conducted by a third-party environmental consultant at all of
its manufacturing sites and is aware of environmental conditions at such sites
that require or may require remediation or continued monitoring. The Company is
undertaking or is planning to undertake remediation or monitoring at these
sites. In particular, the Company's site in Buchanan, Michigan has been
designated a Superfund site under U.S. environmental laws. Mark IV has agreed to
indemnify the Company fully for environmental liabilities resulting from the
Buchanan, Michigan Superfund site and certain of the other sites at which the
environmental consultant indicated monitoring or remediation was necessary. See
"Relationships with Mark IV."
The Company estimates that it will incur, in fiscal year 1998,
approximately $150,000 of environmentally related capital expenditures. The
Company's environmentally related expenditures in fiscal years 1996 and 1997
were not material. The Company does not believe that the costs to the Company of
environmental compliance under current laws and regulations will have a material
adverse effect on the financial condition or results of operations of the
Company.
COMPETITION
The professional audio market is highly competitive and fragmented. Certain
of the Company's competitors are substantially larger than the Company and have
greater financial resources. The principal competitive factors affecting the
market for the Company's products are product quality, reliability, price,
value, name recognition, performance and customer relationships. The Company
believes that it currently competes favorably overall with respect to each of
these factors.
The Company faces meaningful competition in all of its product categories
and markets. Management believes that its major competitor in providing a full
line of professional audio products is Harman International Industries,
Incorporated, one of whose three segments competes in the professional audio
products market. Management believes that it is one of a few manufacturers that
carries a comprehensive line of professional audio products.
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<PAGE> 51
LEGAL PROCEEDINGS
From time to time the Company is a party to various legal actions in the
normal course of business. Gulton Industries, Inc. ("Gulton"), a predecessor to
the holding company that was merged into and with the Company, was sued by a
company for infringement of a U.S. patent that Gulton was using to produce
products unrelated to the business of the Company for a business line that was
transferred out of Gulton prior to the Acquisition. At trial, the plaintiff was
awarded $3,023,773 in damages. The matter was appealed and upheld with the issue
of calculation of damages remanded to the District Court. No decision has been
made by the District Court on this issue. Mark IV, which is prosecuting the
claim on behalf of Gulton, has agreed to indemnify the Company fully for any
losses or liabilities arising from this litigation. The Company believes that it
is not currently party to any litigation which, if adversely determined, would
have a material adverse effect on the liquidity or results of operations of the
Company.
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<PAGE> 52
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the name, age and position of each of the
executive officers, directors and persons nominated to become directors of the
Company. Each director of the Company will hold office until the next annual
meeting of shareholders of the Company or until his successor has been elected.
Qualified officers of the Company are elected by the Board of Directors of the
Company (the "Board") and serve at the discretion of the Board.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------------ ---- ------------------------------------
<S> <C> <C>
Paul A. McGuire....................................... 55 Acting Co-Chief Executive Officer
Roger H. Gaines....................................... 55 Acting Co-Chief Executive Officer
F. Davis Merrey, Jr................................... 56 Vice President -- Research and
Development
Nicholas E. Somers.................................... 34 Chairman of the Board
Alfred C. Eckert III.................................. 48 Director
Edgar S. Woolard, Jr.................................. 62 Director
</TABLE>
Paul A. McGuire was elected Acting Co-Chief Executive Officer of the
Company effective May 6, 1997, prior to which he was Vice President of the
Company with responsibility for sales and marketing. He joined Electro-Voice,
Incorporated in 1972. He held positions in sales and marketing at Electro-Voice,
Incorporated and in 1990 was appointed President. In 1994, he was appointed
President of Mark IV Audio, Inc. with responsibility for the Americas. In 1995,
Mr. McGuire assumed the additional responsibility for Europe.
Roger H. Gaines was elected Acting Co-Chief Executive Officer of the
Company effective May 6, 1997, prior to which he was Vice President of the
Company with responsibility for manufacturing. He joined Electro-Voice,
Incorporated in 1981. In 1991, he was appointed Vice President of Manufacturing
of Mark IV Audio, Inc.
F. Davis Merrey, Jr. is Vice President of the Company with responsibility
for research and development. He joined Electro-Voice, Incorporated in 1976. In
1985, he was appointed President of the Altec Lansing division of Electro-Voice,
Incorporated. In April 1994, he was appointed Vice President of Research and
Development of Electro-Voice, Incorporated.
Nicholas E. Somers has been the Chairman of the Board of the Company since
February 1997. Mr. Somers has been a Managing Director of GSCP since December
1993. Prior to that, he worked at Morgan Stanley & Co. in the Mergers &
Acquisitions and Corporate Finance Departments from June 1988 to June 1993.
Alfred C. Eckert III has been a director of the Company since February
1997. Mr. Eckert has been the President of GSCP since January 1994. Since 1991,
Mr. Eckert has been a general partner of Greycliff Partners. From 1984 to 1991,
Mr. Eckert was a general partner of Goldman, Sachs & Co. He is a director of
Georgia Gulf Corporation and HBO & Company.
Edgar S. Woolard, Jr. has been a director of the Company since February
1997. Mr. Woolard is Chairman of the Board of Directors of DuPont. He joined
DuPont in 1957 and held a variety of engineering, manufacturing and management
positions before being elected President and Chief Operating Officer in 1987 and
Chairman and Chief Executive Officer in 1989. He retired from the company in
1995. Mr. Woolard is also a director of Citicorp and the North Carolina Textile
Foundation, Inc., a member of the Business Council, a member of the Board of
Directors of Apple Computer, a member of the Board of Trustees of Winterthur
Museum and a member of the Board of Trustees of the Medical Center of Delaware.
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<PAGE> 53
DIRECTOR COMPENSATION
With the exception of Edgar S. Woolard, Jr., the current directors of the
Company receive no compensation. For his services as director, Mr. Woolard
receives compensation of $10,000 annually and an additional $1,000 for each
meeting of the Board he attends. In addition, he will receive stock options in
the Company in an amount to be determined. All the directors are entitled to
reimbursement of their reasonable out-of-pocket expenses in connection with
their travel to and attendance at meetings of the Board.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to all
compensation paid or accrued by the Company for services rendered in all
capacities for the fiscal year ended February 28, 1997 by its Chief Executive
Officer and each of the other four most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION
- ------------------------------------------------------- ----- -------- -------- ------------
<S> <C> <C> <C> <C>
Robert D. Pabst........................................ 1997 $230,000 $ 27,658 $ 45,513(a)
Former Chief Executive Officer and President
Paul A. McGuire........................................ 1997 170,577 16,696 3,067(b)
Acting Co-Chief Executive Officer
Roger H. Gaines........................................ 1997 112,800 9,242 2,410(b)
Acting Co-Chief Executive Officer
F. Davis Merrey, Jr.................................... 1997 135,200 8,550 2,824(b)
Vice President -- Research and Development
John G. Bolstetter..................................... 1997 100,577 8,975 990(b)
Former Vice President -- Finance
</TABLE>
- ---------------
(a) Includes (i) supplemental retirement benefits of $42,246 accrued by Mark IV
during fiscal year 1997 and (ii) $3,267 in matching contributions paid by
Mark IV under the Mark IV Savings and Retirement Plan and accrued by the
Company under the EV International, Inc. Savings and Retirement Plan (the
"Savings Plan") during fiscal year 1997.
(b) Represents matching contributions paid by Mark IV under the Mark IV Savings
and Retirement Plan and accrued by the Company under the Savings Plan during
fiscal year 1997.
DEFINED CONTRIBUTION PLAN
The Company maintains the Savings Plan, which is a defined contribution
plan with a cash or deferred arrangement (as described under Section 401(k) of
the Internal Revenue Code of 1986, as amended). All salaried employees and
certain employees covered by the collective bargaining agreements are eligible
to participate in the Savings Plan after completion of one year of service.
Eligible employees may elect to contribute on a tax deferred basis from 1%
to 15% of their compensation (as defined in the Savings Plan), subject to
statutory limitations. In addition, the Company may make matching or
discretionary contributions, which vary in amount, to the Savings Plan. The
Company has committed for the first plan year (as defined in the Savings Plan)
to make a discretionary contribution on behalf of non-collectively bargained
employees in an amount which is substantially comparable to the amount of
contribution of benefits that such participants would have received if they were
participants in the Mark IV Savings and Retirement Plan (which amount, for
fiscal year 1997 would have been an aggregate of approximately $450,000) or the
Mark IV Retirement Plan, had such plans continued in full force and effect after
the Acquisition.
Under the terms of the Savings Plan, each participant has a fully vested
(nonforfeitable) interest in all contributions made by the individual, matching
contributions and all earnings thereon. A participant will vest in any
discretionary contributions made to his or her account upon completion of five
years of service.
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<PAGE> 54
THE ANNUAL BONUS PLAN
It is anticipated that the Company will adopt an annual bonus plan for the
Company's management employees that will provide that participants in such plan
be entitled to an annual bonus based on achievement of certain projected
earnings performance targets. Under the proposed terms of the bonus plan,
participants will be eligible to receive an annual bonus of between 25% and 100%
of his or her base salary depending on the level of achievement of the
performance targets.
AGGREGATED OPTION EXERCISES
The following table sets forth certain information with respect to the
options held by the named executive officers issued under the Mark IV
Industries, Inc. and Subsidiaries 1992 Incentive Stock Option Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
OPTIONS EXERCISED IN FISCAL UNDERLYING UNEXERCISED
YEAR 1996 UNEXERCISED IN-THE-MONEY
------------------------------ OPTIONS AT OPTIONS AT
NUMBER OF SHARES FEB. 28, 1997 FEB. 28, 1997
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- -------------------------------------- ---------------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Robert D. Pabst....................... 55,594 $ 720,770 -- --
Paul A. McGuire....................... 8,172 130,325 8,722/0 $49,773/0
F. Davis Merrey, Jr. ................. 8,764 76,454 -- --
Roger H. Gaines....................... 6,622 39,570 2,430/0 30,455/0
John G. Bolstetter.................... -- -- 10,355/0 97,524/0
</TABLE>
EMPLOYMENT AGREEMENTS
Paul A. McGuire has entered into a three-year employment agreement with the
Company (the "Employment Agreements"), which automatically extends for
successive one-year terms, subject to termination upon notice. Pursuant to such
Employment Agreement, the officer receives (i) an annual base salary of
$185,000, (ii) an annual cash bonus in an amount determined under the Company's
Annual Bonus Plan based on the achievement of targeted performance objectives
and (iii) certain other benefits, including eligibility to participate in
employee pension and welfare benefit plans sponsored by the Company. If Mr.
McGuire's employment with the Company is terminated without cause (as defined in
such Employment Agreement), all obligations of the Company to him will cease
except that (a) he will be entitled to payment of his earned salary, accrued
vacation, and vested benefits, (b) he shall receive a pro rata annual bonus for
the year of termination and (c) the Company will continue to pay his then
current salary for a period of twelve months. If Mr. McGuire terminates his
employment with the Company upon the expiration of his Employment Agreement, or
the Company opts not to renew his Employment Agreement, the Company will
continue to pay him his base salary for a period of six months and he will be
entitled to payment of his earned salary, accrued vacation, and vested benefits.
Mr. McGuire has agreed not to compete with the Company for a one-year period
following the end of his employment with the Company, unless he is terminated
without cause.
MANAGEMENT CHANGES
On May 6, 1997, the employment of Messrs. Pabst, Bolstetter and Graham, who
had been, respectively, the Chief Executive Officer and President, Vice
President-Finance and Vice President-Administration of the Company, was
terminated. The Company is currently conducting a search for senior executive
officers to carry out the functions previously performed by Messrs. Pabst,
Bolstetter and Graham. In the meantime, Messrs. McGuire and Gaines have been
elected Acting Co-Chief Executive Officers.
Under employment agreements with the Company (the "Employment Agreements"),
Messrs. Pabst and Bolstetter are entitled to compensation upon their departure
from the Company. Pursuant to such Employment Agreements during the course of
employment, each officer was entitled to, among other items, an annual
53
<PAGE> 55
base salary of $230,000 and $140,000, respectively, and an annual cash bonus in
an amount determined under the Company's Annual Bonus Plan based on the
achievement of targeted performance objectives. All obligations of the Company
to each such officer cease upon termination except that each (a) will be
entitled to payment of his earned salary, accrued vacation, and vested benefits
earned through the date of termination, and (b) shall receive a pro rata annual
bonus for the year of termination. Any severance payments due to Mssrs. Pabst
and Bolstetter under their Employment Agreements shall be paid by Mark IV, as
provided in such Employment Agreements and the Purchase Agreement.
54
<PAGE> 56
OWNERSHIP OF CAPITAL STOCK
The authorized common stock of the Company consists of 1,000 shares of
common stock, par value $.01 per share, of which 110 shares are issued and
outstanding and all of which is owned by Holding. The authorized common stock of
Holding consists of 300,000 shares of common stock, par value $.001 per share,
of which 85,000 shares are issued and outstanding. All of Holding's issued and
outstanding common stock is owned by EVI Audio, LLC, the parent company of
Holding. Holding is also authorized to issue 100,000 shares of the Class A
pay-in-kind preferred stock (the "PIK Preferred Stock"), par value $.01 per
share, of which 15,000 shares are issued and outstanding to EVI Audio, LLC. The
entire class of PIK Preferred Stock is owned by EVI Audio LLC. See "Use of
Proceeds."
The Company expects to offer shares of common stock of the Company
representing approximately 3% of the total common stock of the Company to
certain officers, foreign managers and employees of the Company.
The following table sets forth the beneficial ownership of the limited
liability company interests of EVI Audio, LLC.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS INTERESTS CLASS
------------------------------------------------------------- --------- ----------
<S> <C> <C>
GSCP(a)(b)................................................... 72.42 72.42%
TRV Employees Fund, L.P.(c)(b)............................... 17.69 17.69%
Greenwich Street Capital Offshore Fund, Ltd.(d)(b)........... 4.41 4.41%
The Travelers Insurance Company(e)(b)........................ 3.67 3.67%
The Travelers Life and Annuity Company(e)(b)................. 1.81 1.81%
------ -------
100.00 100.00%
====== =======
</TABLE>
- ---------------
(a) The address for this person is 388 Greenwich Street, 36th Fl., New York,
N.Y. 10013. The managing general partner of the general partner of this
person is a wholly owned subsidiary of Travelers Group Inc. ("Travelers").
The manager of this person is Greenwich Street Capital Partners, Inc.
("GSCP, Inc."), which is also a wholly owned subsidiary of Travelers.
(b) By virtue of the relationships set forth in notes (a), (c) and (d),
Travelers may be deemed to share beneficial ownership of the securities held
of record by this person and may be deemed to share power to vote, or to
direct the voting of, and power to dispose of, or direct the disposition of,
the securities held of record by such person.
(c) The address for this person is 388 Greenwich Street, 36th Fl., New York,
N.Y. 10013. The general partner of this person and the manager of this
person, GSCP, Inc., are both wholly owned subsidiaries of Travelers.
(d) The address for this person is c/o Rawlinson & Hunter, Woodbourne Hall, P.O.
Box 3162, Road Town Tortola, British Virgin Islands. This person is managed
by GSCP, Inc. and all the voting securities of this person are owned by the
general partner of GSCP, whose managing general partner is a wholly owned
subsidiary of Travelers.
(e) The address for this person is 1 Tower Square, Hartford, CT. 06183-2030. The
person is an indirect wholly owned subsidiary of Travelers.
55
<PAGE> 57
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK OF EV INTERNATIONAL, INC. AND HOLDING
All of the Company's 110 issued and outstanding shares of common stock have
been pledged by Holding to secure Holding's guarantee of the Company's
obligations under the Senior Credit Facility. Each share of common stock of the
Company and Holding entitles the holder thereof to one vote on all matters to be
voted on by shareholders of the Company. Pursuant to restrictions contained in
the Senior Credit Facility and in the Notes, the Company is restricted in the
payment of dividends on its common stock for the foreseeable future. In the
event of a liquidation, dissolution or winding-up of the Company or Holding, the
holders of the common stock of the applicable company would be entitled to share
in the remaining assets of such company after payment of all liabilities
(including, in the case of the Company, payments required to be made to holders
of the Notes and, in the case of Holding, payment required to be made to holders
of the PIK Preferred Stock) in accordance with the General Corporation Law of
the State of Delaware. Neither the Common Stock of the Company nor Holding has
any preemptive or conversion rights or other subscription rights and no
applicable redemption or sinking fund provisions. All outstanding shares of the
common stock of the Company and Holding are fully paid and non-assessable.
THE ACQUISITION
On February 10, 1997, pursuant to the Purchase Agreement, an acquisition
subsidiary wholly owned by GSCP and certain affiliated investors acquired from
Mark IV and its wholly owned subsidiary, Mark IV PLC, all of the issued and
outstanding capital stock of the former parent of the Company and each of its
subsidiaries for an aggregate cash purchase price of $151.5 million, plus $4.9
million in estimated adjustments paid at the Acquisition Closing Date, which
aggregate amount is subject to further adjustment as described below. The
acquisition subsidiary subsequently merged with and into the parent of the
Company, and the parent then merged with and into the Company, with the Company
ultimately surviving. Prior to the Acquisition Closing Date, (i) EVI Audio LLC
purchased all the issued and outstanding shares of common stock and PIK
Preferred Stock of Holding for an aggregate amount of $57.6 million and (ii)
Holding, a Delaware corporation organized by GSCP to hold all the issued and
outstanding stock of the Company, contributed $57.6 million, the GSCP Equity
Investment, to the Company. See "Ownership of Capital Stock."
Financing for the Acquisition, and the related fees and expenses, consisted
of (i) the GSCP Equity Investment, (ii) the $60.0 million Senior Credit
Facility, among the Company, the several lenders from time to time parties
thereto, and The Chase Manhattan Bank ("Chase"), as Administrative Agent,
consisting of (a) the $35.0 million Term Loan Facility, all of which was drawn
down on the Acquisition Closing Date, and (b) the $25.0 million Revolving Credit
Facility, none of which was drawn down on the Acquisition Closing Date and (iii)
the $75.0 million Senior Subordinated Facility, among the Company, the Initial
Purchasers, and other lenders, issued as interim financing. See "Description of
Credit Facilities -- Senior Credit Facility." Of these amounts, $156.4 million
was used for the purchase price under the Purchase Agreement and $10.4 million
was for financing and transaction fees and expenses. See "Use of Proceeds."
Under the Purchase Agreement, the purchase price is subject to adjustment
on the basis of (i) the audited working capital and audited cash flow of the
Company as at and for the 10-month period ended December 31, 1996 and (ii) the
net intercompany transfers of cash between Mark IV and its affiliates (other
than the Company and its subsidiaries), on the one hand, and the Company and its
subsidiaries, on the other hand, during the period between December 31, 1996 and
the Acquisition Closing Date. Any additional amounts due or receivable pursuant
to the adjustment are not expected to be material.
In connection with the Purchase Agreement, Mark IV and the Company entered
into certain agreements pursuant to which Mark IV provides services to the
Company, licenses certain trademarks and subleases one property to the Company.
See "Relationships with Mark IV."
56
<PAGE> 58
THE SPONSOR
GSCP is a private direct equity investment fund organized in 1994 to
provide long-term capital for and make acquisitions of companies in a variety of
industries. GSCP invests in management buyouts, leveraged acquisitions,
international investment opportunities and minority investments. Upon completion
of the Acquisition, GSCP and its co-investors became the owners, indirectly, of
100% of the voting securities of the Company. See "Description of Capital
Stock." GSCP's significant portfolio investments include Marcus Cable Company,
L.P. and Rifkin Acquisition Partners, L.L.L.P., both of which own and operate
cable television systems; Mercury Radio Communications, L.P., which owns and
operates radio stations; Seguros Comercial America, S.A. de C.V., a Mexican
property, casualty and life insurance company; and Telegroup, Inc., a provider
of domestic and international long-distance telephone services. GSCP has
recently announced an agreement to acquire control of Telex Communications
Group, Inc.
RELATED TRANSACTIONS
The Company has also engaged Greenwich Street Capital Partners, Inc.
("Greenwich"), the manager of GSCP, to provide it with certain business,
financial and managerial advisory services, including developing and
implementing corporate and business strategy and providing other consulting and
advisory services. In exchange for such services, the Company has agreed to pay
Greenwich an annual fee of $750,000, payable quarterly in arrears, plus
Greenwich's reasonable out-of-pocket costs and expenses. This engagement is in
effect until the earlier to occur of the tenth anniversary of Acquisition
Closing Date and the date on which GSCP directly or indirectly no longer owns
any shares of the capital stock of Holding, and may be earlier terminated by
Greenwich in its discretion. In addition, on the Acquisition Closing Date,
Greenwich received $1.5 million in fees for providing services relating to the
structuring and financing of the Acquisition and the management compensation
package related thereto and is entitled to receive reimbursement for its
reasonable out-of-pocket costs and expenses relating to its provision of
services.
GSCP and Smith Barney Inc. are both affiliated companies of Travelers Group
Inc. An affiliate of Chase Securities Inc. is a limited partner in GSCP. Chase
Securities Inc. is an affiliate of Chase.
RELATIONSHIPS WITH MARK IV
In connection with the Acquisition, the Company entered into a number of
agreements with Mark IV, which are summarized below.
TRANSITION SERVICES AGREEMENT
For a period not to exceed twelve months following the Acquisition, Mark IV
is providing certain services to the Company and its affiliates that it provided
to the Company prior to the Acquisition Closing Date. The services include:
accounting assistance; tax planning and advice; assistance on developing a
foreign currency hedging program and assistance with respect to establishing a
daily cash management program. In addition, until a transfer of certain pension
plan assets is completed, Mark IV will continue to hold such assets and to cause
its record keeper and administrator to continue to serve in such roles with
respect to such assets.
The Company has agreed to pay Mark IV a monthly fee per service. If Mark IV
performs each service under the Agreement for the entire twelve-month period,
which the Company does not anticipate to be necessary, the total fees under the
Agreement will be $100,000. The Company may cancel each service individually
upon 15 days written notice to Mark IV. Several of the services have already
been cancelled. The parties agreed that they will not hold each other liable for
any losses arising from the provision of the services except to the extent that
such losses arise out of the gross negligence, fraud or willful misconduct of a
party.
TRADEMARK LICENSES
Mark IV has granted to the Company a non-exclusive, royalty-free license to
use the names "Mark IV," "Mark IV Audio Control Technology," "Mark IV Audio
Systems," "Mark IV Audio North America,"
57
<PAGE> 59
"Mark IV Cinema Systems" and "Mark IV Pro Audio." Within six months of the
Acquisition Closing Date, the Company is required to change the corporate names
of its subsidiaries organized outside the United States to names that do not
include such names. In addition, the Company may continue to use such names on
stationery, signage, invoices, receipts, forms, packaging, products,
advertising, promotional materials, training and service literature and
inventory for a period of 18 months after the Acquisition Closing Date. The
Company may also use tooling bearing such names to manufacture its products for
a period of twelve months following the Acquisition Closing Date and,
thereafter, may sell any inventories of such products bearing such names until
the earlier to occur of the following (i) such inventories are exhausted or (ii)
36 months after the Acquisition Closing Date.
Mark IV has also granted a non-exclusive, royalty-free, perpetual license
to use certain portions of software owned by Mark IV and not authored by the
Company or its subsidiaries but used in connection with the business of the
Company prior to the Acquisition.
PURCHASE AGREEMENT
In the Purchase Agreement, Mark IV has agreed, for a period of five years
commencing on the Acquisition Closing Date, to indemnify the Company, subject to
a cap equal to the final purchase price (see "The Acquisition"), for (i)
liabilities arising in connection with the reorganization of the Company and its
subsidiaries undertaken by Mark IV prior to the Acquisition Closing Date; (ii)
taxes that are the responsibility of Mark IV (as provided in the Purchase
Agreement) and, (iii) additionally, to the extent such liabilities exceed $1.5
million, liabilities arising out of a breach of the representations, warranties,
covenants or agreements contained in the Purchase Agreement.
In addition, the Company (or, for certain sites, Mark IV, on behalf of the
Company) has undertaken or currently is undertaking remediation of contamination
at certain of its currently or formerly owned sites (some of which are unrelated
to the audio business) and the Company has agreed it is a de minimis responsible
party at a number of other such sites which have been designated as Superfund
sites under U.S. environmental laws. The Company's Buchanan, Michigan site has
also been designated as a Superfund site under U.S. environmental laws and is
currently being remediated. The Company recently had Phase I Environmental Site
Assessment and Compliance Reviews conducted by an environmental consultant at
all of its manufacturing sites and is aware of environmental conditions at
certain of such sites that may require remediation or continued monitoring.
In addition to the indemnities set forth above, in the Purchase Agreement,
Mark IV has agreed to indemnify the Company fully for environmental liabilities
resulting from (i) any operations, assets or businesses not related to the
business of the Company prior to the Acquisition Closing Date, (ii) certain
sites at which the Company is currently conducting remediation, including the
Superfund site discussed above, or is expected to conduct remediation in the
near term and (iii) certain sites not currently owned by or related to the
business of the Company but at which the Company presently or in the past has
incurred environmental liability or for which third parties have claimed the
Company has responsibility.
AUSTIN SUBLEASE
On the Acquisition Closing Date, the Company entered into a sublease from
Mark IV for certain premises in Austin, Texas that were being used by the
Company prior to the Acquisition Closing Date. The term of the sublease is five
years and the annual base rent is $249,900, plus costs of maintenance and other
expenses. Mark IV sublet most of the remaining space in the Austin building to
another of its former subsidiaries which historically has operated at the same
location and had significant access over and across the Company's premises. The
Company's sublease includes a provision requiring Mark IV to perform certain
work and provide certain equipment to separate further the operations of the
other former subsidiary from those of the Company. If Mark IV fails to complete
such work within a year, the Company has the right to terminate the sublease
after 18-months.
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<PAGE> 60
STANDBY LETTER OF CREDIT
On the Acquisition Closing Date, a Letter of Credit in the amount of $1.4
million was issued under the Senior Credit Facility for the benefit of Mark IV
to provide security for Mark IV's continuing guarantee of certain performance
bonds for work to be performed by the Company's Hong Kong subsidiaries.
DESCRIPTION OF CREDIT FACILITIES
SENIOR CREDIT FACILITY
General. The Company entered into the Senior Credit Facility, dated as of
February 10, 1997, with the banks, financial institutions and other entities
selected in the syndication effort (the "Lenders") and Chase, as administrative
agent, syndication agent, documentation agent and lender, which provides for the
Term Loan Facility of $35.0 million and the Revolving Credit Facility of $25.0
million. The following is a summary of the principal terms of the credit
agreement governing the Senior Credit Facility and related loan documents (the
"Credit Documentation") and is subject to and qualified in its entirety by
reference to the Credit Documentation, copies of which are available upon
request from the Company.
Use of Facilities. On the Acquisition Closing Date, the Company borrowed
the full amount available under the Term Loan Facility and used the proceeds of
$35.0 million, together with the proceeds of the GSCP Equity Investment and the
Senior Subordinated Facility, for payment of the Purchase Price of the
Acquisition and related fees and expenses. On such date, the Company also
obtained letters of credit for use in the ordinary course of business in the
aggregate face amount of approximately $3.8 million. The remainder of the
Revolving Credit Facility is available (subject to borrowing base availability)
to service the working capital requirements of the Company and its subsidiaries
and for their general corporate purposes.
Security, Guarantees. The obligations of the Company under the Credit
Documentation are unconditionally guaranteed, jointly and severally, by Holding
and by each subsequently acquired or organized direct and indirect domestic
subsidiary of the Company. The obligations under the Senior Credit Facility and
the guarantees thereof are secured by a first priority security interest in
substantially all of the Company's tangible and intangible assets, including,
without limitation, intellectual property, owned U.S. real property, all of the
capital stock of the Company and each of its existing and subsequently acquired
or organized direct and indirect domestic subsidiaries, and 65% of the capital
stock of EVI Audio International Holding Corporation, Inc., a wholly owned
subsidiary of the Company organized to hold all of the foreign subsidiaries of
the Company.
Borrowing Base. Loans under the Revolving Credit Facility are subject to
maintenance by the Company of a borrowing base. At any time, amounts borrowed
under the Revolving Credit Facility may not exceed the sum of 80% of the
eligible accounts receivable and 50% of the eligible inventory of the Company,
provided that the portion of the borrowing base represented by eligible
inventory shall not be more than 50%. The borrowing base will be computed at
least monthly by the Company.
Amortization, Interest. The Term Loan Facility has a maturity date of
August 10, 2002. After giving effect to the expected $17.0 million prepayment
with the proceeds of the Offering, the Term Loan Facility will amortize in
quarterly installments aggregating $1.0 million, $2.0 million, $3.0 million,
$3.6 million, $4.3 million and $4.1 million in each of fiscal year 1998, 1999,
2000, 2001, 2002 and 2003. The Term Loan Facility bears interest at a rate per
annum equal (at the Company's option) to (i) an Alternate Base Rate (equal to
the highest of (a) Chase's prime rate, (b) the secondary market rate for
certificates of deposit plus 1% and (c) the federal funds effective rate plus
0.5% (the "ABR")) plus 1.75% (the "ABR Applicable Margin") or (ii) the
Eurodollar Rate (the rate at which Eurodollar deposits for one, two, three or
six months (at the Company's option) are offered to Chase in the interbank
Eurodollar market) in the approximate amount of Chase's share of the relevant
loan (the "Eurodollar Rate") plus 2.75% (the "Eurodollar Applicable Margin").
The Revolving Credit Facility is available on a revolving basis during the
period commencing on the date of the Acquisition Closing and matures on August
10, 2002. The Revolving Credit Facility bears interest at a rate per annum equal
(at the Company's option) to (i) the ABR plus the ABR Applicable Margin or (ii)
the
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Eurodollar Rate plus the Eurodollar Applicable Margin. The foregoing margins
shall be subject to reduction after the first anniversary of the Closing Date.
Prepayments and Reduction of Commitments. The Senior Credit Facility
permits the Company to prepay loans and to reduce permanently revolving credit
commitments in minimum amounts equal to $1,000,000 or a whole multiple of
$500,000 in excess thereof. In addition, the Company shall be required to make
mandatory prepayments with (i) the debt portion of any payments received from
Mark IV pursuant to the purchase price adjustment (see "The Acquisition"), (ii)
non-ordinary asset sale proceeds, (iii) any additional indebtedness and equity
proceeds and (with certain exceptions) (iv) with 75% of the excess cash flow of
the Company and its subsidiaries for each fiscal year commencing on May 31, 1998
and each May 31 thereafter. All such amounts shall be applied, first, to the
prepayment of the Term Loan Facility and, second (other than prepayments with
excess cash flow), to the permanent reduction of the Revolving Credit Facility.
The Revolving Credit Facility must be prepaid and, when there are no loans
outstanding under the Revolving Credit Facility, all outstanding letters of
credit must be cash collateralized to the extent aggregate outstandings at any
time exceed the lesser of the amount of the Revolving Credit Facility or the
Borrowing Base.
Fees. The Company has agreed to pay the lenders the following fees: (i) an
annual administration fee of $50,000 for the first year, which was paid on
February 10, 1997, and $35,000 for each subsequent year, which will be payable
in advance each subsequent anniversary thereof prior to the maturity or early
termination of the Senior Credit Facility and the payment in full of all amounts
owing thereunder and (ii) a commitment fee equal to 0.50% per annum, payable
quarterly, on the average daily unused portion of the Senior Credit Facility.
The Company also pays a commission on the face amount of all outstanding letters
of credit at a per annum rate equal to the Eurodollar Applicable Margin then in
effect plus a fronting fee equal to 0.25% per annum, payable quarterly, on the
face amount of each letter of credit. In addition, the Company will be required
to pay to the issuing lender customary administrative, issuance, amendment,
payment and negotiation charges.
Covenants. The Senior Credit Facility contains a number of negative
covenants that, among other things, restrict the ability of the Company and its
subsidiaries to dispose of assets; incur additional indebtedness (including
preferred stock); guarantee obligations; merge, consolidate, liquidate or
dissolve; lease property; pay dividends or make distributions in respect of
capital stock; create liens on assets; enter into sale and leaseback
transactions; make investments, loans or advances; make optional payments and
modifications of the Notes; change the business conducted by the Company or its
subsidiaries; make capital expenditures in the fiscal year ended February 28,
1998, in excess of $6,500,000 and in any fiscal year thereafter, in excess of
$6,000,000 (subject to certain carry-forward provisions); engage in certain
transactions with affiliates; agree to negative pledge clauses; or cause changes
in the fiscal year. The Senior Credit Facility also contains affirmative
covenants that require that the Company (i) provide certain information to
Chase; (ii) continue its business and maintain its material rights and
privileges; (iii) comply with laws and its material contractual obligations;
(iv) maintain its property and adequate insurance; (v) maintain certain books
and records; (vi) allow the Lenders to inspect its property and books and
conduct field audits of its accounts receivable and inventory; and (vii) agree
to grant security interests in after-acquired property.
The Company is also required to comply with specified financial covenants
and ratios, including (i) a minimum consolidated EBITDA requirement, (ii) a
maximum consolidated debt to consolidated EBITDA ratio, and (iii) a minimum
consolidated EBITDA to consolidated fixed charges ratio.
Events of Default. The Senior Credit Facility contains customary events of
default, including defaults relating to non-payment, material breach of a
representation, warranty or covenant contained therein, cross-default and
acceleration, bankruptcy, certain ERISA events, material judgements, actual or
asserted invalidity of any guarantee or security document, subordination
provisions or security interest, and a change of control.
Expenses and Indemnification. Under the Senior Credit Facility, the
Company has agreed to pay (i) all reasonable out-of-pocket expenses of Chase and
the Initial Purchasers associated with the preparation, execution, delivery, and
administration of the Credit Documentation and any amendment or waiver with
respect thereto (including the reasonable fees and disbursements and other
charges of counsel) and (ii) all
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out-of-pocket expenses of Chase and the Lenders in connection with the
enforcement thereof (including the reasonable fees and disbursements and other
charges of counsel). In addition, the Company has agreed to indemnify Chase, the
Initial Purchasers, the Lenders and related parties against any loss, liability,
cost or expense incurred in respect of the financing or the use or the proposed
use of proceeds thereof, except for losses, liability, costs or expenses
resulting from the gross negligence or willful misconduct of the indemnified
party or any or its respective directors, officers, employees and agents.
FOREIGN WORKING CAPITAL LINES
Certain foreign subsidiaries of the Company have entered into agreements
with banks to provide for local working capital needs. As of February 28, 1997,
the total aggregate availability of these arrangements, including for letter of
credit issuance, was $4.4 million. The rates of interest in effect on these
facilities as of February 28, 1997 ranged from 1.875% to 9.75%, and are
generally subject to change based upon prevailing local prime rates. In certain
instances, the facilities are secured by a lien on foreign real property,
leaseholds or accounts receivables and inventory or guaranteed by another
subsidiary of the Company.
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THE EXCHANGE OFFER
The summary herein of certain provisions of the Exchange and Registration
Rights Agreement does not purport to be complete and reference is made to the
provisions of the Exchange and Registration Rights Agreement, which has been
filed as an exhibit to the Registration Statement and a copy of which is
available as set forth under the heading "Available Information."
TERMS OF THE EXCHANGE OFFER
General
In connection with the issuance of the Existing Notes pursuant to a
Securities Purchase Agreement, dated as of March 19, 1997, between the Company
and the Initial Purchasers, the Initial Purchasers and their respective
assignees became entitled to the benefits of the Exchange and Registration
Rights Agreement.
Under the Exchange and Registration Rights Agreement, the Company has
agreed (i) to file with the Commission within 60 days after March 19, 1997, the
date the Existing Notes were issued (the "Issue Date"), the Registration
Statement of which this Prospectus is a part with respect to a registered offer
to exchange the Existing Notes for the New Notes, (ii) to use its reasonable
best efforts to cause the Registration Statement to be declared effective under
the Securities Act within 150 days after the Issue Date and (iii) to use its
reasonable best efforts to consummate the Exchange Offer within 165 calendar
days after the Issue Date. The Company will keep the Exchange Offer open for not
less than 30 days after the date notice of the Exchange Offer is mailed to
holders of the Existing Notes. The Exchange Offer being made hereby, if
commenced and consummated within the time periods described in this paragraph,
will satisfy those requirements under the Exchange and Registration Rights
Agreement.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, all Existing Notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date will be
accepted for exchange. New Notes will be issued in exchange for an equal
principal amount of outstanding Existing Notes accepted in the Exchange Offer.
Existing Notes may be tendered only in integral multiples of $1,000. This
Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders as of , 1997. The Exchange Offer is not
conditioned upon any minimum principal amount of Existing Notes being tendered
for exchange. However, the obligation to accept Existing Notes for exchange
pursuant to the Exchange Offer is subject to certain conditions as set forth
herein under "-- Conditions."
Existing Notes shall be deemed to have been accepted as validly tendered
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Existing Notes for the purposes of receiving the New Notes and delivering New
Notes to such holders.
Based on interpretations by the Staff of the Commission as set forth in
no-action letters issued to third parties, the Company believes that the New
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by any holder thereof (other than any such holder that
is a broker-dealer or an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that (i) such New
Notes are acquired in the ordinary course of business, (ii) at the time of the
commencement of the Exchange Offer such holder has no arrangement with any
person to participate in a distribution of such New Notes and (iii) such holder
is not engaged in, and does not intend to engage in, a distribution of such New
Notes. The Company has not sought, and does not intend to seek, a no-action
letter from the Commission with respect to the effects of the Exchange Offer,
and there can be no assurance that the Staff would make a similar determination
with respect to the New Notes as it has in such no-action letters.
By tendering Existing Notes in exchange for New Notes and executing the
Letter of Transmittal, each holder will represent to the Company that: (i) it is
not an affiliate of the Company, (ii) any New Notes to be received by it will be
acquired in the ordinary course of business and (iii) at the time of the
commencement of the Exchange Offer it had no arrangement with any person to
participate in a distribution of the New Notes
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and, if such holder is not a broker-dealer, it is not engaged in, and does not
intend to engage in, a distribution of New Notes. If a holder of Existing Notes
is unable to make the foregoing representations, such holder may not rely on the
applicable interpretations of the Staff of the Commission and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction unless such sale is made
pursuant to an exemption from such requirements.
Each broker-dealer that receives New Notes for its own account in exchange
for Existing Notes where such Existing Notes were acquired by such broker-dealer
as a result of market-making or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
See "Plan of Distribution."
Upon consummation of the Exchange Offer, subject to certain limited
exceptions, holders of Existing Notes who do not exchange their Existing Notes
for New Notes in the Exchange Offer will no longer be entitled to registration
rights and will not be able to offer or sell their Existing Notes, unless such
Existing Notes are subsequently registered under the Securities Act (which,
subject to certain limited exceptions, the Company will have no obligation to
do), except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws.
Expiration Date; Extensions; Amendments; Termination
The term "Expiration Date" shall mean , 1997 (30 calendar days
following the commencement of the Exchange Offer), unless the Company, in its
sole discretion, extends the Exchange Offer, in which case the term "Expiration
Date" shall mean the latest date to which the Exchange Offer is extended.
Notwithstanding any extension of the Exchange Offer, if the Exchange Offer is
not consummated by , 1997, the Company must pay liquidated damages.
To extend the Expiration Date, the Company will notify the Exchange Agent
of any extension by oral or written notice and will notify the holders of the
Existing Notes by means of a press release or other public announcement prior to
9:00 A.M., New York City time, on the next business day after the previously
scheduled Expiration Date. Such announcement may state that the Company is
extending the Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Existing
Notes, to extend the Exchange Offer or to terminate the Exchange Offer and not
permit acceptance of Existing Notes not previously accepted if any of the
conditions set forth herein under "-- Conditions" shall have occurred and shall
not have been waived by the Company, by giving oral or written notice of such
delay, extension or termination to the Exchange Agent, or (ii) to amend the
terms of the Exchange Offer in any manner deemed by it to be advantageous to the
holders of the Existing Notes. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the Exchange Agent. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment in a manner reasonably calculated
to inform the holders of the Existing Notes of such amendment.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Company shall have no obligations to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
INTEREST ON THE NEW NOTES
The New Notes will accrue interest at the rate of 11% per annum from the
Issue Date of the Existing Notes. Interest on the New Notes are payable on March
15 and September 15 of each year, commencing September 15, 1997.
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PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Existing Notes into
the Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date or
(ii) the holder must comply with the guaranteed delivery procedures described
below. THE METHOD OF DELIVERY OF LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OTHER REQUIRED DOCUMENTS
SHOULD BE SENT TO THE COMPANY. Delivery of all documents must be made to the
Exchange Agent at its address set forth below. Holders may also request their
respective brokers, dealers, commercial banks, trust companies or nominees to
effect such tender for such holders.
The tender by a holder of Existing Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal. Any beneficial
owner whose Existing Notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and who wishes to tender should
contact such registered holder promptly and instruct such registered holder to
tender on his behalf.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor" institution within the meaning of Rule
17Ad-15 under the Exchange Act (each an "Eligible Institution") unless the
Existing Notes tendered pursuant thereto is tendered for the account of an
Eligible Institution.
If the Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such person should so indicate
when signing, and unless waived by the Company, evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Existing Notes will be determined by the
Company in its sole discretion, which determination will be final and binding.
The Company reserves the absolute right to reject any and all Existing Notes not
properly tendered or any Existing Notes which, if accepted, would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
absolute right to waive any irregularities or conditions of tender as to
particular Existing Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Existing Notes must be
cured within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Existing Notes, nor
shall any of them incur any liability for failure to give such notification.
Tenders of Existing Notes will not be deemed to have been made until such
irregularities have been cured or waived. Any Existing Notes received by the
Exchange Agent that is not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost to
such holder by the Exchange Agent, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion, subject
to the provisions of the Indenture, to (i) purchase or make offers for any
Existing Notes that remains outstanding subsequent to the Expiration Date or, as
set forth under "-- Conditions", to terminate the Exchange Offer in accordance
with
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the terms of the Exchange and Registration Rights Agreement, (ii) to redeem
Existing Notes as a whole or in part at any time and from time to time, as set
forth under "Description of Notes -- Optional Redemption" and (iii) to the
extent permitted by applicable law, purchase Existing Notes in the open market,
in privately negotiated transactions or otherwise. The terms of any such
purchases or offers could differ from the terms of the Exchange Offer.
ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Existing Notes properly tendered will be accepted promptly after the
Expiration Date, and the New Notes will be issued promptly after acceptance of
the Existing Notes. See "-- Conditions." For purposes of the Exchange Offer,
Existing Notes shall be deemed to have been accepted as validly tendered for
exchange when, as and if the Company has given oral or written notice thereof to
the Exchange Agent.
In all cases, issuance of New Notes for Existing Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of a Book-Entry Confirmation of such Existing
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility, a
properly completed and duly executed Letter of Transmittal and all other
required documents. If any tendered Existing Notes are not accepted for any
reason set forth in the terms and conditions of the Exchange Offer, such
unaccepted or such nonexchanged Existing Notes will be credited to an account
maintained with such Book-Entry Transfer Facility as promptly as practicable
after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Existing Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Existing Notes by causing the
Book-Entry Transfer Facility to transfer such Existing Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, the Letter of
Transmittal or facsimile thereof with any required signature guarantees and any
other required documents must, in any case, be transmitted to and received by
the Exchange Agent at one of the addresses set forth below under "-- Exchange
Agent" on or prior to the Expiration Date or the guaranteed delivery procedures
described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If the procedures for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by facsimile transmission,
mail or hand delivery), setting forth the name and address of the holder of
Existing Notes and the amount of Existing Notes tendered, stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange ("NYSE") trading days after the date of execution of the Notice of
Guaranteed Delivery, a Book-Entry Confirmation and any other documents required
by the Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent and (iii) a Book-Entry Confirmation and all other documents
required by the Letter of Transmittal are received by the Exchange Agent within
three NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
WITHDRAWAL OF TENDERS
Tenders of Existing Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time on the Expiration Date.
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For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to 5:00 p.m., New York City time on the
Expiration Date at one of the addresses set forth below under "-- Exchange
Agent." Any such notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility from which the Existing Notes was
tendered, identify the principal amount of the Existing Notes to be withdrawn,
and specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Existing Notes and otherwise comply
with the procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notice will be determined by the
Company, whose determination shall be final and binding on all parties. Any
Existing Notes so withdrawn will be deemed not be have been validly tendered for
exchange for purposes of the Exchange Offer. Any Existing Notes which have been
tendered for exchange but which are not exchanged for any reason will be
credited to an account maintained with such Book-Entry Transfer Facility for the
Existing Notes as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Existing Notes may be
retendered by following one of the procedures described under "-- Procedures for
Tendering" and "-- Book-Entry Transfer" above at any time on or prior to the
Expiration Date.
CONDITIONS
The Company has no obligation to consummate the Exchange Offer if the New
Notes to be received by such holder or holders of Existing Notes in the Exchange
Offer, upon receipt, will not be tradable by such holder without restriction
under the Securities Act and the Exchange Act and without material restrictions
under the "blue sky" or securities laws of the several states of the United
States.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance and requests for additional copies
of this Prospectus or of the Letter of Transmittal should be directed to the
Exchange Agent addressed as follows:
<TABLE>
<S> <C> <C>
By Mail: By Hand:
The Bank of New York Telephone: The Bank of New York
101 Barclay Street, 7E (212) 815-2742 101 Barclay Street
New York, NY 10286 Facsimile: Corporate Trust Services Window
Attention: Reorganization Section (212) 571-3080 Ground Level
Enrique Lopez New York, NY 10286
Attention: Reorganization
Section
Enrique Lopez
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitations may be
made by telegraph, telephone, telecopy or in person by officers and regular
employees of the Company.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of the Prospectus and related documents to the beneficial
owners of the Existing Notes, and in handling or forwarding tenders for
exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company, including fees and expenses of the Exchange Agent and
Trustee and accounting, legal, printing and related fees and expenses.
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The Company will pay all transfer taxes, if any, applicable to the exchange
of Existing Notes pursuant to the Exchange Offer. If, however, New Notes or
Existing Notes for principal amounts not tendered or accepted for exchange are
to be registered or issued in the name of any person other than the registered
holder of the Existing Notes tendered, or if tendered Existing Notes are
registered in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Existing Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Existing Notes who do not exchange their Existing Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Existing Notes as set forth in the legend
thereon as a consequence of the issuance of the Existing Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Existing Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will register the Existing Notes
under the Securities Act. To the extent that Existing Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Existing Notes could be adversely affected.
DESCRIPTION OF NOTES
GENERAL
The Existing Notes were issued, and the New Notes offered hereby will be
issued, under an Indenture, dated as of March 24, 1997 (the "Indenture"),
between the Company and The Bank of New York, as Trustee (the "Trustee"), a copy
of which is available upon request to the Company.
The following summary of certain provisions of the Indenture and the Notes
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Indenture, including the
definitions of certain terms therein and those terms to be made a part thereof
by the Trust Indenture Act of 1939, as amended ("TIA"). The term "Company" and
the other capitalized terms defined in "-- Certain Definitions" below are used
in this "Description of Notes" as so defined.
Principal of, and premium, if any, and interest on, the Notes will be
payable, and the Notes may be exchanged or transferred, at the office or agency
of the Company in the Borough of Manhattan, The City of New York (which
initially shall be the principal corporate trust office of the Trustee, at The
Bank of New York, 101 Barclay Street, New York, New York 10286), except that, at
the option of the Company, payment of interest may be made by check mailed to
the address of the registered holders of the Notes as such address appears in
the Note Register.
The Notes will be unsecured obligations of the Company, ranking subordinate
in right of payment to all Senior Indebtedness of the Company.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF THE NOTES
The Notes will be limited to $100.0 million aggregate principal amount, and
will mature on March 15, 2007. Each Note will bear interest at a rate of 11% per
annum from the date of issuance, or from the most recent date to which interest
has been paid or provided for, payable semiannually in cash to Holders of record
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at the close of business on the March 1 or September 1 immediately preceding the
interest payment date on March 15 and September 15 of each year, commencing
September 15, 1997.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole or in part,
and from time to time on and after March 15, 2002 and prior to maturity, upon
not less than 30 nor more than 60 days' prior notice mailed by first-class mail
to each Holder's registered address, at the following redemption prices
(expressed as a percentage of principal amount), plus accrued interest, if any,
to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the 12-month period commencing on March 15 of the
years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
----------------------------------------------------- ----------------
<S> <C>
2002................................................. 105.500%
2003................................................. 103.667%
2004................................................. 101.833%
2005 and thereafter.................................. 100.000%
</TABLE>
In addition, at any time and from time to time prior to March 15, 2000, the
Company may redeem in the aggregate up to 33 1/3% of the original aggregate
principal amount of the Notes with the proceeds of one or more Public Equity
Offerings by the Company following which there is a Public Market, at a
redemption price (expressed as a percentage of principal amount thereof) of 111%
plus accrued interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that at least 66 2/3% of the
original aggregate principal amount of the Notes must remain outstanding after
each such redemption.
At any time on or prior to March 15, 2002, the Notes may also be redeemed
as a whole at the option of the Company upon the occurrence of a Change of
Control, upon not less than 30 nor more than 60 days' prior notice (but in no
event more than 180 days after the occurrence of such Change of Control) mailed
by first-class mail to each Holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium as of,
and accrued but unpaid interest, if any, to, the date of redemption (the
"Redemption Date") (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
In addition, as more fully described under "Change of Control," each Holder
will have the right to require the Company to repurchase all or any part of such
Holder's Notes following a Change of Control at a purchase price in cash equal
to 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase.
SELECTION
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the notice
of redemption relating to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.
RANKING
The indebtedness evidenced by the Notes will be unsecured Senior
Subordinated Indebtedness of the Company, will be subordinated in right of
payment, as set forth in the Indenture, to the payment when due of all existing
and future Senior Indebtedness of the Company, including the Company's
obligations under the Senior Credit Facility, will rank pari passu in right of
payment with all existing and future Senior Subordinated Indebtedness of the
Company and will be senior in right of payment to all existing and future
Subordinated Obligations of the Company. The Notes will also be effectively
subordinated to any Secured
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Indebtedness of the Company and its Subsidiaries to the extent of the value of
the assets securing such Indebtedness. However, payment from the money or the
proceeds of U.S. Government Obligations held in any defeasance trust described
under "-- Defeasance" below is not subordinated to any Senior Indebtedness or
subject to the restrictions described herein.
At February 28, 1997, on a pro forma basis after giving effect to the
Transactions, the Offering and the application of the proceeds therefrom as
described herein under "Use of Proceeds," the outstanding Senior Indebtedness of
the Company would have been approximately $18 million (exclusive of unused
commitments), all of which would have been Secured Indebtedness. Although the
Indenture contains limitations on the amount of additional Indebtedness which
the Company may Incur, under certain circumstances the amount of such
Indebtedness could be substantial and, in any case, such Indebtedness may be
Senior Indebtedness or Secured Indebtedness. See "-- Certain
Covenants -- Limitation on Indebtedness" below.
Certain of the operations of the Company are conducted through its
Subsidiaries. Claims of creditors of such Subsidiaries, including trade
creditors, and claims of preferred stockholders (if any) of such Subsidiaries
will have priority with respect to the assets and earnings of such Subsidiaries
over the claims of creditors of the Company, including holders of the Notes. The
Notes, therefore, will be effectively subordinated to creditors (including trade
creditors) and preferred stockholders (if any) of Subsidiaries of the Company,
other than any such Subsidiary that may become a Note Guarantor in the future.
See "-- Note Guarantees" below. Although the Indenture limits the incurrence of
Indebtedness and preferred stock by certain of the Company's Subsidiaries, such
limitation is subject to a number of significant qualifications.
"Senior Indebtedness" means the following obligations, whether outstanding
on the date of the Indenture or thereafter issued, without duplication: (i) all
obligations consisting of Bank Indebtedness; and (ii) all obligations consisting
of the principal of and premium, if any, and accrued and unpaid interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company regardless of whether
post-filing interest is allowed in such proceeding) on, and fees and other
amounts owing in respect of, all other Indebtedness of the Company, unless, in
the instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is expressly provided that the obligations in respect of such
Indebtedness are not senior in right of payment to the Notes; provided, however,
that Senior Indebtedness shall not include (1) any obligation of the Company to
any Subsidiary, (2) any liability for Federal, state, foreign, local or other
taxes owed or owing by the Company, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such liabilities), (4) any
Indebtedness of the Company (or Guarantee by the Company of any Indebtedness)
that is expressly subordinate in right of payment to any other Indebtedness of
the Company (or Guarantee by the Company of any Indebtedness) or (5) any Capital
Stock. If any Designated Senior Indebtedness is disallowed, avoided or
subordinated pursuant to the provisions of Section 548 of Title 11 of the United
States Code or any applicable state fraudulent conveyance law, such Designated
Senior Indebtedness nevertheless will constitute Senior Indebtedness.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company. The Company has agreed in the Indenture that it
will not Incur, directly or indirectly, any Indebtedness that is expressly
subordinate in right of payment to Senior Indebtedness unless such Indebtedness
is Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not
deemed to be subordinate or junior to Secured Indebtedness merely because it is
unsecured, and Indebtedness that is not guaranteed by a particular Person is not
deemed to be subordinate or junior to Indebtedness that is so guaranteed merely
because it is not so guaranteed.
The Company may not pay principal of, or premium (if any) or interest on,
the Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not otherwise purchase, redeem or otherwise retire
any Notes (collectively, "pay the Notes") if (i) any Senior Indebtedness is not
paid when due in cash or Cash Equivalents or (ii) any other default on Senior
Indebtedness occurs and the
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<PAGE> 71
maturity of such Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, (x) the default has been cured or waived and any such
acceleration has been rescinded in writing or (y) such Senior Indebtedness has
been paid in full in cash or Cash Equivalents. However, the Company may pay the
Notes without regard to the foregoing if the Company and the Trustee receive
written notice approving such payment from the Representative of the Designated
Senior Indebtedness with respect to which either of the events set forth in
clause (i) or (ii) of the immediately preceding sentence has occurred and is
continuing.
In addition, during the continuance of any default (other than a default
described in clause (i) or (ii) of the first sentence of the immediately
preceding paragraph) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the Company may not pay the
Notes for a period (a "Payment Blockage Period") commencing upon the receipt by
the Trustee (with a copy to the Company) of written notice (a "Blockage Notice")
of such default from the Representative of the Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or Persons who
gave such Blockage Notice, (ii) because such Designated Senior Indebtedness has
been repaid in full or (iii) because the default giving rise to such Blockage
Notice is no longer continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of the immediately preceding paragraph), unless the holders of
such Designated Senior Indebtedness or the Representative of such holders have
accelerated the maturity of such Designated Senior Indebtedness, the Company may
resume payments on the Notes after the end of such Payment Blockage Period. Not
more than one Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period. However, if any Blockage Notice within such
360-day period is given by or on behalf of any holders of Designated Senior
Indebtedness other than Bank Indebtedness, a Representative of Bank Indebtedness
may give another Blockage Notice within such period. In no event, however, may
the total number of days during which any Payment Blockage Period or Periods is
in effect exceed 179 days in the aggregate during any 360 consecutive day
period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property, or in a bankruptcy, insolvency,
receivership or similar proceeding relating to the Company or its property, the
holders of Senior Indebtedness will be entitled to receive payment in full of
the Senior Indebtedness before the Noteholders are entitled to receive any
payment and until the Senior Indebtedness is paid in full, any payment or
distribution to which Noteholders would be entitled but for the subordination
provisions of the Indenture will be made to holders of the Senior Indebtedness
as their interests may appear. If a distribution is made to Noteholders that due
to the subordination provisions should not have been made to them, such
Noteholders are required to hold it in trust for the holders of Senior
Indebtedness and pay it over to them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
The Company may not pay the Notes until five Business Days after such holders or
the Representative of the Designated Senior Indebtedness receive notice of such
acceleration and, thereafter, may pay the Notes only if the subordination
provisions of the Indenture otherwise permit payment at that time.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders, and trade
creditors of the Company who are not holders of Senior Indebtedness or of Senior
Subordinated Indebtedness (including the Notes) may recover less, ratably, than
holders of Senior Indebtedness and may recover more, ratably, than the holders
of Senior Subordinated Indebtedness. In addition, as described above, the Notes
will be effectively subordinated to the claims of creditors of the Company's
Subsidiaries.
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NOTE GUARANTEES
After the Issue Date, the Company may cause any Restricted Subsidiary, and
will cause each newly acquired or created Domestic Subsidiary that is a
Significant Subsidiary (each, a "Note Guarantor"), to execute and deliver to the
Trustee a supplemental indenture pursuant to which such Subsidiary will
guarantee (each, a "Note Guarantee") payment of the Notes. Each such Note
Guarantor as primary obligor and not merely as surety, will jointly and
severally, irrevocably and fully and unconditionally Guarantee, on a senior
subordinated basis, the performance and punctual payment when due, whether at
Stated Maturity, by acceleration or otherwise, of all obligations of the Company
under the Indenture and the Notes, whether for principal of or interest on the
Notes, expenses, indemnification or otherwise (all such obligations guaranteed
by such Note Guarantors being herein called the "Guaranteed Obligations"). Such
Note Guarantors will agree to pay, in addition to the amount stated above, any
and all expenses (including reasonable counsel fees and expenses) incurred by
the Trustee or the Holders in enforcing any rights under the Note Guarantees.
The obligations of each Note Guarantor will be limited to the maximum
amount, as will, after giving effect to all other contingent and fixed
liabilities of such Note Guarantor, result in the obligations of such Note
Guarantor under the Note Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law.
Each such Note Guarantee shall be a continuing Guarantee and shall (i)
remain in full force and effect until payment in full of the principal amount of
all outstanding Notes (whether by payment at maturity, purchase, redemption,
defeasance, retirement or other acquisition) and all other Guaranteed
Obligations then due and owing, unless earlier terminated as described below,
(ii) be binding upon such Note Guarantor and (iii) inure to the benefit of and
be enforceable by the Trustee, the Holders and their successors, transferees and
assigns.
The Indenture will provide that, subject to the provisions described in the
next succeeding paragraph, no Note Guarantor may consolidate or merge with or
into (whether or not such Note Guarantor is the surviving Person) another Person
unless (i) the Person formed by or surviving any such consolidation or merger
(if other than a Note Guarantor or the Company) assumes all the obligations of
such Note Guarantor under the Note Guarantee and the Indenture pursuant to a
supplemental indenture, in form reasonably satisfactory to the Trustee, and (ii)
if such merger or consolidation is with a Person other than the Company or a
Restricted Subsidiary, (x) immediately after such transaction, no Default or
Event of Default exists and (y) the Company will, at the time of such
transaction after giving pro forma effect thereto, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to paragraph (a) under "Certain
Covenants -- Limitation on Indebtedness."
Notwithstanding the preceding paragraph, concurrently with any sale or
disposition (by merger or otherwise) of any Note Guarantor in accordance with
the terms of the Indenture (including the covenant described under "-- Certain
Covenants -- Limitation on Sales of Assets") by the Company or a Restricted
Subsidiary to any Person that is not an Affiliate of the Company, such Note
Guarantor will automatically and unconditionally be released from all
obligations under its Note Guarantee; provided, however, that any such release
shall occur only to the extent that all obligations of such Note Guarantor
under, and all of its guarantees of, and all of its pledges of assets or other
security interests which secure, any Bank Indebtedness of the Company shall also
terminate upon such release, sale or transfer (other than with respect to any
such Indebtedness that is assumed by any Person that is not an Affiliate of the
Company). In addition, any Note Guarantee of any Note Guarantor will be
automatically and unconditionally released and discharged upon the merger or
consolidation of such Note Guarantor with and into the Company or another Note
Guarantor that is the surviving Person in such merger or consolidation.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder will have the right to require the Company to repurchase
all or any part of such Holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the
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<PAGE> 73
relevant interest payment date), provided, however, that notwithstanding the
occurrence of a Change of Control, the Company shall not be obligated to
purchase the Notes pursuant to this covenant in the event that it has exercised
its right to redeem all of the Notes as described under "Optional Redemption":
(i) prior to the first public offering of Voting Stock of the Company,
either (x) Permitted Holders cease to be the "beneficial owner" or
"beneficial owners" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of more than 35% of the total voting power of
the Voting Stock of the Company, or (y) Permitted Holders cease to be
entitled by voting power, contract or otherwise to elect or cause the
election of directors of the Company having a majority of the total voting
power of the Board of Directors, in each case, whether as a result of
issuance of securities of the Company, any merger, consolidation,
liquidation or dissolution of the Company, any direct or indirect transfer
of securities by any Permitted Holder or otherwise (for purposes of this
clause (i) and clause (ii) below, Permitted Holders shall be deemed to
beneficially own any Voting Stock of an entity (the "specified entity" held
by any other entity (the "parent entity") so long as the Permitted Holders
beneficially own (as so defined), directly or indirectly, a majority of the
Voting Stock of the parent entity);
(ii) following the first public offering of Voting Stock of the
Company, any "Person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in clause (i) above, except that a Person
shall be deemed to have "beneficial ownership" of all shares that any such
Person has the right to acquire within one year), directly or indirectly,
of more than 35% of the Voting Stock of the Company, provided that the
Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the Voting
Stock of the Company than such other Person and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors; or
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors of the Company 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) cease for any reason
to constitute a majority of the Board of Directors then in office.
In the event that at the time of such Change of Control the terms of the
Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to this
covenant, then prior to the mailing of the notice to Holders provided for in the
immediately following paragraph but in any event within 30 days following any
Change of Control (unless the Company has exercised its right to redeem all the
Notes as described under "Optional Redemption"), the Company shall (i) repay in
full all Bank Indebtedness or offer to repay in full all Bank Indebtedness and
repay the Bank Indebtedness of each lender who has accepted such offer or (ii)
obtain the requisite consent under the agreements governing the Bank
Indebtedness to permit the repurchase of the Notes as provided for in the
immediately following paragraph.
Unless the Company has exercised its right to redeem all the Notes as
described under "Optional Redemption," the Company shall, within 30 days
following any Change of Control (or at the Company's option, prior to such
Change of Control but after the public announcement thereof), mail a notice to
each Holder with a copy to the Trustee stating: (1) that a Change of Control has
occurred or will occur and that such Holder has (or upon such occurrence will
have) the right to require the Company to purchase such Holder's Notes at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase (subject to the
right of Holders of record on a record date to receive interest on the relevant
interest payment date); (2) the circumstances and relevant facts and financial
information regarding such Change of Control; (3) the repurchase date (which
shall be no earlier than 30 days nor later than 60 days from the date such
notice is mailed); (4) the instructions determined by the Company, consistent
with this covenant, that a Holder must follow in order to have its Notes
purchased; and (5) that, if such Offer is made prior to such Change of Control,
payment is conditioned on the occurrence of such Change of Control.
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<PAGE> 74
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under this paragraph by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. The Company has no present plans to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or recapitalizations, that
would not constitute a Change of Control under the Indenture, but that could
increase the amount of indebtedness outstanding at such time or otherwise affect
the Company's capital structure or credit ratings.
The occurrence of a Change of Control would constitute a default under the
Senior Credit Agreement. Future Senior Indebtedness of the Company may contain
prohibitions of certain events which would constitute a Change of Control or
require such Senior Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the Holders of their right to require the Company to
repurchase the Notes could cause a default under such Senior Indebtedness, even
if the Change of Control itself does not, due to the financial effect of such
repurchase on the Company. Finally, the Company's ability to pay cash to the
Holders upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases. As described above
under "Optional Redemption," the Company also has the right to redeem the Notes
at specified prices, in whole but not in part, upon a Change of Control.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) The Company will not, and will not permit
any Restricted Subsidiary to, Incur any Indebtedness; provided, however, that
the Company and the Note Guarantors may Incur Indebtedness if on the date of the
Incurrence of such Indebtedness the Consolidated Coverage Ratio would be greater
than (i) 2.00:1.00, if such Indebtedness is Incurred on or prior to the second
anniversary of the Issue Date, and (ii) 2.25:1.00 if such Indebtedness is
Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness: (i) Indebtedness
Incurred pursuant to the Senior Credit Facility in a maximum principal amount
not to exceed at any time (A) an aggregate principal amount of $18.0 million
under the Term Loan Facility less the aggregate amount of all scheduled
repayments of principal, or mandatory prepayments of principal with Net
Available Cash from Asset Dispositions, applied to permanently reduce the
Indebtedness outstanding under the Term Loan Facility, plus (in the case of any
refinancing thereof) the aggregate amount of fees, underwriting discounts,
premiums and other costs and expenses incurred in connection with such
refinancing, and (B) an aggregate principal amount outstanding at any time under
the Revolving Credit Facility not to exceed the greater of (x) $25.0 million
less the amount of all mandatory prepayments of principal with Net Available
Cash from Asset Dispositions, applied to permanently reduce the commitments
under the Revolving Credit Facility plus (in the case of any refinancing
thereof) the aggregate amount of fees, underwriting discounts, premiums and
other costs and expenses incurred in connection with such refinancing, and (y)
the Borrowing Base; (ii) Indebtedness of Foreign Subsidiaries for working
capital purposes and any Guarantees in respect thereof, the aggregate principal
amount of which Indebtedness outstanding at any time does not exceed, as to all
such Foreign Subsidiaries, an amount (the "Foreign Subsidiary Amount") equal to
the greater of (A) $10,000,000 and (B) an amount equal to 8% of Consolidated
Tangible Assets; provided, however, that the principal amount of such
Indebtedness may exceed the Foreign Subsidiary Amount by an amount not to exceed
the amount of Indebtedness permitted to be Incurred by clause (i)(B) as of such
date but the principal amount of Indebtedness permitted to be Incurred by clause
(i)(B) above shall be reduced by the amount by which such Indebtedness Incurred
pursuant to this
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clause (ii)(B) exceeds the Foreign Subsidiary Amount; (iii) Indebtedness (A) of
the Company to any Restricted Subsidiary and (B) of any Wholly Owned Subsidiary
to the Company or any Restricted Subsidiary; provided, however, that any
subsequent issuance or transfer of any Capital Stock or any other event that
results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any other subsequent transfer of any such Indebtedness (except to
the Company or a Wholly Owned Subsidiary) will be deemed, in each case, an
Incurrence of Indebtedness by the Company or such Restricted Subsidiary, as the
case may be; (iv) Indebtedness represented by the Notes, any Indebtedness (other
than the Indebtedness described in clauses (i), (ii) or (iii) above) outstanding
on the date of the Indenture and any Refinancing Indebtedness Incurred in
respect of any Indebtedness described in this clause (iv) or paragraph (a); (v)
Indebtedness of the Company or any Restricted Subsidiary to finance or refinance
the deferred purchase price of newly acquired property of the Company and its
Subsidiaries used in the ordinary course of business of the Company and its
Subsidiaries (provided such purchase money financing is entered into within six
months of the acquisition of such property), and any Refinancing Indebtedness
with respect thereto, in an amount (based on the remaining balance of the
obligations therefor on the books of the Company and its Restricted
Subsidiaries) which shall not exceed the greater of (A) $5.0 million and (B) an
amount equal to 4% of Consolidated Tangible Assets in the aggregate at any one
time outstanding; (vi) Indebtedness of the Company or any Restricted Subsidiary
(which may comprise Bank Indebtedness) in an aggregate principal amount at any
one time outstanding not in excess of the greater of (A) $5.0 million and (B) an
amount equal to 4% of Consolidated Tangible Assets; (vii) Indebtedness of the
Company or any Restricted Subsidiary in the form of Capitalized Lease
Obligations or Attributable Debt, and any Refinancing Indebtedness with respect
thereto, in an aggregate amount not in excess of the greater of (A) $5.0 million
and (B) an amount equal to 4% of Consolidated Tangible Assets at any one time
outstanding; provided, however, that all Indebtedness Incurred by one or more
Restricted Subsidiaries that are not Note Guarantors pursuant to clause (v) or
(vi) above or this clause (vii) shall not exceed the greater of (A) $5.0 million
and (B) an amount equal to 4% of Consolidated Tangible Assets in aggregate
principal amount at any one time outstanding; (viii) Indebtedness represented by
the Note Guarantees and Guarantees of Indebtedness Incurred pursuant to clause
(i) or (iii) above; (ix) Guarantees (A) by any Note Guarantor of Senior
Indebtedness, (B) by the Company or any Note Guarantor of Guarantor Senior
Indebtedness or (C) by any Wholly Owned Subsidiary that is not a Note Guarantor
of Indebtedness of any Wholly Owned Subsidiary that is not a Note Guarantor; (x)
Indebtedness (A) arising by reason of any Lien created or permitted to exist in
compliance with the covenant described under "-- Limitations on Liens,"
including any Indebtedness of any Note Guarantor arising by reason of any Lien
granted by such Person to secure Senior Indebtedness, or of the Company or any
Note Guarantor arising by reason of any Lien granted by such Person to secure
Guarantor Senior Indebtedness, or (B) of any Restricted Subsidiary that is not a
Note Guarantor arising by reason of any Lien granted by such Person to secure
Indebtedness of any Restricted Subsidiary that is not a Note Guarantor; (xi)
Indebtedness of the Company or any Restricted Subsidiary arising from the
honoring of a check, draft or similar instrument of such Person drawn against
insufficient funds, provided that such Indebtedness is extinguished within five
Business Days of its incurrence; (xii) Indebtedness of the Company or any
Restricted Subsidiary consisting of guarantees, indemnities, or obligations in
respect of purchase price adjustments, in connection with the acquisition or
disposition of assets, including pursuant to the Acquisition; (xiii)
Indebtedness in respect of (1) commercial letters of credit, or other letters of
credit or other similar instruments or obligations, issued in connection with
liabilities incurred in the ordinary course of business (including those issued
to governmental entities in connection with self-insurance under applicable
workers' compensation statutes), or (2) surety, judgment, appeal, performance
and other similar bonds, instruments or obligations provided in the ordinary
course of business; (xiv) Indebtedness under Hedging Obligations; provided,
however, that such Hedging Obligations are entered into for bona fide hedging
purposes of the Company or any Restricted Subsidiary and are in the ordinary
course of business; (xv) Indebtedness (1) of the Company consisting of
guarantees of up to an aggregate principal amount of $1.0 million of borrowings
by Management Investors in connection with the purchase of Capital Stock of the
Company, Holding or EV LLC by such Management Investors or (2) of the Company or
any Restricted Subsidiary consisting of guarantees in respect of loans or
advances made to officers or employees of Holding, the Company or any Restricted
Subsidiary, or guarantees otherwise made on their behalf, (A) in respect of
travel, entertainment and moving-related expenses incurred in the ordinary
course of business, or (B) in the ordinary course of
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business not exceeding $500,000 in the aggregate outstanding at any time; (xvi)
Indebtedness of any Restricted Subsidiary that is Indebtedness of another Person
assumed by such Restricted Subsidiary in connection with its acquisition of
assets from such Person (other than Indebtedness Incurred in connection with, or
in contemplation of, such acquisition) and any Refinancing Indebtedness with
respect thereto; provided, however, that at the time of such acquisition of
assets the Company shall have been able to Incur at least an additional $1.00 of
Indebtedness under paragraph (a) above after giving effect to such acquisition;
and (xvii) Indebtedness of a Restricted Subsidiary issued and outstanding on or
prior to the date on which such Restricted Subsidiary was acquired by the
Company (other than Indebtedness Incurred (A) as consideration in, or to provide
all or any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by the Company or (B)
otherwise in connection with, or in contemplation of, such acquisition) and any
Refinancing Indebtedness with respect thereto; provided, however, that on the
date of any such acquisition the Company shall have been able to Incur at least
$1.00 of Indebtedness under paragraph (a) above after giving effect to such
acquisition.
(c) Notwithstanding the foregoing, the Company will not Incur any
Indebtedness pursuant to any provision of the foregoing paragraph (b) that
permits Refinancing Indebtedness in respect of Indebtedness constituting
Subordinated Obligations, if the proceeds of such Refinancing Indebtedness are
used, directly or indirectly, to refinance such Subordinated Obligations, unless
such Refinancing Indebtedness will be subordinated to the Notes to at least the
same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this covenant, (i) any other obligation of the obligor on such
Indebtedness arising under any Guarantee, Lien or letter of credit supporting
such Indebtedness shall be disregarded to the extent that such Guarantee, Lien
or letter of credit secures the principal amount of such Indebtedness; (ii) in
the event that Indebtedness meets the criteria of more than one of the types of
Indebtedness described in paragraph (b) above, the Company, in its sole
discretion, shall classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such clauses; and
(iii) the amount of Indebtedness issued at a price that is less than the
principal amount thereof shall be equal to the amount of the liability in
respect thereof determined in accordance with GAAP.
(e) For purposes of determining compliance with any Dollar-denominated
restriction on the Incurrence of Indebtedness denominated in a foreign currency,
the Dollar-equivalent principal amount of such Indebtedness Incurred pursuant
thereto shall be calculated based on the relevant currency exchange rate in
effect on the date that such Indebtedness was Incurred, in the case of term
debt, or first committed, in the case of revolving credit debt; provided that
(x) the Dollar-equivalent principal amount of any such Indebtedness outstanding
on the Issue Date shall be calculated based on the relevant currency exchange
rate in effect on the Issue Date and (y) if such Indebtedness is Incurred to
refinance other Indebtedness denominated in a foreign currency, and such
refinancing would cause the applicable Dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on the
date of such refinancing, such Dollar-denominated restriction shall be deemed
not to have been exceeded so long as the principal amount of such refinancing
Indebtedness does not exceed the principal amount of such Indebtedness being
refinanced. The principal amount of any Indebtedness Incurred to refinance other
Indebtedness, if Incurred in a different currency from the Indebtedness being
refinanced, shall be calculated based on the currency exchange rate applicable
to the currencies in which such respective Indebtedness is denominated that is
in effect on the date of such refinancing.
Limitation on Layering. The Company shall not incur any Indebtedness if
such Indebtedness is expressly subordinate in right of payment to any Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
contractually subordinated in right of payment to Senior Subordinated
Indebtedness. No Note Guarantor shall incur any Indebtedness if such
Indebtedness is expressly subordinate in right of payment to any Guarantor
Senior Indebtedness of such Note Guarantor unless such Indebtedness is Guarantor
Senior Subordinated Indebtedness of such Note Guarantor or is contractually
subordinated in right of payment to Guarantor Senior Subordinated Indebtedness
of such Note Guarantor. Unsecured Indebtedness
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is not deemed to be subordinate or junior to Secured Indebtedness merely because
it is unsecured, and Indebtedness that is not guaranteed by a particular Person
is not deemed to be subordinate or junior to Indebtedness that is so guaranteed
merely because it is not so guaranteed.
Limitation on Restricted Payments. (a) The Company shall not, and shall
not permit any Restricted Subsidiary, directly or indirectly, to (i) declare or
pay any dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or consolidation involving
the Company) except (x) dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) and (y) dividends or distributions payable
to the Company or any Restricted Subsidiary (and, if the Restricted Subsidiary
making such dividend or distribution is not a Wholly Owned Subsidiary, to its
other shareholders on no more than a pro rata basis, measured by value), (ii)
purchase, redeem, retire or otherwise acquire for value any Capital Stock of the
Company held by Persons other than the Company or another Restricted Subsidiary,
(iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for
value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment, any Subordinated Obligations (other than the purchase, repurchase,
redemption or other acquisition of Subordinated Obligations in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition) or (iv) make any
Investment (other than a Permitted Investment) in any Person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment being herein referred to as a "Restricted Payment") if
at the time the Company or such Restricted Subsidiary makes such Restricted
Payment: (1) a Default shall have occurred and be continuing (or would result
therefrom); (2) the Company could not incur at least an additional $1.00 of
Indebtedness under paragraph (a) of the covenant described under "-- Limitation
on Indebtedness"; or (3) the aggregate amount of such Restricted Payment and all
other Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Company's Board of Directors whose determination
shall be conclusive and evidenced by a resolution of the Company's Board of
Directors) declared or made subsequent to the date of the Indenture would exceed
the sum of: (A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the end of the most recent fiscal
quarter ending prior to the Issue Date to the end of the most recent fiscal
quarter ending prior to the date of such Restricted Payment for which
consolidated financial statements of the Company are available (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) the
aggregate Net Cash Proceeds received by the Company either (x) as capital
contributions to the Company after the Issue Date or (y) from the issuance or
sale of its Capital Stock (other than Disqualified Stock) subsequent to the
Issue Date (other than an issuance or sale to a Restricted Subsidiary of the
Company), provided that in the event such issuance or sale is to an employee
stock ownership plan or other trust established by the Company or any of its
Subsidiaries for the benefit of their employees, to the extent the purchase by
such plan or trust is financed by Indebtedness of such plan or trust for which
the Company is liable as Guarantor or otherwise, such aggregate amount of Net
Cash Proceeds shall be limited to the aggregate amount of principal payments
made by such plan or trust with respect to such Indebtedness; (C) the amount by
which Indebtedness of the Company is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Restricted Subsidiary of the
Company) subsequent to the Issue Date, of any Indebtedness of the Company or its
Restricted Subsidiaries convertible or exchangeable for Capital Stock (other
than Disqualified Stock) of the Company (less the amount of any cash, or other
property (other than Capital Stock), distributed by the Company upon such
conversion or exchange), plus the amount of any cash or other property received
by the Company or any Restricted Subsidiary upon such conversion or exchange;
(D) the amount equal to the net reduction in Investments in Unrestricted
Subsidiaries resulting from (i) repayments of the principal of loans or advances
or other transfers of assets to the Company or any Restricted Subsidiary from
any Unrestricted Subsidiary or (ii) the redesignation of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the
definition of "Investment"), not to exceed in the case of any such Unrestricted
Subsidiary the aggregate amount of Investments (other than Permitted
Investments) made by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary after the Issue Date; and (E) in the case of disposition
or repayment of any Investment constituting a Restricted Payment (without
duplication of any amount deducted in calculating the amount of Investments at
any time outstanding included in the amount of Restricted Payments), an amount
equal to the lesser of the return of
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capital or repayment with respect to such Investment and the initial amount of
such Investment, in either case, less the cost of the disposition of such
Investment.
(b) The provisions of the foregoing paragraph (a) will not prohibit: (i)
any purchase, redemption, repurchase, defeasance, retirement or other
acquisition of Capital Stock of the Company or Subordinated Obligations made by
exchange (including any such exchange pursuant to the exercise of a conversion
right or privilege in connection with which cash is paid in lieu of the issuance
of fractional shares) for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Subsidiary or an employee stock
ownership plan or other trust established by the Company or any of its
Subsidiaries) or a substantially concurrent capital contribution to the Company;
provided, however, that (A) such purchase, redemption, repurchase, defeasance,
retirement or other acquisition shall be excluded in subsequent calculations of
the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale
or capital contribution shall be excluded in subsequent calculations under
clause (B) of paragraph (a); (ii) any purchase, redemption, repurchase,
defeasance, retirement or other acquisition of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Subordinated Obligations of the Company that is permitted to be Incurred
pursuant to the covenant described under "Limitation on Indebtedness"; provided,
however, that such purchase, redemption, repurchase, defeasance, retirement or
other acquisition shall be excluded in subsequent calculations of the amount of
Restricted Payments; (iii) any purchase, redemption, repurchase, defeasance,
retirement or other acquisition of Subordinated Obligations from Net Available
Cash to the extent permitted by the covenant described under "-- Limitation on
Sales of Assets"; provided, however, that such purchase, redemption, repurchase,
defeasance, retirement or other acquisition shall be excluded in subsequent
calculations of the amount of Restricted Payments; (iv) any purchase,
redemption, repurchase, defeasance, retirement or other acquisition of
Subordinated Obligations upon a Change of Control to the extent required by the
agreement governing such Subordinated Obligations but only if the Company shall
have complied with the covenant described under "-- Change of Control" and
purchased all Notes tendered pursuant to the offer to repurchase all the Notes
required thereby, prior to purchasing or repaying such Subordinated Obligations;
provided, however, that (1) the purchase price (stated as a percentage of
principal amount or issue price plus accrued original issue discount, if less)
of such Subordinated Obligations shall not be greater than the price (stated as
a percentage of principal amount) of the Notes pursuant to any such offer to
repurchase the Notes in the event of a Change of Control, and (2) any such
purchase, redemption, repurchase, defeasance, retirement or other acquisition
shall be included in subsequent calculations of the amount of Restricted
Payments; (v) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied with
paragraph (a); provided, however, that such dividends shall be included in
subsequent calculations of the amount of Restricted Payments; (vi) loans,
advances, dividends or distributions by the Company to Holding or EV LLC to
permit Holding or EV LLC, as the case may be, to repurchase or otherwise acquire
its Capital Stock or options, warrants or other rights in respect thereof, or
payments by the Company to repurchase or otherwise acquire Capital Stock or
options, warrants or other rights in respect thereof, in each case from
Management Investors, such payments, loans, advances, dividends or distributions
not to exceed an amount (net of repayments of any such loans or advances) equal
to $500,000 in any fiscal year and $2,000,000 in the aggregate (plus the Net
Cash Proceeds received by the Company since the Issue Date as a capital
contribution from the sale to Management Investors of Capital Stock or options,
warrants or other rights in respect thereof); provided, however, that such
payments, loans, advances, dividends or distributions will be included in
subsequent calculations of the amount of Restricted Payments; (vii) loans,
advances, dividends or distributions by the Company or any Restricted Subsidiary
to Holding or EV LLC not to exceed an amount necessary to permit Holding or EV
LLC to (1) pay its costs (including all professional fees and expenses) incurred
to comply with its reporting obligations under federal or state laws or under
the Indenture, including any reports filed with respect to the Securities Act,
Exchange Act or the respective rules and regulations promulgated thereunder, (2)
make payments in respect of its indemnification obligations owing to directors,
officers, employees or other Persons under its charter or by-laws or pursuant to
written agreements with any such Person, to the extent such payments relate to
the Company and its Subsidiaries, (3) pay all reasonable fees and expenses
payable by it in connection with the Transactions, or (4) pay its other
operational expenses (other than taxes) incurred in the ordinary course of
business and not exceeding
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$500,000 in any fiscal year; provided, however, that such loans, advances,
dividends or distributions will be excluded in subsequent calculations of the
amount of Restricted Payments; (viii) payments by the Company or any Restricted
Subsidiary to Holding (A) to satisfy or permit Holding to satisfy its
obligations under the Management Agreements, (B) pursuant to the Tax Sharing
Agreement, (C) to pay or permit Holding to pay any taxes, charges or
assessments, including but not limited to sales, use, transfer, rental, ad
valorem, value-added, stamp, property, consumption, franchise, license, capital,
net worth, gross receipts, excise, occupancy, intangibles or similar taxes,
charges or assessments (other than federal, state or local taxes measured by
income and federal, state or local withholding imposed on payments made by
Holding), required to be paid by Holding by virtue of its being incorporated or
having capital stock outstanding (but not by virtue of owning stock of any
corporation other than the Company or any of its Subsidiaries), or being a
holding company parent of the Company or receiving dividends from or other
distributions in respect of the stock of the Company, or having guaranteed any
obligations of the Company or any Subsidiary thereof, or having made any payment
in respect of any of the items for which the Company is permitted to make
payments to Holding pursuant to this covenant, or (D) to pay or permit Holding
to pay any other federal, state, foreign, provincial or local taxes measured by
income for which Holding is liable up to an amount not to exceed with respect to
such federal taxes the amount of any such taxes which the Company would have
been required to pay on a separate company basis or on a consolidated basis if
the Company had filed a consolidated return on behalf of an affiliated group (as
defined in Section 1504 of the Internal Revenue Code of 1986, as amended, or an
analogous provision of state, local or foreign law) of which it were the common
parent, or with respect to state and local taxes, on a combined basis if the
Company had filed a combined return on behalf of an affiliated group consisting
only of the Company and its Subsidiaries; provided, however, that such payments
will be excluded in subsequent calculations of the amount of Restricted
Payments; (ix) the payment by the Company of, or loans, advances, dividends or
distributions by the Company to Holding or EV LLC to pay, dividends on the
common stock of the Company, Holding or EV LLC, as applicable, following an
initial public offering of such common stock, in an amount not to exceed in any
fiscal year 6% of the net proceeds received by the Company, in or from such
public offering; provided, however, that such payments, loans, advances,
dividends or distributions will be included in subsequent calculations of the
amount of Restricted Payments; and (x) loans, advances, dividends or
distributions by the Company or any Restricted Subsidiary in an aggregate amount
not to exceed $10.0 million; provided, however, that (A) the Company or any
Restricted Subsidiary shall not be permitted to make Restricted Payments under
this clause (x) unless, after giving effect thereto (including the Incurrence of
any Indebtedness to fund such Restricted Payment), the Consolidated Coverage
Ratio of the Company would be at least equal to 2.25:1.00 and (B) such loans,
advances, dividends or distributions will be included in subsequent calculations
of the amount of Restricted Payments; and provided, further, that in the case of
clauses (vii), (ix) and (x) no Default or Event of Default shall have occurred
or be continuing at the time of such payment after giving effect thereto.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligations owed to the Company, (ii)
make any loans or advances to the Company or (iii) transfer any of its property
or assets to the Company, except: (1) any encumbrance or restriction pursuant to
an agreement in effect at or entered into on the date of the Indenture
(including, without limitation, the Senior Credit Facility); (2) any encumbrance
or restriction with respect to a Restricted Subsidiary (x) pursuant to an
agreement relating to any Indebtedness Incurred by a Restricted Subsidiary prior
to the date on which such Restricted Subsidiary was acquired by the Company, or
of another Person that is assumed by the Company or a Restricted Subsidiary in
connection with the acquisition of assets from, or merger or consolidation with,
such Person (other than Indebtedness Incurred as consideration in, or to provide
all or any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by the Company, or
such acquisition of assets, merger or consolidation) and outstanding on the date
of such acquisition, merger or consolidation or (y) pursuant to any agreement
(not relating to any Indebtedness) in existence when a Person becomes a
Subsidiary of the Company or when such agreement is acquired by the Company or
any Subsidiary thereof, that is not created in contemplation of such
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Person becoming such a Subsidiary or such acquisition (for purposes of this
clause(2), if another Person is the Successor Company, any Subsidiary or
agreement thereof shall be deemed acquired or assumed, as the case may be, by
the Company when such Person becomes the Successor Company); (3) any encumbrance
or restriction with respect to a Restricted Subsidiary pursuant to an agreement
(a "Refinancing Agreement") effecting a refinancing of Indebtedness Incurred
pursuant to, or that otherwise extends, renews, refinances or replaces, an
agreement referred to in clause (1) or (2) of this covenant or this clause (3)
(an "Initial Agreement") or contained in any amendment to an Initial Agreement;
provided, however, that the encumbrances and restrictions contained in any such
Refinancing Agreement or amendment are no less favorable to the Holders of the
Notes taken as a whole than encumbrances and restrictions contained in the
Initial Agreement or Initial Agreements to which such Refinancing Agreement or
amendment relates (as conclusively determined in good faith by the Board of
Directors); (4) any encumbrance or restriction (A) that restricts in a customary
manner the subletting, assignment or transfer of any property or asset that is
subject to a lease, license or similar contract, or the assignment or transfer
of any lease, license or other contract, (B) by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any property
or assets of the Company or any Restricted Subsidiary not otherwise prohibited
by the Indenture, (C) contained in mortgages, pledges or other security
agreements securing Indebtedness of a Restricted Subsidiary to the extent such
encumbrance or restrictions restrict the transfer of the property subject to
such mortgages, pledges or other security agreements or (D) pursuant to
customary provisions restricting dispositions of real property interests set
forth in any reciprocal easement agreements of the Company or any Restricted
Subsidiary; (5) any restriction with respect to a Restricted Subsidiary (or any
of its property or assets) imposed pursuant to an agreement entered into for the
direct or indirect sale or disposition of all or substantially all the Capital
Stock or assets of such Restricted Subsidiary (or the property or assets that
are subject to such restriction) pending the closing of such sale or
disposition; (6) any encumbrance or restriction on the transfer of property or
assets required by any regulatory authority having jurisdiction over the Company
or any Restricted Subsidiary or any of their businesses; and (7) any encumbrance
or restriction pursuant to an agreement relating to any Indebtedness incurred,
or any sale of receivables, by a Foreign Subsidiary.
Limitation on Sales of Assets. (a) The Company will not, and will not
permit any Restricted Subsidiary to, make any Asset Disposition unless (i) the
Company or such Restricted Subsidiary receives consideration (including by way
of relief from, or by any other Person assuming responsibility for, any
liabilities, contingent or otherwise) at the time of such Asset Disposition at
least equal to the fair market value of the shares and assets subject to such
Asset Disposition, as such fair market value may be determined (and shall be
determined, to the extent such Asset Disposition or any series of related Asset
Dispositions involves aggregate consideration in excess of $1.0 million) in good
faith by the Board of Directors, whose determination shall be conclusive
(including as to the value of all noncash consideration), (ii) at least 80% of
the consideration therefor (excluding, in the case of an Asset Disposition of
assets, any consideration by way of relief from, or by any other Person assuming
responsibility for, any liabilities, contingent or otherwise, which are not
Indebtedness) received by the Company or such Restricted Subsidiary is in the
form of cash, and (iii) an amount equal to 100% of the Net Available Cash from
such Asset Disposition is applied by the Company (or such Restricted Subsidiary,
as the case may be) as follows:
(A) first, to the extent the Company elects (or is required by the
terms of any Senior Indebtedness or Indebtedness (other than Preferred
Stock) of a Restricted Subsidiary), to prepay, repay or purchase Senior
Indebtedness or such Indebtedness of a Restricted Subsidiary (in each case
other than Indebtedness owed to the Company or a Restricted Subsidiary)
within 365 days after the date of such Asset Disposition; (B) second, to
the extent of the balance of Net Available Cash after application in
accordance with clause (A) above, to the extent the Company or such
Restricted Subsidiary elects, to reinvest in Additional Assets (including
by means of an Investment in Additional Assets by a Restricted Subsidiary
with Net Available Cash received by the Company or another Restricted
Subsidiary) within 365 days from the date of such Asset Disposition, or, if
such reinvestment in Additional Assets is a project authorized by the Board
of Directors that will take longer than such 365 days to complete, the
period of time necessary to complete such project; (C) third, to the extent
of the balance of such Net Available Cash after application in accordance
with clauses (A) and (B) above (such balance, the "Excess Proceeds"), to
make an offer to purchase Notes and (to the extent required by the terms
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thereof) any other Senior Subordinated Indebtedness, pursuant and subject
to the conditions of the Indenture and the agreements governing such other
Indebtedness, at a purchase price of 100% of the principal amount thereof
(or accreted value, as applicable) plus accrued and unpaid interest to the
purchase date; and (D) fourth, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A), (B) and
(C) above, to fund (to the extent consistent with any other applicable
provision of the Indenture) any general corporate purpose (including the
repayment of any Subordinated Obligations); provided, however, that in
connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (A) or (C) above, the Company or such Restricted
Subsidiary will retire such Indebtedness and will cause the related loan
commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased. Notwithstanding the
foregoing provisions of this covenant, the Company and the Restricted
Subsidiaries shall not be required to apply any Net Available Cash in
accordance with this covenant except to the extent that the aggregate Net
Available Cash from all Asset Dispositions that is not applied in
accordance with this covenant exceeds $3.0 million. If the aggregate
principal amount (or accreted value, as applicable) of Notes and Senior
Subordinated Indebtedness validly tendered and not withdrawn in connection
with an offer pursuant to clause (C) above exceeds the Excess Proceeds, the
Excess Proceeds will be apportioned between the Notes and such Senior
Subordinated Indebtedness, with the portion of the Excess Proceeds payable
in respect of the Notes to equal the lesser of (x) the Excess Proceeds
amount multiplied by a fraction, the numerator of which is the outstanding
principal amount of the Notes and the denominator of which is the sum of
the outstanding principal amount of the Notes and the outstanding principal
amount (or accreted value, as applicable) of the relevant Senior
Subordinated Indebtedness, and (y) the aggregate principal amount of Notes
validly tendered and not withdrawn.
For the purposes of this covenant, the following are deemed to be cash: (v)
Cash Equivalents, (w) the assumption of Indebtedness of the Company (other than
Disqualified Stock of the Company) or any Restricted Subsidiary and the release
of the Company or such Restricted Subsidiary from all liability on such
Indebtedness in connection with such Asset Disposition, (x) Indebtedness of any
Restricted Subsidiary that is no longer a Restricted Subsidiary as a result of
such Asset Disposition, to the extent that the Company and each other Restricted
Subsidiary is released from any Guarantee of such Indebtedness in connection
with such Asset Disposition, (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are promptly converted by the
Company or such Restricted Subsidiary into cash, and (z) consideration
consisting of Indebtedness of the Company or any Restricted Subsidiary.
(b) In the event of an Asset Disposition that requires the purchase of
Notes pursuant to clause (a)(iii)(C) above, the Company will be required to
purchase Notes tendered pursuant to an offer by the Company for the Notes (the
"Offer") at a purchase price of 100% of their principal amount plus accrued and
unpaid interest to the Purchase Date in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. If the aggregate purchase price of the Notes tendered pursuant to the
Offer is less than the Net Available Cash allotted to the purchase of Notes, the
remaining Net Available Cash will be available to the Company for use in
accordance with clause (a)(iii)(C) (to repay Senior Subordinated Indebtedness)
or clause (a)(iii)(D) above. The Company shall not be required to make an Offer
for Notes pursuant to this covenant if the Net Available Cash available therefor
(after application of the proceeds as provided in clauses (a)(iii)(A) and
(a)(iii)(B) above) is less than $3.0 million for any particular Asset
Disposition (which lesser amounts shall be carried forward for purposes of
determining whether an Offer is required with respect to the Net Available Cash
from any subsequent Asset Disposition).
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this covenant by virtue thereof.
Limitation on Transactions with Affiliates. (a) The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter into
or conduct any transaction or series of transactions (including the purchase,
sale, lease or exchange of any property or the rendering of any service) with
any
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Affiliate of the Company (an "Affiliate Transaction") on terms (i) that taken as
a whole are less favorable to the Company or such Restricted Subsidiary, as the
case may be, than those that could be obtained at the time of such transaction
in arm's length dealings with a Person who is not such an Affiliate and (ii)
that, in the event such Affiliate Transaction involves an aggregate amount in
excess of $1.0 million, are not in writing and have not been approved by a
majority of the members of the Board of Directors having no material personal
financial interest in such Affiliate Transaction, or, in the event there are no
such members, as to which the Company has not obtained a Fairness Opinion (as
hereinafter defined). In addition, any transaction involving aggregate payments
or other transfers by the Company and its Restricted Subsidiaries in excess of
$10.0 million will also require an opinion (a "Fairness Opinion") from an
independent investment banking firm or appraiser, as appropriate, of national
prominence, to the effect that the terms of such transaction taken as a whole
are either (i) no less favorable to the Company or such Restricted Subsidiary,
as the case may be, than those that could be obtained at the time of such
transaction in arm's length dealings with a Person who is not an Affiliate or
(ii) fair to the Company or such Restricted Subsidiary, as the case may be, from
a financial point of view.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i)
any Restricted Payment permitted by the covenant described under "-- Limitation
on Restricted Payments," any Permitted Investment, or any other transaction
specifically excluded from the definition of the term "Restricted Payment," (ii)
the performance of the Company's or Restricted Subsidiary's obligations under
any employment contract, collective bargaining agreement, employee benefit plan,
related trust agreement or any other similar arrangement heretofore or hereafter
entered into in the ordinary course of business, (iii) payment of compensation,
performance of indemnification or contribution obligations, or any issuance,
grant or award of stock, options or other securities, to employees, officers or
directors in the ordinary course of business, (iv) maintenance in the ordinary
course of business of benefit programs or arrangements for employees, officers
or directors, including vacation plans, health and the insurance plans, deferred
compensation plans, and retirement or savings plans and similar plans, (v) any
transaction between the Company and a Restricted Subsidiary or between
Restricted Subsidiaries, (vi) loans or advances made to directors, officers or
employees of Holding, the Company or any Restricted Subsidiary, or guarantees in
respect thereof or otherwise made on their behalf (including any payments under
such guarantees), (A) in respect of travel, entertainment or moving-related
expenses incurred in the ordinary course of business, or (B) in the ordinary
course of business not exceeding $500,000 in the aggregate outstanding at any
time, (vii) guarantees of borrowings by Management Investors in connection with
the purchase of Capital Stock of the Company, Holding or EV LLC by such
Management Investors, which guarantees are permitted under the covenant
described under "-- Limitation on Indebtedness," and payments thereunder, (viii)
the Transactions and the incurrence and payment of all fees and expenses payable
in connection therewith, (ix) any other transaction arising out of agreements in
existence on the Issue Date, (x) execution, delivery and performance of the Tax
Sharing Agreement and the Management Agreements, including the initial payment
of a fee of $1,500,000 to GSCP and the ongoing payment of fees to GSCP of up to
$750,000 per year plus reasonable out of pocket expenses, (xi) any commercial or
other business transaction in the ordinary course of business with any Permitted
Holder or any Affiliate thereof, on terms that taken as a whole are no less
favorable to the Company and its Restricted Subsidiaries than those that could
be obtained at the time in arm's length dealings with a Person who is not an
Affiliate of the Company and (xii) any transaction in the ordinary course of
business, or approved by a majority of the members of the Board of Directors
having no material personal financial interest in such transaction, between the
Company or any Restricted Subsidiary and any Affiliate of the Company controlled
by the Company that is a joint venture or similar entity primarily engaged in a
Related Business.
Limitation on the Sale or Issuance of Preferred Stock of Restricted
Subsidiaries. The Company will not sell any shares of Preferred Stock of a
Restricted Subsidiary, and will not permit any Restricted Subsidiary, directly
or indirectly, to issue or sell any shares of its Preferred Stock to any Person
(other than to the Company or a Restricted Subsidiary, or to directors as
directors' qualifying shares, or (in the case of any Foreign Subsidiary) to the
extent required by applicable law); provided, however, that (a) the Company or
any Restricted Subsidiary is permitted to sell Preferred Stock of a Subsidiary
in compliance with the terms of the covenant described under "-- Limitation on
Sales of Assets," and (b) any such Preferred Stock may be
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issued or sold if Incurred by any Restricted Subsidiary in compliance with the
covenant described under "-- Limitation on Indebtedness."
Limitation on Liens. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or permit to exist any
Lien (other than Permitted Liens) on any of its property or assets (including
Capital Stock of any other Person), whether owned on the date of the Indenture
or thereafter acquired, securing any Indebtedness that is not Senior
Indebtedness or Guarantor Senior Indebtedness (the "Initial Lien"), unless
contemporaneously therewith effective provision is made to secure the
Indebtedness due under the Indenture and the Notes or, in respect of Liens on
any Restricted Subsidiary's property or assets, any Note Guarantee of such
Restricted Subsidiary, equally and ratably with such obligation for so long as
such obligation is so secured by such Initial Lien. Any such Lien thereby
created in favor of the Notes or any such Note Guarantee will be automatically
and unconditionally released and discharged upon (i) the release and discharge
of the Initial Lien to which it relates, or (ii) any sale, exchange or transfer
to any Person not an Affiliate of the Company of the property or assets secured
by such Initial Lien, or of all of the Capital Stock held by the Company or any
Restricted Subsidiary in, or all or substantially all the assets of, any
Restricted Subsidiary creating such Lien.
SEC Reports. Notwithstanding that the Company may not be required to be or
remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company will file (if then permitted to do so) with the SEC
and provide (whether or not so filed with the SEC) the Trustee and Noteholders
and prospective Noteholders (upon request) with the annual reports and the
information, documents and other reports, which are specified in Sections 13 and
15(d) of the Exchange Act. The Company also will comply with the other
provisions of TIA sec.314(a).
Additional Note Guarantors. The Indenture will provide that if the Company
or any of its Domestic Subsidiaries shall acquire or create another Domestic
Subsidiary that is a Significant Subsidiary, then the Company, the Trustee and
such newly acquired or created Domestic Subsidiary shall execute and deliver a
supplemental indenture evidencing such Note Guarantee and deliver an opinion of
counsel, in accordance with the terms of the Indenture. The Company will also
have the right to cause any Restricted Subsidiary so to become a Note Guarantor.
Each Note Guarantee will be limited to an amount not to exceed the maximum
amount that can be Guaranteed by that Subsidiary without rendering the Note
Guarantee, as it relates to such Subsidiary, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally. See "-- Note Guarantees."
MERGER AND CONSOLIDATION
The Company will not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor Company") will
be a Person organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and the Successor Company
(if not the Company) will expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form reasonably satisfactory to the
Trustee, all the obligations of the Company under the Notes and the Indenture;
(ii) immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Restricted Subsidiary as a result of such transaction as having been Incurred by
the Successor Company or such Restricted Subsidiary at the time of such
transaction), no Default will have occurred and be continuing; (iii) immediately
after giving effect to such transaction, the Consolidated Coverage Ratio of the
Successor Company would be at least equal to the greater of (A) 1.75:1.00 and
(B) a ratio equal to 75% of the actual Consolidated Coverage Ratio of the
Company as of such date of determination; and (iv) each Note Guarantor (other
than any party to any such merger) shall have delivered a written instrument in
form and substance reasonably satisfactory to the Trustee confirming its Note
Guarantee; and (v) the Company will have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each to the effect that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture; provided that (x) in giving such opinion such counsel
may rely on such Officers' Certificate as to any matters of fact (including
without limitation as to compliance with the foregoing clauses (ii) and (iii)),
and (y) no Opinion of Counsel will be required for a consolidation, merger or
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transfer described in the last paragraph of this covenant. Any Indebtedness that
becomes an obligation of the Company or any Restricted Subsidiary (or that is
deemed to be Incurred by any Restricted Subsidiary that becomes a Restricted
Subsidiary) as a result of such transaction undertaken in compliance with this
covenant, and any Refinancing Indebtedness with respect thereto, shall be deemed
to have been Incurred in compliance with the covenant described under
"-- Limitation on Indebtedness".
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, and
thereafter the predecessor Company shall be relieved of all obligations and
covenants under this Agreement, except that, in the case of a conveyance,
transfer or lease of all or substantially all its assets, the predecessor
Company will not be released from the obligation to pay the principal of and
interest on the Notes.
Notwithstanding the foregoing clauses (ii) and (iii), (1) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company and (2) the Company may merge with an
Affiliate incorporated or organized for the purpose of reincorporating or
reorganizing the Company in another jurisdiction to realize tax or other
benefits.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on any Note when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
whether or not such payment is prohibited by the provisions described under
"-- Ranking" above, (iii) the failure by the Company to comply with its
obligations under the covenant described under "-- Merger and Consolidation"
above, (iv) the failure by the Company to comply for 30 days after notice with
any of its obligations under the covenants described under "Change of Control"
or "-- Certain Covenants" above (in each case, other than a failure to purchase
Notes), (v) the failure by the Company to comply for 60 days after notice with
its other agreements contained in the Notes or the Indenture, (vi) the failure
by any Note Guarantor to comply with its obligations under any Note Guarantee to
which such Note Guarantor is a party, after any applicable grace period, (vii)
the failure by the Company or any Significant Subsidiary to pay any Indebtedness
within any applicable grace period after final maturity or the acceleration of
any such Indebtedness by the holders thereof because of a default if the total
amount of such Indebtedness unpaid or accelerated exceeds $5.0 million or its
foreign currency equivalent (the "cross acceleration provision"), (viii) certain
events of bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary (the "bankruptcy provisions"), (ix) the rendering of any
judgment or decree for the payment of money in an amount (net of any insurance
or indemnity payments actually received in respect thereof prior to or within 90
days from the entry thereof, or to be received in respect thereof in the event
any appeal thereof shall be unsuccessful) in excess of $5.0 million or its
foreign currency equivalent against the Company or a Significant Subsidiary that
is not discharged, or bonded or insured by a third Person, if (A) an enforcement
proceeding thereon is commenced or (B) such judgment or decree remains
outstanding for a period of 90 days following such judgment or decree and is not
discharged, waived or stayed (the "judgment default provision") or (x) the
failure of any Note Guarantee by a Note Guarantor which is a Significant
Subsidiary to be in full force and effect (except as contemplated by the terms
thereof or of the Indenture) or the denial or disaffirmation in writing by any
such Note Guarantor of its obligations under the Indenture or any Note Guarantee
if such Default continues for 10 days.
The foregoing will constitute Events of Default whatever the reason for any
such Event Of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
However, a Default under clause (iv) or (v) will not constitute an Event of
Default until the Trustee or the Holders of at least 25% in principal amount of
the outstanding Notes notify the Company of the Default and the Company does not
cure such Default within the time specified in clauses (iv) and (v) hereof after
receipt of such notice.
If an Event of Default (other than a Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company) occurs and is
continuing, the Trustee by notice to the Company, or the
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Holders of at least a majority in principal amount of the outstanding Notes by
notice to the Company and the Trustee, may declare the principal of and accrued
but unpaid interest on all the Notes to be due and payable. Upon such a
declaration, such principal and interest will be due and payable immediately. If
an Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs and is continuing, the principal of and
interest on all the Notes will become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such Holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
Holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such Holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the
Holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the Holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other Holder or that would involve the Trustee in personal liability. Prior
to taking any action under the Indenture, the Trustee will be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of, or premium (if any) or interest on, any Note, the Trustee may
withhold notice if and so long as a committee of its Trust Officers in good
faith determines that withholding notice is in the interests of the Noteholders.
In addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding and any past default or compliance with any provisions may be waived
with the consent of the Holders of a majority in principal amount of the Notes
then outstanding. However, without the consent of each Holder of an outstanding
Note affected, no amendment may, among other things, (i) reduce the principal
amount of Notes whose Holders must consent to an amendment, (ii) reduce the rate
of or extend the time for payment of interest on any Note, (iii) reduce the
principal of or extend the Stated Maturity of any Note, (iv) reduce the premium
payable upon the redemption of any Note or change the time at which any Note may
be redeemed as described under "Optional Redemption" above, (v) make any Note
payable in money other than that stated in the Note, (vi) make any change to the
subordination provisions of the Indenture that adversely affects the rights of
any Holder, (vii) impair the right of any Holder to receive payment of principal
of and interest on such Holder's Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
Holder's Notes or (viii) make any change in the amendment provisions that
require each Holder's
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consent or in the waiver provisions. In addition, without the consent of the
Holders of 90% in principal amount of the Notes then outstanding, no amendment
may release any Note Guarantor that is a Significant Subsidiary from any of its
obligations under its Note Guarantee or the Indenture, except in compliance with
the terms thereof or of the Indenture.
Without the consent of any Holder, the Company and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor of the obligations of the Company under the
Indenture, to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided, however, that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code), to add Guarantees with respect to the Notes, to secure the Notes, to add
to the covenants of the Company for the benefit of the Noteholders or to
surrender any right or power conferred upon the Company, to provide that any
Indebtedness that becomes or will become an obligation of the Successor Company
pursuant to a transaction governed by the provisions described under "-- Merger
and Consolidation" (and that is not a Subordinated Obligation) is Senior
Subordinated Indebtedness for purposes of this Indenture, to make any change
that does not adversely affect the rights of any Holder or to comply with any
requirement of the SEC in connection with the qualification of the Indenture
under the TIA. However, no amendment may be made to the subordination provisions
of the Indenture that adversely affects the rights of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
The consent of the Noteholders is not necessary under the Indenture to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment. After an amendment
under the Indenture becomes effective, the Company is required to mail to
Noteholders a notice briefly describing such amendment. However, the failure to
give such notice to all Noteholders, or any defect therein, will not impair or
affect the validity of the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under the covenants
described under "-- Certain Covenants," the operation of the cross acceleration
provision, the bankruptcy provisions with respect to Subsidiaries and the
judgment default provision described under "-- Defaults" above and the
limitations contained in clause (iii) under "-- Merger and Consolidation" above
("covenant defeasance"). If the Company exercises its legal defeasance option or
its covenant defeasance option, each Note Guarantor will be released from all of
its obligations with respect to its Note Guarantee.
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii), (viii) (but only with
respect to certain bankruptcy events of a Significant Subsidiary), (ix) or (x)
under "Defaults" above or because of the failure of the Company to comply with
clause (iii) under "-- Merger and Consolidation" above.
Either defeasance option may be exercised to any redemption date or to the
maturity date for the Notes. In order to exercise either defeasance option, the
Company must irrevocably deposit in trust (the "defeasance trust") with the
Trustee money or U.S. Government Obligations, or a combination thereof, for the
payment of principal of, and premium (if any) and interest on, the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amount and in the
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same manner and at the same times as would have been the case if such deposit
and defeasance had not occurred (and, in the case of legal defeasance only, such
Opinion of Counsel must be based on a ruling of the Internal Revenue Service or
other change in applicable Federal income tax law since the date of the
Indenture).
CONCERNING THE TRUSTEE
The Bank of New York is to be the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Acquisition" means the acquisition by Acquisition Corp. of all or
substantially all the stock of Gulton Industries on February 10, 1997.
"Acquisition Corp." means Gulton Acquisition Corp., a Delaware corporation
and predecessor by merger of the Company.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Related Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock of
any Person that at such time is a Restricted Subsidiary, acquired from a third
party; provided, however, that, in the case of clauses (ii) and (iii), such
Restricted Subsidiary is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Applicable Premium" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the then outstanding principal amount of such Note
and (ii) the excess of (A) the present value of all remaining required interest
and principal payments due on such Note, computed using a discount rate equal to
the Treasury Rate plus 75 basis points, over (B) the then-outstanding principal
amount of such Note.
"Asset Disposition" means any sale, lease, transfer or other disposition of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares, or (in the case of a Foreign Subsidiary) to the extent
required by applicable law), property or other assets (each referred to for the
purposes of this definition as a "disposition") by the Company or any of its
Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Restricted Subsidiary, (ii) a disposition of inventory,
equipment, obsolete assets or surplus personal property in the ordinary course
of business, (iii) the sale of Temporary Cash Investments or Cash Equivalents in
the ordinary course of business, (iv) dispositions with a fair market value not
exceeding $500,000 in the aggregate in any fiscal year, (v) the sale or discount
(with or without recourse, and on commercially reasonable terms) of accounts
receivable or notes receivable arising in the ordinary course of business, or
the conversion or exchange of accounts receivable for notes receivable, (vi) the
licensing of intellectual property in the ordinary course of business, (vii) the
transfer to Mark IV Industries, Inc. or other disposition of any contracts,
agreements, property and assets relating to the Gulton Data Systems business
formerly conducted by the Company or a predecessor thereof, (viii) for purposes
of the covenant described under "-- Certain Covenants -- Limitation on Sales of
Assets" only, a
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disposition subject to the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments" or (ix) a disposition of
property or assets that is governed by the provisions described under "-- Merger
and Consolidation."
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
assumed in making calculations in accordance with FAS 13) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts, whether outstanding on the
Issue Date or thereafter incurred, payable under or in respect of the Senior
Credit Facility, including without limitation principal, premium (if any),
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company or any Restricted
Subsidiary whether or not a claim for postfiling interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations, guarantees,
other monetary obligations of any nature and all other amounts payable
thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Borrowing Base" means, at any time of determination, the Borrowing Base as
defined in the Senior Credit Agreement.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banking institutions are authorized or required by law to close
in New York City.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease.
"Cash Equivalents" means any of the following: (a) securities issued or
fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof, (b) time deposits, certificates of deposit or bankers'
acceptances of (i) any lender under the Senior Credit Agreement or (ii) any
commercial bank having capital and surplus in excess of $500,000,000 and the
commercial paper of the holding company of which is rated at least A-1 or the
equivalent thereof by Standard & Poor's Ratings Group (a division of McGraw Hill
Inc.) or any successor rating agency ("S&P") or at least P-1 or the equivalent
thereof by Moody's Investors Service, Inc. or any successor rating agency
("Moody's") (or if at such time neither is issuing ratings, then a comparable
rating of another nationally recognized rating agency), (c) commercial paper
rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the
equivalent thereof by Moody's (or if at such time neither is issuing ratings,
then a comparable rating of another nationally recognized rating agency) and (d)
investments in money market funds complying with the risk limiting conditions of
Rule 2a-7 or any successor rule of the Securities and Exchange Commission under
the Investment Company Act.
"Chase" means The Chase Manhattan Bank.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means EV International, Inc., a Delaware corporation, and any
successor thereto.
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"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA of the Company and its Restricted
Subsidiaries for the period of the most recent four consecutive fiscal quarters
ending prior to the date of such determination for which consolidated financial
statements of the Company are available to (ii) Consolidated Interest Expense
for such four fiscal quarters (in each case, determined, for each fiscal quarter
(or portion thereof) of the four fiscal quarters ending prior to the Issue Date,
on a pro forma basis to give effect to the Acquisition as if it had occurred at
the beginning of such four-quarter period); provided, however, that:
(1) if the Company or any Restricted Subsidiary (x) has Incurred any
Indebtedness since the beginning of such period that remains outstanding on
such date of determination or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness,
EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such Indebtedness as
if such Indebtedness had been Incurred on the first day of such period
(except that in making such computation, the amount of Indebtedness under
any revolving credit facility outstanding on the date of such calculation
shall be computed based on (A) the average daily balance of such
Indebtedness during such four fiscal quarters or such shorter period for
which such facility was outstanding or (B) if such facility was created
after the end of such four fiscal quarters, the average daily balance of
such Indebtedness during the period from the date of creation of such
facility to the date of such calculation) and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the
first day of such period, or (y) has repaid, repurchased, defeased or
otherwise discharged any Indebtedness since the beginning of the period
that is no longer outstanding on such date of determination, or if the
transaction giving rise to the need to calculate the Consolidated Coverage
Ratio involves a discharge of Indebtedness (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid), EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving effect on a pro
forma basis to such discharge of such Indebtedness, including with the
proceeds of such new Indebtedness, as if such discharge had occurred on the
first day of such period,
(2) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition of any company
or any business or any group of assets constituting an operating unit of a
business, the EBITDA for such period shall be reduced by an amount equal to
the EBITDA (if positive) directly attributable to the assets that are the
subject of such Asset Disposition for such period or increased by an amount
equal to the EBITDA (if negative) directly attributable thereto for such
period and Consolidated Interest Expense for such period shall be reduced
by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of the Company or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and is continuing Restricted Subsidiaries in
connection with such Asset Disposition for such period (and, if the Capital
Stock of any Restricted Subsidiary is sold, the Consolidated Interest
Expense for such period directly attributable to the Indebtedness of such
Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after
such sale),
(3) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Person that thereby becomes a Restricted Subsidiary, or
otherwise acquired any company or any business or any group of assets
constituting an operating unit of a business, including any such
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving pro forma effect thereto
(including the Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such period, and
(4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period)
shall have made any Asset Disposition or any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (2) or (3)
above if made by the Company or a Restricted Subsidiary during such period,
EBITDA and Consolidated Interest Expense for such period shall be
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calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition of assets occurred on the first day
of such period.
For purposes of this definition, whenever pro forma effect is to be given
to an Asset Disposition, Investment or acquisition of assets, or any transaction
governed by the provisions described under "-- Merger and Consolidation", or the
amount of income or earnings relating thereto and the amount of Consolidated
Interest Expense associated with any Indebtedness Incurred or repaid,
repurchased, defeased or otherwise discharged in connection therewith, the pro
forma calculations in respect thereof shall be as determined in good faith by a
responsible financial or accounting Officer of the Company, based on reasonable
assumptions. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term as at the date of determination in excess of 12 months). If any
Indebtedness bears, at the option of the Company or a Restricted Subsidiary, a
fixed or floating rate of interest and is being given pro forma effect, the
interest expense on such Indebtedness shall be computed by applying, at the
option of the Company or such Restricted Subsidiary, either a fixed or floating
rate. If any Indebtedness which is being given pro forma effect was Incurred
under a revolving credit facility, the interest expense on such Indebtedness
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period.
"Consolidated Interest Expense" means, for any period, the total
consolidated interest expense of the Company and its Restricted Subsidiaries,
the Company and its consolidated Restricted Subsidiaries, determined in
accordance with GAAP, minus, to the extent included in such interest expense,
amortization or write-off of financing costs, and plus, to the extent incurred
by the Company and its Restricted Subsidiaries in such period but not included
in such interest expense, without duplication, (i) interest expense attributable
to Capitalized Lease Obligations and the interest component of rent expense
associated with Attributable Debt in respect of the relevant lease giving rise
thereto, determined as if such lease were a capitalized lease, in accordance
with GAAP, (ii) amortization of debt discount, (iii) interest in respect of
Indebtedness of any other Person that has been Guaranteed by the Company or any
Restricted Subsidiary, but only to the extent that such interest is actually
paid by the Company or any Restricted Subsidiary, (iv) non-cash interest
expense, (v) net costs associated with Hedging Obligations, (vi) the product of
(A) Preferred Stock dividends in respect of all Preferred Stock of Domestic
Subsidiaries of the Company and Disqualified Stock of the Company held by
Persons other than the Company or a Restricted Subsidiary multiplied by (B) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
the Company, expressed as a decimal, in each case, determined on a consolidated
basis in accordance with GAAP; and (vii) the cash contributions to any employee
stock ownership plan or similar trust to the extent such contributions are used
by such plan or trust to pay interest to any Person (other than the Company or
any Restricted Subsidiary) on Indebtedness Incurred by such plan or trust;
provided, however, that there shall be excluded therefrom any such interest
expense of any Unrestricted Subsidiary to the extent the related Indebtedness is
not Guaranteed or paid by the Company or any Restricted Subsidiary. For purposes
of the foregoing, gross interest expense shall be determined after giving effect
to any net payments made or received by the Company and its Subsidiaries with
respect to Interest Rate Agreements.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Company and its Restricted Subsidiaries, determined in
accordance with GAAP; provided, however, that there shall not be included in
such Consolidated Net Income:
(i) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that (A) subject to the limitations contained
in clause (iv) below, the Company's equity in the net income of any such
Person for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash actually distributed by such Person during
such period to the Company or a Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in
clause (iii) below) and (B) the Company's equity
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in the net loss of such Person shall be included to the extent of the
aggregate Investment of the Company or any of its Restricted Subsidiaries
in such Person,
(ii) any net income (loss) of any Person acquired by the Company or a
Restricted Subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition,
(iii) any net income (loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company, except that
(A) subject to the limitations contained in clause (iv) below, the
Company's equity in the net income of any such Restricted Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such
Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend (subject, in the case of a dividend
that could have been made to another Restricted Subsidiary, to the
limitation contained in this clause) and (B) the net loss of such
Restricted Subsidiary shall be included to the extent of the aggregate
Investment of the Company or any of its other Restricted Subsidiaries in
such Restricted Subsidiary,
(iv) any gain or loss realized upon the sale or other disposition of
any asset of the Company or its consolidated Restricted Subsidiaries
(including pursuant to any Sale/Leaseback Transaction) that is not sold or
otherwise disposed of in the ordinary course of business,
(v) any extraordinary gain or loss, and
(vi) the cumulative effect of a change in accounting principles.
"Consolidated Tangible Assets" means, as of any date of determination, the
total assets, less goodwill and other intangibles (other than patents,
trademarks, copyrights, licenses and other intellectual property), shown on the
balance sheet of the Company and its Restricted Subsidiaries as of the most
recent date for which such a balance sheet is available, determined on a
consolidated basis in accordance with GAAP. At February 28, 1997, on a pro forma
basis giving effect to the Transactions and the Offering, the Consolidated
Tangible Assets of the Company was $145.3 million.
"Consolidation" means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP;
provided, however, that "Consolidation" will not include consolidation of the
accounts of any Unrestricted Subsidiary, but the interest of the Company or any
Unrestricted Subsidiary will be accounted for as an investment. The term
"Consolidated" has a correlative meaning.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement or arrangements
(including derivative agreements or arrangements) as to which such Person is a
party or a beneficiary.
"Default" means any event or condition that is, or after notice or passage
of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount to or under which, at the date of determination, the
holders thereof are committed to lend up to, at least $10.0 million and is
specifically designated by the Company in the instrument evidencing or governing
such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the
Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
(other than Management Stock) that by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable or exercisable) or
upon the happening of any event (i) matures or is mandatorily redeemable
pursuant to a sinking fund obligation or otherwise, (ii) is convertible or
exchangeable for Indebtedness or Disqualified Stock or (iii) is redeemable at
the option of the holder thereof, in whole or in part, in each case on or prior
to the 91st day after the Stated Maturity of the Notes.
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"Domestic Subsidiary" means any Restricted Subsidiary of the Company other
than a Foreign Subsidiary.
"EBITDA" means, for any period, the Consolidated Net Income for such
period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest
Expense, (iii) depreciation expense and (iv) amortization of intangibles and
other non-cash charges or non-cash losses.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"EV LLC" means EVI Audio, LLC, a Delaware limited liability company, and
any successor in interest thereto.
"Existing Senior Subordinated Debt" means any Indebtedness in respect of
the Senior Subordinated Credit Agreement, dated as of February 10, 1997, as
amended, supplemented, waived or otherwise modified from time to time, among the
Company, the several banks and other financial institutions from time to time
parties thereto, and The Chase Manhattan Bank, as agent for such lenders.
"Foreign Subsidiary" means (a) any Restricted Subsidiary of the Company
that is not organized under the laws of the United States of America or any
state thereof or the District of Columbia and (b) EVI Audio International
Holding Corporation, Inc., a Delaware corporation, and any successor thereto.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the Issue Date (for purposes of the definitions of
the terms "Consolidated Coverage Ratio," "Consolidated Interest Expense,"
"Consolidated Net Income" and "EBITDA," all defined terms in the Indenture to
the extent used in or relating to any of the foregoing definitions, and all
ratios and computations based on any of the foregoing definitions) and as in
effect from time to time (for all other purposes of the Indenture), including
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession all ratios and computations based on GAAP contained in the
Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other nonfinancial
obligation of any other Person, including any such obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
such other obligation of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Guarantor Senior Indebtedness" means the following obligations, whether
outstanding on the date of the Indenture or thereafter issued, without
duplication: (i) any Guarantee of the Bank Indebtedness by such Note Guarantor
and all other Guarantees by such Note Guarantor of Senior Indebtedness of the
Company or Guarantor Senior Indebtedness for any other Note Guarantor; and (ii)
all obligations consisting of the principal of and premium, if any, and accrued
and unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Note Guarantor
regardless of whether postfiling interest is allowed in such proceeding) on, and
fees and other amount owing in respect of, all other Indebtedness of the Note
Guarantor, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is expressly provided that the obligations
in respect of such Indebtedness are not senior in right of payment to the
obligations of such Note Guarantor under the Note Guarantee; provided, however,
that Guarantor Senior Indebtedness shall not include (1) any obligations of such
Note Guarantor to the Note Guarantor or any other Subsidiary of the Note
Guarantor, (2) any liability for Federal, state, local, foreign or other taxes
owed or owing by such Note Guarantor, (3) any accounts payable or other
liability to
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trade creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities), (4) any Indebtedness of
such Note Guarantor that is expressly subordinate in right of payment to any of
the Indebtedness of such Note Guarantor, including any Guarantor Senior
Subordinated Indebtedness and Guarantor Subordinated Obligations of such Note
Guarantor or (5) any Capital Stock.
"Guarantor Senior Subordinated Indebtedness" means, with respect to a Note
Guarantor, the obligations of such Note Guarantor under the Note Guarantee and
any other Indebtedness of such Note Guarantor that specifically provides that
such Indebtedness is to rank pari passu in right of payment with the obligations
of such Note Guarantor under the Note Guarantee and is not expressly
subordinated by its terms in right of payment to any Indebtedness of such Note
Guarantor which is not Guarantor Senior Indebtedness of such Note Guarantor.
"Guarantor Subordinated Obligation" means, with respect to a Note
Guarantor, any Indebtedness of such Note Guarantor (whether outstanding on the
Issue Date or thereafter Incurred) which is expressly subordinate in right of
payment to the obligations of such Note Guarantor under the Note Guarantee
pursuant to a written agreement.
"Gulton Industries" means Gulton Industries, Inc., a Delaware corporation
and predecessor by merger of the Company.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered in the Register.
"Holding" means EVI Audio Holding, Inc., a Delaware corporation, and any
successor in interest thereto.
"Incur" means issue, assume, enter into any Guarantee of, incur or
otherwise become liable for; provided, however, that any Indebtedness or Capital
Stock of a Person existing at the time such Person becomes a Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary. Any
Indebtedness issued at a discount (including Indebtedness on which interest is
payable through the issuance of additional Indebtedness) shall be deemed
incurred at the time of original issuance of the Indebtedness at the initial
accreted amount thereof.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal of indebtedness of such Person for borrowed money,
(ii) the principal of obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments,
(iii) all reimbursement obligations of such Person (including
reimbursement obligations) in respect of letters of credit or other similar
instruments (the amount of such obligations being equal at any time to the
aggregate then undrawn and unexpired amount of such letters of credit or
other instruments plus the aggregate amount of drawings thereunder that
have not then been reimbursed),
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which
purchase price is due more than one year after the date of placing such
property in final service or taking final delivery and title thereto or the
completion of such services,
(v) all Capitalized Lease Obligations and Attributable Debt of such
Person,
(vi) the redemption, repayment or other repurchase amount of such
Person with respect to any Disqualified Stock or (if such Person is a
Subsidiary of the Company) any Preferred Stock of such Subsidiary, but
excluding, in each case, any accrued dividends (the amount of such
obligation to be equal at any time to the maximum fixed involuntary
redemption, repayment or repurchase price for such Capital Stock, or if
such Capital Stock has no such fixed price, to the involuntary redemption,
repayment
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or repurchase price therefor calculated in accordance with the terms
thereof as if then redeemed, repaid or repurchased, and if such price is
based upon or measured by the fair market value of such Capital Stock, such
fair market value shall be as determined in good faith by the Board of
Directors or the board of directors of the issuer of such Capital Stock),
(vii) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that the amount of Indebtedness of such Person shall be
the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness of such other
Persons,
(viii) all Indebtedness of other Persons to the extent Guaranteed by
such Person, and
(ix) to the extent not otherwise included in this definition, net
Hedging Obligations of such Person (the amount of any such obligation to be
equal at any time to the termination value of such agreement or arrangement
giving rise to such Hedging Obligation that would be payable by such Person
at such time).
The amount of Indebtedness of any Person at any date shall be determined as
set forth above or otherwise provided in this Indenture, or otherwise in
accordance with GAAP.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement (including derivative agreements or arrangements) as to which
such Person is party or a beneficiary.
"Investment" in any Person by any other Person means any direct or indirect
advance, loan or other extension of credit (other than to customers, directors,
officers or employees of any Person in the ordinary course of business) or
capital contribution (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of others)
to, or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by, such Person. For purposes of the definition of
"Unrestricted Subsidiary" and the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments," (i) "Investment" shall include
the portion (proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of any Subsidiary of the Company at
the time that such Subsidiary is designated an Unrestricted Subsidiary;
provided, however,that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
Board of Directors.
"Investors" means Greenwich Street Capital Partners, L.P., Greenwich Street
Capital Offshore Fund, Ltd., The Travelers Insurance Company, The Travelers Life
and Annuity Company, TRV Employees Fund, L.P. and the other parties that
purchased equity interests in the Company on the date of the Acquisition.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Agreements" means, collectively, the Consulting Agreement, the
Fee Agreement and the Indemnification Agreement, each dated February 10, 1997,
each between the Company and Greenwich Street Capital Partners, L.P. (and its
permitted successors and assigns thereunder), as each may be amended,
supplemented, waived or otherwise modified from time to time in accordance with
the terms thereof and of the Indenture.
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"Management Investors" means the officers, directors, employees and other
members of the management of Holding, the Company or any of their respective
Subsidiaries, or family members or relatives thereof, or trusts for the benefit
of any of the foregoing, or any of their heirs, executors, successors and legal
representatives, who at any date beneficially own or have the right to acquire,
directly or indirectly, Capital Stock of the Company, Holding or EV LLC.
"Management Stock" means Capital Stock of the Company, Holding or EV LLC,
or options, warrants or other rights in respect thereof, held by any of the
Management Investors.
"Mergers" means the merger of Acquisition Corp. with and into Gulton
Industries, with Gulton Industries the surviving corporation, and the merger of
Gulton Industries and certain Domestic Subsidiaries with and into the Company,
with the Company the surviving corporation, in each case on the date of the
Acquisition.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, provincial, foreign and local taxes required
to be paid or accrued as a liability under GAAP, as a consequence of such Asset
Disposition, (ii) all payments made, and all installment payments required to be
made, on any Indebtedness that is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon such assets, or that
must by its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of such
Asset Disposition, or to any other Person (other than the Company or a
Restricted Subsidiary) owning a beneficial interest in the assets disposed of in
such Asset Disposition and (iv) appropriate amounts to be provided as a reserve,
in accordance with GAAP, against any liabilities associated with the assets
disposed of in such Asset Disposition and retained by the Company or any
Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of any securities
of the Company or any Subsidiary by the Company or any Subsidiary, or any
capital contribution, means the cash proceeds of such issuance, sale or
contribution net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance, sale or
contribution and net of taxes paid or payable as a result thereof.
"Note Guarantee" means any guarantee that may from time to time be executed
and delivered by a Subsidiary of the Company pursuant to the covenant described
under "-- Certain Covenants -- Additional Note Guarantors."
"Note Guarantor" means any Subsidiary that has issued a Note Guarantee.
"Officer" means the President, Chief Financial Officer, any Vice President,
Controller or Treasurer of the Company.
"Officer's Certificate" means a certificate signed by one Officer.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Permitted Holder" means any of the following: (i) any of the Investors,
Smith Barney Holdings Inc. and their respective Affiliates; (ii) any investment
fund or vehicle managed, sponsored or advised by Greenwich Street Capital
Partners, Inc., The Travelers Insurance Company, The Travelers Life and Annuity
Company, Smith Barney Holdings Inc. or any of their respective Affiliates; (iii)
any limited or general
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partners of, or other investors in, any of the Investors and their respective
Affiliates, or any such investment fund or vehicle; and (iv) any Person acting
in the capacity of an underwriter in connection with a public or private
offering of Capital Stock of the Company, Holding or EV LLC.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in, or consisting of, any of the following:
(i) a Restricted Subsidiary, the Company or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary;
(ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
(iii) Temporary Cash Investments or Cash Equivalents;
(iv) receivables owing to the Company or any Restricted Subsidiary, if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances;
(v) securities or other Investments received as consideration in sales
or other dispositions of property or assets, including Asset Dispositions
made in compliance with the covenant described under "-- Certain
Covenants -- Limitation on Sales of Assets;"
(vi) securities or other Investments received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary, or as a result of foreclosure, perfection or
enforcement of any Lien, or in satisfaction of judgments, including in
connection with any bankruptcy proceeding or other reorganization of
another Person;
(vii) Investments in existence or made pursuant to legally binding
written commitments in existence on the Issue Date;
(viii) Currency Agreements, Interest Rate Agreements and related
Hedging Obligations, which obligations are Incurred in compliance with the
covenant described under "-- Certain Covenants -- Limitation on
Indebtedness;"
(ix) pledges or deposits (x) with respect to leases or utilities
provided to third parties in the ordinary course of business or (y)
otherwise described in the definition of "Permitted Liens"; and
(x) other Investments in an aggregate amount outstanding at any time
not to exceed the greater of (A) $3,000,000 and (B) 3% of Consolidated
Tangible Assets.
"Permitted Liens" means:
(a) Liens for taxes, assessments or other governmental charges not yet
delinquent or the nonpayment of which in the aggregate would not reasonably
be expected to have a material adverse effect on the Company and its
Restricted Subsidiaries, or that are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Company or a Subsidiary thereof, as the case
may be, in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
in respect of obligations that are not overdue for a period of more than 60
days, or that are bonded or that are being contested in good faith and by
appropriate proceedings;
(c) pledges, deposits or Liens in connection with workers'
compensation, unemployment insurance and other social security and other
similar legislation or other insurance related obligations (including,
without limitation, pledges or deposits securing liability to insurance
carriers under insurance or self-insurance arrangements);
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(d) pledges, deposits or Liens to secure the performance of bids,
tenders, trade, government or other contracts (other than for borrowed
money), obligations for utilities, leases, licenses, statutory obligations,
surety, judgment and appeal bonds, performance bonds and other obligations
of a like nature incurred in the ordinary course of business;
(e) easements (including reciprocal easement agreements),
rights-of-way, building, zoning and similar restrictions, utility
agreements, covenants, reservations, restrictions, encroachments, changes,
and other similar encumbrances or title defects incurred, or leases or
subleases granted to others, in the ordinary course of business, which do
not in the aggregate materially interfere with the ordinary conduct of the
business of the Company and its Subsidiaries, taken as a whole;
(f) Liens existing on, or provided for under written arrangements
existing on, the Issue Date, or (in the case of any such Liens securing
Indebtedness of the Company or any of its Subsidiaries existing or arising
under written arrangements existing on the Issue Date) securing any
Refinancing Indebtedness in respect of such Indebtedness so long as the
Lien securing such Refinancing Indebtedness is limited to all or part of
the same property or assets (plus improvements, accessions, proceeds or
dividends or distributions in respect thereof) that secured (or under such
written arrangements could secure) the original Indebtedness;
(g) (i) mortgages, liens, security interests, restrictions,
encumbrances or any other matters of record that have been placed by any
developer, landlord or other third party on property over which the Company
or any Restricted Subsidiary of the Company has easement rights or on any
leased property and subordination or similar agreements relating thereto
and (ii) any condemnation or eminent domain proceedings affecting any real
property;
(h) Liens securing Hedging Obligations Incurred in compliance with the
covenant described under "-- Certain Covenants -- Limitation on
Indebtedness";
(i) Liens arising out of judgments, decrees, orders or awards in
respect of which the Company shall in good faith be prosecuting an appeal
or proceedings for review, which appeal or proceedings shall not have been
finally terminated, or if the period within which such appeal or
proceedings may be initiated shall not have expired;
(j) leases, subleases, licenses or sublicenses to third parties;
(k) Liens securing (x) Indebtedness Incurred in compliance with clause
(b)(i), (b)(ii), (b)(v) or (b)(vii) of the covenant described under
"Certain Covenants -- Limitation on Indebtedness", or clause (b)(iv)
thereof (other than Refinancing Indebtedness Incurred in respect of
Indebtedness described in paragraph (a) thereof) or (y) Bank Indebtedness;
(l) Liens securing commercial bank indebtedness;
(m) Liens on properties or assets (1) of the Company or any Note
Guarantor securing Senior Indebtedness or Guarantor Senior Indebtedness,
(2) of any Wholly Owned Subsidiary that is not a Note Guarantor securing
Indebtedness of any Wholly Owned Subsidiary that is not a Note Guarantor or
(3) of any Restricted Subsidiary that is not a Note Guarantor securing its
Indebtedness;
(n) Liens existing on property or assets of a Person at the time such
Person becomes a Subsidiary of the Company (or at the time the Company or a
Restricted Subsidiary acquires such property or assets); provided,
however,that such Liens are not created in connection with, or in
contemplation of, such other Person becoming such a Subsidiary (or such
acquisition of such property or assets), and that such Liens are limited to
all or part of the same property or assets (plus improvements, accessions,
proceeds or dividends or distributions in respect thereof) that secured
(or, under the written arrangements under which such Liens arose, could
secure) the obligations to which such Liens relate;
(o) Liens on Capital Stock of an Unrestricted Subsidiary that secure
Indebtedness or other obligations of such Unrestricted Subsidiary;
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(p) any encumbrance or restriction (including, but not limited to, put
and call agreements) with respect to Capital Stock of any joint venture or
similar arrangement pursuant to any joint venture or similar agreement;
(q) Liens securing the Notes; and
(r) Liens securing Refinancing Indebtedness Incurred in respect of any
Indebtedness secured by, or securing any refinancing, refunding, extension,
renewal or replacement (in whole or in part) of any other obligation
secured by, any other Permitted Liens, provided that any such new Lien is
limited to all or part of the same property or assets (plus improvements,
accessions, proceeds or dividends or distributions in respect thereof) that
secured (or, under the written arrangements under which the original Lien
arose, could secure) the obligations to which such Liens relate.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation means
Capital Stock of any class or classes (however designated) that is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company, Holding or EV LLC pursuant to an effective
registration statement under the Securities Act (whether alone or in conjunction
with any secondary public offering), the proceeds of which, if issued by Holding
or EV LLC, are contributed to the Company.
"Public Market" means any time after a Public Equity Offering has been
consummated and either (x) at least 10% of the total issued and outstanding
common stock (or equivalent equity interests) of the Company, Holding or EV LLC
has been distributed by means of an effective registration statement under the
Securities Act or (y) an established public trading market otherwise exists for
any such common stock or equivalent equity interests.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) (collectively, "refinances," "refinanced" and
"refinancing"as used in the Indenture shall have a correlative meaning) any
Indebtedness existing on the date of the Indenture or Incurred in compliance
with the Indenture (including Indebtedness of the Company that refinances
Indebtedness of any Restricted Subsidiary (to the extent permitted in the
Indenture) and Indebtedness of any Restricted Subsidiary that refinances
Indebtedness of another Restricted Subsidiary) including Indebtedness that
refinances Refinancing Indebtedness; provided, however, that (i) the Refinancing
Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the
Indebtedness being refinanced, (ii) the Refinancing Indebtedness has an Average
Life at the time such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being refinanced and (iii)
such Refinancing Indebtedness is Incurred in an aggregate principal amount (or
if issued with original issue discount, an aggregate issue price) that is equal
to or less than the sum of (x) the aggregate principal amount (or if issued with
original issue discount, the aggregate accreted value) then outstanding of the
Indebtedness being refinanced, plus (y) fees, underwriting discounts, premiums
and other costs and expenses incurred in connection with such Refinancing
Indebtedness; provided further, however, that Refinancing Indebtedness shall not
include (x) Indebtedness of a Restricted Subsidiary that is not a Note Guarantor
that refinances Indebtedness of the Company or (y) Indebtedness of the Company
or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary.
"Related Business" means those businesses in which the Company or any of
its Subsidiaries is engaged on the date of the Indenture, or that are reasonably
related, complementary or incidental thereto.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
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"Revolving Credit Facility" means the revolving credit facility under the
Senior Credit Facility (which may include any swing line or letter of credit
facility or subfacility thereunder).
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired by the Company or a Restricted Subsidiary whereby
the Company or such Restricted Subsidiary transfers such property to a Person
and the Company or such Restricted Subsidiary leases it from such Person, other
than leases (x) between the Company and a Restricted Subsidiary or between or
(y) required to be classified and accounted for as capitalized leases for
financial reporting purposes in accordance with GAAP.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Senior Credit Agreement" means the credit agreement dated as of February
10, 1997, among the Company, the banks and other financial institutions party
thereto from time to time, and Chase as administrative agent, as such agreement
may be assumed by any successor in interest, and as such agreement may be
amended, supplemented, waived or otherwise modified from time to time, or
refunded, refinanced, restructured, replaced, renewed, repaid, increased or
extended from time to time (whether in whole or in part, whether with the
original agent and lenders or other agents and lenders or otherwise, and whether
provided under the original Senior Credit Agreement or otherwise).
"Senior Credit Facility" means the collective reference to the Senior
Credit Agreement, any Loan Documents (as defined therein), any notes and letters
of credit issued pursuant thereto and any guarantee and collateral agreement,
patent and trademark security agreement, mortgages, letter of credit
applications and other security agreements and collateral documents, and other
instruments and documents, executed and delivered pursuant to or in connection
with any of the foregoing, in each case as the same may be amended,
supplemented, waived or otherwise modified from time to time, or refunded,
refinanced, restructured, replaced, renewed, repaid, increased or extended from
time to time (whether in whole or in part, whether with the original agent and
lenders or other agents and lenders or otherwise, and whether provided under the
original Senior Credit Agreement or otherwise). Without limiting the generality
of the foregoing, the term "Senior Credit Facility" shall include any agreement
(i) changing the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (ii) adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder, (iii) increasing the amount of Indebtedness
incurred thereunder or available to be borrowed thereunder or (iv) otherwise
altering the terms and conditions thereof.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that (i) specifically provides that such
Indebtedness is to rank pari passu with the Notes or is otherwise entitled
"Senior Subordinated" Indebtedness and (ii) is not expressly subordinated by its
terms in right of payment to any Indebtedness of the Company that is not Senior
Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC, as in effect on the Issue Date.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the date of the Indenture or thereafter Incurred) which is
expressly subordinate in right of payment to the Notes pursuant to a written
agreement, but in any event excluding the Existing Senior Subordinated Debt.
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"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other equity interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such person or (ii) one or
more Subsidiaries of such Person.
"Successor Company" shall have the meaning assigned thereto in clause (i)
under "-- Merger and Consolidation."
"Tax Sharing Agreement" means the Amended and Restated Tax Sharing
Agreement, dated as of March 17, 1997, between the Company and Holding, as the
same may be amended, supplemented, waived or otherwise modified from time to
time in accordance with the terms thereof and of the Indenture.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations (x) of the United States of America or any agency thereof
or obligations Guaranteed by the United States of America or any agency thereof
or (y) of any foreign country recognized by the United States of America rated
at least "A" by S&P or "A1" by Moody's, (ii) investments in time deposit
accounts, certificates of deposit and money market deposits maturing within 180
days of the date of acquisition thereof issued by a bank or trust company that
is organized under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States of America having capital
and surplus aggregating in excess of $250 million (or the foreign currency
equivalent thereof) and whose longterm debt is rated "A" by S&P or "A-1" by
Moody's, (iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) or (ii) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
Investments in commercial paper, maturing not more than 270 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the
time as of which any Investment therein is made of "P-1" (or higher) according
to Moody's or "A-1" (or higher) according to S&P, (v) Investments in securities
with maturities of six months or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or "A" by Moody's, (vi) any money market deposit accounts
issued or offered by a domestic commercial bank or a commercial bank organized
and located in a country recognized by the United States of America, in each
case, having capital and surplus in excess of $250 million (or the foreign
currency equivalent thereof), or investments in money market funds complying
with the risk limiting conditions of Rule 2a-7 or any short-term successor rule)
of the SEC, under the Investment Company Act of 1940, as amended, and (vii)
similar short-term investments approved by the Board of Directors in the
ordinary course of business.
"Term Loan Facility" means the term loan facility provided under the Senior
Credit Facility.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. sections.
77aaa-77bbbb) as in effect on the date of the Indenture.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Transactions" means, collectively, the Acquisition, the Mergers, the
initial equity investment by the Investors, the issuance of any Existing Senior
Subordinated Debt, the initial borrowings under the Senior Credit Facility, and
all other transactions relating to the Acquisition or the financing thereof.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two Business Days prior to the Redemption
Date (or, if such Statistical Release is no longer published, any publicly
available source or similar market data)) most nearly equal to the period from
the Redemption Date to the Stated Maturity; provided, however, that if the
period from the Redemption Date to the Stated Maturity is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained
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by linear interpolation (calculated to the nearest one-twelfth of a year) from
the weekly average yields of United States Treasury securities for which such
yields are given, except that if the period from the Redemption Date to the
Stated Maturity is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant maturity of one
year shall be used.
"Trustee" means the party named as such in the Indenture until a successor
replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or any other
officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any other Subsidiary of the Company that
is not a Subsidiary of the Subsidiary to be so designated; provided, however,
that either (A) the Subsidiary to be so designated has total consolidated assets
of $1,000 or less or (B) if such Subsidiary has consolidated assets greater than
$1,000, then such designation would be permitted under "-- Certain
Covenants-Limitation on Restricted Payments." The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
however, that immediately after giving effect to such designation (x) the
Company could incur at least $1.00 of additional Indebtedness under paragraph
(a) in the covenant described under "-- Certain Covenants-Limitation on
Indebtedness" and (y) no Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution of the Company's Board
of Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"Voting Stock" of an entity means all classes of Capital Stock of such
entity then outstanding and normally entitled to vote in the election of
directors or all interests in such entity with the ability to control the
management or actions of such entity.
"Wholly-Owned Subsidiary" means a Restricted Subsidiary of the Company all
the Capital Stock of which (other than directors' qualifying shares, or (in the
case of any Foreign Subsidiary) to the extent required by applicable law) is
owned by the Company or another Wholly-Owned Subsidiary.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax consequences of the acquisition, ownership and disposition of the New
Notes. This summary applies only to a beneficial owner of a New Note who
acquires a New Note at the initial offering thereof. This discussion is based on
currently existing provisions of the Code, existing and proposed Treasury
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect or proposed on the date hereof and all
of which are subject to change, possibly with retroactive effect, or different
interpretations. This discussion does not address the tax consequences to
subsequent purchasers of New Notes, and is limited to investors who hold the New
Notes as capital assets. Moreover, this discussion is for general information
only, and does not address all of the tax consequences that may be relevant to
particular investors in light of their personal circumstances, or to certain
types of investors (such as certain financial institutions, insurance companies,
tax-exempt entities, dealers in securities, persons who have acquired New Notes
as part of a straddle, hedge, conversion transaction or other integrated
investment or persons whose functional currency is not the U.S. Dollar).
PROSPECTIVE ACQUIRORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE NEW NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL ESTATE
OR GIFT TAX LAWS OR ANY STATE, LOCAL OR FOREIGN TAX LAWS, ANY CHANGES IN
APPLICABLE TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS.
EXCHANGE OFFER
The exchange of an Existing Note for a New Note should not constitute a
taxable exchange of an Existing Note, in which case a Holder would not recognize
taxable gain or loss upon receipt of a New Note, a Holder's holding period for a
New Note would generally include the holding period for the Existing Note so
exchanged and such holder's adjusted tax basis in a New Note would generally be
the same as such holder's adjusted tax basis in the Note so exchanged. The
following discussion assumes that the exchange of Existing Notes for New Notes
pursuant to the Exchange Offer will not be treated as an exchange for federal
income tax purposes, and that the Existing Notes and the New Notes will be
treated as the same security for federal income tax purposes.
UNITED STATES TAXATION OF UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a beneficial owner of
a New Note that is, for United States federal income tax purposes, (i) a citizen
or resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate the income of which is subject to
United States federal income taxation regardless of its source, or (iv) a trust
if a court within the United States is able to exercise primary supervision over
the administration of such trust and one or more United States fiduciaries have
the authority to control all the substantial decisions of such trust.
Payment of Interest on New Notes. Subject to the discussion below, in
general, (i) interest paid or payable on a New Note will be taxable to a United
States Holder as ordinary interest income as received or accrued, in accordance
with such holder's method of accounting for federal income tax purposes, and
(ii) assuming that original issue discount on the Existing Note is not greater
than a de minimis amount equal to 0.25% of its stated principal amount
multiplied by the number of complete years to its maturity, any such discount
will be deemed to be equal to zero and a United States Holder will not be
required to accrue a portion of such discount as income in each taxable year.
Because the Existing Notes provide for the payment of liquidated damages
payable on the Existing Notes under the circumstances described above under
"[Exchange and Registration Rights Agreement]," the Existing Notes will be
subject to the Treasury Regulations that apply to debt instruments that provide
for one or more contingent payments. Under those Regulations, however, a payment
is not a contingent payment
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merely because of a contingency that, as of the issue date, is either "remote"
or "incidental." The Company intends to take the position that, solely for these
purposes, the payment of such liquidated damages is a remote or incidental
contingency, in which case the possibility of such payment would not, as of the
issue date, cause the Existing Notes to be treated as having been issued with
original issue discount, and the rules described above (or, New Notes received
pursuant to the Exchange Offer) would apply. The Company's determination that
such payments are a remote or incidental contingency for these purposes is
binding on a holder, unless such holder discloses in the proper manner to the
Internal Revenue Service (the "IRS") that it is taking a different position.
If the Existing Notes (or New Notes received in exchange therefor pursuant
to the Exchange Offer) were treated as having been issued with original issue
discount, a United States Holder could be required to accrue all payments on the
New Notes (including amounts that would otherwise constitute de minimis original
issue discount and projected payments of liquidated damages) on a constant yield
basis (including holders who otherwise use a cash method of accounting for
federal income tax purposes), and in certain circumstances to include market
discount in income sooner than otherwise required and to treat as interest
income any gain recognized on the disposition of the debt instrument (rather
than as capital gain).
Prospective investors should consult their tax advisors as to the tax
considerations relating to instruments providing for payment of such liquidated
damages, in particular in connection with the possible application of
instruments providing for payment of the regulations relating to contingent
payment instruments.
Sale, Exchange or Retirement of the Notes. Upon the sale, exchange,
redemption, retirement at maturity or other disposition of a New Note, a United
States Holder will generally recognize taxable gain or loss equal to the
difference between the sum of cash plus the fair market value of all other
property received on such disposition (except to the extent such cash or
property is attributable to accrued interest, which will be taxable as ordinary
income) and such holder's adjusted tax basis in the New Note. Gain or loss
recognized on the disposition of a New Note generally will be capital gain or
loss and will be long-term capital gain or loss if, at the time of such
disposition, the United States Holder's holding period for the New Note is more
than one year. Under current law, in the case of United States Holders who are
individuals, net long-term capital gains are taxed at a lower rate than ordinary
income and capital losses are subject to certain limitations.
Market Discount. Generally, the market discount provisions of the Code
require a United States Holder of a New Note that is a market discount bond (as
defined in the Code) to treat any gain realized upon the disposition of such New
Note as interest income to the extent of the market discount that accrued during
the period such holder held such New Note. (For this purpose a person disposing
of a market discount New Note in a transaction other than a sale, exchange or
involuntary conversion generally is treated as realizing and amount equal to the
fair market value of the New Note.) A United States Holder may also be required
to recognize as ordinary income any principal payments with respect to a New
Note to the extent such payments do not exceed the accrued market discount on
the New Note. For these purposes, market discount generally equals the excess of
the stated redemption price of the New Note over the basis of the New Note in
the hands of the holder immediately after its acquisition. However, market
discount is deemed not to exist if the market discount is less than a
statutorily defined de minimis amount equal to 1/4 of 1 percent of the New
Note's contract redemption price at maturity multiplied by the number of
complete years to the New Note's maturity after the holder acquired the New
Note.
The market discount rules also provide that any United States Holder of New
Notes that were acquired at a market discount may be required to defer the
deduction of a portion of the interest on any indebtedness incurred or
maintained to acquire or carry the New Notes, until the New Notes are disposed
of.
A United States Holder of a New Note acquired at a market discount may
elect to include market discount in income as the discount accrues. In such
case, the foregoing rules with respect to the recognition of ordinary income on
dispositions and with respect to the deferral of interest deductions on
indebtedness related to such New Note would not apply.
Amortizable Bond Premium. Generally, if the tax basis of an obligation
held as a capital asset exceeds the amount payable at maturity of the
obligation, such excess may constitute amortizable bond premium that
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the United States Holder of such obligation may elect to amortize under the
constant interest rate method and deduct over the period from the holder's
acquisition date to the obligation's maturity date. A United States Holder that
elects to amortize bond premium must reduce its tax basis in the related
obligation by the amount of the aggregate deductions allowable for the
amortizable bond premium. Any election to amortize bond premium shall apply to
all bonds (other than bonds on which the interest is excludible from gross
income) held by the United States Holder at the beginning of the first taxable
year to which the election applies or thereafter acquired by the holder. The
election is irrevocable without the consent of the IRS.
In the case of an obligation, such as a New Note, that may be called at a
premium prior to maturity, an earlier call date is treated as its maturity date,
and the amount of bond premium is determined by treating the amount payable on
such call date as the amount payable at maturity if such a calculation produces
a smaller amortizable bond premium than any other call date or the method
described in the preceding paragraph. If a United States Holder of a New Note is
required to amortize and deduct bond premium by reference to a call date, the
New Note will be treated as reissued on such date for the amount so payable. If
a New Note purchased at a premium is redeemed pursuant to a call prior to such
early call date or its maturity, a purchaser who has elected to deduct bond
premium may deduct the excess of its adjusted basis in the New Note over the
amount received on redemption (or, if greater, the amount payable at maturity)
as an ordinary loss in the taxable year of redemption.
The amortizable bond premium deduction is treated as a reduction of
interest on the bond instead of as a deduction, except as Treasury regulations
may otherwise provide.
Backup Withholding and Information Reporting. In general, a United States
Holder of a New Note will be subject to backup withholding at the rate of 31.0%
with respect to interest, principal and premium, if any, paid on a New Note,
unless the holder (a) is an entity (including corporations, tax-exempt
organizations and certain qualified nominees) which is exempt from withholding
and, when required, demonstrates this fact, or (b) provides the Company with its
Taxpayer Identification Number ("TIN") (which for an individual would be the
holder's Social Security number), certifies that the TIN provided to the Company
is correct and that the holder has not been notified by the Internal Revenue
Service (the "IRS") that it is subject to backup withholding due to under
reporting of interest or dividends, and otherwise complies with applicable
requirements of the backup withholding rules. In addition, such payments of
principal, premium and interest to United States Holders that are not
corporations, tax-exempt organizations or qualified nominees will generally be
subject to information reporting requirements.
The amount of any backup withholding from a payment to a United States
Holder will be allowed as a credit against such holder's federal income tax
liability and may entitle such holder to a refund, provided that the required
information is furnished to the IRS.
UNITED STATES TAXATION OF FOREIGN HOLDERS
Payment of Interest on New Notes. In general, payments of interest
received by any beneficial owner of a New Note that is not a United States
Holder (a "Foreign Holder") will not be subject to a United States federal
withholding tax, provided that (i)(a) the Foreign Holder does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote within the meaning of Section 871(b)(3)
of the Code and the Treasury Regulations thereunder, (b) the Foreign Holder is
not a controlled foreign corporation that is related to the Company actually or
constructively through stock ownership, (c) the Foreign Holder is not a bank
whose receipt of interest on a New Note is described in section 881(c)(3)(A) of
the Code and (d) either (1) the beneficial owner of the New Note, under
penalties of perjury, provides the Company or its agent with the beneficial
owner's name and address and certifies that it is not a United States Holder on
IRS Form W-8 (or a suitable substitute or successor form) or (2) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") holds the New Note and certifies to the Company or its agent under
penalties of perjury that such a Form W-8 (or suitable substitute or successor
form) has been received by it from the beneficial owner or qualifying
intermediary and furnishes the payor a copy thereof; (ii) the Foreign Holder is
subject to United States federal income tax with respect to the New
103
<PAGE> 105
Note on a net basis because payments received with respect to the New Note are
effectively connected with a U.S. trade or business of the Foreign Holder (in
which case the Foreign Holder may also be subject to "branch profits tax" under
section 884 of the Code) and provides the Company with a properly executed IRS
Form 4224 or successor form; or (iii) the Foreign Holder is entitled to the
benefits of an income tax treaty under which the interest is exempt from United
States withholding tax, and the Foreign Holder or such Holder's agent provides a
properly executed IRS Form 1001 or successor form claiming the exemption.
Payments of interest not exempt from U.S. federal withholding tax as described
above will be subject to such withholding tax at the rate of 30.0% (subject to
reduction under an applicable income tax treaty). See "-- Proposed Regulations."
Sales, Exchange or Retirement of the New Notes. A Foreign Holder generally
will not be subject to United States federal income tax (and generally no tax
will be withheld) with respect to gain realized on the sale, exchange,
redemption, retirement at maturity or other disposition of a New Note, unless
(i) the gain is effectively connected with a United States trade or business
conducted by the Foreign Holder or (ii) the Foreign Holder is an individual who
is present in the United States for a period or periods aggregating 183 or more
days in the taxable year of the disposition and certain other conditions are
met.
Backup Withholding and Reporting. Under current Treasury regulations,
backup withholding and information reporting on IRS Form 1099 do not apply to
payments made by the Company or a paying agent to Foreign Holders if the
certification described under "United States Taxation of Foreign
Holders -- Payment of Interest on New Notes" is received, provided that the
payor does not have actual knowledge that the holder is a United States Holder.
If any payments of principal, premium (if any) and interest are made to the
beneficial owner of a New Note by or through the foreign office of a foreign
custodian, foreign nominee or other foreign agent of such beneficial owner, or
if the foreign office of a foreign "broker" (as defined in applicable United
States Treasury Department regulations) pays the proceeds of the sale of a New
Note to the seller thereof, backup withholding and information reporting will
not apply. Information reporting requirements (but not backup withholding) will
apply, however, to any such payments by a foreign office of a broker that is,
for Untied States federal income tax purposes, a United States person, or a
foreign person that derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the United States, or a "controlled
foreign corporation" (generally, a foreign corporation controlled by United
States shareholders) with respect to the United States, unless the broker has
documentary evidence in its records that the holder is a Foreign Holder and
certain other conditions are met, or the holder otherwise establishes an
exemption. Any such payments by a United States office of a custodian, nominee
or agent or by a United States office of a broker are subject to both backup
withholding at a rate of 31% and information reporting unless the holder
certifies under penalties of perjury that it is a Foreign Holder and the payor
does not have actual knowledge that the beneficial owner is a United States
person or otherwise establishes an exemption. A Foreign Holder may obtain a
refund or a credit against such Holder's U.S. federal income tax liability of
any amounts withheld under the backup withholding rules, provided the required
information is furnished to the IRS. See "-- Proposed Regulations."
In addition, in certain circumstances interest on a New Note owned by a
Foreign Holder will be required to be reported annually on IRS Form 1042S, in
which case such form will be filed with the IRS and furnished to the Foreign
Holder.
PROPOSED REGULATIONS
In April 1996, the IRS issued proposed regulations that would change
certain of the certification and other procedures described in the preceding
paragraph ("1996 Proposed Regulations"). The changes set forth in the 1996
Proposed Regulations would not materially affect a Foreign Holder's ability to
qualify for an exemption from withholding tax with respect to payments of
interest on a New Note. Under the 1996 Proposed Regulations, a Foreign Holder
claiming the benefit of an income tax treaty as described in clause (d) of the
paragraph under "-- United States Taxation of Foreign Holders -- Payment of
Interest on the New Notes." (but not a Foreign Holder claiming the portfolio
interest exemption described in clause (a) of such paragraph) would be required
to provide its TIN to the payor. The 1996 Proposed Regulations would apply to
104
<PAGE> 106
payments of interest made after December 31, 1997. There can be no assurance,
however, that the 1996 Proposed Regulations will be adopted without change in
final form.
BOOK-ENTRY; DELIVERY AND FORM
The Notes will initially be issued in the form of one or more registered
Notes in global form without coupons (each a "Global Note"). Each Global Note
will be deposited with, or on behalf of, the Depository Trust Company ("DTC")
and registered in the name of Cede & Co., as nominee of DTC, or will remain in
the custody of the Trustee pursuant to the FAST Balance Certificate Agreement
between DTC and the Trustee.
DTC has advised the Company that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a "banking organization"
within the meaning of the New York banking law, (iii) a member of the Federal
Reserve System, (iv) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and (v) a "Clearing Agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants (collectively, the "Participants") and facilitates the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes to the accounts of its Participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Indirect access to DTC's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly.
The Company expects that pursuant to procedures established by DTC (i) upon
deposit of the Global Notes, DTC will credit the accounts of Participants
designated by the Initial Purchasers with an interest in the Global Note and
(ii) ownership of beneficial interests in the Global Notes will be shown on, and
the transfer of beneficial ownership therein will be effected only through,
records maintained by DTC (with respect to the interest of the Participants),
the Participants and the Indirect Participants. The laws of some states require
that certain persons take physical delivery in definitive form of securities
that they own and that security interests in negotiable instruments can only be
perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer Notes or to pledge the Notes as collateral
to persons in such states will be limited to such extent.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or holder
of the Notes represented by the Global Note for all purposes under the Indenture
and the Notes. Except as provided below, owners of beneficial interests in a
Global Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Securities, and will not be considered the owners or
holders thereof under the Indenture for any purpose, including with respect to
giving of any directions, instruction or approval to the Trustee thereunder. As
a result, the ability of a person having a beneficial interest in Notes
represented by a Global Note to pledge or transfer such interest to persons or
entities that do not participate in DTC's system or to otherwise take action
with respect to such interest, may be affected by the lack of a physical
certificate evidencing such interest.
Payments with respect to the principal of, premium, if any, and interest
on, any Notes represented by a Global Note registered in the name of DTC or its
nominee on the applicable record date will be payable by the Trustee to or at
the direction of DTC or its nominee in its capacity as the registered holder of
the Global Note representing such Notes under the Indenture. Under the terms of
the Indenture, the Company and the Trustee may treat the persons in whose names
the Notes, including the Global Notes, are registered as the owners thereof for
the purpose of receiving such payment and for any and all other purposes
whatsoever. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of interest in the Global Note (including principal, premium, if any, and
interest), or to immediately credit the accounts of the relevant Participants
with such payment, in amounts proportionate to their respective holdings in
principal amount of beneficial interest in the Global
105
<PAGE> 107
Note as shown on the records of DTC. The Company expects that payments by the
Participants and the Indirect Participants to the beneficial owners of interests
in the Global Note will be governed by standing instructions and customary
practice and will be the responsibility of the Participants or the Indirect
Participants and DTC.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depository or DTC ceases to be registered as a
clearing agency under the Exchange Act and the Company is unable to locate a
qualified successor within 90 days, (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture or (iii) upon the occurrence of certain
other events, then, upon surrender by DTC of its Global Notes, then Certificated
Securities will be issued to each person that DTC identifies as the beneficial
owner of the Notes represented by the Global Note. In addition, subject to
certain conditions, any person having a beneficial interests in a Global Note
may, upon request to the Trustee, exchange such beneficial interest for
Certificated Securities. Upon any such issuance, the Trustee is required to
register such Certificated Securities in the name of such person or persons (or
the nominee of any thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the Notes to be issued).
106
<PAGE> 108
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Existing Notes
where such Existing Notes were acquired as a result of market-making activities
or other trading activities. The Company has agreed that, for a period of 90
days after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until , 199 , all dealers effecting
transactions in the New Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit or any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Company has agreed to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for the Holders of the
Existing Notes) other than commissions or concessions of any brokers-dealers and
will indemnify the Holders of the Existing Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
Chase Securities Inc. is an affiliate of Chase, which is the administrative
agent and a lender to the Company under the Senior Credit Facility and under the
Senior Subordinated Credit Facility. Smith Barney Inc. is an affiliate of
Travelers Group Inc. and is a lender under the Senior Subordinated Facility.
Chase has received and will receive customary fees in connection with the Senior
Credit Facility and in connection with the Senior Subordinated Facility and
Smith Barney Inc. has received and will receive customary fees in connection
with the Senior Subordinated Facility. Chase and Smith Barney Inc. will receive
their proportionate shares of any repayment by the Company of amounts
outstanding under the Senior Credit Facility and the Senior Subordinated
Facility from the proceeds of the Offering.
GSCP and Smith Barney Inc. are both affiliated companies of Travelers Group
Inc. An affiliate of Chase Securities Inc. is a limited partner in GSCP. Chase
Securities Inc. is an affiliate of Chase.
107
<PAGE> 109
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Debevoise
& Plimpton, New York, New York.
EXPERTS
The audited consolidated balance sheet of the Company as of February 28,
1997 and for the period from February 11, 1997 through February 28, 1997 (new
basis of accounting), and for the period from March 1, 1996 through February 10,
1997 (predecessor basis of accounting) included in this Prospectus and elsewhere
in the Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
The consolidated balance sheet of EV International, Inc. as of February 29,
1996 and the consolidated statements of income and retained earnings and cash
flows for each of the two years in the period ended February 29, 1996, included
in this Prospectus, have been included herein in reliance on the report of
Coopers & Lybrand, L.L.P., independent accountants, given on the authority of
that Firm as experts in accounting and auditing.
108
<PAGE> 110
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109
<PAGE> 111
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS (NEW BASIS OF ACCOUNTING)
Report of Independent Public Accountants.............................................. F-2
Consolidated Balance Sheet as of February 28, 1997.................................... F-3
Consolidated Statement of Income for the period from February 11, 1997 through
February 28, 1997................................................................... F-4
Consolidated Statement of Stockholder's Equity as of February 28, 1997................ F-5
Consolidated Statement of Cash Flows for the period from February 11, 1997 through
February 28, 1997................................................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
AUDITED CONSOLIDATED FINANCIAL STATEMENTS (PREDECESSOR BASIS OF ACCOUNTING)
Report of Independent Public Accountants.............................................. F-21
Report of Independent Public Accountants.............................................. F-22
Consolidated Balance Sheet as of the Last Day of February 1996........................ F-23
Consolidated Statements of Income and Retained Earnings for the Years Ended the Last
Day of February 1996 and 1995 and for the period from March 1, 1996 through February
10, 1997............................................................................ F-24
Consolidated Statements of Cash Flows for the Years Ended the Last Day of February
1996 and 1995 and for the period from March 1, 1996 through February 10, 1997....... F-25
Notes to Consolidated Financial Statements............................................ F-26
</TABLE>
F-1
<PAGE> 112
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To EV International, Inc.:
We have audited the accompanying consolidated balance sheet of EV
International, Inc. (a Delaware corporation) as of February 28, 1997, and the
related consolidated statements of income, stockholder's equity and cash flows
for the period from February 11, 1997 (date of acquisition and change in basis
of accounting -- see Note 1) through February 28, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of EV
International, Inc. as of February 28, 1997, and the results of their operations
and their cash flows for the period from February 11, 1997 through February 28,
1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
May 9, 1997
F-2
<PAGE> 113
EV INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
AS OF FEBRUARY 28, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash............................................................................ $ 7,044
Accounts receivable, net of allowance for doubtful accounts of $2,203........... 42,856
Inventories..................................................................... 51,141
Deferred tax assets............................................................. 2,907
Other current assets............................................................ 5,019
--------
Total Current Assets......................................................... 108,967
Property, Plant and Equipment, net................................................ 31,411
Deferred Financing Costs.......................................................... 6,216
Cost in Excess of Net Assets Acquired............................................. 60,513
Other Assets...................................................................... 1,008
--------
TOTAL ASSETS............................................................ $208,115
========
LIABILITIES & STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable................................................................ $ 15,250
Current maturities of long-term debt............................................ 1,000
Compensation related liabilities................................................ 6,726
Income taxes payable............................................................ 997
Other accrued liabilities....................................................... 7,456
--------
Total Current Liabilities.................................................... 31,429
Senior Subordinated Credit Facility............................................... 75,000
Term Loan......................................................................... 34,000
Deferred Taxes and Other Liabilities.............................................. 9,294
--------
Total Liabilities............................................................ 149,723
Stockholder's Equity
Common stock ($.01 par value--1,000 shares authorized, 110 shares issued and
outstanding)................................................................. --
Capital in excess of par value.................................................. 57,600
Retained earnings............................................................... 841
Cumulative translation adjustments.............................................. (49)
--------
Total Stockholder's Equity................................................... 58,392
--------
TOTAL LIABILITIES & STOCKHOLDER'S EQUITY................................ $208,115
========
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-3
<PAGE> 114
EV INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIOD ENDED FEBRUARY 28, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Net Sales.......................................................................... $14,916
Operating Costs:
Cost of products sold............................................................ 10,081
Selling and administration....................................................... 1,705
Research and development......................................................... 454
Depreciation and amortization.................................................... 331
-------
Total Operating Costs.................................................... 12,571
-------
Operating Income................................................................. 2,345
Interest Expense................................................................... 843
Foreign Exchange Losses............................................................ 10
-------
Income before income taxes....................................................... 1,492
Provision for Income Taxes......................................................... 651
-------
Net Income............................................................... $ 841
=======
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-4
<PAGE> 115
EVI INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
AS OF FEBRUARY 28, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE TOTAL
COMMON PAID-IN RETAINED TRANSLATION STOCKHOLDER'S
STOCK CAPITAL EARNINGS ADJUSTMENT EQUITY
------ ------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, February 10, 1997............ $-- $ -- $ -- $ -- $ --
Initial Capitalization................ -- 57,600 -- -- 57,600
Net Income............................ -- -- 841 -- 841
Translation........................... -- -- -- (49) (49)
------ ------- -------- ----------- -------------
Balance, February 28, 1997............ $-- $57,600 $841 $ (49) $58,392
====== ======= ====== ======== ==========
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-5
<PAGE> 116
EV INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
AS OF FEBRUARY 28, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income....................................................................... $ 841
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization.................................................. 331
Amortization of deferred financing fees........................................ 234
Changes in assets and liabilities:
Accounts receivable......................................................... (4,846)
Inventories................................................................. 1,855
Other current assets........................................................ 94
Accounts payable............................................................ (1,786)
Compensation related liabilities............................................ 536
Income taxes payable........................................................ 691
Other accrued liabilities................................................... 1,787
Other, net.................................................................. (99)
---------
Net cash used in operating activities.......................................... (362)
---------
Cash flows from investing activities:
Cash paid for acquisition, net of cash acquired................................ (154,615)
Purchases of property and equipment............................................ (67)
---------
Net cash used in investing activities....................................... (154,682)
---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt....................................... 110,000
Deferred financing costs....................................................... (5,595)
Capital contributions.......................................................... 57,600
---------
Net cash provided by financing activities................................... 162,005
---------
Effect of exchange rates on cash............................................ 83
---------
Net increase in cash........................................................ 7,044
Cash at beginning of period................................................. --
---------
Cash at end of period....................................................... $ 7,044
=========
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-6
<PAGE> 117
EV INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
NOTE 1: ORGANIZATION
EV International, Inc., a Delaware corporation, and its subsidiaries (the
"Company" or "EVI") is a manufacturer and marketer of sound system products for
the professional audio market. The Company manufactures and markets a
comprehensive range of products worldwide for professional audio systems,
including microphones, mixing consoles, signal processors, amplifiers and
loudspeaker systems. The Company's brands include Electro-Voice, Altec Lansing,
Midas and Vega. Its products are used in airports, theaters, sports arenas,
concert halls, cinemas, stadiums, convention centers, television and radio
broadcast studios, houses of worship and other venues where music or speech is
amplified. The Company targets three principal lines of business within the
overall professional audio market: (i) fixed installation, or permanently
installed sound systems in public venues; (ii) professional music retail, or
sound products used by professional musicians and sold principally through
retail channels; and (iii) concert/recording/broadcast, or sound products used
in professional concerts, recording projects and radio and television broadcast.
The Company is a wholly owned subsidiary of EVI Audio Holding, Inc.
("Holding"), a Delaware Corporation. Holding is a wholly owned subsidiary of EVI
Audio, LLC (the "Parent"). Holding and the Parent are newly formed entities
organized by Greenwich Street Capital Partners, L.P. and certain affiliated
investors (collectively "GSCP") to effect the acquisition described below.
Holding and the Parent are holding companies only. The primary assets in each
are comprised of investments in subsidiaries.
On February 10, 1997 (the "Acquisition Closing Date"), pursuant to a
Purchase Agreement dated December 12, 1996, an acquisition subsidiary wholly
owned by Holding acquired from Mark IV Industries, Inc. and Mark IV PLC
(collectively, the "Sellers") all of the issued and outstanding capital stock of
Gulton Industries, Inc. ("Gulton"), the former parent of Electro-Voice,
Incorporated (the "Predecessor Company"). The acquisition subsidiary
subsequently merged with and into Gulton, and Gulton then merged with and into
the Predecessor Company, with the Predecessor Company ultimately surviving. The
Predecessor Company then changed its name to EV International, Inc. The
foregoing transactions are referred to herein as the Acquisition.
As of the Acquisition Closing Date, the aggregate cash purchase price paid
was $151,500, plus approximately $4,900 in estimated adjustments paid on the
Acquisition Closing Date. This purchase price is subject to further adjustment
on the basis of (i) the audited working capital and audited cash flow of the
Predecessor Company as of and for the ten month period ended December 31, 1996,
and (ii) the net intercompany transfers of cash between the Sellers and their
affiliates, on the one hand, and the Predecessor Company and its subsidiaries,
on the other hand, during the period between December 31, 1996, and the
Acquisition Closing Date. The Sellers provided a draft of the audited financial
information on May 9, 1997, and have requested a further purchase price payment
of $405, which may be disputed.
The Acquisition was accounted for using the purchase method of accounting,
pursuant to which the purchase price was allocated among the acquired assets and
liabilities in accordance with estimates of fair market value on the Acquisition
Closing Date. The cost of the acquisition included the payment of $156,400 to
the Sellers, plus $3,900 of Acquisition related fees. The Acquisition was funded
with $57,600 of contributed capital and $110,000 of debt, including a bridge
loan facility and a term loan. Debt financing costs were approximately $6,500.
On March 24, 1997, the Company issued 11% Senior Subordinated Notes due 2007
(the "Offering"), the proceeds from which were used to repay the bridge loan
facility in its entirety and a portion of the term loan (see Notes 6 and 15).
F-7
<PAGE> 118
EV INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The results of operations for the period from February 11, 1997, through
February 28, 1997, reflect the results of the Company since the Acquisition and
reflect the buyer's basis in assets and liabilities. The Company's financial
statements are prepared on a consolidated basis in accordance with generally
accepted accounting principles. All significant intercompany balances and
transactions have been eliminated in the accompanying consolidated financial
statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments with
original maturities of three months or less.
Inventories
Inventories are stated at the lower of cost or market, with cost determined
on the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment are presented at cost, net of accumulated
depreciation. The cost of property, plant and equipment retired or otherwise
disposed of, and the accumulated depreciation thereon, are eliminated from the
asset and related accumulated depreciation accounts, and any resulting gain or
loss is reflected in income. The Company provides for depreciation of plant and
equipment primarily on a straight-line basis to amortize the cost of such plant
and equipment over the following estimated useful lives:
<TABLE>
<CAPTION>
YEAR
--------
<S> <C>
Buildings and improvements.................................. 5 to 15
Machinery and equipment..................................... 3 to 10
</TABLE>
Cost in Excess of Net Assets Acquired
The excess of cost over fair value of the net assets acquired ("goodwill")
is amortized on a straight-line basis over 40 years. Goodwill is presented net
of accumulated amortization of $75. The Company recognized approximately $75 of
goodwill amortization expense for the period ended February 28, 1997. On an
on-going basis, the Company measures realizability of goodwill by the ability of
the Company to generate current and undiscounted expected future cash flows in
excess of unamortized goodwill. If such realizability is in doubt, an adjustment
will be made to reduce the carrying value of the goodwill.
Long-Lived Assets
The Company has adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of". SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles, including goodwill, to
be
F-8
<PAGE> 119
EV INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
held and used or disposed of by an entity, be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Under the provisions of SFAS No. 121, impairment losses
are recognized when expected future cash flows are less than the assets'
carrying value. Accordingly, when indicators of impairment are present, the
Company will evaluate the carrying value of property, plant and equipment and
intangibles in relation to the operational performance and future undiscounted
cash flows of the underlying business. As of February 28, 1997, no impairment of
long-lived assets has been identified.
Research and Development Costs
Research and development costs are expensed as incurred and amounted to
approximately $454 for the period from February 11, 1997, through February 28,
1997.
Foreign Currency
Foreign subsidiaries' income statement accounts are translated at the
average exchange rates in effect during the period while assets and liabilities
are translated at the rates of exchange at the balance sheet date. The resulting
balance sheet translation adjustments are charged or credited directly to
stockholder's equity. Foreign exchange transaction gains and losses realized
during the period from February 11, 1997 through February 28, 1997, and those
attributable to exchange rate movements on intercompany receivables and payables
not deemed to be of a long-term investment nature, were not material.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109. Deferred income taxes are provided to reflect the
future tax consequences of differences between the tax bases of assets and
liabilities and their reported amounts in the financial statements.
Fair Value of Financial Investments
The Company's financial instruments include cash, receivables, payables and
debt. The fair value of these financial instruments approximated their carrying
values as of February 28, 1997.
Concentrations, Risks and Uncertainties
As a result of the Acquisition and related financing transactions, the
Company is highly leveraged. The Company's high degree of leverage could have
important consequences, including but not limited to the following: (i) the
Company's ability to obtain additional financing for working capital, capital
expenditures, acquisition, general corporate purposes or other purposes may be
impaired in the future; (ii) a substantial portion of the Company's cash flow
from operations must be dedicated to the payment of principal and interest on
its indebtedness, thereby reducing the funds available to the Company for other
purposes; and (iii) the Company's flexibility to adjust to changing market
conditions and ability to withstand competitive pressures could be limited, and
the Company may be more vulnerable to a downturn in general economic conditions
or its business or may be unable to carry out capital spending that is important
to its growth strategy.
Technological innovation and leadership are among the important factors in
competing successfully in the professional audio market. The Company's future
results will depend, in part, upon its ability to make timely and cost-effective
enhancements and additions to its technology and to introduce new products that
meet customer demands, including products utilizing digital technology, which
are increasingly being introduced in the professional audio industry. The
success of current and new product offerings is dependent on several factors,
including proper identification of customer needs, technological development,
cost, timely completion and introduction, differentiation from offerings of the
Company's competitors and market acceptance.
F-9
<PAGE> 120
EV INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Maintaining flexibility to respond to technological and market dynamics may
require substantial expenditures. There can be no assurance that the Company
will successfully identify and develop new products in a timely manner, that
products or technologies developed by others will not render the Company's
products obsolete or noncompetitive or that constraints in the Company's
financial resources will not adversely affect its ability to develop and
implement technological advances.
The Company's business strategy includes plans for pursuing growth in
certain foreign markets. The Company's international prospects could be
adversely affected by factors such as reversals or delays in the opening of
foreign markets, exchange controls and other trade regulation, currency and
political risks, taxation and economic and market conditions in targeted foreign
markets. The Company's business strategy also includes plans to pursue growth
through strategic acquisitions. The Senior Credit Facility prohibits making
certain acquisitions in an aggregate amount over $7,500 and incurring additional
indebtedness greater than 65% of the purchase price of any such acquisition. In
addition, acquisitions that the Company may make or enter into will involve
risk, including the successful integration and management of acquired
technology, operations and personnel. The integration of acquired businesses may
also lead to the loss of key employees of the acquired companies and diversion
of management attention from ongoing business concerns.
The Company has substantial assets located outside of the United States and
a substantial portion of the Company's sales and earnings are attributable to
operations conducted abroad and to export sales, predominantly in Western Europe
and Asia. The Company's international operations subject the Company to certain
risks, including increased exposure to currency exchange rate fluctuations. The
Company intends to hedge a portion of its foreign currency exposure by incurring
liabilities, including bank debt, denominated in the local currencies of those
countries where its subsidiaries are located and plans to develop systems to
manage and control its currency risk exposure. The Company's international
operations also subject it to certain other risks, including adverse political
or economic developments in the foreign countries in which it conducts business,
foreign governmental regulation, dividend restrictions, tariffs and potential
adverse tax consequences, including payment of taxes in jurisdictions that have
higher tax rates than does the United States.
The Company offers a range of audio products to a diverse customer base
throughout the world. Terms typically require payment within a short period of
time, however, the Company will offer extended payment terms to certain
qualified customers. As of February 28, 1997, the Company believes it has no
significant customer or geographic concentration of accounts receivable that
could expose the Company to adverse, near-term severe financial impacts.
F-10
<PAGE> 121
EV INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3: PRO FORMA RESULTS OF OPERATIONS (UNAUDITED)
Pro forma statements of income are presented below for the year ended
February 28, 1997, as if the Acquisition of the Predecessor Company and the
Offering had occurred on March 1, 1996. The Company's pro forma statement of
income for the twelve months ended February 28, 1997, is based on the
Predecessor Company's statement of income for the period from March 1, 1996
through February 10, 1997, the Company's statement of income for the period from
February 11, 1997 to February 28, 1997, and adjustments (i) giving effect to the
Acquisition under the purchase method of accounting and (ii) the Offering. The
Predecessor Company's statements of income, as disclosed in the notes thereto,
do not reflect any foreign exchange gains or losses, nor any interest expense or
income. The pro forma results are for illustrative purposes only and do not
purport to be indicative of the actual results which occurred, nor are they
indicative of future results of operations.
<TABLE>
<CAPTION>
UNAUDITED
PREDECESSOR NEW BASIS PRO FORMA EV
BASIS FEBRUARY 11, INTERNATIONAL
MARCH 1, 1996 1997 INC.
TO FEBRUARY 10, TO FEBRUARY 8, PRO FORMA TWELVE MONTHS
1997 1997 FULL YEAR ADJUSTMENTS ENDED 2/28/97
--------------- -------------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Revenue.................... $ 177,130 $ 14,916 $ 192,046 $ -- $ 192,046
Operating Income........... 14,547 2,345 16,892 (1,703) 15,189
Net Income................. 8,347 841 9,188 (8,665) 523
EBITDA..................... 19,630 2,676 $ 22,306 (1,213) 21,093
</TABLE>
NOTE 4: INVENTORIES
Inventories consist of the following as of February 28, 1997:
<TABLE>
<S> <C>
Purchased materials and parts.............................................. $19,830
Work in process............................................................ 7,104
Finished goods............................................................. 24,207
-------
$51,141
=======
</TABLE>
NOTE 5: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are presented at their fair market value at
the February 11, 1997 acquisition date and consist of the following as of
February 28, 1997:
<TABLE>
<S> <C>
Land and improvements..................................................... $ 3,583
Buildings and improvements................................................ 4,217
Machinery and equipment................................................... 23,867
--------
Total property, plant and equipment....................................... $ 31,667
Less -- Accumulated depreciation.......................................... (256)
--------
Property, plant and equipment, net........................................ $ 31,411
========
</TABLE>
NOTE 6: LONG-TERM DEBT AND FINANCING ARRANGEMENTS
Long-term debt at February 28, 1997 consisted of the following:
<TABLE>
<S> <C>
Senior subordinated credit facility....................................... $ 75,000
Term loan facility........................................................ 35,000
--------
$110,000
========
</TABLE>
F-11
<PAGE> 122
EV INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Senior Subordinated Credit Facility
The Company entered into a $75,000 Senior Subordinated Credit Facility (the
"Bridge Loan Facility"), dated as of the Acquisition Closing Date, with a group
of financial institutions, issued as interim financing for the Acquisition.
During the period ended February 28, 1997, borrowings under the Bridge Loan
Facility bore interest at 12.25% per annum. Under the terms of the Bridge Loan
Facility, the facility expires one year from the Acquisition Closing Date.
Deferred financing fees associated with the Bridge Loan Facility of $4,398 are
being amortized over the life of the Bridge Loan Facility. Unamortized deferred
financing fees remaining at the date of the Offering were written off.
Senior Credit Facility
The Company entered into a Senior Credit Facility, dated as of the
Acquisition Closing Date, with a group of financial institutions, which provides
for a Term Loan Facility of $35,000 and a Revolving Credit Facility of $25,000.
On the Acquisition Closing Date, the Company borrowed the full amount
available under the Term Loan Facility and used the proceeds of $35,000,
together with the proceeds of the GSCP equity investment and the Bridge Loan
Facility, for payment of the purchase price of the Acquisition and related fees
and expenses. On such date, the Company also obtained letters of credit for use
in the ordinary course of business in the aggregate face amount of approximately
$3,800. The remainder of the Revolving Credit Facility is available to service
the working capital requirements of the Company and its subsidiaries and for
their general corporate purposes.
The obligations of the Company under the Senior Credit Facility are
unconditionally guaranteed, jointly and severally, by Holding and by each
subsequently acquired or organized direct and indirect domestic subsidiary of
the Company. The obligations under the Senior Credit Facility and the guarantees
thereof are secured by a first priority security interest in substantially all
of the Company's tangible and intangible assets, including, without limitation,
intellectual property, owned U.S. real property, all of the capital stock of the
Company and each of its domestic subsidiaries, and 65% of the capital stock of
EVI Audio International Holding Corporation, Inc., a wholly owned subsidiary of
the Company organized to hold all of the foreign subsidiaries of the Company.
The Term Loan Facility has a maturity date of August 10, 2002. After giving
effect to the $17,000 prepayment with the proceeds of the Offering, the Term
Loan Facility will amortize in quarterly installments aggregating $1,000,
$2,000, $3,000, $3,600, $4,300 and $4,100 in each of the fiscal years 1998,
1999, 2000, 2001, 2002 and 2003, respectively. The Term Loan Facility bears
interest at a rate per annum equal (at the Company's option) to (i) an Alternate
Base Rate, as defined, (the "ABR") plus 1.75% (the "ABR Applicable Margin") or
(ii) the Eurodollar Rate, as defined, plus 2.75% (the "Eurodollar Applicable
Margin"). The Revolving Credit Facility is available on a revolving basis during
the period commencing on the date of the Acquisition Closing and matures on
August 10, 2002. The Revolving Credit Facility bears interest at a rate per
annum equal (at the Company's option) to (i) the ABR plus the ABR Applicable
Margin or (ii) the Eurodollar Rate plus the Eurodollar Applicable Margin. The
foregoing margins shall be subject to reduction after the first anniversary of
the Acquisition Closing Date. The interest rate applicable for the period from
February 10, 1997 to February 28, 1997 was 8.17%.
The Company has agreed to pay the lenders the following fees: (i) an annual
administration fee of $50 for the first year, which was paid on February 10,
1997, and $35 for each subsequent year, which will be payable in advance each
subsequent anniversary thereof prior to the maturity or early termination of the
Senior Credit Facility and the payment in full of all amounts owing thereunder
and (ii) a commitment fee equal to 0.50% per annum, payable quarterly, on the
average daily unused portion of the Senior Credit Facility. The Company also
pays a commission on the face amount of all outstanding letters of credit at a
per annum rate equal to the
F-12
<PAGE> 123
EV INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Eurodollar Applicable Margin then in effect plus a fronting fee equal to 0.25%
per annum, payable quarterly, on the face amount of each letter of credit. In
addition, the Company will be required to pay to the issuing lender customary
administrative, issuance, amendment, payment and negotiation charges. Deferred
financing fees of $2,052 are being amortized over the life of the Senior Credit
Facility.
The Senior Credit Facility contains a number of covenants that, among other
things, require the Company to maintain certain financial ratios, including (i)
a minimum consolidated EBITDA requirement, as defined (ii) a maximum
consolidated debt to consolidated EBITDA ratio, and (iii) a minimum consolidated
EBITDA to consolidated fixed charges ratio. As of February 28, 1997, the Company
was in compliance with all covenants under the Senior Credit Facility.
Foreign Working Capital Lines
Certain foreign subsidiaries of the Company have entered into agreements
with banks to provide for local working capital needs. As of February 28, 1997,
the total aggregate availability of these arrangements, including for letter of
credit issuance, was $4,400. The rates of interest in effect on these facilities
as of February 28, 1997, ranged from 1.875% to 9.75%, and are generally subject
to change based upon prevailing local prime rates. In certain instances, the
facilities are secured by a lien on foreign real property, leaseholds or
accounts receivables and inventory or guaranteed by another subsidiary of the
Company.
NOTE 7: INCOME TAXES
Income before income taxes and the related provision for income taxes for
the period from February 11, 1997, through February 28, 1997, consists of the
following:
<TABLE>
<S> <C>
Income before income taxes:
United States............................................................. $ 678
Foreign................................................................... 814
------
Total income before taxes......................................... $1,492
======
Provision for income taxes:
Currently payable United States........................................... $ 277
Foreign................................................................... 374
------
Total currently payable........................................... $ 651
======
Deferred
United States............................................................. $ 15
Foreign................................................................... (15)
------
Total deferred provision (benefit)................................ 0
------
Total provision for income taxes.................................. $ 651
======
</TABLE>
The provision for income taxes at February 28, 1997, differs from the
amount computed using the U.S. statutory income tax rate as follows:
<TABLE>
<S> <C>
Expected provision at U.S. statutory income tax rate........................ $ 502
Nondeductible goodwill...................................................... 29
State and local income taxes................................................ 38
Foreign tax rate differences................................................ 82
------
Total provision for income taxes.................................. $ 651
======
</TABLE>
F-13
<PAGE> 124
EV INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences which give rise to deferred tax
assets (liabilities) consist of the following at February 28, 1997:
<TABLE>
<S> <C>
Current:
Accounts receivable...................................................... $ 118
Inventories.............................................................. 1,140
Accrued liabilities...................................................... 1,290
Other items.............................................................. 359
-------
Net current deferred tax assets.................................. $ 2,907
=======
Noncurrent:
Property and equipment................................................... $(6,624)
Long-term liabilities.................................................... 850
Unremitted foreign earnings.............................................. (1,650)
Other items.............................................................. 255
-------
Net noncurrent deferred tax liabilities.......................... $(7,169)
=======
</TABLE>
Unremitted earnings of EVI's foreign subsidiaries arising after the
Acquisition Closing Date are deemed to be reinvested in each country and are not
expected to be remitted. A deferred tax liability attributable to unremitted
earnings existing at the Acquisition Closing Date was established at the
acquisition date.
NOTE 8: PENSION AND RETIREMENT SAVINGS PLANS
The Predecessor Company's U.S. employees participated in one of a number of
defined-benefit pension plans which were funded and administered by the Sellers.
Such plans provided retirement benefits based upon the employees' ages, earnings
and years of service, or based upon years of service multiplied by stated
monthly benefit amounts. As of the Acquisition Closing Date, all employees
currently participating in the plan ceased to accrue benefits under the plan
administered by the Sellers and became fully vested in their accrued benefits
under such plan. In accordance with the Acquisition agreement, the Sellers
retained the liability under this plan for employee benefits accrued through the
date of the Acquisition.
Subsequent to the Acquisition Closing Date, the Company formed the EV
International Retirement Plan for its U.S. employees. The components of net
periodic pension cost for this plan is as follows:
<TABLE>
<S> <C>
Service cost................................................................. $16
Interest cost................................................................ 0
Actual return on plan assets................................................. 0
Net amortization and deferral................................................ 0
---
Net periodic pension cost.................................................... $16
===
</TABLE>
F-14
<PAGE> 125
EV INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The funded status for the Company's defined-benefit plan based on
valuations as of February 28, 1997, is as follows:
<TABLE>
<S> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.................................................... $15
Non-vested benefit obligation................................................ 1
Accumulated benefit obligation............................................... 16
Projected benefit obligation................................................. 16
Plan assets at fair value.................................................... 0
Projected benefit obligation in excess of plan assets........................ 16
Unrecognized prior service cost.............................................. 0
Unrecognized net transition obligation (asset)............................... 0
---
Accrued pension cost......................................................... $16
===
</TABLE>
The discount rate and the weighted-average compensation increase rate used
to determine the projected benefit obligation at February 28, 1997, were 7.5%
and 0.0%, respectively.
Certain of the Company's U.S. employees also participated in
defined-contribution plans which were previously funded and administered by the
Sellers. These plans consisted of the Company's matching of employees' 401(k)
contributions.
As of the Acquisition Closing Date, the Company ceased withholding 401(k)
contributions from employees' payroll until the time the Company could establish
its own defined-contribution plan. Pursuant to the Purchase Agreement, the
assets of the Sellers' defined-contribution pension plan that relate to the
Company's employees will be transferred into the Company's plan, and, at such
time, employee payroll withholding for 401(k) contributions into the Company's
defined-contribution plan will continue. Accordingly, the Company has not
recognized any liability for these contributions since the date of the
Acquisition.
The Company's Japanese subsidiary also has a retirement and termination
plan (the "Retirement Plan"), which provides benefits to employees in Japan upon
their termination of employment. The benefits are based upon a multiple of the
employee's monthly salary, with the multiple determined based upon the
employee's years of service. The multiple paid to employees who retire or are
involuntarily terminated is greater than the multiple paid to those who
voluntarily terminate their services. The Retirement Plan is unfunded, and the
accompanying consolidated balance sheet includes a liability of approximately
$1,150 at February 28, 1997, which represents the actuarially determined
estimated present value of the Company's liability as of this date. In
developing this estimate, the actuary used appropriate discount and compensation
growth rates prevailing in Japan of 4% and 2.5%, respectively. For the period
from February 10, 1997 through February 28, 1997, the Company charged $5 to
expense for this plan.
NOTE 9: POSTRETIREMENT BENEFITS
The Company is required to provide health and life insurance benefits to a
number of active employees of its U.S. operations upon retirement. Contributions
required to be paid by the active employees towards the cost of such plans are a
flat dollar amount per month in certain instances, or a range from 25% to 100%
in other instances.
F-15
<PAGE> 126
EV INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net postretirement benefit expense included the following components:
<TABLE>
<S> <C>
Service cost.............................................................. $ 0.7
Interest cost............................................................. 1.3
Actual return on plan assets.............................................. 0.0
Net amortization and deferra1............................................. 0.0
------
Net periodic postretirement benefit expense............................... $ 2.0
======
Accumulated postretirement benefit obligations:
Retirees.................................................................. $ 0.0
Fully eligible active plan participants................................... 126.0
Other active plan participants............................................ 219.0
------
345.0
Fair value of plan assets................................................. 0.0
------
Excess of accumulated postretirement benefit obligations over plan
assets.................................................................. 345.0
Unrecognized prior service cost........................................... 0.0
Unrecognized net loss (gain).............................................. 0.0
Unrecognized net transition obligation (asset)............................ 0.0
------
Accrued postretirement benefit cost....................................... $345.0
======
</TABLE>
The assumed health care cost trend rate used in measuring the benefit
obligation is 8% for the period ended February 28, 1997, declining at a rate of
1% per year to an ultimate rate of 4.5% in 2001.
The weighted average discount rate used in determining the benefit
obligation at February 28, 1997, is 7.50%.
The Company does not provide any post-employment benefits which would
require accrual under Statement of Financial Accounting Standards No. 112.
NOTE 10: COMMITMENTS AND CONTINGENCIES
At February 28, 1997, the Company had various noncancellable operating
leases for manufacturing, distribution and office buildings, warehouse space and
equipment.
Approximate future minimum rental commitments under all noncancelable
operating leases are as follows:
<TABLE>
<S> <C>
Fiscal Year 1998.................................................... $1,166
1999................................................................ 943
2000................................................................ 598
2001................................................................ 418
2002................................................................ 249
2003 and thereafter................................................. 888
Total minimum lease commitments..................................... $4,262
</TABLE>
From time to time the Company is a party to various legal actions in the
normal course of business. Gulton was sued for infringement of a U.S. patent
that Gulton was using to produce products unrelated to the business of the
Company for a business line that was transferred out of Gulton prior to the
Acquisition. At trial, the plaintiff was awarded $3,024 in damages. The matter
was appealed and upheld with the issue of calculation of damages remanded to the
District Court. No decision has been made by the District Court on
F-16
<PAGE> 127
EV INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
this issue. The Sellers, which are prosecuting the claim on behalf of Gulton,
have agreed to indemnify the Company fully for any losses or liabilities arising
from this litigation. The Company believes that it is not currently party to any
litigation which, if adversely determined, would have a material adverse effect
on the liquidity or results of operations of the Company.
The Company and its operations are subject to extensive and changing U.S.
federal, state and local and foreign environmental laws and regulations,
including, but not limited to, laws and regulations that impose liability on
responsible parties to remediate, or contribute to the costs of remediating,
current or formerly owned or leased sites or other sites where solid or
hazardous wastes or substances were disposed of or released into the
environment. These remediation requirements may be imposed without regard to
fault or legality at the time of the disposal or release. The Company believes
that it currently conducts its operations, and in the past has operated its
business, in substantial compliance with applicable environmental laws and
regulations. From time to time, however, operations of the Company have
resulted, and may result in the future, in non-compliance or liability with
respect to such laws and regulations.
The Company (or, for certain sites, the Sellers, on behalf of the Company)
has undertaken or currently is undertaking remediation of contamination at
certain of its currently or formerly owned sites (some of which are unrelated to
the audio business) and the Company has agreed it is a de minimis responsible
party at a number of other such sites, which have been designated as Superfund
sites under U.S. environmental laws. The Company recently had Phase I
Environmental Site Assessments and Compliance Reviews conducted by a third-party
environmental consultant at all of its manufacturing sites and is aware of
environmental conditions at certain of such sites that require or may require
remediation or continued monitoring. In particular, the Company's site in
Buchanan, Michigan has been designated a Superfund site under U.S. environmental
laws. The Sellers have agreed to indemnify the Company fully for environmental
liabilities resulting from the Buchanan, Michigan Superfund site and certain of
the other sites at which the environmental consultant indicated monitoring or
remediation was necessary.
The Company estimates that it will incur, in fiscal year 1998,
approximately $150 for environmentally related capital expenditures. The
Company's environmentally related expenditures in the period from February 11,
1997, through February 28,1997, were not material. The Company does not believe
that the costs to the Company of environmental compliance under current laws and
regulations will have a material adverse effect on the financial condition or
results of operations of the Company.
There can be no assurance that the Company's estimated environmental
expenditures, which the Company believes to be reasonable, will cover in full
the actual amounts of environmental obligations the Company does incur, that the
Sellers will pay in full the indemnified environmental liabilities when they are
incurred, that new or existing environmental laws will not affect the Company in
currently unforeseen ways or that present or future activities undertaken by the
Company will not result in additional environmentally related expenditures.
However, the Company does not believe that the costs to the Company of the
environmental compliance under current laws and regulations will have a material
adverse effect on the financial condition or results of operations of the
Company.
NOTE 11: DOMESTIC AND FOREIGN OPERATIONS
The Company operates in a single industry segment, the professional audio
market. The Company's customers are not concentrated in any specific geographic
region and no single customer accounts for a significant amount of the Company's
sales.
F-17
<PAGE> 128
EV INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information related to domestic and foreign operations is as follows:
<TABLE>
<S> <C>
Net sales to customers:
North America........................................................... $ 7,366
Europe.................................................................. 3,981
Asia and other foreign.................................................. 3,569
--------
Total net sales to customers.................................... $ 14,916
========
Operating income:
North America........................................................... $ 1,565
Europe.................................................................. 409
Asia and other foreign.................................................. 371
--------
Total operating income.......................................... $ 2,345
========
Identifiable assets:
North America........................................................... $131,269
Europe.................................................................. 42,255
Asia and other foreign.................................................. 34,391
--------
Total identifiable assets....................................... $207,915
========
</TABLE>
The net sales to customers reflect the sales of the Company's operating
units in each geographic area to unaffiliated customers. Export sales from the
United States to unaffiliated customers were approximately $761 for the period
from February 11, 1997, through February 28, 1997.
NOTE 12: RELATED PARTY TRANSACTIONS
The Company has engaged Greenwich Street Capital Partners, Inc.
("Greenwich"), the manager of GSCP, to provide it with certain business,
financial and managerial advisory services, including developing and
implementing corporate and business strategy and providing other consulting and
advisory services. In exchange for such services, the Company has agreed to pay
Greenwich an annual fee of $750 payable quarterly in arrears, plus Greenwich's
reasonable out-of-pocket costs and expenses. This engagement is in effect until
the earlier to occur of the tenth anniversary of Acquisition Closing Date and
the date on which GSCP directly or indirectly no longer owns any shares of the
capital stock of Holding, and may be earlier terminated by Greenwich at its
discretion. For the period ended February 28, 1997, $37 of expense was
recognized by the Company. In addition, on the Acquisition Closing Date,
Greenwich received $1,500 in fees for providing services relating to the
structuring and financing of the Acquisition and the management compensation
package related thereto and is entitled to receive reimbursement for its
reasonable out-of-pocket costs and expenses relating to its provision of
services.
NOTE 13: EMPLOYMENT AGREEMENTS
Robert D. Pabst and John G. Bolstetter entered into a three-year employment
agreements with the Company prior to February 11, 1997. Pursuant to the terms of
the Purchase Agreement, if these executives were terminated within 90 days of
the closing of the Acquisition, the Sellers would be responsible for applicable
severance payments. The employment of these executives was terminated effective
May 9, 1997. The Company will likely enter into employment agreements in the
future as new executives are located.
F-18
<PAGE> 129
EV INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14: SUPPLEMENTAL DISCLOSURES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
Net cash used for business acquisitions, net of cash acquired, was
allocated as follows:
<TABLE>
<S> <C>
Working capital........................................................... $ 63,878
Plant and equipment....................................................... 31,649
Purchase price in excess of the net tangible assets acquired.............. 60,588
Deferred financing costs.................................................. 6,450
Other assets.............................................................. 1,358
Noncurrent Liabilities.................................................... (9,308)
--------
Net cash used for acquisition............................................. $154,615
========
</TABLE>
For the period ended from February 11, 1997, through February 28, 1997, no
interest or income tax payments were made.
NOTE 15: SUBSEQUENT EVENT
On March 24, 1997, the Company issued $100,000 of 11% Senior Subordinated
notes due 2007 (the "Notes"). Interest on the Notes will be payable
semi-annually on March 15 and September 15 of each year, commencing on September
15, 1997. The Notes will mature on March 15, 2007. The proceeds from the
Offering were used by the Company to repay all amounts outstanding under the
Bridge Loan Facility and $17,000 of indebtedness outstanding under the Term Loan
Facility. The balance of such proceeds was used for working capital and general
corporate purposes.
The Notes will be redeemable, at the Company's option, in whole or in part
and from time to time on and after March 15, 2002 and prior to maturity, at the
following redemption prices (expressed as a percentage of principal amount),
plus accrued interest, if any, to the redemption date, if redeemed during the
12-month period commencing on March 15 of the years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
------------------------------------------------------------- ----------------
<S> <C>
2002......................................................... 105.500%
2003......................................................... 103.667%
2004......................................................... 101.833%
2005 and thereafter.......................................... 100.000%
</TABLE>
In addition, at any time and from time-to-time prior to March 15, 2000, the
Company may redeem, in the aggregate, up to 33 1/3% of the original aggregate
principal amount of the Notes with the proceeds of one or more Public Equity
Offerings by the Company following which there is a public market, at a
redemption price (expressed as a percentage of principal amount thereof) of 111%
plus accrued interest, if any, to the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided however, that at least 66 2/3% of the
original aggregate principal amount of the Notes must remain outstanding
immediately after each such redemption.
The Notes will not be subject to any sinking fund requirement. The Notes
will be unsecured and will be subordinated to all existing and future senior
indebtedness (as defined) of the Company and will be effectively subordinated to
all obligations of the subsidiaries of the Company. The Notes will rank pari
passu with any future senior subordinated indebtedness (as defined) of the
Company and will rank senior to all other subordinated indebtedness (as defined)
of the Company.
F-19
<PAGE> 130
EV INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Notes will be unconditionally guaranteed on an unsecured, senior
subordinated basis by each subsidiary of the Company (other than foreign
subsidiaries and unrestricted subsidiaries, as defined) that is a significant
subsidiary (as defined) created or acquired after the date the Notes are issued.
The Notes have been designated for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market.
F-20
<PAGE> 131
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To EV International, Inc.:
We have audited the accompanying consolidated statements of income and
retained earnings and cash flows of EV International, Inc. (a Delaware
corporation) for the period from March 1, 1996 through February 10, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of EV
International, Inc. for the period from March 1, 1996 through February 10, 1997,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
May 9, 1997
F-21
<PAGE> 132
REPORT OF INDEPENDENT ACCOUNTANTS
To the Management of
EV International, Inc.
We have audited the accompanying consolidated balance sheet of EV
International, Inc. (the "Company") as of the last day of February 1996 and the
related consolidated statements of income and retained earnings, and cash flows
for each of the two years in the period ended February 28, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company as
of the last day of February 1996 and the consolidated results of their
operations and their cash flows for each of the two years in the period ended
February 29, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Rochester, New York
August 7, 1996
(February 10, 1997 as to effects
of the reorganization discussed
in Note 1)
F-22
<PAGE> 133
EV INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
LAST DAY OF FEBRUARY 1996
(000'S OMITTED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Accounts receivable, net........................................................ $ 38,300
Inventories..................................................................... 54,400
Current deferred tax assets..................................................... 1,100
Other current assets............................................................ 3,500
--------
Total current assets......................................................... 97,300
Property, Plant And Equipment, net................................................ 32,800
Cost In Excess Of Net Assets Acquired............................................. 33,900
Other Noncurrent Assets........................................................... 900
--------
TOTAL ASSETS............................................................ $164,900
========
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable................................................................ $ 13,400
Compensation-related liabilities................................................ 5,100
Income taxes payable............................................................ 1,100
Other current liabilities....................................................... 4,400
--------
Total current liabilities.................................................... 24,000
Deferred Taxes And Other Noncurrent Liabilities................................... 7,900
Retained Earnings and Common Stock, $1.00 par value............................... 133,000
--------
TOTAL LIABILITIES AND EQUITY............................................ $164,900
========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-23
<PAGE> 134
EV INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE YEARS ENDED
FROM MARCH 1, THE LAST DAY OF
1996 THROUGH FEBRUARY
FEBRUARY 10, ---------------------
1997 1996 1995
-------------- -------- --------
<S> <C> <C> <C>
Net Sales................................................ $177,100 $195,500 $185,300
Operating Costs:
Cost of products sold.................................. 121,400 134,500 125,300
Selling and administration............................. 28,400 30,000 29,400
Research and development............................... 7,700 8,200 6,300
Depreciation and amortization.......................... 5,100 5,100 4,800
-------- -------- --------
Total operating costs............................... 162,600 177,800 165,800
-------- -------- --------
Operating income......................................... 14,500 17,700 19,500
Gain On Sale Of Assets................................... -- 400 --
-------- -------- --------
Income before taxes.................................... 14,500 18,100 19,500
Provision For Income Taxes............................... 6,200 7,100 7,500
Net income............................................. 8,300 11,000 12,000
Retained Earnings, at the beginning of the year.......... 133,000 118,700 110,500
Cash transfers (to) from Parent, net and adjustments
resulting from the acquisition (see Note 1)......... (2,000) 3,300 (3,800)
-------- -------- --------
Retained Earnings, at the end of the period.............. $139,300 $133,000 $118,700
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE> 135
EV INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE YEARS ENDED
FROM MARCH 1, THE LAST DAY OF
1996 THROUGH FEBRUARY
FEBRUARY 10, -------------------
1997 1996 1995
--------------- ------- -------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income.............................................. $ 8,300 $11,000 $12,000
Items not affecting cash:
Depreciation and amortization........................ 5,100 5,100 4,800
Deferred income tax (benefit)........................ 700 (300) (600)
Changes in assets and liabilities.......................
Accounts receivable.................................. (500) (5,100) (5,900)
Inventories.......................................... (2,100) (8,500) (4,800)
Other assets......................................... (2,500) (100) (1,400)
Accounts payable..................................... (800) 300 2,800
Other liabilities.................................... (2,900) (2,000) 1,500
-------- ------- --------
Net cash provided by operating activities....... 5,300 400 8,400
-------- ------- --------
Cash Flows From Investing Activities to purchase
equipment............................................ (3,300) (3,700) (4,600)
-------- ------- --------
Net cash transferred (to) from Parent and adjustments
resulting from the acquisition (see Note 1)........ $(2,000) $ 3,300 $(3,800)
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE> 136
EV INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000'S OMITTED)
1. BACKGROUND INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Prior to the date of their disposition on February 10, 1997, Mark IV
Industries, Inc. ("Mark IV") was the owner of a number of operating divisions
and subsidiaries which made up its professional audio business, referred to as
the Mark IV Audio Group (the "Group"). Effective February 10, 1997, Mark IV
completed a reorganization of the Group in which certain assets and liabilities
not relating to the business of the Group were transferred out of the parent
company of the Group, Gulton Industries, Inc. ("Gulton"). On the same date, (i)
all the issued and outstanding stock of Gulton was then sold to an indirect
acquisition subsidiary of Greenwich Street Capital Partners, L.P. ("Sub"), (ii)
Sub merged with and into Gulton, with Gulton surviving, (iii) Gulton merged with
and into Electro-Voice, Incorporated ("EV"), Mark IV Audio, Inc., Mark IV Audio
Magnetic, Inc. and LFE Corporation, with EV surviving, and (iv) EV changed its
name to EV International, Inc. (the "Company"). The accompanying financial
statements have been restated to reflect the foregoing steps and include the
accounts of Gulton. All references to the Company relate to the business of the
Mark IV Audio Group, and exclude any activities which may have been a part of
the Company during the reporting periods, but which were transferred out as part
of the foregoing steps. There were no adjustments to the net assets or net
income of the Group as a result of this reorganization. The operating
subsidiaries and divisions of the Company are as follows:
<TABLE>
<S> <C>
Audio Consultants Co., Limited Mark IV Audio (Europe) AG
Altec Lansing International Mark IV Audio (Aust.) Pty Ltd.
Cetec International Limited Mark IV Audio Canada, Inc.
Dearden Davies Associates Limited Mark IV Audio France S.A.
Dynacord France Mark IV Audio Hong Kong Limited
Dynacord Audio GmbH Mark IV Audio Japan Ltd.
Klark-Teknik PLC Nivenfield (1992) Limited
Rebis Audio Limited
</TABLE>
Mark IV Audio Japan had a certain minority ownership interest as of
February 29, 1996. As part of the reorganization described above, the minority
interest was acquired by Mark IV, and Mark IV Audio Japan became a 100%-owned
subsidiary.
The financial statements reflect all of the operations making up the
Company and no recognition has been made to reflect the minority interests that
existed as of the various financial statement dates. All significant intergroup
transactions have been eliminated. These consolidated financial statements have
been prepared in conformity with generally accepted accounting principles, which
require management to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of such financial statements,
and the reported amounts of revenues and expenses during the reporting periods.
It should be recognized that the actual results could differ from those
estimates. The Company's significant accounting policies are as follows:
Inventories
Inventories are stated at the lower of cost or market, with cost determined
on the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment are presented at cost, net of accumulated
depreciation. The cost of property, plant and equipment retired or otherwise
disposed of, and the accumulated depreciation thereon, are eliminated from the
asset and related accumulated depreciation accounts, and any resulting gain or
loss is
F-26
<PAGE> 137
EV INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reflected in income. The Company provides for depreciation of plant and
equipment primarily on the straight-line method to amortize the cost of such
plant and equipment over their useful lives.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired ("goodwill") is presented net of
accumulated amortization. Management continually evaluates the existence of
goodwill impairment on the basis of whether the goodwill is fully recoverable
from projected, undiscounted net cash flows of the business. Goodwill is
amortized on the straight-line method over a 40-year period.
Income Taxes
Mark IV adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"), in fiscal 1994. The adoption of
this standard retroactively changed Mark IV's method of accounting for income
taxes from the deferred method to the liability method. The Company's provisions
for income taxes have been calculated on the separate return basis.
Postretirement Benefits
Mark IV adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" ("SFAS
No. 106"), effective as of February 28, 1993. SFAS No. 106 required the
estimated present value of the Company's liability for its commitments to
provide health and life insurance benefits to its retirees to be included in the
balance sheet. The related expense is required to be recognized on the accrual
method over the remaining years of the employees' active service, up to the
dates of the individual's eligibility to retire and begin receiving the benefit.
Research and Development Costs
Research and development costs are expensed as incurred and amounted to
approximately $8,200 and $6,300 in the fiscal years 1996 and 1995, respectively
and $7,700 for the period from March 1, 1996 through February 10, 1997.
Foreign Currency
The assets and liabilities of the Company's foreign operations are
translated at year-end exchange rates, and resulting gains and losses are
included as a part of net equity. Realized foreign currency transactions
recognized at the Company level have been eliminated from the accompanying
consolidated statements of income, since such transactions are in integral part
of Mark IV's consolidated currency exposure, including operations other than
those of the Company.
Cash
All cash balances are transferred to Mark IV as they arise.
2. ACCOUNTS RECEIVABLE
Accounts receivable are presented net of allowances for doubtful accounts
of approximately $1,900 as of the last day of February 1996.
F-27
<PAGE> 138
EV INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INVENTORIES
Inventories consist of the following as of the last day of February 1996:
<TABLE>
<CAPTION>
1996
-------
<S> <C>
Purchased materials and parts.............................................. $22,200
Work in process............................................................ 7,800
Finished goods............................................................. 24,400
-------
Net inventories.......................................................... $54,400
=======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and consist of the
following as of the last day of February 1996:
<TABLE>
<CAPTION>
1996
-------
<S> <C>
Land and improvements...................................................... $ 4,800
Buildings and improvements................................................. 20,200
Machinery and equipment.................................................... 32,900
-------
Total property, plant and equipment.............................. 57,900
Less Accumulated depreciation............................................ 25,100
-------
Property, plant and equipment, net............................... $32,800
=======
</TABLE>
Depreciation expense was approximately $4,100 and $3,800 in fiscal 1996 and
1995, respectively, and $4,200 for the period from March 1, 1996 through
February 10, 1997.
5. COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired is presented net of accumulated
amortization of approximately $6,600 as of the last day of February 1996.
Amortization expense was approximately $1,000 in each of fiscal 1996 and 1995,
and $900 for the period from March 1, 1996 through February 10, 1997.
F-28
<PAGE> 139
EV INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES
Income before taxes and the related provision for income taxes for fiscal
1996 and 1995, and for the period from March 1, 1996 through February 10, 1997,
consist of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Income before taxes:
United States....................................... $10,700 $10,600 $11,900
Foreign............................................. 3,800 7,500 7,600
------- ------- -------
Total income before taxes................... $14,500 $18,100 $19,500
======= ======= =======
Provision for income taxes:
Currently payable --
United States.................................... $ 4,700 $ 5,300 $ 5,800
Foreign.......................................... 800 2,100 2,300
------- ------- -------
Total currently payable..................... 5,500 7,400 8,100
------- ------- -------
Deferred --
United States.................................... 200 (600) (600)
Foreign.......................................... 500 300 --
------- ------- -------
Total deferred income tax (benefit)......... 700 (300) (600)
------- ------- -------
Total provision for income taxes............ $ 6,200 $ 7,100 $ 7,500
======= ======= =======
</TABLE>
The provision for income taxes for fiscal years 1996 and 1995 and for the
period from March 1, 1996 through February 10, 1997, differs from the amount
computed using the U.S. statutory income tax rate as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Expected tax at U.S. statutory income tax rate........ $ 5,100 $ 6,300 $ 6,800
Permanent differences................................. 600 200 200
State and local income taxes.......................... 600 400 400
Foreign tax rate differences.......................... (100) 200 100
------ ------ ------
Total provision for income taxes...................... $ 6,200 $ 7,100 $ 7,500
====== ====== ======
</TABLE>
F-29
<PAGE> 140
EV INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences which give rise to deferred tax
assets (liabilities) consist of the following at the last day of February 1996:
<TABLE>
<CAPTION>
1996
-------
<S> <C>
Current:
Accounts receivable...................................................... $ 200
Inventories.............................................................. (800)
Compensation related..................................................... 600
Other items.............................................................. 1,100
-------
Net current deferred tax assets.................................. $ 1,100
=======
Noncurrent:
Fixed and intangible assets.............................................. $(6,600)
Postretirement health benefit
Retirees.............................................................. 300
Active................................................................ 100
Other items.............................................................. 500
-------
Net noncurrent deferred tax liabilities.......................... $(5,700)
=======
</TABLE>
For purposes of these financial statements, the undistributed earnings of
Gulton's foreign subsidiaries were considered to have been reinvested in each
country, and were not expected to be remitted back to Mark IV.
7. PENSION AND RETIREMENT SAVINGS PLANS
Prior to the consummation of the steps set forth in Note 1, the Company's
U.S. employees participated in one of a number of defined-benefit pension plans
which were funded and administered by Mark IV. Such plans provide retirement
benefits based upon the employees' age, earnings and years of service, or were
based upon years of service multiplied by stated monthly benefit amounts. The
Company recognized an expense for the estimated service cost of such plans of
approximately $400 in each of fiscal 1996 and 1995, and approximately $350 for
the period from March 1, 1996 through February 10, 1997. The plans are a part of
Mark IV's Master Defined Benefit Plan, and the funded position and
responsibility for benefit payments were managed by Mark IV.
Certain of the Company's U.S. employees also participated in defined
contribution plans which were also funded and administered by Mark IV. The
Company recognized an expense of approximately $200 for these plans in each of
fiscal 1996 and 1995, and approximately $170 for the period from March 1, 1996
through February 10, 1997.
The Company's Japanese subsidiary also had a retirement and termination
plan (the "Retirement Plan") which provided benefits to employees in Japan upon
their termination of employment. The benefits were based upon a multiple of the
employee's monthly salary, with the multiple determined based upon the
employee's years of service. The multiple paid to employees who retired or are
involuntarily terminated is greater than the multiple paid to those who
voluntarily terminate their services. The Retirement Plan is unfunded, and the
accompanying consolidated balance sheet includes a liability of approximately
$910 at the last day of February 1996, which represents the actuarially
determined estimated present value of the Company's liability as of those dates.
The Company recognized an expense of approximately $100 for these plans in each
of fiscal 1996 and 1995, and approximately $100 for the period from March 1,
1996 through February 10, 1997.
F-30
<PAGE> 141
EV INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. POSTRETIREMENT BENEFITS
The Company provided health and life insurance benefits to a number of
existing retirees from its U.S. operations. Contributions required to be paid by
the retirees towards the cost of such plans are a flat dollar amount per month
in certain instances, or a range from 25% to 100% in other instances. The
Company also had a number of active employees who will receive such benefits
upon their retirement.
The following table sets forth the liability for the cost of these benefits
included in the consolidated balance sheet as of the last day of February 1996:
<TABLE>
<CAPTION>
1996
------
<S> <C>
Accumulated postretirement benefit obligation:
Retirees and beneficiaries receiving benefits............................. $1,500
Active employees, fully eligible for benefits............................. 100
Active employees, not fully eligible for benefits......................... 100
------
Total accumulated benefit obligation.............................. 1,700
Unrecognized net loss....................................................... (500)
------
Postretirement benefit liability recognized in the combined
balance sheet.................................................... $1,200
======
</TABLE>
The Company's postretirement benefit expense on the accrual method for
fiscal 1996 and 1995, and for the period from March 1 through February 10, 1997
includes the following components:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits earned during the period................ $ 5 $ 10 $ 10
Interest cost on the APBO..................................... 15 130 100
--- ---- ----
Total expense....................................... $20 $140 $110
=== ==== ====
</TABLE>
The postretirement liability recognized in the consolidated balance sheet
as of February 29, 1996 includes approximately $1,000 related to existing
retirees, and $200 related to active employees of the Company as of that date.
Of the total expense recognized by the Company, approximately $20 relates to the
benefits earned by the active employees in each of the fiscal years presented,
with the balance related to the existing retirees of the Company. In connection
with the disposition of the Company discussed in Note 1, Mark IV retained the
obligation for retirees and beneficiaries currently receiving benefits.
There was an increase in the unrecognized net loss during fiscal 1996 as a
result of the settlement of certain litigation actions between the Company and
certain retirees. The settlement resulted in the mutual agreement to
prospectively reduce amounts previously required to be contributed by such
retirees to the cost of their benefits. The APBO was calculated using a discount
rate of 7.50% at February 29, 1996. The rate used in the prior year was 8.75%.
The change in the discount rate did not have a significant effect on the expense
determination for fiscal 1996 and 1995. The APBO determinations assume an
initial health care cost trend rate of approximately 8.0%, trending down ratably
to an ultimate rate of 4.5%. A one-percentage-point increase in such trend rate
would not have a significant effect on the Company's obligations or annual
expense.
9. LEGAL AND ENVIRONMENTAL MATTERS
The Company has historically been involved in various legal and
environmental matters. In the opinion of management, the ultimate cost to
resolve these matters will not have a material adverse effect on the Company's
financial position, results of operations or cash flows.
The Company's manufacturing facility in Michigan is adjacent to land which
has been designated as a Superfund site by the U.S. Environmental Protection
Agency ("EPA"). The Company has been identified by
F-31
<PAGE> 142
EV INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the EPA as the sole Potentially Responsible Person at this site. The remediation
required by the EPA has been substantially completed as of February 29, 1996,
and remains the financial responsibility of Mark IV. Therefore, the accompanying
consolidated financial statements do not reflect any of the associated cleanup
costs expended to date, or remaining to be expended as of February 29, 1996.
10. FOREIGN OPERATIONS
The Company's foreign operations are located in Europe and the Far East.
Information concerning the Company's operations by geographic area for fiscal
1996 and 1995, and for the period from March 1, 1996 through February 10, 1997
is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net sales to customers:
United States.................................... $ 80,800 $ 88,200 $ 91,000
Foreign.......................................... 96,300 107,300 94,300
-------- -------- --------
Total net sales to customers............. $ 177,100 $ 195,500 $ 185,300
======== ======== ========
Operating income:
United States.................................... $ 10,700 $ 10,600 $ 11,900
Foreign.......................................... 3,800 7,100 7,600
-------- -------- --------
Total operating income................... $ 14,500 $ 17,700 $ 19,500
======== ======== ========
Identifiable assets:
United States.................................... $ 77,200 $ 71,600
Foreign.......................................... 87,700 81,000
-------- --------
Total identifiable assets................ $ 164,900 $ 152,600
======== ========
</TABLE>
The net sales to customers reflect the sales of the Company's operating
units in each geographic area to unaffiliated customers. Export sales from the
United States to unaffiliated customers were approximately $8,100 and $13,200 in
fiscal 1996 and 1995, respectively, and approximately $8,160 for the period from
March 1, 1996 through February 10, 1997.
11. RELATED PARTY TRANSACTIONS
Through February 10,1997, Mark IV provided and coordinated treasury, tax,
audit, legal, medical and risk insurance, and benefits administration services
to the various operating units of the Company. Insurance, legal, audit and
direct employee benefits related costs have been allocated directly to the
Company. An allocation of Mark IV's costs for tax, treasury and other
administrative work performed has not been made as Mark IV management did not
believe such costs to be significant. All intercompany accounts with Mark IV and
its affiliates other than the Company and its subsidiaries have been included as
a part of net equity.
Certain bank indebtedness existed in certain of the Company's foreign
subsidiaries. The amount of such indebtedness was controlled by Mark IV and is
based on Mark IV's financing plans on a consolidated country-by-country basis.
As a result, the accompanying consolidated financial statements exclude all such
indebtedness and related interest expense for the periods presented.
Mark IV also provided letters of credit for the Company's operating needs.
The Company had an informal lease arrangement with Mark IV for a facility
which it uses for its cabinet assembly requirements. The Company recognized an
expense for this lease of approximately $234,000 and $205,000 in fiscal 1996 and
1995, respectively, and approximately $450 for the period from March 1, 1996
through February 10, 1997.
F-32
<PAGE> 143
[This Page Intentionally Left Blank.]
<PAGE> 144
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE
ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OF
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THIS
PROSPECTUS FOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER,
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................... 4
Prospectus Summary......................... 5
Risk Factors............................... 16
Use of Proceeds............................ 21
Capitalization............................. 22
Unaudited Pro Forma Financial
Information.............................. 23
Selected Historical and Pro Forma Financial
Information.............................. 29
Management's Discussion and Analysis of
Financial Condition And Results of
Operations............................... 32
Business................................... 37
Management................................. 51
Ownership of Capital Stock................. 55
Description of Capital Stock............... 56
The Acquisition............................ 56
The Sponsor................................ 57
Related Transactions....................... 57
Relationships with Mark IV................. 57
Description of Credit Facilities........... 59
The Exchange Offer......................... 62
Description of Notes....................... 67
Certain Federal Income Tax
Considerations........................... 101
Book-entry; Delivery and Form.............. 105
Plan of Distribution....................... 107
Legal Matters.............................. 108
Independent Public Accountants............. 108
</TABLE>
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW
NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
EV INTERNATIONAL, INC.
OFFER TO EXCHANGE
11% SENIOR SUBORDINATED NOTES
DUE 2007, SERIES A, WHICH HAVE
BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933,
AS AMENDED, FOR ANY AND ALL
OUTSTANDING 11% SENIOR
SUBORDINATED NOTES DUE 2007.
--------------------
PROSPECTUS
--------------------
, 1997
======================================================
<PAGE> 145
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware Corporation Law, as amended, provides in
regards to indemnification of directors and officers as follows:
"145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE. -- (a) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2)
if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending a civil
or criminal action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or
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<PAGE> 146
proceeding upon receipt of an undertaking by or on behalf of such director
or officer to repay such amount if it shall ultimately be determined that
he is not entitled to be indemnified by the corporation as authorized in
this section. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any,
as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person."
Article VI of the Company's By-Laws provides in regard to indemnification
of directors and officers as follows:
Section 6.01. Nature of Indemnity. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (a "Proceeding"),
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was or has agreed to become a director or officer of the
Corporation, or is or was serving or has agreed to serve at the request of the
Corporation as a director or officer, of another corporation, partnership, joint
venture, trust or other enterprise, or by reason of any action alleged to have
been taken or omitted in such capacity, and may indemnify any person who was or
is a party or is threatened to be made a party to such an action, suit or
proceeding by reason of the fact that he or she is or was or has agreed to
become an employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as an employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including
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<PAGE> 147
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her or on his or her behalf in connection with
such action, suit or proceeding and any appeal therefrom, if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with respect to any criminal
action or proceeding had no reasonable cause to believe his or her conduct was
unlawful; except that in the case of an action or suit by or in the right of the
Corporation to procure a judgment in its favor (1) such indemnification shall be
limited to expenses (including attorneys' fees) actually and reasonably incurred
by such person in the defense or settlement of such action or suit, and (2) no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 6.02. Successful Defense. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
6.01 of these By-Laws or in defense of any claim, issue or matter therein, he or
she shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith.
Section 6.03. Determination That Indemnification Is Proper. Any
indemnification of a director or officer of the Corporation under Section 6.01
of these By-Laws (unless ordered by a court) shall be made by the Corporation
unless a determination is made that indemnification of the director or officer
is not proper in the circumstances because he or she has not met the applicable
standard of conduct set forth in Section 6.01 of these By-Laws. Any
indemnification of an employee or agent of the Corporation under Section 6.01 of
these By-Laws (unless ordered by a court) may be made by the Corporation upon a
determination that indemnification of the employee or agent is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in Section 6.01 of these By-Laws. Any such determination shall be made (1)
by a majority vote of the Directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (3) by the stockholders.
Section 6.04 Advance Payment of Expenses. Expenses (including attorneys'
fees) incurred by a director or officer in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation as authorized in this
Article. Such expenses (including attorneys' fees) incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as the Board
of Directors deems appropriate. The Board of Directors may authorize the
Corporation's counsel to represent such director, officer, employee or agent in
any action, suit or proceeding, whether or not the Corporation is a party to
such action, suit or proceeding.
Section 6.05. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the Corporation under Sections 6.01
and 6.02 of these By-Laws, or advance of costs, charges and expenses to a
director or officer under Section 6.04 of these By-Laws, shall be made promptly,
and in any event within thirty days, upon the written request of the director or
officer. If a determination by the Corporation that the director or officer is
entitled to indemnification pursuant to this Article is required, and the
Corporation fails to respond within sixty days to a written request for
indemnity, the Corporation shall be deemed to have approved such request. If the
Corporation denies a written request for indemnity or
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<PAGE> 148
advancement of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within thirty days, the right to indemnification or
advances as granted by this Article shall be enforceable by the director or
officer in any court of competent jurisdiction. Such person's costs and expenses
incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for the advance of costs, charges and
expenses under Section 6.04 of these By-Laws where the required undertaking, if
any, has been received by or tendered to the Corporation) that the claimant has
not met the standard of conduct set forth in Section 6.01 of these By-Laws, but
the burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors, its independent
legal counsel, and its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he has met the applicable standard of conduct set
forth in Section 6.01 of these By-Laws, nor the fact that there has been an
actual determination by the Corporation (including its Board of Directors, its
independent legal counsel, and its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
Section 6.06. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing with
respect to any state of facts then or previously existing or any action, suit or
proceeding previously or thereafter brought or threatened based in whole or in
part upon any such state of facts. Such a "contract right" may not be modified
retroactively without the consent of such director, officer, employee or agent.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Section 6.07. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him or her and incurred by him or her or on his or her behalf in any such
capacity, or arising out of his or her status as such, whether or not the
Corporation would have the power to indemnify him or her against such liability
under the provisions of this Article, provided that such insurance is available
on acceptable terms, which determination shall be made by a vote of a majority
of the entire Board of Directors.
Section 6.08. Severability. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.
Section 102(b)(7) of the Delaware General Corporation Law, as amended,
provides in regard to the limitation of liability of directors and
officers as follows:
(b) In addition to the matters required to be set forth in the certificate
of incorporation by subsection (a) of this section, the certificate of
incorporation may also contain any or all of the following matters:
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<PAGE> 149
* * * *
(7) A provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director: (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under section 174 of this Title; or (iv) for any
transaction from which the director derived an improper personal benefit. No
such provision shall eliminate or limit the liability of a director for any act
or omission occurring prior to the date when such provision becomes effective.
All references in this Paragraph to a director shall also be deemed to refer (x)
to a member of the governing body of a corporation which is not authorized to
issue capital stock, and (y) to such other person or persons, if any, who,
pursuant to a provision of the certificate of incorporation in accordance with
sec.141(a) of this title, exercise or perform any of the powers or duties
otherwise conferred or imposed upon the board of directors by this title.
Paragraph (e) of Article Fifth of the Restated Certificate of Incorporation
of the Company, as amended, provides as follows:
"(e) No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of his or her fiduciary duty as
a director, provided that nothing contained in this Article shall eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
the law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware or (iv) for any transaction from which the director derived an improper
personal benefit. Notwithstanding anything contained in this Certificate to the
contrary, any alteration, amendment or repeal of, or adoption of any provision
inconsistent with, this Article FIFTH shall not adversely affect any rights or
protection of a director of the Corporation existing hereunder in respect of any
act or omission occurring prior to such alteration, amendment, repeal or
adoption."
As permitted by Section 145 of the General Corporation Law of the State of
Delaware, as amended, the Company has purchased and maintains insurance
providing for reimbursement to elected directors and officers, subject to
certain exceptions, of amounts they may be legally obligated to pay, including
but not limited to damages, judgments, settlements, costs and attorneys' fees
(but not including fines, penalties or matters not insurable under the law), as
a result of claims and legal actions instituted against them to recover for
their acts while serving as directors or officers.
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<PAGE> 150
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ ----------------------------------------------------------------------------
<C> <S> <C>
*2(a) -- Purchase Agreement, dated December 12, 1996, among Gulton Acquisition Corp.,
Mark IV Industries, Inc., and Mark IV PLC, and Gulton Industries, Inc.
*3(a) -- Amended and Restated Certificate of Incorporation of Electro-Voice,
Incorporated, dated February 6, 1997.
*3(b) -- By-laws of Gulton Acquisition Corp., dated December 4, 1996.
*4(a) -- Indenture, dated March 24, 1997, between the Company and The Bank of New
York, as Trustee.
*4(b) -- Purchase Agreement, dated March 19, 1997, among EV International, Inc. (the
"Company") and Chase Securities Inc. and Smith Barney Inc. (together, the
"Initial Purchasers").
*4(c) -- Exchange and Registration Rights Agreement, dated March 24, 1997, between
the Company and the Initial Purchasers.
*4(d) -- Credit Agreement, dated February 10, 1997, among the Gulton Acquisition
Corp., the lenders named on the signature pages thereof (the "Senior
Lenders") and The Chase Manhattan Bank, a New York banking corporation
("Chase"), as administrative agent for such Senior Lenders (the
"Administrative Agent").
*4(e) -- Guarantee and Collateral Agreement, dated February 10, 1997, made by EVI
Audio Holding, Inc. and the Company in favor of the Administrative Agent for
the benefit of the Senior Lenders and certain other secured parties.
*4(f) -- Patent and Trademark Security Agreement, dated February 10, 1997, made by
the Company in favor of the Administrative Agent for the benefit of the
lenders under the Credit Agreement.
**5 -- Opinion of Debevoise & Plimpton regarding the legality of the New Notes
being registered.
*10(a) -- Consulting Agreement, dated February 6, 1997, among EVI Audio Holding, Inc.,
the Company, and Greenwich Street Capital Partners, Inc.
*10(b) -- Employment Agreement, dated December 11, 1996, between Gulton Acquisition
Corp. and Robert Pabst.
*10(c) -- Employment Agreement, dated December 11, 1996, between Gulton Acquisition
Corp. and Paul McGuire.
*10(d) -- Employment Agreement, dated December 11, 1996, between Gulton Acquisition
Corp. and John Bolstetter.
*10(e) -- Tradename and Trademark License Agreement, dated February 10, 1997, between
Gulton Industries, Inc. and Mark IV Industries, Inc.
*10(f) -- Transition Services Agreement, dated February 10, 1997, between Gulton
Industries, Inc. and Mark IV Industries, Inc.
*10(g) -- Software License Agreement, dated February 10, 1997, between Gulton
Industries, Inc. and Mark IV Industries, Inc.
*10(h) -- Collective Bargaining Agreement, dated May 15, 1995, between Electro-Voice,
Inc. and the International Union of Electronic, Electrical, Salaried,
Machine and Furniture Workers, AFL-CIO, and its Local 662, relating to the
Company's manufacturing facility in Newport, Tennessee.
*10(i) -- Collective Bargaining Agreement, dated June 1, 1992, between Electro-Voice,
Inc. and the International Union of Electronic, Electrical, Technical,
Salaried and Machine and Furniture Workers, AFL-CIO, and its Local 663,
relating to the Company's manufacturing facility in Sevierville, Tennessee.
</TABLE>
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<PAGE> 151
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ ----------------------------------------------------------------------------
<C> <S> <C>
*10(j) -- Collective Bargaining Agreement, dated March 18, 1993, between
Electro-Voice, Inc. and the International Union of Electronic, Electrical,
Technical, Salaried and Machine and Furniture Workers, AFL-CIO, and its
Local 900, relating to the Company's manufacturing facility in Buchanan,
Michigan.
*10(k) -- Collective Bargaining Agreement, dated June 20, 1994, between Altec Lansing
Corporation and the International Association of Machinists and Aerospace
Workers, AFL-CIO, and its Local Lodge No. 850, relating to the Company's
manufacturing facility in Oklahoma City, Oklahoma.
*10(l) -- Mortgage (or deed of trust), dated February 10, 1997, from EV International,
Inc., as Mortgagor, to the Administrative Agent, with respect to Sun Valley,
CA.
*10(m) -- Mortgage (or deed of trust), dated February 10, 1997, from EV International,
Inc., as Mortgagor, to the Administrative Agent, with respect to Sylmar, CA.
*10(n) -- Mortgage (or deed of trust), dated February 10, 1997, from EV International,
Inc., as Mortgagor, to the Administrative Agent, with respect to Buchanan,
MI (Cecil Street).
*10(o) -- Mortgage (or deed of trust), dated February 10, 1997, from EV International,
Inc., as Mortgagor, to the Administrative Agent, with respect to Buchanan,
MI (Front Street).
*10(p) -- Mortgage (or deed of trust), dated February 10, 1997, from EV International,
Inc., as Mortgagor, to the Administrative Agent, with respect to Oklahoma
City, OK.
*10(q) -- Mortgage (or deed of trust), dated February 10, 1997, from EV International,
Inc., as Mortgagor, to the Administrative Agent, with respect to Newport,
TN.
*10(r) -- Mortgage (or deed of trust), dated February 10, 1997, from EV International,
Inc., as Mortgagor, to the Administrative Agent, with respect to
Sevierville, TN.
*12 -- Computation of Ratio of Earnings to Fixed Charges.
*21 -- List of Subsidiaries of the Registrant.
*23(a) -- Consent of Coopers & Lybrand L.L.P.
*23(b) -- Consent of Arthur Andersen LLP.
*23(c) -- Consent of Appraisal Economic Inc.
**23(d) -- Consent of Debevoise & Plimpton (included in Opinion filed as Exhibit 5).
*24 -- Powers of Attorney (included on signature pages to this Registration
Statement on Form S-4).
*25 -- Statement of Eligibility and Qualification Under the Trust Indenture Act of
1939 (Form T-1) of The Bank of New York.
*99.1 -- Form of Letter of Transmittal.
*99.2 -- Form of Notice of Guaranteed Delivery.
*99.3 -- Form of Exchange Agreement between the Company and the Exchange Agent.
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES.
Financial statement schedules of the Company for which provision is made in
the applicable accounting regulations of the Commission are not required, are
inapplicable or have been disclosed in the notes to the financial statements and
therefore have been omitted.
ITEM 22. UNDERTAKINGS.
The Registrant hereby undertakes
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) to
include any prospectus required by section 10(a)(3) of the Securities Act
of 1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the
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<PAGE> 152
registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(5) That every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415 will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offering therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling
persons of the Registrants pursuant to the foregoing provisions or
otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrants of expenses incurred or paid by
a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrants will, unless in the opinion of their
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
(7) To respond to requests for information that is incorporated by
reference into the Prospectus pursuant to Items 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first-class mail or equally prompt means. This
includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-8
<PAGE> 153
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, EV
international, Inc. has caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Buchanan, State of Michigan, on the th day of May, 1997.
EV INTERNATIONAL, INC.
By /s/ PAUL A. MCGUIRE
------------------------------------
Paul A. McGuire
Acting Co-Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul A. McGuire. Roger H. Gaines and Nicholas E.
Somers, and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead in any and all capacities, to sign any or all amendments to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises. as fully and to all intents and purposes
as he might or could do in persons hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of this Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
PRINCIPAL EXECUTIVE OFFICER:
<TABLE>
<S> <C> <C>
/s/ PAUL A. MCGUIRE Acting Co-Chief Executive Officer May 15, 1997
- -------------------------------------
Paul A. McGuire
/s/ ROGER H. GAINES Acting Co-Chief Executive Officer May 15, 1997
- -------------------------------------
Roger H. Gaines
PRINCIPAL ACCOUNTING OFFICER:
/s/ MARCIA CHAPMAN May 15, 1997
- -------------------------------------
Marcia Chapman
</TABLE>
II-9
<PAGE> 154
<TABLE>
<S> <C> <C>
DIRECTORS:
/s/ NICHOLAS E. SOMERS
- ------------------------------------- Director and Chairman of the Board May 15, 1997
Nicholas E. Somers
/s/ ALFRED C. ECKERT III
- ------------------------------------- Director May 15, 1997
Alfred C. Eckert III
/s/ EDGAR S. WOOLARD, JR.
- ------------------------------------- Director May 15, 1997
Edgar S. Woolard, Jr.
*By: May , 1997
- -------------------------------------
Attorney-in-Fact
</TABLE>
II-10
<PAGE> 155
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE NO.
- ------ -------------------------------------------------------------------- --------
<C> <S> <C> <C>
*2(a) -- Purchase Agreement, dated December 12, 1996, among Gulton
Acquisition Corp., Mark IV Industries, Inc., and Mark IV PLC, and
Gulton Industries, Inc..............................................
*3(a) -- Amended and Restated Certificate of Incorporation of Electro-Voice,
Incorporated, dated February 10, 1997...............................
*3(b) -- By-laws of Gulton Acquisition Corp., dated December 4, 1996.........
*4(a) -- Indenture, dated March 24, 1997, between the Company and The Bank of
New York, as Trustee................................................
*4(b) -- Purchase Agreement, dated March 19, 1997, among EV International,
Inc. (the "Company") and Chase Securities Inc. and Smith Barney Inc.
(together, the "Initial Purchasers")................................
*4(c) -- Exchange and Registration Rights Agreement, dated March 24, 1997,
between the Company and the Initial Purchasers......................
*4(d) -- Credit Agreement, dated February 10, 1997, among the Gulton
Acquisition Corp., the lenders named on the signature pages thereof
(the "Senior Lenders") and The Chase Manhattan Bank, a New York
banking corporation ("Chase"), as administrative agent for such
Senior Lenders (the "Administrative Agent").........................
*4(e) -- Guarantee and Collateral Agreement, dated February 10, 1997, made by
EVI Audio Holding, Inc. and the Company in favor of the
Administrative Agent for the benefit of the Senior Lenders and
certain other secured parties.......................................
*4(f) -- Patent and Trademark Security Agreement, dated February 10, 1997,
made by the Company in favor of the Administrative Agent for the
benefit of the lenders under the Credit Agreement ..................
**5 -- Opinion of Debevoise & Plimpton regarding the legality of the New
Notes being registered..............................................
*10(a) -- Consulting Agreement, dated February 6, 1997, among EVI Audio
Holding, Inc., the Company, and Greenwich Street Capital Partners,
Inc.................................................................
*10(b) -- Employment Agreement, dated December 11, 1996, between Gulton
Acquisition Corp. and Robert Pabst..................................
*10(c) -- Employment Agreement, dated December 11, 1996, between Gulton
Acquisition Corp. and Paul McGuire..................................
*10(d) -- Employment Agreement, dated December 11, 1996, between Gulton
Acquisition Corp. and John Bolstetter...............................
*10(e) -- Tradename and Trademark License Agreement, dated February 10, 1997,
between Gulton Industries, Inc. and Mark IV Industries, Inc.........
*10(f) -- Transition Services Agreement, dated February 10, 1997, between
Gulton Industries, Inc. and Mark IV Industries, Inc.................
*10(g) -- Software License Agreement, dated February 10, 1997, between Gulton
Industries, Inc. and Mark IV Industries, Inc........................
*10(h) -- Collective Bargaining Agreement, dated May 15, 1995, between
Electro-Voice, Inc. and the International Union of Electronic,
Electrical, Salaried, Machine and Furniture Workers, AFL-CIO, and
its Local 662, relating to the Company's manufacturing facility in
Newport, Tennessee..................................................
*10(i) -- Collective Bargaining Agreement, dated June 1, 1992, between
Electro-Voice, Inc. and the International Union of Electronic,
Electrical, Technical, Salaried and Machine and Furniture Workers,
AFL-CIO, and its Local 663, relating to the Company's manufacturing
facility in Sevierville, Tennessee..................................
</TABLE>
<PAGE> 156
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE NO.
- ------ -------------------------------------------------------------------- --------
<C> <S> <C> <C>
*10(j) -- Collective Bargaining Agreement, dated March 18, 1993, between
Electro- Voice, Inc. and the International Union of Electronic,
Electrical, Technical, Salaried and Machine and Furniture Workers,
AFL-CIO, and its Local 900, relating to the Company's manufacturing
facility in Buchanan, Michigan......................................
*10(k) -- Collective Bargaining Agreement, dated June 20, 1994, between Altec
Lansing Corporation and the International Association of Machinists
and Aerospace Workers, AFL-CIO, and its Local Lodge No. 850,
relating to the Company's manufacturing facility in Oklahoma City,
Oklahoma............................................................
*10(l) -- Mortgage (or deed of trust), dated February 10, 1997, from EV
International, Inc., as Mortgagor, to the Administrative Agent, with
respect to Sun Valley, CA.
*10(m) -- Mortgage (or deed of trust), dated February 10, 1997, from EV
International, Inc., as Mortgagor, to the Administrative Agent, with
respect to Sylmar, CA.
*10(n) -- Mortgage (or deed of trust), dated February 10, 1997, from EV
International, Inc., as Mortgagor, to the Administrative Agent, with
respect to Buchanan, MI (Cecil Street).
*10(o) -- Mortgage (or deed of trust), dated February 10, 1997, from EV
International, Inc., as Mortgagor, to the Administrative Agent, with
respect to Buchanan, MI (Front Street).
*10(p) -- Mortgage (or deed of trust), dated February 10, 1997, from EV
International, Inc., as Mortgagor, to the Administrative Agent, with
respect to Oklahoma City, OK.
*10(q) -- Mortgage (or deed of trust), dated February 10, 1997, from EV
International, Inc., as Mortgagor, to the Administrative Agent, with
respect to Newport, TN.
*10(r) -- Mortgage (or deed of trust), dated February 10, 1997, from EV
International, Inc., as Mortgagor, to the Administrative Agent, with
respect to Sevierville, TN.
*12 -- Computation of Ratio of Earnings to Fixed Charges...................
*21 -- List of Subsidiaries of the Registrant..............................
*23(a) -- Consent of Coopers & Lybrand........................................
*23(b) -- Consent of Arthur Andersen & Company................................
*23(c) -- Consent of Appraisal Economic Inc.
**23(d) -- Consent of Debevoise & Plimpton (included in Opinion filed as
Exhibit 5).
*24 -- Powers of Attorney (included on signature pages to this Registration
Statement on Form S-4)..............................................
*25 -- Statement of Eligibility and Qualification Under the Trust Indenture
Act of 1939 (Form T-1) of The Bank of New York......................
*99.1 -- Form of Letter of Transmittal.......................................
*99.2 -- Form of Notice of Guaranteed Delivery...............................
*99.3 -- Form of Exchange Agreement between the Company and the Exchange
Agent...............................................................
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
<PAGE> 1
EXHIBIT 2(a)
EXECUTION COPY
================================================================================
PURCHASE AGREEMENT
dated as of December 12, 1996
by and among
Mark IV Industries, Inc.,
Gulton Industries, Inc.,
Mark IV PLC,
and
Gulton Acquisition Corp.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE 1. THE SALE.............................................. 4
1.1 The Sale.............................................. 4
ARTICLE 2. PURCHASE PRICE........................................ 4
2.1 Purchase Price........................................ 4
2.2 Payment of Purchase Price............................. 5
2.3 [Intentionally omitted]............................... 5
2.4 Definitions Relating to Purchase Price
Adjustments.......................................... 5
2.5 Calculation of Estimated Purchase Price............... 8
2.6 Pre-Closing Deliveries of Financial
Information.......................................... 9
2.7 Post-Closing Adjustment............................... 9
2.8 Calculation of the Audited Cash Flow,
Audited Working Capital and Final Net Cash
Intercompany Transfer Amount......................... 10
ARTICLE 3. CLOSING............................................... 15
3.1 Time and Place of Closing............................. 15
3.2 Deliveries by Mark IV and PLC......................... 15
3.3 Deliveries by the Buyer............................... 16
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF
MARK IV AND PLC...................................... 17
4.1 Organization of Mark IV............................... 17
4.2 Organization of the Audio Products Group
Companies............................................ 17
4.3 Authorization......................................... 17
4.4 Capitalization........................................ 18
4.5 Options or Other Rights............................... 19
4.6 Certificates of Incorporation and By-Laws............. 20
4.7 Binding Agreements.................................... 20
4.8 No Violation.......................................... 20
4.9 Financial Statements.................................. 21
i
<PAGE> 3
4.10 Absence of Certain Changes......................... 22
4.11 Assets............................................. 26
4.12 Real Property...................................... 26
4.13 Personal Property Leases........................... 29
4.14 Intangible Assets.................................. 29
4.15 Litigation......................................... 32
4.16 Banks and Brokers.................................. 32
4.17 Employee Benefit Plans............................. 33
4.18 Consents and Approvals............................. 38
4.19 Environmental Protection........................... 38
4.20 Insurance.......................................... 40
4.21 Contracts and Commitments.......................... 41
4.22 Tax Matters........................................ 43
4.23 Labor Relations.................................... 45
4.24 Customers and Suppliers............................ 46
4.25 Compliance with Law................................ 46
4.26 Brokers and Finders................................ 47
4.27 Product Warranties................................. 47
4.28 Potential Conflicts of Interest.................... 48
4.29 Inventories........................................ 48
4.30 Undisclosed Liabilities............................ 48
4.31 Disclosure......................................... 49
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE BUYER........ 49
5.1 Organization....................................... 49
5.2 Authorization by the Buyer......................... 49
5.3 Binding Agreements................................. 50
5.4 No Violation....................................... 50
5.5 Litigation......................................... 51
5.6 Consents and Approvals............................. 51
5.7 Financing.......................................... 51
5.8 Purchase for Investment............................ 52
5.9 Brokers and Finders................................ 52
ARTICLE 6. COVENANTS OF MARK IV AND PLC....................... 52
6.1 Access Pending the Closing Date.................... 52
6.2 Conduct of Business Prior to the Closing........... 53
6.3 Termination of Benefit Accruals Under
Defined Benefit Plans............................. 54
6.4 Financing.......................................... 56
ii
<PAGE> 4
6.5 Supplements to Schedules.......................... 56
6.6 No Solicitation................................... 56
6.7 Non-Competition................................... 57
6.8 Corporate Organization............................ 59
6.9 Insurance......................................... 60
6.10 Subsequent Financial Statements................... 61
6.11 Cash Balances..................................... 61
6.12 United Kingdom Trademarks......................... 62
ARTICLE 7. COVENANTS OF THE BUYER............................ 62
7.1 Obligation to Secure Financing.................... 62
7.2 Obligation to Continue Certain Employee
Benefits......................................... 63
7.3 Continuation of Welfare Plans..................... 64
7.4 Continuation of Certain Defined Benefit
Pension Benefits................................. 64
7.5 Continuation of 401(k) Benefits................... 65
7.6 Insurance Coverage................................ 65
7.7 Investigation..................................... 66
7.8 Schedules......................................... 66
ARTICLE 8. ADDITIONAL COVENANTS OF THE BUYER AND MARK IV..... 67
8.1 Consents and Conditions........................... 67
8.2 Filings........................................... 68
8.3 Access After the Closing Date..................... 68
8.4 Record Retention.................................. 69
8.5 Tax Matters....................................... 69
8.6 Tax Refunds....................................... 74
8.7 Confidentiality................................... 74
8.8 Coordination of Defined Benefit Plan
Payments......................................... 75
8.9 Transfer of 401(k) Plan Assets.................... 75
8.10 Public Announcements.............................. 78
8.11 Post-Closing Cooperation.......................... 78
ARTICLE 9. CONDITIONS PRECEDENT TO THE OBLIGATION
OF MARK IV, PLC AND THE COMPANY.................. 80
9.1 Representations and Covenants.................... 80
9.2 Government Consents; Filings..................... 80
9.3 Third-Party Consents............................. 81
iii
<PAGE> 5
9.4 Substitute Sureties and Letters of Credit........... 81
9.5 Ancillary Documents................................. 81
9.6 Litigation.......................................... 82
9.7 Opinion of Counsel.................................. 82
9.8 Corporate and Other Proceedings; Delivery
of Documents....................................... 82
ARTICLE 10. CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE BUYER...................................... 82
10.1 Representations and Covenants....................... 83
10.2 Government Consents; Filings........................ 83
10.3 Third-Party Consents................................ 83
10.4 Ancillary Agreements................................ 84
10.5 Litigation.......................................... 84
10.6 Certificate as to Authorization..................... 84
10.7 No Material Adverse Effect.......................... 85
10.8 Opinion of Counsel.................................. 85
10.9 Financing........................................... 85
10.10 Real Estate Matters................................. 85
10.11 Corporate and Other Proceedings; Delivery
of Documents....................................... 86
10.12 Repayment of Indebtedness........................... 86
10.13 Cancellation of Intercompany Arrangements........... 87
10.14 Data Base Transfer Instructions..................... 87
10.15 Equity Interests.................................... 87
ARTICLE 11. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS....... 87
11.1 Survival of Representations and Warranties,
Etc................................................ 87
11.2 Statements as Representations....................... 89
11.3 Indemnification by Mark IV.......................... 89
11.4 Indemnification by the Buyer and the Company........ 90
11.5 Payment Adjustments................................. 91
11.6 Conditions of Indemnification....................... 92
11.7 Litigation Cooperation.............................. 93
11.8 Remedies Cumulative................................. 93
ARTICLE 12. MISCELLANEOUS PROVISIONS............................ 94
12.1 Termination......................................... 94
12.2 Knowledge........................................... 94
iv
<PAGE> 6
12.3 Amendment and Modification..................... 95
12.4 Waiver of Compliance........................... 95
12.5 Expenses....................................... 95
12.6 Notices........................................ 95
12.7 Further Assurances............................. 97
12.8 Assignment..................................... 97
12.9 Governing Law and Jurisdiction................. 98
12.10 Counterparts................................... 98
12.11 Headings....................................... 98
12.12 Entire Agreement............................... 98
12.13 Third Parties.................................. 98
12.14 Severability................................... 99
Schedule 4.4(a) Capitalization
Schedule 4.4(b) Encumbrances on Equity Interests
Schedule 4.8 No Violation
Schedule 4.10 Absence of Certain Changes
Schedule 4.11(a) Assets
Schedule 4.12(a) Real Property
Schedule 4.12(b) Encumbrances on Owned Properties
Schedule 4.12(c) Leased Properties
Schedule 4.12(d) Notice of Violation of Real Property
Schedule 4.12(e) Condemnation
Schedule 4.12(f) Easements
Schedule 4.13 Personal Property Leases
Schedule 4.14(a) Owned Intellectual Property
Schedule 4.14(b) Material Oral Licenses and Other Agreements
Schedule 4.14(c) Infringement of Intellectual Property
Schedule 4.14(d) Challenges to Intellectual Property
Schedule 4.15 Litigation
Schedule 4.16 Banks and Brokers
Schedule 4.17(a) Employee Benefit Plans; Personnel Policies
Schedule 4.17(b) Employee Benefit Plans not Delivered
Schedule 4.17(f) Employee Pension Plan
Schedule 4.17(h) Liability
Schedule 4.17(j) Multiemployer Plan
Schedule 4.17(1) Benefits Payable
Schedule 4.18 Consents and Approvals
v
<PAGE> 7
Schedule 4.19(a) Environmental Permits
Schedule 4.19(b) Environmental Compliance
Schedule 4.19(c) Environmental Notice of Regulated Material
Schedule 4.19(d) Environmental Action
Schedule 4.19(e) Environmental Liability
Schedule 4.20 Insurance
Schedule 4.21(a) Contracts and Commitments
Schedule 4.21(b) Validity of Contracts and Commitments
Schedule 4.21(c) Contract Default
Schedule 4.22(a) Tax Matters
Schedule 4.22(b) Tax Payments
Schedule 4.22(c) Tax Liabilities
Schedule 4.22(d) Tax Returns
Schedule 4.22(e) Tax Waivers
Schedule 4.22(f) Material Elections
Schedule 4.22(g) Tax Agreements
Schedule 4.23 Labor Agreements
Schedule 4.25 Notification to Comply with Laws
Schedule 4.26 Brokers and Finders
Schedule 4.27 Product Warranties
Schedule 4.28 Potential Conflicts of Interest
Schedule 4.29 Inventories
Schedule 4.30 Undisclosed Liabilities, Etc.
Schedule 5.6 Consents and Approvals
Schedule 5.10 Brokers and Finders
Schedule 6.2 Conduct of Business Prior to the Closing
Schedule 6.3 Employees Retirement Income Fund
Schedule 6.4 Employees to be Made Available in Connection with
Financing
Schedule 7.3 List of Employees Entitled to Certain Severance Benefits
Schedule 9.4 Substitute Guarantees and Letters of Credit
Schedule 10.12 Repayment of Indebtedness
Schedule 10.13 Cancellation of Intercompany Arrangements
Schedule 10.15 Ownership of Capital Stock, etc.
Schedule 11.3(a)(iv) Special Indemnity
vi
<PAGE> 8
Schedule 12.2 Persons Having "Knowledge"
Exhibit A Mark IV License Agreement
Exhibit B Transition Services Agreement
Exhibit C Software License Agreement
vii
<PAGE> 9
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is made on the 12th
of December, 1996, by and among Mark IV Industries, Inc., a Delaware corporation
("Mark IV"), Gulton Industries, Inc., a Delaware corporation (the "Company"),
Mark IV PLC, an United Kingdom corporation ("PLC"), and Gulton Acquisition
Corp., a Delaware corporation (the "Buyer").
RECITALS:
General
WHEREAS, Mark IV, through certain of its direct and indirect
wholly owned subsidiaries as hereinafter described, is engaged in the
manufacture and sale of a comprehensive range of high quality, high performance
sound system products for musical concerts, stadiums, theaters, hotel ballrooms,
churches and other places where music or speech is amplified (the "Audio
Products Business"). The principal product lines of these direct and indirect
wholly owned subsidiaries include, without limitation, wired and wireless
microphones, mixing consoles, signal processors, amplifiers, loudspeakers and
loudspeaker systems. For purposes of this Agreement, the term the "Audio
Products Group" shall mean all of the direct and indirect wholly owned
subsidiaries, other business entities or Affiliates (as defined in Section
6.7(e)) of Mark IV engaged in the Audio Products Business, including, but not
limited to, the Company and the companies listed in the recitals below
(collectively, the "Audio Products Group Companies"), together with the
aggregate Audio Products Business as conducted, collectively, by such Audio
Products Group Companies;
WHEREAS, as of the date hereof, the corporate organization of
the Audio Products Group is as follows:
<PAGE> 10
The First Tier Subsidiaries
The Company is the direct owner of all the issued and
outstanding capital stock of: (a) Mark IV Audio Magnetic, Inc., a Delaware
corporation ("ElectroSound"); (b) LFE Corporation, a Delaware corporation
("Vega"); (c) Mark IV Audio, Inc., a Delaware corporation ("Mark IV Audio"); (d)
Klark-Teknik PLC, an United Kingdom corporation ("Klark-Teknik"); (e) Dynacord
Audio GmbH, a German corporation ("Audio GmbH"); (f) Electro-Voice,
Incorporated, a Delaware corporation ("Electro-Voice"); (g) Mark IV Audio
(Europe) AG, a Swiss corporation; (h) Mark IV Audio (Aust) Pty Ltd., an
Australian corporation ("Mark IV Audio Australia"); (i) Mark IV Audio Japan
Ltd., a Japanese corporation ("Mark IV Audio Japan"); and (j) Mark IV Audio
France S.A., a French corporation ("Mark IV France").
The Second Tier Subsidiaries
Electro-Voice is the owner of all the issued and outstanding
capital stock of: (a) Altec Lansing International, an United Kingdom corporation
("Altec"); (b) Mark IV Hong Kong Limited, a Hong Kong corporation ("Mark IV Hong
Kong"); and (c) Mark IV Audio Canada, Inc., a Canadian corporation.
Klark-Teknik is the owner of all the issued and outstanding
capital stock of: (a) Cetec International Limited, an United Kingdom
corporation; (b) Rebis Audio Limited, an United Kingdom corporation; (c) Dearden
Davies Associates Limited, an United Kingdom corporation; and (d) Nivenfield
(1992) Limited, an United Kingdom corporation.
WHEREAS, Mark IV owns all of the issued and outstanding
capital stock of Mark IV Industries GmbH, a German corporation ("Industries
GmbH"), and Industries GmbH is the owner of all the issued and outstanding
capital stock of: (a) Mark IV Audio Deutschland GmbH, a German corporation
("Mark IV Audio Deutschland"); (b) Mark IV Vertriebs GmbH, a
2
<PAGE> 11
German corporation ("Vertriebs"); and (c) in combination with Mark IV Audio
Deutschland, the owner of all the issued and outstanding capital interests of
Mark IV Deutschland & Co. KG, a German partnership ("Dynacord").
The Third Tier Subsidiary
Dynacord will be the owner of all the issued and outstanding
shares of capital stock of Dynacord France, S.A., a French corporation
("Dynacord France").
Mark IV Hong Kong is the owner of all the issued and
outstanding shares of capital stock of Audio Consultants Co., Limited, a Hong
Kong corporation.
WHEREAS, prior to the Closing, and subject to Section 6.8
hereof, Audio GmbH shall acquire all of the equity interests in Dynacord from
Industries GmbH and Mark IV Audio Deutschland, together with any other assets
related to the Audio Products Business held by any of Industries GmbH, Mark IV
Audio Deutschland or Vertriebs;
WHEREAS, the Boards of Directors of Mark IV, PLC the Company
and the Buyer have approved and deem it advisable and in the best interests of
their respective stockholders to consummate the transactions contemplated by
this Agreement;
WHEREAS, Mark IV and PLC (as sole stockholders of the Company)
and the Buyer have each duly approved this Agreement the terms and subject to
the conditions set forth herein;
WHEREAS, immediately prior to the Closing Date (as defined in
Section 3.1) all the issued and outstanding capital stock of the Company will be
held as follows: Mark IV will own 29,577 issued and outstanding shares of Common
Stock of the Company, par value $1.00 per share (the "Common Stock"), and PLC
will own 2,544 issued and outstanding shares of Common Stock;
3
<PAGE> 12
NOW, THEREFORE, in consideration of the foregoing and the
covenants and agreements hereinafter set forth, Mark IV, PLC, the Company and
the Buyer hereby agree as follows:
ARTICLE 1.
THE SALE
1.1 The Sale. Subject to the terms and conditions hereof, on
the Closing Date, upon payment of the Estimated Cash Purchase Price (as defined
in Section 2.1), Mark IV and PLC will sell all of the issued and outstanding
shares of Common Stock to the Buyer and the Buyer will purchase all of the
issued and outstanding shares of Common Stock from Mark IV and PLC.
ARTICLE 2.
PURCHASE PRICE
2.1 Purchase Price. (a) The aggregate cash consideration for
the purchase of the Common Stock shall be $151,500,000 (the "Initial Purchase
Price"), adjusted as described in this Article 2. For purposes of determining
the aggregate amount of cash consideration to be received at the Closing (as
defined in Section 3.1) by Mark IV and PLC, as the sole stockholders of the
Company, the Initial Purchase Price shall be adjusted in the manner provided for
in Section 2.5 hereof (the Initial Purchase Price, as so adjusted, being
hereinafter referred to as the "Estimated Purchase Price") after determination
of the amount of the Estimated Cash Flow and the Estimated Working Capital (as
such terms are hereafter defined) is made.
(b) Of the Estimated Purchase Price, 92.08% shall be paid to
Mark IV and 7.92% shall be paid to PLC.
4
<PAGE> 13
(c) For purposes of determining the final aggregate amount of
the cash consideration that will be received by Mark IV and PLC, the Initial
Purchase Price shall be adjusted in the manner provided by Section 2.7 to
determine the Final Purchase Price (as hereinafter defined) after the final
determination of the amount of the Audited Cash Flow, the Audited Working
Capital and the Final Net Cash Intercompany Transfer Amount (as such terms are
hereinafter defined) is made.
2.2 Payment of Purchase Price. At the Closing, the Buyer shall
pay the Estimated Purchase Price as provided in Section 3.3(a) hereof. The Final
Purchase Price shall be paid, as necessary, by wire transfer of immediately
available funds to an account specified by the party receiving such funds as
provided for in Section 2.7(c) hereof.
2.3 [Intentionally omitted].
2.4 Definitions Relating to Purchase Price Adjustments. For
purposes of calculating the adjustments to the Initial Purchase Price provided
for by this Article 2 and for purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Audited Cash Flow" means the Cash Flow (as defined herein) for the
10-month period commencing March 1, 1996 and ending on December 31, 1996 as
determined pursuant to Section 2.8.
(b) "Audited Working Capital" means the Working Capital (as defined
herein) as at December 31, 1996 as determined pursuant to Section 2.8, except
that (i) cash balances reportable as cash in accordance with United States GAAP
shall be included in current assets to the extent such balances are held by the
Audio Products Group Companies as at December 31, 1996, whether or not such
balances appear on the Audited Closing Balance Sheet, and, (ii) all indebtedness
for borrowed money of the Audio Products Group Companies as at December 31, 1996
shall be included in
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current liabilities irrespective of the date of maturity of such indebtedness
and whether or not such indebtedness appears on the Audited Closing Balance
Sheet.
(c) "Cash Flow" means the consolidated net income or loss of the Audio
Products Group during the 10-month period commencing March 1, 1996 to and
including December 31, 1996 determined in accordance with United States
generally accepted accounting principles ("GAAP") applied on a basis consistent
with the statement of income included in the Financial Statements (as defined
herein) as at and for the year ending February 29, 1996, as calculated before
the deduction of interest, taxes, depreciation and amortization and excluding
any gains or losses on sales of fixed assets and other non-recurring items out
of the ordinary course of business, provided, however, that, in determining Cash
Flow, net income or loss shall be adjusted to reflect the annual amount to be
incurred by the Audio Products Group Companies under the Austin Sublease (as
defined in Section 10.4), including without limitation all rental, maintenance
and other occupancy costs, prorated as if such amounts had been incurred by the
Audio Products Group Companies from the period commencing March 1, 1996 to and
including December 31, 1996.
(d) "Cash Flow Multiple" means 7.0.
(e) "Estimated Cash Flow" means the unaudited Cash Flow for the
10-month period commencing March 1, 1996 to and including December 31, 1996, as
estimated in good faith by Mark IV pursuant to Section 2.6(a).
(f) "Estimated Net Cash Intercompany Transfer Amount" means the Net
Cash Intercompany Transfer Amount (as defined herein) as estimated in good faith
by Mark IV for the period commencing January 1, 1997 to and including the day
immediately preceding the Closing Date, as set forth in the daily written
statement provided by Mark IV to Buyer on the Closing Date pursuant to Section
2.6.
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(g) "Estimated Working Capital" means the unaudited Working Capital (as
defined herein) as at December 31, 1996 as estimated in good faith by Mark IV
pursuant to Section 2.6, except that (i) cash balances reportable as cash in
accordance with United States GAAP shall be included in current assets to the
extent such balances are held by the Audio Products Group Companies as at
December 31, 1996, whether or not such balances appear on the Audited Closing
Balance Sheet, and, (ii) all indebtedness for borrowed money of the Audio
Products Group Companies as at December 31, 1996 shall be included in current
liabilities irrespective of the date of maturity of such indebtedness.
(h) "Final Net Cash Intercompany Transfer Amount" means the Net Cash
Intercompany Transfer Amount (as defined herein) for the period commencing
January 1, 1997 to and including the Closing Date as determined pursuant to
Section 2.8.
(i) "Final Purchase Price" means (i) the amount calculated pursuant to
Section 2.7(a) if such amount differs from the Initial Purchase Price by at
least $500,000, and (ii) the Initial Purchase Price, if such amount calculated
pursuant to Section 2.7(a) does not differ from the Initial Purchase Price by at
least $500,000.
(j) "Net Cash Intercompany Transfer Amount" means, with respect to any
period, the difference (positive or negative), between (i) the aggregate amount
of loans, advances or other disbursements of cash or cash equivalents made by
Mark IV or its Affiliates to any Audio Products Group Company and (ii) the
aggregate amount of the repayments, withdrawals, dividends, loans, advances or
other disbursements of cash and cash equivalents made by any Audio Products
Group Company to Mark IV or its Affiliates.
(k) "Targeted Cash Flow" means $17.9 million.
(l) "Targeted Working Capital" means $75,758,000.
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(m) "Working Capital" means the amount by which the consolidated
current assets of the Audio Products Group as of a specified date exceeds or are
less than its consolidated current liabilities as at such date, determined in
accordance with United States GAAP applied on a basis consistent with the
Balance Sheet, except that no adjustments to current assets or current
liabilities as at December 31, 1996 will be made with respect to normal year end
audit adjustments reflected in the Audited Closing Balance Sheet.
2.5 Calculation of Estimated Purchase Price. The Initial
Purchase Price shall be adjusted as of the Closing Date as follows:
(a) If the Estimated Cash Flow is equal to or greater than the
Targeted Cash Flow, the Initial Purchase Price shall be adjusted on a
dollar-for-dollar basis, plus or minus, as the case may be, by (i) the amount by
which the Estimated Working Capital differs from the Targeted Working Capital,
and (ii) the Estimated Net Cash Intercompany Transfer Amount,
(b) If the Estimated Cash Flow is less than the Targeted Cash
Flow, the Initial Purchase Price shall be (i) reduced, on a dollar-for-dollar
basis, by an amount equal to (A) the excess of the Targeted Cash Flow over the
Estimated Cash Flow, multiplied by (B) the Cash Flow Multiple, and (ii) adjusted
plus or minus, as the case may be, by (x) the amount by which the Estimated
Working Capital differs from the Targeted Working Capital, and (y) the Estimated
Net Cash Intercompany Transfer Amount, provided, however, no adjustment of the
Initial Purchase Price shall be made pursuant to the foregoing clauses (a) and
(b) unless the aggregate amount of the adjustments required pursuant to either
such clause is greater than or equal to $500,000 in which case the entire amount
of such adjustment shall be made.
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2.6 Pre-Closing Deliveries of Financial Information. At least
three days prior to the Closing, Mark IV shall provide the Buyer with statements
showing the Estimated Cash Flow and the Estimated Working Capital, accompanied
by a certificate of Mark IV executed by its chief financial officer setting
forth the supporting calculations for each such statement in reasonable detail.
Beginning at least seven days prior to the Closing Date and on the Closing Date,
Mark IV shall provide the Buyer with a daily written statement setting forth the
then current Estimated Net Cash Intercompany Transfer Amount, which statement
provided on the Closing Date shall be certified by the chief financial officer
of Mark IV. Mark IV shall also, promptly following a request from the Buyer,
provide to the Buyer copies of such additional documents as may reasonably be
requested by the Buyer for the purpose of verifying the amount of the Estimated
Cash Flow, Estimated Working Capital and Estimated Net Cash Intercompany
Transfer Amount as contained in the statements delivered to the Buyer pursuant
to this Section 2.6.
2.7 Post-Closing Adjustment. (a) The Final Purchase Price
shall be calculated upon final calculation of the final Audited Cash Flow,
Audited Working Capital and Final Net Cash Intercompany Transfer Amount (as each
is determined pursuant to Section 2.8 below). If the final Audited Cash Flow is
greater than the Targeted Cash Flow, the Initial Purchase Price shall be
adjusted, on a dollar-for-dollar basis, plus or minus, as the case may be, by
(x) the amount by which the final Audited Working Capital differs from the
Targeted Working Capital and (y) the Final Net Cash Intercompany Transfer
Amount. If the final Audited Cash Flow is less than the Targeted Cash Flow, the
Initial Purchase Price shall be (i) reduced, on a dollar-for-dollar basis, by an
amount equal to (A) the excess of the final Targeted Cash Flow over the Audited
Cash Flow, multiplied by (B) the Cash Flow Multiple and (ii) adjusted plus or
minus, as the case may be, by (A) the amount by which the final Audited Working
Capital differs from the Targeted Working
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Capital, and (B) the Final Net Cash Intercompany Transfer Amount.
(b) If the Final Purchase Price exceeds the Estimated Purchase
Price, the entire amount by which the Final Purchase Price exceeds the Estimated
Purchase Price shall be paid by the Buyer to Mark IV and PLC. If the Final
Purchase Price is less than the Estimated Purchase Price, the entire amount by
which the Estimated Purchase Price exceeds the Final Purchase Price shall be
paid by Mark IV and PLC to the Buyer.
(c) All payments required to be made pursuant to Section
2.7(b) above shall be paid to the party entitled to receive the same in cash or
immediately available funds promptly, but in no event later than ten business
days following the final determination of the Audited Cash Flow, Audited Working
Capital and Final Net Cash Intercompany Transfer Amount as contemplated in
Section 2.8 below, by delivery to such account as the party entitled to payment
shall specify in writing, of an amount equal to the sum of any such payment
together with interest thereon from, and including the Closing Date to, but
excluding, the date of such payment at a variable rate per annum equal to the
rate announced publicly by Bank of America National Trust and Savings
Association from time to time as its "base rate." Mark IV and PLC shall be
jointly and severally liable for any amounts required to be paid by either of
them pursuant to Section 2.7(b) above and all amounts required to be paid by
Buyer pursuant to such sections shall be paid 92.08% to Mark IV and 7.92% to PLC
unless Mark IV and PLC otherwise instruct the Buyer in writing.
2.8 Calculation of the Audited Cash Flow, Audited Working
Capital and Final Net Cash Intercompany Transfer Amount. (a) As soon as
practicable, but no later than 90 days after the Closing Date, Mark IV shall
prepare and deliver to the Buyer (i) audited combined financial statements of
the Audio Products Group as of and for the ten months ended December 31, 1996,
together with a report on
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such statements by Coopers & Lybrand LLP, including (A) a balance sheet (the
"Audited Closing Balance Sheet"), (B) a statement of income and net equity (the
"Audited Income Statement") and (C) a statement of cash flow (the "Audited
Closing Cash Flow Statement", and together with the Audited Closing Balance
Sheet and the Audited Closing Income Statement, the "Audited Closing Financial
Statements"), all prepared in accordance with United States GAAP applied on a
consistent basis with the Financial Statements, (ii) a written statement setting
forth Mark IV's proposed calculation of the Audited Cash Flow for such period
derived from the Audited Closing Cash Flow Statement (the "Proposed Audited Cash
Flow Statement") (iii) a written statement setting forth Mark IV's proposed
calculation of the Audited Working Capital as of such date derived from the
Audited Closing Balance Sheet (the "Proposed Audited Working Capital
Statement"), and (iv) a written statement setting forth in reasonable detail the
calculation of the Final Net Cash Intercompany Transfer Amount (the "Proposed
Final Net Cash Intercompany Transfer Amount Statement", and together with the
Proposed Audited Cash Flow Statement and the Proposed Audited Working Capital
Statement, the "Proposed Statements").
(b) The Audited Closing Financial Statements and the Proposed
Statements and supporting documents shall be subject to verification and
examination by the Buyer and its representatives and, in order to facilitate
such verification and examination, Mark IV shall, at such reasonable times and
places as may be requested by the Buyer or its representatives, promptly deliver
copies of all supporting documents to the Buyer and its representatives and
provide to the Buyer and its representatives the right to examine any such work
papers or to take copies of any such work papers (other than proprietary work
papers) used by Mark IV or its accountants in the preparation of the Audited
Closing Financial Statements and the Proposed Statements.
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(c) The Buyer shall have a period of 30 days after delivery of
each of the Audited Closing Financial Statements and the Proposed Statements to
the Buyer to present in writing to Mark IV any objections the Buyer may have to
the Audited Closing Financial Statements and the calculation of Audited Cash
Flow, Audited Working Capital and Final Net Cash Intercompany Transfer Amount
set forth in the Proposed Statements, which objections shall be set forth in
reasonable detail. If no objections are raised within such 30-day period, the
Audited Closing Financial Statements shall be deemed to be accepted and approved
by the Buyer, the calculation of Audited Cash Flow, Audited Working Capital and
Final Net Cash Intercompany Transfer Amount contained in the Proposed Statements
shall be deemed to be final, and any amounts required to be paid by Section
2.7(b) hereof shall be paid, as the case may be, either (i) by Mark IV and PLC,
or (ii) by the Buyer to Mark IV and PLC, in either case as provided in Section
2.7(c).
(d) If the Buyer shall object in any respect as to the Audited
Closing Financial Statements or as to the calculation of Audited Cash Flow,
Audited Working Capital and Final Net Cash Intercompany Transfer Amount set
forth in the Proposed Statements, the Buyer shall present to Mark IV written
notice on or prior to the last day of the 30-day period described in Section
2.8(c) specifying such objections. Following receipt of such notice by Mark IV,
the Buyer and Mark IV shall use their best efforts promptly to resolve the
matter or matters in disagreement. If Mark IV and the Buyer resolve the matter
or matters in disagreement, Mark IV and the Buyer shall either confirm or revise
the original Proposed Statements whereupon Mark IV's calculations of the Audited
Cash Flow, Audited Working Capital and Final Net Cash Intercompany Transfer
Amount as contained in the confirmed or revised Proposed Statements shall be
deemed to be the final Audited Cash Flow, Audited Working Capital and Final Net
Cash Intercompany Transfer Amount and shall be binding upon the parties hereto,
and any amounts required to be paid by Section 2.7(b) hereof shall be paid, as
the case may be, either (i) by Mark IV and PLC,
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or (ii) by the Buyer, in either case as provided in Section 2.7(c).
(e) If Mark IV and the Buyer are unable to resolve the matter
or matters in disagreement within 45 days following Mark IV's receipt of written
notice from the Buyer of the Buyer's objections, then such disagreement or
disagreements shall, within 15 days after the expiration of such 45-day period
or within 15 days after Mark IV and the Buyer have agreed that they are unable
to resolve such disagreements, be referred for resolution to the Chicago Office
of KMPG Peat Marwick, a nationally recognized firm of independent certified
public accountants, or, if the Chicago Office of KMPG Peat Marwick is not
available, to another nationally recognized firm of independent certified public
accountants mutually agreeable to the Buyer and Mark IV. If the Buyer and Mark
IV cannot agree on the independent certified accounting firm to be retained, the
Buyer and Mark IV shall each submit the name of one accounting firm that has not
directly represented either party within the past three years and the
independent certified accounting firm shall be selected by lot from those two
firms. The firm that is selected pursuant to this Section 2.8(e) is herein
referred to as the "Independent Accountants." The Independent Accountants shall
be directed to furnish written notice to Mark IV and the Buyer of their
resolution of any such disagreements referred to them as soon as practicable but
in no event later than 20 days following the referral of such dispute to the
Independent Accountants. The amounts of the Audited Cash Flow, Audited Working
Capital and Final Net Cash Intercompany Transfer Amount as determined by the
Independent Accountants shall be final and binding upon the parties and any
amounts required to be paid by Section 2.7(b) hereof after the Independent
Accountants have made their determination shall be paid, as the case may be,
either (i) by Mark IV and PLC, or (ii) by the Buyer, in either case as provided
in Section 2.7(c).
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(f) Notwithstanding anything to the contrary in this Section
2.8, during the period that the determination of the final Audited Cash Flow,
Audited Working Capital and Final Net Cash Intercompany Transfer Amount shall
remain in dispute, neither Mark IV, PLC, the Company nor the Buyer shall be
required to pay the amount of the adjustment that would otherwise be payable
hereunder if no such disagreement were to exist. The rights to indemnification
of Mark IV, PLC or the Buyer pursuant to Article 11 (and any limitations on such
rights) shall not be deemed to limit, supersede or otherwise affect the parties'
rights to a full purchase price adjustment pursuant to this Article 2.
(g) During and with respect to the audit and reviews referred
to in this Section 2.8, Mark IV and the Buyer, as the case may be, shall: (i)
fully cooperate with all reasonable requests of Mark IV, the Buyer and the
Independent Accountants, as the case be; (ii) upon reasonable request make
available to Mark IV, the Buyer and the Independent Accountants, all work
papers, supporting schedules, documents and other information (including access
to all appropriate knowledgeable personnel of Mark IV) upon which the Audited
Closing Financial Statements and Proposed Statements are prepared; and (iii)
promptly provide the Independent Accountants with such management representation
letters (in customary form) executed by appropriate personnel of Mark IV and the
Buyer as applicable, as may reasonably be requested with respect to the
calculation of the final Audited Cash Flow, Audited Working Capital and Final
Net Cash Intercompany Transfer Amount and the preparation of the Audited
Closing Financial Statements and Proposed Statements.
(h) With the exception of the fees and expenses of the
Independent Accountants, all fees and expenses of Mark IV, PLC and, prior to the
Closing, the Company relating to the matters described in this Section 2.8 shall
be borne by Mark IV or PLC, as the case may be, and all fees and expenses of the
Buyer and, after the Closing, the Company relating to the matters described in
this Section 2.8 shall
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be borne by the Buyer. The fees, expenses and disbursements of the Independent
Accountants shall be shared equally by the Buyer, on the one hand, and Mark IV
and PLC, on the other hand.
ARTICLE 3.
CLOSING
3.1 Time and Place of Closing. Unless this Agreement has been
terminated pursuant to the provisions of Section 12.1, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022
on January 29, 1997 or at such other place, date and time as the parties hereto
may mutually agree in writing. For purposes of this Agreement, the date on which
the Closing occurs is referred to as the "Closing Date."
3.2 Deliveries by Mark IV and PLC. At the Closing, Mark IV and
PLC will deliver to the Buyer (unless previously delivered):
(a) free and clear of any liens, charges or encumbrances,
stock certificates evidencing 32,121 shares of Common Stock;
(b) the corporate minute books and stock ledgers of each Audio
Products Group Company;
(c) the written resignation of such of the officers and
directors of each of the Audio Products Group Companies, including the Company,
as may be requested by the Buyer in writing at least two days prior to the
Closing Date;
(d) an executed Trade Name and Trademark License Agreement,
substantially in the form of Exhibit A attached hereto, containing the terms and
conditions upon which the
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Buyer and each of the Audio Products Group Companies shall be permitted to use
the "Mark IV" name following the Closing Date (the "Mark IV License Agreement");
(e) an executed transition services agreement, substantially
in the form of Exhibit B attached hereto, containing the terms and conditions
upon which Mark IV will provide to the Audio Products Group Companies certain
services following the Closing Date (the "Transition Services Agreement");
(f) an executed Software License Agreement, substantially in
the form of Exhibit C attached hereto, containing the terms and conditions upon
which Mark IV shall license and sublicense certain software programs to the
Company following the Closing Date (the "Software License Agreement"); and
(g) any other documentation identified in Article 10 hereof
which is required to be delivered to the Buyer in satisfaction of the conditions
to the transactions contemplated by this Agreement.
3.3 Deliveries by the Buyer. At the Closing, the Buyer will
deliver to Mark IV and PLC, as applicable (unless previously delivered):
(a) an amount equal to the Estimated Purchase Price, by wire
transfer of immediately available funds to such account or accounts as may be
designated by Mark IV in writing at least two business days prior to the
Closing, which shall be paid to Mark IV and PLC pro rata on the basis set forth
in Section 2.1(b); and
(b) any other documentation identified in Article 9 hereof
which is required to be delivered to Mark IV in satisfaction of the conditions
to the transactions contemplated by this Agreement.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF MARK IV AND PLC
Mark IV, on behalf of itself and PLC, and the Company hereby
jointly and severally represent and warrant to the Buyer as follows:
4.1 Organization of Mark IV. Mark IV is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all necessary corporate power and authority to carry on its
business as presently conducted.
4.2 Organization of the Audio Products Group Companies. Each
Audio Products Group Company (other than Dynacord) is a corporation, duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it was incorporated and has all necessary corporate power
and authority to carry on its business as presently conducted. Each Audio
Products Group Company (other than Dynacord) is qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
failure to be so qualified would have a material adverse effect on the business,
financial condition, results of operations, assets or liabilities of the Audio
Products Group Companies, taken as a whole (hereinafter, a "Material Adverse
Effect").
Dynacord is a partnership, duly organized and validly existing
under the laws of the Federal Republic of Germany and has full power and
authority to carry on its business as presently conducted. Dynacord is qualified
to do business as a foreign partnership in each jurisdiction in which failure to
be so qualified would have a Material Adverse Effect.
4.3 Authorization. Each of Mark IV, PLC and the Company has
full corporate power and authority to enter into, execute and deliver this
Agreement and each of the
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other documents and instruments to be executed and delivered by them, as the
case may be, pursuant to this Agreement (the "Mark IV Ancillary Agreements") and
to consummate the transactions contemplated hereunder and thereunder. The
execution, delivery and performance of this Agreement and the Mark IV Ancillary
Agreements pursuant to this Agreement and the consummation of the transactions
contemplated hereunder and thereunder have been duly authorized by all necessary
corporate or shareholder action on the part of Mark IV, PLC or the Company, as
the case may be. This Agreement has been, and when executed the Mark IV
Ancillary Agreements will be, duly executed and delivered by Mark IV, PLC and
the Company, as the case may be. No other corporate act or proceeding on the
part of Mark IV, PLC, the Company or their respective shareholders is necessary
to authorize the execution and delivery of this Agreement and the Mark IV
Ancillary Agreements, or the consummation by Mark IV, PLC or the Company of the
transactions contemplated hereby and thereby.
4.4 Capitalization. (a) Schedule 4.4(a) attached hereto
contains a statement of: (i) the total number, class and par value of each class
of capital stock or other equity or partnership interest which each Audio
Products Group Company is authorized to issue; (ii) the total number, class and
par value of each class of capital stock or other equity or partnership interest
of each Audio Products Group Company which is issued and outstanding; and (iii)
the identity of the owner beneficially and of record of all the issued and
outstanding shares of each class of capital stock and all other outstanding
equity or partnership interests of each such Audio Products Group Company,
together with a statement of the number of shares of capital stock or other
equity or partnership interests of each such Audio Products Group Company that
is owned beneficially and of record by any such corporation or other entity. All
of such outstanding shares of capital stock and all other outstanding equity or
partnership interests, as the case may be, of each Audio Products Group Company
are duly authorized, validly issued, fully paid and nonassessable, or, in the
case of Dynacord, validly issued, fully paid and nonassess-
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able with no unlawful or remaining repayments or contributions, and are owned
beneficially and of record by the corporation or other entity as set forth on
Schedule 4.4(a). As of the Closing, Mark IV will own 29,577 shares of Common
Stock and PLC will own 2,544 shares of Common Stock.
(b) Except as otherwise set forth in Schedule 4.4(b), each
corporation or other entity that is identified in Schedule 4.4(a) as owning any
issued and outstanding capital stock or other equity or partnership interest of
any Audio Products Group Company has good and valid legal title to all the
issued and outstanding capital stock or other equity or partnership interests
which are set forth next to such corporation's or other entity's name in
Schedule 4.4(a), in each case, free and clear of all liens, claims, encumbrances
or other restrictions or limitations of any kind.
4.5 Options or Other Rights. There are no preemptive or
similar rights on the part of any holders of any class of capital stock or other
equity or partnership interest of any Audio Products Group Company. There is no
existing subscription, option, warrant, call, commitment or other agreement
entitling any third party to, and there are no convertible or exchangeable
securities of Mark IV or any of the Audio Products Group Companies outstanding
which (upon conversion or exchange) would require the issuance of, any
additional shares of capital stock or other equity or partnership interests in
any of the Audio Products Group Companies or any other securities convertible
into or exchangeable for shares of capital stock or other equity or partnership
interests in any of the Audio Products Group Companies, and no authorization
therefor has been given. None of the Audio Products Group Companies is a party
to any agreement which would require such Audio Products Group Company to
repurchase, redeem or otherwise acquire any of the issued and outstanding shares
of capital stock or other equity or partnership interests of such Audio Products
Group
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Company or to increase any capital contribution or other participation in any
such Audio Products Group Company.
4.6 Certificates of Incorporation and By-Laws. With respect to
each Audio Products Group Company, Mark IV has heretofore delivered to the
Buyer, true and complete copies of the certificate of incorporation (or any
other substantially equivalent documentation required in the jurisdiction in
which any of such Audio Products Group Companies has been incorporated or
organized) (such certificates or documents are hereinafter referred to as
"Incorporation Documents") and the By-Laws or any other substantially equivalent
documentation regulating the internal affairs of such Audio Products Group
Company (such By-Laws or documents are hereinafter referred to as the "ByLaws")
as the same are in effect on and as of the date hereof, including all amendments
and restatements thereto. In addition, Mark IV has heretofore made the minute
books of each Audio Products Group Company available to the Buyer for inspection
by the Buyer and its representatives. No Audio Products Group Company is in
violation of any of the provisions of its Incorporation Documents or By-Laws.
4.7 Binding Agreements. This Agreement constitutes and, when
executed and delivered on the Closing Date, each of the Mark IV Ancillary
Agreements will constitute, valid and binding obligations of Mark IV, PLC and
the Company, as the case may be, enforceable against Mark IV, PLC, the Company
in accordance with their respective terms.
4.8 No Violation. Except as set forth in Schedule 4.8, neither
the execution and delivery of this Agreement, the Mark IV Ancillary Agreements
or the Reorganization Agreements (as defined in Section 6.8), nor the
consummation by Mark IV, PLC, or each Affiliate of Mark IV that is a party to
any of the Reorganization Agreements, of the transactions contemplated hereby or
thereby: (a) violate any statute or law, or any rule or regulation of any
governmental authority; or (b) violate any
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order, writ, injunction or decree of any court or governmental authority; or (c)
violate or conflict with or constitute a default under (or an event which, with
notice or lapse of time, or both, would constitute a default under), or will
result in the termination of, or give any third party the right to terminate or
modify in any material respect, or accelerate the performance required by, or
result in the creation of any material lien, security interest, charge or
encumbrance upon any of the material assets of any of the Audio Products Group
Companies under any term or provision of: (i) the Incorporation Documents and
By-Laws of Mark IV, PLC or any of the Audio Products Group Companies; or (ii)
any material lease, contract, commitment, license, agreement or restriction of
any kind or character: (A) to which Mark IV, PLC or any of the Audio Products
Group Companies is a party or (B) by which any of the Audio Products Group
Companies or any of their material assets or properties may be bound.
4.9 Financial Statements.
(a) Mark IV has heretofore delivered to the Buyer true and
complete copies of (i) the unaudited combined financial statements of the Audio
Products Group as at and for the eight-month period ended October 31, 1996 (the
"Interim Financial Statements"), including a balance sheet and a statement of
income, and (ii) the audited combined financial statements of the Audio Products
Group as of the last day of February 1996 and 1995 and for each of the three
years ended February 29, 1996, together with reports on such years and
statements by Coopers & Lybrand, LLP, the Audio Products Group's independent
public accountants, including in each case a balance sheet, a statement of
income and net equity, and a statement of cash flows, and accompanying notes
(the "Audited Financial Statements" and, together with the Interim Financial
Statements, hereinafter collectively referred to as the "Financial Statements").
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(b) The Financial Statements (i) have been derived from the
accounting books and records of the Audio Products Group Companies, and (ii)
have been prepared in accordance with United States GAAP applied on a consistent
basis throughout the periods presented therein subject, in the case of the
Interim Financial Statements, only to normal adjustments and the absence of
notes thereto.
(c) The balance sheets included in the Financial Statements
present fairly the financial position of the Audio Products Group as at the
respective dates thereof, and the statements of income, statements of
stockholder's equity and statements of cash flows included in such Financial
Statements present fairly the results of operations and cash flows of the Audio
Products Group for the respective periods indicated.
(d) The balance sheets included in the Financial Statements do
not include any material assets or liabilities not constituting a part of the
Audio Products Group as it is organized immediately prior to the Closing Date.
The statements of income, stockholders' equity and cash flows included in the
Financial Statements do not reflect the operations of any entity or business not
constituting a part of the business of the Audio Products Group as it is
organized immediately prior to the Closing Date.
4.10 Absence of Certain Changes. Except as and to the extent
set forth in Schedule 4.10 or Schedule 6.2, from February 29, 1996 through the
date hereof, no Audio Products Group Company has:
(a) (i) amended its Incorporation Documents or its By-Laws;
(ii) merged with or into or consolidated with any other person, firm,
corporation or other entity; or (iii) subdivided or reclassified any shares of
its capital stock or any of its other outstanding equity or partnership
interests;
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(b) issued, sold, purchased or redeemed or issued options or
rights to subscribe to, or entered into any contracts or commitments to issue,
sell, purchase or redeem any shares of its capital stock or other equity or
partnership interests or any securities convertible into or exchangeable for any
of its shares of capital stock or other equity or partnership interests;
(c) declared or paid any dividends or declared or made any
distributions of any kind (other than cash distributions) to its stockholders or
other owners of any of its outstanding equity or partnership interests or made
any direct or indirect redemption, retirement, purchase or other acquisition of
any shares of its capital stock or other equity or partnership interests, except
for cash receipts remitted to Mark IV in connection with the ordinary cash
management practices of Mark IV;
(d) entered into or amended any (i) written employment
agreement with any officer, director or management employee of any of the Audio
Products Group Companies; (ii) agreement with any labor union or association
representing any employee; or (iii) employee benefit plan or arrangement
relating to any employees of any of the Audio Products Group Companies in any
material respect;
(e) suffered any Material Adverse Effect;
(f) sold, transferred, assigned, mortgaged, pledged,
hypothecated, granted any security interest in or otherwise disposed of or
subjected to any lien, charge or encumbrance any of its material assets,
tangible or intangible, properties, Real Property (as defined in Section 4.12),
or rights other than in the ordinary course of the conduct of its business or
canceled any claims which are material to its business;
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(g) disposed of or permitted to lapse any material patent,
patent application, trademark, trademark registration, trademark application,
assumed name, service mark, trade name or copyright application, copyright
registration or license or disposed of or permitted to lapse any agreement under
which it has any material right or license;
(h) made any single capital expenditure in excess of $100,000
or made any commitment to make capital expenditures in excess of $200,000 in
the aggregate, except for commitments to make such capital expenditures which
have been made in the ordinary course of the business of such Audio Products
Group Company;
(i) made any material change in any method of accounting or
accounting practice or policy or in its manner of keeping its books, accounts or
records, filed any amended Tax Return (as defined in Section 4.22(i)), made any
material Tax (as defined in Section 4.22(i)) elections, settled or compromised
any claim in respect of Taxes, or conducted the Tax affairs of any of the Audio
Products Group Companies in a manner inconsistent with past practice;
(j) made any material changes in its warranty policies;
(k) granted any increase in the compensation or benefits of
any of its officers or employees other than in the ordinary course of business,
(including any such increase pursuant to any bonus, pension, profit sharing,
severance or other plan or commitment);
(l) made any loan or advance to any of its officers, directors
or employees other than advances of expenses made in the ordinary course of its
business and cash receipts remitted to Mark IV in accordance with the regular
cash management policies of Mark IV and the Audio Products Group Companies;
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(m) materially modified any existing contract required to be
set forth on Schedule 4.21(a) hereto or entered into any agreement or commitment
that, pursuant to its terms, is not cancelable without penalty on less than 30
days' notice;
(n) suffered any damage, destruction or loss (whether or not
covered by insurance), or any strike or other employment-related problem, or any
change in relations with or any loss of a supplier, customer or employee, that,
individually or in the aggregate, had or could reasonably be expected to have, a
Material Adverse Effect;
(o) incurred any indebtedness for borrowed money, issued or
sold any debt securities or prepaid any debt, including, without limitation, any
borrowings from or prepayments to Mark IV or any of its Affiliates (as defined
in Section 6.7), except for borrowings and prepayments in the ordinary course of
business;
(p) other than in the ordinary course of business consistent
with past practice, incurred, assumed, guaranteed or otherwise become directly
or indirectly liable with respect to any liability or obligation in excess of
$100,000 in each case or $200,000 in the aggregate at any one time outstanding
(whether absolute, accrued, contingent or otherwise and whether direct or
indirect, or as guarantor or otherwise with respect to any liability or
obligation of any other person);
(q) entered into agreements with any governmental authority
with respect to environmental remediation pursuant to which Mark IV or any of
the Audio Products Groups agreed to spend in excess of $50,000 in connection
with any individual site or in excess of $200,000 in the aggregate; or
(r) agreed to take any action, taken any action or omitted to
take any action that would result in the occurrence of any of the foregoing.
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4.11 Assets. Except as set forth in Schedule 4.11(a),
together, the Audio Products Group Companies own, or otherwise have sufficient
and legally enforceable rights to use, all of the properties and assets (real,
personal or mixed, tangible or intangible), used or held for use in connection
with, necessary for the conduct of, or otherwise material to, the Audio Products
Group Business as such business is currently conducted (the "Assets"). Each
Audio Products Group Company has good, valid and legal title to, or in the case
of leased property has good and valid leasehold interests in, all Assets that
are material to the business as such business is currently conducted, including
but not limited to all such Assets reflected in the consolidated balance sheet
of the Audio Products Group as at February 29, 1996 included in the Financial
Statements (the "Balance Sheet") or acquired since the date thereof (except as
may be disposed of in the ordinary course of business since February 29, 1996
and in accordance with this Agreement), in each case free and clear of any
lien, charge or encumbrance, except for any such liens, charges or encumbrances
listed in Schedules 4.11(a) and 4.12(b). Each Audio Products Group Company has
maintained its tangible Assets in reasonable repair and working order, exclusive
of equipment which in the ordinary course may be non-operational or held as
spares. Upon consummation of the transactions contemplated by this Agreement,
the Company will own, lease or have the right to use, directly or indirectly,
all the Assets, except for Assets disposed of during the period from the date of
this Agreement to the Closing Date in the ordinary course of business consistent
with past practice.
4.12 Real Property. (a) Schedule 4.12(a) hereto contains a
list of the address of each parcel of real property owned, leased or occupied by
the Audio Products Group Companies (the "Real Property") and includes a
statement of: (i) the approximate square footage of each such parcel of Real
Property; (ii) whether such Real Property is owned or leased; (iii) in the case
of any Real Property which is owned by any of the Audio Products Group
Companies, the identity of the Audio Products Group Company
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that is the owner of such Real Property and (iv) in the case of any Real
Property which is leased or occupied by any of the Audio Products Group
Companies, the identity of the lessee or occupant and the lessor of such Real
Property and a description of the documents constituting the lease or occupancy
agreement, including any amendments, modifications or extensions, or, for oral
agreements, an accurate description of all material terms of the oral agreement,
including parties, premises, duration, options and sums to be paid. The Real
Property constitutes all the fee, leasehold and other interests in real property
held by the Audio Products Group, and constitutes (except for the corporate
headquarters of Mark IV located in Amherst, New York at 501 John James Audubon
Parkway, Amherst, New York) all of the fee, leasehold and other interests in
real property used or held for use in connection with, necessary for the conduct
of, or otherwise material to, the business of the Audio Products Group as such
business is currently conducted.
(b) Except as otherwise set forth in Schedule 4.12(b), each
Audio Products Group Company that is identified in Schedule 4.12(a) as the owner
of any Real Property has good and marketable fee simple title to the Real
Property which the Audio Products Group Company is identified as the owner of,
free and clear of all liens, charges or other encumbrances.
(c) Except as set forth in Schedule 4.12(c), with respect to
each parcel of Real Property which is identified in Schedule 4.12(a) as being
leased or occupied by an Audio Products Group Company, each Audio Products Group
Company that is identified in Schedule 4.12(a) as the lessee or occupant of such
Real Property, and, to the knowledge of Mark IV, each other party that is a
lessee or occupant of such Real Property, has a valid and enforceable leasehold
or occupancy interest in such Real Property free and clear of all liens, charges
or other encumbrances. Each lease or occupancy agreement is valid, binding and
in full force and effect and enforceable in accordance with its terms. Each
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lease or occupancy agreement grants the tenant under the lease or occupancy
agreement the exclusive right to use and occupy the premises and rights demised
and intended to be demised thereunder, except as set forth in Schedule 4.12(c).
Each Audio Products Group Company enjoys peaceful and undisturbed possession
under its respective leases or occupancy agreements for the leased or occupied
Real Property, except as set forth in Schedule 4.12(c). Except as otherwise set
forth in Schedule 4.12(c), there are no material defaults that have occurred
under the terms of any lease or occupancy agreement of any Real Property used by
any of the Audio Products Group Companies with respect to the obligations of the
Audio Products Group Company party or occupant thereto or with respect to the
obligations of the lessor of such Real Property. No event has occurred and is
continuing that, with respect to the Audio Products Group, constitutes or, with
notice or the passage of time or both, would constitute a material default,
violation or breach in any respect under any such lease or occupancy agreement.
Prior to the date hereof, Mark IV has delivered to the Buyer a complete and true
copy of each document set forth on Schedule 4.12(a).
(d) Except as otherwise set forth in Schedule 4.12(d), neither
Mark IV nor any of the Audio Products Group Companies has received any written
or, to the knowledge of Mark IV, oral notice that the current use, occupancy and
ownership (or leasing) of any Real Property, including any buildings, structure
or other improvements constituting part of the Real Property, violates in any
material way any applicable building, zoning, subdivision and other land use and
similar laws affecting the Real Property. No current use by the Audio Products
Group of the Real Property is dependent on a nonconforming use or other
governmental approval, the absence of which would materially limit the use of
any of the properties or assets in the business of the Audio Products Group.
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(e) Except as otherwise set forth in Schedule 4.12(e), none of
the Real Property is subject to any pending or, to the knowledge of Mark IV or
the Company, threatened condemnation proceeding by any public or quasi-public
agency or other authority.
(f) To the knowledge of Mark IV, except as otherwise set forth
in Schedule 4.12(f), all of the Real Property is benefited by all easements or
other rights (including utility service) necessary for the Audio Products Group
Company which is identified in Schedule 4.12(a) as the owner or lessee of such
Real Property, to continue to conduct its business at such Real Property in the
ordinary course.
4.13 Personal Property Leases. Schedule 4.13 contains a list
of each lease relating to any personal property used by any of the Audio
Products Group Companies in the conduct of its business that (a) provides for
annual lease payments in excess of $25,000, (b) has a term in excess of one year
and (c) is not cancelable upon 30 or fewer days' notice without any liability,
penalty or premium, other than nominal cancellation fee or charge (the
"Leases"). Prior to the date hereof, Mark IV has delivered to the Buyer copies
of the Leases including all amendments thereof and all modifications thereto.
Except as set forth in Schedule 4.13, no material default has occurred under the
terms of any of the Leases with respect to the obligations of any of the Audio
Products Group Companies or, to the knowledge of Mark IV, any other parties to
the Leases.
4.14 Intangible Assets. (a) For the purposes of this
Agreement, "Intellectual Property" is defined as: the United States and foreign
trademarks, service marks, trade names, brand names, trade dress, domain names,
copyrights, mask works and similar rights, including registrations and
applications to register or renew the registration of any of the foregoing,
patents and patent applications, inventions, processes, designs, manufacturing,
engineering and other drawings, formulae, technology, trade secrets,
confidential
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information, computer software, data and documentation, tangible embodiments of
any of the foregoing (in any medium including electronic media). Schedule
4.14(a) contains a complete and accurate list and general description of all
Intellectual Property that is owned by any member of the Audio Products Group
(the "Owned Intellectual Property"), provided, however, that Owned Intellectual
Property shall include, but Schedule 4.14(a) need not disclose, inventions,
processes, designs, manufacturing, engineering and other drawings, formulae,
technology, trade secrets or confidential information. Except as specifically
set forth on Schedule 4.14(a) or 4.14(b), each member of the Audio Products
Group has the exclusive right to use all Owned Intellectual Property set forth
in Schedule 4.14(a) used in connection with the Audio Products Business and owns
such Owned Intellectual Property free and clear of any liens, charges or
encumbrances and any requirement of any past, present or future royalty
payments, license fees, charges or other payments. Immediately after the
Closing, each member of the Audio Products Group shall own or have licensed to
it all Intellectual Property used in the Audio Products Business on the same
terms and conditions as in effect immediately prior to the Closing.
(b) Schedule 4.14(b) sets forth a complete and correct list of
all written, and a description of all material oral, licenses and agreements
related to the Audio Products Group Business, (i) pursuant to which the use by
any person of Intellectual Property is permitted by any member of the Audio
Products Group, and (ii) pursuant to which the use of Intellectual Property by
any member of the Audio Products Group is permitted by any person (collectively,
the "Intellectual Property Licenses"). All Intellectual Property Licenses are in
full force and effect in accordance with their terms, and are free and clear of
any liens, charges or encumbrances relating to, incurred by or granted by any
Audio Products Group Company. Neither any member of the Audio Products Group
nor, to the knowledge of Mark IV, any other party is in default under any
Intellectual Property License. Prior to the date hereof
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Mark IV has delivered or otherwise made available to the Buyer copies of the
written Intellectual Property Licenses and accurate descriptions of all terms of
any material oral Intellectual Property License.
(c) Except as set forth on Schedule 4.14(a), the Owned
Intellectual Property and the Intellectual Property used by the members of the
Audio Products Group pursuant to Intellectual Property Licenses is all the
Intellectual Property used or held for use in connection with, necessary for the
conduct of or otherwise material to the Audio Products Business as such business
is currently conducted.
(d) Neither the conduct of the Audio Products Group Business
nor, to the knowledge of Mark IV, that of any other party, conflicts with or
infringes the rights of any third party in respect of any Intellectual Property,
except as set forth on Schedule 4.14(c). Except as set forth on Schedule
4.14(c), to the knowledge of Mark IV, none of the Owned Intellectual Property is
being infringed or misappropriated by third parties. Except as set forth on
Schedule 4.14(d), there is no written claim or demand of any person pertaining
to, or any proceeding which is pending or, to the knowledge of Mark IV,
threatened, that (i) challenges the rights of any member of the Audio Products
Group in respect of any Owned Intellectual Property or Intellectual Property
License, (ii) asserts that any member of the Audio Products Group is infringing
or otherwise in conflict with, or is required to pay any royalty, license fee,
charge or other amount with respect to, any Intellectual Property, or (iii)
claims that any default exists under any Intellectual Property License.
(e) The Owned Intellectual Property listed on Schedule 4.14(a)
is in proper form, not disclaimed and has been properly maintained and otherwise
duly registered with, filed in or issued by, as the case may be, the United
States Patent and Trademark Office and the United States Copyright Office or
other filing offices, domestic or foreign, to the extent necessary or desirable
to ensure full protection
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under any applicable law, and the same remain in full force and effect to the
extent material to the Audio Products Business, and each member of the Audio
Products Group has taken such other actions necessary (including maintaining all
necessary and appropriate standards of quality control) to ensure full
protection under applicable laws.
4.15 Litigation. Except as set forth in Schedule 4.15, there
are no actions, suits or written claims (including, without limitation, product
liability claims or claims that any of the Audio Products Group Companies has
breached or otherwise failed to perform its obligations under any product or
service warranties described in Section 4.27 hereof) or legal, administrative,
equitable or arbitration proceedings or outstanding orders, judgments,
injunctions, awards or decrees of any court, any governmental or regulatory
body or any arbitration tribunal pending or, to the knowledge of Mark IV,
threatened against or involving Mark IV or any of the Audio Products Group
Companies which: (a) seek to prevent the consummation of the transactions
contemplated by this Agreement or the Mark IV Ancillary Agreements; or (b)
relate to the business of any of the Audio Products Group Companies and which,
if adversely decided, would have a Material Adverse Effect. There are no
outstanding orders, judgments, decrees, stipulations or injunctions issued by
any governmental authority against any member of the Audio Products Group, Mark
IV or PLC or that in any way affect the Audio Products Group.
4.16 Banks and Brokers. Schedule 4.16 sets forth the name of
each bank, trust company, securities or other broker or other financial
institution: (a) with which Mark IV or the Company have any account, lock box,
safe deposit box or vault for the exclusive purpose of providing or maintaining
banking or other financial services to any of the Audio Products Group
Companies; and (b) with which any of the Audio Products Group Companies has any
account, lock box, safe deposit box or vault.
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4.17 Employee Benefit Plans. (a) Except for any individual
employment, consulting or severance contracts disclosed in Schedule 4.21
attached hereto, Schedule 4.17(a) attached hereto sets forth a list, and a
general description for each of the Audio Products Group Companies of:
(i) each written personnel practice and each material
non-written personnel practice (collectively, the "Personnel
Practices") including, without limitation, vacation policies, holiday
pay policies, severance pay policies, sick or personal pay policies,
incentive bonus programs, bereavement pay programs, company car
policies, service award policies, tuition refund policies, relocation
assistance policies and patent award policies but excluding any stock
ownership, stock purchase, stock option and phantom stock plans;
(ii) each plan, fund or program which provides to its participants
or beneficiaries, through the purchase of insurance or otherwise,
medical, surgical or hospital care or benefits, in the event of
sickness, accident, disability, death or unemployment, vacation,
benefits or severance benefits (each of such plans, funds or programs
being hereinafter referred to individually as an "Employee Welfare
Plan" and collectively as "Employee Welfare Plans"); and
(iii) each plan, fund or program which, by its express terms,
provides a retirement income to employees or results in the deferral of
income by employees for periods extending to the termination of covered
employment or beyond (other than any such plans, funds or programs
which are required to be maintained by any of the Audio Products Group
Companies, Mark IV or any other person or entity that, together with
Mark IV and/or any Audio Products Group Company, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code (each, a
"Commonly Controlled Entity")) under the terms of any law, rule
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or regulation of any United States or foreign federal, state (or its
regional equivalent) or local governmental authority (each of such
plans, funds or programs being hereinafter referred to individually as
an "Employee Pension Plan" and collectively as the "Employee Pension
Plans") which is: (w) maintained, assumed or contributed to by Mark IV
for the benefit of any employee of any of the Audio Products Group
Companies; or (x) maintained, assumed or contributed to by any Audio
Products Group Company for the benefit of any of its employees
(all such Personnel Practices, Employee Welfare Plans and Employee Pension Plans
being sometimes hereinafter referred to individually as a "Plan" and
collectively as the "Plans").
(b) Except as otherwise set forth in Schedule 4.17(b), Mark IV
has previously delivered to the Buyer: (i) complete copies of all written plan
documents which set forth the terms of each of the Plans and where applicable,
complete copies of each currently effective trust agreement, insurance or group
annuity contract and each other funding or financing arrangement relating to any
Plan; (ii) a general description of any of the Plans with respect to which no
formal written plan document has been adopted; (iii) the most recent summary
plan description for each Plan for which such summary plan description is
required or has been prepared; and (iv) where applicable, copies of the most
recent annual report or registration forms, if any, required to be filed with
respect to any such Plans with any governmental agency or authority.
(c) Each of the Plans is in material compliance with the
applicable requirements of all laws, rules and regulations of any United States
or foreign, federal, state (or its regional equivalent) or local governmental
authority and the terms of all collective bargaining agreements relating to the
Plans and each of the Plans has been administered in all material respects in
substantial
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compliance with its terms, all laws, rules and regulations of any United States
or foreign, federal, state (or its regional equivalent) or local governmental
authority and the terms of all collective bargaining agreements relating to the
Plans. To the reasonable knowledge of Mark IV, there are no investigations by
any governmental agency, termination proceedings or other claims (except routine
claims for benefits payable under the Plans), suits or proceedings pending or
threatened against any Plan or asserting any rights or claims to benefits under
any Plan that, individually or in the aggregate, is reasonably likely to result
in a Material Adverse Effect.
(d) (i) There has been no application for waiver or waiver of
the minimum funding standards imposed by Section 412 of the Code with respect to
any Employee Pension Plan; and (ii) no Employee Pension Plan has or had at any
time during the current plan year an "accumulated funding deficiency" within the
meaning of Section 412(a) of the Code.
(e) Each Employee Pension Plan that is intended to be a
tax-qualified plan has received a determination letter from the Internal Revenue
Service to the effect that such Pension Plan and related trust is qualified and
exempt from Federal income taxes under Sections 401(a) and 501(a), respectively,
of the Code; no such determination letter has been revoked, and, to the
knowledge of Mark IV, revocation has not been threatened; and no such Employee
Pension Plan has been amended since the effective date of its most recent
determination letter in any respect that would reasonably be expected to
adversely affect its qualification. Each foreign Employee Pension Plan that is
required to receive the equivalent of a determination letter from its applicable
host country has received such letter; no such letter has been revoked and, to
the knowledge of Mark IV, revocation has not been threatened; and no such
foreign Employee Pension Plan has been amended since the effective date of its
most recent letter in any respect that would reasonably be expected to adversely
affect such letter. Mark IV has
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delivered or made available to the Buyer a copy of the most recent determination
letter, or any foreign equivalent, received with respect to each Employee
Pension Plan for which such a letter has been issued, as well as a copy of any
pending application for a determination letter or foreign equivalent. To the
knowledge of Mark IV, no event has occurred that could subject any Employee
Pension Plan to tax under Section 511 of the Code.
(f) (i) Within the past five years, no Employee Pension Plan
that is subject to Title IV of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") has been terminated other than in a standard
termination in accordance with Section 4041(b) of ERISA (a "Standard
Termination") and, except as otherwise disclosed on Schedule 4.17(f), no
Employee Pension Plan has been the subject of a "reportable event" (as defined
in Section 4043 of ERISA and the regulations thereunder); (ii) no Employee
Pension Plan is reasonably expected to be terminated other than in a Standard
Termination prior to the Closing Date or as a result of the transactions
contemplated hereby; and (iii) none of Mark IV, any Audio Products Group Company
or any significant subsidiaries thereof or, to the knowledge of Mark IV, any
non-employee trustee, non-employee administrator or other non-employee fiduciary
of any Plan has breached the fiduciary duty provisions of ERISA or any other
applicable law in a manner that, individually or in the aggregate, is reasonably
likely to result in a Material Adverse Effect.
(g) Mark IV has furnished to the Buyer the most recent
actuarial report or valuation with respect to each Defined Benefit Plan.
(h) Within the last six years, no Commonly Controlled Entity
has incurred any liability under Title IV of ERISA other than for the payment of
premiums to the Pension Benefit Guaranty Corporation, other than any liability
identified on Schedule 4.17(h) hereof which has
been fully paid as of the date hereof.
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(i) No Commonly Controlled Entity has engaged in a transaction
described in Section 4069 of ERISA that could subject Mark IV or any Audio
Products Group Company to liability under such Section .
(j) Except as disclosed in Schedule 4.17(j), no Employee
Pension Plan constitutes, or within the past 6 years, has constituted, a
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA and no
Commonly Controlled Entity has incurred or is expected to incur prior to the
Closing Date or will incur as a result of the transactions contemplated hereby,
any liability to any multiemployer plan which remains unsatisfied in connection
with a complete or partial withdrawal from any such Plan within the meaning of
Section 4203 or 4205 of ERISA. Except as disclosed in Schedule 4.17(j), no
condition exists and no event has occurred with respect to any multiemployer
plan that could present a risk of any liability arising with respect to a
complete or partial withdrawal by any Commonly Controlled Entity within the
meaning of Section 4203 or 4205 of ERISA, which would have a Material Adverse
Effect.
(k) Except as specifically provided in this Agreement, no
employee of any Audio Products Group Company will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any Plan or under any employment, severance, termination or compensation
agreement or as a result of the transactions contemplated by this Agreement.
(l) Except as otherwise set forth in Schedule 4.17, no benefit
that is payable, or which may become payable, to any employee of an Audio
Products Group Company pursuant to any Plan shall constitute an "excess
parachute payment" (as defined in Section 280G(b)(1)of the Code) which is
subject to the imposition of an excise tax under Section 4999 of the Code or
which would not be deductible by reason of Section 280G of the Code.
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4.18 Consents and Approvals. Except for consents listed in
Schedule 4.18 and for the filing of notification documentation under the HSR Act
and the expiration of all applicable waiting periods thereunder, no material
permit, consent, approval or authorization of, or declaration, filing or
registration with, any governmental agency or authority or any other person,
firm or corporation is necessary or required to be obtained in connection with
the execution and delivery by Mark IV, PLC or the Company of this Agreement and
the Mark IV Ancillary Agreements or the consummation of the transactions
contemplated hereby or thereby. Schedule 4.18 also contains a list of all
material consents, approvals, authorizations, declarations, filings, or
registrations which are, to the knowledge of Mark IV, required to be obtained by
the Audio Products Group Companies from any governmental agency or authority and
that are necessary for, or otherwise material to, the conduct of the business of
the Audio Products Group as currently conducted. Except as set forth in Schedule
4.18, all such governmental approvals and other consents have been duly obtained
and are held by the Audio Products Group and are in full force and effect. Each
member of the Audio Products Group is in compliance with all such governmental
approvals and other consents held by any member thereof, and no member of the
Audio Products Group has been notified in writing or otherwise has reason to
believe that any such governmental approval or consent will be modified,
suspended, canceled or modified or that such governmental approval or consent
cannot be renewed in the ordinary course of business.
4.19 Environmental Protection. (a) Except as set forth in
Schedule 4.19(a), each Audio Products Group Company has obtained all permits,
licenses, consents, authorizations, waivers, grants, exemptions, orders,
registrations and approvals (collectively, the "Permits") that: (i) are required
to be obtained by any such Audio Products Group Company under all applicable
United States or foreign federal, state (or its regional equivalent) and local
statutes, laws, rules and regulations relating to pollution, cleanup,
restoration or protection of the
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environment or to the protection of flora or fauna or their habitat or to human
or public health or safety (collectively referred to as "Environmental Laws"),
including, without limitation, laws relating to emissions, discharges, releases
or threatened releases into the environment (including, without limitation,
ambient air, surface water, ground water or land) of any substances identified
in any such Environmental Laws (such substances being hereinafter referred to as
"Regulated Materials"); and (ii) relate to the manufacture, generation,
processing, distribution, use, treatment, receipt, storage, disposal, transport,
or handling of Regulated Materials.
(b) Except as set forth in Schedule 4.19(b), each Audio
Products Group Company has complied in all material respects and is currently in
material compliance with: (i) all terms and conditions of all Permits required
under any applicable Environmental Laws and the making and filing of all
reports, forms and documents and the maintenance of all records required to be
made, filed or maintained by it under any Environmental Law; (ii) all applicable
Environmental Laws pertaining to any of the properties and assets of the Audio
Products Group (including Real Property) and the use and ownership thereof; and
(iii) all plans, orders, decrees, judgments, injunctions, notices or demand
letters applicable to such Audio Products Group Company and issued, entered,
promulgated or approved under any Environmental Law.
(c) Except as set forth in Schedule 4.19(c), neither Mark IV
nor any of the Audio Products Group Companies has received any written notice
that any past or present conditions, circumstances, activities, practices,
incidents or actions of any Audio Products Group Company relating to the
manufacture, generation, processing, distribution, use, treatment, receipt,
storage, disposal, transport, or handling of any Regulated Material or relating
to any emission, discharge, release or threatened release into the environment
of any Regulated Material: (i) may interfere with or prevent compliance or
continued compliance
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by any of the Audio Products Group Companies with any of the Environmental Laws
or any regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder; (ii) may give
rise to any common law or legal liability; or (iii) may otherwise form the basis
of any claim, action, demand, suit, proceeding, hearing, study or investigation.
(d) Except as set forth in Schedule 4.19(d), there is no
civil, criminal or administrative action, suit, demand, claim, hearing, notice
or demand letter, notice of violation, investigation or proceeding pending or to
the knowledge of Mark IV, threatened against any Audio Products Group Company
relating in any way to any violation of any Environmental Law or any regulation,
code, plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder.
(e) Except as set forth in Schedule 4.19(e), no Audio Products
Group Company or other person has caused or taken any action that will result
in, and no Audio Products Group Company is subject to, any material liability or
obligation relating to (i) the environmental conditions on, under, or about the
Real Property or other properties or assets owned, leased, operated or used by
any Audio Products Group Company or any predecessor thereto at the present time
or in the past, including without limitation, the air, soil and groundwater
conditions at such properties; or (ii) the past or present use, management,
handling, transport, treatment, generation, storage, disposal or release of any
Regulated Material.
4.20 Insurance. Schedule 4.20 contains a complete and correct
list and summary description (including the amount of any applicable
deductibles) of all policies of fire, liability, workmen's compensation and
other forms of insurance owned or held by Mark IV or any Audio Products Group
Company and issued with respect to or covering risks associated with the assets,
properties or business of each Audio Products Group Company. All such policies
are in full
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force and effect, all premiums with respect thereto covering all periods up to
and including the Closing Date have been paid, and no notice of cancellation or
termination has been received with respect to any such policy. Such policies are
valid, outstanding and enforceable; will remain in full force and effect through
the respective dates set forth in Schedule 4.20 without the payment of
additional premiums; and will not, with respect to all periods up to and
including the Closing Date, in any way be affected by, or terminate or lapse by
reason of, the consummation of the transactions contemplated by this Agreement,
except to the extent set forth in Schedule 4.20.
4.21 Contracts and Commitments. (a) Except for leases required
to be disclosed pursuant to Sections 4.12 and 4.13 hereof, Plans required to be
disclosed pursuant to Section 4.17(a) hereof and insurance policies required to
be disclosed by Section 4.20 hereof, Schedule 4.21(a) contains a list of each
written contract, subcontract, agreement, commitment, option, note, bond,
mortgage, indenture, deed of trust, guarantee, franchise or license of the Audio
Products Group which: (i) (A) requires payments in excess of $150,000 per year;
(B) contains the terms and conditions: (x) upon which any person is employed as
an officer or management-level employee or under which any person serves as a
consultant; or (y) upon which any severance or other termination payments (other
than severance or termination payments required to be made by applicable law)
are payable; (C) provides preferential rights to purchase any material quantity
of any assets; (D) limits the freedom of any party to engage in any business in
any geographic area; (E) contains any "change in control" provision which would
be activated or otherwise affected by the consummation of the transactions
contemplated by this Agreement; (F) contains the terms of any guaranty of the
payment or performance of any liabilities or obligations the cost of the payment
or performance of which liabilities or obligations exceeds, in the aggregate, an
amount equal to $150,000; or (G) contains terms and conditions upon which any
person or entity is engaged to act as a distributor or a sales representative,
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whether on exclusive or non-exclusive terms, for any products manufactured,
assembled, purchased or otherwise procured for sale by the Audio Products Group
and pursuant to which there were in excess of $100,000 of annual sales of
products of the Audio Products Group Companies in 1996 fiscal year or the
eight-month period ended October 31, 1996; and (ii) (A) Mark IV is a party to
and relates exclusively to the Audio Products Group (hereinafter individually
referred to as a "Mark IV Contract" and collectively as the "Mark IV
Contracts"); or (B) any Audio Products Group Company is a party to or the
beneficiary of (hereinafter individually referred to as an "Audio Products Group
Contract" and collectively as the ("Audio Products Group Contracts"). Prior to
the date hereof Mark IV has delivered or otherwise made available to the Buyer
copies of the Mark IV Contracts and the Audio Products Group Contracts, and
accurate descriptions of all material terms of any oral contracts which, if
written, would be required to be disclosed on Schedule 4.21(a), including all
amendments thereof and modifications thereto.
(b) Except as set forth in Schedule 4.21(b), each of the Mark
IV Contracts and each of the Audio Products Group Contracts is valid, binding
and in full force and effect and enforceable in accordance with its terms.
(c) Except as set forth in Schedule 4.21(c), Mark IV is not in
material default with respect to any of its obligations under any of the Mark IV
Contracts, and, to the knowledge of Mark IV, there is no basis for any claim
that any other parties to any of the Mark IV Contracts is in material default
with respect to its obligations under such Mark IV Contracts.
(d) Except as set forth in Schedules 4.21(b)-(d), there does
not exist under any Audio Products Group Contracts any material violation,
breach or event of default, or event or condition that, after notice or lapse of
time or both, would constitute a material violation, breach or event of default
thereunder, on the part of any
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member of the Audio Products Group or, to the knowledge of Mark IV, any other
person.
4.22 Tax Matters. (a) Except as set forth in Schedule 4.22(a),
(i) Mark IV and each of the Audio Products Group Companies have duly and timely
filed or caused to be filed with the appropriate governmental agencies all Tax
Returns (as hereinafter defined) required to be filed with respect to any of the
Audio Products Group Companies or the respective operations or assets thereof,
(ii) all Taxes shown due on such Tax Returns have been paid, (iii) all such Tax
Returns are correct and complete in all material respects, and (iv) none of the
Audio Products Group Companies or any group of companies that files a combined,
consolidated or unitary Tax Return that includes any of the Audio Products Group
Companies is currently the beneficiary of any extension of time within which to
file any Tax Return.
(b) Except as set forth on Schedule 4.22(b), (i) all Taxes
that are or may become payable by any of the Audio Products Group Companies or
chargeable as a lien upon any of the assets thereof for which the filing of a
Tax Return is not required have been or as of the Closing Date will have been
duly and timely paid or, to the extent not yet due and payable, accrued and (ii)
each of the Audio Products Group Companies has duly and timely withheld all
Taxes required to be withheld in connection with the business or assets of such
Company, and such withheld Taxes have been either duly and timely paid to the
proper governmental authorities or properly set aside in accounts for such
purpose.
(c) Except as set forth on Schedule 4.22(c), there has been no
written claim (other than a claim that has been finally settled) concerning any
liability for Taxes of any of the Audio Products Group Companies or that may be
chargeable as a lien on the assets thereof asserted or raised by any taxing
authority and, to the knowledge of Mark
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IV and its Affiliates, no circumstances exist to form the basis for such a
claim.
(d) Schedule 4.22(d) lists all Income Tax Returns that have
been filed with respect to any of the Audio Products Group Companies or any
combined, consolidated or unitary Tax Return that includes any of the Audio
Products Group Companies and that have not yet been audited or are currently the
subject of audit or for which the relevant period for the assessment of Taxes
has not expired.
(e) Except as set forth on Schedule 4.22(e), none of the Audio
Products Group Companies or any combined, consolidated or unitary Tax Return
that includes any of the Audio Products Group Companies has (i) waived any
statute of limitations or agreed to any extension of the period for assessment
or collection of Taxes, or (ii) executed or filed any power of attorney with
respect to Taxes, which waiver, agreement or power of attorney is currently in
force.
(f) Except as set forth on Schedule 4.22(f), no material
elections for United States federal Income Tax purposes have been made by any of
the Audio Products Group Companies or any combined, consolidated or unitary Tax
Return that includes any of the Audio Products Group Companies that are
currently in force and by which any of the Audio Products Group Companies is
bound.
(g) Except as set forth in Schedule 4.22(g), none of the Audio
Products Group Companies (i) is a party to or bound by or has any obligation
under any Tax allocation, sharing, indemnity or similar agreement or
arrangement, or (ii) is or has been a member of any combined, consolidated or
unitary Tax Return that includes any of the Audio Products Group Companies.
(h) For the purposes of this Agreement: (i) "Taxes" shall mean
all taxes, charges, fees, levies, duties or other assessments, including,
without limitation, income, excise, sales, use, value added, alternative,
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minimum, accumulated earnings, personal holding company, capital stock, profits,
windfall profits, gross receipts, transfer, registration, stamp, premium,
customs duties, severance, environmental (including taxes under section 59A of
the Code), real property, personal property, ad valorem, occupancy, license,
occupation, employment, payroll, social security, disability, unemployment,
workers' compensation, withholding, estimated or other similar tax, duty, fee,
assessment or other governmental charge or deficiencies thereof, franchise taxes
or other similar tax, duty, fee, assessment or other governmental charge or
deficiencies thereof (including any interest, penalties or additions
attributable to or imposed on or with respect to any such assessment) imposed by
the United States, any foreign jurisdiction, and any state, province, county,
locality or other government, taxing authority, or subdivision thereof; (ii)
"Income Taxes" shall mean all Taxes computed in whole or in part based on or by
reference to net income and any alternative, minimum, accumulated earnings or
personal holding company Tax; and (iii) "Tax Return" shall mean any return,
report, information return or other document (including any related attachments,
schedules or supporting information) filed or required to be filed with any
governmental entity or other authority in connection with the determination,
assessment or collection of any Taxes (whether or not such Taxes are imposed on
Mark IV or any of the Audio Products Group Companies) or the administration of
any laws, regulations or administrative requirements relating to any Taxes.
4.23 Labor Relations. Schedule 4.23 contains a list of each
contract or other agreement between Mark IV or any Audio Products Group Company
and any labor union or other association representing any employees of any Audio
Products Group Company (each such contract being hereinafter referred to as a
"Labor Agreement"). Prior to the date hereof, Mark IV has delivered to the Buyer
true and complete copies of each Labor Agreement listed in Schedule 4.23. Except
as set forth in Schedule 4.23, none of the Audio Products Group Companies has,
at any time during the last
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three years, experienced any material labor disputes or any work stoppage due to
labor disagreements. Except to the extent set forth in Schedule 4.23: (a) there
is no unfair labor practice charge, or complaint or other action against any of
the Audio Products Group Companies pending or, to the knowledge of Mark IV,
threatened before the National Labor Relations Board or any other foreign,
federal, state (or its regional equivalent) or local administrative or
governmental agency or authority having regulatory powers with respect to the
relationships between employers and employees (hereinafter a "Foreign Labor
Board"), and none of the Audio Products Group Companies is subject to any order
to bargain by the National Labor Relations Board or any Foreign Labor Board; (b)
there is no, and during the past three years there has been no, labor strike or
work stoppage and, to the knowledge of Mark IV, no labor strike or work stoppage
is threatened against or affecting Mark IV with respect to any of the Audio
Products Group Companies; (c) no question concerning representation is pending
or to Mark IV's knowledge is threatened respecting employees of any of the Audio
Products Group Companies; and (d) no grievance is pending under any collective
bargaining agreement to which any Audio Products Group Company is a party or
bound, before any Foreign Labor Board or that would have a Material Adverse
Effect.
4.24 Customers and Suppliers. None of the Audio Products Group
Companies is engaged in any dispute with any customer or supplier of any of the
Audio Products Group Companies which, individually or in the aggregate, would
have a Material Adverse Effect.
4.25 Compliance with Law. Except for matters pertaining to the
Plans which are provided for in Section 4.17 and matters pertaining to
Environmental Laws which are provided for in Section 4.19, the operations of
each of the Audio Products Group Companies are conducted in compliance with all
applicable laws, regulations and other requirements of all national governmental
authorities, and of all states, municipalities, foreign governments and other
political
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subdivisions and agencies thereof, having jurisdiction over the business of the
Audio Products Group Companies, including, without limitation, all such laws,
regulations and requirements relating to employment of unauthorized aliens,
antitrust, consumer protection, currency exchange, equal opportunity, health,
occupational safety, pension and securities except to the extent that any
failure to so comply would not have a Material Adverse Effect. Except as set
forth in Schedule 4.25, none of the Audio Products Group Companies has received
any written notification of any asserted failure by any of the Audio Products
Group Companies to comply with any such laws, rules or regulations.
4.26 Brokers and Finders. Except as set forth in Schedule
4.26, neither Mark IV, the Company nor any of their respective stockholders,
officers, directors or employees, as the case may be, nor any of the Audio
Products Group Companies, has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement.
4.27 Product Warranties. The standard product or service
warranties, indemnifications and guarantees which each of the Audio Products
Group Companies extends to its customers in the ordinary course of the conduct
of their respective businesses, copies of which have been delivered to the
Buyer, are identified in Schedule 4.27. Schedule 4.27 also contains a general
description of any product or service warranties, indemnifications or guarantees
extended by any of the Audio Products Companies to any material customer, the
terms of which are materially different from the standard product or service
warranties, indemnifications or guarantees otherwise described in Schedule 4.27.
No material warranties, indemnifications or guarantees are now in effect or
outstanding with respect to products or services manufactured, produced or
performed by any of the Audio Products Group Companies in the ordinary course of
conduct of their respective businesses, except for
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warranties implied by law and warranties, indemnifications and guarantees of the
types identified in Schedule 4.27.
4.28 Potential Conflicts of Interest. Except as set forth in
Schedule 4.28, no contract, agreement or arrangement (excluding employment
agreements and rights arising under any of the Plans), whether written or oral,
providing for the purchase or sale of any goods or services or relating to any
interest in any property, whether real or personal, or tangible or intangible,
which is used by or relates to any of the Audio Products Group Companies exists
between: (a) Mark IV and any of the Audio Products Group Companies; (b) Mark IV
and any officers or directors of any of the Audio Products Group Companies; or
(c) between any of the Audio Products Group Companies and any officers or
directors of any of the Audio Products Group Companies. Except as set forth in
Schedule 4.28, none of the officers or directors of Mark IV and none of the
stockholders, officers or directors of any of the Audio Products Group Companies
has any cause of action or other claim whatsoever against any of the Audio
Products Group Companies.
4.29 Inventories. All inventories of raw materials,
work-in-process and finished goods of the Audio Products Group included in the
audited balance sheet of the Audio Products Group as at December 31, 1996 shall
be usable or saleable, as the case may be, in the ordinary course of business,
except for obsolete, discontinued and slow moving items for which reserves shall
be established in said balance sheet in accordance with United States GAAP
applied on a basis consistent with the Balance Sheet.
4.30 Undisclosed Liabilities. Except as set forth on Schedule
4.30 and except for the liabilities reflected, reserved or otherwise disclosed
in the Balance Sheet and in the notes thereto, no member of the Audio Products
Group has any other liabilities, whether known, unknown, absolute, accrued or
contingent, which would be required, in order to conform with United States
GAAP, to be set forth in the Balance Sheet, and no member of the Audio
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Products Group has incurred any material liability since the date of the Balance
Sheet other than (a) as set forth in Schedule 4.30, (b) as reflected, reserved
or otherwise disclosed in the balance sheet included in the Interim Financial
Statements or (c) in the ordinary course of business.
4.31 Disclosure. This Agreement and each of the Mark IV
Ancillary Agreements and the instruments attached hereto as Exhibits to be
executed and delivered pursuant to this Agreement by Mark IV or the Company, and
each certificate furnished by or on behalf of Mark IV and any member of the
Audio Products Group to the Buyer pursuant hereto, taken as a whole, do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated herein or therein or necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to Mark IV and PLC as
follows:
5.1 Organization. The Buyer is a limited liability company
duly organized and in good standing under the laws of Delaware, and has the
power and authority to carry on its business as presently conducted.
5.2 Authorization by the Buyer. The Buyer has full power and
authority to enter into, execute and deliver this Agreement and each of the
other documents and instruments to be executed and delivered by it pursuant to
this Agreement (the "Buyer Ancillary Agreements" and, together with the Mark IV
Ancillary Agreements, the "Ancillary Agreements") and to consummate the
transactions
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contemplated hereunder or thereunder. The execution and delivery of this
Agreement and each of the Buyer Ancillary Agreements and the consummation of the
transactions contemplated hereunder or thereunder have been duly authorized by
all necessary action on the part of the Buyer. No other act or proceeding on the
part of the Buyer is necessary to authorize the execution and delivery of this
Agreement and each of the other documents and instruments to be executed and
delivered by the Buyer pursuant to this Agreement, or the consummation by the
Buyer of the transactions contemplated hereby or thereby.
5.3 Binding Agreements. This Agreement constitutes, and, when
executed and delivered on the Closing Date, each of the Buyer Ancillary
Agreements will constitute, valid and binding obligations of the Buyer,
enforceable against the Buyer in accordance with their respective terms.
5.4 No Violation. Neither the execution and delivery of this
Agreement nor the Buyer Ancillary Agreements, nor the consummation of the
transactions contemplated hereby or thereby will: (a) violate any statute or
law, or any rule or regulation of any governmental authority; (b) violate any
order, writ, injunction or decree of any court or governmental authority; or (c)
violate or conflict with or constitute a default under (or an event which, with
notice or lapse of time, or both, would constitute a default under) or will
result in the termination of, or accelerate the performance required by, or
result in the creation of any material lien, security interest, charge or
encumbrance upon any of the material assets of the Buyer under any term or
provision of: (i) the Operating Agreement or Certificate of Formation of the
Buyer, (ii) any material lease, contract, commitment, agreement or restriction
of any kind or character to which the Buyer is party or by which the Buyer or
any of its assets or properties may be bound or affected.
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5.5 Litigation. There are no actions, suits or written claims
or legal, administrative, equitable or arbitration proceedings or outstanding
orders, judgments, injunctions, awards or decrees of any court, any governmental
or regulatory body or arbitration tribunal pending, or to the knowledge of the
Buyer, threatened against or involving the Buyer which: (a) seek to prevent the
consummation of the transactions contemplated by this Agreement or the Buyer
Ancillary Agreements; or (b) or relate to the business or operations of the
Buyer and which, if adversely decided, would have a material adverse effect on
the business, assets, liabilities or financial condition of the Buyer. There are
no outstanding orders, judgments, decrees, stipulations or injunctions issued by
any governmental authority against the Buyer.
5.6 Consents and Approvals. Except for consents listed in
Schedule 5.6 and for the filing of pre-merger notification documentation under
the HSR Act and the expiration of all applicable waiting periods thereunder, no
material permit, consent, approval or authorization of, or declaration, filing
or registration with, any governmental agency or authority or any other person,
firm or corporation is necessary or required to be obtained in connection with
the execution and delivery by the Buyer of this Agreement and the Buyer
Ancillary Agreements or the consummation of the transactions contemplated hereby
or thereby.
5.7 Financing. Buyer has access to net equity capital funds in
an amount in excess of $60 million, which net equity capital funds are free and
clear of any liens, charges or other encumbrances and available to fund the
purchase of the Common Stock and the other obligations of the Buyer set forth in
this Agreement. Prior to the date hereof, the Buyer has delivered to Mark IV
written commitments (the "Bank Commitments") from one or more banks or other
financial institutions which contain the general terms and conditions upon which
such banks or financial institutions have agreed to make loans to the Company,
the proceeds of which loans, together with the Buyer's net
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equity capital funds, will be sufficient to enable the Buyer to consummate the
transactions contemplated in this Agreement (the funds to be loaned to the
Company are hereinafter referred to as the "Financing"). The Bank Commitments
are in full force and effect without modification or amendment of any kind.
5.8 Purchase for Investment. The Buyer is acquiring the Common
Stock of the Company for investment and not for resale or distribution and the
Buyer will not sell, transfer, offer for sale, pledge, hypothecate or otherwise
dispose of any of the shares of Common Stock in violation of any applicable
securities laws or regulations.
5.9 Brokers and Finders. Except as set forth in Schedule 5.10,
neither the Buyer nor any of its officers, directors or employees has employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finders fees in connection with the transactions contemplated by
this Agreement.
ARTICLE 6.
COVENANTS OF MARK IV AND PLC
6.1 Access Pending the Closing Date. Subject to applicable
laws and upon reasonable advance written notice, Mark IV and PLC will and will
cause each of the Audio Products Group Companies to: (a) grant to the Buyer and
its prospective lenders and investors and its and their counsel, accountants and
other representatives, reasonable access during normal business hours to each
parcel of Real Property which is owned, leased or used by the Audio Products
Group Companies in the conduct of their respective businesses and to all
properties, books, contracts, commitments and records of each of the Audio
Products Group Companies; and (b) furnish the Buyer and its prospective lenders
and investors and its and their counsel, accountants and other representatives
all such information as the Buyer or its
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representatives may reasonably request concerning the business and assets of the
Audio Products Group Companies.
6.2 Conduct of Business Prior to the Closing. Except as
described in Schedule 6.2, during the period commencing on the date hereof and
ending on the Closing Date, neither Mark IV, PLC nor the Company have taken, and
Mark IV will take any and all action necessary to prevent each of the Audio
Products Group Companies from taking, any action that would cause any of the
representations and warranties of Mark IV and PLC contained in Section 4.10 to
be untrue as of the Closing Date. Mark IV and PLC shall cause each of the Audio
Products Group Companies not to increase or otherwise enhance the compensation
payable to any employee of the Audio Products Group Companies other than
increases in base salary in the ordinary course consistent with past practices.
In addition, on and after the date hereof to the Closing Date, except as
expressly permitted or required by this Agreement or as otherwise expressly
consented to by the Buyer in writing, Mark IV, PLC and the Company will, and
will cause each other member of the Audio Products Group to:
(a) carry on its business in, and only in, the ordinary course
of business, in substantially the same manner as heretofore conducted, and use
reasonable efforts to preserve intact its present business organization, keep
available the services of its present officers and significant employees, and
preserve its relationships with customers, suppliers and others having business
dealings with it;
(b) maintain all of the tangible Assets and all other tangible
properties and assets owned, leased, occupied, operated or used by it in
reasonable working order and repair consistent with past practice;
(c) use best efforts to keep in full force and effect
insurance comparable in amount and scope of coverage to insurance now carried by
it;
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(d) pay accounts payable and other obligations, when they
become due and payable, in the ordinary course of business;
(e) perform in all material respects all of its obligations
under any contracts, licenses, agreements or other instruments relating to or
affecting any of the properties and assets of any member of the Audio Products
Group (including the Assets) or the business of the Audio Products Group;
(f) promptly advise the Buyer in writing of the occurrence or
non-occurrence of any event or condition (other than matters of a general
economic or political nature that do not affect the business of the Audio
Products Group uniquely) that individually or in the aggregate would reasonably
be expected to have a Material Adverse Effect or result in a breach of this
Section 6.2;
(g) not agree or otherwise commit to take any action
prohibited in the foregoing paragraphs (a) through (e); and
(h) conduct all tax affairs relating to the Audio Products
Group only in the ordinary course of business, in the same manner as heretofore
conducted.
6.3 Termination of Benefit Accruals Under Defined Benefit
Plans. Schedule 6.3 contains a list of each Audio Products Group Company whose
employees are eligible to participate in the master defined benefit pension plan
known as the "Mark IV Industries, Inc. and Subsidiaries Employees Retirement
Income Fund" (hereinafter the "Master Defined Benefit Plan"), which is
maintained by Mark IV for the purpose of providing a defined benefit retirement
income for employees of certain direct and indirect wholly owned subsidiaries of
Mark IV. Mark IV agrees that, prior to the Closing Date, Mark IV shall amend the
terms of the Master Defined Benefit Plan to the extent necessary: (a) to provide
that participants therein who are employees of any
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of the Audio Products Group Companies immediately prior to the Closing Date
("Audio Products Group Participants") shall cease to accrue benefits thereunder
effective not later than sixteen days following the Closing Date (or such
earlier date as Mark IV and the Buyer may subsequently agree to in writing); (b)
to provide that, as of the Closing Date, Audio Products Group Participants shall
be fully vested (i.e., one hundred percent vested) in their accrued benefits
under the Master Defined Benefit Plan; (c) to provide that post- Closing Date
service will be counted for purposes of determining eligibility for benefits for
disability and early retirement for each Audio Products Group Participant
subject to a collective bargaining agreement; and (d) to provide that Audio
Products Group Participants who are located at the Newport, Tennessee plant,
subject (i) to the Collective Bargaining Agreement between Electro-Voice and the
International Union of Electronic, Electrical, Salaried, Machine and Furniture
Workers, AFL-CIO, and its Local 662 and who terminate employment with the Buyer
and its Affiliates on or after May 16, 1997, or (ii) to the Collective
Bargaining Agreement between Electro-Voice and the International Union of
Electronic, Electrical, Salaried, Machine and Furniture Workers, AFL-CIO, and
its Local 663 and who terminate employment with the Buyer and its Affiliates on
or after July 10, 1997, shall be entitled to the monthly pension benefit due to
such employee pursuant to the Master Defined Benefit Plan for each year of
credited service (as defined in the Master Defined Benefit Plan) earned through
the Closing Date based on the multiplier that is effective as of May 16, 1997 or
July 10, 1997, as the case may be (i.e., $17.00 per month) and such benefit
shall be paid from the assets of the Master Defined Benefit Plan. Mark IV agrees
to take, or cause each of the Audio Products Group Companies to take, prior to
the Closing Date, any and all actions (including, without limitation, the
delivery of any notices required under ERISA and the Code and the timely filing
of all required filings with any government agency), which are necessary or
reasonably required to effectuate the intent of this Section 6.3.
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6.4 Financing. At the direction of the Buyer and to the extent
so directed, Mark IV, PLC and each member of the Audio Products Group will use
its reasonable efforts to assist the Buyer in obtaining the Financing,
including, at Buyer's request, by causing each member of the Audio Products
Group and their respective officers, and employees, and by using reasonable
efforts to cause the respective counsel and accountants of each member of the
Audio Products Group to, cooperate with the Buyer in obtaining such Financing.
Without limiting the foregoing, Mark IV agrees to cause the employees of the
Audio Products Group set forth on Schedule 6.4 to be available to assist the
Buyer in obtaining the Financing as Buyer may request.
6.5 Supplements to Schedules. From time to time prior to the
Closing Date, Mark IV and PLC will promptly supplement or amend any Schedules
with respect to any matter arising after the execution of this Agreement, which,
if existing or occurring at or prior to the date of this Agreement, would have
been required to have been set forth by Mark IV or PLC in a Schedule pursuant to
this Agreement, provided that Mark IV and PLC shall deliver a final set of
updated Schedules to the Buyer no later than the third calendar day preceding
the Closing, which set of Schedules shall be subject to further supplementation
only in the case of matters having or expected to have a Material Adverse
Effect. Notwithstanding the foregoing, for purposes of Section 10.7, the
Schedules to this Agreement delivered by Mark IV and PLC shall be deemed to
include only such information as is contained therein on the date of this
Agreement and shall be deemed to exclude any information contained in any
supplement thereto.
6.6 No Solicitation. Mark IV and PLC shall not, and Mark IV
shall take any and all action necessary to prevent any of Mark IV's directors,
officers, employees or agents and any directors, officers, employees or agents
of any of the Audio Products Group Companies, as the case may be, from, directly
or indirectly, encouraging, soliciting, initiating or entering into any
discussions or negotiations
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concerning, any disposition of all the stock or assets of the Audio Products
Group Companies or any of the business of the Audio Products Group (other than
pursuant to this Agreement) or any proposal therefor, or from furnishing or
causing to be furnished any information concerning the Audio Products Group to
any party in connection with any transaction involving the acquisition of any
stock or assets of any Audio Products Group Company or any of the business of
the Audio Products Group by any person other than the Buyer.
6.7 Non-Competition. (a) As a part of the inducement to the
Buyer to enter into this Agreement, Mark IV hereby agrees that for a period of
five years from the Closing Date (the "Covenant Term"), Mark IV shall not, nor
shall any Affiliate of Mark IV (the "Mark IV Affiliates") without the prior
express written consent of the Buyer, own, manage, operate, or control, directly
or indirectly, any business, firm or corporation which competes with the Audio
Products Business as conducted immediately prior to the Closing Date in any
geographical market in which the Audio Products Business conducts its business
as of such date (a "Competing Business"). Ownership by Mark IV or any Mark IV
Affiliate at or after the time of Closing, of less than five percent of the
issued and outstanding capital stock of any enterprise that engages in a
Competing Business the securities of which are listed on a national securities
exchange or included in the national list of over-the-counter securities shall
not be deemed a violation of this Section 6.7.
(b) In addition, neither Mark IV nor any Mark IV Affiliate
shall be deemed to be in violation of this Section 6.7 in the event that, at any
time during the Covenant Term, Mark IV or any Mark IV Affiliate acquires
substantially all the assets of any person, firm or corporation or a majority of
the issued and outstanding capital stock or interests of any corporation or
other entity and, following such acquisition, (i) less than the smaller of five
percent or $5 million of annual sales of any such acquired company are in
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respect of a Competing Business or (ii) (x) more than (A) the smaller of five
percent or $5 million of annual sales of any such acquired company, but less
than (B) the smaller of ten percent or $20 million of annual sales of any such
acquired company are in respect of a Competing Business and (y) Mark IV disposes
of the entities or assets of such acquired company engaged in a Competing
Business (the "Interest") within 18 months following such acquisition pursuant
to the terms of clause (c) of this Section 6.7.
(c) If Mark IV or a Mark IV Affiliate determines to sell an
Interest to a third party, Mark IV shall notify the Buyer of such determination
and offer to negotiate a sale of such Interest to the Buyer. Such notice shall
describe the Interest in reasonable detail. The Buyer shall notify Mark IV
within 30 days after receipt of the notice from Mark IV as to whether the Buyer
desires to engage in such negotiations. If the Buyer does not wish to engage in
such negotiations or if the Buyer fails to respond to Mark IV's notice within
such 30-day period, Mark IV may sell the Interest to any third party or parties
for such price and on such terms and conditions as are acceptable to Mark IV in
its discretion. If within such 30-day period the Buyer informs Mark IV that it
desires to engage in such negotiations, Mark IV and the Buyer shall each
negotiate in good faith the price and other terms and conditions of a sale of
the Interest to the Buyer. If despite such good faith negotiations Mark IV and
the Buyer are unable to enter into a definitive agreement within 60 days after
the Buyer has informed Mark IV it desires to negotiate and to consummate such
sale within the time provided for closing therein, then Mark IV may sell the
Interest to any third party or parties for not less than the purchase price, and
on terms and conditions no more favorable to the third party or parties than the
material terms and conditions last offered by the Buyer to Mark IV during the
course of such negotiations.
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(d) In the event of a breach by Mark IV or any Mark IV
Affiliate of any provision of this Section 6.7, the Buyer shall be entitled to
injunctive relief, both preliminarily and permanently, since the remedy at law
would be inadequate and insufficient. Additionally, the Buyer will be entitled
to all such other legal and equitable remedies as may be available to it. In the
event any of the provisions of this Section 6.8 are determined by a court of
competent jurisdiction to be contrary to any applicable statute, law or rule, or
for any reason to be unenforceable as written, such court may modify any of such
provisions so as to permit enforcement thereof as thus modified.
(e) For purposes of this Agreement, an "Affiliate" of a
person shall mean the subsidiaries of such person, any person that controls such
person or any of such person's subsidiaries, provided that an Affiliate of Mark
IV shall not include a person that acquires control of Mark IV unless such
person or its subsidiaries acquires any Competing Business subsequent to
acquiring control of Mark IV, in which event such person shall be treated as an
Affiliate with respect to such newly acquired Competing Business. As used in
this clause (e), "control" shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management policies of a
person, whether through the ownership of voting securities, by contract or
otherwise.
6.8 Corporate Organization. Mark IV and PLC agree that, prior
to taking any action in connection with any restructuring, reorganization,
transfer, distribution or other disposition described in the recitals to this
Agreement or otherwise affecting the Audio Products Business (the
"Reorganization"), Mark IV shall (a) consult with the Buyer and the Buyer's
advisors and (b) refrain from taking any such proposed action to which the
Buyer, in its reasonable judgment, objects on the basis that such proposed
action is inconsistent with the Reorganization. The fact that Mark IV shall have
consulted with, and the Buyer shall have consented to, any proposed action in
connection with such
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restructuring shall in no way affect or limit any indemnification obligations
Mark IV or PLC may have hereunder. Prior to the Closing, Mark IV, PLC and each
Audio Products Group Company will have taken all corporate and other actions and
proceedings necessary to be taken in order to effect the Reorganization, and all
documents, including instruments of conveyance and assumption related thereto
(the "Reorganization Agreements") (or pursuant to which any Audio Products Group
Company or Asset has been restructured, reorganized, transferred, distributed or
otherwise disposed of during the six months prior to the Closing), will be
provided to the Buyer prior to the execution thereof and the Reorganization
Documents will be in form and substance reasonably satisfactory to the Buyer.
Each of Mark IV, PLC and their respective Affiliates has full power and
authority to enter into, execute and deliver each of the Reorganization
Agreements to be executed and delivered by them and to consummate the
transactions contemplated thereunder. As of the Closing, (i) the execution,
delivery and performance of each of the Reorganization Agreements will have been
duly authorized by all necessary action on the part of Mark IV, PLC and their
respective Affiliates and their respective shareholders, (ii) each of the
Reorganization Agreements will have been duly executed and delivered by Mark IV,
PLC or by their respective Affiliates which are party thereto, as the case may
be, (iii) no other corporate act or proceeding on the part of Mark IV, PLC or
their respective Affiliates or their respective shareholders will be necessary
to authorize the execution and delivery of the Reorganization Agreements or the
consummation by Mark IV or each Affiliate which is a party thereto of the
transactions contemplated thereby, and (iv) will constitute valid and binding
obligations of Mark IV, PLC or their respective Affiliates, as the case may be,
enforceable against them in accordance with their respective terms.
6.9 Insurance. (a) In the event that, after the Closing, the
Buyer shall suffer any loss, arising out of a third party claim or otherwise,
that the Buyer in good faith
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notifies Mark IV would be covered by any insurance policy maintained prior to
Closing by or for the benefit of any member of the Audio Products Group or any
asset used in the Audio Products Business (an "Insured Claim"), Mark IV shall
present and diligently prosecute a claim for payment under such policy in
respect of such loss, and pay to the Buyer the proceeds of such claim under such
policy as reimbursement in respect of the amount of such loss, subject to the
provisions of this Section 6.9.
(b) Mark IV shall not be obligated to present or prosecute any
claim under any such insurance policy with respect to any Insured Claim unless
(i) such Insured Claim is based upon bodily injury, property damage, wrongful or
other acts or another condition or event that arose or occurred (as determined
under the applicable insurance policy) prior to the Closing; and (ii) the Buyer
cooperates fully at its expense with Mark IV's insurers in the investigation of
such Insured Claim and (in the case of any Insured Claim arising out of a
third-party claim) the defense thereof.
6.10 Subsequent Financial Statements. From the date hereof to
and including the Closing Date, Mark IV will, and will cause the Audio Products
Group to, timely prepare, and promptly deliver to the Buyer, a monthly
consolidated balance sheet of the Audio Products Group as at the last day of
each month commencing from October 31, 1996, prepared in accordance with United
States GAAP applied on a consistent basis with the Financial Statements for the
period presented therein subject only to normal adjustments and the absence of
the notes thereto.
6.11 Cash Balances. Mark IV and PLC will cause the Audio
Products Group Companies to hold only such cash at December 31, 1996 as is
necessary (a) in Mark IV and PLC's reasonable judgment, to meet the Audio
Products Group Companies' anticipated working capital needs through and
including the Closing Date, and (b) to repay any
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indebtedness for borrowed money of the Audio Products Group Companies
outstanding as at December 31, 1996.
6.12 United Kingdom Trademarks. Mark IV and PLC shall use
their best efforts to purchase or obtain, or to procure an assignment or
transfer to Klark Teknik of, the right to use the trademarks ELECTROVOICE as set
forth in Registration No. B1,077,124 and SENTRY as set forth in Registration No.
1,077,127 in the United Kingdom, free and clear of all liens, charges or
encumbrances and any requirement of any past, present or future royalty
payments, license fees, charges or other payment. Subject to Sections 11.6 and
11.7 of this Agreement, in the event neither Mark IV nor PLC are able to
purchase, obtain or procure such use of such trademarks, Mark IV and PLC shall,
jointly and severally, indemnify, defend and hold harmless the Buyer Group (as
defined in Section 11.3) from and against all Damages (as defined in Section
11.3) asserted against, resulting from, imposed upon or incurred by the Buyer
Group or any member thereof by reason of or resulting from the any lawsuit,
claim, action, litigation, demand, proceeding, citation, opposition, summons or
investigation brought by any party that is not an Affiliate of Mark IV, PLC, the
Company or the Buyer alleging or stating that the use of either or both such
trademarks conflicts with, imitates, infringes upon, makes illegal use of,
dilutes or misappropriates such third party's rights.
ARTICLE 7.
COVENANTS OF THE BUYER
7.1 Obligation to Secure Financing. The Buyer shall use
reasonable efforts to enter into definitive financing agreements pursuant to the
Bank Commitments as may be necessary to permit the Buyer to consummate the
transactions contemplated hereby on terms satisfactory to the Buyer in its
reasonable judgment and to do all such acts and
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things reasonably necessary to consummate the financing transactions
contemplated by the Bank Commitments.
7.2 Obligation to Continue Certain Employee Benefits. (a)
Except as expressly provided below, the Buyer hereby agrees that, at all times
during the one-year period following the Closing Date (the "Benefit Continuation
Period"), the Buyer shall maintain and provide for the employees of each Audio
Products Group Company or take such action as may be necessary to cause each
Audio Products Group Company to maintain and provide for its employees,
personnel practices, employee welfare plans and employee pension plans which
provide to the employees of each such Audio Products Group Company, benefits
that are substantially comparable in the aggregate to the Personnel Practices,
the Employee Welfare Plans and the Employee Pension Plans which were provided to
the employees of such Audio Products Group Company on the Closing Date, but
specifically excluding (i) any retiree medical benefits or insurance programs
maintained for former employees and retirees of any of the Audio Products Group
Companies, and (ii) any retiree medical benefits which are the subject of the
Settlement Agreement between IUE Local Union 900 and Electro-Voice, Inc. Mark IV
hereby expressly agrees, without limiting any other terms of this Agreement,
that it or any of its successors shall be responsible for the retiree liability
set forth in clauses (i) and (ii) hereof.
(b) Notwithstanding anything else in this Agreement to the
contrary, Mark IV acknowledges and agrees that it is and shall be solely
responsible for the payment of any deferred compensation or stay bonuses payable
to any Audio Products Group Company employee related to services performed for
any of Mark IV or any of the Audio Products Group Companies on or before the
Closing Date which is not paid or otherwise satisfied on or before the Closing
Date, and that, if any liability for any such amount is carried on the books and
records of any Audio Products Group Company as of the Closing Date, such
liability shall be taken into account as a current liability of such Audio
Products Group
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Company in determining its Working Capital for purposes of the purchase price
adjustment contemplated under Section 2.8 hereof.
7.3 Continuation of Welfare Plans. In connection with its
obligations set forth in Section 7.2 hereof, the Buyer agrees that, as soon as
reasonably practical following the Closing Date, the Buyer shall take such
action as may be necessary (including, but not limited to, the establishment of
contractual relationships with providers of group medical insurance, health
maintenance organizations, preferred provider organizations, insurance companies
and others) to cause each Audio Products Group Company to continue to maintain
and provide, at all times during the Benefit Continuation Period, benefits
which, in the aggregate, are substantially comparable to those provided under
the Employee Welfare Plans immediately prior to the Closing Date.
Notwithstanding anything contained in this Agreement to the contrary, if the
employment of any Audio Products Group Company employee set forth on Schedule
7.3 is terminated on or before the three-month anniversary following the
Closing Date, then Mark IV shall be liable for and obligated to pay, in cash,
any severance or termination benefits payable to such employee under any
severance plan, policy or other arrangement entered into by such employee and
executed by with Mark IV prior to the Closing Date. If the employment of any of
the Audio Products Group Company employees who are listed on Schedule 7.3 is
terminated after the three-month anniversary of the Closing Date, the Buyer or
the appropriate Audio Products Group Company shall be solely responsible for any
severance or other termination benefits that are payable to such employee as a
result of such termination of employment.
7.4 Continuation of Certain Defined Benefit Pension Benefits.
Except as otherwise required by any collective bargaining agreement, the Buyer
shall not be obligated by this Agreement or any other agreement or plan to adopt
and maintain, or to cause any Audio Products Group Company whose employees are
currently participating in the
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Master Defined Benefit Plan to adopt and maintain, any defined benefit pension
plans. If the Buyer or any Audio Products Group Company is required by any
collective bargaining agreement to provide benefits under a defined benefit
pension plan, the Buyer or the appropriate Audio Products Group Company shall
establish and maintain such a plan that provides benefits that are substantially
comparable to those provided in the Master Defined Benefit Plan and satisfies
the terms of the collective bargaining agreement currently applicable; provided,
however, that nothing contained herein shall limit the Buyer's ability to amend
or change such plan in any respect (i) if, in the good faith judgement of the
Buyer, such change is necessary to preserve the tax qualified status of such
plan or (ii) after the expiration of the collective bargaining agreements
currently in force.
7.5 Continuation of 401(k) Benefits. In connection with the
Buyer's obligations set forth in Section 7.2 hereof, the Buyer hereby agrees to
take such action as shall be necessary to adopt and maintain or to cause each
Audio Products Group Company whose employees are currently eligible to
participate in the Mark IV Savings & Retirement Plan (the "Master 401(k) Plan"),
to adopt and maintain one or more profit sharing/401(k) type retirement plans
(all such profit sharing/401(k) type retirement plans hereinafter adopted and
maintained by the Buyer or any Audio Products Group Company being hereinafter
referred to as the "New 401(k) Plan") which provide each such employee of each
Audio Products Group Company during the Benefits Continuation Period the
opportunity to receive contributions to his account which are at least
substantially the same as the contributions made available under the terms of
the Master 401(k) Plan immediately prior to the Closing Date.
7.6 Insurance Coverage. The Buyer acknowledges that the
insurance coverage which Mark IV maintains with respect to certain of the Audio
Products Group Companies, including, without limitation, general liability,
product liability, auto liability, property, commercial umbrella,
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excess umbrella, aircraft products, fiduciary liability, crime liability and
workers compensation insurance coverage, is maintained by Mark IV under policies
with respect to which Mark IV is the named insured and the Audio Products Group
Companies for whose benefit such insurance is maintained are additional
insureds. The Buyer acknowledges that effective as of the Closing Date, Mark IV
intends to remove the Audio Products Group Companies from the insurance coverage
provided by such insurance policies to the extent that such insurance coverage
relates to the business and assets of the Audio Products Group Companies with
respect to any periods arising at any time on or after the Closing Date.
Accordingly, the Buyer acknowledges that no insurance protection shall be
available to the Buyer with respect to any injury, loss or damage which the
Buyer, any of the Audio Products Companies, or any third party may suffer as a
result of any event occurring with respect to any of the Audio Products Group
Companies at any time on or after the Closing Date.
7.7 Investigation. The Buyer acknowledges that, except for the
representations and warranties of Mark IV, PLC and the Company contained in or
made pursuant to this Agreement, neither Mark IV, PLC nor any of their
respective officers, employees, agents, stockholders, Affiliates, consultants,
investment bankers, legal advisors or other representatives shall: (a) be deemed
to have made any representations, warranties or assurances of any kind; and (b)
have any liability or obligation to the Buyer in respect of any statement or
assurance made to the Buyer in connection with the transactions contemplated
hereby, including, without limitation, statements set forth in a Confidential
Selling Memorandum and provided to the Buyer or any written or oral statements
made by any employee or representative of Mark IV or any of the Audio Products
Group Companies.
7.8 Schedules. Mark IV and PLC shall deliver to Buyer
definitive Schedules to this Agreement no later than December 10, 1996.
Following delivery of the Schedules,
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Buyer shall have the period from December 11, 1996 up to and including December
16, 1996 to review and comment upon them. If, following such period of comment
and review Buyer is not satisfied with the Schedules or the disclosures
contained therein, Buyer may, by notice given to Mark IV on or before December
17, 1996, reject such Schedules whereupon this Agreement shall be terminated
without liability on the part of either party. If Buyer does not so reject such
Schedules following such period of comment and review, such Schedules (including
any modifications agreed to by Buyer, Mark IV and PLC) shall become part of this
Agreement as of the date hereof.
ARTICLE 8.
ADDITIONAL COVENANTS OF THE BUYER AND MARK IV
8.1 Consents and Conditions. (a) Mark IV and PLC will use
their reasonable efforts, at their own cost and expense, to seek to obtain any
required stockholder, partner, third-party and governmental consents necessary
to consummate the transactions contemplated by this Agreement and to cause each
of the conditions to the obligations of Mark IV and PLC and the Buyer to close
the transactions contemplated hereby (as more particularly set forth in Articles
9 and 10 hereof) to be satisfied. The Buyer will cooperate with Mark IV and PLC
and take such action as Mark IV and PLC may reasonably request in connection
with Mark IV's and PLC's efforts to obtain any consent from any third party to
the consummation of the transactions contemplated hereby or to otherwise cause
such conditions to be fulfilled.
(b) The Buyer will use its reasonable efforts, at its own cost
and expense, to seek to obtain any required interest holder, third-party and
governmental consents necessary to consummate the transactions contemplated by
this Agreement, and to cause each of the conditions to the obligations of the
Buyer and Mark IV to close the transac-
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tions contemplated hereby (as more particularly set forth in Articles 9 and 10
hereof) to be satisfied. Mark IV will cooperate with the Buyer and take any such
action as the Buyer may reasonably request in connection with the Buyer's
efforts to obtain any consent from any third party to the consummation of the
transactions contemplated hereby or to otherwise cause such conditions to be
fulfilled. Mark IV agrees to cooperate in good faith with Buyer in restructuring
the transactions contemplated hereby to provide for the acquisition of one or
more Audio Products Companies organized outside the United States by Buyer or
its subsidiaries, provided that Mark IV and PLC shall not be required to consent
to any such restructuring to which Mark IV objects in its reasonable judgment.
8.2 Filings. As soon as practicable after the date hereof,
Mark IV, PLC and the Buyer shall make any and all filings required under the HSR
Act. In addition, Mark IV and PLC shall furnish to the Buyer and the Buyer shall
furnish to Mark IV and PLC: (a) such information and assistance as may
reasonably be requested in connection with the preparation by such other party
of any necessary filings or submissions to any governmental agency, including,
without limitation, any filings necessary under the provisions of the HSR Act;
and (b) copies of all correspondence, filings or communications (or memoranda
setting forth the substance thereof) between such party or its representatives,
on the one hand, and the Federal Trade Commission, the Antitrust Division of the
U.S. Department of Justice or any other governmental agency or authority or
members of their respective staffs, on the other hand, with respect to this
Agreement and the transactions contemplated hereby.
8.3 Access After the Closing Date. Mark IV, PLC and the
Company agree with the Buyer that, on and after the Closing Date, each, upon
reasonable advance notice from the other, will permit the other and their
respective representatives (including their counsel and auditors), during
normal business hours to have access to and examine and make
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copies of all books and records of the other which pertain to the business and
assets of any of the Audio Products Group Companies, including, but not limited
to, correspondence, memoranda, books of account, payroll records, computer,
litigation and tax records and insurance policies. The out-of-pocket costs of
photocopying any such material (excluding the compensation and related payroll
taxes of employees engaged in the copying of any such materials) shall be borne
by the party requesting such photocopies.
8.4 Record Retention. For a period of seven years after the
date hereof, or, in the case of books or records pertaining to Taxes, for a
period until the expiration of all applicable statutes of limitation, Mark IV,
PLC, the Company and the Buyer agree that, prior to the destruction or
disposition of any books or records pertaining to any of the Mark IV Contracts,
any of the Audio Products Group Contracts or the business or assets of any of
the Audio Products Group Companies, each party shall provide not less than 45
nor more than 90 days' prior written notice to the other of any such proposed
destruction or disposal. If the recipient of such notice desires to obtain any
of such documents, it may do so by notifying the other party in writing at any
time prior to the scheduled date for such destruction or disposal. Such notice
must specify the documents which the requesting party wishes to obtain. The
parties shall then promptly arrange for the delivery of such documents. All
out-of-pocket costs associated with the delivery of the requested documents
(excluding the compensation (and related payroll taxes) of employees engaged in
the preparation, copying or delivery of any such documents) shall be paid by the
requesting party.
8.5 Tax Matters. (a) Tax Payments. (i) Mark IV's
Responsibility. Mark IV shall pay or cause to be paid to the relevant taxing
authorities, and shall reimburse and indemnify the Audio Products Group
Companies and the Buyer for (A) all federal Income Taxes of the consolidated
group (as defined in Section 1504(a) of the Code) that includes any of the Audio
Products Group Companies and of which Mark
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IV is a member ("Mark IV's Consolidated Group") for all periods or portions
thereof ending on or prior to the Closing Date, (B) all state, local and foreign
Income Taxes of any combined, consolidated or unitary state, local or foreign
group that includes any of the Audio Products Group Companies and of which Mark
IV or any of Mark IV's Affiliates (other than the Audio Products Group
Companies) is a member for all periods or portions thereof ending on or prior to
the Closing Date, (C) all Taxes for which any of the Audio Products Group
Companies may be held liable as a member of Mark IV's Consolidated Group
pursuant to Section 1.1502-6(a) of the Treasury Regulations or as a member of
any combined, consolidated or unitary group of which Mark IV or any of the its
Affiliates is or was a member pursuant to any similar provision of any state,
local or foreign law with respect to Income Taxes, (D) any Taxes arising from
any "intercompany transaction" (within the meaning of Section 1.1503-13 of the
Treasury Regulations and any similar provision of state, local or foreign law)
that occurred on or prior to the Closing Date and is required, for any reason,
to be taken into account on or after the Closing Date and (E) all Taxes for
which Mark IV is responsible pursuant to Section 8.5(d). Mark IV shall also pay
to the relevant taxing authorities, or shall reimburse or indemnify the Audio
Products Group Companies and the Buyer for, all Taxes that are or may become
payable by any of the Audio Products Group Companies or chargeable as a lien
upon the assets thereof and that (A) are attributable to any period or a portion
thereof ending or event occurring on or prior to the Closing Date, (B) have not
been paid as of the Closing Date, and (C) do not appear as a liability on the
balance sheet of the relevant Audio Products Group Company used in determining
the final Audited Working Capital.
(ii) The Buyer's Responsibility. The Buyer shall pay or cause
to be paid to the relevant taxing authorities, or shall reimburse and indemnify
Mark IV for, all Taxes that are or may become payable by any of the Audio
Products Group Companies or chargeable as a lien upon the
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assets thereof and that are not described as being the responsibility of Mark IV
in Section 8.5(a)(i) above.
(b) Tax Returns. (i) Mark IV's Responsibility. Mark IV and the
Buyer will cause each of the Audio Products Group Companies, to the extent
permitted by law, to join, for all periods ending on or prior to the Closing
Date, in Mark IV's Consolidated Group and in any unitary, combined or
consolidated group state or local Tax Return that includes any of the Audio
Products Group Companies and Mark IV or any of its Affiliates. Mark IV shall
prepare and timely file, or cause to be prepared and timely filed, with the
relevant taxing authorities all Tax Returns relating to the business or assets
of any of the Audio Products Group Companies that are required to be filed on or
prior to the Closing Date.
(ii) The Buyer's Responsibility. The Buyer shall prepare and
timely file, or cause to be prepared and timely filed, with the relevant taxing
authorities all Tax Returns relating to the business or assets of the Audio
Products Group Companies other than those Tax Returns
described in Section 8.5(b)(i).
(iii) Cooperation. The Buyer and Mark IV shall cooperate with
respect to the preparation and filing of any Tax Return for which the other is
responsible pursuant to this Section 8.5.
(iv) Apportionment. For purposes of paragraphs (a) and (b) of
this Section 8.5, any liability attributable to a taxable period that begins
before and ends after the Closing Date shall be apportioned between the portion
of such period ending on the Closing Date and the portion beginning on the day
after the Closing Date (A) in the case of real and personal property Taxes, by
apportioning such Taxes on a per diem basis, and (B) in the case of all other
Taxes on the basis of the actual activities of the Audio Products Group
Companies as determined from the books and records of the relevant entity for
such partial period, except that the exemptions, allowances or deductions that
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are calculated on an annual basis, such as the deduction for depreciation, shall
be apportioned on a time basis.
(c) Audits and Other Proceedings. Following the Closing Date,
Mark IV will, at its sole cost and expense, control the conduct of all stages of
any audit or other administrative or judicial proceeding with respect to (i) the
federal Income Tax liability of Mark IV's Consolidated Group, (ii) any unitary,
combined or consolidated foreign, state or local Tax Return that includes any of
the Audio Products Group Companies and Mark IV or any of its Affiliates, and
(iii) the Tax liability of the Audio Products Group Companies for any tax period
ending on or prior to the Closing Date. The Buyer will control the conduct of
all other audits or administrative or judicial proceedings with respect to the
Tax liability of the Audio Products Group Companies for any tax period or
portion thereof. With respect to any audit or other proceeding that it controls,
Mark IV (A) will give prompt notice to the Buyer of any Tax adjustment proposed
in writing pursuant to any audit or other proceeding controlled by Mark IV with
respect to the assets or activities any of the Audio Products Group Companies,
provided that the failure to comply with this provision shall not affect any
party's right to indemnification hereunder except to the extent such party is
materially prejudiced thereby; (B) upon the Buyer's reasonable request will
discuss with the Buyer and its counsel the position that Mark IV intends to take
regarding any issue concerning such assets or activities; and (C) will not, and
will not permit any of its Affiliates to, enter into any settlement or agreement
in compromise of any proposed adjustment which purports to bind the Buyer or any
of the Audio Group Companies with respect to any tax period ending after the
Closing Date without the express written consent of the Buyer, which consent
will not be unreasonably withheld. The Buyer (x) will give prompt notice to Mark
IV of the commencement of any audit or other proceeding which could give rise to
a claim for payment against Mark IV under this Agreement, provided that the
failure to comply with this provision shall not affect any party's right to
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indemnification hereunder except to the extent such party is materially
prejudiced thereby; (y) with respect to any audit or proceeding controlled by
the Buyer, afford Mark IV and its counsel a reasonable opportunity to
participate in the conduct of any administrative or judicial proceeding
regarding a proposed adjustment described in clause (x) above including, without
limitation, the right to participate at its own expense in conferences with tax
authorities and submit pertinent material in support of Mark IV's position; and
(z) will not, and will not permit any of its Affiliates to, accept any proposed
adjustment or enter into any settlement or agreement in compromise which would
result in a claim for indemnification against Mark IV pursuant to this Agreement
without Mark IV's express written consent, which consent will not be
unreasonably withheld. The Buyer and Mark IV shall cooperate, and the Buyer
shall cause the Audio Products Group Companies Company Group to cooperate with
Mark IV, with respect to any Tax audit or administrative or court proceeding
relating to Taxes referred to in this Section 8.05(c). Such cooperation shall
include providing all relevant information available to Mark IV or the Buyer
(through the Audio Products Group Companies or otherwise), as the case may be,
with respect to any such audit or proceeding and making personnel available at
and for reasonable times, provided, that the foregoing shall be done in a manner
so as not to interfere unreasonably with the conduct of the business of the
parties.
The procedures in this Section 8.5(c), and not the procedures
in Section 11.6 or 11.7, shall govern the conduct of any audit or other
governmental proceeding with respect to Taxes described herein.
(d) Transaction-Related Taxes. Mark IV shall be responsible
for, and neither the Buyer nor any of the Audio Products Group Companies shall
bear, any Taxes that relate to the consummation of the transactions contemplated
by this Agreement (including, but not limited to, any real property gains and
transfer Taxes).
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(e) Tax Sharing. On or before the Closing Date, all Tax
sharing agreements and arrangements between any of the Audio Products Group
Companies, on the one hand, and Mark IV or any of its Affiliates on the other
hand, shall be terminated, and no additional payments shall be made thereunder.
8.6 Tax Refunds. Mark IV shall be entitled to any tax refund
received by the Buyer or any of the Audio Products Group Companies (net of any
Taxes payable by the Buyer, its Affiliates or any of the Audio Products Group
Companies as a result of the receipt of such refunds and any reasonable
out-of-pocket fees or expenses, including attorneys' and accountants' fees,
payable by the Buyer, its Affiliates or the Company in connection with the
receipt thereof) to the extent that Mark IV would be required to indemnify the
Buyer, its Affiliates or any of the Audio Products Group Companies for such
Taxes under this Agreement, other than (a) any refund reflected on the balance
sheets used in determining the final Audited Working Capital, and (b) any
refunds attributable to the carryback to any period ending on or prior to the
Closing Date of net operating losses, net capital losses or any other Tax
credits or benefits provided by law which are generated after the Closing Date
(other than any such loss or other credit or benefit that may be carried forward
under applicable law). Any amounts due to Mark IV pursuant to this Section 8.6
shall be payable by the Buyer within 45 days after the receipt of such refund by
the relevant Audio Products Group Company. The Buyer shall be entitled to retain
all other refunds of Taxes of Audio Products Group Companies.
8.7 Confidentiality. Mark IV, PLC and the Company, on the one
hand, and the Buyer, on the other hand, will hold and will cause their
directors, officers, employees, agents, consultants and advisors to hold in
strict confidence, unless compelled to disclose by judicial or administrative
process or, in the opinion of their counsel, by other requirements of law, all
documents and
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information concerning the other parties furnished to them by such other parties
or its representatives in connection with the transactions contemplated by this
Agreement (except to the extent that such information can be shown to have been:
(a) previously lawfully known by the party to which it was furnished, (b) in the
public domain through no fault of the party to which it was furnished, or (c)
later lawfully acquired from other sources by the party to which it was
furnished), and the parties will not release or disclose such information to any
other person, except their auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with this Agreement. If the
transactions contemplated by this Agreement are not consummated, such confidence
shall be maintained except to the extent such information comes into the public
domain through no fault of the party required to hold it in confidence, and in
any event such information shall not be used to the detriment of, or in relation
to any investment in, the other party and all such documents (including copies
thereof and software) shall be returned to the other party immediately upon the
written request of such other party.
8.8 Coordination of Defined Benefit Plan Payments. Subject to
the requirements of law, Mark IV and PLC agree to use their best efforts, on and
after the Closing Date, to provide the Buyer with any information that may be
reasonably requested with respect to the amount or level of benefits under the
terms of any collective bargaining agreement or the Master Defined Benefit Plan.
8.9 Transfer of 401(k) Plan Assets. Certain employees of
certain of the Audio Products Group Companies have accumulated funds for their
retirement in an account which is maintained for the benefit of such Audio
Products Group Company employees under the terms of Mark IV's Master 401(k)
Plan. The assets of the Master 401(k) Plan are held under the terms of a master
trust agreement, dated as of January 1, 1987, between Mark IV and Marine Midland
Bank, N.A. (the "Master Trust").
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(a) As soon as practicable following the Closing, Mark IV
shall take such action as may reasonably be necessary to amend the Master 401(k)
Plan to the extent necessary to provide that each Audio Products Group Company
employee who is a participant in the Master 401(k) Plan shall be fully vested
(i.e., one-hundred percent vested) in his or her account balance, if any,
determined as of the Closing Date under the terms of the Master 401(k) Plan.
(b) As soon as practicable following the Closing Date, the
Buyer shall take such action as may be reasonably necessary to provide for the
transfer of the account balance of each employee of any Audio Products Group
Company under the terms of the Master 401(k) Plan to the New 401(k) Plan. In
connection with such transfer, the Buyer shall take such action as may
reasonably be necessary or which may be required by the Internal Revenue
Service, including, but not limited to, the adoption of amendments to the New
401(k) Plan, to accommodate such transfer. In addition, the Buyer shall take all
necessary steps to ensure that: (i) the account balance determined under the
terms of the New 401(k) Plan as of the date on which the assets of the Master
401(k) Plan which are attributable to employees of the Audio Products Group
Companies are transferred (as hereinafter provided for) is not less than the
account balance of each such employee determined as of such date under the terms
of the Master 401(k) Plan; and (ii) the New 401(k) Plan shall continue to
conform to all applicable requirements established for qualification of
retirement plans under the terms of Section 401(a) of the Code and all
requirements of Section 401(k) of the Code for the duration of the Benefit
Continuation Period.
(c) As soon as practicable following the Closing Date, Mark IV
shall deliver to the Buyer a statement of the amount of the account balance
under the terms of the Master 401(k) Plan of each employee of each Audio
Products Group Company.
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(d) As soon as practicable following the Closing Date and the
delivery by the Buyer to Mark IV of a copy of the New 401(k) Plan, a copy of any
amendment to such plan adopted pursuant to Section 8.9(b) hereof, a copy of the
trust established pursuant to the terms of the New 401(k) Plan, documentation
establishing to the reasonable satisfaction of Mark IV's counsel that the New
401(k) Plan, as amended, is intended to conform to all applicable requirements
established for qualification of retirement plans under Section 401(a) of the
Code and that the trust established pursuant to the terms of the New 401(k) Plan
is intended to conform to all applicable requirements under Section 501(a) of
the Code and the regulations thereunder, but in no event prior to the expiration
of 30 days following the filing of any notices of transfer and assumption
required under Section 6058(b) of the Code, Mark IV shall, direct the trustee of
the Master Trust holding the assets of the Master 401(k) Plan to transfer to the
trust established under the terms of the New 401(k) Plan, an amount, in cash,
equal to the aggregate value of the accounts established under the terms of the
Master 401(k) Plan for all employees of the Audio Products Group Companies. For
purposes of calculating the amount to be transferred to the trust established
under the terms of the New 401(k) Plan pursuant to the preceding sentence, the
value of such accounts shall be determined as of the valuation date immediately
preceding the Closing Date, plus or minus, as the case may be, the net earnings
or losses of such trust attributable to the employees of the Audio Products
Group Companies for the period from the valuation date immediately preceding the
Closing Date to the valuation date immediately preceding the date of such
transfer, plus any contributions which are required to be made in respect of
such employees which were not yet paid to the trustee of the Master Trust.
(e) In connection with the transfer contemplated by this
Section 8.9, Mark IV and the Buyer shall cooperate with each other and make all
appropriate filings required under the Code or the regulations thereunder in
connection
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with such transfers and provide any necessary information to the Buyer.
8.10 Public Announcements. The Buyer, on the one hand, and
Mark IV, PLC and the Company, on the other hand, will consult with each other
before issuing any press releases or otherwise making any public statements with
respect to this Agreement or the transactions contemplated hereby and shall not
issue any press release or make any public statement prior to receiving the
written consent of the party being consulted, except as may be required by law.
8.11 Post-Closing Cooperation. After the Closing, without
further consideration: (a) Mark IV and PLC shall, and shall cause their
respective officers, directors, employees, representatives, Affiliates and
agents to, take all such further actions and execute, acknowledge and deliver
all such further consents and other documents as the Buyer may reasonably
request to facilitate or effect the transactions contemplated hereby or pursuant
to the Ancillary Agreements; and (b) the Buyer shall, and shall cause each of
the Audio Products Group Companies and its and their respective officers,
members, directors, employees, representatives, Affiliates and agents, to take
all such further actions and execute, acknowledge and deliver all such further
consents and other documents as Mark IV may reasonably request in order to
facilitate or effect the transactions contemplated hereby or pursuant to the
Ancillary Agreements. Mark IV and PLC shall also provide cooperation and
information with respect to ongoing legal matters relating to the Audio Products
Group Companies and shall use reasonable commercial efforts to cause any lawyers
or law firms who currently provide services to any Audio Products Group Company
to cooperate in providing information or services to any Audio Products Group
Company in connection with such matters after the Closing. In addition, Mark IV
and PLC shall use reasonable commercial efforts, and shall use reasonable
commercial efforts to cause their respective officers, directors, employees,
representatives and agents, to take all such further actions
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to execute, acknowledge and deliver all such further consents and other
documents as the Buyer may reasonably request to facilitate or effect the
refinancing of the subordinated debt and equity contemplated by the Bank
Commitments, provided, however, that (i) Buyer shall pay any third party fees
and expenses required to be incurred by Mark IV or PLC in connection therewith,
and (ii) to the extent that compliance with any such request could result in
other material liability to either Mark IV or PLC, Mark IV or PLC, as the case
may be, shall not be required to comply with any such request unless Buyer or
the Company agrees to provide indemnification against any such liability in form
and substance reasonably satisfactory to Mark IV or PLC.
8.12 Gulton Name. Buyer will change the name of the Company
immediately following the Closing to a name that does not include the word
GULTON or any word confusingly similar to GULTON. The Buyer acknowledges that
after Closing, ownership of all right, title and interest in and to the
trademark, trade name and service mark GULTON owned by Mark IV, PLC and/or any
of the Audio Products Group Companies prior to the Closing shall remain with
Mark IV or PLC, as the case may be. Except as set forth herein, nothing in this
Agreement grants the Buyer, any right, title or interest in and to GULTON and
the Buyer agrees, at Mark IV's and/or PLC's expense, to take all actions and to
execute and deliver all documents reasonably necessary, desirable or proper to
assist Mark IV and/or PLC in maintaining their respective rights to the GULTON
trademark, trade name or service mark, provided, however, that notwithstanding
anything contained in this Section 8.12 to the contrary, for a period of one
month after the Closing Date, Mark IV and PLC hereby grant the Buyer, the
Company and each Audio Products Company a royalty-free right and license to use
GULTON as a trade name, trademark or service mark in any jurisdiction in the
world in which the Audio Products Business is currently using GULTON.
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ARTICLE 9.
CONDITIONS PRECEDENT TO THE OBLIGATION
OF MARK IV, PLC AND THE COMPANY
The obligations of Mark IV, PLC and the Company to enter into
and complete the transactions contemplated by this Agreement are subject to the
fulfillment of the following conditions, any one or more of which may be waived
by them:
9.1 Representations and Covenants. (a) The representations and
warranties of the Buyer contained in this Agreement shall be true and correct in
all material respects (without regard to any materiality or knowledge
qualification contained in such representation or warranty) on and as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date.
(b) The Buyer shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by it on or prior to the Closing Date.
(c) The Buyer shall have delivered to Mark IV a certificate,
dated the Closing Date and signed by an officer of the Buyer, to the foregoing
effect and stating that all conditions to Mark IV's obligations hereunder have
been satisfied.
9.2 Government Consents; Filings. All consents, approvals,
authorizations, filings and registrations required to be obtained or made under
applicable law in connection with the transactions contemplated by this
Agreement shall have been obtained or made and shall be in full force and
effect, the waiting period under the HSR Act shall have expired and no
conditions to the transactions contemplated by this Agreement shall have been
imposed or proposed by any foreign or U.S. federal or state governmental or
regulatory agency.
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9.3 Third-Party Consents. All consents and approvals required
to be obtained by the Buyer in connection with the execution and delivery of
this Agreement and the Buyer Ancillary Agreements for the consummation of the
transactions contemplated hereby or thereby shall have been obtained, including
all consents and approvals from any parties to any contracts or other agreements
with the Buyer set forth in Schedule 5.6.
9.4 Substitute Sureties and Letters of Credit. Except as
otherwise set forth in this Section 9.4, the Buyer shall deliver to the parties
identified in Schedule 9.4 letters of credit and sureties to replace the letters
of credit and sureties identified in Schedule 9.4. The form and substance of
such substitute letters of credit and sureties shall be reasonably acceptable to
Mark IV and shall be sufficient to cause each of the parties identified in
Schedule 9.4 to deliver to Mark IV a written acknowledgment from such parties
that, effective as of the Closing Date, Mark IV is and shall be unconditionally
released and discharged from any and all liabilities and obligations that Mark
IV may have under the terms of any such sureties or letters of credit set forth
on such Schedule 9.4, or in the event that any such discharges cannot be
obtained at or prior to Closing, as an interim measure the Buyer shall deliver
one or more letters of credit for the benefit of Mark IV in the same amount and
otherwise of like tenor to any letter of credit or surety for which such
discharge cannot be obtained.
9.5 Ancillary Documents. The Buyer or the Company shall have
executed and delivered to Mark IV and PLC the Mark IV License Agreement, the
Transition Services Agreement and the Software License Agreement and a sublease
in form and substance reasonably satisfactory to Mark IV and the Buyer pursuant
to which Mark IV shall sublease to the Company a portion of the property at
8004B Cameron Road, Austin, Texas.
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9.6 Litigation. No action, suit or proceeding which seeks to
restrain, modify or prevent the carrying out of the transactions contemplated
hereby or which seeks damages or a discovery order in connection with such
transactions shall have been instituted before any court or U.S. or foreign
governmental or regulatory body, or instituted or threatened by any U.S. or
foreign governmental or regulatory body, and no suit, action or proceeding shall
have been instituted or threatened against the Buyer by any person, firm,
corporation or other entity before any court or U.S. or foreign governmental or
regulatory body which, if adversely determined against the Buyer, would have a
material adverse effect on the business and financial condition of the Buyer.
9.7 Opinion of Counsel. Mark IV shall have received an
opinion, addressed to it and dated the Closing Date, from Debevoise & Plimpton,
counsel to the Buyer, in form and substance reasonably satisfactory to Mark IV.
9.8 Corporate and Other Proceedings; Delivery of Documents.
All limited liability company proceedings of the Buyer necessary in connection
with the transactions contemplated by this Agreement shall have been taken, and
the Buyer shall have delivered to Mark IV and PLC at the Closing all other
documents, instruments and writings reasonably requested by Mark IV or PLC in
order to effect the consummation of the transactions contemplated by this
Agreement.
ARTICLE 10.
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE BUYER
The obligations of the Buyer to enter into and complete the
transactions contemplated by this Agreement are subject to the fulfillment, on
or prior to the Closing Date, of the following conditions, any one or more of
which may be waived by them:
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10.1 Representations and Covenants. (a) The representations
and warranties of Mark IV, PLC and the Company contained in this Agreement shall
be true and correct in all material respects (without regard to any materiality
or knowledge qualification contained in such representation or warranty) on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date.
(b) Mark IV, PLC and the Company shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by Mark IV, PLC or the Company,
as the case may be, on or prior to the Closing Date.
(c) Mark IV and PLC shall each have delivered to the Buyer a
certificate, dated the Closing Date and signed by an officer of Mark IV and PLC,
to the foregoing effect and stating that all conditions to the Buyer's
obligations hereunder have been satisfied.
10.2 Government Consents; Filings. All consents, approvals,
authorizations, filings and registrations required to be made under applicable
law in connection with the transactions contemplated by this Agreement shall
have been made and shall be in full force and effect, the waiting period under
the HSR Act shall have expired and no conditions to the transactions
contemplated hereby shall have been imposed or proposed by any foreign or U.S.
federal or state governmental or regulatory agency.
10.3 Third-Party Consents. (a) Chase Manhattan Bank shall have
released all the shares of Common Stock of the Company and the shares of common
stock of Electro-Voice held by them from any lien under, or pledge contemplated
by, the terms of the Credit Agreement between Mark IV and Chase Manhattan Bank,
dated as of March 8, 1996.
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(b) All consents and approvals required to be obtained by Mark
IV, PLC or the Company and all notices required to be provided in connection
with the execution and delivery of this Agreement and the Mark IV Ancillary
Agreements for the consummation of the transactions contemplated hereby or
thereby shall have been obtained or given, including all consents and approvals
from any parties to any contracts or other agreements with Mark IV, PLC or any
of the Audio Products Group Companies as more particularly set forth in
Schedule 4.18 and any notices to workers councils or other similar bodies.
10.4 Ancillary Agreements. Mark IV and PLC shall have executed
and delivered to the Buyer the Mark IV License Agreement, the Transition
Services Agreement and the Soft ware License Agreement and a sublease in form
and substance reasonably satisfactory to the Buyer and Mark IV pursuant to which
Mark IV shall sublease to the Company a portion of the property at 8004B Cameron
Road, Austin, Texas (the "Austin Sublease").
10.5 Litigation. No action, suit or proceeding which seeks to
restrain, modify or prevent the carrying out of the transactions contemplated
hereby or which seeks damages or a discovery order in connection with such
transactions shall have been instituted before any court or U.S. or foreign
governmental or regulatory body, or instituted or threatened by any U.S. or
foreign governmental or regulatory body, and no suit, action or proceeding shall
have been instituted or threatened against Mark IV, PLC or the Company by any
person, firm, corporation or other entity before any court or U.S. or foreign
governmental or regulatory body which, if adversely determined against Mark IV,
PLC or the Company, would have a Material Adverse Effect.
10.6 Certificate as to Authorization. The Buyer shall have
received a certificate of the Secretary or an Assistant Secretary of each of
Mark IV, PLC and the Company, dated the Closing Date, setting forth the
resolutions of their respective Boards of Directors authorizing the
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execution and delivery of this Agreement, the transactions contemplated by this
Agreement, and certifying that such resolutions were duly adopted and have not
been rescinded or amended as of the Closing Date, and certifying that approval
by the shareholders of Mark IV, PLC and the Company is not required, or has been
obtained, in connection with this Agreement or the transactions contemplated by
this Agreement.
10.7 No Material Adverse Effect. No event or condition shall
exist or have occurred since the date of this Agreement that, individually or in
the aggregate, has had or resulted in, or would reasonably be expected to have
or result in, a Material Adverse Effect.
10.8 Opinion of Counsel. The Buyer shall have received an
opinion, addressed to it and dated the Closing Date, from Lippes, Silverstein,
Mathias & Wexler, LLP, counsel to Mark IV, in form and substance reasonably
satisfactory to the Buyer.
10.9 Financing. The Buyer shall have obtained funds sufficient
to enable it to consummate the transactions contemplated by this Agreement on
such terms as are consistent with the Bank Commitments and satisfactory to the
Buyer in its reasonable judgment.
10.10 Real Estate Matters. The Buyer shall have received
commitments from one or more nationally recognized title insurance companies
selected by the Buyer (each a "Title Company") to issue, at the Buyer's expense,
(a) a fee owner's title insurance policy to the applicable members of the Audio
Products Group, and a loan policy to one or more of the Buyer's financial
institutions, with respect to each of the material Real Properties in the United
States owned by the Audio Products Group Companies, and (b) a leasehold owner's
title insurance policy to the applicable members of the Audio Products Group,
and a leasehold loan policy issued to one or more of the Buyer's financial
institutions, with respect to each of the material Real Properties leased by
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the Audio Products Group Companies in the United States, in each case in form
and substance reasonably satisfactory to the Buyer and each such financial
institution, together with reinsurance agreements and endorsements reasonably
requested by the Buyer, including, without limitation, access, survey, zoning,
non-imputation, comprehensive and contiguity endorsements, in an amount
determined by the Buyer, insuring applicable members of the Audio Products Group
and the Buyer's financial institutions and issued as of the Closing Date by such
Title Company, showing the applicable members of the Audio Products Group to
have a fee simple title to all of the Real Property owned and a valid leasehold
estate in such Real Property leased, in each case subject only to such liens,
charges or other encumbrances as are set forth on appropriate schedules to
Section 4.12. The Buyer shall also have received any affidavits or indemnities
required by the Title Company in connection with the deletion of standard
exceptions and provision of gap coverage on the owner's title policies,
leasehold title policies and any loan title policies issued to the Buyer's
lenders.
10.11 Corporate and Other Proceedings; Delivery of Documents.
All corporate, partnership and other proceedings of Mark IV, PLC and the Company
necessary in connection with the transactions contemplated hereby shall have
been taken, and the Buyer and its counsel shall have received all such
documents, instruments and writings reasonably requested by the Buyer in order
to effect the consummation of the transactions contemplated by this Agreement.
10.12 Repayment of Indebtedness. All outstanding indebtedness
for borrowed money of any of the Audio Products Group Companies, including but
not limited to guarantees, letters of credit, performance bonds, sureties,
loans, security interests, other debt obligations and those such items set forth
in Schedule 10.12 hereto (other than any item set forth in Schedule 9.4 or at
items VIII, IX and XI in Schedule 4.11(a) and, if requested by Buyer on or prior
to the seventh day prior to the Closing Date and subject to
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the Mortgagee's consent, the mortgage of the Gauss Facility in Sun Valley,
California (the "Gauss Mortgage")) shall have been repaid or removed as of the
Closing Date without liability to the Buyer.
10.13 Cancellation of Intercompany Arrangements. Except for
the Ancillary Agreements, all arrangements, whether written or oral, between any
of the Audio Products Group Companies, on the one hand, and Mark IV or any of
its Affiliates (other than the Audio Products Group Companies but excluding
PLC), on the other hand, shall have been canceled without liability to the Buyer
or any of the Audio Products Group Companies, including those set forth on
Schedule 10.13.
10.14 Data Base Transfer Instructions. A complete copy of all
data and computer records with respect to any health and welfare plans or Plans
of any of the Audio Products Group Companies or the benefits, dates of service
of any employee of any Audio Products Group Company shall, as of the Closing
Date, has been segregated and downloaded from the computers of Mark IV to the
computers of the Company.
10.15 Equity Interests. All issued and outstanding shares of
capital stock or other outstanding equity or partnership interests of each of
the Audio Products Group Companies shall be owned free and clear of all liens
and encumbrances by the person set forth opposite such company's name on
Schedule 10.15.
ARTICLE 11.
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS
11.1 Survival of Representations and Warranties, Etc. All
claims for indemnification under Section 11.3 or Section 11.4 with respect to
the representations and warranties contained herein must be asserted on or prior
to
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the date of termination of the respective survival periods set forth in this
Section 11.1, provided that, no obligation of indemnification pursuant to this
Article 11 shall terminate with respect to any representation or warranty if an
Indemnified Party (as defined in Section 11.6) shall have, prior to the
termination of the survival period for such representation or warranty, made a
claim relating to a breach of such representation or warranty by delivering
written notice (stating in reasonable detail the basis of such claim) to an
Indemnifying Party (as defined in Section 11.6). The representations and
warranties contained in this Agreement shall survive the execution and delivery
of this Agreement, any examination by or on behalf of the parties hereto and the
completion of the transactions contemplated herein, but only to the extent
specified below:
(a) except as set forth in clause (c) below, the
representations and warranties contained in Article 4 shall survive for a period
of 18 months from and after the Closing Date;
(b) the representations and warranties contained in Article 5
shall survive for a period of 18 months from and after the Closing Date; and
(c) the representations and warranties of Mark IV contained in
(i) Sections 4.3 (the "Due Authorization Warranties") and 4.4 and 4.5 (the
"Title Warranties") shall survive without limitation; (ii) Section 4.17(c) (the
"ERISA Warranties") shall survive for a period of three years; (iii) Section
4.19 (the "Environmental Warranties") shall survive for a period of five years;
(iv) Section 4.22 (the "Tax Warranties") shall survive until 30 days after the
expiration of the applicable statute of limitations (plus extensions) with
respect to the Tax giving rise to such Claim; and (v) Section 4.29 shall survive
for a period of 45 days following the delivery to Buyer of the Audited Closing
Financial Statements.
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11.2 Statements as Representations. All statements contained
in any Schedule delivered pursuant to Articles 4 and 5 hereof, shall be deemed
representations and warranties for purposes of this Agreement.
11.3 Indemnification by Mark IV. (a) Subject to the terms and
conditions of this Section 11, Mark IV and PLC hereby agree to, jointly and
severally, indemnify, defend and hold harmless the Buyer and any parent,
subsidiary or Affiliate entities of the Buyer and the officers, directors,
partners, members, stockholders, employees, agents and advisers of each such
person, including, without limitation, each of the Audio Products Group
Companies (hereinafter the "Buyer Group"), from and against all demands, claims,
actions or causes of action, assessments, payments, losses, damages,
liabilities, costs and expenses, including, without limitation, interest,
penalties and reasonable attorneys' fees and expenses (collectively "Damages")
asserted against, resulting to, imposed upon or incurred by the Buyer Group or
any member thereof, by reason of or resulting from: (i) any liabilities of Mark
IV, PLC or any of their Affiliates (other than the Audio Products Group
Companies), arising for any reason, and any liabilities relating to any of their
respective businesses, operations or assets (other than the business, assets or
operations of the Audio Products Group Business); (ii) any breach of any
representation, warranty, covenant or agreement of Mark IV or PLC; (iii) Taxes
that are the responsibility of Mark IV as provided in Section 8.5; (iv) any
liabilities arising in connection with the items set forth on Schedule
11.3(a)(iv); and (v) any liabilities arising in connection with the obligations
set forth in Section 6.12. For purposes of this Agreement, the claims described
in Section 11.3(a)(i) through (v) shall be referred to individually as a "Claim"
and collectively as "Claims".
(b) The obligation of Mark IV and PLC to indemnify the Buyer
Group shall exclude Damages which may arise as a result of any reorganization or
other legal restructuring of the Buyer or the Buyer Group and in no
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event shall any such reorganization or restructuring be deemed to increase the
liability of Mark IV or PLC beyond the actual Damages arising from any Claims.
(c) Neither Mark IV nor PLC shall be required to indemnify the
Buyer or any member of the Buyer Group from any Damages except to the extent
that (i) the aggregate amount of the Damages incurred by the Buyer and the Buyer
Group arising from any such Claim or from all Claims exceeds $1,500,000 and then
only to the extent that the amount of such Damages exceeds $1,500,000, and (ii)
the aggregate liability of Mark IV and PLC under this Section 11.3 shall not
exceed the amount of the Final Purchase Price; provided, however, that (A) the
foregoing clauses (c)(i) and (c)(ii) shall not apply to Claims under Section
11.3(a)(i) and 11.3(a)(iv) and (B) the foregoing clause (c)(i) shall not apply
to Claims under (x) Section 11.3(a)(ii) to the extent that such Claim arises out
of a breach of the Title Warranty, Due Authorization Warranty, or Tax Warranty,
(y) Section 11.3(a)(iii) or (z) Section 11.3(a)(v).
11.4 Indemnification by the Buyer and the Company. (a) The
Buyer and the Company hereby agree to, jointly and severally, indemnify, defend
and hold harmless Mark IV and any subsidiary or Affiliate entities of Mark IV
and the officers, directors, partners, members, stock holders, employees, agents
and advisers of each such person (the "Seller Group") from any Damages arising
by reason of or resulting from: (i) any claim made against Mark IV or any member
of the Seller Group relating to any of the business, assets or operations of the
Audio Products Group after, but not before, the Closing Date; and (ii) any
breach of any representation, warranty, covenant or agreement of the Buyer
contained in or made pursuant to this Agreement.
(b) The obligation of the Buyer and the Company to indemnify
the Mark IV Group as set forth in the preceding paragraph shall exclude Damages
which may arise as a result of any reorganization or other legal restructuring
of Mark IV or the Seller Group and in no event shall any such
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reorganization or restructuring be deemed to increase the liability of the Buyer
or the Company beyond the actual Damages arising from any such claims.
(c) Neither the Buyer nor the Company shall be required to
indemnify Mark IV or any member of the Seller Group from any Damages except to
the extent that (i) the aggregate amount of the Damages incurred by Mark IV and
the Seller Group arising from any claim or claims described solely in Section
11.4(a) hereof exceeds $1,500,000 and then only to the extent that the amount of
such Damages exceeds $1,500,000, and (ii) the aggregate liability of the Buyer
and the Company under this Section 11.4 shall not exceed the amount of the Final
Purchase Price; provided, however, that the foregoing clauses (c)(i) and (c)(ii)
shall not apply to claims under Section 11.4(a)(i) and the foregoing clause
(c)(i) shall not apply to claims under Section 11.4(a)(iii) to the extent that
such claim arises out of a breach of Section 5.2.
11.5 Payment Adjustments. Any indemnity payment made by Mark
IV to the Buyer Group, on the one hand, or by the Buyer and the Company to the
Seller Group, on the other hand, pursuant to this Article 11 in respect of any
claim shall be net of an amount equal to (a) any insurance proceeds realized by
and paid to the Indemnified Party (as defined in Section 11.6 below) minus (b)
any related costs and expenses, including the aggregate cost of pursuing any
related insurance claims plus any correspondent increases in insurance premiums
or other chargebacks. The Indemnified Party shall use its reasonable efforts to
make insurance claims relating to any claim for which it is seeking
indemnification pursuant to this Article 11; provided, that the Indemnified
party shall not be obligated to make such an insurance claim if the Indemnified
Party in its reasonable judgment believes that the cost of pursuing such an
insurance claim together with any correspondent increase in insurance premiums
or other chargebacks to the Indemnified Party or the Company, as the case may
be, would exceed the
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value of the claim for which the Indemnified Party is seeking indemnification
pursuant to this Article 11.
11.6 Conditions of Indemnification. The obligations and
liabilities of Mark IV under Section 11.3 hereof and the obligations and
liabilities of the Buyer and the Company under Section 11.4 hereof with respect
to Claims relating to third parties shall be subject to the following terms and
conditions:
(a) A party seeking indemnification under this Agreement
("Indemnified Party") will give the party required to provide such
indemnification (the "Indemnifying Party") prompt notice of any such Claim, and
thereafter the Indemnifying Party will undertake the defense thereof by
representatives chosen by it (which counsel shall be reasonably acceptable to
the Indemnified Parties).
(b) If the Indemnifying Party, within a reason able time after
notice of any such Claim, fails to defend such Claim, the Indemnified Party
will, upon further notice to the Indemnifying Party, have the right to undertake
the defense, compromise or settlement of such Claim on behalf of and for the
account and risk of the Indemnifying Party, subject to the right of the
Indemnifying Party to assume the defense of such Claim at any time prior to
settlement, compromise or final determination thereof.
(c) Anything in this Section 11.6 to the contrary
notwithstanding: (i) if there is a reasonable probability that a Claim may
materially and adversely affect an Indemnified Party other than as a result of
money damages or other money payments, the Indemnified Party shall have the
right, at its own cost and expense, to defend, and with the consent of the
Indemnifying Party, to compromise or settle such Claim; and (ii) the
Indemnifying Party shall not, without the written consent of the Indemnified
Party, its successors and assigns settle or compromise any Claim or consent to
the entry of any judgment which does not include as an unconditional term
thereof the giving by the claimant
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or the plaintiff to the Indemnified Party, a release from all liability in
respect of such Claim.
11.7 Litigation Cooperation. (a) Mark IV shall cooperate with
the Buyer and each of the Audio Products Group Companies and shall cause its
officers, employees, agents, auditors and representatives to cooperate with the
Buyer and each of the Audio Products Group Companies in connection with the
investigation, prosecution, defense and settlement of any judicial or
administrative proceeding or claim which the Buyer or any of the Audio Products
Group Companies has undertaken the defense of in connection with the Buyer's
obligation to indemnify Mark IV as provided for in Section 11.4 above; provided,
that the Buyer shall reimburse Mark IV and its officers, employees, agents,
auditors and representatives for the reasonable out-of-pocket costs and expenses
incurred in providing such assistance.
(b) The Buyer shall cooperate with Mark IV and shall cause its
officers, employees, agents, auditors and representatives (and the officers,
employees, agents, auditors and representatives of each of the Audio Products
Group Companies) to cooperate with Mark IV in connection with the investigation,
prosecution, defense and settlement of any judicial or administrative proceeding
or claim which Mark IV has undertaken the defense of in connection with Mark
IV's obligation to indemnify the Buyer as provided for in Section 11.3 above;
provided, that Mark IV shall reimburse the Buyer, its officers, employees,
agents, auditors and representatives (and the officers, employees, agents,
auditors and representatives of each of the Audio Products Group Companies) for
the reasonable out-of-pocket costs and expenses incurred in providing such
assistance.
11.8 Remedies Cumulative. Except as herein expressly provided,
the remedies provided herein shall be cumulative and shall not preclude
assertion by any party hereto of any other rights or the seeking of any other
remedies against any other party hereto.
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<PAGE> 102
ARTICLE 12.
MISCELLANEOUS PROVISIONS
12.1 Termination. This Agreement may be terminated at any time
prior to the Closing: (a) by either the Buyer or Mark IV by written notice to
the other party if: (i) the representations and warranties of the other party
shall not be true and correct in all material respects at and as of the date
when made, or shall not be true and correct in all material respects as of the
Closing Date as though made on and as of such date, or (ii) the other party
shall (and the terminating party shall not) have failed to perform and comply
with, in all material respects, all agreements, covenants and conditions hereby
required to have been performed or complied with by such party prior to the time
of such termination, and such failure shall not have been cured within a
reasonable period of time but not less than 15 days following notice of such
failure; (b) by written agreement of Mark IV and the Buyer; (c) by Buyer
pursuant to section 7.8; and (d) by Mark IV or the Buyer at any time subsequent
to February 11, 1997, if the Closing has not occurred by or before such date
unless such date is extended by the mutual written consent of Mark IV and the
Buyer. In the event of the termination of this Agreement pursuant to the
provisions of this Section 12.1, this Agreement shall become void and have no
effect, without any liability to any person in respect hereof or of the
transactions contemplated hereby on the part of any party hereto, or any of its
directors, officers, parties, members, representatives, stockholders or
Affiliates, except for any liability resulting from such party's willful breach
of this Agreement and except that Sections 8.7, 8.10, 12.3, 12.5 and 12.9 and
this Section 12.1 shall not terminate.
12.2 Knowledge. For purposes of this Agreement, the term
"knowledge" with respect to Mark IV means the actual knowledge of those persons
identified in Schedule 12.2 attached hereto.
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12.3 Amendment and Modification. This Agreement may be
amended, modified and supplemented only by written agreement of the parties
hereto.
12.4 Waiver of Compliance. Any failure of Mark IV or PLC, on
the one hand, or the Buyer, on the other, to comply with any obligation,
covenant, agreement or condition herein may be expressly waived in writing by
the President or a Vice President of the Buyer or Mark IV, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
12.5 Expenses. Whether or not the transactions contemplated
hereby shall be consummated, Mark IV and PLC, on the one hand, and the Buyer, on
the other hand, shall bear their respective expenses, costs and fees (including,
without limitation, attorneys', auditors' and financing commitment fees) in
connection with the transactions contemplated hereby, including the
preparation, execution and delivery of this Agreement and compliance herewith,
provided, that (a) Mark IV shall pay any and all fees and expenses of Salomon
Brothers Inc and any and all expenses of Mark IV or any of its Affiliates
relating to the Reorganization and (b) the Buyer shall pay any and all
third-party fees and expenses relating to the Financing.
12.6 Notices. All notices, requests, demands, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage pre-paid, (c)
sent by next day or overnight mail or delivery or (d) sent by telecopy or
telegram, as follows:
95
<PAGE> 104
(i) If to Mark IV, PLC or the Company, to:
Mark IV Industries, Inc.
One Towne Centre
501 John James Audubon Parkway
Amherst, NY 14226
Attention: John J. Byrne
with a copy to:
Gerald S. Lippes, Esq.
Lippes, Silverstein, Mathias &
Wexler LLP
700 Guaranty Building
28 Church Street
Buffalo, New York 14202
or to such other person or address as Mark IV shall furnish to the Buyer in
writing.
(ii) If to the Buyer, to:
Gulton Acquisition Corp.
c/o Greenwich Street LLC
388 Greenwich Street, 36th Floor
New York, New York 10013
Attention: Nicholas E. Somers
with a copy to:
Andrew L. Sommer, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
or to such other person or address as the Buyer shall furnish to Mark IV in
writing.
All such notices, requests, demands, waivers and other
communications shall be deemed to have been received (w) if by personal
delivery, on the day after such delivery,
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<PAGE> 105
(x) if by certified or registered mail, on the seventh business day after the
mailing thereof, (y) if by next-day or overnight mail or delivery, on the day
delivered, (z) if by telecopy or telegram, on the next day following the day on
which such telecopy or telegram was sent, provided that a copy is also sent by
certified or registered mail.
12.7 Further Assurances. If at any time after the Closing Date
the Company shall consider or be advised that any deeds, bills of sale,
assignments or assurances or any other acts or things are necessary, desirable
or proper (a) to vest, perfect or confirm, of record or otherwise, in the
Company its right, title or interest in, to or under any of the rights,
privileges, immunities, powers, purposes, franchises, properties or assets of
any of the Audio Products Group Companies, or (b) otherwise to carry out the
purposes of this Agreement, the Company and its proper officers and directors or
their designees shall be authorized to solicit in the name of the Company or the
Buyer any third party consents or other documents required to be delivered by
any third party, to execute and deliver, in the name and on behalf of the
Company or the Buyer, all such deeds, bills of sale, assignments and assurances
and do, in the name and on behalf of the Company or the Buyer, all such other
acts and things necessary, desirable or proper to vest, perfect or confirm its
right, title or interest in, to or under any of the rights, privileges,
immunities, powers, purposes, franchises, properties or assets of the Company or
the Buyer and otherwise to carry out the purposes of this Agreement.
12.8 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties; provided, that the Buyer may assign this Agreement to any subsidiary of
the Buyer, or to any lender to the Buyer or any subsidiary or
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<PAGE> 106
Affiliate thereof as security for obligations to such lender, and provided,
further, that no assignment to any such lender shall in any way affect the
Buyer's obligations or liabilities under this Agreement.
12.9 Governing Law and Jurisdiction. This Agreement and the
legal relations among the parties hereto shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to its
conflicts of law doctrine.
12.10 Counterparts. This Agreement may be executed
simultaneously 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.
12.11 Headings. The headings of the Sections , Schedules and
Articles of this Agreement are inserted for convenience only and shall not
constitute a part hereof or affect in any way the meaning or interpretation of
this Agreement.
12.12 Entire Agreement. This Agreement, including the Exhibits
and Schedules hereto and the other documents and certificates delivered pursuant
to the terms hereof, sets forth the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein, and supersedes
all prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, between the parties with
respect to the subject matter hereof.
12.13 Third Parties. Except as specifically set forth or
referred to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or corporation other than the
parties hereto and their successors or assigns, any rights or remedies under or
by reason of this Agreement.
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<PAGE> 107
12.14 Severability. The invalidity, illegality or
unenforceability of any provision, term, or agreement contained in or made a
part of this Agreement shall not affect the validity, legality or enforceability
of the remainder of this Agreement.
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<PAGE> 108
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective corporate seals to be affixed
hereto, all as of the day and year first above written.
MARK IV INDUSTRIES, INC.
By: /s/ JOHN J. BYRNE
-----------------------
Name: John J. Byrne
Title: Vice President and
Chief Financial Officer
MARK IV PLC
By: /s/ JOHN J. BYRNE
-----------------------
Name: John J. Byrne
Title: Director
GULTON INDUSTRIES, INC.
By: /s/ JOHN J. BYRNE
-----------------------
Name: John J. Byrne
Title: Vice President
GULTON ACQUISITION CORP.
By: /s/ NICHOLAS E. SOMERS
------------------------
Name: Nicholas E. Somers
Title: President
<PAGE> 109
Schedule 6.4
Employees to be Made Available In Connection with Financing
Robert D. Pabst
John Bolstetter
Paul McGuire
<PAGE> 110
Schedule 7.3
List of Employees Entitled to Certain Severance Benefits
Robert D. Pabst
Paul McGuire
R. Gaines
John Bolstetter
Ronald M. Graham
F. Davis Merrey, Jr.
Kazuyasu Takane
James R. Williams
Garry Templin
M. O'Neil
William Criswell
B. Evans
D. Duran
T. Sawyer
Wayne Hrabak
Bruce Landsberger
Bruce M. Birmingham
Colin Formston
<PAGE> 111
Schedule 11.3(a)(iv)
1. All environmental liabilities, obligations, losses, damages,
litigation, fines, penalties, payments, costs or expenses (whether or
not resulting from third party claims), including attorneys' and
accountants' fees and expenses (collectively, "Losses"), arising out of
or related to the following:
a. Contamination, testing, monitoring, remediation of dry wall
and lagoon areas at the Electro-Voice facility in Buchanan,
Michigan.
b. Contamination, testing, monitoring, remediation, excavation,
back fill of plating and process residues in soil and ground
water at Electro-Voice, Inc., 1201 Dolly Parton Pkwy.,
Sevierville, Tennessee.
c. Monitoring, remediation and excavation resulting from existing
ground water contamination at Electro-Voice, Inc./Mark IV
Audio Facility, 366 Industrial Road, Newport, Tennessee.
2. All Losses arising out of any lawsuit, claim, action, litigation,
demand, proceeding, citation, summons or investigation brought against
or involving the Audio Products Group and relating to any of the
following:
a. The Cameron Yakima, Inc. Waste Site in Yakima, Washington
b. The Seaboard Group II Superfund Waste Site in Jamestown, North
Carolina
c. The Archem Waste Site in Houston, Texas
<PAGE> 112
d. U.S. and State of Texas v. Motorola, et al., Civil No.
3-96CV-0844G regarding Pesses S'West Superfund Site, Forth
Worth, Texas
e. The former Gulton Industries site in Metuchen, New Jersey
f. The Ekotec Gas and Oil Waste Site at 1628 North Chicago
Street, Salt Lake City, Utah
g. The Metcoa Salvage Site in Pulaski, Pennsylvania
h. The Rinchem Recycling Facility Site in Albuquerque, New Mexico
i. The former Gulton Data Systems Facility Site in Albuquerque,
New Mexico
j. Environmental Protection Agency/Department of Justice
investigation regarding Bags Site, New Found Road, Mt. Olive,
Alabama
k. The Chemsol Facility Site in Picataway, New Jersey
l. The Liquid Disposal Site in Utica, Shelby Township, Michigan
m. The Tri-County Investors Group Ltd. v. Southern States
litigation, the Jack's Creek/Sitkin Smelting Superfund Site in
Maitlan County, Pennsylvania and the Southern States Facility
Remediation Cleanup in Hampton, Georgia as well as any other
environmental matter arising out of these properties or any
other properties owned or previously owned by Southern States
Inc.
o. The State College Associates Ltd. v. Gulton Industries, Inc.,
EDO Western Corporation, et al. litigation and the Prout v.
EDO Western Corporation, Gulton Industries, et al. litigation,
as well as,
2
<PAGE> 113
any other environmental matter arising from the State College
site in Fullerton, California.
3. All Losses, whether or not resulting from collateral suits or
liabilities, or arising from the same factual context of, or otherwise
arising out of or related to Transmatic Inc. v. Gulton Industries, Inc.
4. Any Losses arising in connection with any arrangements in existence at
or prior to Closing pursuant to which Mark IV or any Audio Products
Group Company is required to indemnify any of its officers or directors
or any officer or director of Mark IV, whether arising under an
indemnification agreement, applicable law or the Incorporation
Documents or By-Laws of the entity, but only to the extent that such
Losses arise out of or are in connection with acts that were committed
prior to the Closing by any person in his capacity as a director or
officer of an Audio Products Group Company or Mark IV.
5. Without regard to Section 11.4(b), any Losses arising out of or related
to the assets or liabilities on or prior to the Closing Date of Cetec
International Limited, Rebis Audio Limited, Dearden Davies Associates
Limited, Altec Lansing International, Nivenfield (1992) Limited, except
with respect to the Hounslow lease, the Wembley lease and two items of
Intellectual Property owned by Rebis Audio Limited and that are being
transferred to the Company or any of Audio Products Group Companies.
6. Any breach of Mark IV's agreement in Section 7.3 to provide severance
arrangements or stay bonuses for the employees covered by the
agreements set forth on Schedule 7.3.
7. Any Losses arising out of or related to the fire on March 11, 1996 at
Keltenstrasse 5, CH-2563, Ipsach, Switzerland.
3
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Schedule 12.2
Persons Having "Knowledge"
Steven Chan
Kazuyasu Takane
Colin Formston
Bob Doyle
David Knowles
Bob D. Pabst
Paul A. McGuire
John G. Bolstetter
F. Davis Merrey, Jr.
Ronald Graham
Roger H. Gaines
Hans-Peter Richter
Cecile Dehlinger
Rolf Andres
Violet Dennison
<PAGE> 1
Exhibit 3(a)
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ELECTRO-VOICE, INCORPORATED
Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware
ELECTRO-VOICE, INCORPORATED ("the Corporation"), a corporation
incorporated pursuant to the General Corporation Law of the State of Delaware
("DGCL") on July 12, 1967 under the name GULL COMPANY OF BUCHANAN, INC., DOES
HEREBY CERTIFY:
1. This Restated Certificate of Incorporation restates, integrates and
further amends the provisions of the Certificate of Incorporation of the
Corporation to read in their entirety as follows:
FIRST: The name of the Corporation is EV INTERNATIONAL, INC.
SECOND: The Corporation's registered office in the State of Delaware is
at Corporation Trust Center, 1209 Orange Street in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is
The Corporation Trust Company.
THIRD: The nature of the business of the Corporation and its purpose is
to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 1,000 shares of Common Stock, par value $.01 per
share.
<PAGE> 2
FIFTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation and for the
purpose of creating, defining, limiting and regulating the powers of the
Corporation and its directors and stockholders:
(a) The number of directors of the Corporation shall be fixed
by and may be altered from time to time in the manner provided in the
By-Laws, and vacancies in the Board of Directors and newly created
directorships resulting from any increase in the authorized number of
directors may be filled, and directors may be removed, as provided in
the By-Laws.
(b) The election of directors may be conducted in any manner
approved by the stockholders at the time when the election is held and
need not be by written ballot.
(c) All corporate powers and authority of the Corporation
(except as at the time otherwise provided by law, by this Certificate
of Incorporation or by the By-Laws) shall be vested in and exercised by
the Board of Directors.
(d) The Board of Directors shall have the power without the
assent or vote of the stockholders to adopt, amend, alter or repeal the
By-Laws of the Corporation, except to the extent that the By-Laws or
this Certificate of Incorporation otherwise provide.
(e) No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of his
or her fiduciary duty as a director, provided that nothing contained in
this Article shall eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the Corporation or
its stockholders, (ii) for acts or
2
<PAGE> 3
omissions not in good faith or which involve intentional misconduct or
a knowing violation of the law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware or (iv) for any transaction
from which the director derived an improper personal benefit.
Notwithstanding anything contained in this Certificate to the contrary,
any alteration, amendment or repeal of, or adoption of any provision
inconsistent with, this Article FIFTH shall not adversely affect any
rights or protection of a director of the Corporation existing
hereunder in respect of any act or omission occurring prior to such
alteration, amendment, repeal or adoption.
SIXTH: The Corporation reserves the right to amend or repeal any
provision contained in this Restated Certificate of Incorporation in the
manner now or hereafter prescribed by the laws of the State of Delaware,
and all rights herein conferred upon stockholders or directors are granted
subject to this reservation.
2. This Restated Certificate of Incorporation was duly adopted by the
Board of Directors by resolutions dated as of February 10, 1997 in accordance
with the provisions of Sections 141(f), 242 and 245 of the General Corporation
Law of the State of Delaware.
3. This Restated Certificate of Incorporation has been approved by the
written consent of holder of a majority of the common stock of the Corporation
in accordance with the provisions of Sections 228(a), 242 and 245 of the General
Corporation Law of the State of Delaware.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
3
<PAGE> 4
IN WITNESS WHEREOF, ELECTRO-VOICE, INCORPORATED has caused this
Restated Certificate of Incorporation to be signed by its President and attested
by its Secretary this 10th day of February, 1997.
ELECTRO-VOICE, INCORPORATED
By: /s/ NICHOLAS E. SOMERS
--------------------------
Name: Nicholas E. Somers
Title: President
ATTEST:
By: /s/ CHRISTINE K. VANDEN BEUKEL
----------------------------------
Name: Christine K. Vanden Beukel
Title: Secretary
4
<PAGE> 1
Exhibit 3(b)
================================================================================
Gulton Acquisition Corp.
BY-LAWS
As Adopted on December 4, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
ARTICLE I STOCKHOLDERS....................................... 1
Section 1.01. Annual Meetings............................... 1
Section 1.02. Special Meetings.............................. 1
Section 1.03. Notice of Meetings; Waiver.................... 2
Section 1.04. Quorum........................................ 2
Section 1.05. Voting........................................ 3
Section 1.06. Voting by Ballot.............................. 3
Section 1.07. Adjournment................................... 3
Section 1.08. Proxies....................................... 4
Section 1.09. Organization; Procedure....................... 5
Section 1.10. Consent of Stockholders in Lieu of
Meeting....................................... 5
ARTICLE II BOARD OF DIRECTORS................................. 6
Section 2.01. General Powers................................ 6
Section 2.02. Number and Term of Office..................... 6
Section 2.03. Election of Directors......................... 6
Section 2.04. Annual and Regular Meetings................... 7
Section 2.05. Special Meetings; Notice...................... 7
Section 2.06. Quorum; Voting................................ 8
Section 2.07. Adjournment................................... 8
Section 2.08. Action Without a Meeting...................... 8
Section 2.09. Regulations; Manner of Acting................. 8
Section 2.10. Action by Telephonic Communications........... 9
Section 2.11. Resignations.................................. 9
Section 2.12. Removal of Directors.......................... 9
Section 2.13. Vacancies and Newly Created
Directorships................................. 9
Section 2.14. Compensation.................................. 10
Section 2.15. Reliance on Accounts and
Reports, etc.................................. 10
ARTICLE III EXECUTIVE COMMITTEE AND OTHER
COMMITTEES......................................... 10
Section 3.01. How Constituted............................... 10
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
Section 3.02. Powers........................................ 11
Section 3.03. Proceedings................................... 13
Section 3.04. Quorum and Manner of Acting................... 13
Section 3.05. Action by Telephonic Communications........... 14
Section 3.06. Absent or Disqualified Members................ 14
Section 3.07. Resignations.................................. 14
Section 3.08. Removal....................................... 14
Section 3.09. Vacancies..................................... 14
ARTICLE IV OFFICERS........................................... 15
Section 4.01. Number........................................ 15
Section 4.02. Election...................................... 15
Section 4.03. Salaries...................................... 15
Section 4.04. Removal and Resignation; Vacancies............ 15
Section 4.05. Authority and Duties of Officers.............. 16
Section 4.06. The President................................. 16
Section 4.07. The Vice President............................ 17
Section 4.08. The Secretary................................. 17
Section 4.09. Additional Officers........................... 18
Section 4.10. Security...................................... 19
ARTICLE V CAPITAL STOCK...................................... 19
Section 5.01. Certificates of Stock, Uncertificated
Shares........................................ 19
Section 5.02. Signatures; Facsimile......................... 19
Section 5.03. Lost, Stolen or Destroyed
Certificates.................................. 20
Section 5.04. Transfer of Stock............................. 20
Section 5.05. Record Date................................... 21
Section 5.06. Registered Stockholders....................... 22
Section 5.07. Transfer Agent and Registrar.................. 22
ARTICLE VI INDEMNIFICATION.................................... 23
Section 6.01. Nature of Indemnity........................... 23
Section 6.02. Successful Defense............................ 24
Section 6.03. Determination That Indemnification Is
Proper........................................ 24
Section 6.04. Advance Payment of Expenses................... 25
Section 6.05. Procedure for Indemnification of
Directors and Officers........................ 25
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
Section 6.06. Survival; Preservation of
Other Rights.................................. 26
Section 6.07. Insurance..................................... 27
Section 6.08. Severability.................................. 28
ARTICLE VII OFFICES............................................ 28
Section 7.01. Registered Office............................. 28
Section 7.02. Other Offices................................. 28
ARTICLE VIII GENERAL PROVISIONS................................. 28
Section 8.01. Dividends..................................... 28
Section 8.02. Reserves...................................... 29
Section 8.03. Execution of Instruments...................... 29
Section 8.04. Corporate Indebtedness........................ 30
Section 8.05. Deposits...................................... 30
Section 8.06. Checks........................................ 30
Section 8.07. Sale, Transfer, etc. of Securities............ 30
Section 8.08. Voting as Stockholder......................... 31
Section 8.09. Fiscal Year................................... 31
Section 8.10. Seal.......................................... 31
Section 8.11. Books and Records; Inspection................. 32
ARTICLE IX AMENDMENT OF BY-LAWS............................... 32
Section 9.01. Amendment..................................... 32
ARTICLE X CONSTRUCTION....................................... 32
Section 10.01. Construction.................................. 32
</TABLE>
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Gulton Acquisition Corp.
BY-LAWS
As adopted on December 4th, 1996
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meetings. The annual meeting of the stockholders
of the Corporation for the election of directors and for the transaction of such
other business as properly may come before such meeting shall be held at such
place, either within or without the State of Delaware, during the first two
weeks of May, on a day and at a time which shall be determined by the Board, or
at such other date and hour, as may be fixed from time to time by resolution of
the Board of Directors and set forth in the notice or waiver of notice of the
meeting.
Section 1.02. Special Meetings. Special meetings of the stockholders
may be called at any time by the President (or, in the event of his absence or
disability, by the Vice President), or by the Board of Directors. A special
meeting shall be called by the President (or, in the event of his absence or
disability, by the Vice President), or by the Secretary, immediately upon
receipt of a written request therefor by stockholders holding in the aggregate
not less than a majority of the outstanding shares of the Corporation at the
time entitled to vote at any meeting of the stockholders. If such officers or
the Board of Directors shall fail to call such meeting within twenty days after
receipt of such request, any stockholder executing such request may call such
meeting. Such special meetings of the stockholders shall be held at such places,
within or without the State of Delaware, as shall be specified in the respective
notices or waivers of notice thereof.
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Section 1.03. Notice of Meetings; Waiver. The Secretary or any
Assistant Secretary shall cause written notice of the place, date and hour of
each meeting of the stockholders, and, in the case of a special meeting, the
purpose or purposes for which such meeting is called, to be given personally or
by mail, not less than ten nor more than sixty days prior to the meeting, to
each stockholder of record entitled to vote at such meeting. If such notice is
mailed, it shall be deemed to have been given to a stockholder when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the record of stockholders of the Corporation, or, if
he or she shall have filed with the Secretary of the Corporation a written
request that notices to him or her be mailed to some other address, then
directed to him or her at such other address. Such further notice shall be given
as may be required by law.
No notice of any meeting of stockholders need be given to any
stockholder who submits a signed waiver of notice, whether before or after the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in a written
waiver of notice. The attendance of any stockholder at a meeting of stockholders
shall constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
Section 1.04. Quorum. Except as otherwise required by law or by the
Certificate of Incorporation, the presence in person or by proxy of the holders
of record of a majority of the shares entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business at such
meeting.
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Section 1.05. Voting. If, pursuant to Section 5.05 of these By-Laws, a
record date has been fixed, every holder of record of shares entitled to vote at
a meeting of stockholders shall be entitled to one vote for each share
outstanding in his or her name on the books of the Corporation at the close of
business on such record date. If no record date has been fixed, then every
holder of record of shares entitled to vote at a meeting of stockholders shall
be entitled to one vote for each share of stock standing in his or her name on
the books of the Corporation at the close of business on the day next preceding
the day on which notice of the meeting is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. Except as otherwise required by law or by the Certificate of Incorporation
or by these ByLaws, the vote of a majority of the shares represented in person
or by proxy at any meeting at which a quorum is present shall be sufficient for
the transaction of any business at such meeting.
Section 1.06. Voting by Ballot. No vote of the stockholders need be
taken by written ballot unless otherwise required by law. Any vote which need
not be taken by ballot may be conducted in any manner approved by the meeting.
Section 1.07. Adjournment. If a quorum is not present at any meeting of
the stockholders, the stockholders present in person or by proxy shall have the
power to adjourn any such meeting from time to time until a quorum is present.
Notice of any adjourned meeting of the stockholders of the Corporation need not
be given if the place, date and hour thereof are announced at the meeting at
which the adjournment is taken, provided, however, that if the adjournment is
for more than thirty days, or if after the adjournment a new record date for the
adjourned meeting is fixed pursuant to Section 5.05 of these By-Laws, a notice
of the adjourned meeting, conforming to the requirements of Section 1.03 of
these By-Laws, shall be given to each
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stockholder of record entitled to vote at such meeting. At any adjourned meeting
at which a quorum is present, any business may be transacted that might have
been transacted on the original date of the meeting.
Section 1.08. Proxies. Any stockholder entitled to vote at any meeting
of the stockholders or to express consent to or dissent from corporate action in
writing without a meeting may authorize another person or persons to vote at any
such meeting and express such consent or dissent for him or her by proxy. A
stockholder may authorize a valid proxy by executing a written instrument signed
by such stockholder, or by causing his or her signature to be affixed to such
writing by any reasonable means including, but not limited to, by facsimile
signature, or by transmitting or authorizing the transmission of a telegram,
cablegram or other means of electronic transmission to the person designated as
the holder of the proxy, a proxy solicitation firm or a like authorized agent.
No such proxy shall be voted or acted upon after the expiration of three years
from the date of such proxy, unless such proxy provides for a longer period.
Every proxy shall be revocable at the pleasure of the stockholder executing it,
except in those cases where applicable law provides that a proxy shall be
irrevocable. A stockholder may revoke any proxy which is not irrevocable by
attending the meeting and voting in person or by filing an instrument in writing
revoking the proxy or by filing another duly executed proxy bearing a later date
with the Secretary. Proxies by telegram, cablegram or other electronic
transmission must either set forth or be submitted with information from which
it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the stockholder. Any copy, facsimile
telecommunication or other reliable reproduction of a writing or transmission
created pursuant to this section may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication
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or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
Section 1.09. Organization; Procedure. At every meeting of stockholders
the presiding officer shall be the President or, in the event of his absence or
disability, a presiding officer chosen by a majority of the stockholders present
in person or by proxy. The Secretary, or in the event of his or her absence or
disability, the Assistant Secretary, if any, or if there be no Assistant
Secretary, in the absence of the Secretary, an appointee of the presiding
officer, shall act as Secretary of the meeting. The order of business and all
other matters of procedure at every meeting of stockholders may be determined by
such presiding officer.
Section 1.10. Consent of Stockholders in Lieu of Meeting. To the
fullest extent permitted by law, whenever the vote of stockholders at a meeting
thereof is required or permitted to be taken for or in connection with any
corporate action, such action may be taken without a meeting, without prior
notice and without a vote of stockholders, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate
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action referred to therein unless, within sixty days of the earliest dated
consent delivered in the manner required by law to the Corporation, written
consents signed by a sufficient number of holders to take action are delivered
to the Corporation by delivery to its registered office in the State of
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. General Powers. Except as may otherwise be provided by
law, by the Certificate of Incorporation or by these By-Laws, the property,
affairs and business of the Corporation shall be managed by or under the
direction of the Board of Directors and the Board of Directors may exercise all
the powers of the Corporation.
Section 2.02. Number and Term of Office. The number of Directors
constituting the entire Board of Directors shall be no less than three, which
number may be modified from time to time by resolution of the Board of
Directors, but in no event shall the number of Directors be less than one. Each
Director (whenever elected) shall hold office until his or her successor has
been duly elected and qualified, or until his or her earlier death, resignation
or removal.
Section 2.03. Election of Directors. Except as otherwise provided in
Sections 2.12 and 2.13 of these By-Laws, the Directors shall be elected at each
annual meeting of the stockholders. If the annual meeting for the election of
Directors is not held on the date designated
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therefor, the Directors shall cause the meeting to be held as soon thereafter as
convenient. At each meeting of the stockholders for the election of Directors,
provided a quorum is present, the Directors shall be elected by a plurality of
the votes validly cast in such election.
Section 2.04. Annual and Regular Meetings. The annual meeting of the
Board of Directors for the purpose of electing officers and for the transaction
of such other business as may come before the meeting shall be held as soon as
possible following adjournment of the annual meeting of the stockholders at the
place of such annual meeting of the stockholders. Notice of such annual meeting
of the Board of Directors need not be given. The Board of Directors from time to
time may by resolution provide for the holding of regular meetings and fix the
place (which may be within or without the State of Delaware) and the date and
hour of such meetings. Notice of regular meetings need not be given, provided,
however, that if the Board of Directors shall fix or change the time or place of
any regular meeting, notice of such action shall be mailed promptly, or sent by
telegram, radio or cable, to each Director who shall not have been present at
the meeting at which such action was taken, addressed to him or her at his or
her usual place of business, or shall be delivered to him or her personally.
Notice of such action need not be given to any Director who attends the first
regular meeting after such action is taken without protesting the lack of notice
to him or her, prior to or at the commencement of such meeting, or to any
Director who submits a signed waiver of notice, whether before or after such
meeting.
Section 2.05. Special Meetings; Notice. Special meetings of the Board
of Directors shall be held whenever called by the President or, in the event of
his absence or disability, by any Vice President, at such place (within or
without the State of Delaware), date and hour as may be specified in the
respective notices or waivers of notice of such meetings. Special meetings of
the Board of Directors
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may be called on twenty-four hours' notice, if notice is given to each Director
personally or by telephone or telegram, or on five days' notice, if notice is
mailed to each Director, addressed to him or her at his or her usual place of
business. Notice of any special meeting need not be given to any Director who
attends such meeting without protesting the lack of notice to him or her, prior
to or at the commencement of such meeting, or to any Director who submits a
signed waiver of notice, whether before or after such meeting, and any business
may be transacted thereat.
Section 2.06. Quorum; Voting. At all meetings of the Board of
Directors, the presence of a majority of the total authorized number of
Directors shall constitute a quorum for the transaction of business. Except as
otherwise required by law, the vote of a majority of the Directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors.
Section 2.07. Adjournment. A majority of the Directors present, whether
or not a quorum is present, may adjourn any meeting of the Board of Directors to
another time or place. No notice need be given of any adjourned meeting unless
the time and place of the adjourned meeting are not announced at the time of
adjournment, in which case notice conforming to the requirements of Section 2.05
of these By-Laws shall be given to each Director.
Section 2.08. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board of Directors consent thereto in
writing, and such writing or writings are filed with the minutes of proceedings
of the Board of Directors.
Section 2.09. Regulations; Manner of Acting. To the extent consistent
with applicable law, the Certificate of Incorporation and these By-Laws, the
Board of Directors may adopt such rules and regulations for the conduct of
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meetings of the Board of Directors and for the management of the property,
affairs and business of the Corporation as the Board of Directors may deem
appropriate. The Directors shall act only as a Board, and the individual
Directors shall have no power as such.
Section 2.10. Action by Telephonic Communications. Members of the
Board of Directors may participate in a meeting of the Board of Directors by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this provision shall constitute presence
in person at such meeting.
Section 2.11. Resignations. Any Director may resign at any time by
delivering a written notice of resignation, signed by such Director, to the
President or the Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
Section 2.12. Removal of Directors. Any Director may be removed at any
time, either for or without cause, upon the affirmative vote of the holders of a
majority of the outstanding shares of stock of the Corporation entitled to vote
for the election of such Director. Any vacancy in the Board of Directors caused
by any such removal may be filled at such meeting by the stockholders entitled
to vote for the election of the Director so removed. If such stockholders do not
fill such vacancy at such meeting (or in the written instrument effecting such
removal, if such removal was effected by consent without a meeting), such
vacancy may be filled in the manner provided in Section 2.13 of these By-Laws.
Section 2.13. Vacancies and Newly Created Directorships. If any
vacancies shall occur in the Board of Directors, by reason of death,
resignation, removal or otherwise, or if the authorized number of Directors
shall be
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increased, the Directors then in office shall continue to act, and such
vacancies and newly created directorships may be filled by a majority of the
Directors then in office, although less than a quorum. A Director elected to
fill a vacancy or a newly created directorship shall hold office until his or
her successor has been elected and qualified or until his or her earlier death,
resignation or removal. Any such vacancy or newly created directorship may also
be filled at any time by vote of the stockholders.
Section 2.14. Compensation. The amount, if any, which each Director
shall be entitled to receive as compensation for his or her services as such
shall be fixed from time to time by resolution of the Board of Directors.
Section 2.15. Reliance on Accounts and Reports, etc. A Director, or a
member of any Committee designated by the Board of Directors shall, in the
performance of his or her duties, be fully protected in relying in good faith
upon the records of the Corporation and upon information, opinions, reports or
statements presented to the Corporation by any of the Corporation's officers or
employees, or Committees designated by the Board of Directors, or by any other
person as to the matters the member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.01. How Constituted. The Board of Directors may, by
resolution adopted by a majority of the whole Board, designate one or more
Committees, including an Executive Committee, each such Committee to consist of
such number of Directors as from time to time may be fixed by the Board of
Directors. The Board of Directors may designate
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one or more Directors as alternate members of any such Committee, who may
replace any absent or disqualified member or members at any meeting of such
Committee. Thereafter, members (and alternate members, if any) of each such
Committee may be designated at the annual meeting of the Board of Directors. Any
such Committee may be abolished or re-designated from time to time by the Board
of Directors. Each member (and each alternate member) of any such Committee
(whether designated at an annual meeting of the Board of Directors or to fill a
vacancy or otherwise) shall hold office until his or her successor shall have
been designated or until he or she shall cease to be a Director, or until his or
her earlier death, resignation or removal.
Section 3.02. Powers. During the intervals between the meetings of the
Board of Directors, the Executive Committee, except as otherwise provided in
this section, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the property, affairs and business of
the Corporation, including the power to declare dividends and to authorize the
issuance of stock. Each such other Committee, except as otherwise provided in
this section, shall have and may exercise such powers of the Board of Directors
as may be provided by resolution or resolutions of the Board of Directors.
Neither the Executive Committee nor any such other Committee shall have the
power or authority:
(a) to amend the Certificate of Incorporation (except that a
Committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by
the Board of Directors as provided in Section 151(a) of the General
Corporation Law, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution,
any distribution of assets of the Corporation or the conversion into,
or the exchange of such shares for, shares of any other class or
classes or any other series of the same or any
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other class or classes of stock of the Corporation or fix the number of
shares of any series of stock or authorize the increase or decrease of
the shares of any series);
(b) to adopt an agreement of merger or consolidation;
(c) to recommend to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and
assets;
(d) to recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution;
(e) to amend the By-Laws of the Corporation;
(f) to remove any President, Vice President, Assistant
Secretary or Assistant Treasurer of the Corporation;
(g) to authorize the borrowing of funds, other than under
existing facilities, that is material to the capital structure of the
Corporation;
(h) to authorize any new compensation or benefit program;
(i) to appoint or discharge the Corporation's independent
public accountants;
(j) to authorize the annual operating plan, annual capital
expenditure plan and strategic plan;
(k) to abolish or usurp the authority of the Board of
Directors;
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(l) to cause the General Partner to approve or effect the
acquisition or disposition by the Fund of any Portfolio Investment; or
(m) to consent to the amendment of the Amended and Restated
Limited Partnership of the General Partner or to permit the General
Partner to consent to any amendment of the Amended and Restated Limited
Partnership Agreement of the Fund.
The Executive Committee shall have, and any such other Committee may be
granted by the Board of Directors, power to authorize the seal of the
Corporation to be affixed to any or all papers which may require it.
Section 3.03. Proceedings. Each such Committee may fix its own rules of
procedure and may meet at such place (within or without the State of Delaware),
at such time and upon such notice, if any, as it shall determine from time to
time. Each such Committee shall keep minutes of its proceedings and shall report
such proceedings to the Board of Directors at the meeting of the Board of
Directors next following any such proceedings.
Section 3.04. Quorum and Manner of Acting. Except as may be otherwise
provided in the resolution creating such Committee, at all meetings of any
Committee the presence of members (or alternate members) constituting a majority
of the total authorized membership of such Committee shall constitute a quorum
for the transaction of business. The act of the majority of the members present
at any meeting at which a quorum is present shall be the act of such Committee.
Any action required or permitted to be taken at any meeting of any such
Committee may be taken without a meeting, if all members of such Committee shall
consent to such action in writing and such writing or writings are filed with
the minutes of the proceedings of the Committee. The members of any such
Committee shall act
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only as a Committee, and the individual members of such Committee shall have no
power as such.
Section 3.05. Action by Telephonic Communications. Members of any
Committee designated by the Board of Directors may participate in a meeting of
such Committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting.
Section 3.06. Absent or Disqualified Members. In the absence or
disqualification of a member of any Committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he, she
or they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member.
Section 3.07. Resignations. Any member (and any alternate member) of
any Committee may resign at any time by delivering a written notice of
resignation, signed by such member, to the Chairman or the President. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Section 3.08. Removal. Any member (and any alternate member) of any
Committee may be removed from his or her position as a member (or alternate
member, as the case may be) of such Committee at any time, either for or without
cause, by resolution adopted by a majority of the whole Board of Directors.
Section 3.09. Vacancies. If any vacancy shall occur in any Committee,
by reason of disqualification, death, resignation, removal or otherwise, the
remaining members (and any alternate members) shall continue to act,
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and any such vacancy may be filled by the Board of Directors.
ARTICLE IV
OFFICERS
Section 4.01. Number. The officers of the Corporation shall be chosen
by the Board of Directors and shall initially be a President, a Vice President
and a Secretary. The Board of Directors also may elect a Treasurer and one or
more Assistant Secretaries and Assistant Treasurers in such numbers as the Board
of Directors may determine. Any number of offices may be held by the same
person. No officer need be a Director of the Corporation.
Section 4.02. Election. Unless otherwise determined by the Board of
Directors, the officers of the Corporation shall be elected by the Board of
Directors at the annual meeting of the Board of Directors, and shall be elected
to hold office until the next succeeding annual meeting of the Board of
Directors. In the event of the failure to elect officers at such annual meeting,
officers may be elected at any regular or special meeting of the Board of
Directors. Each officer shall hold office until his successor has been elected
and qualified, or until his earlier death, resignation or removal.
Section 4.03. Salaries. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
Section 4.04. Removal and Resignation; Vacancies. Any officer may be
removed for or without cause at any time by the Board of Directors. Any officer
may resign at any time by delivering a written notice of resignation, signed by
such officer, to the Board of Directors or the President.
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Unless otherwise specified therein, such resignation shall take effect upon
delivery. Any vacancy occurring in any office of the Corporation by death,
resignation, removal or otherwise, shall be filled by the Board of Directors.
Section 4.05. Authority and Duties of Officers. The officers of the
Corporation shall have such authority and shall exercise such powers and perform
such duties as may be specified in these By-Laws, except that in any event each
officer shall exercise such powers and perform such duties as may be required by
law.
Section 4.06. The President. The President shall preside at all
meetings of the stockholders and directors at which he or she is present, shall
be the chief executive officer and the chief operating officer of the
Corporation, shall have general control and supervision of the policies and
operations of the Corporation and shall see that all orders and resolutions of
the Board of Directors are carried into effect. He or she shall manage and
administer the Corporation's business and affairs and shall also perform all
duties and exercise all powers usually pertaining to the office of a chief
executive officer and a chief operating officer of a corporation. He or she
shall have the authority to sign, in the name and on behalf of the Corporation,
checks, orders, contracts, leases, notes, drafts and other documents and
instruments in connection with the business of the Corporation, and together
with the Secretary or an Assistant Secretary, conveyances of real estate and
other documents and instruments to which the seal of the Corporation is affixed.
He or she shall have the authority to cause the employment or appointment of
such employees and agents of the Corporation as the conduct of the business of
the Corporation may require, to fix their compensation, and to remove or suspend
any employee or agent elected or appointed by the President or the Board of
Directors. The President shall perform such other duties and have such other
powers as the Board of Directors or the Chairman may from time to time
prescribe.
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Section 4.07. The Vice President. Each Vice President shall perform
such duties and exercise such powers as may be assigned to him from time to time
by the President. In the absence of the President, the duties of the President
shall be performed and his powers may be exercised by such Vice President as
shall be designated by the President, or failing such designation, such duties
shall be performed and such powers may be exercised by each Vice President in
the order of their earliest election to that office; subject in any case to
review and superseding action by the President.
Section 4.08. The Secretary. The Secretary shall have the following
powers and duties:
(a) He or she shall keep or cause to be kept a record of all
the proceedings of the meetings of the stockholders and of the Board of
Directors in books provided for that purpose.
(b) He or she shall cause all notices to be duly given in
accordance with the provisions of these By-Laws and as required by law.
(c) Whenever any Committee shall be appointed pursuant to a
resolution of the Board of Directors, he or she shall furnish a copy of
such resolution to the members of such Committee.
(d) He or she shall be the custodian of the records and of the
seal of the Corporation and cause such seal (or a facsimile thereof) to
be affixed to all certificates representing shares of the Corporation
prior to the issuance thereof and to all instruments the execution of
which on behalf of the Corporation under its seal shall have been duly
authorized in accordance with these By-Laws, and when so affixed he or
she may attest the same.
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(e) He or she shall properly maintain and file all books,
reports, statements, certificates and all other documents and records
required by law, the Certificate of Incorporation or these By-Laws.
(f) He or she shall have charge of the stock books and ledgers
of the Corporation and shall cause the stock and transfer books to be
kept in such manner as to show at any time the number of shares of
stock of the Corporation of each class issued and outstanding, the
names (alphabetically arranged) and the addresses of the holders of
record of such shares, the number of shares held by each holder and the
date as of which each became such holder of record.
(g) He or she shall sign (unless the Treasurer, an Assistant
Treasurer or an Assistant Secretary shall have signed) certificates
representing shares of the Corporation the issuance of which shall have
been authorized by the Board of Directors.
(h) He or she shall perform, in general, all duties incident
to the office of secretary and such other duties as may be specified in
these By-Laws or as may be assigned to him or her from time to time by
the Board of Directors, or the President.
Section 4.09. Additional Officers. The Board of Directors may appoint
such other officers and agents as it may deem appropriate, and such other
officers and agents shall hold their offices for such terms and shall exercise
such powers and perform such duties as may be determined from time to time by
the Board of Directors. The Board of Directors from time to time may delegate to
any officer or agent the power to appoint subordinate officers or agents and to
prescribe their respective rights, terms of office, authorities and duties. Any
such officer or agent may
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remove any such subordinate officer or agent appointed by him or her, for or
without cause.
Section 4.10. Security. The Board of Directors may require any officer,
agent or employee of the Corporation to provide security for the faithful
performance of his or her duties, in such amount and of such character as may be
determined from time to time by the Board of Directors.
ARTICLE V
CAPITAL STOCK
Section 5.01. Certificates of Stock, Uncertificated Shares. The shares
of the Corporation shall be represented by certificates, provided that the Board
of Directors may provide by resolution or resolutions that some or all of any or
all classes or series of the stock of the Corporation shall be uncertificated
shares. Any such resolution shall not apply to shares represented by a
certificate until each certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock in the Corporation represented by certificates and upon
request every holder of uncertificated shares shall be entitled to have a
certificate signed by, or in the name of the Corporation, by the President or a
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary, representing the number of shares registered in
certificate form. Such certificate shall be in such form as the Board of
Directors may determine, to the extent consistent with applicable law, the
Certificate of Incorporation and these By-Laws.
Section 5.02. Signatures; Facsimile. All of such signatures on the
certificate referred to in Section 5.01 of these By-Laws may be a facsimile,
engraved or printed, to the extent permitted by law. In case any officer,
transfer
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Gulton Acquisition Corp.
agent or registrar who has signed, or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he or she were such officer, transfer agent or
registrar at the date of issue.
Section 5.03. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct that a new certificate be issued in place of any
certificate thereto fore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon delivery to the Board of Directors of an affidavit of
the owner or owners of such certificate, setting forth such allegation. The
Board of Directors may require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of any such new certificate.
Section 5.04. Transfer of Stock. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares, duly endorsed
or accompanied by appropriate evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Within a reasonable time after the transfer of uncertificated stock, the
Corporation shall send to the registered owner thereof a written notice
containing the information required to be set forth or stated on certificates
pursuant to Sections 151, 156, 202(a) or 218(a) of the General Corporation Law
of the State of Delaware. Subject to the provisions of the Certificate of
Incorporation and these By-Laws, the Board of Directors may prescribe such
additional rules and regulations as it may deem appropriate relating to the
issue, transfer and registration of shares of the Corporation.
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Gulton Acquisition Corp.
Section 5.05. Record Date. In order to determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date on which the resolution fixing the
record date is adopted by the Board of Directors, and which shall not be more
than sixty nor less than ten days before the date of such meeting. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting, provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the board of directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting
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Gulton Acquisition Corp.
shall be at the close of business on the day on which the Board of Directors
adopts the resolution taking such prior action.
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights of the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
Section 5.06. Registered Stockholders. Prior to due surrender of a
certificate for registration of transfer, the Corporation may treat the
registered owner as the person exclusively entitled to receive dividends and
other distributions, to vote, to receive notice and otherwise to exercise all
the rights and powers of the owner of the shares represented by such
certificate, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other person,
whether or not the Corporation shall have notice of such claim or interests.
Whenever any transfer of shares shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer if, when the
certificates are presented to the Corporation for transfer or uncertificated
shares are requested to be transferred, both the transferor and transferee
request the Corporation to do so.
Section 5.07. Transfer Agent and Registrar. The Board of Directors may
appoint one or more transfer agents
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and one or more registrars, and may require all certificates representing shares
to bear the signature of any such transfer agents or registrars.
ARTICLE VI
INDEMNIFICATION
Section 6.01. Nature of Indemnity. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (a "Proceeding"),
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was or has agreed to become a director or officer of the
Corporation, or is or was serving or has agreed to serve at the request of the
Corporation as a director or officer, of another corporation, partnership,
joint venture, trust or other enterprise, or by reason of any action alleged to
have been taken or omitted in such capacity, and may indemnify any person who
was or is a party or is threatened to be made a party to such an action, suit or
proceeding by reason of the fact that he or she is or was or has agreed to
become an employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as an employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her or on his or her
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding had no reasonable cause to
believe his or her conduct was unlawful; except that in the case of an action or
suit by or in the right of the Corporation to procure a judgment in its favor
(1) such
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Gulton Acquisition Corp.
indemnification shall be limited to expenses (including attorneys' fees)
actually and reasonably incurred by such person in the defense or settlement of
such action or suit, and (2) no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 6.02. Successful Defense. To the extent that a director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in Section
6.01 of these By-Laws or in defense of any claim, issue or matter therein, he or
she shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith.
Section 6.03. Determination That Indemnification Is Proper. Any
indemnification of a director or officer of the Corporation under Section 6.01
of these By-Laws (unless ordered by a court) shall be made by the Corporation
unless a determination is made that indemnification of the director or officer
is not proper in the circumstances because he or
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Gulton Acquisition Corp.
she has not met the applicable standard of conduct set forth in Section 6.01 of
these By-Laws. Any indemnification of an employee or agent of the Corporation
under Section 6.01 of these By-Laws (unless ordered by a court) may be made by
the Corporation upon a determination that indemnification of the employee or
agent is proper in the circumstances because he or she has met the applicable
standard of conduct set forth in Section 6.01 of these By-Laws. Any such
determination shall be made (1) by a majority vote of the Directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(2) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (3) by the stockholders.
Section 6.04. Advance Payment of Expenses. Expenses (including
attorneys' fees) incurred by a director or officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation as authorized in this
Article. Such expenses (including attorneys' fees) incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as the Board
of Directors deems appropriate. The Board of Directors may authorize the
Corporation's counsel to represent such director, officer, employee or agent in
any action, suit or proceeding, whether or not the Corporation is a party to
such action, suit or proceeding.
Section 6.05. Procedure for Indemnification of Directors and Officers.
Any indemnification of a director or officer of the Corporation under Sections
6.01 and 6.02 of these By-Laws, or advance of costs, charges and expenses to a
director or officer under Section 6.04 of these ByLaws, shall be made promptly,
and in any event within thirty
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Gulton Acquisition Corp.
days, upon the written request of the director or officer. If a determination by
the Corporation that the director or officer is entitled to indemnification
pursuant to this Article is required, and the Corporation fails to respond
within sixty days to a written request for indemnity, the Corporation shall be
deemed to have approved such request. If the Corporation denies a written
request for indemnity or advancement of expenses, in whole or in part, or if
payment in full pursuant to such request is not made within thirty days, the
right to indemnification or advances as granted by this Article shall be
enforceable by the director or officer in any court of competent jurisdiction.
Such person's costs and expenses incurred in connection with successfully
establishing his right to indemnification, in whole or in part, in any such
action shall also be indemnified by the Corporation. It shall be a defense to
any such action (other than an action brought to enforce a claim for the advance
of costs, charges and expenses under Section 6.04 of these By-Laws where the
required undertaking, if any, has been received by or tendered to the
Corporation) that the claimant has not met the standard of conduct set forth in
Section 6.01 of these By-Laws, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors, its independent legal counsel, and its stockholders) to have made
a determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 6.01 of these By-Laws, nor the fact
that there has been an actual determination by the Corporation (including its
Board of Directors, its independent legal counsel, and its stockholders) that
the claimant has not met such applicable standard of conduct, shall be a defense
to the action or create a presumption that the claimant has not met the
applicable standard of conduct.
Section 6.06. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be
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Gulton Acquisition Corp.
deemed to be a contract between the Corporation and each director, officer,
employee and agent who serves in any such capacity at any time while these
provisions as well as the relevant provisions of the Delaware Corporation Law
are in effect and any repeal or modification thereof shall not affect any right
or obligation then existing with respect to any state of facts then or
previously existing or any action, suit or proceeding previously or thereafter
brought or threatened based in whole or in part upon any such state of facts.
Such a "contract right" may not be modified retroactively without the consent of
such director, officer, employee or agent.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Section 6.07. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him or her and incurred by him or her or on his or her behalf in any such
capacity, or arising out of his or her status as such, whether or not the
Corporation would have the power to indemnify him or her against such liability
under the provisions of this Article, provided that such insurance is available
on acceptable terms, which determination shall be made by a vote of a majority
of the entire Board of Directors.
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Section 6.08. Severability. If this Article or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.
ARTICLE VII
OFFICES
Section 7.01. Registered Office. The registered office of the
Corporation in the State of Delaware shall be located at Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New Castle.
Section 7.02. Other Offices. The Corporation may maintain offices or
places of business at such other locations within or without the State of
Delaware as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01. Dividends. Subject to any applicable provisions of law
and the Certificate of Incorporation, dividends upon the shares of the
Corporation may be declared by the Board of Directors at any regular or
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Gulton Acquisition Corp.
special meeting of the Board of Directors and any such dividend may be paid in
cash, property, or shares of the Corporation's Capital Stock.
A member of the Board of Directors, or a member of any Committee
designated by the Board of Directors shall be fully protected in relying in good
faith upon the records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or Committees of the Board of Directors, or by any other person as to
matters the Director reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Corporation, as to the value and amount of the assets,
liabilities and/or net profits of the Corporation, or any other facts pertinent
to the existence and amount of surplus or other funds from which dividends might
properly be declared and paid.
Section 8.02. Reserves. There may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in its absolute discretion, thinks proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation or for such other purpose as the
Board of Directors shall think conducive to the interest of the Corporation, and
the Board of Directors may similarly modify or abolish any such reserve.
Section 8.03. Execution of Instruments. The President, any Vice
President, the Secretary or the Treasurer may enter into any contract or execute
and deliver any instrument in the name and on behalf of the Corporation. The
Board of Directors or the President may authorize any other officer or agent to
enter into any contract or execute and deliver any instrument in the name and on
behalf of the Corporation. Any such authorization may be general or limited to
specific contracts or instruments.
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Section 8.04. Corporate Indebtedness. No loan shall be contracted on
behalf of the Corporation, and no evidence of indebtedness shall be issued in
its name, unless authorized by the Board of Directors or the President. Such
authorization may be general or confined to specific instances. Loans so
authorized may be effected at any time for the Corporation from any bank, trust
company or other institution, or from any firm, corporation or individual. All
bonds, debentures, notes and other obligations or evidences of indebtedness of
the Corporation issued for such loans shall be made, executed and delivered as
the Board of Directors or the President shall authorize. When so authorized by
the Board of Directors or the President, any part of or all the properties,
including contract rights, assets, business or good will of the Corporation,
whether then owned or thereafter acquired, may be mortgaged, pledged,
hypothecated or conveyed or assigned in trust as security for the payment of
such bonds, debentures, notes and other obligations or evidences of indebtedness
of the Corporation, and of the interest thereon, by instruments executed and
delivered in the name of the Corporation.
Section 8.05. Deposits. Any funds of the Corporation may be deposited
from time to time in such banks, trust companies or other depositaries as may be
determined by the Board of Directors or the President, or by such officers or
agents as may be authorized by the Board of Directors or the President to make
such determination.
Section 8.06. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such agent or agents
of the Corporation, and in such manner, as the Board of Directors or the
President from time to time may determine.
Section 8.07. Sale, Transfer, etc. of Securities. To the extent
authorized by the Board of Directors or by the President, any Vice President,
the Secretary or the Treasurer or any other officers designated by the Board of
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Gulton Acquisition Corp.
Directors or the President may sell, transfer, endorse, and assign any shares of
stock, bonds or other securities owned by or held in the name of the
Corporation, and may make, execute and deliver in the name of the Corporation,
under its corporate seal, any instruments that may be appropriate to effect any
such sale, transfer, endorsement or assignment.
Section 8.08. Voting as Stockholder. Unless otherwise determined by
resolution of the Board of Directors, the President or any Vice President shall
have full power and authority on behalf of the Corporation to attend any meeting
of stockholders of any corporation in which the Corporation may hold stock, and
to act, vote (or execute proxies to vote) and exercise in person or by proxy all
other rights, powers and privileges incident to the ownership of such stock.
Such officers acting on behalf of the Corporation shall have full power and
authority to execute any instrument expressing consent to or dissent from any
action of any such corporation without a meeting. The Board of Directors may by
resolution from time to time confer such power and authority upon any other
person or persons.
Section 8.09. Fiscal Year. The fiscal year of the Corporation shall
commence on the first day of March of each year (except for the Corporation's
first fiscal year which shall commence on the date of incorporation) and shall
terminate in each case on the last day of February of the subsequent calendar
year.
Section 8.10. Seal. The seal of the Corporation shall be circular in
form and shall contain the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware". The form of such
seal shall be subject to alteration by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed, affixed or
reproduced, or may be used in any other lawful manner.
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Section 8.11. Books and Records; Inspection. Except to the extent
otherwise required by law, the books and records of the Corporation shall be
kept at such place or places within or without the State of Delaware as may be
determined from time to time by the Board of Directors.
ARTICLE IX
AMENDMENT OF BY-LAWS
Section 9.01. Amendment. These By-Laws may be amended, altered or
repealed
(a) by resolution adopted by a majority of the Board of
Directors at any special or regular meeting of the Board if, in the
case of such special meeting only, notice of such amendment, alteration
or repeal is contained in the notice or waiver of notice of such
meeting; or
(b) at any regular or special meeting of the stockholders if,
in the case of such special meeting only, notice of such amendment,
alteration or repeal is contained in the notice or waiver of notice of
such meeting.
ARTICLE X
CONSTRUCTION
Section 10.01. Construction. In the event of any conflict between the
provisions of these By-Laws as in effect from time to time and the provisions of
the Certificate of Incorporation of the Corporation as in effect from time to
time, the provisions of such Certificate of Incorporation shall be controlling.
32
<PAGE> 1
Exhibit 4(a)
Execution Copy
================================================================================
INDENTURE
Between
EV INTERNATIONAL, INC.,
AND
THE BANK OF NEW YORK
Dated as of March 24, 1997
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a) 1) .............................. 7.10
(a)(2) .............................. 7.10
(a)(3) .............................. N.A.
(a)(4) .............................. N.A.
(a)(5) .............................. N.A.
(b) .............................. 7.8; 7.10
(c) .............................. N.A.
311(a) .............................. 7.11
(b) .............................. 7.11
(c) .............................. N.A.
312(a) .............................. 2.5
(b) .............................. 11.3
(c) .............................. 11.3
313(a) .............................. 7.6
(b)(1) .............................. N.A.
(b)(2) .............................. 7.6
(c) .............................. 11.2
(d) .............................. 7.6
314(a) .............................. 4.2
4.9; 11.2
(b) .............................. N.A.
(c)(1) .............................. 11.4
(c)(2) .............................. 11.4
(c)(3) .............................. N.A.
(d) .............................. N.A.
(e) .............................. 11.5
(f) .............................. 4.9
315(a)(1) .............................. 7.1
315(a)(2) .............................. 7.1
(b) .............................. 7.5; 11.2
(c) .............................. 7.1
(d) .............................. 7.1
(e) .............................. 6.11
316(a)(last sentence) ....................... 11.6
(a)(1)(A) .............................. 6.5
(a)(1)(B) .............................. 6.4
(a)(2) ............................... N.A.
(b) .............................. 6.7
(c) .............................. 6.10
317(a)(1) .............................. 6.8
(a)(2) .............................. 6.9
<PAGE> 3
(b) .............................. 2.4
318(a) .............................. 11.1
N.A. means Not Applicable.
- ----------
Note: This Cross-Reference Table shall not, for any purpose,
be deemed to be part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
Page
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ARTICLE 1
Definitions and Incorporation by Reference...................... 1
SECTION 1.1. Definitions 1
SECTION 1.2. Other Definitions........................................ 27
SECTION 1.3. Incorporation by Reference of Trust Indenture
Act...................................................... 28
SECTION 1.4. Rules of Construction.................................... 28
ARTICLE 2
The Securities............................. 29
SECTION 2.1. Form and Dating.......................................... 29
SECTION 2.2. Execution and Authentication............................. 31
SECTION 2.3. Registrar and Paying Agent............................... 32
SECTION 2.4. Paying Agent To Hold Money in Trust...................... 32
SECTION 2.5. Securityholder Lists..................................... 33
SECTION 2.6. Transfer and Exchange.................................... 33
SECTION 2.7. Replacement Securities................................... 41
SECTION 2.8. Outstanding Securities................................... 41
SECTION 2.9. Temporary Securities..................................... 42
SECTION 2.10. Cancellation............................................. 42
SECTION 2.11. Defaulted Interest....................................... 42
SECTION 2.12. CUSIP Numbers............................................ 42
ARTICLE 3
Redemption.............................. 43
SECTION 3.1. Notices to Trustee....................................... 43
SECTION 3.2. Selection of Securities To Be Redeemed................... 43
SECTION 3.3. Notice of Redemption..................................... 43
SECTION 3.4. Effect of Notice of Redemption........................... 44
SECTION 3.5. Deposit of Redemption Price.............................. 44
SECTION 3.6. Securities Redeemed in Part.............................. 45
SECTION 3.7. Optional Redemption...................................... 45
ARTICLE 4
-i-
<PAGE> 5
Covenants.............................. 46
SECTION 4.1. Payment of Securities.................................... 46
SECTION 4.2. SEC Reports.............................................. 46
SECTION 4.3. Limitation on Indebtedness............................... 46
SECTION 4.4. Limitation on Restricted Payments........................ 51
SECTION 4.5. Limitation on Restrictions on
Distributions from Restricted Subsidiaries............... 56
SECTION 4.6. Limitation on Sales of Assets............................ 58
SECTION 4.7. Limitation on Transactions with Affiliates............... 60
SECTION 4.8. Change of Control........................................ 62
SECTION 4.9. Compliance Certificate; Notice of Default................ 63
SECTION 4.10. Intentionally Deleted.....................................64
SECTION 4.11. Limitation on Liens...................................... 64
SECTION 4.12. Additional Note Guarantors............................... 64
SECTION 4.13. Limitation on the Sale or Issuance of Preferred
Stock of Restricted Subsidiaries......................... 65
SECTION 4.14. Limitation on Layering................................... 65
ARTICLE 5
Successor Company............................. 65
SECTION 5.1. When Company May Merge or Transfer Assets................. 65
ARTICLE 6
Defaults and Remedies........................ 67
SECTION 6.1. Events of Default......................................... 67
SECTION 6.2. Acceleration.............................................. 69
SECTION 6.3. Other Remedies............................................ 69
SECTION 6.4. Waiver of Past Defaults................................... 69
SECTION 6.5. Control by Majority....................................... 70
SECTION 6.6. Limitation on Suits....................................... 70
SECTION 6.7. Rights of Holders to Receive Payment...................... 70
SECTION 6.8. Collection Suit by Trustee................................ 71
SECTION 6.9. Trustee May File Proofs of Claim.......................... 71
SECTION 6.10. Priorities................................................ 71
SECTION 6.11. Undertaking for Costs..................................... 71
SECTION 6.12. Waiver of Stay or Extension Laws.......................... 72
ARTICLE 7
-ii-
<PAGE> 6
Trustee................................... 72
SECTION 7.1. Duties of Trustee.......................................... 72
SECTION 7.2. Rights of Trustee.......................................... 73
SECTION 7.3. Individual Rights of Trustee............................... 75
SECTION 7.4. Trustee's Disclaimer....................................... 75
SECTION 7.5. Notice of Defaults......................................... 75
SECTION 7.6. Reports by Trustee to Holders.............................. 75
SECTION 7.7. Compensation and Indemnity................................. 76
SECTION 7.8. Replacement of Trustee..................................... 77
SECTION 7.9. Successor Trustee by Merger................................ 78
SECTION 7.10. Eligibility; Disqualification.............................. 78
SECTION 7.11. Preferential Collection of Claims Against
Company.................................................... 78
SECTION 7.12. Not Responsible for Recitals or Issuance of
Securities................................................. 78
-iii-
<PAGE> 7
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ARTICLE 8
Discharge of Indenture; Defeasance........................... 79
SECTION 8.1. Discharge of Liability on Securities;
Defeasance................................................ 79
SECTION 8.2. Conditions to Defeasance.................................. 80
SECTION 8.3. Application of Trust Money................................ 81
SECTION 8.4. Repayment to Company...................................... 81
SECTION 8.5. Indemnity for Government Obligations...................... 81
SECTION 8.6. Reinstatement............................................. 82
ARTICLE 9
Amendments................................ 82
SECTION 9.1. Without Consent of Holders................................ 82
SECTION 9.2. With Consent of Holders................................... 83
SECTION 9.3. Compliance with Trust Indenture Act....................... 84
SECTION 9.4. Effect of Amendment; Revocation and Effect of
Consents and Waivers...................................... 84
SECTION 9.5. Notation on or Exchange of Securities..................... 85
SECTION 9.6. Trustee To Sign Amendments................................ 85
SECTION 9.7. Payment for Consent....................................... 85
ARTICLE 10
Subordination.............................. 85
SECTION 10.1. Agreement To Subordinate.................................. 85
SECTION 10.2. Liquidation, Dissolution, Bankruptcy...................... 86
SECTION 10.3. Default on Senior Indebtedness............................ 86
SECTION 10.4. Acceleration a Payment of Securities...................... 87
SECTION 10.5. When a Distribution Must Be Paid Over..................... 87
SECTION 10.6. Subrogation............................................... 88
SECTION 10.7. Relative Rights........................................... 88
SECTION 10.8. Subordination May Not Be Impaired by Company.............. 88
SECTION 10.9. Rights of Trustee and Paying Agent........................ 88
SECTION 10.10. Distribution or Notice to Representative.................. 89
SECTION 10.11. Article 10 Not To Prevent Events of Default or
Limit Right To Accelerate................................. 89
SECTION 10.12. Trust Moneys Not Subordinated............................. 89
SECTION 10.13. Trustee Entitled To Rely.................................. 89
-iv-
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SECTION 10.14. Trustee To Effectuate Subordination....................... 90
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness.............................................. 90
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions.................................. 90
SECTION 10.17. Trustee's Compensation Not Prejudiced..................... 90
-v-
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ARTICLE 11
Miscellaneous.............................................................. 91
SECTION 11.1. Trust Indenture Act Controls............................. 91
SECTION 11.2. Notices.................................................. 91
SECTION 11.3. Communication by Holders with Other Holders 92
SECTION 11.4. Certificate and Opinion as to Conditions
Precedent................................................ 92
SECTION 11.5. Statements Required in Certificate or Opinion............ 92
SECTION 11.6. When Securities Disregarded.............................. 93
SECTION 11.7. Acts of Holders; Rules by Trustee, Paying Agent
and Registrar............................................ 93
SECTION 11.8. Legal Holidays........................................... 94
SECTION 11.9. Governing Law............................................ 94
SECTION 11.10. No Recourse Against Others............................... 94
SECTION 11.11. Successors............................................... 94
SECTION 11.12. Multiple Originals....................................... 94
SECTION 11.13. Table of Contents; Headings.............................. 94
SECTION 11.14. Separability............................................. 94
SECTION 11.15. Benefits of Indenture.................................... 94
EXHIBIT A Form of Initial Security
EXHIBIT B Form of Exchange Security
EXHIBIT C Transferee Letter of Representation
EXHIBIT D Form of Supplemental Indenture
-vi-
<PAGE> 10
INDENTURE dated as of March 24, 1997, between EV International,
Inc., a Delaware corporation (the "Company"), and The Bank of New York, a New
York banking corporation (the "Trustee").
For good and valuable consideration, the receipt of which is
hereby acknowledged, each party hereto agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders of the
Company's 11% Senior Subordinated Notes due 2007 (the "Initial Securities") and,
when and if issued as provided in the Exchange and Registration Rights Agreement
of even date herewith, the Company's 11% Senior Subordinated Notes due 2007,
Series A (the "Exchange Securities", and together with the Initial Securities,
the "Securities").
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.1. Definitions.
"Acquisition" means the acquisition by Acquisition Corp. of all
or substantially all the stock of Gulton Industries on February 10, 1997.
"Acquisition Corp." means Gulton Acquisition Corp., a Delaware
corporation and predecessor by merger of the Company.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Related Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock of
any Person that at such time is a Restricted Subsidiary, acquired from a third
party; provided, however, that, in the case of clauses (ii) and (iii), such
Restricted Subsidiary is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract
<PAGE> 11
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Applicable Premium" means, with respect to a Note at any
Redemption Date, the greater of (i) 1.0% of the then outstanding principal
amount of such Note and (ii) the excess of (A) the present value of all
remaining required interest and principal payments due on such Note, computed
using a discount rate equal to the Treasury Rate plus 75 basis points, over (B)
the then-outstanding principal amount of such Note.
"Asset Disposition" means any sale, lease, transfer or other
disposition of shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares, or (in the case of a Foreign Subsidiary) to the
extent required by applicable law), property or other assets (each referred to
for the purposes of this definition as a "disposition") by the Company or any of
its Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Restricted Subsidiary, (ii) a disposition of inventory,
equipment, obsolete assets or surplus personal property in the ordinary course
of business, (iii) the sale of Temporary Cash Investments or Cash Equivalents in
the ordinary course of business, (iv) dispositions with a fair market value not
exceeding $500,000 in the aggregate in any fiscal year, (v) the sale or discount
(with or without recourse, and on commercially reasonable terms) of accounts
receivable or notes receivable arising in the ordinary course of business, or
the conversion or exchange of accounts receivable for notes receivable, (vi) the
licensing of intellectual property in the ordinary course of business, (vii) the
transfer to Mark IV Industries, Inc. or other disposition of any contracts,
agreements, property and assets relating to the Gulton Data Systems business
formerly conducted by the Company or a predecessor thereof, (viii) for purposes
of Section 4.6 only, a disposition subject to Section 4.4 or (ix) a disposition
of property or assets that is governed by Section 5.1.
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate assumed in making calculations in accordance with FAS 13) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
<PAGE> 12
3
"Average Life" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by (ii) the sum of all
such payments.
"Bank Indebtedness" means any and all amounts, whether
outstanding on the Issue Date or thereafter incurred, payable under or in
respect of the Senior Credit Facility, including without limitation principal,
premium (if any), interest (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to the Company or
any Restricted Subsidiary whether or not a claim for postfiling interest is
allowed in such proceedings), fees, charges, expenses, reimbursement
obligations, guarantees, other monetary obligations of any nature and all other
amounts payable thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company
or any committee thereof duly authorized to act on behalf of such Board.
"Borrowing Base" means, at any time of determination, the
Borrowing Base as defined in the Senior Credit Agreement.
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banking institutions are authorized or required by law
to close in New York City.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.
"Capitalized Lease Obligations" means an obligation that is
required to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity
<PAGE> 13
4
thereof shall be the date of the last payment of rent or any other amount due
under such lease.
"Cash Equivalents" means any of the following: (a) securities
issued or fully guaranteed or insured by the United States Government or any
agency or instrumentality thereof, (b) time deposits, certificates of deposit or
bankers' acceptances of (i) any lender under the Senior Credit Agreement or (ii)
any commercial bank having capital and surplus in excess of $500,000,000 and the
commercial paper of the holding company of which is rated at least A-1 or the
equivalent thereof by Standard & Poor's Ratings Group (a division of McGraw Hill
Inc.) or any successor rating agency ("S&P") or at least P-1 or the equivalent
thereof by Moody's Investors Service, Inc. or any successor rating agency
("Moody's") (or if at such time neither is issuing ratings, then a comparable
rating of another nationally recognized rating agency), (c) commercial paper
rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the
equivalent thereof by Moody's (or if at such time neither is issuing ratings,
then a comparable rating of another nationally recognized rating agency) and (d)
investments in money market funds complying with the risk limiting conditions of
Rule 2a-7 or any successor rule of the Securities and Exchange Commission under
the Investment Company Act of 1940, as amended.
"Change of Control" means the occurrence of any of the following
events:
(i)prior to the first public offering of Voting Stock of the
Company, either (x) Permitted Holders cease to be the "beneficial owner"
or "beneficial owners" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of more than 35% of the total
voting power of the Voting Stock of the Company, or (y) Permitted Holders
cease to be entitled by voting power, contract or otherwise to elect or
cause the election of directors of the Company having a majority of the
total voting power of the Board of Directors, in each case, whether as a
result of issuance of securities of the Company, any merger,
consolidation, liquidation or dissolution of the Company, any direct or
indirect transfer of securities by any Permitted Holder or otherwise (for
purposes of this clause (i) and clause (ii) below, Permitted Holders shall
be deemed to beneficially own any Voting Stock of an entity (the
<PAGE> 14
5
"specified entity" held by any other entity (the "parent entity") so long
as the Permitted Holders beneficially own (as so defined), directly or
indirectly, a majority of the Voting Stock of the parent entity);
(ii) following the first public offering of Voting Stock of the
Company, any "Person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in clause (i) above, except that a Person
shall be deemed to have "beneficial ownership" of all shares that any such
Person has the right to acquire within one year), directly or indirectly,
of more than 35% of the Voting Stock of the Company, provided that the
Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the Voting
Stock of the Company than such other Person and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors; or
(iii) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the shareholders of the Company was
approved by a vote of a majority of the directors of the Company 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)
cease for any reason to constitute a majority of the Board of Directors
then in office.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means EV International, Inc., a Delaware corporation,
and any successor thereto.
"Consolidated Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA of the Company and its
Restricted Subsidiaries for the period of the most recent four consecutive
fiscal quarters ending prior to the date of such determination for which
consolidated
<PAGE> 15
6
financial statements of the Company are available to (ii) Consolidated Interest
Expense for such four fiscal quarters (in each case, determined, for each fiscal
quarter (or portion thereof) of the four fiscal quarters ending prior to the
Issue Date, on a pro forma basis to give effect to the Acquisition as if it had
occurred at the beginning of such four-quarter period); provided, however, that:
(1) if the Company or any Restricted Subsidiary (x) has Incurred any
Indebtedness since the beginning of such period that remains outstanding
on such date of determination or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of
such period (except that in making such computation, the amount of
Indebtedness under any revolving credit facility outstanding on the date
of such calculation shall be computed based on (A) the average daily
balance of such Indebtedness during such four fiscal quarters or such
shorter period for which such facility was outstanding or (B) if such
facility was created after the end of such four fiscal quarters, the
average daily balance of such Indebtedness during the period from the date
of creation of such facility to the date of such calculation) and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, or (y) has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of the period that is no longer outstanding on such date of
determination, or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio involves a discharge of Indebtedness (in
each case other than Indebtedness Incurred under any revolving credit
facility unless such Indebtedness has been permanently repaid), EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such discharge of such Indebtedness,
including with the proceeds of such new Indebtedness, as if such discharge
had occurred on the first day of such period,
<PAGE> 16
7
(2) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition of any company
or any business or any group of assets constituting an operating unit of a
business, the EBITDA for such period shall be reduced by an amount equal
to the EBITDA (if positive) directly attributable to the assets that are
the subject of such Asset Disposition for such period or increased by an
amount equal to the EBITDA (if negative) directly attributable thereto for
such period and Consolidated Interest Expense for such period shall be
reduced by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of the Company or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and is continuing Restricted Subsidiaries in
connection with such Asset Disposition for such period (and, if the
Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness
of such Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after
such sale),
(3) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Person that thereby becomes a Restricted Subsidiary, or
otherwise acquired any company or any business or any group of assets
constituting an operating unit of a business, including any such
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving pro forma effect thereto
(including the Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such period, and
(4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period)
shall have made any Asset Disposition or any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (2) or
(3) above if made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period shall be
calculated after
<PAGE> 17
8
giving pro forma effect thereto as if such Asset Disposition, Investment
or acquisition of assets occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to
be given to an Asset Disposition, Investment or acquisition of assets, or any
transaction governed by the provisions of Article 5, or the amount of income or
earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Indebtedness Incurred or repaid, repurchased, defeased or
otherwise discharged in connection therewith, the pro forma calculations in
respect thereof shall be as determined in good faith by a responsible financial
or accounting Officer of the Company, based on reasonable assumptions. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term as at the
date of determination in excess of 12 months). If any Indebtedness bears, at the
option of the Company or a Restricted Subsidiary, a fixed or floating rate of
interest and is being given pro forma effect, the interest expense on such
Indebtedness shall be computed by applying, at the option of the Company or such
Restricted Subsidiary, either a fixed or floating rate. If any Indebtedness
which is being given pro forma effect was Incurred under a revolving credit
facility, the interest expense on such Indebtedness shall be computed based upon
the average daily balance of such Indebtedness during the applicable period.
"Consolidated Interest Expense" means, for any period, the total
consolidated interest expense of the Company and its Restricted Subsidiaries,
the Company and its consolidated Restricted Subsidiaries, determined in
accordance with GAAP, minus, to the extent included in such interest expense,
amortization or write-off of financing costs, and plus, to the extent incurred
by the Company and its Restricted Subsidiaries in such period but not included
in such interest expense, without duplication, (i) interest expense attributable
to Capitalized Lease Obligations and the interest component of rent expense
associated with Attributable Debt in respect of the relevant lease giving rise
thereto, determined as if such lease were a
<PAGE> 18
9
capitalized lease, in accordance with GAAP, (ii) amortization of debt discount,
(iii) interest in respect of Indebtedness of any other Person that has been
Guaranteed by the Company or any Restricted Subsidiary, but only to the extent
that such interest is actually paid by the Company or any Restricted Subsidiary,
(iv) non-cash interest expense, (v) net costs associated with Hedging
Obligations, (vi) the product of (A) Preferred Stock dividends in respect of all
Preferred Stock of Domestic Subsidiaries of the Company and Disqualified Stock
of the Company held by Persons other than the Company or a Restricted Subsidiary
multiplied by (B) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of the Company, expressed as a decimal, in each case,
determined on a consolidated basis in accordance with GAAP; and (vii) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest to any
Person (other than the Company or any Restricted Subsidiary) on Indebtedness
Incurred by such plan or trust; provided, however, that there shall be excluded
therefrom any such interest expense of any Unrestricted Subsidiary to the extent
the related Indebtedness is not Guaranteed or paid by the Company or any
Restricted Subsidiary. For purposes of the foregoing, gross interest expense
shall be determined after giving effect to any net payments made or received by
the Company and its Subsidiaries with respect to Interest Rate Agreements.
"Consolidated Net Income" means, for any period, the consolidated
net income (loss) of the Company and its Restricted Subsidiaries, determined in
accordance with GAAP; provided, however, that there shall not be included in
such Consolidated Net Income:
(i) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that (A) subject to the limitations
contained in clause (iv) below, the Company's equity in the net income of
any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or
other distribution to a Restricted Subsidiary, to the limitations
<PAGE> 19
10
contained in clause (iii) below) and (B) the Company's equity in the net
loss of such Person shall be included to the extent of the aggregate
Investment of the Company or any of its Restricted Subsidiaries in such
Person,
(ii) any net income (loss) of any Person acquired by the Company or
a Restricted Subsidiary in a pooling of interests transaction for any
period prior to the date of such acquisition,
(iii) any net income (loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company, except that
(A) subject to the limitations contained in clause (iv) below, the
Company's equity in the net income of any such Restricted Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such
Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend (subject, in the case of a dividend
that could have been made to another Restricted Subsidiary, to the
limitation contained in this clause) and (B) the net loss of such
Restricted Subsidiary shall be included to the extent of the aggregate
Investment of the Company or any of its other Restricted Subsidiaries in
such Restricted Subsidiary,
(iv) any gain or loss realized upon the sale or other disposition of
any asset of the Company or its consolidated Restricted Subsidiaries
(including pursuant to any Sale/Leaseback Transaction) that is not sold or
otherwise disposed of in the ordinary course of business,
(v) any extraordinary gain or loss, and
(vi) the cumulative effect of a change in accounting principles.
"Consolidated Tangible Assets" means, as of any date of
determination, the total assets, less goodwill and other intangibles (other than
patents, trademarks, copyrights, licenses and other intellectual property),
shown on the balance sheet of
<PAGE> 20
11
the Company and its Restricted Subsidiaries as of the most recent date for which
such a balance sheet is available, determined on a consolidated basis in
accordance with GAAP.
"Consolidation" means the consolidation of the accounts of each of
the Restricted Subsidiaries with those of the Company in accordance with GAAP;
provided, however, that "Consolidation" will not include consolidation of the
accounts of any Unrestricted Subsidiary, but the interest of the Company or any
Unrestricted Subsidiary will be accounted for as an investment. The term
"Consolidated" has a correlative meaning.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangements (including derivative agreements or arrangements) as to which such
Person is a party or a beneficiary.
"Default" means any event or condition that is, or after notice or
passage of time or both would be, an Event of Default.
"Definitive Securities" means Securities that are substantially in
the form of Exhibit A or Exhibit B attached hereto that do not include the
information called for by footnote 1 thereof.
"Depository" means, with respect to the Securities issuable or
issued in whole or in part in global form, the person specified in Section 2.3
as the Depository with respect to the Securities, until a successor shall have
been appointed and become such pursuant to the applicable provisions of this
Indenture, and thereafter, "Depository" shall mean or include such successor.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and
(ii) any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount to or under which, at the date of determination, the
holders thereof are committed to lend up to, at least $10.0 million and is
specifically designated by the Company in the instrument evidencing or governing
such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the
Indenture.
<PAGE> 21
12
"Disqualified Stock" means, with respect to any Person, any Capital
Stock (other than Management Stock) that by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable) or upon the happening of any event (i) matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise, (ii) is
convertible or exchangeable for Indebtedness or Disqualified Stock or (iii) is
redeemable at the option of the holder thereof, in whole or in part, in each
case on or prior to the 91st day after the Stated Maturity of the Notes.
"Domestic Subsidiary" means any Restricted Subsidiary of the Company
other than a Foreign Subsidiary.
"EBITDA" means, for any period, the Consolidated Net Income for such
period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest
Expense, (iii) depreciation expense and (iv) amortization of intangibles and
other non-cash charges or non-cash losses.
"EV LLC" means EVI Audio, LLC, a Delaware limited liability company,
and any successor in interest thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement dated March 24, 1997, by and between the Initial
Purchasers and the Company, as such agreement may be amended, modified, or
supplemented from time to time in accordance with the terms thereof.
"Existing Senior Subordinated Debt" means any Indebtedness in
respect of the Senior Subordinated Credit Agreement, dated as of February 10,
1997, as amended, supplemented, waived or otherwise modified from time to time,
among the Company, the several banks and other financial institutions from time
to time parties thereto, and The Chase Manhattan Bank, as agent for such
lenders.
"Foreign Subsidiary" means (a) any Restricted Subsidiary of the
Company that is not organized under the laws of the United States of America or
any state thereof or the District
<PAGE> 22
13
of Columbia and (b) EVI Audio International Holding Corporation, Inc., a
Delaware corporation, and any successor thereto.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect on the Issue Date (for purposes of the
definitions of the terms "Consolidated Coverage Ratio," "Consolidated Interest
Expense," "Consolidated Net Income" and "EBITDA," all defined terms in the
Indenture to the extent used in or relating to any of the foregoing definitions,
and all ratios and computations based on any of the foregoing definitions) and
as in effect from time to time (for all other purposes of the Indenture),
including those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession all ratios and computations based on GAAP contained
in the Indenture shall be computed in conformity with GAAP.
"Global Security" means a Security that is substantially in the form
of Exhibit A or Exhibit B hereto that includes the information called for by
footnote 1 thereof.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other
nonfinancial obligation of any other Person, including any such obligation,
direct or indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or such other obligation of such other Person (whether arising by
virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided,
<PAGE> 23
14
however, that the term "Guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Guarantor Senior Indebtedness" means the following obligations,
whether outstanding on the date of the Indenture or thereafter issued, without
duplication: (i) any Guarantee of the Bank Indebtedness by such Note Guarantor
and all other Guarantees by such Note Guarantor of Senior Indebtedness of the
Company or Guarantor Senior Indebtedness for any other Note Guarantor; and (ii)
all obligations consisting of the principal of and premium, if any, and accrued
and unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Note Guarantor
regardless of whether postfiling interest is allowed in such proceeding) on, and
fees and other amount owing in respect of, all other Indebtedness of the Note
Guarantor, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is expressly provided that the obligations
in respect of such Indebtedness are not senior in right of payment to the
obligations of such Note Guarantor under the Note Guarantee; provided, however,
that Guarantor Senior Indebtedness shall not include (1) any obligations of such
Note Guarantor to the Note Guarantor or any other Subsidiary of the Note
Guarantor, (2) any liability for Federal, state, local, foreign or other taxes
owed or owing by such Note Guarantor, (3) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), (4)
any Indebtedness of such Note Guarantor that is expressly subordinate in right
of payment to any of the Indebtedness of such Note Guarantor, including any
Guarantor Senior Subordinated Indebtedness and Guarantor Subordinated
Obligations of such Note Guarantor or (5) any Capital Stock.
"Guarantor Senior Subordinated Indebtedness" means, with respect to
a Note Guarantor, the obligations of such Note Guarantor under the Note
Guarantee and any other Indebtedness of such Note Guarantor that specifically
provides that such Indebtedness is to rank pari passu in right of payment with
the obligations of such Note Guarantor under the Note Guarantee and is not
expressly subordinated by its terms in right of payment to any Indebtedness of
such Note Guarantor which is not Guarantor Senior Indebtedness of such Note
Guarantor.
<PAGE> 24
15
"Guarantor Subordinated Obligation" means, with respect to a Note
Guarantor, any Indebtedness of such Note Guarantor (whether outstanding on the
Issue Date or thereafter Incurred) which is expressly subordinate in right of
payment to the obligations of such Note Guarantor under its Note Guarantee
pursuant to a written agreement.
"Gulton Industries" means Gulton Industries, Inc., a Delaware
corporation and predecessor by merger of the Company.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered in the Register.
"Holding" means EVI Audio Holding, Inc., a Delaware corporation, and
any successor in interest thereto.
"Incur" means issue, assume, enter into any Guarantee of, incur or
otherwise become liable for; provided, however, that any Indebtedness or Capital
Stock of a Person existing at the time such Person becomes a Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary. Any
Indebtedness issued at a discount (including Indebtedness on which interest is
payable through the issuance of additional Indebtedness) shall be deemed
incurred at the time of original issuance of the Indebtedness at the initial
accreted amount thereof.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal of indebtedness of such Person for borrowed money,
(ii) the principal of obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments,
(iii) all reimbursement obligations of such Person (including
reimbursement obligations) in respect of letters
<PAGE> 25
16
of credit or other similar instruments (the amount of such obligations
being equal at any time to the aggregate then undrawn and unexpired amount
of such letters of credit or other instruments plus the aggregate amount
of drawings thereunder that have not then been reimbursed),
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which
purchase price is due more than one year after the date of placing such
property in final service or taking final delivery and title thereto or
the completion of such services,
(v) all Capitalized Lease Obligations and Attributable Debt of such
Person,
(vi) the redemption, repayment or other repurchase amount of such
Person with respect to any Disqualified Stock or (if such Person is a
Subsidiary of the Company) any Preferred Stock of such Subsidiary, but
excluding, in each case, any accrued dividends (the amount of such
obligation to be equal at any time to the maximum fixed involuntary
redemption, repayment or repurchase price for such Capital Stock, or if
such Capital Stock has no such fixed price, to the involuntary redemption,
repayment or repurchase price therefor calculated in accordance with the
terms thereof as if then redeemed, repaid or repurchased, and if such
price is based upon or measured by the fair market value of such Capital
Stock, such fair market value shall be as determined in good faith by the
Board of Directors or the board of directors of the issuer of such Capital
Stock),
(vii) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that the amount of Indebtedness of such Person
shall be the lesser of (A) the fair market value of such asset at such
date of determination and (B) the amount of such Indebtedness of such
other Persons,
(viii) all Indebtedness of other Persons to the extent Guaranteed by
such Person, and
<PAGE> 26
17
(ix) to the extent not otherwise included in this definition, net
Hedging Obligations of such Person (the amount of any such obligation to
be equal at any time to the termination value of such agreement or
arrangement giving rise to such Hedging Obligation that would be payable
by such Person at such time).
The amount of Indebtedness of any Person at any date shall be
determined as set forth above or otherwise provided in this Indenture, or
otherwise in accordance with GAAP.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Initial Purchasers" mean Chase Securities Inc. and Smith Barney
Inc.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement (including derivative agreements or
arrangements) as to which such Person is party or a beneficiary.
"Investment" in any Person by any other Person means any direct or
indirect advance, loan or other extension of credit (other than to customers,
directors, officers or employees of any Person in the ordinary course of
business) or capital contribution (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others) to, or any purchase or acquisition of Capital Stock, Indebtedness
or other similar instruments issued by, such Person. For purposes of the
definition of "Unrestricted Subsidiary" and Section 4.4, (i) "Investment" shall
include the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of any Subsidiary of the
Company at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive)
equal to (x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion
<PAGE> 27
18
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Investors" means Greenwich Street Capital Partners, L.P., Greenwich
Street Capital Offshore Fund, Ltd., The Travelers Insurance Company, The
Travelers Life and Annuity Company, TRV Employees Fund, L.P. and the other
parties that purchased equity interests in the Company on the date of the
Acquisition.
"Issue Date" means the date on which the Notes are originally
issued.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Management Agreements" means, collectively, the Consulting
Agreement, the Fee Agreement and the Indemnification Agreement, each dated
February 10, 1997, each between the Company and Greenwich Street Capital
Partners, L.P. (and its permitted successors and assigns thereunder), as each
may be amended, supplemented, waived or otherwise modified from time to time in
accordance with the terms thereof and of the Indenture.
"Management Investors" means the officers, directors, employees and
other members of the management of Holding, the Company or any of their
respective Subsidiaries, or family members or relatives thereof, or trusts for
the benefit of any of the foregoing, or any of their heirs, executors,
successors and legal representatives, who at any date beneficially own or have
the right to acquire, directly or indirectly, Capital Stock of the Company,
Holding or EV LLC.
"Management Stock" means Capital Stock of the Company, Holding or EV
LLC, or options, warrants or other rights in respect thereof, held by any of the
Management Investors.
<PAGE> 28
19
"Mergers" means the merger of Acquisition Corp. with and into Gulton
Industries, with Gulton Industries the surviving corporation, and the merger of
Gulton Industries and certain Domestic Subsidiaries with and into the Company,
with the Company the surviving corporation, in each case on the date of the
Acquisition.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, provincial, foreign and local taxes required
to be paid or accrued as a liability under GAAP, as a consequence of such Asset
Disposition, (ii) all payments made, and all installment payments required to be
made, on any Indebtedness that is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon such assets, or that
must by its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of such
Asset Disposition, or to any other Person (other than the Company or a
Restricted Subsidiary) owning a beneficial interest in the assets disposed of in
such Asset Disposition and (iv) appropriate amounts to be provided as a reserve,
in accordance with GAAP, against any liabilities associated with the assets
disposed of in such Asset Disposition and retained by the Company or any
Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of any
securities of the Company or any Subsidiary by the Company or any Subsidiary, or
any capital contribution, means the cash proceeds of such issuance, sale or
contribution net of
<PAGE> 29
20
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance, sale or contribution and net of taxes
paid or payable as a result thereof.
"Note Guarantee" means any guarantee that may from time to time be
executed and delivered by a Subsidiary of the Company pursuant to Section 4.12.
"Note Guarantor" means any Subsidiary that has issued a Note
Guarantee.
"Officer" means the President, Chief Financial Officer, any Vice
President, Controller or Treasurer of the Company.
"Officer's Certificate" means a certificate signed by one Officer.
"Opinion of Counsel" means a written opinion from legal counsel who
is reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Permitted Holder" means any of the following: (i) any of the
Investors, Smith Barney Holdings Inc. and their respective Affiliates; (ii) any
investment fund or vehicle managed, sponsored or advised by Greenwich Street
Capital Partners, Inc., The Travelers Insurance Company, The Travelers Life and
Annuity Company, Smith Barney Holdings Inc. or any of their respective
Affiliates; (iii) any limited or general partners of, or other investors in, any
of the Investors and their respective Affiliates, or any such investment fund or
vehicle; and (iv) any Person acting in the capacity of an underwriter in
connection with a public or private offering of Capital Stock of the Company,
Holding or EV LLC.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in, or consisting of, any of the following:
(i) a Restricted Subsidiary, the Company or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary;
<PAGE> 30
21
(ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted
Subsidiary;
(iii) Temporary Cash Investments or Cash Equivalents;
(iv) receivables owing to the Company or any Restricted Subsidiary,
if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances;
(v) securities or other Investments received as consideration in
sales or other dispositions of property or assets, including Asset
Dispositions made in compliance with Section 4.6;
(vi) securities or other Investments received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary, or as a result of foreclosure, perfection or
enforcement of any Lien, or in satisfaction of judgments, including in
connection with any bankruptcy proceeding or other reorganization of
another Person;
(vii) Investments in existence or made pursuant to legally binding
written commitments in existence on the Issue Date;
(viii) Currency Agreements, Interest Rate Agreements and related
Hedging Obligations, which obligations are Incurred in compliance with
Section 4.3;
(ix) pledges or deposits (x) with respect to leases or utilities
provided to third parties in the ordinary course of business or (y)
otherwise described in the definition of "Permitted Liens"; and
(x) other Investments in an aggregate amount outstanding at any time
not to exceed the greater of (A) $3,000,000 and (B) 3% of Consolidated
Tangible Assets.
<PAGE> 31
22
"Permitted Liens" means:
(a) Liens for taxes, assessments or other governmental charges not
yet delinquent or the nonpayment of which in the aggregate would not
reasonably be expected to have a material adverse effect on the Company
and its Restricted Subsidiaries, or that are being contested in good faith
and by appropriate proceedings if adequate reserves with respect thereto
are maintained on the books of the Company or a Subsidiary thereof, as the
case may be, in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business in respect of obligations that are not overdue for a
period of more than 60 days, or that are bonded or that are being
contested in good faith and by appropriate proceedings;
(c) pledges, deposits or Liens in connection with workers'
compensation, unemployment insurance and other social security and other
similar legislation or other insurance related obligations (including,
without limitation, pledges or deposits securing liability to insurance
carriers under insurance or self-insurance arrangements);
(d) pledges, deposits or Liens to secure the performance of bids,
tenders, trade, government or other contracts (other than for borrowed
money), obligations for utilities, leases, licenses, statutory
obligations, surety, judgment and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of
business;
(e) easements (including reciprocal easement agreements),
rights-of-way, building, zoning and similar restrictions, utility
agreements, covenants, reservations, restrictions, encroachments, changes,
and other similar encumbrances or title defects incurred, or leases or
subleases granted to others, in the ordinary course of business, which do
not in the aggregate materially interfere with the ordinary conduct of the
business of the Company and its Subsidiaries, taken as a whole;
<PAGE> 32
23
(f) Liens existing on, or provided for under written arrangements
existing on, the Issue Date, or (in the case of any such Liens securing
Indebtedness of the Company or any of its Subsidiaries existing or arising
under written arrangements existing on the Issue Date) securing any
Refinancing Indebtedness in respect of such Indebtedness so long as the
Lien securing such Refinancing Indebtedness is limited to all or part of
the same property or assets (plus improvements, accessions, proceeds or
dividends or distributions in respect thereof) that secured (or under such
written arrangements could secure) the original Indebtedness;
(g) (i) mortgages, liens, security interests, restrictions,
encumbrances or any other matters of record that have been placed by any
developer, landlord or other third party on property over which the
Company or any Restricted Subsidiary of the Company has easement rights or
on any leased property and subordination or similar agreements relating
thereto and (ii) any condemnation or eminent domain proceedings affecting
any real property;
(h) Liens securing Hedging Obligations Incurred in compliance with
Section 4.3;
(i) Liens arising out of judgments, decrees, orders or awards in
respect of which the Company shall in good faith be prosecuting an appeal
or proceedings for review, which appeal or proceedings shall not have been
finally terminated, or if the period within which such appeal or
proceedings may be initiated shall not have expired;
(j) leases, subleases, licenses or sublicenses to third parties;
(k) Liens securing (x) Indebtedness Incurred in compliance with
clause (b)(i), (b)(ii), (b)(v) or (b)(vii) of Section 4.3, or clause
(b)(iv) thereof (other than Refinancing Indebtedness Incurred in respect
of Indebtedness described in paragraph (a) thereof) or (y) Bank
Indebtedness;
(l) Liens securing commercial bank indebtedness;
<PAGE> 33
24
(m) Liens on properties or assets (1) of the Company or any Note
Guarantor securing Senior Indebtedness or Guarantor Senior Indebtedness,
(2) of any Wholly Owned Subsidiary that is not a Note Guarantor securing
Indebtedness of any Wholly Owned Subsidiary that is not a Note Guarantor
or (3) of any Restricted Subsidiary that is not a Note Guarantor securing
its Indebtedness;
(n) Liens existing on property or assets of a Person at the time
such Person becomes a Subsidiary of the Company (or at the time the
Company or a Restricted Subsidiary acquires such property or assets);
provided, however, that such Liens are not created in connection with, or
in contemplation of, such other Person becoming such a Subsidiary (or such
acquisition of such property or assets), and that such Liens are limited
to all or part of the same property or assets (plus improvements,
accessions, proceeds or dividends or distributions in respect thereof)
that secured (or, under the written arrangements under which such Liens
arose, could secure) the obligations to which such Liens relate;
(o) Liens on Capital Stock of an Unrestricted Subsidiary that secure
Indebtedness or other obligations of such Unrestricted Subsidiary;
(p) any encumbrance or restriction (including, but not limited to,
put and call agreements) with respect to Capital Stock of any joint
venture or similar arrangement pursuant to any joint venture or similar
agreement;
(q) Liens securing the Notes; and
(r) Liens securing Refinancing Indebtedness Incurred in respect of
any Indebtedness secured by, or securing any refinancing, refunding,
extension, renewal or replacement (in whole or in part) of any other
obligation secured by, any other Permitted Liens, provided that any such
new Lien is limited to all or part of the same property or assets (plus
improvements, accessions, proceeds or dividends or distributions in
respect thereof) that secured (or, under the written arrangements under
which the original Lien arose, could secure) the obligations to which such
Liens relate.
<PAGE> 34
25
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Principal" of a Security means the principal of the Security plus
the premium, if any, payable on the Security that is due or overdue or is to
become due at the relevant time.
"Public Equity Offering" means an underwritten primary public
offering of common stock of the Company, Holding or EV LLC pursuant to an
effective registration statement under the Securities Act (whether alone or in
conjunction with any secondary public offering), the proceeds of which, if
issued by Holding or EV LLC, are contributed to the Company.
"Public Market" means any time after a Public Equity Offering has
been consummated and either (x) at least 10% of the total issued and outstanding
common stock (or equivalent equity interests) of the Company, Holding or EV LLC
has been distributed by means of an effective registration statement under the
Securities Act or (y) an established public trading market otherwise exists for
any such common stock or equivalent equity interests.
"Purchase Agreement" means the Agreement, dated March 19, 1997,
between the Company and the Initial Purchasers, providing for the purchase by
the Initial Purchasers of $100,000,000 principal amount of the Company's 11%
Senior Subordinated Notes due 2007.
"Redemption Date" means the date on which the Securities are
optionally redeemed pursuant to Section 3.7.
<PAGE> 35
26
"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," "refinanced" and
"refinancing" as used in the Indenture shall have a correlative meaning) any
Indebtedness existing on the date of the Indenture or Incurred in compliance
with the Indenture (including Indebtedness of the Company that refinances
Indebtedness of any Restricted Subsidiary (to the extent permitted in the
Indenture) and Indebtedness of any Restricted Subsidiary that refinances
Indebtedness of another Restricted Subsidiary) including Indebtedness that
refinances Refinancing Indebtedness; provided, however, that (i) the Refinancing
Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the
Indebtedness being refinanced, (ii) the Refinancing Indebtedness has an Average
Life at the time such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being refinanced and (iii)
such Refinancing Indebtedness is Incurred in an aggregate principal amount (or
if issued with original issue discount, an aggregate issue price) that is equal
to or less than the sum of (x) the aggregate principal amount (or if issued with
original issue discount, the aggregate accreted value) then outstanding of the
Indebtedness being refinanced, plus (y) fees, underwriting discounts, premiums
and other costs and expenses incurred in connection with such Refinancing
Indebtedness; provided further, however, that Refinancing Indebtedness shall not
include (x) Indebtedness of a Restricted Subsidiary that is not a Note Guarantor
that refinances Indebtedness of the Company or (y) Indebtedness of the Company
or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary.
"Registered Exchange Offer" shall have the meaning set forth in the
Exchange and Registration Rights Agreement.
"Related Business" means those businesses in which the Company or
any of its Subsidiaries is engaged on the date of the Indenture, or that are
reasonably related, complementary or incidental thereto.
"Representative" means the trustee, agent or representative (if any)
for an issue of Senior Indebtedness.
"Restricted Securities Legend" means the legend set forth in Section
2.6(g) hereof.
<PAGE> 36
27
"Restricted Subsidiary" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"Revolving Credit Facility" means the revolving credit facility
under the Senior Credit Facility (which may include any swing line or letter of
credit facility or subfacility thereunder).
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired by the Company or a Restricted
Subsidiary whereby the Company or such Restricted Subsidiary transfers such
property to a Person and the Company or such Restricted Subsidiary leases it
from such Person, other than leases (x) between the Company and a Restricted
Subsidiary or between or (y) required to be classified and accounted for as
capitalized leases for financial reporting purposes in accordance with GAAP.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Securities Custodian" means the custodian with respect to the
Global Security (as appointed by the Depository), or any successor entity
thereto and shall initially be the Trustee.
"Senior Credit Agreement" means the credit agreement dated as of
February 10, 1997, among the Company, the banks and other financial institutions
party thereto from time to time, and The Chase Manhattan Bank, as administrative
agent, as such agreement may be assumed by any successor in interest, and as
such agreement may be amended, supplemented, waived or otherwise modified from
time to time, or refunded, refinanced, restructured, replaced, renewed, repaid,
increased or extended from time to time (whether in whole or in part, whether
with the original agent and lenders or other agents and lenders or otherwise,
and whether provided under the original Senior Credit Agreement or otherwise).
"Senior Credit Facility" means the collective reference to the
Senior Credit Agreement, any Loan Documents (as defined therein), any notes and
letters of credit issued pursuant thereto and any guarantee and collateral
agreement, patent and trademark
<PAGE> 37
28
security agreement, mortgages, letter of credit applications and other security
agreements and collateral documents, and other instruments and documents,
executed and delivered pursuant to or in connection with any of the foregoing,
in each case as the same may be amended, supplemented, waived or otherwise
modified from time to time, or refunded, refinanced, restructured, replaced,
renewed, repaid, increased or extended from time to time (whether in whole or in
part, whether with the original agent and lenders or other agents and lenders or
otherwise, and whether provided under the original Senior Credit Agreement or
otherwise). Without limiting the generality of the foregoing, the term "Senior
Credit Facility" shall include any agreement (i) changing the maturity of any
Indebtedness incurred thereunder or contemplated thereby, (ii) adding
Subsidiaries of the Company as additional borrowers or guarantors thereunder,
(iii) increasing the amount of Indebtedness incurred thereunder or available to
be borrowed thereunder or (iv) otherwise altering the terms and conditions
thereof.
"Senior Indebtedness" means the following obligations, whether
outstanding on the date of the Indenture or thereafter issued, without
duplication: (i) all obligations consisting of Bank Indebtedness; and (ii) all
obligations consisting of the principal of and premium, if any, and accrued and
unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company regardless
of whether post-filing interest is allowed in such proceeding) on, and fees and
other amounts owing in respect of, all other Indebtedness of the Company,
unless, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is expressly provided that the obligations in
respect of such Indebtedness are not senior in right of payment to the Notes;
provided, however, that Senior Indebtedness shall not include (1) any obligation
of the Company to any Subsidiary, (2) any liability for Federal, state, foreign,
local or other taxes owed or owing by the Company, (3) any accounts payable or
other liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), (4)
any Indebtedness of the Company (or Guarantee by the Company of any
Indebtedness) that is expressly subordinate in right of payment to any other
Indebtedness of the Company (or Guarantee by the Company of any Indebtedness) or
(5) any Capital Stock. If any Designated Senior Indebtedness is disallowed,
avoided or subordinated pursuant to
<PAGE> 38
29
the provisions of Section 548 of Title 11 of the United States Code or any
applicable state fraudulent conveyance law, such Designated Senior Indebtedness
nevertheless will constitute
Senior Indebtedness.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that (i) specifically provides that such
Indebtedness is to rank pari passu with the Notes or is otherwise entitled
"Senior Subordinated" Indebtedness and (ii) is not expressly subordinated by its
terms in right of payment to any Indebtedness of the Company that is not Senior
Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that would
be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02
under Regulation S-X promulgated by the SEC, as in effect on the Issue Date.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the date of the Indenture or thereafter Incurred) which
is expressly subordinate in right of payment to the Notes pursuant to a written
agreement, but in any event excluding the Existing Senior Subordinated Debt.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other equity interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such person
or (ii) one or more Subsidiaries of such Person.
<PAGE> 39
30
"Tax Sharing Agreement" means the Amended and Restated Tax Sharing
Agreement, dated as of March 17, 1997, between the Company and Holding, as the
same may be amended, supplemented, waived or otherwise modified from time to
time in accordance with the terms thereof and of the Indenture.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations (x) of the United States of America or any
agency thereof or obligations Guaranteed by the United States of America or any
agency thereof or (y) of any foreign country recognized by the United States of
America rated at least "A" by S&P or "A1" by Moody's, (ii) investments in time
deposit accounts, certificates of deposit and money market deposits maturing
within 180 days of the date of acquisition thereof issued by a bank or trust
company that is organized under the laws of the United States of America, any
state thereof or any foreign country recognized by the United States of America
having capital and surplus aggregating in excess of $250 million (or the foreign
currency equivalent thereof) and whose long term debt is rated "A" by S&P or
"A-1" by Moody's, (iii) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (i) or (ii)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) Investments in commercial paper, maturing not more than 270
days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any Investment therein is made
of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P,
(v) Investments in securities with maturities of six months or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's, (vi)
any money market deposit accounts issued or offered by a domestic commercial
bank or a commercial bank organized and located in a country recognized by the
United States of America, in each case, having capital and surplus in excess of
$250 million (or the foreign currency equivalent thereof), or investments in
money market funds complying with the risk limiting conditions of Rule 2a-7 or
any short-term successor rule) of the SEC, under the Investment Company Act of
1940, as
<PAGE> 40
31
amended, and (vii) similar short-term investments approved by the Board of
Directors in the ordinary course of business.
"Term Loan Facility" means the term loan facility provided under the
Senior Credit Facility.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of the Indenture.
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.6 hereof.
"Transactions" means, collectively, the Acquisition, the Mergers,
the initial equity investment by the Investors, the issuance of any Existing
Senior Subordinated Debt, the initial borrowings under the Senior Credit
Facility, and all other transactions relating to the Acquisition or the
financing thereof.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15(519) which has become publicly available at least two Business Days prior
to the Redemption Date (or, if such Statistical Release is no longer published,
any publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to the Stated Maturity; provided, however, that
if the period from the Redemption Date to the Stated Maturity is not equal to
the constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the Redemption Date to the Stated Maturity
is less than one year, the weekly average yield on
<PAGE> 41
32
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Trustee" means the party named as such in the Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or
any other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect from time to time in any relevant jurisdiction.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
that at the time of determination shall be designated an Unrestricted Subsidiary
by the Board of Directors in the manner provided below and (ii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors may designate any
Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of,
or owns or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total consolidated assets of $1,000 or less or (B) if such
Subsidiary has consolidated assets greater than $1,000, then such designation
would be permitted under Section 4.4. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (x) the Company could incur
at least $1.00 of additional Indebtedness under Section 4.3(a) and (y) no
Default shall have occurred and be continuing. Any such designation by the Board
of Directors shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the resolution of the Company's Board of Directors giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such
<PAGE> 42
33
obligations) of the United States of America (including any agency or
instrumentality thereof) for the payment of which the full faith and credit of
the United States of America is pledged and which are not callable or redeemable
at the issuer's option.
"Voting Stock" of an entity means all classes of Capital Stock of
such entity then outstanding and normally entitled to vote in the election of
directors or all interests in such entity with the ability to control the
management or actions of such entity.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the
Company all the Capital Stock of which (other than directors' qualifying shares,
or (in the case of any Foreign Subsidiary) to the extent required by applicable
law) is owned by the Company or another Wholly Owned Subsidiary.
SECTION 1.2. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Affiliate Transaction" .......................................... 4.7
"Bankruptcy Law" ................................................. 6.1
"Blockage Notice" ................................................ 10.3
"covenant defeasance option" ..................................... 8.1(b)
"Custodian" ...................................................... 6.1
"Event of Default" ............................................... 6.1
"Excess Proceeds" ................................................ 4.6
"Fairness Opinion" ............................................... 4.7
"legal defeasance option" ........................................ 8.1(b)
"Legal Holiday" .................................................. 11.8
"Offer" .......................................................... 4.6
"Offer Period" ................................................... 4.6
"pay the Securities" ............................................. 10.3
"Paying Agent" ................................................... 2.3
"Payment Blockage Period" ........................................ 10.3
"Register"........................................................ 2.3
"Registrar"....................................................... 2.3
"Restricted Payment" ............................................. 4.4
"Securities Act" ................................................. 2.1
"Successor Company" .............................................. 5.1
</TABLE>
<PAGE> 43
34
SECTION 1.3. Incorporation by Reference of Trust Indenture Act. This
Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.4. Rules of Construction. (a) Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) as used herein, accounting terms relating to the Company and its
Subsidiaries not defined in Section 1.1, and accounting terms partly
defined in Section 1.1 to the extent not defined, shall have the
respective meanings given to them under GAAP. All computations determining
compliance with financial covenants or terms, including definitions used
therein, shall be prepared in accordance with generally accepted
accounting principles in effect at the Issue Date, as and to the extent
provided in the definition of the term "GAAP." If at any time the
computations for determining compliance with such financial covenants or
provisions relating thereto utilize generally accepted accounting
principles different than those in effect at the Issue Date, the financial
statements within which such computations are
<PAGE> 44
35
delivered shall be accompanied by a reconciliation statement with respect
to such computations;
(3) "or" is not exclusive;
(4) "including" means including without limitation; and
(5) words in the singular include the plural and words in the plural
include the singular.
(b) Unsecured Indebtedness is not deemed to be subordinate or junior
to Secured Indebtedness merely because it is unsecured, and Indebtedness that is
not guaranteed by a particular Person is not deemed to be subordinate or junior
to Indebtedness that is so guaranteed merely because it is not so guaranteed.
ARTICLE 2
The Securities
SECTION 2.1. Form and Dating. The Initial Securities and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of this
Indenture. Any Exchange Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit B, which is
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company).
Each Security shall be dated the date of its authentication. The terms of the
Securities set forth in Exhibit A and B are part of the terms of this Indenture.
(a) Global Securities. The Initial Securities are being offered and
sold by the Company pursuant to the Purchase Agreement.
<PAGE> 45
36
Initial Securities offered and sold to "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act")) ("QIBs") in accordance with Rule 144A under the
Securities Act ("Rule 144A") as provided in the Purchase Agreement, shall be
issued initially in the form of a single, permanent Global Security in
definitive, fully registered form without interest coupons with the legend
called for by footnote 1 to Exhibit A hereto (the "Restricted Global Security"),
which shall be deposited on behalf of the Initial Purchasers of the Initial
Securities represented thereby with the Trustee, as Securities Custodian for the
Depository, and registered in the name of Cede & Co., as nominee of the
Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Restricted Global
Security may from time to time be increased or decreased by adjustments made on
the records of the Trustee, as Securities Custodian, and the Depository or its
nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to
Global Securities deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (i) shall be registered in the name of the Depository for such
Global Security or Global Securities or the nominee of such Depository and (ii)
shall be held by the Trustee as custodian for the Depository. After the issuance
of Exchange Securities under a Registered Exchange Offer, the Trustee shall have
no duty to hold any Global Security as custodian for the Depository or any other
Security registered in the name of the Depository or a nominee of the
Depository.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or
<PAGE> 46
37
the Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices of such Depository
governing the exercise of the rights of a holder of a beneficial interest in any
Global Security.
(c) Certificated Securities. Except as otherwise provided herein,
owners of beneficial interests in Global Securities will not be entitled to
receive physical delivery of certificated Securities. Purchasers of Initial
Securities who are not QIBs (referred to herein as the "Non-Global Purchasers")
will receive certificated Initial Securities bearing the Restricted Securities
Legend ("Restricted Certificated Securities"); provided, however, that upon
transfer of such Restricted Certificated Securities to a QIB, such Restricted
Certificated Securities will, unless the relevant Global Security has previously
been exchanged, be exchanged for an interest in a Global Security pursuant to
the provisions of Section 2.6 hereof. Certificated Securities will include the
Restricted Securities Legend unless removed in accordance with this Section
2.1(c) or Section 2.6(g) hereof.
After a transfer of any Initial Securities during the period of the
effectiveness of, and pursuant to, a Shelf Registration Statement with respect
to the Initial Securities, all requirements pertaining to legends on such
Initial Securities will cease to apply, the requirements requiring that any such
Initial Securities issued to certain Holders be issued in global form will cease
to apply, and certificated Initial Securities without legends will be made
available to the Holders of such Initial Securities. Upon the consummation of a
Registered Exchange Offer with respect to the Initial Securities pursuant to
which Holders of Initial Securities are offered Exchange Securities in exchange
for their Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued in global
form will cease to apply and certificated Initial Securities with the Restricted
Securities Legend will be available to Holders of such Initial Securities that
do not exchange their Initial Securities, and Exchange Securities in
certificated form will be available to Holders that exchange such Initial
Securities in such Registered Exchange Offer.
<PAGE> 47
38
SECTION 2.2. Execution and Authentication. One Officer shall sign
the Securities for the Company by manual or facsimile signature. The Company's
seal shall be impressed, affixed, imprinted or reproduced on the Securities and
may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate and make available for delivery (1)
Initial Securities for original issue in an aggregate principal amount of
$100,000,000, and (2) Exchange Securities for issue only in a Registered
Exchange Offer, pursuant to the Exchange and Registration Rights Agreement, for
Initial Securities for a like principal amount of Initial Securities exchanged
pursuant thereto, in each case upon a written order of the Company signed by one
Officer. Such order shall specify the amount of the Securities to be
authenticated, the date on which the original issue of Securities is to be
authenticated and whether the Securities are to be Initial Securities or
Exchange Securities. The aggregate principal amount of Securities outstanding at
any time may not exceed $100,000,000 except as provided in Section 2.7.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate the Securities. Any such appointment shall be evidenced
by an instrument in writing signed by a Trust Officer, a copy of which
instrument shall be promptly furnished to the Company. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.
<PAGE> 48
39
SECTION 2.3. Registrar and Paying Agent. The Company shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange (the
"Register"). The ownership of Securities shall be proved by such Register. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with
any Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.7. The
Company or any of its Wholly Owned Subsidiaries that is a Domestic Subsidiary
may act as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
The Company initially appoints The Depository Trust Company to act
as Depository with respect to the Global Securities.
SECTION 2.4. Paying Agent To Hold Money in Trust. On or prior to
each due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold in
trust for the benefit of Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal of or interest on the Securities and
shall notify the Trustee of any default by the Company in making any such
payment. If the Company or a Subsidiary acts as Paying Agent, it shall, on or
immediately prior to each due date of the principal and interest on any
Security, segregate the money held by it as Paying Agent
<PAGE> 49
40
and hold it as a separate trust fund. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee and to account for any
funds disbursed by the Paying Agent. Upon complying with this Section, the
Paying Agent shall have no further liability for the money delivered to the
Trustee.
Any money deposited with the Trustee or any Paying Agent in trust
for the payment of principal and interest on any Security and remaining
unclaimed for two years after such principal and interest has become due and
payable shall be paid to the Company at its request; and the Holder of such
Security shall thereafter look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money
shall thereupon cease.
SECTION 2.5. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of principal or interest on any
Security and remaining unclaimed for two years after such principal and interest
has become due and payable shall be paid to the Company at its request, or, if
then held by the Company, shall be discharged from such trust; and the Holder of
such Security shall thereafter, as an unsecured general creditor, look only to
the Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease.
SECTION 2.6. Transfer and Exchange. (a) Transfer and Exchange of
Definitive Securities. When Definitive Securities are presented to the Registrar
or a co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
<PAGE> 50
41
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form and substance reasonably satisfactory to the Company and
the Registrar or co-registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
(ii) in the case of Transfer Restricted Securities that are
Definitive Securities, are being transferred or exchanged pursuant to an
effective registration statement under the Securities Act or pursuant to
clause (A), (B) or (C) below, and are accompanied by the following
additional information and documents, as applicable:
(A) if such Transfer Restricted Securities are being delivered
to the Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that
effect (in substantially the form set forth on the reverse of the
Security); or
(B) if such Transfer Restricted Securities are being
transferred to the Company or to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act) in accordance
with Rule 144A under the Securities Act, a certification to that
effect (in substantially the form set forth on the reverse of the
Security); or
(C) if such Transfer Restricted Securities are being
transferred (w) pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S under the Securities Act;
or (x) to an institutional "accredited investor" within the meaning
of Rules 501(a)(1), (2), (3) or (7) under the Securities Act that is
acquiring the security for its own account, or
<PAGE> 51
42
for the account of such an institutional accredited investor, with
respect to which it exercises sole discretion, in each case in a
minimum principal amount of the Securities of $250,000 for
investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities
Act; or (y) in reliance on another exemption from the registration
requirements of the Securities Act: (i) a certification to that
effect (in substantially the form set forth on the reverse of the
Security), (ii) if the Company or Registrar so requests, an Opinion
of Counsel reasonably acceptable to the Company and to the Registrar
to the effect that such transfer is in compliance with the
Securities Act and (iii) in the case of clause (x), a signed letter
substantially in the form of Exhibit C hereto.
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form and substance satisfactory to the Trustee and the Company,
together with:
(i) if such Definitive Security is a Transfer Restricted Security,
certification, substantially in the form set forth on the reverse of the
Security, that such Definitive Security is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive Security is a Transfer
Restricted Security, written instructions directing the Trustee to make,
or to direct the Securities Custodian to make, an adjustment on its books
and records with respect to such Global Security to reflect an increase in
the aggregate principal amount of the Securities represented by the Global
Security,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with
<PAGE> 52
43
the standing instructions and procedures existing between the Depository and the
Securities Custodian, the aggregate principal amount of Securities represented
by the Global Security to be increased accordingly. If no Global Securities are
then outstanding, the Company shall issue and the Trustee shall authenticate,
upon written order of the Company in the form of an Officer's Certificate, a new
Global Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depository, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Depository therefor.
(d) Transfer of a Beneficial Interest in a Global Security for a
Definitive Security.
(i) Any person having a beneficial interest in a Global Security
that is being transferred or exchanged pursuant to an effective
registration statement under the Securities Act or pursuant to clause
(A),(B) or (C) below may upon request, and if accompanied by the
information specified below, exchange such beneficial interest for a
Definitive Security of the same aggregate principal amount. Upon receipt
by the Trustee of written instructions or such other form of instructions
as is customary for the Depository from the Depository or its nominee on
behalf of any Person having a beneficial interest in a Global Security and
upon receipt by the Trustee of a written order or such other form of
instructions as is customary for the Depository or the Person designated
by the Depository as having such a beneficial interest in a Transfer
Restricted Security only, the following additional information and
documents:
(A) if such beneficial interest is being transferred to the
Person designated by the Depository as being the owner of a
beneficial interest in a Global Security, a certification from such
Person to that effect (in substantially the form set forth on the
reverse of the Security); or
<PAGE> 53
44
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities
Act, a certification to that effect (in substantially the form set
forth on the reverse of the Security); or
(C) if such beneficial interest is being transferred (w)
pursuant to an exemption from registration in accordance with Rule
144 or Regulation S under the Securities Act; or (x) to an
institutional "accredited investor" within the meaning of Rules
501(a)(1), (2), (3) and (7) under the Securities Act that is
acquiring the security for its own account, or for the account of
such an institutional accredited investor, with respect to which it
exercises sole discretion, in each case in a minimum principal
amount of the Securities of $250,000 for investment purposes and not
with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities; or (y) in reliance on
another exemption from the registration requirements of the
Securities Act: (i) a certification to that effect from the
transferee or transferor (in substantially the form set forth on the
reverse of the Security), (ii) if the Company or Registrar so
requests, an Opinion of Counsel from the transferee or transferor
reasonably acceptable to the Company and to the Registrar to the
effect that such transfer is in compliance with the Securities Act,
and (iii) in the case of clause (x), a signed letter substantially
in the form of Exhibit C hereto,
then the Trustee or the Securities Custodian, at the direction of the
Trustee, will cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian,
the aggregate principal amount of the Global Security to be reduced on its
books and records and, following such reduction, the Company will execute
and the Trustee will authenticate and make available for delivery to the
transferee a Definitive Security.
<PAGE> 54
45
(ii) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.6(d) shall be
registered in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall
make such Definitive Securities available for delivery to the persons in
whose names such Securities are so registered in accordance with the
instructions of the Depository.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.6), a Global Security
may not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Authentication of Definitive Securities in Absence of
Depository. If at any time:
(i) the Depository for the Securities notifies the Company that the
Depository is unwilling or unable to continue as Depository for the Global
Securities and a successor Depository for the Global Securities is not
appointed by the Company within 90 days after delivery of such notice; or
(ii) the Company, in its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive Securities
under this Indenture,
then the Company will execute, and the Trustee, upon receipt of an Officer's
Certificate requesting the authentication and delivery of Definitive Securities
to the Persons designated by the Company, will authenticate and make available
for delivery Definitive Securities, in an aggregate principal amount equal to
the principal amount of Global Securities, in exchange for such Global
Securities.
(g) Legend.
<PAGE> 55
46
(i) Except as permitted by the following paragraph (ii), each
Security certificate evidencing the Global Securities and the Definitive
Securities (and all Securities issued in exchange therefor or substitution
thereof) shall bear a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, ON ITS
OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS
PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION
DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE
OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, IN A
TRANSACTION COMPLYING WITH THE REQUIREMENTS OF RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO
AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULES
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000 FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR
<PAGE> 56
47
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S OR THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF ANY OF
THE FOREGOING CLAUSES (A)-(F), A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act or an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Security, the Registrar shall permit the Holder thereof
to exchange such Transfer Restricted Security for a Definitive
Security that does not bear the legend set forth above and rescind
any restriction on the transfer of such Transfer Restricted
Security; and
(B) any such Transfer Restricted Security represented by a
Global Security shall not be subject to the provisions set forth in
clause (i) of this Section 2.6(g) (such sales or transfers being
subject only to the provisions of Section 2.6(c) hereof); provided,
however, that with respect to any request for an exchange of a
Transfer Restricted Security that is represented by a Global
Security for a Definitive Security that does not bear a legend,
which request is made in reliance upon Rule 144, the Holder thereof
shall certify in writing to the Registrar that such request is being
made pursuant to Rule 144 (such certification to be substantially in
the form set forth on the reverse of the Security).
<PAGE> 57
48
(h) Cancellation and/or Adjustment of Global Security. At such time
as all beneficial interests in a Global Security have either been exchanged for
Definitive Securities, redeemed, repurchased or canceled, such Global Security
shall be returned to the Depository for cancellation or retained and canceled by
the Trustee. At any time prior to such cancellation, if any beneficial interest
in a Global Security is exchanged for Definitive Securities, redeemed,
repurchased or canceled, the principal amount of Securities represented by such
Global Security shall be reduced and an adjustment shall be made on the books
and records of the Trustee (if it is then the Securities Custodian for such
Global Security) or the Securities Custodian with respect to such Global
Security, by the Trustee or the Securities Custodian, to reflect such reduction.
(i) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Definitive Securities and
Global Securities at the Registrar's or co-registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar governmental
charge payable in connection therewith.
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) any Definitive Security
selected for redemption in whole or in part pursuant to Article 3, except
the unredeemed portion of any Definitive Security being redeemed in part,
or (b) any Security for a period beginning 15 Business Days before the
mailing of a notice of an offer to repurchase or redeem Securities or 15
Business Days before an interest payment date.
(iv) Prior to the due presentation for registration of transfer of
any Security, each of the Company, the Trustee, the Paying Agent, the
Registrar and any co-registrar may deem and treat the person in whose name
a Security is registered as the absolute owner of such Security for the
<PAGE> 58
49
purpose of receiving payment of principal of and interest on such Security
and for all other purposes whatsoever, whether or not such Security is
overdue, and none of the Company, the Trustee, the Paying Agent, the
Registrar and any co-registrar shall be affected by notice to the
contrary.
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(j) No Obligation of the Trustee. (i) The Trustee shall have no
responsibility or obligation to any beneficial owner of a Global Security, a
member of, or a participant in the Depository or other Person with respect to
the accuracy of the records of the Depository or its nominee or of any
participant or member thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depository) of any notice
(including any notice of redemption) or the payment of any amount, under or with
respect to such Securities. All notices and communications to be given to the
Holders and all payments to be made to Holders under the Securities shall be
given or made only to or upon the order of the registered Holders (which shall
be the Depository or its nominee in the case of a Global Security). The rights
of beneficial owners in any Global Security in global form shall be exercised
only through the Depository subject to the applicable rules and procedures of
the Depository. The Trustee may conclusively rely and shall be fully protected
in relying upon information furnished by the Depository with respect to its
members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including, without limitation, any transfers between
or among Depository participants, members or beneficial owners in any Global
Security) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and when
expressly required by, the terms of this Indenture, and to examine the same
<PAGE> 59
50
to determine substantial compliance as to form with the express requirements
hereof.
SECTION 2.7. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Article 8 of the Uniform Commercial Code and any other applicable law are met,
and if the Holder (i) satisfies the Company and the Trustee, within a reasonable
time after such Holder has notice thereof, with respect to such loss,
destruction or wrongful taking and the Registrar does not register a transfer
prior to receiving such notification, (ii) so requests the Company or the
Trustee prior to the Security being acquired by a bona fide purchaser and (iii)
satisfies any other reasonable requirements of the Company and the Trustee. Such
Holder shall furnish an indemnity bond sufficient in the judgment of the Company
and the Trustee to protect the Company, the Trustee, the Paying Agent, the
Registrar and any co-registrar from any loss that any of them may suffer if a
Security is replaced. The Company and the Trustee may charge the Holder for
their expenses in replacing a Security (including amounts necessary to pay taxes
or other governmental charges associated with such replacement).
Every replacement Security is an additional obligation of the
Company.
The provisions of this Section 2.7 shall (to the extent lawful) be
exclusive and preclude all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.8. Outstanding Securities. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation and those described in this
Section as not outstanding. A Security does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
<PAGE> 60
51
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest payable on that date with respect to the
Securities (or portions thereof) to be redeemed or maturing, as the case may be,
and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.9. Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities and make
them available for delivery in exchange for temporary Securities.
SECTION 2.10. Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
deliver canceled Securities to the Company. The Company may not issue new
Securities to replace Securities it has delivered to the Trustee for
cancellation. The Trustee shall not authenticate Securities in place of canceled
Securities other than pursuant to the terms of this Indenture.
SECTION 2.11. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay the defaulted
interest (plus interest on such defaulted interest to the extent lawful) in any
lawful manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
<PAGE> 61
52
SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
The Company will promptly notify the Trustee of any change in the CUSIP numbers.
ARTICLE 3
Redemption
SECTION 3.1. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.
The Company shall give each notice to the Trustee provided for in
this Section at least 45 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officer's
Certificate from the Company to the effect that such redemption will comply with
the conditions herein. If fewer than all the Securities are to be redeemed, the
record date relating to such redemption shall be selected by the Company and
given to the Trustee, which record date shall be not less than 15 days after the
date of notice to the Trustee. Any such notice may be canceled at any time prior
to notice of such redemption being mailed to any Holder and shall thereby be
void and of no effect.
SECTION 3.2. Selection of Securities To Be Redeemed. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed on a pro rata basis, by lot or by a method that complies with
applicable legal and securities exchange requirements, if any, and that the
Trustee considers, in its sole discretion, fair and appropriate and in
<PAGE> 62
53
accordance with methods generally used at the time of selection by fiduciaries
in similar circumstances. The Trustee shall make the selection from outstanding
Securities not previously called for redemption. The Trustee may select for
redemption portions of the principal of Securities that have denominations
larger than $1,000. Securities and portions of them the Trustee selects shall be
in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture
that apply to Securities called for redemption also apply to portions of
Securities called for redemption. The Trustee shall notify the Company promptly
in writing of the Securities or portions of Securities to be redeemed.
SECTION 3.3. Notice of Redemption. At least 30 days but not more
than 60 days before a date for redemption of Securities, the Company shall mail
a notice of redemption by first-class mail to each Holder of Securities to be
redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the certificate numbers and principal amounts of the particular Securities
to be redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest on Securities (or
portion thereof) called for redemption ceases to accrue on and after the
redemption date;
(7) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed;
<PAGE> 63
54
(8) the CUSIP number, if any, printed on the Securities being
redeemed; and
(9) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.4. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest, if any, to the redemption
date; provided that if the redemption date is after a regular record date and on
or prior to the interest payment date, the accrued interest shall be payable to
the Securityholder of the redeemed Securities registered on the relevant record
date. Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.5. Deposit of Redemption Price. On or prior to 10:00 a.m.
on the redemption date, the Company shall deposit with the Paying Agent (or, if
the Company or a Subsidiary is the Paying Agent, shall segregate and hold in
trust) money sufficient to pay the redemption price of and accrued interest on
all Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption which have been delivered by the Company to the
Trustee for cancellation, and from and after such date (unless the Company
defaults in making such redemption payment) interest on such Securities shall
cease to accrue.
SECTION 3.6. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
<PAGE> 64
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SECTION 3.7. Optional Redemption. (a) Except as set forth in this
Section 3.7, the Securities may not be redeemed pursuant to this Section 3.7(a)
at the option of the Company prior to March 15, 2002. On and after that date,
the Company may redeem the Securities in whole at any time or in part from time
to time at the following redemption prices (expressed in percentages of
principal amount), plus accrued interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date) if redeemed during
the 12-month period beginning on or after March 15 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ ----------
<S> <C>
2002....................................................... 105.500%
2003....................................................... 103.667%
2004....................................................... 101.833%
2005 and thereafter ....................................... 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time and from time to time
prior to March 15, 2000, the Company may redeem in the aggregate up to 33 1/3%
of the original aggregate principal amount of the Securities with the proceeds
of one or more Public Equity Offerings by the Company following which there is a
Public Market, at a redemption price (expressed as a percentage of principal
amount) of 111% plus accrued interest, if any, to the redemption date (subject
to the right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date); provided, however, that at
least 66 2/3% of the original aggregate principal amount of the Securities must
remain outstanding after each such redemption.
(c) At any time on or prior to March 15, 2002, the Securities may be
redeemed as a whole at the option of the Company upon the occurrence of a Change
of Control, upon not fewer than 30 nor more than 60 days' prior notice (but in
no event more than 180 days after the occurrence of such Change of Control)
mailed by first-class mail to each Holder's registered address, at a redemption
price equal to 100% of the principal amount thereof plus the Applicable Premium
as of, and accrued but unpaid interest, if any, to, the Redemption Date (subject
to the
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56
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date).
ARTICLE 4
Covenants
SECTION 4.1. Payment of Securities. The Company shall promptly pay
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.2. SEC Reports. Notwithstanding that the Company may not
be required to be or remain subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act, the Company shall file (if then permitted to do
so) with the SEC and provide (whether or not so filed with the SEC) the Trustee
and Holders and prospective Holders (upon request) with the annual reports and
the information, documents and other reports, which are specified in Sections 13
and 15(d) of the Exchange Act. The Company also shall comply with the other
provisions of TIA Section 314(a). Delivery of such reports, information and
documents to the Trustee is for informational purposes only and the Trustee's
receipt of such shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
the Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officer's Certificates).
SECTION 4.3. Limitation on Indebtedness. (a) The Company will not,
and will not permit any Restricted Subsidiary
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to, Incur any Indebtedness; provided, however, that the Company and the Note
Guarantors may Incur Indebtedness if on the date of the Incurrence of such
Indebtedness the Consolidated Coverage Ratio would be greater than (i)
2.00:1.00, if such Indebtedness is Incurred on or prior to the second
anniversary of the Issue Date, and (ii) 2.25:1.00 if such Indebtedness is
Incurred thereafter.
(b) Notwithstanding Section 4.3(a), the Company and its Restricted
Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness Incurred pursuant to the Senior Credit Facility in
a maximum principal amount not to exceed at any time (A) an aggregate
principal amount of $18.0 million under the Term Loan Facility less the
aggregate amount of all scheduled repayments of principal, or mandatory
prepayments of principal with Net Available Cash from Asset Dispositions,
applied to permanently reduce the Indebtedness outstanding under the Term
Loan Facility, plus (in the case of any refinancing thereof) the aggregate
amount of fees, underwriting discounts, premiums and other costs and
expenses incurred in connection with such refinancing, and (B) an
aggregate principal amount outstanding at any time under the Revolving
Credit Facility not to exceed the greater of (x) $25.0 million less the
amount of all mandatory prepayments of principal with Net Available Cash
from Asset Dispositions, applied to permanently reduce the commitments
under the Revolving Credit Facility plus (in the case of any refinancing
thereof) the aggregate amount of fees, underwriting discounts, premiums
and other costs and expenses incurred in connection with such refinancing,
and (y) the Borrowing Base;
(ii) Indebtedness of Foreign Subsidiaries for working capital
purposes and any Guarantees in respect thereof, the aggregate principal
amount of which Indebtedness outstanding at any time does not exceed, as
to all such Foreign Subsidiaries, an amount (the "Foreign Subsidiary
Amount") equal to the greater of (A) $10,000,000 and (B) an amount equal
to 8% of Consolidated Tangible Assets; provided, however, that the
principal amount of such Indebtedness may exceed the Foreign Subsidiary
Amount by an amount not to exceed the amount of Indebtedness permitted to
be Incurred
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58
by clause 4.3(b)(i)(B) above as of such date, but the principal amount of
Indebtedness permitted to be Incurred by clause 4.3(b)(i)(B) above shall
be reduced by the amount by which such Indebtedness Incurred pursuant to
this clause 4.3(b)(ii) exceeds the Foreign Subsidiary Amount;
(iii) Indebtedness (A) of the Company to any Restricted Subsidiary
and (B) of any Wholly Owned Subsidiary to the Company or any Restricted
Subsidiary; provided, however, that any subsequent issuance or transfer of
any Capital Stock or any other event that results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any other subsequent
transfer of any such Indebtedness (except to the Company or a Wholly Owned
Subsidiary) will be deemed, in each case, an Incurrence of Indebtedness by
the Company or such Restricted Subsidiary, as the case may be;
(iv) Indebtedness represented by the Notes, any Indebtedness (other
than the Indebtedness described in clause 4.3(b)(i), (ii) or (iii) above)
outstanding on the date of the Indenture and any Refinancing Indebtedness
Incurred in respect of any Indebtedness described in this clause
4.3(b)(iv) or Section 4.3(a) above;
(v) Indebtedness of the Company or any Restricted Subsidiary to
finance or refinance the deferred purchase price of newly acquired
property of the Company and its Subsidiaries used in the ordinary course
of business of the Company and its Subsidiaries (provided such purchase
money financing is entered into within six months of the acquisition of
such property), and any Refinancing Indebtedness with respect thereto, in
an amount (based on the remaining balance of the obligations therefor on
the books of the Company and its Restricted Subsidiaries) which shall not
exceed the greater of (A) $5.0 million and (B) an amount equal to 4% of
Consolidated Tangible Assets in the aggregate at any one time outstanding;
(vi) Indebtedness of the Company or any Restricted Subsidiary (which
may comprise Bank Indebtedness) in an aggregate principal amount at any
one time outstanding not in excess of the greater of (A) $5.0 million and
(B) an amount equal to 4% of Consolidated Tangible Assets;
<PAGE> 68
59
(vii) Indebtedness of the Company or any Restricted Subsidiary in
the form of Capitalized Lease Obligations or Attributable Debt, and any
Refinancing Indebtedness with respect thereto, in an aggregate amount not
in excess of the greater of (A) $5.0 million and (B) an amount equal to 4%
of Consolidated Tangible Assets at any one time outstanding; provided,
however, that all Indebtedness Incurred by one or more Restricted
Subsidiaries that are not Note Guarantors pursuant to clause 4.3(b)(v) or
(vi) above or this clause 4.3(b)(vii) shall not exceed the greater of (A)
$5.0 million and (B) an amount equal to 4% of Consolidated Tangible Assets
in aggregate principal amount at any one time outstanding;
(viii) Indebtedness represented by the Note Guarantees and
Guarantees of Indebtedness Incurred pursuant to clause 4.3(b)(i) or (iii)
above;
(ix) Guarantees (A) by any Note Guarantor of Senior Indebtedness,
(B) by the Company or any Note Guarantor of Guarantor Senior Indebtedness
or (C) by any Wholly Owned Subsidiary that is not a Note Guarantor of
Indebtedness of any Wholly Owned Subsidiary that is not a Note Guarantor;
(x) Indebtedness (A) arising by reason of any Lien created or
permitted to exist by Section 4.10, including any Indebtedness of any Note
Guarantor arising by reason of any Lien granted by such Person to secure
Senior Indebtedness, or of the Company or any Note Guarantor arising by
reason of any Lien granted by such Person to secure Guarantor Senior
Indebtedness, or (B) of any Restricted Subsidiary that is not a Note
Guarantor arising by reason of any Lien granted by such Person to secure
Indebtedness of any Restricted Subsidiary that is not a Note Guarantor;
(xi) Indebtedness of the Company or any Restricted Subsidiary
arising from the honoring of a check, draft or similar instrument of such
Person drawn against insufficient funds, provided that such Indebtedness
is extinguished within five Business Days of its incurrence;
(xii) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees, indemnities, or obligations in respect of
purchase price adjustments, in
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connection with the acquisition or disposition of assets, including
pursuant to the Acquisition;
(xiii) Indebtedness in respect of (1) commercial letters of credit,
or other letters of credit or other similar instruments or obligations,
issued in connection with liabilities incurred in the ordinary course of
business (including those issued to governmental entities in connection
with self-insurance under applicable workers' compensation statutes), or
(2) surety, judgment, appeal, performance and other similar bonds,
instruments or obligations provided in the ordinary course of business;
(xiv) Indebtedness under Hedging Obligations; provided, however,
that such Hedging Obligations are entered into for bona fide hedging
purposes of the Company or any Restricted Subsidiary and are in the
ordinary course of business;
(xv) Indebtedness (1) of the Company consisting of guarantees of up
to an aggregate principal amount of $1.0 million of borrowings by
Management Investors in connection with the purchase of Capital Stock of
the Company, Holding or EV LLC by such Management Investors or (2) of the
Company or any Restricted Subsidiary consisting of guarantees in respect
of loans or advances made to officers or employees of Holding, the Company
or any Restricted Subsidiary, or guarantees otherwise made on their
behalf, (A) in respect of travel, entertainment and moving-related
expenses incurred in the ordinary course of business, or (B) in the
ordinary course of business not exceeding $500,000 in the aggregate
outstanding at any time;
(xvi) Indebtedness of any Restricted Subsidiary that is Indebtedness
of another Person assumed by such Restricted Subsidiary in connection with
its acquisition of assets from such Person (other than Indebtedness
Incurred in connection with, or in contemplation of, such acquisition) and
any Refinancing Indebtedness with respect thereto; provided, however, that
at the time of such acquisition of assets the Company shall have been able
to Incur at least an additional $1.00 of Indebtedness under Section 4.3(a)
above after giving effect to such acquisition; and
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(xvii) Indebtedness of a Restricted Subsidiary issued and
outstanding on or prior to the date on which such Restricted Subsidiary
was acquired by the Company (other than Indebtedness Incurred (A) as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company or (B) otherwise in
connection with, or in contemplation of, such acquisition) and any
Refinancing Indebtedness with respect thereto; provided, however, that on
the date of any such acquisition the Company shall have been able to Incur
at least $1.00 of Indebtedness under Section 4.3(a) above after giving
effect to such acquisition.
(c) Notwithstanding the foregoing, the Company will not Incur any
Indebtedness pursuant to any provision of the foregoing paragraph (b) that
permits Refinancing Indebtedness in respect of Indebtedness constituting
Subordinated Obligations, if the proceeds of such Refinancing Indebtedness are
used, directly or indirectly, to refinance such Subordinated Obligations, unless
such Refinancing Indebtedness will be subordinated to the Notes to at least the
same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this covenant, (i) any other obligation of the obligor on such
Indebtedness arising under any Guarantee, Lien or letter of credit supporting
such Indebtedness shall be disregarded to the extent that such Guarantee, Lien
or letter of credit secures the principal amount of such Indebtedness; (ii) in
the event that Indebtedness meets the criteria of more than one of the types of
Indebtedness described in any clause of Section 4.3(b) above, the Company, in
its sole discretion, shall classify such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of such
clauses; and (iii) the amount of Indebtedness issued at a price that is less
than the principal amount thereof shall be equal to the amount of the liability
in respect thereof determined in accordance with GAAP.
(e) For purposes of determining compliance with any
Dollar-denominated restriction on the Incurrence of Indebtedness
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denominated in a foreign currency, the Dollar-equivalent principal amount of
such Indebtedness Incurred pursuant thereto shall be calculated based on the
relevant currency exchange rate in effect on the date that such Indebtedness was
Incurred, in the case of term debt, or first committed, in the case of revolving
credit debt; provided that (x) the Dollar-equivalent principal amount of any
such Indebtedness outstanding on the Issue Date shall be calculated based on the
relevant currency exchange rate in effect on the Issue Date and (y) if such
Indebtedness is Incurred to refinance other Indebtedness denominated in a
foreign currency, and such refinancing would cause the applicable
Dollar-denominated restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of such refinancing, such
Dollar-denominated restriction shall be deemed not to have been exceeded so long
as the principal amount of such refinancing Indebtedness does not exceed the
principal amount of such Indebtedness being refinanced. The principal amount of
any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a
different currency from the Indebtedness being refinanced, shall be calculated
based on the currency exchange rate applicable to the currencies in which such
respective Indebtedness is denominated that is in effect on the date of such
refinancing.
SECTION 4.4. Limitation on Restricted Payments. (a) The Company
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to (i) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving the Company) except (x) dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and (y) dividends or distributions payable to the Company or any
Restricted Subsidiary (and, if the Restricted Subsidiary making such dividend or
distribution is not a Wholly Owned Subsidiary, to its other shareholders on no
more than a pro rata basis, measured by value), (ii) purchase, redeem, retire or
otherwise acquire for value any Capital Stock of the Company held by Persons
other than the Company or another Restricted Subsidiary, (iii) purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than the purchase, repurchase, redemption or
other acquisition of Subordinated Obligations in anticipation of satisfying a
sinking fund
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obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition) or (iv) make any Investment (other than a
Permitted Investment) in any Person (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition, retirement or Investment
being herein referred to as a "Restricted Payment") if at the time the Company
or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company could not incur at least an additional $1.00 of
Indebtedness under Section 4.3(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Company's Board of Directors whose
determination shall be conclusive and evidenced by a resolution of the
Company's Board of Directors) declared or made subsequent to the date of
the Indenture would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the end of the most
recent fiscal quarter ending prior to the Issue Date to the end of
the most recent fiscal quarter ending prior to the date of such
Restricted Payment for which consolidated financial statements of
the Company are available (or, in case such Consolidated Net Income
shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company
either (x) as capital contributions to the Company after the Issue
Date or (y) from the issuance or sale of its Capital Stock (other
than Disqualified Stock) subsequent to the Issue Date (other than an
issuance or sale to a Restricted Subsidiary of the Company),
provided that in the event such issuance or sale is to an employee
stock ownership plan or other trust established by the Company or
any of its Subsidiaries for the benefit of their employees, to the
extent the purchase by such plan or trust is financed
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by Indebtedness of such plan or trust for which the Company is
liable as Guarantor or otherwise, such aggregate amount of Net Cash
Proceeds shall be limited to the aggregate amount of principal
payments made by such plan or trust with respect to such
Indebtedness;
(C) the amount by which Indebtedness of the Company is reduced
on the Company's balance sheet upon the conversion or exchange
(other than by a Restricted Subsidiary of the Company) subsequent to
the Issue Date, of any Indebtedness of the Company or its Restricted
Subsidiaries convertible or exchangeable for Capital Stock (other
than Disqualified Stock) of the Company (less the amount of any
cash, or other property (other than Capital Stock), distributed by
the Company upon such conversion or exchange), plus the amount of
any cash or other property received by the Company or any Restricted
Subsidiary upon such conversion or exchange;
(D) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (i) repayments of the
principal of loans or advances or other transfers of assets to the
Company or any Restricted Subsidiary from any Unrestricted
Subsidiary or (ii) the redesignation of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the
definition of "Investment"), not to exceed in the case of any such
Unrestricted Subsidiary the aggregate amount of Investments (other
than Permitted Investments) made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary after the Issue Date; and
(E) in the case of disposition or repayment of any Investment
constituting a Restricted Payment (without duplication of any amount
deducted in calculating the amount of Investments at any time
outstanding included in the amount of Restricted Payments), an
amount equal to the lesser of the return of capital or repayment
with respect to such Investment and the initial amount of such
Investment, in either case, less the cost of the disposition of such
Investment.
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(b) The provisions of Section 4.4(a) will not prohibit:
(i) any purchase, redemption, repurchase, defeasance, retirement or
other acquisition of Capital Stock of the Company or Subordinated
Obligations made by exchange (including any such exchange pursuant to the
exercise of a conversion right or privilege in connection with which cash
is paid in lieu of the issuance of fractional shares) for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of the
Company (other than Disqualified Stock and other than Capital Stock issued
or sold to a Subsidiary or an employee stock ownership plan or other trust
established by the Company or any of its Subsidiaries) or a substantially
concurrent capital contribution to the Company; provided, however, that
(A) such purchase, redemption, repurchase, defeasance, retirement or other
acquisition shall be excluded in subsequent calculations of the amount of
Restricted Payments and (B) the Net Cash Proceeds from such sale or
capital contribution shall be excluded in subsequent calculations under
clause (B) of Section 4.4(a);
(ii) any purchase, redemption, repurchase, defeasance, retirement or
other acquisition of Subordinated Obligations made by exchange for, or out
of the proceeds of the substantially concurrent sale of, Subordinated
Obligations of the Company that is permitted to be Incurred pursuant to
Section 4.3; provided, however, that such purchase, redemption,
repurchase, defeasance, retirement or other acquisition shall be excluded
in subsequent calculations of the amount of Restricted Payments;
(iii) any purchase, redemption, repurchase, defeasance, retirement
or other acquisition of Subordinated Obligations from Net Available Cash
to the extent permitted by Section 4.6; provided, however, that such
purchase, redemption, repurchase, defeasance, retirement or other
acquisition shall be excluded in subsequent calculations of the amount of
Restricted Payments;
(iv) any purchase, redemption, repurchase, defeasance, retirement or
other acquisition of Subordinated Obligations upon a Change of Control to
the extent required by the
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agreement governing such Subordinated Obligations but only if the Company
shall have complied with Section 4.8 and purchased all Notes tendered
pursuant to the offer to repurchase all the Notes required thereby, prior
to purchasing or repaying such Subordinated Obligations; provided,
however, that (1) the purchase price (stated as a percentage of principal
amount or issue price plus accrued original issue discount, if less) of
such Subordinated Obligations shall not be greater than the price (stated
as a percentage of principal amount) of the Notes pursuant to any such
offer to repurchase the Notes in the event of a Change of Control, and (2)
any such purchase, redemption, repurchase, defeasance, retirement or other
acquisition shall be included in subsequent calculations of the amount of
Restricted Payments;
(v) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 4.4(a); provided however, that such dividends shall be
included in subsequent calculations of the amount of Restricted Payments;
(vi) loans, advances, dividends or distributions by the Company to
Holding or EV LLC to permit Holding or EV LLC, as the case may be, to
repurchase or otherwise acquire its Capital Stock or options, warrants or
other rights in respect thereof, or payments by the Company to repurchase
or otherwise acquire Capital Stock or options, warrants or other rights in
respect thereof, in each case from Management Investors, such payments,
loans, advances, dividends or distributions not to exceed an amount (net
of repayments of any such loans or advances) equal to $500,000 in any
fiscal year and $2,000,000 in the aggregate (plus the Net Cash Proceeds
received by the Company since the Issue Date as a capital contribution
from the sale to Management Investors of Capital Stock or options,
warrants or other rights in respect thereof); provided, however, that such
payments, loans, advances, dividends or distributions will be included in
subsequent calculations of the amount of Restricted Payments;
(vii) loans, advances, dividends or distributions by the Company or
any Restricted Subsidiary to Holding or EV LLC not to exceed an amount
necessary to permit Holding or
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EV LLC to (1) pay its costs (including all professional fees and expenses)
incurred to comply with its reporting obligations under federal or state
laws or under the Indenture, including any reports filed with respect to
the Securities Act, Exchange Act or the respective rules and regulations
promulgated thereunder, (2) make payments in respect of its
indemnification obligations owing to directors, officers, employees or
other Persons under its charter or by-laws or pursuant to written
agreements with any such Person, to the extent such payments relate to the
Company and its Subsidiaries, (3) pay all reasonable fees and expenses
payable by it in connection with the Transactions, or (4) pay its other
operational expenses (other than taxes) incurred in the ordinary course of
business and not exceeding $500,000 in any fiscal year; provided, however,
that such loans, advances, dividends or distributions will be excluded in
subsequent calculations of the amount of Restricted Payments;
(viii) payments by the Company or any Restricted Subsidiary to
Holding (A) to satisfy or permit Holding to satisfy its obligations under
the Management Agreements, (B) pursuant to the Tax Sharing Agreement, (C)
to pay or permit Holding to pay any taxes, charges or assessments,
including but not limited to sales, use, transfer, rental, ad valorem,
value-added, stamp, property, consumption, franchise, license, capital,
net worth, gross receipts, excise, occupancy, intangibles or similar
taxes, charges or assessments (other than federal, state or local taxes
measured by income and federal, state or local withholding imposed on
payments made by Holding), required to be paid by Holding by virtue of its
being incorporated or having capital stock outstanding (but not by virtue
of owning stock of any corporation other than the Company or any of its
Subsidiaries), or being a holding company parent of the Company or
receiving dividends from or other distributions in respect of the stock of
the Company, or having guaranteed any obligations of the Company or any
Subsidiary thereof, or having made any payment in respect of any of the
items for which the Company is permitted to make payments to Holding
pursuant to this covenant, or (D) to pay or permit Holding to pay any
other federal, state, foreign, provincial or local taxes measured by
income for which Holding is liable up to an amount not to exceed with
respect to such federal
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taxes the amount of any such taxes which the Company would have been
required to pay on a separate company basis or on a consolidated basis if
the Company had filed a consolidated return on behalf of an affiliated
group (as defined in Section 1504 of the Internal Revenue Code of 1986, as
amended, or an analogous provision of state, local or foreign law) of
which it were the common parent, or with respect to state and local taxes,
on a combined basis if the Company had filed a combined return on behalf
of an affiliated group consisting only of the Company and its
Subsidiaries; provided, however, that such payments will be excluded in
subsequent calculations of the amount of Restricted Payments;
(ix) the payment by the Company of, or loans, advances, dividends or
distributions by the Company to Holding or EV LLC to pay, dividends on the
common stock of the Company, Holding or EV LLC, as applicable, following
an initial public offering of such common stock, in an amount not to
exceed in any fiscal year 6% of the net proceeds received by the Company,
in or from such public offering; provided, however, that such payments,
loans, advances, dividends or distributions will be included in subsequent
calculations of the amount of Restricted Payments; and
(x) loans, advances, dividends or distributions by the Company or
any Restricted Subsidiary in an aggregate amount not to exceed $10.0
million; provided, however, that (A) the Company or any Restricted
Subsidiary shall not be permitted to make Restricted Payments under this
clause (x) unless, after giving effect thereto (including the Incurrence
of any Indebtedness to fund such Restricted Payment), the Consolidated
Coverage Ratio of the Company would be at least equal to 2.25:1.00 and (B)
such loans, advances, dividends or distributions will be included in
subsequent calculations of the amount of Restricted Payments; and
provided, further, that in the case of clauses 4.4(b)(vii), (ix) and (x), no
Default or Event of Default shall have occurred or be continuing at the time of
such payment after giving effect thereto.
SECTION 4.5. Limitation on Restrictions on
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Distributions from Restricted Subsidiaries. The Company will not, and will not
permit any Restricted Subsidiary to, create or otherwise cause or permit to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (i) pay dividends or make any other
distributions on its Capital Stock or pay any Indebtedness or other obligations
owed to the Company, (ii) make any loans or advances to the Company or (iii)
transfer any of its property or assets to the Company, except:
(1) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the date of the Indenture (including, without
limitation, the Senior Credit Facility);
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary (x) pursuant to an agreement relating to any Indebtedness
Incurred by a Restricted Subsidiary prior to the date on which such
Restricted Subsidiary was acquired by the Company, or of another Person
that is assumed by the Company or a Restricted Subsidiary in connection
with the acquisition of assets from, or merger or consolidation with, such
Person (other than Indebtedness Incurred as consideration in, or to
provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Restricted Subsidiary or was
acquired by the Company, or such acquisition of assets, merger or
consolidation) and outstanding on the date of such acquisition, merger or
consolidation or (y) pursuant to any agreement (not relating to any
Indebtedness) in existence when a Person becomes a Subsidiary of the
Company or when such agreement is acquired by the Company or any
Subsidiary thereof, that is not created in contemplation of such Person
becoming such a Subsidiary or such acquisition (for purposes of this
clause (2), if another Person is the Successor Company, any Subsidiary or
agreement thereof shall be deemed acquired or assumed, as the case may be,
by the Company when such Person becomes the Successor Company);
(3) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement (a "Refinancing Agreement") effecting
a refinancing of
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Indebtedness Incurred pursuant to, or that otherwise extends, renews,
refinances or replaces, an agreement referred to in clause (1) or (2) of
this Section 4.5 or this clause (3) (an "Initial Agreement") or contained
in any amendment to an Initial Agreement; provided, however, that the
encumbrances and restrictions contained in any such Refinancing Agreement
or amendment are no less favorable to the Holders of the Notes taken as a
whole than encumbrances and restrictions contained in the Initial
Agreement or Initial Agreements to which such Refinancing Agreement or
amendment relates (as conclusively determined in good faith by the Board
of Directors);
(4) any encumbrance or restriction (A) that restricts in a customary
manner the subletting, assignment or transfer of any property or asset
that is subject to a lease, license or similar contract, or the assignment
or transfer of any lease, license or other contract, (B) by virtue of any
transfer of, agreement to transfer, option or right with respect to, or
Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by the Indenture, (C) contained in
mortgages, pledges or other security agreements securing Indebtedness of a
Restricted Subsidiary to the extent such encumbrance or restrictions
restrict the transfer of the property subject to such mortgages, pledges
or other security agreements or (D) pursuant to customary provisions
restricting dispositions of real property interests set forth in any
reciprocal easement agreements of the Company or any Restricted
Subsidiary;
(5) any restriction with respect to a Restricted Subsidiary (or any
of its property or assets) imposed pursuant to an agreement entered into
for the direct or indirect sale or disposition of all or substantially all
the Capital Stock or assets of such Restricted Subsidiary (or the property
or assets that are subject to such restriction) pending the closing of
such sale or disposition;
(6) any encumbrance or restriction on the transfer of property or
assets required by any regulatory authority having jurisdiction over the
Company or any Restricted Subsidiary or any of their businesses; and
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(7) any encumbrance or restriction pursuant to an agreement relating
to any Indebtedness incurred, or any sale of receivables, by a Foreign
Subsidiary.
SECTION 4.6. Limitation on Sales of Assets. (a) The Company will
not, and will not permit any Restricted Subsidiary to, make any Asset
Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other Person assuming
responsibility for, any liabilities, contingent or otherwise) at the time of
such Asset Disposition at least equal to the fair market value of the shares and
assets subject to such Asset Disposition, as such fair market value may be
determined (and shall be determined, to the extent such Asset Disposition or any
series of related Asset Dispositions involves aggregate consideration in excess
of $1.0 million) in good faith by the Board of Directors, whose determination
shall be conclusive (including as to the value of all noncash consideration),
(ii) at least 80% of the consideration therefor (excluding, in the case of an
Asset Disposition of assets, any consideration by way of relief from, or by any
other Person assuming responsibility for, any liabilities, contingent or
otherwise, which are not Indebtedness) received by the Company or such
Restricted Subsidiary is in the form of cash, and (iii) an amount equal to 100%
of the Net Available Cash from such Asset Disposition is applied by the Company
(or such Restricted Subsidiary, as the case may be) as follows:
(A) first, to the extent the Company elects (or is required by the
terms of any Senior Indebtedness or Indebtedness (other than Preferred
Stock) of a Restricted Subsidiary), to prepay, repay or purchase Senior
Indebtedness or such Indebtedness of a Restricted Subsidiary (in each case
other than Indebtedness owed to the Company or a Restricted Subsidiary)
within 365 days after the date of such Asset Disposition;
(B) second, to the extent of the balance of Net Available Cash after
application in accordance with clause (A) above, to the extent the Company
or such Restricted Subsidiary elects, to reinvest in Additional Assets
(including by means of an Investment in Additional Assets by a Restricted
Subsidiary with Net Available Cash received by the Company or another
Restricted Subsidiary) within 365
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days from the date of such Asset Disposition, or, if such reinvestment in
Additional Assets is a project authorized by the Board of Directors that
will take longer than such 365 days to complete, the period of time
necessary to complete such project;
(C) third, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B) above (such
balance, the "Excess Proceeds"), to make an offer to purchase Notes and
(to the extent required by the terms thereof) any other Senior
Subordinated Indebtedness, pursuant and subject to the conditions of the
Indenture and the agreements governing such other Indebtedness, at a
purchase price of 100% of the principal amount thereof (or accreted value,
as applicable) plus accrued and unpaid interest to the purchase date; and
(D) fourth, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A), (B) and (C) above, to
fund (to the extent consistent with any other applicable provision of the
Indenture) any general corporate purpose (including the repayment of any
Subordinated Obligations); provided, however, that in connection with any
prepayment, repayment or purchase of Indebtedness pursuant to clause (A)
or (C) above, the Company or such Restricted Subsidiary will retire such
Indebtedness and will cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions of this
covenant, the Company and the Restricted Subsidiaries shall not be
required to apply any Net Available Cash in accordance with this covenant
except to the extent that the aggregate Net Available Cash from all Asset
Dispositions that is not applied in accordance with this covenant exceeds
$3.0 million. If the aggregate principal amount (or accreted value, as
applicable) of Notes and Senior Subordinated Indebtedness validly tendered
and not withdrawn in connection with an offer pursuant to clause (C) above
exceeds the Excess Proceeds, the Excess Proceeds will be apportioned
between the Notes and such Senior Subordinated Indebtedness, with the
portion of the Excess Proceeds payable in respect of the Notes to equal
the lesser of (x) the Excess Proceeds amount multiplied by a fraction, the
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numerator of which is the outstanding principal amount of the Notes and
the denominator of which is the sum of the outstanding principal amount of
the Notes and the outstanding principal amount (or accreted value, as
applicable) of the relevant Senior Subordinated Indebtedness, and (y) the
aggregate principal amount of Notes validly tendered and not withdrawn.
For the purposes of this covenant, the following are deemed to be
cash: (v) Cash Equivalents, (w) the assumption of Indebtedness of the Company
(other than Disqualified Stock of the Company) or any Restricted Subsidiary and
the release of the Company or such Restricted Subsidiary from all liability on
such Indebtedness in connection with such Asset Disposition, (x) Indebtedness of
any Restricted Subsidiary that is no longer a Restricted Subsidiary as a result
of such Asset Disposition, to the extent that the Company and each other
Restricted Subsidiary is released from any Guarantee of such Indebtedness in
connection with such Asset Disposition, (y) securities received by the Company
or any Restricted Subsidiary from the transferee that are promptly converted by
the Company or such Restricted Subsidiary into cash, and (z) consideration
consisting of Indebtedness of the Company or any Restricted Subsidiary.
(b) In the event of an Asset Disposition that requires the purchase
of Notes pursuant to clause 4.6(a)(iii)(C) above, the Company will be required
to purchase Notes tendered pursuant to an offer by the Company for the Notes
(the "Offer") at a purchase price of 100% of their principal amount plus accrued
and unpaid interest to the Purchase Date in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. If the aggregate purchase price of the Notes tendered pursuant to the
Offer is less than the Net Available Cash allotted to the purchase of Notes, the
remaining Net Available Cash will be available to the Company for use in
accordance with clause 4.6(a)(iii)(C) above (to repay Senior Subordinated
Indebtedness) or clause 4.6(a)(iii)(D) above. The Company shall not be required
to make an Offer for Notes pursuant to this covenant if the Net Available Cash
available therefor (after application of the proceeds as provided in clause
4.6(a)(iii)(A) and clause 4.6(a)(iii)(B) above) is less than $3.0 million for
any particular Asset Disposition (which lesser amounts shall be carried forward
for purposes of determining
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whether an Offer is required with respect to the Net Available Cash from any
subsequent Asset Disposition).
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 4.6. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.6, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Section 4.6 by virtue
thereof.
SECTION 4.7. Limitation on Transactions with Affiliates. (a) The
Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, enter into or conduct any transaction or series of transactions
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate of the Company (an "Affiliate
Transaction") on terms (i) that taken as a whole are less favorable to the
Company or such Restricted Subsidiary, as the case may be, than those that could
be obtained at the time of such transaction in arm's length dealings with a
Person who is not such an Affiliate and (ii) that, in the event such Affiliate
Transaction involves an aggregate amount in excess of $1.0 million, are not in
writing and (x) have not been approved by a majority of the members of the Board
of Directors having no material personal financial interest in such Affiliate
Transaction or (y) in the event there are no such members, as to which the
Company has not obtained a Fairness Opinion (as hereinafter defined). In
addition, any transaction involving aggregate payments or other transfers by the
Company and its Restricted Subsidiaries in excess of $10.0 million will also
require an opinion (a "Fairness Opinion") from an independent investment banking
firm or appraiser, as appropriate, of national prominence, to the effect that
the terms of such transaction taken as a whole are either (i) no less favorable
to the Company or such Restricted Subsidiary, as the case may be, than those
that could be obtained at the time of such transaction in arm's length dealings
with a Person who is not an Affiliate or (ii) fair to the Company or such
Restricted Subsidiary, as the case may be, from a financial point of view.
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(b) The provisions of Section 4.7(a) shall not prohibit (i) any
Restricted Payment permitted by Section 4.4, any Permitted Investment, or any
other transaction specifically excluded from the definition of the term
"Restricted Payment," (ii) the performance of the Company's or Restricted
Subsidiary's obligations under any employment contract, collective bargaining
agreement, employee benefit plan, related trust agreement or any other similar
arrangement heretofore or hereafter entered into in the ordinary course of
business, (iii) payment of compensation, performance of indemnification or
contribution obligations, or any issuance, grant or award of stock, options or
other securities, to employees, officers or directors in the ordinary course of
business, (iv) maintenance in the ordinary course of business of benefit
programs or arrangements for employees, officers or directors, including
vacation plans, health and the insurance plans, deferred compensation plans, and
retirement or savings plans and similar plans, (v) any transaction between the
Company and a Restricted Subsidiary or between Restricted Subsidiaries, (vi)
loans or advances made to directors, officers or employees of Holding, the
Company or any Restricted Subsidiary, or guarantees in respect thereof or
otherwise made on their behalf (including any payments under such guarantees),
(A) in respect of travel, entertainment or moving-related expenses incurred in
the ordinary course of business, or (B) in the ordinary course of business not
exceeding $500,000 in the aggregate outstanding at any time, (vii) guarantees of
borrowings by Management Investors in connection with the purchase of Capital
Stock of the Company, Holding or EV LLC by such Management Investors, which
guarantees are permitted by Section 4.3, and payments thereunder, (viii) the
Transactions and the incurrence and payment of all fees and expenses payable in
connection therewith, (ix) any other transaction arising out of agreements in
existence on the Issue Date, (x) execution, delivery and performance of the Tax
Sharing Agreement and the Management Agreements, including the initial payment
of a fee of $1,500,000 to GSCP and the ongoing payment of fees to GSCP of up to
$750,000 per year plus reasonable out of pocket expenses, (xi) any commercial or
other business transaction in the ordinary course of business with any Permitted
Holder or any Affiliate thereof, on terms that taken as a whole are no less
favorable to the Company and its Restricted Subsidiaries than those that could
be obtained at the time in arm's length dealings with a Person who is not an
Affiliate of the Company and (xii) any transaction in the ordinary course of
business, or approved by a majority of
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the members of the Board of Directors having no material personal financial
interest in such transaction, between the Company or any Restricted Subsidiary
and any Affiliate of the Company controlled by the Company that is a joint
venture or similar entity primarily engaged in a Related Business.
SECTION 4.8. Change of Control. (a) Upon the occurrence of a Change
of Control, each Securityholder shall have the right to require the Company to
repurchase all or any part of such Holder's Securities at a purchase price in
cash equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), provided, however, that notwithstanding the occurrence
of a Change of Control, the Company shall not be obligated to purchase the
Securities pursuant to this Section 4.8 in the event that it has exercised its
right to redeem all the Securities under Section 3.7 hereof.
In the event that at the time of such Change of Control the terms of
the Bank Indebtedness restrict or prohibit the repurchase of Securities pursuant
to this Section, then prior to the mailing of the notice to Holders provided for
in Section 4.8(b) below but in any event within 30 days following any Change of
Control (unless the Company has exercised its right to redeem all the Securities
under Section 3.7 hereof), the Company shall (i) repay in full all Bank
Indebtedness or offer to repay in full all Bank Indebtedness and repay the Bank
Indebtedness of each lender who has accepted such offer or (ii) obtain the
requisite consent under the agreements governing the Bank Indebtedness to permit
the repurchase of the Securities as provided for in Section 4.8(b) below.
(b) Unless the Company has exercised its right to redeem all the
Securities under Section 3.7 hereof, within 30 days following any Change of
Control (or at the Company's option, prior to such Change of Control but after
the public announcement thereof) (except as provided in the proviso to the first
sentence of Section 4.8(a)), the Company shall mail a notice to each Holder with
a copy to the Trustee stating: (1) that a Change of Control has occurred or will
occur and that such Holder has (or upon such occurrence will have) the right to
require the Company to purchase such Holder's Securities at a purchase price in
cash
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equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, to the date of purchase (subject to the right of Holders of record on a
record date to receive interest on the relevant interest payment date); (2) the
circumstances and relevant facts and financial information regarding such Change
of Control; (3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); (4) the instructions
determined by the Company, consistent with this Section, that a Holder must
follow in order to have its Securities purchased and (5) that if such offer is
made prior to such Change of Control, payment is conditioned on the occurrence
of such Change of Control.
(c) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders shall be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the purchase date a facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Security which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section shall be delivered to the Trustee for cancellation, and the
Company shall pay the purchase price plus accrued and unpaid interest, if any,
to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.8. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.8, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.8 by virtue
thereof.
SECTION 4.9. Compliance Certificate; Notice of Default. The Company
shall deliver to the Trustee within 120 days after the end of each fiscal year
of the Company an
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Officer's Certificate signed by the principal executive, principal financial or
principal accounting officer of the Company complying with Section 314(a)(4) of
the TIA and stating that a review of its activities and the activities of its
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officer with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture and further stating, as to each Officer signing such certificate,
whether or not the signer knows of any failure by the Company or any Subsidiary
of the Company to comply with any conditions or covenants in this Indenture,
and, if such signer does know of such a failure to comply, the certificate shall
describe such failure with particularity and describe what actions, if any, the
Company proposes to take with respect to such failure. The Company shall file
with the Trustee written notice of the occurrence of any Default or Event of
Default within five Business Days of its becoming aware of any such Default or
Event of Default.
SECTION 4.10. [INTENTIONALLY DELETED]
SECTION 4.11. Limitation on Liens. The Company shall not, and shall
not permit any Restricted Subsidiary to, directly or indirectly, create or
permit to exist any Lien (other than Permitted Liens) on any of its property or
assets (including Capital Stock of any other Person), whether owned on the date
of the Indenture or thereafter acquired, securing any Indebtedness that is not
Senior Indebtedness or Guarantor Senior Indebtedness (the "Initial Lien"),
unless contemporaneously therewith effective provision is made to secure the
Indebtedness due under the Indenture and the Notes or, in respect of Liens on
any Restricted Subsidiary's property or assets, any Note Guarantee of such
Restricted Subsidiary, equally and ratably with such obligation for so long as
such obligation is so secured by such Initial Lien. Any such Lien thereby
created in favor of the Notes or any such Note Guarantee will be automatically
and unconditionally released and discharged upon (i) the release and discharge
of the Initial Lien to which it relates, or (ii) any sale, exchange or transfer
to any Person not an Affiliate of the Company of the property or assets secured
by such Initial Lien, or of all of the Capital Stock held by the Company or any
Restricted Subsidiary in, or all or substantially all the assets of, any
Restricted Subsidiary creating such Lien. Upon notice to the Trustee of any such
event, the Trustee shall execute all
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agreements and instruments confirming and acknowledging such release and
discharge as may be reasonably requested by the Company.
SECTION 4.12. Additional Note Guarantors. (a) If the Company or any
of its Domestic Subsidiaries shall acquire or create another Domestic Subsidiary
that is a Significant Subsidiary, then the Company, the Trustee and such newly
acquired or created Domestic Subsidiary shall execute and deliver a supplemental
indenture evidencing such Note Guarantee and deliver an Opinion of Counsel, in
accordance with the terms of this Indenture. The Company will also have the
right to cause any Restricted Subsidiary so to become a Note Guarantor. Each
Note Guarantee will be limited to an amount not to exceed the maximum amount
that can be Guaranteed by that Subsidiary without rendering the Note Guarantee,
as it relates to such Subsidiary, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally. Such Note Guarantee may be substantially in the
form of Exhibit D hereto or in such other form as may be reasonably satisfactory
to the Trustee and the Company.
(b) Except as provided in the applicable Note Guarantee, no Note
Guarantor may consolidate or merge with into (whether or not such Note Guarantor
is the surviving Person) another Person unless (i) the Person formed by or
surviving any such consolidation or merger (if other than a Note Guarantor or
the Company) assumes all the obligations of such Note Guarantor under the Note
Guarantee and the Indenture pursuant to a supplemental indenture, in form
reasonably satisfactory to the Trustee, and (ii) if such merger or consolidation
is with a Person other than the Company or a Restricted Subsidiary, (x)
immediately after such transaction, no Default or Event of Default exists and
(y) the Company will, at the time of such transaction after giving pro forma
effect thereto, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to Section 4.3(a).
SECTION 4.13. Limitation on the Sale or Issuance of Preferred Stock
of Restricted Subsidiaries. The Company will not sell any shares of Preferred
Stock of a Restricted Subsidiary, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell any shares of its Preferred Stock to
any Person (other than to the Company or a Restricted Subsidiary
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or to directors as directors' qualifying shares, or (in the case of any Foreign
Subsidiary) to the extent required by applicable law); provided, however, that
(a) the Company or any Restricted Subsidiary is permitted to sell Preferred
Stock of a Subsidiary in compliance with the terms of Section 4.6 and (b) any
such Preferred Stock may be issued or sold if Incurred by any Restricted
Subsidiary in compliance with Section 4.3.
SECTION 4.14. Limitation on Layering. The Company shall not incur
any Indebtedness if such Indebtedness is expressly subordinate in right of
payment to any Senior Indebtedness unless such Indebtedness is Senior
Subordinated Indebtedness or is contractually subordinated in right of payment
to Senior Subordinated Indebtedness. No Note Guarantor shall incur any
Indebtedness if such Indebtedness is expressly subordinate in right of payment
to any Guarantor Senior Indebtedness of such Note Guarantor unless such
Indebtedness is Guarantor Senior Subordinated Indebtedness of such Note
Guarantor or is contractually subordinated in right of payment to Guarantor
Senior Subordinated Indebtedness of such Note Guarantor.
ARTICLE 5
Successor Company
SECTION 5.1. When Company May Merge or Transfer Assets. The Company
shall not consolidate with or merge with or into, or convey, transfer or lease
all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") will be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia
and the Successor Company (if not the Company) will expressly assume, by
an indenture supplemental hereto, executed and delivered to the Trustee,
in form reasonably satisfactory to the Trustee, all the obligations of the
Company under the Notes and the Indenture; (ii) immediately after giving
effect to such transaction (and treating any Indebtedness which becomes an
obligation of the Successor Company or any Restricted Subsidiary as a
result of such transaction as having been Incurred by the Successor
Company or such Restricted
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Subsidiary at the time of such transaction), no Default will have occurred
and be continuing; (iii) immediately after giving effect to such
transaction, the Consolidated Coverage Ratio of the Successor Company
would be at least equal to the greater of (A) 1.75:1.00 and (B) a ratio
equal to 75% of the actual Consolidated Coverage Ratio of the Company as
of such date of determination; and (iv) each Note Guarantor (other than
any party to any such merger) shall have delivered a written instrument in
form and substance reasonably satisfactory to the Trustee confirming its
Note Guarantee; and (v) the Company will have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each to the effect that
such consolidation, merger or transfer and such supplemental indenture (if
any) comply with the Indenture; provided that (x) in giving such opinion
such counsel may rely on such Officer's Certificate as to any matters of
fact (including without limitation as to compliance with the foregoing
clauses (ii) and (iii)), and (y) no Opinion of Counsel will be required
for a consolidation, merger or transfer described in the last paragraph of
this Section 5.1. Any Indebtedness that becomes an obligation of the
Company or any Restricted Subsidiary (or that is deemed to be Incurred by
any Restricted Subsidiary that becomes a Restricted Subsidiary) as a
result of such transaction undertaken in compliance with this covenant,
and any Refinancing Indebtedness with respect thereto, shall be deemed to
have been Incurred in compliance with Section 4.3.
The Successor Company will succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture,
and thereafter the predecessor Company shall be relieved of all
obligations and covenants under this Agreement, except that, in the case
of a conveyance, transfer or lease of all or substantially all its assets,
the predecessor Company will not be released from the obligation to pay
the principal of and interest on the Notes.
Notwithstanding Section 5.1(ii) and (iii), (1) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company and (2) the Company may merge with an
Affiliate incorporated or
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organized for the purpose of reincorporating or reorganizing the Company in
another jurisdiction to realize tax or other benefits.
ARTICLE 6
Defaults and Remedies
SECTION 6.1. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and such default continues for a period of 30
days;
(2) the Company defaults in the payment of the principal of any
Security when the same becomes due at its Stated Maturity, upon optional
redemption, upon required repurchase, upon declaration or otherwise,
whether or not such payment shall be prohibited by Article 10;
(3) the Company fails to comply with Section 5.1;
(4) the Company fails to comply with Section 4.2, 4.3, 4.4, 4.5,
4.6, 4.7, 4.8, 4.11, 4.12, 4.13 or 4.14 (other than a failure to purchase
Securities when required under Section 4.6 or 4.8) and such failure
continues for 30 days after the notice specified below;
(5) the Company fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in (1), (2),
(3) or (4) above) and such failure continues for 60 days after the notice
specified below;
(6) any Note Guarantor fails to comply with its obligations under
any Note Guarantee to which such Note Guarantor is a party, after any
applicable grace period;
(7) Indebtedness of the Company or any Significant Subsidiary is not
paid within any applicable grace period after final maturity or the
acceleration by the holders thereof because of a default and the total
amount of such
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Indebtedness unpaid or accelerated exceeds $5,000,000 or its foreign
currency equivalent at the time;
(8) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law (as defined below):
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property;
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(9) any judgment or decree for the payment of money (net of any
insurance or indemnity payments actually received in respect thereof prior
to or within 90 days from the entry thereof, or to be received in respect
thereof in the event any appeal thereof shall be unsuccessful) in excess
of $5,000,000 or its foreign currency equivalent at the time is entered
against the Company or any Significant Subsidiary that is not discharged,
or bonded or insured by a third Person and either (A) an enforcement
proceeding has been commenced upon such judgment or decree or (B) there is
a period of 90 days following the entry of such judgment or decree during
which such judgment or decree is not discharged, waived or the execution
thereof stayed; or
(10) any Note Guarantee by a Note Guarantor which is a Significant
Subsidiary shall cease to be in full force and effect (except as
contemplated by the terms thereof or of this Indenture) or any such Note
Guarantor shall deny or disaffirm its obligations in writing under this
Indenture or any Note Guarantee and such Default continues for 10 days
after the notice specified below.
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The foregoing shall constitute Events of Default what ever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (4) or (5) above is not an Event of Default
until the Trustee or the Holders of at least 25% in principal amount of the
outstanding Securities notify the Company of the Default and the Company does
not cure such Default within the time specified after receipt of such notice.
Such notice must specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officer's Certificate of
any Event of Default under clause (6) above and any event which with the giving
of notice or the lapse of time would become an Event of Default under clause
(4), (5) or (9) above, its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 6.2. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.1(7) or (8) with respect to the Company)
occurs and is continuing, the Trustee by notice to the Company, or the Holders
of at least a majority in principal amount of the outstanding Securities by
notice to the Company and the Trustee, may declare the principal of and accrued
but unpaid interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in Section 6.1(7) or (8) with respect to the
Company occurs and is continuing, the principal of and interest on all the
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Securityholders.
The Holders of a majority in principal amount of the outstanding Securities by
notice to
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the Trustee may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of acceleration. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
SECTION 6.3. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.4. Waiver of Past Defaults. The Holders of a majority in
principal amount of the outstanding Securities by notice to the Trustee may
waive an existing Default and its consequences except (i) a Default in the
payment of the principal of or interest on a Security or (ii) a Default in
respect of a provision that under Section 9.2 cannot be amended without the
consent of each Securityholder affected. When a Default is waived, it is deemed
cured, but no such waiver shall extend to any subsequent or other Default or
impair any consequent right.
SECTION 6.5. Control by Majority. The Holders of a majority in
principal amount of the outstanding Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.1, that the Trustee determines is unduly prejudicial to the
rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the
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Trustee shall be entitled to indemnification satisfactory to it in its sole
discretion against all losses and expenses caused by taking or not taking such
action.
SECTION 6.6. Limitation on Suits. A Securityholder may not pursue
any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
outstanding Securities make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the outstanding
Securities do not give the Trustee a direction inconsistent with the
request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.7. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and premium (if any) and interest on the Securities held
by such Holder, on or after the respective due dates expressed in the
Securities, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.8. Collection Suit by Trustee. If an Event of Default
specified in Section 6.1(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and
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as trustee of an express trust against the Company for the whole amount then due
and owing (together with interest on any unpaid interest to the extent lawful)
and the amounts provided for in Section 7.7.
SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents and take such other actions,
including participating as a member, voting or otherwise, of any committee of
creditors appointed in the matter, as may be necessary or advisable in order to
have the claims of the Trustee and the Securityholders allowed in any judicial
proceedings relative to the Company, any Subsidiary or Note Guarantor, their
creditors or their property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements
and-advances of the Trustee, its agents and its counsel, and any other amounts
due the Trustee under Section 7.7.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to holders of Senior Indebtedness to the extent required by
Article 10;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment
to Securityholders pursuant to this Section. At
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least 15 days before such record date, the Trustee shall mail to each
Securityholder and the Company a notice that states the record date, the payment
date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees and expenses, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Company, a suit by the Trustee, a suit by a Holder pursuant to
Section 6.7 or a suit by Holders of more than 10% in principal amount of the
Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE 7
Trustee
SECTION 7.1. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
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(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, in the case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished to the Trustee,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section 7.1;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.1.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
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(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.2. Rights of Trustee. Subject to Section 7.1: (a) The
Trustee may rely on any document believed by it to be genuine and to have been
signed or presented by the proper person. The Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officer's Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officer's Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(e) The Trustee may consult with counsel of its selection, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered by
it
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hereunder in good faith and in accordance with the advice or opinion of such
counsel.
(f) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other paper or document unless requested in writing to do so
by the Holders of not less than a majority in principal amount of the Securities
at the time outstanding, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney, during reasonable business
hours and subject to executing a confidentiality undertaking in customary form
with respect to confidential and/or proprietary information of the Company;
provided, however, that if the payment within a reasonable time to the Trustee
of the costs, expenses or liabilities likely to be incurred by it in the making
of such investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this Indenture,
the Trustee may require reasonable indemnity against such expense or liability
as a condition to so proceeding.
(g) The Trustee shall not be deemed to have knowledge of any default
or fact the occurrence of which requires the Trustee to take any action (other
than a payment default hereunder) unless a Trust Officer actually knows of such
default or fact.
(h) The Trustee shall not be liable for any action taken, suffered,
or omitted to be taken by it in good faith and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Indenture; and
(i) The Trustee shall not be deemed to have notice of any Event of
Default unless a Responsible Officer of the Trustee has actual knowledge thereof
or unless written notice of any event which is in fact such an Event of Default
is received by the Trustee at the Corporate Trust Office of the Trustee, and
such notice references the Securities and this Indenture.
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(j) Upon request of the Trustee, the Company shall make reasonable
efforts to execute and deliver such further instruments and do such further acts
as may be reasonably necessary to carry out more effectively the purpose of this
Indenture. The parties hereto agree that the purpose of this provision shall be
for administrative purposes only.
SECTION 7.3. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.5. Notice of Defaults. If a Default occurs and is
continuing and if it is known to a Trust Officer of the Trustee, the Trustee
shall mail to each Securityholder notice of the Default within 90 days after it
occurs. Except in the case of a Default in payment of principal of or premium
(if any) or interest on any Security (including payments pursuant to the
mandatory redemption provisions of such Security, if any), the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interests of
Securityholders.
SECTION 7.6. Reports by Trustee to Holders. As promptly as
practicable after each March 15 beginning with the March 15 following the date
of this Indenture (and in any event prior to May 15 in each year), but only upon
the occurrence within the previous 12 months of any events specified in TIA
Section 313(a), the Trustee shall mail to each Securityholder a brief report
dated as of March 15 that complies with TIA Section 313(a). The Trustee shall
also comply with TIA Section 313(b).
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A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.7. Compensation and Indemnity. The Company shall pay to
the Trustee, Paying Agent and Registrar from time to time such compensation as
shall be agreed in writing between the Company and the Trustee for its services.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company shall indemnify the Trustee, Paying Agent, Registrar, and
each of their officers, directors, agents and employees (each in their
respective capacities), for and hold each of them harmless against any and all
loss, demand, claim, liability or expense (including reasonable attorneys' fees
and expenses) incurred by them without negligence or bad faith on their part in
connection with the acceptance or administration of this trust and the
performance of their duties hereunder. The Trustee, Paying Agent and Registrar
shall notify the Company of any claim for which they may seek indemnity promptly
upon obtaining actual knowledge thereof; provided that any failure so to notify
the Company shall not relieve the Company of its indemnity obligations hereunder
except to the extent the Company shall have been adversely affected thereby. The
Company shall defend the claim and the indemnified party shall provide
reasonable cooperation at the Company's expense in the defense. Such indemnified
parties may have separate counsel and the Company shall pay the fees and
expenses of such counsel; provided that the Company shall not be required to pay
such fees and expenses if it assumes such indemnified parties' defense and, in
such indemnified parties' reasonable judgment, there is no conflict of interest
between the Company and such parties in connection with such defense. The
Company need not pay for any settlement made without its written consent. The
Company need not reimburse any expense or indemnify against any loss, liability
or expense incurred by an indemnified party
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through any indemnified party's own wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture or the resignation or removal of the
Trustee. When the Trustee, Paying Agent or Registrar incurs expenses after the
occurrence of a Default specified in Section 6.1(7) or (8) with respect to the
Company, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee may resign at any
time by so notifying the Company in writing. The Holders of a majority in
principal amount of the outstanding Securities may remove the Trustee by so
notifying the Company and the Trustee and may appoint a successor Trustee with
the consent of the Company, which shall not be unreasonably withheld. The
Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders
of a majority in principal amount of the outstanding Securities and such Holders
do not reasonably promptly appoint a successor Trustee, or if a vacancy exists
in the office of Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Company shall promptly appoint
a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company.
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95
Thereupon the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. The successor Trustee shall mail a
notice of its succession to Securityholders. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, subject to
the lien provided for in Section 7.7.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the outstanding Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section 7.8, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this
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Indenture provided that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall have
a combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
SECTION 7.12. Not Responsible for Recitals or Issuance of
Securities. The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Securities. The Trustee
or any Authenticating Agent shall not be accountable for the use or application
by the Company of Securities or the proceeds thereof.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.1. Discharge of Liability on Securities; Defeasance. (a)
When (i) the Company delivers to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.7) for cancellation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article 3 hereof and
the Company irrevocably deposits with the
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Trustee funds or U.S. Government Obligations on which payment of principal and
interest when due will be sufficient to pay at maturity or upon redemption all
outstanding Securities, including interest thereon to maturity or such
redemption date (other than Securities replaced pursuant to Section 2.7), and if
in either case the Company pays all other sums payable hereunder by the Company,
then this Indenture shall, subject to Section 8.1(c), cease to be of further
effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of the Company accompanied by an Officer's Certificate and
an Opinion of Counsel and at the cost and expense of the Company.
(b) Subject to Sections 8.1(c) and 8.2, the Company at any time may
terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.2 (subject
to any requirement of the TIA), 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.11, 4.12, 4.13,
4.14, 5.1 (iii) and the operation of Sections 6.1(4), 6.1(6), 6.1(7) (with
respect to Subsidiaries of the Company only), 6.1(8) (with respect to
Subsidiaries of the Company only) and 6.1(9) ("covenant defeasance option"). The
Company may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Section 6.1(4), 6.1(6),
6.1(7), 6.1(8) (but only with respect to certain bankruptcy events of a
Significant Subsidiary), 6.1(9) or 6.1(10) or because of the failure of the
Company to comply with (iii) of Section 5.1. If the Company exercises its legal
defeasance option or its covenant defeasance option, each Note Guarantor will be
automatically and unconditionally released and discharged from all of its
obligations under its Note Guarantee.
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, Sections 2.3, 2.4,
2.5, 2.6, 2.7, 7.7, 7.8, 8.4, 8.5 and 8.6
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shall survive until the Securities have been paid in full. Thereafter, Sections
7.7, 8.4 and 8.5 shall survive.
SECTION 8.2. Conditions to Defeasance. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal, premium (if
any) and interest on the Securities to maturity or redemption, as the case
may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on all the Securities to maturity or redemption, as the case may be;
(3) 90 days pass after the deposit is made and during the 90-day
period no Default specified in Section 6.1(7) or (8) with respect to the
Company occurs which is continuing at the end of the period;
(4) the deposit does not constitute a material default under any
other material agreement binding on the Company and is not prohibited by
Article 10;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or
is qualified as, a regulated investment company under the Investment
Company Act of 1940;
(6) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Indenture there
has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Securityholders
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will not recognize income, gain or loss for federal income tax purposes as
a result of such defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred;
(7) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders will not recognize income, gain or loss for federal income
tax purposes as a result of such covenant defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance had not
occurred; and
(8) the Company delivers to the Trustee an Officer's Certificate and
an Opinion of Counsel, each to the effect that all conditions precedent
under this Section 8.2 to the defeasance and discharge of the Securities
as contemplated by this Article 8 have been complied with; provided that
in giving such opinion such counsel may rely on such Officer's Certificate
as to any matters of fact (including without limitation as to compliance
with the foregoing clauses (1), (2), (3) and (4)).
Either defeasance option may be exercised to any redemption date or
to the maturity date for the Securities. Before or after a deposit, the Company
may make arrangements reasonably satisfactory to the Trustee for the redemption
of Securities at a future date in accordance with Article 3.
SECTION 8.3. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal of and interest on the Securities. Money and securities
so held in trust are not subject to Article 10.
SECTION 8.4. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon written request any excess money or
securities held by them at any time.
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Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Company for payment as general unsecured creditors and all liability of the
Trustee or the Paying Agent with respect to such trust money shall thereupon
cease.
SECTION 8.5. Indemnity for Government Obligations. The Company shall
pay and shall indemnify the Trustee against any tax, fee or other charge imposed
on or assessed against deposited U.S. Government Obligations or the principal
and interest received on such U.S. Government Obligations other than any tax,
fee or other charge that by law is for the account of the Securityholders.
SECTION 8.6. Reinstatement. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, if the
Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
Amendments
SECTION 9.1. Without Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without notice to or consent of any
Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
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(2) to comply with Article 5, or otherwise to provide for the
assumption by a successor of the obligations of the Company under the
Indenture;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to provide that any Indebtedness that becomes or will become an
obligation of the Successor Company pursuant to a transaction governed by
the provisions of Article 5 (and that is not a Subordinated Obligation) is
Senior Subordinated Indebtedness for the purposes of this Indenture;
(5) to add Guarantees with respect to the Securities;
(6) to secure the Securities;
(7) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(8) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA; or
(9) to make any change that does not adversely affect the rights of
any Securityholder.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
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SECTION 9.2. With Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without notice to any Securityholder
but with the consent of, and compliance with any provision of this Indenture or
the Securities may be waived by, the Holders of at least a majority in principal
amount of the outstanding Securities. However, without the consent of each
Securityholder affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any Security
or change the time at which any Security may be redeemed in accordance
with Article 3;
(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in Article 10 that adversely affects the rights
of any Securityholder;
(7) impair the right of any Holder to receive payment of principal
of and interest on such Holder's Securities on or after the due dates
therefor or to institute suit for the enforcement of any payment on or
with respect to such Holder's Securities; or
(8) make any change to the second sentence of this Section.
In addition, without the consent of the Securityholders holding 90%
in principal amount of the Securities then outstanding, no amendment may release
any Note Guarantor that is a Significant Subsidiary from any of its obligations
under its Note Guarantee or this Indenture, except in compliance with the terms
thereof or of this Indenture.
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It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.4. Effect of Amendment; Revocation and Effect of Consents
and Waivers. Upon the execution of any amendment under this Article 9, this
Indenture shall be modified in accordance therewith, and such amendment shall
form a part of this Indenture for all purposes. A consent to an amendment or a
waiver by a Holder of a Security shall bind the Holder and every subsequent
Holder of that Security or portion of the Security that evidences the same debt
as the consenting Holder's Security, even if notation of the consent or waiver
is not made on the Security. However, any such Holder or subsequent Holder may
revoke the consent or waiver as to such Holder's Security or portion of the
Security if the Trustee receives the notice of revocation before the date the
instrument providing for the amendment or waiver is signed by the parties
thereto. After an amendment or waiver becomes effective, it shall bind every
Securityholder. An amendment or waiver becomes effective once the requisite
number of consents are received by the Company or the Trustee.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this
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Indenture. If a record date is fixed, then notwithstanding the immediately
preceding paragraph, those Persons who were Securityholders at such record date
(or their duly designated proxies), and only those Persons, shall be entitled to
give such consent or to revoke any consent previously given or to take any such
action, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 180 days after
such record date.
SECTION 9.5. Notation on or Exchange of Securities. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company so determines, the Company in exchange for
the Security shall issue and the Trustee shall authenticate a new Security that
reflects the changed terms. Failure to make the appropriate notation or to issue
a new Security shall not affect the validity of any amendment or waiver.
SECTION 9.6. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.1) shall be fully protected in relying
upon, an Officer's Certificate and an Opinion of Counsel each to the effect that
such amendment is authorized or permitted by this Indenture and complies with
the provisions hereof (including Section 9.3); provided that in giving such
opinion such counsel may rely on such Officer's Certificate as to any matters of
fact.
SECTION 9.7. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame, and subject
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to the terms and conditions, set forth in solicitation documents relating to
such consent, waiver or agreement.
ARTICLE 10
Subordination
SECTION 10.1. Agreement To Subordinate. The Company agrees, and each
Securityholder by accepting a Security agrees, that the Indebtedness evidenced
by the Securities is subordinated in right of payment, to the extent and in the
manner provided in this Article 10, to the prior payment in full (when due) of
all existing and future Senior Indebtedness and that the subordination is for
the benefit of and enforceable by the holders of Senior Indebtedness. The
Company shall not incur, directly or indirectly, any Indebtedness that is
subordinate or junior in ranking in any respect to Senior Indebtedness unless
such Indebtedness is Senior Subordinated Indebtedness or is expressly
subordinated in right of payment to Senior Subordinated Indebtedness and the
Securities shall in all respects rank pari passu with all other Senior
Subordinated Indebtedness of the Company and only Indebtedness of the Company
that is Senior Indebtedness shall rank senior to the Securities in accordance
with the provisions set forth herein. For purposes of these subordination
provisions, the Indebtedness evidenced by the Securities is deemed to include
the liquidated damages payable pursuant to the provisions set forth in the
Securities and the Exchange and Registration Rights Agreement. All provisions of
this Article 10 shall be subject to Section 10.12.
SECTION 10.2. Liquidation, Dissolution, Bankruptcy. Upon any payment
or distribution of the assets of the Company upon a total or partial liquidation
or a total or partial dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property:
(1) holders of Senior Indebtedness shall be entitled to receive
payment in full of the Senior Indebtedness before Securityholders shall be
entitled to receive any payment of principal of or interest on the
Securities; and
<PAGE> 115
106
(2) until the Senior Indebtedness is paid in full, any payment or
distribution to which Securityholders would be entitled but for this
Article 10 shall be made to holders of Senior Indebtedness as their
interests may appear.
SECTION 10.3. Default on Senior Indebtedness. The Company may not
pay the principal of, or premium (if any) or interest on the Securities or make
any deposit pursuant to Section 8.1 and may not purchase, redeem or otherwise
retire any Securities (collectively, "pay the Securities") if (i) any Senior
Indebtedness is not paid when due in cash or Cash Equivalents or (ii) any other
default on Senior Indebtedness occurs and the maturity of such Senior
Indebtedness is accelerated in accordance with its terms unless, in either case,
(x) the default has been cured or waived and any such acceleration has been
rescinded in writing or (y) such Senior Indebtedness has been paid in full in
cash or Cash Equivalents; provided, however, that the Company may pay the
Securities without regard to the foregoing if the Company and the Trustee
receive written notice approving such payment from the Representative of the
Designated Senior Indebtedness with respect to which either of the events in
clause (i) or (ii) of this sentence has occurred and is continuing. In addition,
during the continuance of any default (other than a default described in clause
(i) or (ii) of the preceding sentence) with respect to any Designated Senior
Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Company may not pay the Securities for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative of
such Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter (or earlier if such Payment
Blockage Period is terminated (i) by written notice to the Trustee and the
Company from the Person or Persons who gave such Blockage Notice, (ii) by
repayment in full of such Designated Senior Indebtedness or (iii) because the
default giving rise to such Blockage Notice is no longer continuing).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the provisions contained in the first sentence of this Section )
unless the holders of such Designated Senior Indebtedness or the Representative
of such holders shall have accelerated the
<PAGE> 116
107
maturity of such Designated Senior Indebtedness, the Company may resume payments
on the Securities after the end of such Payment Blockage Period. Not more than
one Blockage Notice may be given in any consecutive 360-day period, irrespective
of the number of defaults with respect to Designated Senior Indebtedness during
such period; provided, however, that if any Blockage Notice within such 360-day
period is given by or on behalf of any holders of Designated Senior Indebtedness
(other than Bank Indebtedness), the Representative of Bank Indebtedness may give
another Blockage Notice within such period; provided further, however, that in
no event may the total number of days during which any Payment Blockage Period
or Periods is in effect exceed 179 days in the aggregate during any 360
consecutive day period.
SECTION 10.4. Acceleration a Payment of Securities. If payment of
the Securities is accelerated because of an Event of Default, the Company or the
Trustee shall promptly notify the holders of the Designated Senior Indebtedness
(or their Representative) of the acceleration. If any Designated Senior
Indebtedness is outstanding, the Company may not pay the Securities until five
Business Days after such holders or the Representative of the Designated Senior
Indebtedness receive notice of such acceleration and, thereafter, may pay the
Securities only if this Article 10 otherwise permits payment at that time.
SECTION 10.5. When a Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of the provisions of
Article 10 should not have been made to them, the Securityholders who receive
the distribution shall hold it in trust for holders of Senior Indebtedness and
pay it over to them as their interests may appear.
SECTION 10.6. Subrogation. After all Senior Indebtedness is paid in
full and until the Securities are paid in full, Securityholders shall be
subrogated to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness. A distribution made under this
Article 10 to holders of Senior Indebtedness which otherwise would have been
made to Securityholders is not, as between the Company and Securityholders, a
payment by the Company on Senior Indebtedness.
<PAGE> 117
108
SECTION 10.7. Relative Rights. This Article 10 defines the relative
rights of Securityholders and holders of Senior Indebtedness prior to the
Subordination Termination Date. Nothing in this Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness to receive distributions otherwise payable to
Securityholders.
SECTION 10.8. Subordination May Not Be Impaired by Company. No right
of any holder of Senior Indebtedness to enforce the subordination of the
Indebtedness evidenced by the Securities shall be impaired by any act or failure
to act by the Company or by its failure to comply with this Indenture.
SECTION 10.9. Rights of Trustee and Paying Agent. The Company shall
give prompt written notice to the Trustee of any fact known to the Company which
would prohibit the making of any payment to or by the Trustee in respect of the
Securities. Failure to give such notice shall not affect the subordination of
the Securities to Senior Indebtedness. Notwithstanding Section 10.3, the Trustee
or Paying Agent may continue to make payments on the Securities and shall not be
charged with knowledge of the existence of facts that would prohibit the making
of any such payments unless, not less than two Business Days prior to the date
of such payment, a Trust Officer of the Trustee receives notice satisfactory to
it that payments may not be made under this Article 10. The Company, the
Registrar or co-registrar, the Paying Agent, a Representative or a holder of
Senior Indebtedness may give the notice; provided, however, that, if an issue of
Senior Indebtedness has a Representative, only the Representative may give the
notice. The Trustee shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself or itself to be a holder of any Senior
Indebtedness (or a Representative of such holder) to establish that such notice
has been given by a holder of such Senior Indebtedness or Representative
thereof.
<PAGE> 118
109
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. The
Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 10 with respect to any Senior Indebtedness which may at any time be held
by it, to the same extent as any other holder of Senior Indebtedness; and
nothing in Article 7 shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article 10 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.7.
SECTION 10.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representative (if
any).
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit
Right To Accelerate. The failure to make a payment pursuant to the Securities by
reason of any provision in this Article 10 shall not be construed as preventing
the occurrence of a Default. Nothing in this Article 10 shall have any effect on
the right of the Securityholders or the Trustee to accelerate the maturity of
the Securities.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article 8 by the Trustee for
the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness or subject to the
restrictions set forth in this Article 10, and none of the Securityholders shall
be obligated to pay over any such amount to the Company or any holder of Senior
Indebtedness of the Company or any other creditor of the Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.2
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the
<PAGE> 119
110
Trustee or to the Securityholders or (iii) upon the Representatives for the
holders of Senior Indebtedness for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of the
Senior Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 10. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Indebtedness to participate in any payment
or distribution pursuant to this Article 10, the Trustee may request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and other
facts pertinent to the rights of such Person under this Article 10, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.1 and 7.2 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article 10.
SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness as provided in this Article 10 and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall mistakenly pay over or distribute to Securityholders or the Company or any
other Person, money or assets to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article 10 or otherwise. With respect to the
holders of Senior Indebtedness, the Trustee undertakes to perform or to observe
only such of its covenants or obligations as are specifically set forth in this
Article 10 and no implied covenants or obligations with respect to holders of
Senior Indebtedness shall be read into this Indenture against the Trustee.
<PAGE> 120
111
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness and such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
SECTION 10.17. Trustee's Compensation Not Prejudiced. Nothing in
this Article shall apply to amounts due to the Trustee pursuant to other
sections of this Indenture.
ARTICLE 11
Miscellaneous
SECTION 11.1. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 11.2. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
EV International, Inc.
602 Cecil Street
Buchanan, MI 49107
Attention of: Robert D. Pabst
with a copy to:
Greenwich Street Capital Partners
388 Greenwich St., 36th Floor
<PAGE> 121
112
New York, New York 10013
Attention of: Nicholas E. Somers
and:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention of: David Brittenham
if to the Trustee:
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention of: Mary Legumina
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be
mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
All notices and communications shall be deemed to be duly given: at
the time delivered, if personally delivered, or five Business Days after being
deposited into the mail, if mailed. All notices may be waived by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice for all purposes of this
Indenture. Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
<PAGE> 122
113
SECTION 11.3. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and their agents shall have
the protection of TIA Section 312(c).
SECTION 11.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officer's Certificate in form and substance reasonably
satisfactory to the Trustee to the effect that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee to the effect that, in the opinion of such
counsel, all such conditions precedent have been complied with, provided
that in giving such opinion such counsel may rely on any Officer's
Certificate or certificate of a public official as to any matters of fact;
and
provided, further, that, in the case of any such application or request as to
which the furnishing of any Officer's Certificate or Opinion of Counsel is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
SECTION 11.5. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement to the effect that the individual or counsel making
such certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements
<PAGE> 123
114
or opinions contained in such certificate or opinion are based;
(3) a statement to the effect that, in the opinion of such
individual or counsel, such individual or counsel has made such
examination or investigation as is necessary to enable such individual or
counsel to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual or counsel, such covenant or condition has been complied with;
provided that an Opinion of Counsel can rely as to matters of fact on an
Officer's Certificate or certificates of public officials.
SECTION 11.6. When Securities Disregarded. In determining whether
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee actually knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at the
time shall be considered in any such determination.
SECTION 11.7. Acts of Holders; Rules by Trustee, Paying Agent and
Registrar. Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by a
specified percentage in principal amount of the Holders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such specified percentage of Holders in person or by agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Trustee and, where it is hereby expressly required, to the Company. The Trustee
may make reasonable rules for action by or a meeting of Securityholders not
inconsistent with the foregoing. The
<PAGE> 124
115
Registrar and the Paying Agent may make reasonable rules for their functions.
SECTION 11.8. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which commercial banking institutions (including, without
limitation, the Federal Reserve System) are authorized or required by law to
close in New York City. If a payment date is a Legal Holiday, payment shall be
made on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period. If a regular record date is a Legal
Holiday, the record date shall not be affected.
SECTION 11.9. Governing Law. This Indenture and the Securities shall
be governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 11.10. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company or a Note Guarantor shall not
have any liability for any obligations of the Company or any Note Guarantor
under the Securities, this Indenture or any Note Guarantee or for any claim
based on, in respect of or by reason of such obligations or their creation. By
accepting a Security, each Securityholder waives and releases all such
liability. The waiver and release shall be part of the consideration for the
issue of the Securities.
SECTION 11.11. Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 11.12. Multiple Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 11.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
<PAGE> 125
116
SECTION 11.14. Separability. In case any provision of this
Indenture, the Securities or the Note Guarantees shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 11.15. Benefits of Indenture. Nothing in this Indenture, the
Securities or any Note Guarantee, expressed or implied, shall give to any
Person, other than the parties hereto and their successors hereunder and the
Holders, any benefit or any legal or equitable right, remedy or claim under this
Indenture.
<PAGE> 126
117
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
EV INTERNATIONAL, INC.
Attest: /s/ CHRISTINE K. VANDEN BEUKEL By: /s/ ROBERT D. PABST
- -------------------------------------- ---------------------------------
Title: Name:
Title:
THE BANK OF NEW YORK
By: /s/ MARY LA GUMINA
---------------------------------
Name: Mary La Gumina
Title: Assistant Vice President
<PAGE> 127
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY
TO THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.(1)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, ON ITS
OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED
SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY
OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT, IN A TRANSACTION COMPLYING WITH THE
- --------
(1) This paragraph should only be added if the Security is issued in global
form.
<PAGE> 128
2
REQUIREMENTS OF RULE 144A TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION
S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF RULES 501 (A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT
IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF
THE SECURITIES OF $250,000 FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR
FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S OR THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF ANY OF
THE FOREGOING CLAUSES (A)-(F), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING
ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR
TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE.
11% SENIOR SUBORDINATED NOTE DUE 2007
CUSIP No.________
$[ ]
EV International, Inc., a Delaware corporation, promises to pay to [
], or registered assigns, the principal sum of $[ ] on March 15, 2007.
Interest Payment Dates: September 15 and March 15.
Record Dates: September 1 and March 1.
Additional provisions of this Security are set forth on the other
side of this Security.
[Seal] EV INTERNATIONAL, INC.,
<PAGE> 129
3
by
____________________________________
Dated: March 24, 1997
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture
by ________________________________,
Authorized Signatory
<PAGE> 130
4
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
11% Senior Subordinated Note due 2007
1. Interest
EV International, Inc., a Delaware corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The Company will use
its best efforts to have the Exchange Offer Registration Statement and, if
applicable, a Shelf Registration Statement (each a "Registration Statement")
declared effective by the Commission as promptly as practicable after the filing
thereof. If (i) the Exchange Offer Registration Statement is not filed with the
Commission on or prior to 60 days after the Issue Date; (ii) the Exchange Offer
Registration Statement is not declared effective within 150 days after the Issue
Date; (iii) the Exchange Offer is not consummated on or prior to 165 days after
the Issue Date; (iv) the Shelf Registration Statement is not filed with the
Commission within 60 days after the Shelf Notice is required to be delivered or
is not declared effective within 150 days after such date or (v) the Shelf
Registration Statement is filed and declared effective within 150 days after the
date the Shelf Notice is required to be delivered but shall thereafter cease to
be effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 30 days by an additional
or amended Registration Statement filed and declared effective (each such event
referred to in clauses (i) through (v), a "Registration Default"), the Company
will pay liquidated damages to each holder of Transfer Restricted Securities,
during the period of such Registration Default, in an amount equal to $0.192 per
week per $1,000 principal amount of the Securities constituting Transfer
Restricted Securities held by such holder until the applicable Registration
Statement is filed or declared effective, the Exchange Offer is consummated or
the Shelf Registration Statement again becomes effective, as the case may be.
All accrued liquidated damages shall be paid to holders in the same manner as
interest payments on the Securities on semi-annual payment dates which
correspond to interest payment dates for the Securities. Following the cure of
all Registration Defaults, the accrual of liquidated damages will cease. The
<PAGE> 131
5
Trustee shall have no responsibility with respect to the determination of the
amount of any such liquidated damages.
The Company will pay interest semiannually on March 15 and September
15 of each year. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
March 24, 1997. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Company shall pay interest on overdue principal at the
rate borne by the Securities, and it shall pay interest on overdue installments
of interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the March 1 or September 1 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may, at its option, pay principal
and interest (i) by check payable in such money or (ii) by wire transfer of
immediately available funds to such account as may be designated by a Holder and
as specified in the books of the Registrar. It may mail an interest check to a
Holder's registered address.
3. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking corporation
("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice. The Company
or any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
March 24, 1997 (as amended or supplemented from time
<PAGE> 132
6
to time, "Indenture"), between the Company and the Trustee. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the
"TIA"). Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the TIA for a statement of
those terms.
The Securities are general unsecured obligations of the Company
limited to $100,000,000 aggregate principal amount at any one time outstanding
(subject to Section 2.7 of the Indenture). This Security is one of the Initial
Securities referred to in the Indenture. The Securities include the Initial
Securities and any Exchange Securities issued in exchange for the Initial
Securities pursuant to the Indenture. The Initial Securities and the Exchange
Securities are treated as a single class of securities under the Indenture. The
Indenture imposes certain limitations on the issuance of debt by the Company,
the payment of dividends and other distributions and acquisitions or retirements
of the Company's Capital Stock and Subordinated Obligations, the incurrence by
the Company and its Restricted Subsidiaries of Liens on its property and assets
which do not equally and ratably secure the Securities, the sale or transfer of
assets and Subsidiary Stock, investments by the Company, consolidations, mergers
and transfers of all or substantially all of the Company's assets and
transactions with Affiliates. In addition, the Indenture limits the ability of
the Company and its Restricted Subsidiaries to restrict distributions and
dividends from Restricted Subsidiaries.
5. Optional Redemption
Except as set forth in the next two paragraphs, the Securities may
not be redeemed pursuant to this paragraph 5 at the option of the Company prior
to March 15, 2002. On and after that date, the Company may redeem the Securities
in whole at any time or in part from time to time at the following redemption
prices (expressed in percentages of principal amount), plus accrued interest, if
any, to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the related interest payment
date), if redeemed
<PAGE> 133
7
during the 12-month period beginning on or after March 15 of the years set forth
below:
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ ----------
<S> <C>
2002............................................................. 105.500%
2003............................................................. 103.667%
2004............................................................. 101.833%
2005 and thereafter.............................................. 100.000%
</TABLE>
Notwithstanding the foregoing, at any time and from time to time
prior to March 15, 2000, the Company may redeem in the aggregate up to 33 1/3%
of the original aggregate principal amount of the Securities with the proceeds
of one or more Public Equity Offerings by the Company following which there is a
Public Market, at a redemption price (expressed as a percentage of principal
amount) of 111% plus accrued interest, if any, to the redemption date (subject
to the right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date); provided, however, that at
least 66 2/3% of the original aggregate principal amount of the Securities must
remain outstanding after each such redemption.
At any time on or prior to March 15, 2002, the Securities may also
be redeemed as a whole at the option of the Company upon the occurrence of a
Change of Control, upon not fewer than 30 nor more than 60 days prior notice
(but in no event more than 180 days after the occurrence of such Change of
Control) mailed by first-class mail to each Holder's registered address, at a
redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium as of, and accrued but unpaid interest, if any, to, the
Redemption Date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger than
$1,000 may be redeemed in
<PAGE> 134
8
part but only in whole multiples of $1,000. If money sufficient to pay the
redemption price of and accrued interest on all Securities (or portions thereof)
to be redeemed on the redemption date is deposited with the Paying Agent on or
before the redemption date and certain other conditions are satisfied, on and
after such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions specified in the Indenture, to cause the
Company to repurchase all or any part of the Securities of such Holder at a
purchase price in cash equal to 101% of the principal amount of the Securities
to be repurchased plus accrued and unpaid interest, if any, to the date of
repurchase (subject to the right of holders of record on the relevant record
date to receive interest due on the related interest payment date) as provided
in, and subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness, as defined
in the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give effect to such
provisions and appoints the Trustee as attorney-in-fact for such purpose.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15
<PAGE> 135
9
days before a selection of Securities to be redeemed or 15 days before an
interest payment date.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes, subject to provisions for record dates with respect to
payment of interest.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal of and interest on the Securities to redemption or
maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the consent of the Holders of at
least a majority in principal amount outstanding of the Securities and (ii) any
default or noncompliance with any provision may be waived with the consent of
the Holders of a majority in principal amount outstanding of the Securities.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Securityholder, the Company and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, omission, defect or inconsistency, or to
comply with Article 5 of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities, or to add
Guarantees with respect to the Securities, or to secure the Securities, or to
add additional covenants or surrender rights
<PAGE> 136
10
and powers conferred on the Company, or to provide that any Indebtedness that
becomes or will become an obligation of the Successor Company pursuant to
Article 5 (and that is not a Subordinated Obligation) is Senior Subordinated
Indebtedness for the purposes of the Indenture, or to comply with any request of
the SEC in connection with qualifying the Indenture under the TIA, or to make
any other change that does not adversely affect the rights of any
Securityholder.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) a default in any
payment of interest on any Note when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
whether or not such payment is prohibited by Article 10 of the Indenture, (iii)
the failure by the Company to comply with its obligations under Section 5.1 of
the Indenture, (iv) the failure by the Company to comply for 30 days after
notice with certain of its obligations under Article 4 of the Indenture (in each
case, other than a failure to purchase Notes), (v) the failure by the Company to
comply for 60 days after notice with its other agreements contained in the Notes
or the Indenture, (vi) the failure by any Note Guarantor to comply with its
obligations under any Note Guarantee to which such Note Guarantor is a party,
after any applicable grace period, (vii) the failure by the Company or any
Significant Subsidiary to pay any Indebtedness within any applicable grace
period after final maturity or the acceleration of any such Indebtedness by the
holders thereof because of a default if the total amount of such Indebtedness
unpaid or accelerated exceeds $5.0 million or its foreign currency equivalent
(the "cross acceleration provision"), (viii) certain events of bankruptcy,
insolvency or reorganization of the Company or a Significant Subsidiary (the
"bankruptcy provisions"), (ix) the rendering of any judgment or decree for the
payment of money in an amount (net of any insurance or indemnity payments
actually received in respect thereof prior to or within 90 days from the entry
thereof, or to be received in respect thereof in the event any appeal thereof
shall be unsuccessful) in excess of $5.0 million or its foreign currency
equivalent against the Company or a Significant Subsidiary that is not
discharged, or bonded or insured by a third Person, if (A) an enforcement
proceeding thereon is
<PAGE> 137
11
commenced or (B) such judgment or decree remains outstanding for a period of 90
days following such judgment or decree and is not discharged, waived or stayed
(the "judgment default provision") or (x) the failure of any Note Guarantee by a
Note Guarantor which is a Significant Subsidiary to be in full force and effect
(except as contemplated by the terms thereof or of the Indenture) or the denial
or disaffirmation in writing by any such Note Guarantor of its obligations under
the Indenture or any Note Guarantee if such Default continues for 10 days. If an
Event of Default (other than a Default relating to certain events of bankruptcy,
insolvency or reorganization of the Company) occurs and is continuing, the
Trustee or the Holders of at least a majority in principal amount of the
outstanding Securities may declare the principal of and accrued but unpaid
interest on all the Securities to be due and payable immediately. Certain events
of bankruptcy, insolvency, or reorganization are Events of Default which will
result in the Securities being due and payable immediately upon the occurrence
of such Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
outstanding Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if and so long as
a committee of its Trust Officers in good faith determines that withholding
notice is in the interest of the Holders.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
<PAGE> 138
12
A director, officer, employee or stockholder, as such, of the
Company or a Note Guarantor shall not have any liability for any obligations of
the Company or any Note Guarantor under the Securities, the Indenture or any
Note Guarantee or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH HAS IN IT
THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:
EV INTERNATIONAL, INC.
<PAGE> 139
13
602 CECIL STREET
BUCHANAN, MICHIGAN 49107
(616) 695-2207
<PAGE> 140
14
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer
this Security on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date:____________________ Your Signature:________________________________
Signature Guarantee:_________________________________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
<PAGE> 141
15
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $________ principal amount of Securities held in
(check applicable space) _____ book-entry or _____ definitive form by the
undersigned.
The undersigned (check one box below):
/ / has requested the Trustee by written order to deliver in
exchange for its beneficial interest in the Global Security
held by the Depository a Security or Securities in definitive,
registered form of authorized denominations and an aggregate
principal amount equal to its beneficial interest in such
Global Security (or the portion thereof indicated above);
/ / has requested the Trustee by written order to exchange or
register the transfer of a Security or Securities.
In connection with any transfer or exchange of any of the Securities evidenced
by this certificate occurring prior to the date that is three years after the
later of the date of original issuance of such Securities and the last date, if
any, on which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW:
(1) / / acquired for the undersigned's own account,
without transfer (in satisfaction of Section
2.06(a)(ii)(A) or Section 2.06(d)(i)(A) of
the Indenture); or
(2) / / transferred to the Company; or
(3) / / transferred pursuant to and in compliance
with Rule 144A under the Securities Act of
1933, as amended; or
(4) / / transferred pursuant to and in compliance
with Regulation S under the Securities Act of
1933, as amended; or
<PAGE> 142
16
(5) / / transferred to an institutional "accredited
investor" (as defined in Rules 501(a)(1),
(2), (3) or (7) under the Securities Act of
1933, as amended), that has furnished to the
Trustee a signed letter containing certain
representations and agreements (the form of
which letter appears as Exhibit C to the
Indenture; or
(6) / / transferred pursuant to another available
exemption from the registration requirements
of the Securities Act of 1933, as amended.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered holder thereof; provided, however, that if box (4), (5) or
(6) is checked, the Trustee or the Company may require, prior to registering any
such transfer of the Securities, in their sole discretion, such legal opinions,
certifications and other information as the Trustee or Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, as amended, such as the exemption provided by Rule 144
under such Act.
_________________________________
Signature
Signature Guarantee:
_____________________________ _________________________________
Signature
(Signature must be guaranteed
by a participant in a signature
guarantee medallion program)
<PAGE> 143
17
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box:
/ /
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.6 or 4.8 of the Indenture, state the amount:
$
Date:____________________________ Your Signature:_____________________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:___________________________________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
<PAGE> 144
EXHIBIT B
[FORM OF FACE OF EXCHANGE SECURITY]
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY
TO THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.(1)
EV INTERNATIONAL, INC.
11% SENIOR SUBORDINATED NOTE DUE 2007, SERIES A
No. CUSIP No.________
$[ ]
EV INTERNATIONAL, INC., a Delaware corporation, promises to pay to
[ ], or registered assigns, the principal sum of $[ ] on March 15,
2007.
Interest Payment Dates: March 15 and September 15.
Record Dates: March 1 and September 1.
- --------
(1) This paragraph should only be added if the Security is issued in global
form.
<PAGE> 145
2
Additional provisions of this Security are set forth on the other
side of this Security.
[Seal] EV INTERNATIONAL, INC.,
by
__________________________________________
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
The ________________________
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture
by
________________________
Authorized Signatory
<PAGE> 146
3
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
11% Senior Subordinated Note due 2007, Series A
1. Interest
EV International, Inc., a Delaware corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The Company will pay
interest semiannually on March 15 and September 15 of each year. Interest on the
Securities will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from March 24, 1997. Interest will be computed
on the basis of a 360-day year of twelve 30-day months. The Company shall pay
interest on overdue principal at the rate borne by the Securities, and it shall
pay interest on overdue installments of interest at the same rate to the extent
lawful.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the March 1 or September 1 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may, at its option, pay principal
and interest (i) by check payable in such money or (ii) by wire transfer of
immediately available funds to such account as may be designated by the Holder
and as specified in the books of the Registrar. It may mail an interest check to
a Holder's registered address.
3. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking corporation
("Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice. The Company
or any of its
<PAGE> 147
4
domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent,
Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
March 24, 1997 (as amended or supplemented from time to time, "Indenture"),
between the Company and the Trustee. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect
on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the TIA for a statement of those terms.
The Securities are general unsecured obligations of the Company
limited to $100,000,000 aggregate principal amount at any one time outstanding
(subject to Section 2.7 of the Indenture). This Security is one of the Exchange
Securities referred to in the Indenture. The Securities include the Initial
Securities and any Exchange Securities issued in exchange for the Initial
Securities pursuant to the Indenture. The Initial Securities and the Exchange
Securities are treated as a single class of securities under the Indenture. The
Indenture imposes certain limitations on the issuance of debt by the Company,
the payment of dividends and other distributions and acquisitions or retirements
of the Company's Capital Stock and Subordinated Obligations, the incurrence by
the Company and its Restricted Subsidiaries of Liens on its property and assets
which do not equally and ratably secure the Securities, the sale or transfer of
assets and Subsidiary Stock, investments by the Company, consolidations, mergers
and transfers of all or substantially all of the Company's assets and
transactions with Affiliates. In addition, the Indenture limits the ability of
the Company and its Restricted Subsidiaries to restrict distributions and
dividends from Restricted Subsidiaries.
5. Optional Redemption
Except as set forth in the next two paragraphs, the Securities may
not be redeemed pursuant to this paragraph 5 at the option of the Company prior
to March 15, 2002. On and after
<PAGE> 148
5
that date, the Company may redeem the Securities in whole at any time or in part
from time to time at the following redemption prices (expressed in percentages
of principal amount), plus accrued interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date), if redeemed during
the 12-month period beginning on or after March 15 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ ----------
<S> <C>
2002.............................................................. 105.500%
2003.............................................................. 103.667%
2004.............................................................. 101.833%
2005 and thereafter............................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time and from time to time
prior to March 15, 2000, the Company may redeem in the aggregate up to 33 1/3%
of the original aggregate principal amount of the Securities with the proceeds
of one or more Public Equity Offerings by the Company following which there is a
Public Market, at a redemption price (expressed as a percentage of principal
amount) of 111% plus accrued interest, if any, to the redemption date (subject
to the right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date); provided, however, that at
least 66 2/3% of the original aggregate principal amount of the Securities must
remain outstanding after each such redemption.
At any time on or prior to March 15, 2002, the Securities may also
be redeemed as a whole at the option of the Company upon the occurrence of a
Change of Control, upon not fewer than 30 nor more than 60 days prior notice
(but in no event more than 180 days after the occurrence of such Change of
Control) mailed by first-class mail to each Holder's registered address, at a
redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium as of, and accrued but unpaid interest, if any, to, the
Redemption Date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
<PAGE> 149
6
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000. If money
sufficient to pay the redemption price of and accrued interest on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent on or before the redemption date and certain other conditions
are satisfied, on and after such date interest ceases to accrue on such
Securities (or such portions thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions specified in the Indenture, to cause the
Company to repurchase all or any part of the Securities of such Holder at a
purchase price in cash equal to 101% of the principal amount of the Securities
to be repurchased plus accrued and unpaid interest, if any, to the date of
repurchase (subject to the right of holders of record on the relevant record
date to receive interest due on the related interest payment date) as provided
in, and subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness, as defined
in the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give effect to such
provisions and appoints the Trustee as attorney-in-fact for such purpose.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other
<PAGE> 150
7
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes and fees required by law or permitted by the Indenture. The Registrar need
not register the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or any Securities for a period of 15 days before a
selection of Securities to be redeemed or 15 days before an interest payment
date.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes, subject to the provisions for record dates with respect
to payment of interest.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal of and interest on the Securities to redemption or
maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the consent of the Holders of at
least a majority in principal amount outstanding of the Securities and (ii) any
default or noncompliance with any provision may be waived with the consent of
the Holders of a majority in principal amount outstanding of the Securities.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Securityholder, the Company and the Trustee may amend the
<PAGE> 151
8
Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article 5 of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated Securities,
or to add Guarantees with respect to the Securities, or to secure the
Securities, or to add additional covenants or surrender rights and powers
conferred on the Company, or to provide that any Indebtedness that becomes or
will become an obligation of the Successor Company pursuant to Article 5 of the
Indenture (and that is not a Subordinated Obligation) is Senior Subordinated
Indebtedness for the purposes of the Indenture or to comply with any request of
the SEC in connection with qualifying the Indenture under the Act, or to make
certain changes in the subordination provisions, or to make any change that does
not adversely affect the rights of any Securityholder.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) a default in any
payment of interest on any Note when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
whether or not such payment is prohibited by Article 10 of the Indenture, (iii)
the failure by the Company to comply with its obligations under Section 5.1 of
the Indenture, (iv) the failure by the Company to comply for 30 days after
notice with certain of its obligations under Article 4 of the Indenture (in each
case, other than a failure to purchase Notes), (v) the failure by the Company to
comply for 60 days after notice with its other agreements contained in the Notes
or the Indenture, (vi) the failure by any Note Guarantor to comply with its
obligations under any Note Guarantee to which such Note Guarantor is a party,
after any applicable grace period, (vii) the failure by the Company or any
Significant Subsidiary to pay any Indebtedness within any applicable grace
period after final maturity or the acceleration of any such Indebtedness by the
holders thereof because of a default if the total amount of such Indebtedness
unpaid or accelerated exceeds $5.0 million or its foreign currency equivalent
(the "cross acceleration provision"), (viii) certain events of bankruptcy,
insolvency or reorganization of the Company or a Significant Subsidiary (the
"bankruptcy provisions"), (ix) the rendering of any judgment or decree for the
payment of money in an amount (net of any
<PAGE> 152
9
insurance or indemnity payments actually received in respect thereof prior to or
within 90 days from the entry thereof, or to be received in respect thereof in
the event any appeal thereof shall be unsuccessful) in excess of $5.0 million or
its foreign currency equivalent against the Company or a Significant Subsidiary
that is not discharged, or bonded or insured by a third Person, if (A) an
enforcement proceeding thereon is commenced or (B) such judgment or decree
remains outstanding for a period of 90 days following such judgment or decree
and is not discharged, waived or stayed (the "judgment default provision") or
(x) the failure of any Note Guarantee by a Note Guarantor which is a Significant
Subsidiary to be in full force and effect (except as contemplated by the terms
thereof or of the Indenture) or the denial or disaffirmation in writing by any
such Note Guarantor of its obligations under the Indenture or any Note Guarantee
if such Default continues for 10 days. If an Event of Default (other than a
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Company) occurs and is continuing , the Trustee or the Holders of at
least a majority in principal amount of the outstanding Securities may declare
the principal of and accrued but unpaid interest on all the Securities to be due
and payable immediately. Certain events of bankruptcy, insolvency, or
reorganization are Events of Default which will result in the Securities being
due and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
outstanding Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if and so long as
a committee of its Trust Officers in good faith determines that withholding
notice is in the interest of the Holders.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the
<PAGE> 153
10
Company or its Affiliates and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or a Note Guarantor shall not have any liability for any obligations of
the Company or any Note Guarantor under the Securities, the Indenture or any
Note Guarantee or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
<PAGE> 154
11
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH HAS IN IT
THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:
EV INTERNATIONAL, INC.
602 CECIL STREET
BUCHANAN, MICHIGAN 49107
(616) 695-2207
<PAGE> 155
12
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer
this Security on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date:_______________________ Your Signature:__________________________________
Signature Guarantee:___________________________________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
<PAGE> 156
13
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box:
/ /
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.6 or 4.8 of the Indenture, state the amount:
$
Date:______________________ Your Signature:___________________________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:___________________________________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
<PAGE> 157
EXHIBIT C
Transferee Letter of Representation
EV International, Inc.
c/o The Bank of New York
101 Barclay Street
New York, New York 10286
Dear Sirs:
This certificate is delivered to request a transfer of $ principal
amount of the 11% Senior Subordinated Notes due 2007 (the "Notes") of EV
International, Inc. (the "Company").
Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name:
Address:
Taxpayer ID Number:
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in
Rules 501(a)(1), (2), (3) and (7) under the Securities Act of 1933, as
amended (the "Securities Act")), purchasing for our own account or for the
account of such an institutional "accredited investor" at least $250,000
principal amount of the Notes, and we are acquiring the Notes not with a
view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act. We have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of our investment in the Notes and invest in or purchase
securities similar to the Notes in the normal course of our business. We
and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on
behalf of any investor account for which we are purchasing Notes to offer,
sell or otherwise transfer such Notes prior to the date which is three
years after the later of the date
<PAGE> 158
2
of original issue and the last date on which the Company or any affiliate
of the Company was the owner of such Notes (or any predecessor thereto)
(the "Resale Restriction Termination Date") only (a) to the Company, (b)
pursuant to a registration statement which has been declared effective
under the Securities Act, (c) in a transaction complying with the
requirements of Rule 144A under the Securities Act to a person we
reasonably believe is a qualified institutional buyer under Rule 144A (a
"QIB") that purchases for its own account or for the account of a QIB and
to whom notice is given that the transfer is being made in reliance on
Rule 144A, (d) pursuant to offers and sales that occur outside the United
States within the meaning of Regulation S under the Securities Act, (e) to
an institutional "accredited investor" within the meaning of Rules
501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for
its own account or for the account of such an institutional "accredited
investor," in each case in a minimum principal amount of Notes of
$250,000, or (f) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our
property or the property of such investor account or accounts be at all
times within our or their control and in compliance with any applicable
state securities laws. The foregoing restrictions on resale will not apply
subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Notes is proposed to be made pursuant to clause (e)
above prior to the Resale Restriction Termination Date, the transferor
shall deliver a letter from the transferee substantially in the form of
this letter to the Company and the Trustee, which shall provide, among
other things, that the transferee is an institutional "accredited
investor" within the meaning of Rules 501 (a)(1), (2), (3) or (7) under
the Securities Act and that it is acquiring such Notes for investment
purposes and not for distribution in violation of the Securities Act. Each
purchaser acknowledges that the Company and the Trustee reserve the right
prior to the offer, sale or other transfer prior to the Resale Termination
Date of the Notes pursuant to clause (d), (e) or (f) above to require the
delivery of an opinion of counsel, certifications or other information
satisfactory to the Company and the Trustee.
<PAGE> 159
3
TRANSFEREE:
BY:
<PAGE> 160
EXHIBIT D
FORM OF SUPPLEMENTAL INDENTURE
This Supplemental Indenture, dated as of [__________] (this
"Supplemental Indenture" or "Guarantee"), among [name of Note Guarantor] (the
"Guarantor"), [Company] (together with its successors and assigns, the
"Company"), [each other then existing Note Guarantor under the Indenture
referred to below,] and [Trustee], as Trustee under the Indenture referred to
below.
W I T N E S S E T H:
WHEREAS, the Company and the Trustee have heretofore executed and
delivered an Indenture, dated as of March 24, 1997 (as amended, supplemented,
waived or otherwise modified, the "Indenture"), providing for the issuance of an
aggregate principal amount of $100,000,000 of 11% Senior Subordinated Notes due
2007 of the Company (the "Securities");
WHEREAS, Section 4.12 of the Indenture provides that under certain
circumstances the Company is required to cause the Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the Guarantor
shall unconditionally guarantee all of the Company's obligations under the
Securities pursuant to a Note Guarantee on the terms and conditions set forth
herein; and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee and
the Company are authorized to execute and deliver this Supplemental Indenture to
amend the Indenture, without the consent of any Securityholder;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor, the Company[, the other Note Guarantors] and the Trustee mutually
covenant and agree for the equal and ratable benefit of the holders of the
Securities as follows:
ARTICLE I
Definitions
<PAGE> 161
2
SECTION 1.1 Defined Terms. As used in this Guarantee, terms defined
in the Indenture or in the preamble or recital hereto are used herein as therein
defined, except that the term "Holders" in this Guarantee shall refer to the
term "Holders" as defined in the Indenture and the Trustee acting on behalf or
for the benefit of such holders. The words "herein," "hereof" and "hereby" and
other words of similar import used in this Supplemental Indenture refer to this
Supplemental Indenture as a whole and not to any particular section hereof.
ARTICLE II
Guarantee
SECTION 2.1 Guarantee. The Guarantor hereby fully, unconditionally
and irrevocably guarantees, as primary obligor and not merely as surety, jointly
and severally with each other Note Guarantor, to each Holder of the Securities
(a) the full and punctual payment when due, whether at Stated Maturity, by
acceleration, by redemption or otherwise, of principal of and interest on the
Securities and all other monetary obligations of the Company under the Indenture
and the Securities and (b) the full and punctual performance within applicable
grace periods of all other obligations of the Company under the Indenture and
the Securities (all the foregoing being hereinafter collectively called the
"Obligations"). The Guarantor further agrees (to the extent permitted by law)
that the Obligations may be extended or renewed, in whole or in part, without
notice or further assent from it, and that it will remain bound under this
Article II notwithstanding any extension or renewal of any Obligation.
To the extent permitted by applicable law, (i) the Guarantor waives
presentation to, demand of payment from and protest to the Company of any of the
Obligations and also waives notice of protest for nonpayment (ii), the Guarantor
waives notice of any default under the Securities or the Obligations and (iii)
the obligations of the Guarantor hereunder shall not be affected by (a) the
failure of any Holder to assert any claim or demand or to enforce any right or
remedy against the Company or any other person under the Indenture, the
Securities or any other agreement or otherwise; (b) any extension or renewal of
any thereof; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of the Indenture, the Securities
<PAGE> 162
3
or any other agreement; or (d) the failure of any Holder to exercise any right
or remedy against any other Guarantor of the Obligations.
The Guarantor further agrees that its Guarantee herein constitutes a
guarantee of payment, performance and compliance when due (and not a guarantee
of collection) and, to the extent permitted by applicable law, waives any right
to require that any resort be had by any Holder to any security held for payment
of the Obligations.
Except as otherwise provided herein or under applicable law, the
obligations of the Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason (other than payment of the
Obligations in full), including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense of setoff,
counterclaim, recoupment or termination whatsoever or by reason of the
invalidity, illegality or unenforceability of the Obligations or otherwise.
Without limiting the generality of the foregoing, to the extent permitted by
applicable law, the obligations of the Guarantor herein shall not be discharged
or impaired or otherwise affected by the failure of any Holder to assert any
claim or demand or to enforce any remedy under the Indenture, the Securities or
any other agreement, by any waiver or modification of any thereof, by any
default, failure or delay, willful or otherwise, in the performance of the
Obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
the Guarantor or would otherwise operate as a discharge of the Guarantor as a
matter of law or equity.
The Guarantor further agrees that, subject to Section 2.2(b) hereof,
its Guarantee herein shall continue to be effective or be reinstated, as the
case may be, if at any time payment, or any part thereof, of principal of or
interest on any Obligation is rescinded or must otherwise be restored by any
Holder upon the bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder has at law or in equity against the Guarantor by virtue
hereof, upon the failure of the Company to pay the principal of or interest on
any Obligation
<PAGE> 163
4
when and as the same shall become due, whether at maturity, by acceleration, by
redemption or otherwise, or to perform or comply with any other Obligation, the
Guarantor hereby promises to and will, upon receipt of written demand by the
Trustee or the Holders of a majority in principal amount of the then outstanding
Securities (the "Majority Securityholders"), forthwith pay, or cause to be paid,
in cash, to the Holders an amount equal to the sum of (i) the unpaid principal
amount of such Obligations then due and owing, (ii) accrued and unpaid interest
on such Obligations then due and owing (but only to the extent not prohibited by
law) and (iii) all other monetary Obligations of the Company to the Holders then
due and owing.
The Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any Obligations guarantied
hereby until payment in full of all Obligations. The Guarantor further agrees
(to the extent permitted by applicable law) that, as between such Guarantor, on
the one hand, and the Holders, on the other hand, (x) the maturity of the
Obligations guarantied hereby may be accelerated for the purposes of such
Guarantor's Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guarantied hereby, and (y) in the event of any declaration of acceleration of
such Obligations, such Obligations (whether or not due and payable) shall
forthwith become due and payable by such Guarantor for the purposes of this
Section.
The Guarantor also agrees to pay any and all reasonable costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or the
Holders in enforcing any rights under this Section.
SECTION 2.2 Limitation on Liability; Termination, Release and
Discharge. (a) Any term or provision of this Guarantee to the contrary
notwithstanding, the maximum aggregate amount of the Obligations guarantied
hereunder by the Guarantor shall not exceed the maximum amount that can be
hereby guarantied without rendering this Guarantee, as it relates to such
Guarantor, voidable under applicable law, including without limitation
applicable law relating to fraudulent conveyance or fraudulent transfer or
affecting the rights or remedies of creditors generally.
<PAGE> 164
5
(b) This Guarantee shall terminate and be of no further force or
effect, and the Guarantor shall automatically and unconditionally be released
and discharged from all liabilities and obligations in respect hereof, upon (w)
payment in full of the principal amount of all outstanding Securities (whether
by payment at maturity, purchase, redemption, defeasance, retirement or other
acquisition) and all other monetary Obligations then due and owing, (x) the
merger or consolidation of the Guarantor with and into the Company or another
Note Guarantor that is the surviving Person in such merger or consolidation, or
(y) the exercise by the Company of its legal defeasance option or its covenant
defeasance option, or (z) the sale or other transfer (i) by the Guarantor of all
or substantially all of its assets or (ii) by the Company or a Restricted
Subsidiary of all of the capital stock or other equity interests in the
Guarantor held by the Company or such Restricted Subsidiary, to a Person that is
not an Affiliate of the Company; provided, however, that, in the case of this
clause (z), (1) any such sale or transfer is made in accordance with the terms
of the Indenture (including Section 4.6 thereof), and (2) all obligations of the
Guarantor under, and all of its guarantees of, and all of its pledges of assets
or other security interests which secure, any Bank Indebtedness of the Company
shall also terminate upon such release, sale or transfer (other than with
respect to any such Indebtedness that is assumed by any Person that is not an
Affiliate of the Company). Upon notice to the Trustee that any such payment,
merger, consolidation, exercise, sale or transfer has occurred or is occurring,
the Trustee shall execute all agreements and instruments confirming and
acknowledging such termination, release and discharge as may be reasonably
requested by the Guarantor, and the Trustee shall return the original Guarantee
to the Guarantor.
ARTICLE III
Subordination
SECTION 3.1 Subordination. The Guarantor agrees, and each
Securityholder by accepting a Security agrees, that (a) the obligations of the
Guarantor under this Guarantee are subordinated in right of payment to the prior
payment in full (when due) of all existing and future Guarantor Senior
Indebtedness of the Guarantor, including without limitation any Guarantee by the
Guarantor of the Bank Indebtedness or of any
<PAGE> 165
6
Senior Indebtedness of the Company or of any Guarantor Senior Indebtedness of
any other Note Guarantor, to the extent and in the matter provided in Article 10
of the Indenture (as if the Guarantor were the Company for purposes of such
Article 10 and all defined terms used therein, and the Guarantor Senior
Indebtedness of the Guarantor were Senior Indebtedness), and this Guarantor is
made subject to such provisions (which are hereby incorporated herein by
reference), and (b) such subordination is for the benefit of and enforceable by
the holders of Guarantor Senior Indebtedness of the Guarantor.
ARTICLE IV
Miscellaneous
SECTION 4.1 Notices. All notices and other communications pertaining
to this Guarantee or any Security shall be in writing and shall be deemed to
have been duly given upon the receipt thereof. Such notices shall be delivered
by hand, or mailed, certified or registered mail with postage prepaid (a) if to
the Guarantor, at its address set forth below, with a copy to the Company as
provided in the Indenture for notices to the Company, and (b) if to the Holders
or the Trustee, as provided in the Indenture. The Guarantor by notice to the
Trustee may designate additional or different addresses for subsequent notices
to or communications with the Guarantor.
SECTION 4.2 Parties. Nothing expressed or mentioned in this
Guarantee is intended or shall be construed to give any Person, firm or
corporation, other than the Holders and the Trustee and the holders of any
Guarantor Senior Indebtedness, any legal or equitable right, remedy or claim
under or in respect of this Guarantee or any provision herein contained.
SECTION 4.3 Governing Law. This Agreement shall be governed by the
laws of the State of New York.
SECTION 4.4 Severability Clause. In case any provision in this
Guarantee shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby and such provision shall be ineffective only to the extent of
such invalidity, illegality or unenforceability.
<PAGE> 166
7
SECTION 4.5 Waivers and Remedies. Neither a failure nor a delay on
the part of the Holders or the Trustee in exercising any right, power or
privilege under this Guarantee shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of the Holders and
the Trustee herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Guarantee or
at law, in equity, by statute or otherwise.
SECTION 4.6 Successors and Assigns. Subject to Section 2.2(b)
hereof, (a) this Guarantee shall be binding upon and inure to the benefit of the
Guarantor, the Trustee, any other parties hereto, the Holders and their
respective successors and assigns and (b) in the event of any transfer or
assignment of rights by any Holder, the rights and privileges conferred upon
that party in this Guarantee and in the Securities shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions of this Guarantee and the Indenture.
SECTION 4.7 Modification, etc. Subject to the provisions of, and
except as otherwise provided in, Article 9 of the Indenture (including without
limitation Section 9.1 thereof), no modification, amendment or waiver of any
provision of this Guarantee, nor the consent to any departure by the Guarantor
therefrom, shall in any event be effective unless the same shall be in writing
and consented to by the Majority Securityholders, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which it was given. No notice to or demand on the Guarantor in any case shall
entitle such Guarantor or any other guarantor to any other or further notice or
demand in the same, similar or other circumstances.
SECTION 4.8 Entire Agreement. This Guarantee is intended by the
parties to be a final expression of their agreement in respect of the subject
matter contained herein and, together with the Indenture, supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
SECTION 4.9 Ratification of Indenture; Supplemental Indentures Part
of Indenture. Except as expressly amended
<PAGE> 167
8
hereby, the Indenture is in all respects ratified and confirmed and all the
terms, conditions and provisions thereof shall remain in full force and effect.
This Supplemental Indenture shall form a part of the Indenture for all purposes,
and every holder of Securities heretofore or hereafter authenticated and
delivered shall be bound hereby. The Trustee makes no representation or warranty
as to the validity or sufficiency of this Supplemental Indenture.
SECTION 4.10 Counterparts. The parties hereto may sign one or more
copies of this Supplemental Indenture in counterparts, all of which together
shall constitute one and the same agreement.
SECTION 4.11 Headings. The headings of the Articles and the sections
in this Guarantee are for convenience of reference only and shall not be deemed
to alter or affect the meaning or interpretation of any provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NAME OF GUARANTOR],
By:
_____________________________________
Name:
Title:
Address:
[COMPANY]
By:
_____________________________________
Name:
Title:
[Add signature block for any other
existing Note Guarantor]
<PAGE> 168
9
[TRUSTEE]
By:
_____________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 4(b)
EXECUTION COPY
EV INTERNATIONAL, INC.
$100,000,000
11% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
March 19, 1997
CHASE SECURITIES INC.
SMITH BARNEY INC.
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
EV International, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell $100,000,000 aggregate principal amount
of its 11% Senior Subordinated Notes due 2007 (the "Securities"). The Securities
will be issued pursuant to an Indenture to be dated as of March 24, 1997 (the
"Indenture") between the Company and The Bank of New York, as trustee (the
"Trustee"). The Company hereby confirms its agreement with Chase Securities Inc.
("CSI") and Smith Barney Inc. (together with CSI, the "Initial Purchasers")
concerning the purchase of the Securities from the Company by the Initial
Purchasers.
The Securities will be offered and sold to the Initial
Purchasers without being registered under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon an exemption therefrom. The Company has
prepared a preliminary offering memorandum dated March 7, 1997 (the "Preliminary
Offering Memorandum") and will prepare an offering memorandum dated the date
hereof (the "Offering Memorandum") setting forth information concerning the
Company and the Securities. Copies of the Preliminary Offering Memorandum have
been, and copies of the Offering Memorandum will be, delivered by the Company to
the Initial Purchasers pursuant to the terms of this Agreement. Any references
herein to the Preliminary Offering Memorandum and the Offering Memorandum shall
be deemed to include all amendments and supplements thereto, unless otherwise
noted. The Company hereby confirms that it has authorized the use of the
Preliminary Offering Memorandum and the Offering Memorandum in connection with
the offering and resale of the Securities by the Initial Purchasers in
accordance with Section 2.
<PAGE> 2
2
Holders of the Securities (including the Initial Purchasers
and their direct and indirect transferees) will be entitled to the benefits of
an Exchange and Registration Rights Agreement, substantially in the form
attached hereto as Annex A (the "Registration Rights Agreement"), pursuant to
which the Company will agree to file with the Securities and Exchange Commission
(the "Commission") (i) a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") registering an issue of senior
subordinated notes of the Company (the "Exchange Securities") which are
identical in all material respects to the Securities (except that the Exchange
Securities will not contain terms with respect to transfer restrictions) and
(ii) under certain circumstances, a shelf registration statement pursuant to
Rule 415 under the Securities Act (the "Shelf Registration Statement").
Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Offering Memorandum.
1. Representations, Warranties and Agreements of the Company.
The Company represents and warrants to, and agrees with, the Initial Purchasers
on and as of the date hereof and the Closing Date (as defined in Section 3)
that:
(a) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its respective date, did not, and on the
Closing Date the Offering Memorandum will not, contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided that the Company makes no representation or
warranty as to information contained in or omitted from the Preliminary
Offering Memorandum or the Offering Memorandum in reliance upon and in
conformity with written information relating to the Initial Purchasers
furnished to the Company by or on behalf of any Initial Purchaser
specifically for use therein (the "Initial Purchasers' Information").
(b) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its respective date, contains all of the
information that, if requested by a prospective purchaser of the
Securities, would be required to be provided to such prospective
purchaser pursuant to Rule 144A(d)(4) under the Securities Act.
(c) Assuming the accuracy of the representations and
warranties of the Initial Purchasers contained in Section 2 and their
compliance with the agreements set forth therein, it is not necessary,
in connection with the issuance and sale of the Securities to the
Initial Purchasers and the offer, resale and delivery of the Securities
by the Initial Purchasers in the manner contemplated by this Agreement
and the Offering Memorandum, to register the Securities under the
Securities Act or to qualify the Indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act").
<PAGE> 3
3
(d) The Company and each of its subsidiaries (i) have been
duly incorporated and are validly existing as corporations in good
standing under the laws of their respective jurisdictions of
incorporation, (ii) are duly qualified to do business and are in good
standing as foreign corporations in each jurisdiction in which their
respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and (iii) have all
power and authority necessary to own or hold their respective
properties and to conduct the businesses in which they are engaged,
except, in the case of clauses (ii) and (iii), where the failure to so
qualify or have such power or authority would not, singularly or in the
aggregate, have a material adverse effect on the condition (financial
or otherwise), results of operations, business or prospects of the
Company and its subsidiaries taken as a whole (a "Material Adverse
Effect").
(e) The Company has an authorized capitalization as set forth
in the Offering Memorandum under the heading "Description of Capital
Stock"; all of the outstanding shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable; and the capital stock of the Company conforms in all
material respects to the description thereof contained in the Offering
Memorandum. All of the outstanding shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and are owned directly or
indirectly by the Company (or are owned by nominees of the Company or
directors of its subsidiaries), free and clear of any lien, charge,
encumbrance, security interest, restriction upon voting or transfer or
any other claim of any third party, except for the pledge of stock by
EVI Audio International Holding Corporation, Inc. pursuant to the
Credit Agreement among the Company and the several lenders from time to
time parties thereto and The Chase Manhattan Bank, as Administrative
Agent, dated as of February 10, 1997.
(f) The Company has full right, power and authority to execute
and deliver this Agreement, the Indenture, the Registration Rights
Agreement, and the Securities (collectively, the "Transaction
Documents") and to perform its obligations hereunder and thereunder;
and all corporate action required to be taken for the due and proper
authorization, execution and delivery of each of the Transaction
Documents and the consummation of the transactions contemplated thereby
have been duly and validly taken.
(g) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and legally binding
agreement of the Company.
(h) The Registration Rights Agreement has been duly authorized
by the Company and, when duly executed and delivered in accordance with
its terms by each of the parties thereto, will constitute a valid and
legally binding agreement of the Company enforceable against the
Company in accordance with its terms, except (i) to the extent that
such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws affecting
<PAGE> 4
4
creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law) or (ii)
insofar as rights to indemnification and contribution contained therein
may be limited by Federal or state securities laws or public policy.
(i) The Indenture has been duly authorized by the Company and,
when duly executed and delivered in accordance with its terms by each
of the parties thereto, will constitute a valid and legally binding
agreement of the Company enforceable against the Company in accordance
with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law). On the Closing Date,
the Indenture will conform in all material respects to the requirements
of the Trust Indenture Act and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder.
(j) The Securities have been duly authorized by the Company
and, when duly executed, authenticated, issued and delivered as
provided in the Indenture and paid for as provided herein, will be duly
and validly issued and outstanding and will constitute valid and
legally binding obligations of the Company entitled to the benefits of
the Indenture and enforceable against the Company in accordance with
their terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law).
(k) Each Transaction Document conforms in all material
respects to the description thereof contained in the Offering
Memorandum.
(l) The execution, delivery and performance by the Company of
each of the Transaction Documents, the issuance, authentication, sale
and delivery of the Securities and compliance by the Company with the
terms thereof and the consummation of the transactions contemplated by
the Transaction Documents (i) will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute
a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
of its subsidiaries pursuant to, any material indenture, mortgage, deed
of trust, loan agreement or other material agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject, nor (ii) will such actions result in (a) any violation of the
provisions of the charter or by-laws of the Company or any of its
subsidiaries or (b) any statute or any judgment, order, decree, rule or
regulation of any court or arbitrator or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any
of their properties or
<PAGE> 5
5
assets except, in the case of clauses (i) and (ii) (b), for such
actions as would not, individually or in the aggregate, have a Material
Adverse Effect and would not have a material adverse effect on the
Company's ability to perform its obligations under the Transaction
Documents; and no consent, approval, authorization or order of, or
filing or registration with, any such court or arbitrator or
governmental agency or body under any such statute, judgment, order,
decree, rule or regulation is required for the execution, delivery and
performance by the Company of each of the Transaction Documents, the
issuance, authentication, sale and delivery of the Securities and
compliance by the Company with the terms thereof and the consummation
of the transactions contemplated by the Transaction Documents, except
for such consents, approvals, authorizations, filings, registrations or
qualifications (i) which shall have been obtained or made prior to the
Closing Date and (ii) as may be required to be obtained or made under
the Securities Act and applicable state securities laws as provided in
the Registration Rights Agreement.
(m) To the best knowledge of the Company, each of Coopers &
Lybrand L.L.P. and Arthur Andersen & Company are independent certified
public accountants with respect to the Company and its subsidiaries
within the meaning of Rule 101 of the Code of Professional Conduct of
the American Institute of Certified Public Accountants ("AICPA") and
its interpretations and rulings thereunder. The historical financial
statements (including the related notes) contained in the Offering
Memorandum comply in all material respects with the requirements
applicable to a registration statement on Form S-1 under the Securities
Act (except that certain supporting schedules are omitted); such
financial statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
periods covered thereby and fairly present the financial position of
the entities purported to be covered thereby at the respective dates
indicated and the results of their operations and their cash flows for
the respective periods indicated; and the financial information
contained in the Offering Memorandum under the headings "Summary
Historical and Pro Forma Financial Information", "Capitalization",
"Selected Historical and Pro Forma Financial Information",
"Management's Discussion and Analysis of Financial Condition and
Results of Operations", "Management--Summary Compensation Table" and
"Management--Aggregated Option Exercises" are derived from the
accounting records of the Company and its subsidiaries and fairly
present the information purported to be shown thereby. The pro forma
financial information contained in the Offering Memorandum has been
prepared on a basis consistent with the historical financial statements
contained in the Offering Memorandum (except for the pro forma
adjustments specified therein), includes all material adjustments to
the historical financial information required by Rule 11-02 of
Regulation S-X under the Securities Act and the Exchange Act to reflect
the transactions described in the Offering Memorandum, gives effect to
assumptions made on a reasonable basis and fairly presents the
historical and proposed transactions contemplated by the Offering
Memorandum and the Transaction Documents. The other historical
financial and statistical information and data included in the Offering
Memorandum are, in all material respects, fairly presented.
<PAGE> 6
6
(n) Except as described in the Offering Memorandum under
"Business--Legal Proceedings", there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is
a party or of which any property or assets of the Company or any of its
subsidiaries is the subject which, singularly or in the aggregate, if
determined adversely to the Company or any of its subsidiaries, could
reasonably be expected to have a Material Adverse Effect; and to the
best knowledge of the Company, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others.
(o) No action has been taken and no statute, rule, regulation
or order has been enacted, adopted or issued by any governmental agency
or body which prevents the issuance of the Securities or suspends the
sale of the Securities in any jurisdiction; no injunction, restraining
order or order of any nature by any federal or state court of competent
jurisdiction has been issued with respect to the Company or any of its
subsidiaries which would prevent or suspend the issuance or sale of the
Securities or the use of the Preliminary Offering Memorandum or the
Offering Memorandum in any jurisdiction; no action, suit or proceeding
is pending against or, to the best knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries before any
court or arbitrator or any governmental agency, body or official,
domestic or foreign, which could reasonably be expected to interfere
with or adversely affect the issuance of the Securities or in any
manner draw into question the validity or enforceability of any of the
Transaction Documents or any action taken or to be taken pursuant
thereto; and the Company has complied with any and all requests by any
securities authority in any jurisdiction for additional information to
be included in the Preliminary Offering Memorandum and the Offering
Memorandum.
(p) Neither the Company nor any of its subsidiaries is (i) in
violation of its charter or by-laws, (ii) in default in any material
respect, and no event has occurred which, with notice or lapse of time
or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument to which it is a party or by which it is bound
or to which any of its property or assets is subject or (iii) in
violation in any material respect of any law, ordinance, governmental
rule, regulation or court decree to which it or its property or assets
may be subject.
(q) The Company and each of its subsidiaries possess all
material licenses, certificates, authorizations and permits issued by,
and have made all material declarations and filings with, the
appropriate federal, state or foreign regulatory agencies or bodies
which are necessary or desirable for the ownership of their respective
properties or the conduct of their respective businesses as described
in the Offering Memorandum, except where the failure to possess or make
the same would not, singularly or in the aggregate, have a Material
Adverse Effect, and neither the Company nor any of its subsidiaries has
received notification of any revocation or
<PAGE> 7
7
modification of any such license, certificate, authorization or permit
or has any reason to believe that any such license, certificate,
authorization or permit will not be renewed in the ordinary course.
(r) The Company and each of its subsidiaries have filed all
federal, state, local and foreign income and franchise tax returns
required to be filed through the date hereof and have paid all taxes
due thereon, and no tax deficiency has been determined adversely to the
Company or any of its subsidiaries which has had (nor does the Company
or any of its subsidiaries have any knowledge of any tax deficiency
which, if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected to have) a Material Adverse
Effect.
(s) Neither the Company nor any of its subsidiaries is (i) an
"investment company" or a company "controlled by" an investment company
within the meaning of the Investment Company Act of 1940, as amended
(the "Investment Company Act"), and the rules and regulations of the
Commission thereunder or (ii) a "holding company" or a "subsidiary
company" of a holding company or an "affiliate" thereof within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(t) The Company and each of its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(u) The Company and each of its subsidiaries have insurance
covering their respective properties, operations, personnel and
businesses, adequate and suitable for its business and comparable to
insurance customarily carried by comparable companies similarly
situated and carrying on the same or similar business. Neither the
Company nor any of its subsidiaries has received notice from any
insurer or agent of such insurer that material capital improvements or
other material expenditures are required or necessary to be made in
order to continue such insurance.
(v) The Company and each of its subsidiaries own or possess
adequate rights to use all material patents, patent applications,
trademarks, service marks, trade names, trademark registrations,
service mark registrations, copyrights, licenses and know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures)
necessary for the conduct of their respective businesses; except where
the failure to own or possess such rights or use such intellectual
properties would not individually or in the aggregate, have a Material
<PAGE> 8
8
Adverse Effect; and the conduct of their respective businesses will not
conflict in any material respect with, and the Company and its
subsidiaries have not received any notice of any claim of conflict
with, any such rights of others where such claim would not
individually, or together with other claims, have a Material Adverse
Effect.
(w) The Company and each of its subsidiaries have good and (in
the case of real property) marketable title in fee simple to, or have
valid rights to lease or otherwise use, all items of real and personal
property which are material to the business of the Company and its
subsidiaries, in each case free and clear of all liens, encumbrances,
claims and defects and imperfections of title except such as (i) do not
materially interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries or (ii) could not
reasonably be expected to have a Material Adverse Effect.
(x) No material labor disturbance by or dispute with the
employees of the Company or any of its subsidiaries exists or, to the
best knowledge of the Company, is contemplated or threatened.
(y) No "prohibited transaction" (as defined in Section 406 of
the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder
("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code")) or "accumulated funding
deficiency" (as defined in Section 302 of ERISA) or any of the events
set forth in Section 4043(b) of ERISA (other than events with respect
to which the 30-day notice requirement under Section 4043 of ERISA has
been waived) has occurred with respect to any employee benefit plan of
the Company or any of its subsidiaries which could reasonably be
expected to have a Material Adverse Effect; each such employee benefit
plan is in compliance in all material respects with applicable law,
including ERISA and the Code; the Company and each of its subsidiaries
have not incurred and do not expect to incur liability under Title IV
of ERISA with respect to the termination of, or withdrawal from, any
pension plan for which the Company or any of its subsidiaries would
have any liability; and for each such pension plan that is intended to
be qualified under Section 401(a) of the Code there is an application
pending with the Internal Revenue Service for such qualification and
the Company will use its best efforts to take all actions to so qualify
such plans.
(aa) There has been no storage, generation, transportation,
handling, treatment, disposal, discharge, emission or other release of
any kind of toxic or other wastes or other hazardous substances by, due
to or caused by the Company or any of its subsidiaries (or, to the best
knowledge of the Company, any other entity (including any predecessor)
for whose acts or omissions the Company or any of its subsidiaries is
or could reasonably be expected to be liable) upon any of the property
now or previously owned or leased by the Company or any of its
subsidiaries, or upon any other property, in violation of any statute
or any ordinance, rule, regulation, order, judgment, decree
<PAGE> 9
9
or permit or which would, under any statute or any ordinance, rule
(including rule of common law), regulation, order, judgment, decree or
permit, give rise to any liability, except for any violation or
liability that could not reasonably be expected to have, singularly or
in the aggregate with all such violations and liabilities, a Material
Adverse Effect; and there has been no disposal, discharge, emission or
other release of any kind onto such property or into the environment
surrounding such property of any toxic or other wastes or other
hazardous substances with respect to which the Company has knowledge,
except for any such disposal, discharge, emission or other release of
any kind which could not reasonably be expected to have, singularly or
in the aggregate with all such discharges and other releases, a
Material Adverse Effect.
(bb) Neither the Company nor, to the best knowledge of the
Company, any director, officer, agent, employee or other person
associated with or acting on behalf of the Company has (i) used any
corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expense relating to political activity; (ii) made any
direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; (iii) violated or
is in violation of any provision of the Foreign Corrupt Practices Act
of 1977; or (iv) made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment, except for any such use, payment or
violation that, individually or in the aggregate, would not have a
Material Adverse Effect.
(cc) On and immediately after the Closing Date, the Company
(after giving effect to the issuance of the Securities and to the other
transactions related thereto as described in the Offering Memorandum)
will be Solvent. As used in this paragraph, the term "Solvent" means,
with respect to a particular date, that on such date (i) the present
fair market value (or present fair saleable value) of the assets of the
Company is not less than the total amount required to pay the probable
liabilities of the Company on its total existing debts and liabilities
(including contingent liabilities) as they become absolute and matured,
(ii) the Company is able to realize upon its assets and pay its debts
and other liabilities, contingent obligations and commitments as they
mature and become due in the normal course of business, (iii) assuming
the sale of the Securities as contemplated by this Agreement and the
Offering Memorandum, the Company is not incurring debts or liabilities
beyond its ability to pay as such debts and liabilities mature and (iv)
the Company is not engaged in any business or transaction, and is not
about to engage in any business or transaction, for which its property
would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which the
Company is engaged. In computing the amount of such contingent
liabilities at any time, it is intended that such liabilities will be
computed at the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
<PAGE> 10
10
(dd) Except as described in the Offering Memorandum, there are
no outstanding subscriptions, rights, warrants, calls or options to
acquire, or instruments convertible into or exchangeable for, or
agreements or understandings with respect to the sale or issuance of,
any shares of capital stock of or other equity or other ownership
interest in the Company or any of its subsidiaries.
(ee) Neither the Company nor any of its subsidiaries owns any
"margin securities" as that term is defined in Regulations G and U of
the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), and none of the proceeds of the sale of the Securities
will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin security, for the purpose of reducing or retiring
any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the
Securities to be considered a "purpose credit" within the meanings of
Regulation G, T, U or X of the Federal Reserve Board.
(ff) Neither the Company nor any of its subsidiaries is a
party to any contract, agreement or understanding with any person that
would give rise to a valid claim against the Company or the Initial
Purchasers for a brokerage commission, finder's fee or like payment in
connection with the offering and sale of the Securities, other than the
fees payable to the Initial Purchasers in connection with the Offering
and sale of the Securities.
(gg) The Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act.
(hh) Neither the Company nor any of its affiliates has,
directly or through any agent, sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of, any security (as such
term is defined in the Securities Act), which is or will be integrated
with the sale of the Securities in a manner that would require
registration of the Securities under the Securities Act.
(ii) None of the Company or any of its affiliates or any other
person acting on its or their behalf has engaged, in connection with
the offering of the Securities, in any form of general solicitation or
general advertising within the meaning of Rule 502(c) under the
Securities Act.
(jj) There are no securities of the Company registered under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or listed on a national securities exchange or quoted in a U.S.
automated inter-dealer quotation system.
(kk) The Company has not taken and will not take, directly or
indirectly, any action prohibited by Regulation M under the Exchange
Act in connection with the offering of the Securities.
<PAGE> 11
11
(ll) None of the Company or any of its subsidiaries does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Florida Statutes Section 517.075.
(mm) Since the date as of which information is given in the
Offering Memorandum, except as otherwise stated therein, (i) there has
been no material adverse change or any development involving a
prospective material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs, management or business
prospects of the Company, whether or not arising in the ordinary course
of business, (ii) the Company has not incurred any material liability
or obligation, direct or contingent, other than in the ordinary course
of business, (iii) the Company has not entered into any material
transaction other than in the ordinary course of business and (iv)
there has not been any change in the capital stock or long-term debt of
the Company, or any dividend or distribution of any kind declared, paid
or made by the Company on any class of its capital stock.
2. Purchase and Resale of the Securities. (a) On the basis of
the representations, warranties and agreements contained herein, and subject to
the terms and conditions set forth herein, the Company agrees to issue and sell
to each of the Initial Purchasers, severally and not jointly, and each of the
Initial Purchasers, severally and not jointly, agrees to purchase from the
Company, the principal amount of Securities set forth opposite the name of such
Initial Purchaser on Schedule 1 hereto at a purchase price equal to 97% of the
principal amount thereof. The Company shall not be obligated to deliver any of
the Securities except upon payment for all of the Securities to be purchased as
provided herein.
(b) The Initial Purchasers have advised the Company that they
propose to offer the Securities for resale upon the terms and subject to the
conditions set forth herein and in the Offering Memorandum. Each Initial
Purchaser, severally and not jointly, represents and warrants to, and agrees
with, the Company that (i) it is purchasing the Securities pursuant to a private
sale exempt from registration under the Securities Act, (ii) it has not
solicited offers for, or offered or sold, and will not solicit offers for, or
offer or sell, the Securities by means of any form of general solicitation or
general advertising within the meaning of Rule 502(c) of Regulation D under the
Securities Act ("Regulation D") or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act and (iii) it has
solicited and will solicit offers for the Securities only from, and has offered
or sold and will offer, sell or deliver the Securities, as part of its initial
offering, only to (A) persons whom it reasonably believes to be qualified
institutional buyers ("Qualified Institutional Buyers") as defined in Rule 144A
under the Securities Act, or if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to it that each such account is a
Qualified Institutional Buyer to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A and in each case, in
transactions in accordance with Rule 144A and (B) a limited number of other
accredited investors ("Accredited Investors") as defined in Rule 501(a)(1), (2),
(3) or (7) under Regulation D that are institutional investors in private sales
exempt from registration under the
<PAGE> 12
12
Securities Act. Each Initial Purchaser, severally and not jointly, agrees that,
prior to or simultaneously with the confirmation of sale by such Initial
Purchaser to any purchaser of any of the Securities purchased by such Initial
Purchaser from the Company pursuant hereto, such Initial Purchaser shall furnish
to that purchaser a copy of the Offering Memorandum (and any amendment or
supplement thereto that the Company shall have furnished to such Initial
Purchaser prior to the date of such confirmation of sale). In addition to the
foregoing, each Initial Purchaser acknowledges and agrees that the Company and,
for purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Sections 5(d), (e) and (f) counsel for the Company and for the Initial
Purchasers, respectively, may rely upon the accuracy of the representations and
warranties of the Initial Purchasers and their compliance with their agreements
contained in this Section 2, and each Initial Purchaser hereby consents to such
reliance.
(c) The Company acknowledges and agrees that CSI may sell
Securities to any affiliate of CSI and that any such affiliate may sell
Securities purchased by it to CSI.
3. Delivery of and Payment for the Securities. (a) Delivery of
and payment for the Securities shall be made at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York, 10017 or at such other place
as shall be agreed upon by the Initial Purchasers and the Company, at 10:00
A.M., New York City time, on March 24, 1997, or at such other time or date, not
later than seven full business days thereafter, as shall be agreed upon by the
Initial Purchasers and the Company (such date and time of payment and delivery
being referred to herein as the "Closing Date").
(b) On the Closing Date, payment of the purchase price for the
Securities shall be made to the Company by wire or book-entry transfer of
same-day funds to such account or accounts as the Company shall specify prior to
the Closing Date or by such other means as the parties hereto shall agree prior
to the Closing Date against delivery to the Initial Purchasers of the
certificates evidencing the Securities. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligations of the Initial Purchasers hereunder. Upon delivery,
the Securities shall be in global form, registered in such names and in such
denominations as CSI on behalf of the Initial Purchasers shall have requested in
writing not less than two full business days prior to the Closing Date. The
Company agrees to make one or more global certificates evidencing the Securities
available for inspection by CSI on behalf of the Initial Purchasers in New York,
New York at least 24 hours prior to the Closing Date.
4. Further Agreements of the Company. The Company agrees with
each of the Initial Purchasers:
(a) to advise the Initial Purchasers promptly and, if
requested, confirm such advice in writing, of the happening of any
event which makes any statement of a material fact made in the Offering
Memorandum untrue or which requires the making of any additions to or
changes in the Offering Memorandum (as amended or
<PAGE> 13
13
supplemented from time to time) in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; to advise the Initial Purchasers promptly of any order
preventing or suspending the use of the Preliminary Offering Memorandum
or the Offering Memorandum, of any suspension of the qualification of
the Securities for offering or sale in any jurisdiction and of the
initiation or threatening of any proceeding for any such purpose; and
to use its best efforts to prevent the issuance of any such order
preventing or suspending the use of the Preliminary Offering Memorandum
or the Offering Memorandum or suspending any such qualification and, if
any such suspension is issued, to obtain the lifting thereof at the
earliest possible time;
(b) to furnish promptly to each of the Initial Purchasers and
counsel for the Initial Purchasers, without charge, as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum (and
any amendments or supplements thereto) as may be reasonably requested;
(c) prior to making any amendment or supplement to the
Offering Memorandum, to furnish a copy thereof to each of the Initial
Purchasers and counsel for the Initial Purchasers and not to effect any
such amendment or supplement to which the Initial Purchasers shall
reasonably object by notice to the Company after a reasonable period to
review;
(d) if, at any time prior to completion of the resale of the
Securities by the Initial Purchasers, any event shall occur or
condition exist as a result of which it is necessary, in the opinion of
counsel for the Initial Purchasers or counsel for the Company, to amend
or supplement the Offering Memorandum in order that the Offering
Memorandum will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is
delivered to a purchaser, not misleading, or if it is necessary to
amend or supplement the Offering Memorandum to comply with applicable
law, to promptly prepare such amendment or supplement as may be
necessary to correct such untrue statement or omission or so that the
Offering Memorandum, as so amended or supplemented, will comply with
applicable law;
(e) for so long as the Securities are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, to furnish to holders of the Securities and prospective
purchasers of the Securities designated by such holders, upon request
of such holders or such prospective purchasers, the information
required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act, unless the Company is then subject to and in compliance
with Section 13 or 15(d) of the Exchange Act (the foregoing agreement
being for the benefit of the holders from time to time of the
Securities and prospective purchasers of the Securities designated by
such holders);
<PAGE> 14
14
(f) for so long as the Securities are outstanding, to furnish
to the Initial Purchasers copies of any annual reports, quarterly
reports and current reports filed by the Company with the Commission on
Forms 10-K, 10-Q and 8-K, or such other similar forms as may be
designated by the Commission, and such other documents, reports and
information as shall be furnished by the Company to the Trustee or to
the holders of the Securities pursuant to the Indenture or the Exchange
Act or any rule or regulation of the Commission thereunder;
(g) to promptly take from time to time such actions as the
Initial Purchasers may reasonably request to qualify the Securities for
offering and sale under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers may designate and to continue
such qualifications in effect for so long as required for the resale of
the Securities; and to arrange for the determination of the eligibility
for investment of the Securities under the laws of such jurisdictions
as the Initial Purchasers may reasonably request; provided that the
Company and its subsidiaries shall not be obligated to qualify as
foreign corporations in any jurisdiction in which they are not so
qualified or to subject itself to taxation in respect to doing business
in any jurisdiction in which it is not otherwise so subject or to file
a general consent to service of process in any jurisdiction;
(h) to assist the Initial Purchasers in arranging for the
Securities to be designated Private Offerings, Resales and Trading
through Automated Linkages ("PORTAL") Market securities in accordance
with the rules and regulations adopted by the National Association of
Securities Dealers, Inc. ("NASD") relating to trading in the PORTAL
Market and for the Securities to be eligible for clearance and
settlement through the Depository Trust Company ("DTC");
(i) not to, and to cause its affiliates not to, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of
any security (as such term is defined in the Securities Act) which
could be integrated with the sale of the Securities in a manner which
would require registration of the Securities under the Securities Act;
(j) except following the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case
may be, not to, and to cause its affiliates not to, and not to
authorize or knowingly permit any person acting on their behalf to,
solicit any offer to buy or offer to sell the Securities by means of
any form of general solicitation or general advertising within the
meaning of Regulation D or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act; and not to
offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, any securities under circumstances where such offer, sale,
contract or disposition would cause the exemption afforded by Section
4(2) of the Securities Act to cease to be applicable to the offering
and sale of the Securities as contemplated by this Agreement and the
Offering Memorandum;
<PAGE> 15
15
(k) for a period of 90 days from the date of the Offering
Memorandum, not to offer for sale, sell, contract to sell or otherwise
dispose of, directly or indirectly, or file a registration statement
for, or announce any offer, sale, contract for sale of or other
disposition of any debt securities issued or guaranteed by the Company
or any of its subsidiaries (other than the Securities) without the
prior written consent of the Initial Purchasers;
(l) during the period from the Closing Date until three years
after the Closing Date, without the prior written consent of the
Initial Purchasers, not to, and not permit any of its affiliates (as
defined in Rule 144 under the Securities Act) to, resell any of the
Securities that have been reacquired by them, except for Securities (i)
purchased by the Company or any of its affiliates (other than Smith
Barney Inc.) and resold in a transaction registered under the
Securities Act or (ii) purchased by Smith Barney Inc. and resold in a
transaction registered under or exempt from the Securities Act;
(m) not to, for so long as the Securities are outstanding, be
or become, or be or become owned by, an open-end investment company,
unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company
Act, and to not be or become, or be or become owned by, a closed-end
investment company required to be registered, but not registered
thereunder;
(n) in connection with the offering of the Securities, until
CSI on behalf of the Initial Purchasers shall have notified the Company
of the completion of the resale of the Securities, not to, and to cause
its affiliated purchasers (as defined in Regulation M under the
Exchange Act) (other than Smith Barney Inc.) not to, either alone or
with one or more other persons, bid for or purchase, for any account in
which such purchasers has a beneficial interest, any Securities, or
attempt to induce any person to purchase any Securities; and not to,
and to cause its affiliated purchasers including Smith Barney Inc. not
to, make bids or purchase for the purpose of creating actual, or
apparent, active trading in or of raising the price of the Securities;
(o) in connection with the offering of the Securities, to make
its officers, employees, independent accountants and legal counsel
reasonably available upon request by the Initial Purchasers;
(p) to furnish to each of the Initial Purchasers on the date
hereof a copy of the independent accountants' report included in the
Offering Memorandum signed by the accountants rendering such report;
(q) to do and perform all things required to be done and
performed by it under this Agreement that are within its control prior
to or after the Closing Date, and to use its best efforts to satisfy
all conditions precedent contained herein on its part to the delivery
of the Securities;
<PAGE> 16
16
(r) to not take any action prior to the execution and delivery
of the Indenture which, if taken after such execution and delivery,
would have violated any of the covenants contained in the Indenture;
(s) to use its best efforts to not take any action prior to
the Closing Date which would require the Offering Memorandum to be
amended or supplemented pursuant to Section 4(d);
(t) prior to the Closing Date, not to issue any press release
or other communication directly or indirectly or hold any press
conference with respect to the Company, its condition, financial or
otherwise, or earnings, business affairs or business prospects (except
for routine oral marketing communications in the ordinary course of
business and consistent with the past practices of the Company and of
which the Initial Purchasers are notified), without the prior written
consent of the Initial Purchasers, unless in the judgment of the
Company and its counsel, and after notification to the Initial
Purchasers, such press release or communication is required by law; and
(u) to apply the net proceeds from the sale of the Securities
as set forth in the Offering Memorandum under the heading "Use of
Proceeds".
5. Conditions of Initial Purchasers' Obligations. The
respective obligations of the several Initial Purchasers hereunder are subject
to the accuracy, on and as of the date hereof and the Closing Date, of the
representations and warranties of the Company contained herein, to the accuracy
of the statements of the Company and its officers made in any certificates
delivered pursuant hereto, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Offering Memorandum (and any amendments or supplements
thereto) shall have been printed and copies distributed to the Initial
Purchasers as promptly as practicable on or following the date of this
Agreement or at such other date and time as to which the Initial
Purchasers may agree; and no stop order suspending the sale of the
Securities in any jurisdiction shall have been issued and no proceeding
for that purpose shall have been commenced or shall be pending or
threatened.
(b) None of the Initial Purchasers shall have discovered and
disclosed to the Company on or prior to the Closing Date that the
Offering Memorandum or any amendment or supplement thereto contains an
untrue statement of a fact which, in the opinion of counsel for the
Initial Purchasers, is material or omits to state any fact which, in
the opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of each of the Transaction
Documents and the Offering Memorandum, and all other legal matters
relating to the Transaction Documents and
<PAGE> 17
17
the transactions contemplated thereby, shall be satisfactory in all
material respects to the Initial Purchasers, and the Company shall have
furnished to the Initial Purchasers all documents and information that
they or their counsel may reasonably request to enable them to pass
upon such matters.
(d) Debevoise & Plimpton shall have furnished to the Initial
Purchasers their written opinion, as counsel to the Company, addressed
to the Initial Purchasers and dated the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchasers,
substantially to the effect set forth in Annex B hereto.
(e) (i) Ashurst Morris Crisp, British counsel to the Company,
shall have furnished to the Initial Purchasers their written opinion
addressed to the Initial Purchasers and dated the Closing Date, in form
and substance reasonably satisfactory to the Initial Purchasers,
substantially to the effect set forth in Annex C-1 hereto;
(ii) Oppenhoff & Radler, German counsel to the
Company, shall have furnished to the Initial Purchasers their written
opinion addressed to the Initial Purchasers and dated the Closing Date,
in form and substance reasonably satisfactory to the Initial
Purchasers, substantially to the effect set forth in Annex C-2 hereto;
(iii) Nishimura & Partners, Japanese counsel to the
Company, shall have furnished to the Initial Purchasers their written
opinion addressed to the Initial Purchasers and dated the Closing Date,
in form and substance reasonably satisfactory to the Initial
Purchasers, substantially to the effect set forth in Annex C-3 hereto;
and
(iv) Fred Kan & Co., Hong Kong counsel to the
Company, shall have furnished to the Initial Purchasers their written
opinion addressed to the Initial Purchasers and dated the Closing Date,
in form and substance reasonably satisfactory to the Initial
Purchasers, substantially to the effect set forth in Annex C-4 hereto.
(f) The Initial Purchasers shall have received from Simpson
Thacher & Bartlett, counsel for the Initial Purchasers, such opinion or
opinions, dated the Closing Date, with respect to such matters as the
Initial Purchasers may reasonably require, and the Company shall have
furnished to such counsel such documents and information as they
request for the purpose of enabling them to pass upon such matters.
(g) The Company shall have furnished to the Initial Purchasers
a letter of Coopers & Lybrand L.L.P., addressed to the Initial
Purchasers and dated the date hereof, in form and substance
satisfactory to the Initial Purchasers, substantially to the effect set
forth in Annex D hereto and a letter of Arthur Andersen & Company,
addressed to the Initial Purchasers and dated the date hereof in form
and substance satisfactory to the Initial Purchasers (the "Initial
Letters").
<PAGE> 18
18
(h) The Company shall have furnished to the Initial Purchasers
letters (the "Bring-Down Letters") of each of Coopers & Lybrand L.L.P.,
and Arthur Andersen & Company, addressed to the Initial Purchasers and
dated the Closing Date (i) confirming that they are independent public
accountants with respect to the Company and its subsidiaries within the
meaning of Rule 101 of the Code of Professional Conduct of the AICPA
and its interpretations and rulings thereunder, (ii) stating, as of the
date of such respective Bring-Down Letter (or, with respect to matters
involving changes or developments since the respective dates as of
which specified financial information is given in the Offering
Memorandum, as of a date not more than three business days prior to the
date of such Bring-Down Letters), that the conclusions and findings of
such accountants with respect to the financial information and other
matters covered by the Initial Letters are accurate and (iii)
confirming in all material respects the conclusions and findings set
forth in the Initial Letters. In addition, the Company shall have
received letters from Coopers & Lybrand L.L.P. consenting to the use,
in connection with the offering of the Securities, of the audited
financial statements of the Company prepared by such accountants and
included in the Offering Memorandum.
(i) The Company shall have furnished to the Initial Purchasers
a certificate, dated the Closing Date, of its chief executive officer
and its chief financial officer stating that (A) such officers have
carefully examined the Offering Memorandum, (B) in their opinion, the
Offering Memorandum, as of its date, did not include any untrue
statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, and since the date of the Offering
Memorandum, no event has occurred which should have been set forth in a
supplement or amendment to the Offering Memorandum so that the Offering
Memorandum (as so amended or supplemented) would not include any untrue
statement of a material fact and would not omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading and (C) as of the Closing Date, the
representations and warranties of the Company in this Agreement are
true and correct in all material respects, the Company has complied
with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder on or prior to the Closing Date, and
subsequent to the date of the most recent financial statements
contained in the Offering Memorandum, there has been no material
adverse change in the financial position or results of operation of the
Company or any of its subsidiaries, or any change, or any development
including a prospective change, in or affecting the condition
(financial or otherwise), results of operations, business or prospects
of the Company and its subsidiaries taken as a whole, except as set
forth in the Offering Memorandum.
(j) The Initial Purchasers shall have received a counterpart
of the Registration Rights Agreement which shall have been executed and
delivered by a duly authorized officer of the Company.
<PAGE> 19
19
(k) The Indenture shall have been duly executed and delivered
by the Company and the Trustee, and the Securities shall have been duly
executed and delivered by the Company and duly authenticated by the
Trustee.
(l) The Securities shall have been approved by the NASD for
trading in the PORTAL Market.
(m) If any event shall have occurred that requires the Company
under Section 4(d) to prepare an amendment or supplement to the
Offering Memorandum, such amendment or supplement shall have been
prepared, the Initial Purchasers shall have been given a reasonable
opportunity to comment thereon, and copies thereof shall have been
delivered to the Initial Purchasers reasonably in advance of the
Closing Date.
(n) There shall not have occurred any invalidation of Rule
144A under the Securities Act by any court or any withdrawal or
proposed withdrawal of any rule or regulation under the Securities Act
or the Exchange Act by the Commission or any amendment or proposed
amendment thereof by the Commission which in the judgment of the
Initial Purchasers would materially impair the ability of the Initial
Purchasers to purchase, hold or effect resales of the Securities as
contemplated hereby.
(o) Subsequent to the execution and delivery of this Agreement
or, if earlier, the dates as of which information is given in the
Offering Memorandum (exclusive of any amendment or supplement thereto),
there shall not have been any change in the capital stock or long-term
debt or any change, or any development involving a prospective change,
in or affecting the condition (financial or otherwise), results of
operations, business or prospects of the Company and its subsidiaries
taken as a whole, the effect of which, in any such case described
above, is, in the judgment of the Initial Purchasers, so material and
adverse as to make it impracticable or inadvisable to proceed with the
sale or delivery of the Securities on the terms and in the manner
contemplated by this Agreement and the Offering Memorandum (exclusive
of any amendment or supplement thereto).
(p) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency or body which would, as of the Closing Date,
prevent the issuance or sale of the Securities; and no injunction,
restraining order or order of any other nature by any federal or state
court of competent jurisdiction shall have been issued as of the
Closing Date which would prevent the issuance or sale of the
Securities.
(q) Subsequent to the execution and delivery of this Agreement
(i) no downgrading shall have occurred in the rating accorded the
Securities or any of the Company's other debt securities or preferred
stock by any "nationally recognized statistical rating organization",
as such term is defined by the Commission for purposes of Rule
436(g)(2) of the rules and regulations of the Commission under the
Securities
<PAGE> 20
20
Act and (ii) no such organization shall have publicly announced that it
has under surveillance or review (other than an announcement with
positive implications of a possible upgrading), its rating of the
Securities or any of the Company's other debt securities or preferred
stock.
(r) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange, the American Stock
Exchange or the over-the-counter market shall have been suspended or
limited, or minimum prices shall have been established on any such
exchange or market by the Commission, by any such exchange or by any
other regulatory body or governmental authority having jurisdiction, or
trading in any securities of the Company on any exchange or in the
over-the-counter market shall have been suspended or (ii) any
moratorium on commercial banking activities shall have been declared by
federal or New York state authorities or (iii) an outbreak or
escalation of hostilities or a declaration by the United States of a
national emergency or war or (iv) a material adverse change in general
economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) the effect of which, in the case of this clause (iv),
is, in the judgment of the Initial Purchasers, so material and adverse
as to make it impracticable or inadvisable to proceed with the sale or
the delivery of the Securities on the terms and in the manner
contemplated by this Agreement and in the Offering Memorandum
(exclusive of any amendment or supplement thereto).
(s) The Company shall have furnished to the Initial Purchasers
such documents and opinions as they may reasonably require for the
purpose of enabling them to pass upon the issuance and sale of the
Securities as herein contemplated, or in order to evidence the accuracy
of any of the representations or warranties, or the fulfillment of any
of the conditions, herein contained.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchasers.
6. Termination. The obligations of the Initial Purchasers
hereunder may be terminated by the Initial Purchasers, in their absolute
discretion, by notice given to and received by the Company prior to delivery of
and payment for the Securities if, prior to that time, any of the events
described in Section 5(m), (n), (o), (p) or (q) shall have occurred and be
continuing.
7. Defaulting Initial Purchasers. (a) If, on the Closing Date,
any Initial Purchaser defaults in the performance of its obligations under this
Agreement, the non-defaulting Initial Purchasers may make arrangements for the
purchase of the Securities which such defaulting Purchaser agreed but failed to
purchase by other persons satisfactory to the Company and the non-defaulting
Initial Purchasers, but if no such arrangements are made
<PAGE> 21
21
within 36 hours after such default, this Agreement shall terminate without
liability on the part of the non-defaulting Initial Purchasers or the Company,
except that the Company will continue to be liable for the payment of expenses
to the extent set forth in Sections 8 and 12 and except that the provisions of
Sections 9 and 10 shall not terminate and shall remain in effect. As used in
this Agreement, the term "Initial Purchasers" includes, for all purposes of this
Agreement unless the context otherwise requires, any party not listed in
Schedule 1 hereto that, pursuant to this Section 7, purchases Securities which a
defaulting Initial Purchaser agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting
Initial Purchaser of any liability it may have to the Company or any
non-defaulting Initial Purchaser for damages caused by its default. If other
persons are obligated or agree to purchase the Securities of a defaulting
Initial Purchaser, either the non-defaulting Initial Purchasers or the Company
may postpone the Closing Date for up to seven full business days in order to
effect any changes that in the opinion of counsel for the Company or counsel for
the Initial Purchasers may be necessary in the Offering Memorandum or in any
other document or arrangement, and the Company agrees to promptly prepare any
amendment or supplement to the Offering Memorandum that effects any such
changes.
8. Reimbursement of Initial Purchasers' Expenses. If (a) this
Agreement shall have been terminated pursuant to Section 7, (b) the Company
shall fail to tender the Securities for delivery to the Initial Purchasers for
any reason permitted under this Agreement or (c) the Initial Purchasers shall
decline to purchase the Securities for any reason permitted under this
Agreement, the Company shall reimburse the Initial Purchasers for such
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
as shall have been reasonably incurred by the Initial Purchasers in connection
with this Agreement and the proposed purchase and resale of the Securities. If
this Agreement is terminated pursuant to Section 7 by reason of the default of
one or more of the Initial Purchasers, the Company shall not be obligated to
reimburse any defaulting Initial Purchaser on account of such expenses.
9. Indemnification. (a) The Company shall indemnify and hold
harmless each Initial Purchaser, its affiliates, their respective officers,
directors, employees, representatives and agents, and each person, if any, who
controls any Initial Purchaser within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 9(a) and
Section 10 as an Initial Purchaser), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including,
without limitation, any loss, claim, damage, liability or action relating to
purchases and sales of the Securities), to which that Initial Purchaser may
become subject under the Securities Act, the Exchange Act, any other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Preliminary Offering Memorandum or the Offering Memorandum or in any
amendment or supplement thereto or in any information provided by the Company
pursuant to Section 4(e) or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in
<PAGE> 22
22
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and shall reimburse each Initial Purchaser
promptly upon demand for any legal or other expenses reasonably incurred by that
Initial Purchaser in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with any Initial Purchasers' Information; and
provided, further, that with respect to any such untrue statement in or omission
from the Preliminary Offering Memorandum, the indemnity agreement contained in
this Section 9(a) shall not inure to the benefit of any such Initial Purchaser
to the extent that the sale to the person asserting any such loss, claim,
damage, liability or action was an initial resale by such Initial Purchaser and
any such loss, claim, damage, liability or action of or with respect to such
Initial Purchaser results from the fact that both (A) to the extent required by
applicable law, a copy of the Offering Memorandum was not sent or given to such
person at or prior to the written confirmation of the sale of such Securities to
such person and (B) the untrue statement in or omission from the Preliminary
Offering Memorandum was corrected in the Offering Memorandum unless, in either
case, such failure to deliver the Offering Memorandum was a result of
non-compliance by the Company with Section 4(b).
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 9(b) and
Section 10 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject under the Securities Act, the Exchange Act, any other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum or the Offering Memorandum
or in any amendment or supplement thereto or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with any Initial
Purchasers' Information, and shall reimburse the Company promptly upon demand
for any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 9(a) or
<PAGE> 23
23
9(b), notify the indemnifying party in writing of the claim or the commencement
of that action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under this
Section 9 except to the extent that it has been materially prejudiced (through
the forfeiture of substantive rights or defenses) by such failure; and,
provided, further, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have to an indemnified party
otherwise than under this Section 9. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 9 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that an indemnified party
shall have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel for the indemnified party will be at
the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(2) a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (3) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 9(a) and 9(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending proceeding in respect of which any indemnified party is a party and
indemnity has been sought hereunder by such indemnified party unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
<PAGE> 24
24
The obligations of the Company and the Initial Purchasers in
this Section 9 and in Section 10 are in addition to any other liability that the
Company or the Initial Purchasers, as the case may be, may otherwise have,
including in respect of any breaches of representations, warranties and
agreements made herein by any such party.
10. Contribution. If the indemnification provided for in Section
9 is unavailable or insufficient to hold harmless an indemnified party under
Section 9(a) or 9(b), 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 loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company on the one hand and by the
Initial Purchasers on the other hand from the offering of the Securities or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company on the one hand and the Initial Purchasers on the other hand with
respect to the statements or omissions that resulted in such loss, claim, damage
or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Initial Purchasers on the other hand with respect to such
offering shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Securities purchased under this Agreement (before
deducting expenses) received by or on behalf of the Company, on the one hand,
and the total discounts and commissions received by the Initial Purchasers with
respect to the Securities purchased under this Agreement, on the other hand,
bear to the total gross proceeds from the sale of the Securities under this
Agreement, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to the
Company or information supplied by the Company on the one hand or to any Initial
Purchasers' Information on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and the Initial Purchasers agree
that it would not be just and equitable if contributions pursuant to this
Section 10 were to be determined by pro rata allocation (even if the Initial
Purchasers were treated as one entity for such purpose) or by any other method
of allocation that does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 10 shall be deemed to include, for purposes of
this Section 10, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending or preparing to
defend any such action or claim. Notwithstanding the provisions of this Section
10, no Initial Purchaser shall be required to contribute any amount in excess of
the amount by which the total discounts and commissions received by such Initial
Purchaser with respect to the Securities purchased by it under this Agreement
exceeds the amount of any damages which such Initial Purchaser has otherwise
paid or become liable to pay by reason of any untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
<PAGE> 25
25
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations
to contribute as provided in this Section 10 are several in proportion to their
respective purchase obligations and not joint.
11. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the Initial Purchasers, the
Company and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except as
provided in Sections 9 and 10 with respect to affiliates, officers, directors,
employees, representatives, agents and controlling persons of the Company and
the Initial Purchasers and in Section 4(e) with respect to holders and
prospective purchasers of the Securities. Nothing in this Agreement is intended
or shall be construed to give any person, other than the persons referred to in
this Section 11, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
12. Expenses. The Company agrees with the Initial Purchasers to
pay (a) the costs incident to the authorization, issuance, sale, preparation and
delivery of the Securities and any taxes payable in that connection; (b) the
costs incident to the preparation, printing and distribution of the Preliminary
Offering Memorandum, the Offering Memorandum and any amendments or supplements
thereto; (c) the costs of reproducing and distributing each of the Transaction
Documents; (d) the costs incident to the preparation, printing and delivery of
the certificates evidencing the Securities, including stamp duties and transfer
taxes, if any, payable upon issuance of the Securities; (e) the fees and
expenses of the Company's counsel and independent accountants; (f) the fees and
expenses of qualifying the Securities under the securities laws of the several
jurisdictions as provided in Section 4(h) and of preparing, printing and
distributing Blue Sky Memoranda (including related fees and expenses of counsel
for the Initial Purchasers); (g) any fees charged by rating agencies for rating
the Securities; (h) the fees and expenses of the Trustee and any paying agent
(including related fees and expenses of any counsel to such parties); (i) all
expenses and application fees incurred in connection with the application for
the inclusion of the Securities on the PORTAL Market and the approval of the
Securities for book-entry transfer by DTC; and (j) all other costs and expenses
incident to the performance of the obligations of the Company under this
Agreement which are not otherwise specifically provided for in this Section 12;
provided, however, that except as provided in this Section 12 and Section 8, the
Initial Purchasers shall pay their own costs and expenses, including counsel's
fees and expenses.
13. Survival. The respective indemnities, rights of
contribution, representations, warranties and agreements of the Company and the
Initial Purchasers contained in this Agreement or made by or on behalf of the
Company or the Initial Purchasers pursuant to this Agreement or any certificate
delivered pursuant hereto shall survive the delivery of and payment for the
Securities and shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement or any investigation made by or on
behalf of any of them or any of their respective affiliates, officers,
directors, employees, representatives, agents or controlling persons.
<PAGE> 26
26
14. Notices, etc.. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent
by mail or telecopy transmission to Chase Securities Inc., 270 Park
Avenue, New York, New York 10017, Attention: David Fass (telecopier
no.: (212) 270-0994); or
(b) if to the Company, shall be delivered or sent by mail or
telecopy transmission to the address of the Company set forth in the
Offering Memorandum, Attention: Robert D. Pabst (telecopier no.: (616)
695-2207) with a copy to: Debevoise & Plimpton, 875 Third Ave, New
York, New York 10022, Attention: Steven Ostner (telecopier no.: (212)
909-6836); and Greenwich Street Capital Partners, L.P., 388 Greenwich
Street, 36th Floor, New York, New York, 10013, Attention: Nicholas E.
Somers (telecopier no.: (212) 816-0166);
provided that any notice to an Initial Purchaser pursuant to Section 9(c) shall
also be delivered or sent by mail to such Initial Purchaser at its address set
forth on the signature page hereof. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the Initial Purchasers by CSI.
15. Definition of Terms. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange, Inc.
is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
16. Initial Purchasers' Information. The parties hereto
acknowledge and agree that the Initial Purchasers' Information consists solely
of the following information in the Preliminary Offering Memorandum and the
Offering Memorandum: (i) the last paragraph on the front cover page concerning
the terms of the offering by the Initial Purchasers; (ii) the legend on the
inside front cover page concerning over-allotment and trading activities by the
Initial Purchasers; and (iii) the statements concerning the Initial Purchasers
contained in the last two paragraphs under the heading "Plan of Distribution"
and the last paragraph under the heading "Related Transactions".
17. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
18. Counterparts. This Agreement may be executed in one or
more counterparts (which may include counterparts delivered by telecopier) and,
if executed in more than one counterpart, the executed counterparts shall each
be deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
<PAGE> 27
27
19. Amendments. No amendment or waiver of any provision of
this Agreement, nor any consent or approval to any departure therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto.
20. Headings. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
<PAGE> 28
28
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between the Company and the several
Initial Purchasers in accordance with its terms.
Very truly yours,
EV INTERNATIONAL, INC.
By /s/ ROBERT D. PABST
-------------------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.
By /s/ DAVID V. FASS
----------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
1 Chase Plaza, 25th floor
New York, New York 10081
Attention: Legal Department
SMITH BARNEY INC.
By /s/ ALEX WEISS
----------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
388 Greenwich Street, 36th Floor
New York, New York 10013
Attention:
<PAGE> 29
SCHEDULE 1
<TABLE>
<CAPTION>
Principal
Amount
Initial Purchasers of Securities
------------------ -------------
<S> <C>
Chase Securities Inc. $ 75,000,000
Smith Barney Inc. $ 25,000,000
------------
Total $100,000,000
============
</TABLE>
<PAGE> 30
ANNEX A
[Form of Exchange and Registration Rights Agreement]
<PAGE> 31
ANNEX B
Form of Opinion of Debevoise & Plimpton, Counsel for the Company
Debevoise & Plimpton shall have furnished to the Initial
Purchasers their written opinion, as counsel to the Company, addressed to the
Initial Purchasers and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers, substantially to the effect set forth
below:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Delaware,
is duly qualified to do business and is in good standing as a foreign
corporation in Delaware, California, Tennessee, Indiana, Michigan,
Oklahoma, Texas and Washington, which jurisdictions are all of the
domestic jurisdictions identified by management of the Company to such
counsel in which the Company or its domestic subsidiaries own property
or have significant operations and has all requisite corporate power
and authority necessary to own or hold its properties and to conduct
the businesses in which it is engaged (except where the failure to so
qualify or have such power or authority would not, singularly or in the
aggregate, have a Material Adverse Effect),
(ii) the Company has an authorized capitalization as set forth
in the Offering Memorandum, and all of the outstanding shares of
capital stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable; and the capital stock of
the Company conforms in all material respects to the description
thereof contained in the Offering Memorandum;
(iii) the statements in the Offering Memorandum under the
heading "Certain Federal Income Tax Considerations", insofar as such
statements purport to summarize the Federal laws of United States,
fairly summarize such provisions described therein in all material
respects; and such counsel does not have actual knowledge of any
current or pending legal or governmental actions, suits or proceedings
which would be required to be described in the Offering Memorandum if
the Offering Memorandum were a prospectus included in a registration
statement on Form S-1 which are not described as so required;
(iv) the Indenture conforms in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations
of the Commission applicable to an indenture which is qualified
thereunder;
(v) the Company has full right, power and authority to execute
and deliver each of the Transaction Documents and to perform its
obligations thereunder; and all corporate action required to be taken
for the due and proper authorization, execution and delivery of each of
the Transaction Documents and the consummation of the transactions
contemplated thereby have been duly and validly taken;
<PAGE> 32
2
(vi) each of the Purchase Agreement and the Registration
Rights Agreement has been duly authorized, executed and delivered by
the Company and constitutes a valid and legally binding agreement of
the Company enforceable against the Company in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar laws
of general applicability relating to or affecting creditors' rights
generally and to general equity principles (whether considered in a
proceeding in equity or at law), an implied covenant of good faith and
fair dealing, the possible judicial application of foreign laws or
foreign governmental or judicial action affecting creditors' rights
and, in the case of indemnification and contribution provisions
therein, considerations of public policy;
(vii) the Indenture has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution and
delivery thereof by the Trustee, constitutes a valid and legally
binding agreement of the Company enforceable against the Company in
accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and other similar laws of general applicability relating to or
affecting creditors' rights generally and to general equity principles
(whether considered in a proceeding in equity or at law), an implied
covenant of good faith and fair dealing, the possible judicial
application of foreign laws or foreign governmental or judicial action
affecting creditors' rights and, in the case of indemnification and
contribution provisions therein, considerations of public policy;
(viii) the Securities have been duly authorized and issued by
the Company and, assuming due authentication thereof by the Trustee in
accordance with the terms of the Indenture and upon payment and
delivery in accordance with the Purchase Agreement and the Indenture,
will constitute valid and legally binding obligations of the Company
entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms, except as may be limited by
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws of general applicability relating to
or affecting creditors' rights generally and to general equity
principles (whether considered in a proceeding in equity or at law), an
implied covenant of good faith and fair dealing, the possible judicial
application of foreign laws or foreign governmental or judicial action
affecting creditors' rights and, in the case of indemnification and
contribution provisions therein, considerations of public policy;
(ix) each Transaction Document, to the extent described in the
Offering Memorandum, conforms in all material respects to the
description thereof contained in the Offering Memorandum;
(x) the execution, delivery and performance by the Company of
each of the Purchase Agreement, the Indenture and the Registration
Rights Agreement, the compliance by the Company with the terms thereof,
the consummation of the transactions contemplated by such documents and
the issuance, authentication, sale and
<PAGE> 33
3
delivery of the Securities will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any of the agreements and instruments listed on Exhibit
A hereto (which agreements and instruments have been certified by the
Company to such counsel to constitute all the material agreements or
instruments to which the Issuer or any of its domestic subsidiaries is
a party or by which the Issuer or any of its domestic subsidiaries is
bound or to which any of the property or assets of the Issuer or any of
its domestic subsidiaries is subject and which relate to the
transactions contemplated by the Transaction Documents (other than the
Transaction Documents)), nor will such actions result in any violation
of the provisions of the charter or by-laws of the Company or any of
its subsidiaries or any existing Federal or New York State, statute,
rule or regulation or, to the knowledge of counsel, any judgment,
order, decree of any Federal or New York State court or arbitrator or
governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties or assets; and no
consent, approval, authorization or order of, or filing or registration
with, any such court or arbitrator or governmental agency or body under
any such statute, judgment, order, decree, rule or regulation is
required for the execution, delivery and performance by the Company of
each of the Purchase Agreement, the Indenture or the Registration
Rights Agreement, the issuance, authentication, sale and delivery of
the Securities and compliance by the Company with the terms thereof and
the consummation of the transactions contemplated by the Transaction
Documents, except for such consents, approvals, authorizations,
filings, registrations or qualifications (i) which have been obtained
or made prior to the Closing Date, (ii) as may be required under state
securities or Blue Sky laws in connection with the purchase and resale
of the Securities by the Initial Purchasers, and (iii) as may be
required under the Securities Act of 1933, as amended (the "Act"), the
Trust Indenture Act of 1939, as amended, or state securities or Blue
Sky laws in connection with the Exchange Offer contemplated in the
Offering Memorandum.
(xi) to the best knowledge of such counsel, and other than as
set forth or contemplated in the Offering Memorandum there are no
pending actions or suits or judicial, arbitral, rule-making,
administrative or other proceedings to which the Company or any of its
subsidiaries is a party or of which any property or assets of the
Company or any of its subsidiaries is the subject which question the
validity or enforceability of any of the Transaction Documents or any
action taken or to be taken pursuant thereto; and to the best knowledge
of such counsel, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
(xii) neither the Company nor any of its subsidiaries is in
violation of its charter or by-laws;
(xiii) neither the Company nor any of its subsidiaries is (A)
an "investment company" or a company "controlled by" an investment
company within the meaning of the Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission thereunder,
without taking account of any exemption under the Investment
<PAGE> 34
4
Company Act arising out of the number of holders of the Company's
securities or (B) a "holding company" or a "subsidiary company" of a
holding company or an "affiliate" thereof within the meaning of the
Public Utility Holding Company Act of 1935, as amended;
(xiv) neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Securities will violate Regulation G, T, U or X of the
Federal Reserve Board; and
(xv) assuming the accuracy of the representations, warranties
and agreements of the Company and of the Initial Purchasers contained
in the Purchase Agreement, the issuance, offer and sale of the
Securities to the Initial Purchasers and the initial resale and
delivery of the Securities in the manner contemplated by the Purchase
Agreement and the Offering Memorandum are exempt from the registration
requirements of the Securities Act, and it is not necessary to qualify
the Indenture under the Trust Indenture Act.
Such counsel shall also state that they themselves have not checked the
accuracy or completeness of, or otherwise verified, and are not passing upon and
assume no responsibility for the accuracy or completeness of, the information
contained or incorporated by reference in the Offering Memorandum, except to the
limited extent stated in paragraphs (ii), (iii) and (ix) above. In the course of
such counsel's review, such counsel has participated in conferences with certain
officers and other representatives of the Company, representatives of its
independent public accountants and representatives of the Initial Purchasers, at
which the contents of the Offering Memorandum were discussed, and in the course
of that review and discussion, but without independent check or verification, no
facts have come to such counsel's attention that have caused such counsel to
believe that any part of the Offering Memorandum contains an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; it being understood that such
counsel shall express no opinion as to the financial statements or other
financial, accounting or statistical data included in an of the documents
mentioned in this paragraph
In rendering such opinion, such counsel may rely as to matters of fact,
to the extent such counsel deems proper, on certificates of responsible officers
of the Company and public officials which are furnished to the Initial
Purchasers.
<PAGE> 35
ANNEX C-1
Form of Opinion of Ashurt Morris Crisp
1. [Local company/ies] has been duly incorporated and is validly
existing as a corporation under the laws of [your jurisdiction] and has the
power and authority necessary to own or hold its properties and to conduct
businesses in which it is engaged.
2. All of the issued shares of capital stock of [local company/ies]
have been duly and validly authorized and issued and are fully paid and
non-assessable, and all the issued and outstanding shares [of local company/ies]
are held by EV International Holding Corporation, Inc.
3. To your knowledge, there are no legal or governmental proceedings
pending or threatened to which EV International, Inc. (the "Company") and [local
company/ies] are a party or of which any property or assets of the Company or
[local company/ies] are subject which, if determined adversely to the Company or
[local company/ies], are reasonably likely to have a material adverse effect on
the financial condition, results of operations, business or prospects of the
Company and all of its subsidiaries, taken as a whole.
<PAGE> 36
ANNEX C-2
Form of Opinion of Oppenhoff & Radler
1. [Local company/ies] has been duly incorporated and is validly
existing as a corporation under the laws of [your jurisdiction] and has the
power and authority necessary to own or hold its properties and to conduct
businesses in which it is engaged.
2. All of the issued shares of capital stock of [local company/ies]
have been duly and validly authorized and issued and are fully paid and
non-assessable, and all the issued and outstanding shares [of local company/ies]
are held by EV International Holding Corporation, Inc.
3. To your knowledge, there are no legal or governmental proceedings
pending or threatened to which EV International, Inc. (the "Company") and [local
company/ies] are a party or of which any property or assets of the Company or
[local company/ies] are subject which, if determined adversely to the Company or
[local company/ies], are reasonably likely to have a material adverse effect on
the financial condition, results of operations, business or prospects of the
Company and all of its subsidiaries, taken as a whole.
<PAGE> 37
ANNEX C-3
Form of Opinion of Nishimura & Partners
1. [Local company/ies] has been duly incorporated and is validly
existing as a corporation under the laws of [your jurisdiction] and has the
power and authority necessary to own or hold its properties and to conduct
businesses in which it is engaged.
2. All of the issued shares of capital stock of [local company/ies]
have been duly and validly authorized and issued and are fully paid and
non-assessable, and all the issued and outstanding shares [of local company/ies]
are held by EV International Holding Corporation, Inc.
3. To your knowledge, there are no legal or governmental proceedings
pending or threatened to which EV International, Inc. (the "Company") and [local
company/ies] are a party or of which any property or assets of the Company or
[local company/ies] are subject which, if determined adversely to the Company or
[local company/ies], are reasonably likely to have a material adverse effect on
the financial condition, results of operations, business or prospects of the
Company and all of its subsidiaries, taken as a whole.
<PAGE> 38
ANNEX C-4
Form of Opinion of Fred Kan & Co.
1. [Local company/ies] has been duly incorporated and is validly
existing as a corporation under the laws of [your jurisdiction] and has the
power and authority necessary to own or hold its properties and to conduct
businesses in which it is engaged.
2. All of the issued shares of capital stock of [local company/ies]
have been duly and validly authorized and issued and are fully paid and
non-assessable, and all the issued and outstanding shares [of local company/ies]
are held by EV International Holding Corporation, Inc.
3. To your knowledge, there are no legal or governmental proceedings
pending or threatened to which EV International, Inc. (the "Company") and [local
company/ies] are a party or of which any property or assets of the Company or
[local company/ies] are subject which, if determined adversely to the Company or
[local company/ies], are reasonably likely to have a material adverse effect on
the financial condition, results of operations, business or prospects of the
Company and all of its subsidiaries, taken as a whole.
<PAGE> 39
ANNEX D
Form of Initial Comfort Letter
The Company shall have furnished to the Initial Purchasers a
letter of Coopers & Lybrand L.L.P. addressed to the Initial Purchasers and dated
the date of the Purchase Agreement, in form and substance satisfactory to the
Initial Purchasers, substantially to the effect set forth below:
(i) they are independent certified public accountants with
respect to the Company within the meaning of Rule 101 of the Code of
Professional Conduct of the AICPA and its interpretations and rulings;
(ii) in their opinion, the audited financial statements
included in the Offering Memorandum and reported on by them comply in
form in all material respects with the accounting requirements of the
Exchange Act and the related published rules and regulations of the
Commission thereunder that would apply to the Offering Memorandum if
the Offering Memorandum were a prospectus included in a registration
statement on Form S-1 under the Securities Act (except that certain
supporting schedules are omitted);
(iii) based upon a reading of the latest unaudited financial
statements made available by the Company, the procedures of the AICPA
for a review of interim financial information as described in Statement
of Auditing Standards No. 71, reading of minutes and inquiries of
certain officials of the Company who have responsibility for financial
and accounting matters and certain other limited procedures requested
by the Initial Purchasers and described in detail in such letter,
nothing has come to their attention that causes them to believe that
(A) any unaudited financial statements included in the Offering
Memorandum do not comply as to form in all material respects with
applicable accounting requirements, (B) any material modifications
should be made to the unaudited financial statements included in the
Offering Memorandum for them to be in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in
the Offering Memorandum or (C) the information included under the
headings "Summary--Summary Financial Data", "Capitalization", "Selected
Financial Data", and "Management's Discussion and Analysis of Results
of Operations and Financial Condition" is not in conformity with the
disclosure requirements of Regulation S-K that would apply to the
Offering Memorandum if the Offering Memorandum were a prospectus
included in a registration statement on Form S-1 under the Securities
Act;
(iv) based upon the procedures detailed in such letter with
respect to the period subsequent to the date of the last available
balance sheet, including reading of minutes and inquiries of certain
officials of the Company who have responsibility for financial and
accounting matters, nothing has come to their attention that causes
them to believe
<PAGE> 40
2
that (A) at a specified date not more than three business days prior to
the date of such letter, there was any change in capital stock,
increase in long-term debt or decrease in net current assets as
compared with the amounts shown in the November 30, 1996 unaudited
balance sheet included in the Offering Memorandum or (B) for the period
from _________ __, 199__ to a specified date not more than three
business days prior to the date of such letter, there were any
decreases, as compared with the corresponding period in the preceding
year, in net sales, income from operations, EBITDA or net income,
except in all instances for changes, increases or decreases that the
Offering Memorandum discloses have occurred or which are set forth in
such letter, in which case the letter shall be accompanied by an
explanation by the Company as to the significance thereof unless said
explanation is not deemed necessary by the Initial Purchasers; and
(v) they have performed certain other specified procedures as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company) set forth in the Offering
Memorandum agrees with the accounting records of the Company, excluding
any questions of legal interpretation.
<PAGE> 1
EXHIBIT 4(c)
EXECUTION COPY
EV INTERNATIONAL, INC.
$100,000,000
11% Senior Subordinated Notes due 2007
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
March 24, 1997
CHASE SECURITIES INC.
SMITH BARNEY INC.
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
EV International, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to you (the "Initial Purchasers"), upon
the terms and subject to the conditions set forth in a purchase agreement dated
March 19, 1997 (the "Purchase Agreement"), $100,000,000 aggregate principal
amount of its 11% Senior Subordinated Notes due 2007 (the "Securities").
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to your obligations
thereunder, the Company agrees with you, for the benefit of the holders
(including the Initial Purchasers) (the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall (i) prepare
and, not later than 60 days following the date of original issuance of the
Securities (the "Issue Date"), file with the Commission a registration statement
(the "Exchange Offer Registration Statement") on an appropriate form under the
Securities Act with respect to a proposed offer to the Holders (the "Registered
Exchange Offer") to issue and deliver to such Holders, in exchange for the
Securities, a like aggregate principal amount of debt securities of the Company
(the "Exchange Securities") identical in all material respects to the
Securities, except for the transfer restrictions relating to the Securities,
(ii) use its reasonable best efforts to cause the Exchange Offer Registration
Statement to become effective under the Securities Act no later than 150 days
after the Issue Date and the Registered Exchange Offer to be consummated no
later than 165 days after the Issue Date, and (iii) keep the Exchange Offer
Registration Statement effective for not less than 30 days (or longer, if
required by applicable law) after the date that notice of the Registered
Exchange Offer is mailed to the Holders (such period being called the "Exchange
Offer Registration Period"). The Exchange Securities will be issued under the
Indenture or an indenture (the "Exchange Securities
<PAGE> 2
2
Indenture") between the Company and the Trustee or such other bank or trust
company reasonably satisfactory to you, as trustee (the "Exchange Securities
Trustee"), such indenture to be identical in all material respects to the
Indenture except for the transfer restrictions relating to the Securities (as
described above).
Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer, it
being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Securities for Exchange Securities (assuming that such
Holder (a) is not an affiliate of the Company or an Exchanging Dealer (as
defined below) not complying with the requirements of the next sentence, (b)
acquires the Exchange Securities in the ordinary course of such Holder's
business and (c) has no arrangements or understandings with any person to
participate in the distribution of the Exchange Securities) to trade such
Exchange Securities from and after their receipt without any limitations or
restrictions under the Securities Act and without material restrictions under
the securities laws of the several states of the United States. The Company, the
Initial Purchasers and each Exchanging Dealer acknowledge that, pursuant to
current interpretations by the Commission's staff of Section 5 of the Securities
Act, each Holder which is a broker-dealer electing to exchange Securities,
acquired for its own account as a result of market making activities or other
trading activities, for Exchange Securities (an "Exchanging Dealer"), is
required to deliver a prospectus containing the information set forth in Annex A
hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section and in Annex C hereto in
the "Plan of Distribution" section of such prospectus in connection with a sale
of any such Exchange Securities received by such Exchanging Dealer pursuant to
the Registered Exchange Offer.
In connection with the Registered Exchange Offer, the Company
shall:
(a) mail to each Holder a copy of the prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than
30 days after the date that notice of the Registered Exchange Offer is
mailed to the Holders (or longer if required by applicable law);
(c) utilize the services of a Depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York;
(d) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York City time, on the last
business day on which the Registered Exchange Offer shall remain open;
and
(e) otherwise comply in all respects with all laws applicable
to the Registered Exchange Offer.
<PAGE> 3
3
As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:
(a) accept for exchange all Securities tendered and not
validly withdrawn pursuant to the Registered Exchange Offer;
(b) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as
the case may be, promptly to authenticate and deliver to each Holder of
Securities, Exchange Securities equal in principal amount to the
Securities of such Holder so accepted for exchange.
The Company shall make available, for a period of 90 days
after the consummation of the Registered Exchange Offer, a copy of the
prospectus forming part of the Exchange Offer Registration Statement to any
broker-dealer for use in connection with any resale of any Exchange Securities.
Interest on each Exchange Security issued pursuant to the
Registered Exchange Offer will accrue from the last interest payment date on
which interest was paid on the Securities surrendered in exchange therefor or,
if no interest has been paid on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer
shall be required to represent to the Company that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Securities
received by such Holder will be acquired in the ordinary course of business,
(ii) such Holder will have no arrangements or understanding with any person to
participate in the distribution of the Securities or the Exchange Securities
within the meaning of the Securities Act and (iii) such Holder is not an
affiliate of the Company or, if it is such an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Exchange Offer Registration Statement and any amendment
thereto and any prospectus forming part thereof and any supplement thereto
complies in all material respects with the Securities Act and the rules and
regulations of the Commission thereunder, (ii) any Exchange Offer Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
and (iii) any prospectus forming part of any Exchange Offer Registration
Statement, and any supplement to such prospectus, does not include, as of the
consummation of the Registered Exchange Offer, an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
<PAGE> 4
4
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations of the Commission's staff the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (ii) for any other reason the Registered Exchange Offer is not
consummated within 165 days after the Issue Date, or (iii) any holder of Private
Exchange Securities so requests in writing to the Company within 60 days after
the consummation of the Registered Exchange Offer, or (iv) any applicable law or
interpretations do not permit any Holder to participate in the Registered
Exchange Offer, or (v) any Holder that participates in the Registered Exchange
Offer does not receive freely transferable Exchange Securities in exchange for
tendered Securities, or (vi) the Company so elects, then the following
provisions shall apply:
(a) The Company shall use its reasonable best efforts to file
as promptly as practicable with the Commission, and thereafter shall use its
reasonable best efforts to cause to be declared effective, a shelf registration
statement on an appropriate form under the Securities Act relating to the offer
and sale of the Transfer Restricted Securities by the Holders from time to time
in accordance with the methods of distribution set forth in such registration
statement (hereafter, a "Shelf Registration Statement" and, together with any
Exchange Offer Registration Statement, a "Registration Statement").
(b) The Company shall use its reasonable best efforts to keep
the Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders for a period of three
years from the Issue Date or such shorter period that will terminate when all
the Securities covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement (in any such case, such period
being called the "Shelf Registration Period"). The Company shall be deemed not
to have used its reasonable best efforts to keep the Shelf Registration
Statement effective during the requisite period if it voluntarily takes any
action that would result in Holders of Securities or Exchange Securities covered
thereby not being able to offer and sell such Securities or Exchange Securities
during that period, unless such action is required by applicable law
(c) Notwithstanding any other provisions hereof, the Company
will ensure that (i) any Shelf Registration Statement and any amendment thereto
and any prospectus forming part thereof and any supplement thereto complies in
all material respects with the Securities Act and the rules and regulations of
the Commission thereunder, (ii) any Shelf Registration Statement and any
amendment thereto (in either case, other than with respect to information
included therein in reliance upon or in conformity with written information
furnished to the Company by or on behalf of any Holder specifically for use
therein (the "Holders' Information")) does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (iii) any prospectus forming part of any Shelf Registration
Statement, and any supplement to such prospectus (in either case, other than
with respect to Holders' Information), does not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
<PAGE> 5
5
3. Liquidated Damages. (a) The parties hereto agree that the
Holders of Securities will suffer damages if the Company fails to fulfill its
obligations under Section 1 or Section 2, as applicable, and that it would not
be feasible to ascertain the extent of such damages. Accordingly, if (i) the
applicable Registration Statement is not filed with the Commission on or prior
to 60 days after the Issue Date, (ii) the Exchange Offer Registration Statement
or the Shelf Registration Statement, as the case may be, is not declared
effective within 150 days after the Issue Date (or in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
the applicable interpretations of Commission's staff, if later, within 45 days
after publication of the change in law or interpretation), (iii) the Registered
Exchange Offer is not consummated on or prior to 165 days after the Issue Date,
or (iv) the Shelf Registration Statement is filed and declared effective within
150 days after the Issue Date (or in the case of a Shelf Registration Statement
required to be filed in response to a change in law or the applicable
interpretations of Commission's staff, if later, within 45 days after
publication of the change in law or interpretation) but shall thereafter cease
to be effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 30 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Company will be
obligated to pay liquidated damages to each holder of Transfer Restricted
Securities, during the period of one or more such Registration Defaults, in an
amount equal to $ 0.192 per week per $1,000 principal amount of the Securities
constituting Transfer Restricted Securities held by such Holder until (i) the
applicable Registration Statement is filed, (ii) the Exchange Offer Registration
Statement is declared effective and the Registered Exchange Offer is
consummated, (iii) the Shelf Registration Statement is declared effective or
(iv) the Shelf Registration Statement again becomes effective, as the case may
be. Following the cure of all Registration Defaults, the accrual of liquidated
damages will cease. As used herein, the term "Transfer Restricted Securities"
means each Security or Exchange Security until (a) the date on which such
Security, or Exchange Security has been exchanged for a freely transferable
Exchange Security in the Registered Exchange Offer, (b) the date on which such
Security or Exchange Security has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (c) the date on which such Security or Exchange Security is
distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding
anything to the contrary in this Section 3(a), the Company shall not be required
to pay liquidated damages to the holder of Transfer Restricted Securities if
such holder failed to comply with its obligations to make the representations
set forth in the second to last paragraph of Section 1 or failed to provide the
information required to be provided by it, if any, pursuant to Section 4(n).
(b) The Company shall notify the Trustee and the Paying Agent
under the Indenture immediately upon the happening of each and every
Registration Default. The Company shall pay the liquidated damages due on the
Transfer Restricted Securities by depositing with the Paying Agent (which may
not be the Company for these purposes), in trust, for the benefit of the holders
thereof, prior to 10:00 a.m., New York City time, on the next interest payment
date specified by the Indenture and the Securities, sums sufficient to pay the
liquidated damages then due. The liquidated damages due shall be payable on each
interest payment date specified by the Indenture and the Securities to the
record holder entitled to receive the interest payment to be
<PAGE> 6
6
made on such date. Each obligation to pay liquidated damages shall be deemed to
accrue from and including the date of the applicable Registration Default.
(c) The parties hereto agree that the liquidated damages
provided for in this Section 3 constitute a reasonable estimate of and are
intended to constitute the sole damages that will be suffered by holders of
Transfer Restricted Securities by reason of the failure of (i) the Shelf
Registration Statement or the Exchange Offer Registration Statement to be filed,
(ii) the Shelf Registration Statement to remain effective or (iii) the Exchange
Offer Registration Statement to be declared effective and the Registered
Exchange Offer to be consummated, in each case to the extent required by this
Agreement.
4. Registration Procedures. In connection with any
Registration Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to you, prior to the filing
thereof with the Commission, a copy of the Registration Statement and each
amendment thereof and each supplement, if any, to the prospectus included
therein and, in the event that any of the Initial Purchasers (with respect to
any portion of an unsold allotment from the original offering) are participating
in the Registered Exchange Offer or the Shelf Registration, shall use its
reasonable best efforts to reflect in each such document, when so filed with the
Commission, such comments as you reasonably may propose; (ii) if applicable,
include the information set forth in Annex A hereto on the cover, in Annex B
hereto in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section and in Annex C hereto in the "Plan of Distribution"
section of the prospectus forming a part of the Exchange Offer Registration
Statement, and include the information set forth in Annex D hereto in the Letter
of Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if
requested by any Initial Purchaser, include the information required by Items
507 or 508 of Regulation S-K, as applicable, in the prospectus forming a part of
the Exchange Offer Registration Statement.
(b) The Company shall advise you and the Holders (if
applicable) and, if requested by you or any such Holder, confirm such advice in
writing (which advice pursuant to clauses (ii)-(v) hereof shall be accompanied
by an instruction to suspend the use of the prospectus until the requisite
changes have been made):
(i) when any Registration Statement and any amendment thereto
has been filed with the Commission and when such Registration Statement
or any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
<PAGE> 7
7
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities or the
Exchange Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of
any changes in any Registration Statement or the prospectus included
therein so that, as of such date, the statements therein are not
misleading and do not omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(c) The Company will make every reasonable effort to obtain
the withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time.
(d) The Company will furnish to each holder of Transfer
Restricted Securities included within the coverage of any Shelf Registration
Statement, without charge, at least one copy of such Shelf Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules and, if the Holder so requests in writing, all exhibits
(including those incorporated by reference).
(e) The Company will, during the Shelf Registration Period,
promptly deliver to each holder of Transfer Restricted Securities included
within the coverage of any Shelf Registration Statement, without charge, as many
copies of the prospectus (including each preliminary prospectus) included in
such Shelf Registration Statement and any amendment or supplement thereto as
such Holder may reasonably request; and the Company consents to the use of such
prospectus or any amendment or supplement thereto by each of the selling holders
of Transfer Restricted Securities in connection with the offer and sale of the
Transfer Restricted Securities covered by such prospectus or any amendment or
supplement thereto.
(f) The Company will furnish to each Exchanging Dealer or
Initial Purchaser, as applicable, which so requests, without charge, at least
one copy of the Exchange Offer Registration Statement and any post-effective
amendment thereto, including financial statements and schedules and, if the
Exchanging Dealer or Initial Purchaser, as applicable, so requests in writing,
all exhibits (including those incorporated by reference).
(g) The Company will, during the Exchange Offer Registration
Period or the Shelf Registration Period, as applicable, promptly deliver to each
Exchanging Dealer or Initial Purchaser, as applicable, without charge, as many
copies of the prospectus included within the coverage of the Exchange Offer
Registration Statement or the Shelf Registration Statement and any amendment or
supplement thereto as such Exchanging Dealer or Initial Purchaser, as
applicable, may reasonably request for delivery by (i) such Exchanging Dealer in
connection with a sale of Exchange Securities received by it pursuant to the
Registered Exchange Offer or (ii) such Initial Purchaser in connection with a
sale of Exchange Securities received by it in exchange for Securities
constituting any portion of an unsold allotment; and the Company consents to the
use of such prospectus or any amendment or supplement thereto by any such
Exchanging Dealer or Initial Purchaser, as applicable, as aforesaid.
<PAGE> 8
8
(h) Prior to any public offering of Securities or Exchange
Securities pursuant to any Registration Statement, the Company will use its
reasonable best efforts to register or qualify, or cooperate with the Holders of
Securities included therein and their respective counsel in connection with the
registration or qualification of, such Securities or Exchange Securities for
offer and sale under the securities or blue sky laws of such jurisdictions as
any such Holder reasonably requests in writing and do any and all other acts or
things necessary or advisable to enable the offer and sale in such jurisdictions
of the Securities or Exchange Securities covered by such Registration Statement;
provided that the Company will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any
action which would subject it to general service of process or to taxation in
any such jurisdiction where it is not then so subject.
(i) The Company will cooperate with the Holders of Securities
or Exchange Securities to facilitate the timely preparation and delivery of
certificates representing Securities or Exchange Securities to be sold pursuant
to any Registration Statement free of any restrictive legends and in such
denominations and registered in such names as Holders may request in writing
prior to sales of Securities or Exchange Securities pursuant to such
Registration Statement.
(j) If any event contemplated by paragraphs (b)(ii) through
(v) above occurs during the period for which the Company is required to maintain
an effective Registration Statement, the Company will promptly prepare a
post-effective amendment to the Registration Statement or a supplement to the
related prospectus or file any other required document so that, as thereafter
delivered to purchasers of the Securities or Exchange Securities from a Holder,
the prospectus will not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(k) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for the
Securities or Exchange Securities, as the case may be, and provide the
applicable trustee with printed certificates for the Securities or Exchange
Securities, as the case may be, in a form eligible for deposit with The
Depository Trust Company.
(l) The Company will comply with all applicable rules and
regulations of the Commission and will make generally available to its security
holders as soon as practicable after the effective date of the applicable
Registration Statement an earning statement satisfying the provisions of Section
11(a) of the Securities Act; provided that in no event shall such earning
statement be delivered later than 45 days after the end of a 12-month period (or
90 days, if such period is a fiscal year) beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
applicable Registration Statement, which statement shall cover such 12-month
period.
(m) The Company will cause the Indenture or the Exchange
Securities Indenture, as the case may be, to be qualified under the Trust
Indenture Act as required by applicable law in a timely manner.
<PAGE> 9
9
(n) The Company may require each holder of Transfer Restricted
Securities to be sold pursuant to any Shelf Registration Statement to furnish to
the Company such information concerning the Holder and the distribution of such
Transfer Restricted Securities as the Company may from time to time reasonably
require for inclusion in such Registration Statement, and the Company may
exclude from such registration the Transfer Restricted Securities of any Holder
that fails to furnish such information within a reasonable time after receiving
such request.
(o) In the case of a Shelf Registration Statement, each holder
of Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice of the Company pursuant to Section 4(b)(ii) through (v) hereof, such
holder will discontinue disposition of such Transfer Restricted Securities until
such holder's receipt of copies of the supplemental or amended prospectus
contemplated by Section 4(j) hereof or until advised in writing (the "Advice")
by the Company that the use of the applicable prospectus may be resumed. If the
Company shall give any notice under Section 4(b)(ii) through (v) during the
period that the Company is required to maintain an effective Registration
Statement (the "Effectiveness Period"), such Effectiveness Period shall be
extended by the number of days during such period from and including the date of
the giving of such notice to and including the date when each seller of Transfer
Restricted Securities covered by such Registration Statement shall have received
(x) the copies of the supplemental or amended prospectus contemplated by Section
4(j) (if an amended or supplemental prospectus is required) or (y) the Advice
(if no amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company
shall enter into such customary agreements (including, if requested, an
underwriting agreement in customary form) and take all such other action, if
any, as Holders of a majority in aggregate principal amount of the Securities or
Exchange Securities being sold or the managing underwriters (if any) shall
reasonably request in order to facilitate any disposition of Securities pursuant
to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company
shall (i) make reasonably available for inspection by a representative of, and
Special Counsel (as defined below) acting for, Holders of a majority in
aggregate principal amount of the Securities or Exchange Securities being sold
and any underwriter participating in any disposition of Securities or Exchange
Securities pursuant to such Shelf Registration Statement, all relevant financial
and other records, pertinent corporate documents and properties of the Company
and its subsidiaries and (ii) use its reasonable best efforts to have its
officers, directors, employees, accountants and counsel supply all relevant
information reasonably requested by such representative, Special Counsel or any
such underwriter (an "Inspector") in connection with such Shelf Registration
Statement.
(r) In the case of a Shelf Registration Statement, the Company
shall, if requested by Holders of a majority in aggregate principal amount of
the Securities or Exchange Securities being sold, their Special Counsel or the
managing underwriters (if any) in connection with such Shelf Registration
Statement, use its reasonable best efforts to cause (i) its counsel to deliver
an opinion relating to the Shelf Registration Statement and the Securities or
Exchange Securities, as
<PAGE> 10
10
applicable, in customary form, (ii) its officers to execute and deliver all
customary documents and certificates requested by Holders of a majority in
aggregate principal amount of the Securities or Exchange Securities being sold,
their Special Counsel or the managing underwriters (if any) and (iii) its
independent public accountants to provide a comfort letter in customary form,
subject to receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.
5. Registration Expenses. The Company will bear all expenses
incurred in connection with the performance of its obligations under Sections 1,
2, 3 and 4 and the Company will reimburse the Initial Purchasers and the Holders
for the reasonable fees and disbursements of one firm of attorneys (in addition
to any local counsel) chosen by the Holders of a majority in aggregate principal
amount of the Securities and the Exchange Securities to be sold pursuant to each
Registration Statement (the "Special Counsel") acting for the Initial Purchasers
or Holders in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Exchanging Dealer or Initial Purchaser, as
applicable, the Company shall indemnify and hold harmless each Holder, its
affiliates, their respective officers, directors, employees, representatives and
agents, and each person, if any, who controls such Holder within the meaning of
the Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 6 and Section 7 as a Holder) from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof
(including, without limitation, any loss, claim, damage, liability or action
relating to purchases and sales of Securities or Exchange Securities), to which
that Holder may become subject, under the Securities Act, the Exchange Act, any
other federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any such Registration Statement or any prospectus forming part
thereof or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and shall reimburse
each Holder promptly upon demand for any legal or other expenses reasonably
incurred by that Holder in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with any Holders' Information; and
provided, further, that with respect to any such untrue statement in or omission
from any related preliminary prospectus, the indemnity agreement contained in
this Section 6(a) shall not inure to the benefit of any Holder from whom the
person asserting any such loss, claim, damage, liability or action received
Securities or Exchange Securities to the extent that such loss, claim, damage,
liability or action of or with respect to such Holder results from the fact that
both (A) to the extent required by applicable law, a copy of the final
prospectus was not sent or given to such person at
<PAGE> 11
11
or prior to the written confirmation of the sale of such Securities or Exchange
Securities to such person and (B) the untrue statement in or omission from the
related preliminary prospectus was corrected in the final prospectus unless, in
either case, such failure to deliver the final prospectus was a result of
non-compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement or in
connection with any prospectus delivery pursuant to an Exchange Offer
Registration Statement by an Exchanging Dealer or Initial Purchaser, as
applicable, each Holder shall indemnify and hold harmless the Company, its
affiliates, their respective officers, directors, employees, representatives and
agents, and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 6(b) and Section 7 as the Company), from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Company may become subject, under the Securities Act, the Exchange
Act, any other federal or state statutory law or regulation, at common law or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any such Registration Statement or any prospectus
forming part thereof or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, but in
each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with any Holders' Information furnished to the Company by such
Holder, and shall reimburse the Company promptly upon demand for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that no such Holder shall be liable for any indemnity claims hereunder in excess
of the amount of net proceeds received by such Holder from the sale of
Securities or Exchange Securities pursuant to such Shelf Registration Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 6. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other
<PAGE> 12
12
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than the reasonable costs of investigation; provided,
however, that an indemnified party shall have the right to employ its own
counsel in any such action, but the fees, expenses and other charges of such
counsel for the indemnified party will be at the expense of such indemnified
party unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) a conflict or potential
conflict exists (based upon advice of counsel to the indemnified party) between
the indemnified party and the indemnifying party (in which case the indemnifying
party will not have the right to direct the defense of such action on behalf of
the indemnified party) or (3) the indemnifying party has not in fact employed
counsel reasonably satisfactory to the indemnified party to assume the defense
of such action within a reasonable time after receiving notice of the
commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm of attorneys (in addition to any
local counsel) at any one time for all such indemnified party or parties. Each
indemnified party, as a condition of the indemnity agreements contained in
Sections 6(a) and 6(b), shall use all reasonable efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No indemnifying
party shall be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party (which consent shall not be
unreasonably withheld), effect any settlement of any pending proceeding in
respect of which any indemnified party is a party and indemnity has been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
7. Contribution. If the indemnification provided for in
Section 6 is unavailable or insufficient to hold harmless an indemnified party
under Section 6(a) or 6(b), 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 loss, claim, damage or liability, or
action in respect thereof, in such proportion as shall be appropriate to reflect
the relative fault of the indemnifying party on the one hand and the indemnified
party on the other hand with respect to the actions, statements or omissions
that resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified party shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact, has been taken or made by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such action, statement or omission. The
parties hereto agree that it would not be just and equitable if contributions
pursuant to this Section 7 were to be determined by pro rata
<PAGE> 13
13
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 7 shall be deemed
to include, for purposes of this Section 7, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending or preparing to defend any such action or claim. Notwithstanding
the provisions of this Section 7, an indemnifying party that is a holder of
Transfer Restricted Securities or Exchange Securities shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Transfer Restricted Securities or Exchange Securities sold by such
indemnifying party to any purchaser exceeds the amount of any damages which such
indemnifying party has otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
8. Rules 144 and 144A. The Company shall use its reasonable
best efforts to file the reports required to be filed by it under the Securities
Act and the Exchange Act in a timely manner and, if at any time the Company is
not required to file such reports, it will, upon the written request of any
holder of Transfer Restricted Securities, make publicly available other
information so long as necessary to permit sales of their securities pursuant to
Rules 144 and 144A. The Company covenants that it will take such further action
as any holder of Transfer Restricted Securities may reasonably request, all to
the extent required from time to time to enable such holder to sell Transfer
Restricted Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including, without
limitation, the requirements of Rule 144A(d)(4)). Upon the written request of
any holder of Transfer Restricted Securities, the Company shall deliver to such
holder a written statement as to whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
9. Underwritten Registrations. If any of the Transfer
Restricted Securities covered by any Shelf Registration Statement are to be sold
in an underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by the
holders of a majority in aggregate principal amount of such Transfer Restricted
Securities included in such offering, subject to the consent of the Company
(which shall not be unreasonably withheld or delayed), and such holders shall be
responsible for all underwriting commissions and discounts in connection
therewith.
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Securities on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
<PAGE> 14
14
10. Miscellaneous. (a) Amendments and Waivers. The provisions
of this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Securities and the Exchange Securities, taken as a
single class. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of the Holders of Securities or Exchange Securities whose Securities or
Exchange Securities are being sold pursuant to a Registration Statement and that
does not directly or indirectly affect the rights of other Holders may be given
by Holders of a majority in aggregate principal amount of the Securities or
Exchange Securities being sold by such Holders pursuant to such Registration
Statement.
(b) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
10(b), which address initially is, with respect to each Holder, the
address of such Holder maintained by the Registrar under the Indenture,
with a copy in like manner to Chase Securities Inc. and Smith Barney
Inc.
(2) if to you, initially at your respective addresses set
forth in the Purchase Agreement; and
(3) if to the Company, initially at the address of the Company
set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; one business
day after being delivered to a next-day air courier; five business days after
being deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding
upon the Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number
of counterparts (which may be delivered in original form or by telecopier) and
by the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange, Inc.
is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except
<PAGE> 15
15
where otherwise expressly provided, the term "affiliate" has the meaning set
forth in Rule 405 under the Securities Act.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) Remedies. In the event of a breach by the Company, or by
any holder of Transfer Restricted Securities, of any of their obligations under
this Agreement, each holder of Transfer Restricted Securities or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law, including recovery of damages (other than the recovery of damages for a
breach by the Company of its obligations under Sections 1 or 2 hereof for which
liquidated damages have been paid pursuant to Section 3 hereof), will be
entitled to specific performance of its rights under this Agreement. The Company
and each holder of Transfer Restricted Securities agree that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of any of the provisions of this Agreement and hereby further agree that,
in the event of any action for specific performance in respect of such breach,
it shall waive the defense that a remedy at law would be adequate.
(i) No Inconsistent Agreements. The Company represents,
warrants and agrees that (i) it has not entered into shall not, on or after the
date of this Agreement, enter into any agreement that is inconsistent with the
rights granted to the holders of Transfer Restricted Securities in this
Agreement or otherwise conflicts with the provisions hereof, (ii) it has not
previously entered into any agreement which remains in effect granting any
registration rights with respect to any of its debt securities to any person and
(iii) without limiting the generality of the foregoing, without the written
consent of the Holders of a majority in aggregate principal amount of the then
outstanding Transfer Restricted Securities, it shall not grant to any person the
right to request the Company to register any debt securities of the Company
under the Securities Act unless the rights so granted are not in conflict or
inconsistent with the provisions of this Agreement.
(j) No Piggyback on Registrations. Neither the Company nor any
of its security holders (other than the holders of Transfer Restricted
Securities in such capacity) shall have the right to include any securities of
the Company in any Shelf Registration or Registered Exchange Offer other than
Transfer Restricted Securities.
(k) Severability. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable best efforts to find and
employ an alternative means
<PAGE> 16
16
to achieve the same or substantially the same result as that contemplated by
such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
<PAGE> 17
17
Please confirm that the foregoing correctly sets forth the
agreement among the Company and you.
Very truly yours,
EV INTERNATIONAL, INC.
By /s/ ROBERT D. PABST
------------------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.
By /s/ DAVID V. FASS
----------------------------
Authorized Signatory
SMITH BARNEY INC.
By /s/ LEE J. TAWIL
----------------------------
Authorized Signatory
<PAGE> 18
ANNEX A
Each broker-dealer that receives Exchange Securities for its
own account pursuant to the Registered Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Securities. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Securities received in
exchange for Securities where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
<PAGE> 19
ANNEX B
Each broker-dealer that receives Exchange Securities for its
own account in exchange for Securities, where such Securities were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE> 20
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its
own account pursuant to the Registered Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Securities. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of Exchange
Securities received in exchange for Securities where such Securities were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that, for a period of 90 days after the Expiration Date,
it will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
_______________, 199_, all dealers effecting transactions in the Exchange
Securities may be required to deliver a prospectus.(1)
The Company will not receive any proceeds from any sale of
Exchange Securities by broker-dealers. Exchange Securities received by
broker-dealers for their own account pursuant to the Registered Exchange Offer
may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Securities. Any
broker-dealer that resells Exchange Securities that were received by it for its
own account pursuant to the Registered Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Securities may be deemed to
be an "underwriter" within the meaning of the Securities Act and any profit on
any such resale of Exchange Securities and any commission or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
For a period of 90 days after the Expiration Date the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the Holders of the Securities) other than commissions or concessions of any
broker-dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
- --------
(1) In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Registered Exchange Offer
prospectus.
<PAGE> 21
ANNEX D
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
------------------------------------------
Address:
---------------------------------------
------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE> 1
EXHIBIT 4(d)
EXECUTION COPY
================================================================================
CREDIT AGREEMENT
AMONG
GULTON ACQUISITION CORP.
(To be merged first into Gulton Industries,
Inc., which will then be merged into Electro-Voice, Incorporated,
which will then be renamed EV International, Inc.)
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO
AND
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT
DATED AS OF FEBRUARY 10, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C>
SECTION 1. DEFINITIONS......................................................... 2
1.1 Defined Terms..................................................... 2
1.2 Other Definitional Provisions..................................... 30
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS..................................... 30
2.1 Revolving Credit Commitments...................................... 30
2.2 Revolving Credit Notes............................................ 31
2.3 Procedure for Revolving Credit Borrowing.......................... 31
2.4 Termination or Reduction of Revolving Credit
Commitments................................................ 32
2.5 Swing Line Commitment............................................. 32
2.6 Term Loans........................................................ 34
2.7 Term Notes........................................................ 34
2.8 Procedure for Term Loan Borrowing................................. 35
2.9 Repayment of Loans................................................ 35
SECTION 3. LETTERS OF CREDIT................................................... 36
3.1 L/C Commitment.................................................... 36
3.2 Procedure for Issuance of Letters of Credit....................... 37
3.3 Fees, Commissions and Other Charges............................... 37
3.4 L/C Participations................................................ 38
3.5 Reimbursement Obligation of the Borrower.......................... 39
3.6 Obligations Absolute.............................................. 39
3.7 Letter of Credit Payments......................................... 40
3.8 Application....................................................... 40
SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT........ 40
4.1 Interest Rates and Payment Dates.................................. 40
4.2 Conversion and Continuation Options............................... 41
4.3 Minimum Amounts of Sets........................................... 42
4.4 Optional and Mandatory Prepayments................................ 42
4.5 Commitment Fees................................................... 45
4.6 Computation of Interest and Fees.................................. 45
4.7 Inability to Determine Interest Rate.............................. 45
4.8 Pro Rata Treatment and Payments................................... 46
4.9 Illegality........................................................ 47
4.10 Requirements of Law.............................................. 48
4.11 Taxes ........................................................... 49
4.12 Indemnity........................................................ 52
4.13 Certain Rules Relating to the Payment of Additional Amounts...... 52
</TABLE>
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<TABLE>
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SECTION 5. REPRESENTATIONS AND WARRANTIES...................................... 54
5.1 Financial Condition............................................... 54
5.2 No Change; Solvent................................................ 55
5.3 Corporate Existence; Compliance with Law.......................... 55
5.4 Corporate Power; Authorization; Enforceable Obligations........... 55
5.5 No Legal Bar...................................................... 56
5.6 No Material Litigation............................................. 56
5.7 No Default......................................................... 56
5.8 Ownership of Property; Liens....................................... 56
5.9 Intellectual Property.............................................. 56
5.10 No Burdensome Restrictions........................................ 57
5.11 Taxes ............................................................ 57
5.12 Federal Regulations............................................... 57
5.13 ERISA ............................................................ 57
5.14 Collateral........................................................ 58
5.15 Investment Company Act; Other Regulations......................... 59
5.16 Subsidiaries...................................................... 59
5.17 Purpose of Loans.................................................. 59
5.18 Environmental Matters............................................. 59
5.19 No Material Misstatements......................................... 60
5.20 Delivery of the Transaction Documents............................. 60
5.21 Representations and Warranties Contained in the
Transaction Documents....................................... 61
5.22 Labor Matters..................................................... 61
SECTION 6. CONDITIONS PRECEDENT................................................. 61
6.1 Conditions to Initial Extension of Credit.......................... 61
6.2 Conditions to Each Other Extension of Credit....................... 67
SECTION 7. AFFIRMATIVE COVENANTS................................................ 68
7.1 Financial Statements............................................... 68
7.2 Certificates; Other Information.................................... 69
7.3 Payment of Obligations............................................. 70
7.4 Conduct of Business and Maintenance of Existence................... 70
7.5 Maintenance of Property; Insurance................................. 70
7.6 Inspection of Property; Books and Records; Discussions............. 70
7.7 Notices............................................................ 71
7.8 Environmental Laws................................................. 73
7.9 After-Acquired Real Property and Fixtures.......................... 74
SECTION 8. NEGATIVE COVENANTS................................................... 75
8.1 Financial Condition Covenants...................................... 75
8.2 Limitation on Indebtedness......................................... 77
8.3 Limitation on Liens................................................ 79
8.4 Limitation on Guarantee Obligations................................ 81
8.5 Limitation on Fundamental Changes.................................. 82
</TABLE>
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<PAGE> 4
<TABLE>
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8.6 Limitation on Sale of Assets....................................... 83
8.7 Limitation on Restricted Payments.................................. 84
8.8 Limitation on Capital Expenditures................................. 85
8.9 Limitation on Investments, Loans and Advances...................... 85
8.10 Limitation on Transactions with Affiliates........................ 87
8.11 Limitation on Sale and Leaseback Transactions..................... 88
8.12 Limitation on Optional Payments and Modifications
of Debt Instruments and Other Documents..................... 88
8.13 Limitation on Changes in Fiscal Year.............................. 89
8.14 Limitation on Negative Pledge Clauses............................. 89
8.15 Limitation on Lines of Business; Creation of Subsidiaries......... 90
8.16 Limitations on Currency and Commodity Hedging Transactions........ 90
8.17 Holding Company Status of EVI Audio............................... 90
8.18 Establishment and Maintenance of Lockbox Accounts................. 91
SECTION 9. EVENTS OF DEFAULT................................................... 91
SECTION 10. THE ADMINISTRATIVE AGENT AND THE OTHER REPRESENTATIVES.............. 95
10.1 Appointment....................................................... 95
10.2 Delegation of Duties.............................................. 95
10.3 Exculpatory Provisions............................................ 95
10.4 Reliance by Administrative Agent.................................. 96
10.5 Notice of Default................................................. 96
10.6 Acknowledgements and Representations by Lenders................... 97
10.7 Indemnification................................................... 97
10.8 Administrative Agent and Other Representatives in
Their Individual Capacity................................... 98
10.9 Successor Administrative Agent.................................... 98
10.10 Swing Line Lender................................................ 98
SECTION 11. MISCELLANEOUS....................................................... 99
11.1 Amendments and Waivers............................................ 99
11.2 Notices........................................................... 100
11.3 No Waiver; Cumulative Remedies.................................... 101
11.4 Survival of Representations and Warranties........................ 101
11.5 Payment of Expenses and Taxes..................................... 101
11.6 Successors and Assigns; Participations and Assignments............ 102
11.7 Adjustments; Set-off.............................................. 105
11.8 Counterparts...................................................... 106
11.9 Severability...................................................... 106
11.10 Integration...................................................... 106
11.11 GOVERNING LAW.................................................... 106
11.12 Submission To Jurisdiction; Waivers.............................. 106
11.13 Acknowledgements................................................. 107
</TABLE>
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<TABLE>
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11.14 WAIVER OF JURY TRIAL............................................. 107
11.15 Confidentiality.................................................. 107
</TABLE>
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<PAGE> 6
SCHEDULES
I Commitments and Addresses
II Applicable Margin Step-Downs
III Lockbox Banks
3.1 Continued Letters of Credit
5.2(a) Material Adverse Effect Disclosure
5.4 Consents Required
5.6 Litigation
5.8 Mortgaged Real Property
5.9 Intellectual Property Claims
5.14 Filing Jurisdictions and Lien Searches
5.16 Subsidiaries
6.1(o) Local Counsel Jurisdictions
7.9(c) Leased U.S. Inventory Locations
8.2(g) Permitted Indebtedness
8.3(j) Permitted Liens
8.4(a) Permitted Guarantee Obligations
8.9(c) Permitted Investments
8.10 Permitted Transactions with Affiliates
EXHIBITS
A-1 Form of Revolving Credit Note
A-2 Form of Term Note
A-3 Form of Swing Line Note
B Guarantee and Collateral Agreement
C Form of Patent and Trademark Security Agreement
D Form of Mortgage
E Form of Solvency Opinion
F Form of Opinions of Counsel to the Loan Parties
G Form of U.S. Tax Compliance Certificate
H Form of Assignment and Acceptance
I-1 Form of Borrowing Certificate
I-2 Form of Borrowing Base Certificate
J Form of Landlord Waiver
K Form of Swing Line Participation Certificate
L Form of Lockbox Agreement
-v-
<PAGE> 7
CREDIT AGREEMENT, dated as of February 10, 1997, among GULTON
ACQUISITION CORP., a Delaware corporation ("Acquisition Co."), the several banks
and other financial institutions from time to time parties to this Agreement
(collectively, the "Lenders"; individually, a "Lender"), and THE CHASE MANHATTAN
BANK ("Chase"), a New York banking corporation, as administrative agent for the
Lenders hereunder (in such capacity, the "Administrative Agent").
WHEREAS, Gulton Holdings Corp., a Delaware corporation which,
on or after the Effective Date, will be renamed EVI Audio Holding, Inc.
("Holdings"), and Acquisition Co., its direct Wholly Owned Subsidiary, are newly
formed companies organized by an investor group led by Greenwich Street Capital
Partners, Inc., a Delaware corporation ("GSCP");
WHEREAS, Acquisition Co. proposes to acquire Gulton
Industries, Inc., a Delaware corporation ("GII"), which is a subsidiary of Mark
IV Industries, Inc. ("Mark IV") through the purchase from Mark IV and Mark IV
PLC of the capital stock of GII (the "Acquisition") pursuant to the Stock
Purchase Agreement, dated as of December 12, 1996, by and among Mark IV, Mark IV
PLC and Acquisition Co. (as previously amended and as further amended,
supplemented, waived or otherwise modified from time to time in accordance with
this Agreement, the "Stock Purchase Agreement");
WHEREAS, immediately following the Acquisition, Acquisition
Co. will merge with and into GII (the "First Merger"), and GII as surviving
corporation of the First Merger will merge (the "Second Merger"; the First
Merger together with the Second Merger, the "Mergers") with and into
Electro-Voice, Incorporated, a Delaware corporation and a Wholly Owned
Subsidiary of GII, which will thereupon be renamed EV International, Inc. ("EV
International") and which shall be the Borrower hereunder;
WHEREAS, the other domestic subsidiaries of EV International
will be merged with and into EV International concurrently with the consummation
of the Second Merger, with EV International as surviving corporation of any such
merger;
WHEREAS, in connection with the Acquisition, EV International
will contribute or otherwise transfer Capital Stock and Indebtedness held by it
of certain Foreign Subsidiaries (as hereinafter defined) to EVI Audio
International Holding Corporation, Inc. ("EVI Audio"), a Delaware corporation
and wholly-owned subsidiary of EV International (such contribution or transfer,
the "Foreign Subsidiary Transfer");
WHEREAS, in order to (i) finance a portion of the Acquisition
Consideration (as defined in the Stock Purchase Agreement), (ii) refinance a
portion of the existing indebtedness of GII and its subsidiaries, (iii) pay
certain fees, taxes and expenses related to (x) the Acquisition and the
financing thereof and (y) the refinancing of such existing indebtedness of GII
and its subsidiaries and (iv) finance the working capital and other business
requirements of the Borrower and its Subsidiaries following the consummation of
the Acquisition and the Mergers, Acquisition Co. has requested that the Lenders
make the Loans and issue and participate in the Letters of Credit (as
hereinafter defined) provided for herein; and
<PAGE> 8
2
WHEREAS, all the obligations of the Borrower hereunder shall
be secured and guaranteed by, among other things, (i) a perfected first lien on
and security interest in certain collateral described in the Security Documents
(as hereinafter defined), (ii) a pledge of all the issued and outstanding
Capital Stock (as hereinafter defined) of the Borrower and each of the direct or
indirect Domestic Subsidiaries (as hereinafter defined) of the Borrower (it
being understood that as of the Effective Date and after giving effect to the
Mergers there are no Domestic Subsidiaries of the Borrower in existence), 65% of
the issued and outstanding Capital Stock of EVI Audio and 65% of the issued and
outstanding Capital Stock of any direct Foreign Subsidiary (as hereinafter
defined) of the Borrower and its Domestic Subsidiaries that is not a Foreign
Subsidiary of EVI Audio and (iii) unconditional guarantees by each of the
Guarantors (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate (grossed up for
maximum statutory reserve requirements) in effect on such day plus 1%
and (c) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. For purposes hereof: "Prime Rate" shall mean the rate of
interest per annum publicly announced from time to time by Chase as its
prime rate in effect at its principal office in New York City (the
Prime Rate not being intended to be the lowest rate of interest charged
by Chase in connection with extensions of credit to debtors); "Base CD
Rate" shall mean the sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) a fraction, the numerator of which is one
and the denominator of which is one minus the C/D Reserve Percentage
and (b) the C/D Assessment Rate; "Three-Month Secondary CD Rate" shall
mean, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such day (or, if
such day shall not be a Business Day, the next preceding Business Day)
by the Board of Governors of the Federal Reserve System (the "Board")
through the public information telephone line of the Federal Reserve
Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day, the average
of the secondary market quotations for three-month certificates of
deposit of major money center banks in New York City received at
approximately 10:00 A.M., New York City time, on such day (or, if such
day shall not be a Business Day, on the next preceding Business Day) by
the Administrative Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it;
and "Federal Funds
<PAGE> 9
3
Effective Rate" shall mean, for any day, the weighted average of the
rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published
on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by it. Any change in the
ABR due to a change in the Prime Rate, the Three-Month Secondary CD
Rate or the Federal Funds Effective Rate shall be effective as of the
opening of business on the effective day of such change in the Prime
Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective
Rate, respectively.
"ABR Loans": Loans the rate of interest applicable to which is
based upon the ABR.
"Acceleration": as defined in Section 9(e).
"Account": as defined in the Uniform Commercial Code as in
effect in the State of New York.
"Acquisition": as defined in the Recitals hereto.
"Acquisition Co." as defined in the Preamble hereto.
"Adjustment Date": each date on or after the first anniversary
of the Effective Date that is the second Business Day following receipt
by the Lenders of both (i) the financial statements required to be
delivered pursuant to subsection 7.1(a) or 7.1(b), as applicable, for
the most recently completed fiscal period and (ii) the related
compliance certificate required to be delivered pursuant to subsection
7.2(b) with respect to such fiscal period.
"Adjustment Payment": the portion of the excess, if any, of
(x) the Estimated Purchase Price over (y) the Final Purchase Price (as
each such term is defined in the Stock Purchase Agreement) which is
directly attributable to the application of the provisions in clause
(i) of the third sentence of Section 2.7(a) of the Stock Purchase
Agreement and which is actually paid to the Borrower by Mark IV, net of
any costs, charges, expenses or other amounts relating to the
calculation and payment of such portion which are of a type referred to
in clauses (i)-(iii) of the definition of "Net Cash Proceeds" in this
subsection 1.1.
"Administrative Agent": as defined in the Preamble hereto.
"Affected Eurodollar Loans": as defined in subsection 4.9.
"Affected Eurodollar Rate": as defined in subsection 4.7.
<PAGE> 10
4
"Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person. For
purposes of this definition, "control" of a Person means the power,
directly or indirectly, either to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors
of such Person or (b) direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
"Aggregate Outstanding Revolving Credit": as to any Revolving
Credit Lender at any time, an amount equal to the sum of (a) the
aggregate principal amount of all Revolving Credit Loans made by such
Revolving Credit Lender then outstanding, (b) such Revolving Credit
Lender's Revolving Credit Commitment Percentage of the L/C Obligations
then outstanding and (c) such Revolving Credit Lender's Revolving
Credit Commitment Percentage of the Swing Line Loans then outstanding.
"Agreement": this Credit Agreement, as amended, supplemented,
waived or otherwise modified from time to time.
"Applicable Margin": during the period from the Effective Date
until the first Adjustment Date, the Applicable Margin shall equal (i)
1.75% per annum with respect to ABR Loans and (ii) 2.75% per annum with
respect to Eurodollar Loans. The Applicable Margin will be adjusted on
each Adjustment Date to the applicable rate per annum set forth under
the heading "ABR Loans Applicable Margin" or "Eurodollar Loans
Applicable Margin" on Schedule II which corresponds to the achievement
of certain performance criteria determined from the financial
statements and compliance certificate relating to the end of the fiscal
quarter immediately preceding such Adjustment Date; provided that in
the event that the financial statements required to be delivered
pursuant to subsection 7.1(a) or 7.1(b), as applicable, and the related
compliance certificate required to be delivered pursuant to subsection
7.2(b), are not delivered when due, then
(a) if such financial statements and compliance
certificate are delivered after the date such financial
statements and compliance certificate were required to be
delivered (without giving effect to any applicable cure
period) and the Applicable Margin increases from that
previously in effect as a result of the delivery of such
financial statements, then the Applicable Margin in respect of
the Loans during the period from the date upon which such
financial statements were required to be delivered (without
giving effect to any applicable cure period) until the date
upon which they actually are delivered shall, except as
otherwise provided in clause (c) below, be the Applicable
Margin as so increased;
(b) if such financial statements and compliance
certificate are delivered after the date such financial
statements and compliance certificate were required to be
delivered and the Applicable Margin decreases from that
previously in
<PAGE> 11
5
effect as a result of the delivery of such financial
statements, then such decrease in the Applicable Margin shall
not become applicable until the date upon which the financial
statements and certificate actually are delivered; and
(c) if such financial statements and compliance
certificate are not delivered prior to the expiration of the
applicable cure period, then, effective upon such expiration,
for the period from the date upon which such financial
statements and compliance certificate were required to be
delivered (after the expiration of the applicable cure period)
until two Business Days following the date upon which they
actually are delivered, the Applicable Margin in respect of
the Loans shall be 1.75% per annum, in the case of ABR Loans,
and 2.75% per annum, in the case of Eurodollar Loans (it being
understood that the foregoing shall not limit the rights of
the Administrative Agent and the Lenders set forth in Section
9).
"Application": an application, in such form as the Issuing
Lender may specify from time to time, requesting the Issuing Lender to
open a Letter of Credit.
"Asset Sale": any sale, issuance, conveyance, transfer, lease
or other disposition (including, without limitation, through a Sale and
Leaseback Transaction) (a "Disposition") by the Borrower or any of its
Subsidiaries, in one or a series of related transactions, of any real
or personal, tangible or intangible, property (including, without
limitation, Capital Stock) of the Borrower or such Subsidiary to any
Person (other than to Acquisition Co., Holdings or any of their
respective Wholly Owned Subsidiaries).
"Assignee": as defined in subsection 11.6(c).
"Available Revolving Credit Commitment": as to any Revolving
Credit Lender at any time, an amount equal to the excess, if any, of
(a) the amount of such Revolving Credit Lender's Revolving Credit
Commitment at such time over (b) the sum of (i) the aggregate unpaid
principal amount at such time of all Revolving Credit Loans made by
such Revolving Credit Lender and (ii) an amount equal to such Revolving
Credit Lender's Revolving Credit Commitment Percentage of the aggregate
unpaid principal amount at such time of all Swing Line Loans, provided
that for purposes of calculating Available Revolving Credit Commitments
pursuant to subsection 4.5 such amount shall be zero, and (iii) an
amount equal to such Revolving Credit Lender's Revolving Credit
Commitment Percentage of the outstanding L/C Obligations at such time;
collectively, as to all the Lenders, the "Available Revolving Credit
Commitments".
"Base CD Rate": as defined in the definition of the term "ABR"
in this subsection 1.1.
"Board": as defined in the definition of the term "ABR" in
this subsection 1.1.
<PAGE> 12
6
"Borrower": Acquisition Co. until the consummation of the
First Merger, and thereafter GII until the consummation of the Second
Merger, and thereafter the corporation currently named Electro-Voice,
Inc., which will be renamed EV International, Inc. (it being understood
that the First Merger and the Second Merger will be consummated on the
Effective Date).
"Borrower Patent and Trademark Security Agreement": the Patent
and Trademark Security Agreement executed and delivered by the
Borrower, substantially in the form of Exhibit C, as the same may be
amended, supplemented, waived or otherwise modified from time to time.
"Borrowing Base": at any date of determination thereof, an
amount equal to the sum of (i) 80% of the Eligible Accounts Receivable
at such date and (ii) 50% of the Eligible Inventory at such date;
provided that the amount represented by the Eligible Inventory shall at
no time be more than 50% of the Borrowing Base. The Borrowing Base
shall be determined from time to time by the Administrative Agent in
its reasonable judgment by reference to the Borrowing Base Certificate
then most recently delivered to it; provided that the information
contained in such Borrowing Base Certificate shall not be conclusive in
calculating the Borrowing Base and, after consultation with the
Borrower, the Administrative Agent shall be entitled to adjust the
amounts and other information contained therein to the extent that it
believes in its reasonable credit judgment that such adjustment is
appropriate to cause the Borrowing Base (as so adjusted) to reflect the
standards set forth in the definitions of the terms "Eligible Accounts
Receivable" and "Eligible Inventory".
"Borrowing Base Certificate": a certificate executed and
delivered by the Borrower, substantially in the form of Exhibit I-2,
delivered pursuant to subsection 7.2(e).
"Borrowing Date": any Business Day specified in a notice
pursuant to subsection 2.3, 2.5, 2.8 or 3.2 as a date on which the
Borrower requests the Lenders to make Loans hereunder or the Issuing
Lender to issue Letters of Credit hereunder.
"Business Day": a day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are authorized or
required by law to close, except that, when used in connection with a
Eurodollar Loan, "Business Day" shall mean, any Business Day on which
dealings in Dollars between banks may be carried on in London, England
and New York, New York.
"Capital Expenditures": with respect to any Person for any
period, the sum of the aggregate of all expenditures by such Person and
its consolidated Subsidiaries during such period which, in accordance
with GAAP, are or should be included in "capital expenditures."
<PAGE> 13
7
"Capital Stock": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants or options to
purchase any of the foregoing.
"Cash Equivalents": (a) securities issued or fully guaranteed
or insured by the United States Government or any agency or
instrumentality thereof, (b) time deposits, certificates of deposit or
bankers' acceptances of (i) any Lender or (ii) any commercial bank
having capital and surplus in excess of $500,000,000 and the commercial
paper of the holding company of which is rated at least A-2 or the
equivalent thereof by Standard & Poor's Ratings Group (a division of
McGraw Hill Inc.) or any successor rating agency ("S&P") or at least
P-2 or the equivalent thereof by Moody's Investors Service, Inc. or any
successor rating agency ("Moody's") (or if at such time neither is
issuing ratings, then a comparable rating of such other nationally
recognized rating agency as shall be approved by the Administrative
Agent in its reasonable judgment), (c) commercial paper rated at least
A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent
thereof by Moody's (or if at such time neither is issuing ratings, then
a comparable rating of such other nationally recognized rating agency
as shall be approved by the Administrative Agent in its reasonable
judgment) and (d) investments in money market funds complying with the
risk limiting conditions of Rule 2a-7 or any successor rule of the
Securities and Exchange Commission under the Investment Company Act.
"C/D Assessment Rate": for any day as applied to any ABR Loan,
the annual assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund classified as well-capitalized and
within supervisory subgroup "B" (or a comparable successor assessment
risk classification) within the meaning of 12 C.F.R. Section 327.4 (or
any successor provision) to the Federal Deposit Insurance Corporation
(or any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the United
States.
"C/D Reserve Percentage": for any day as applied to any ABR
Loan, that percentage (expressed as a decimal) which is in effect on
such day, as prescribed by the Board, for determining the maximum
reserve requirement for a Depositary Institution (as defined in
Regulation D of the Board) in respect of new non-personal time deposits
in Dollars of $100,000 or more having a maturity of 30 days or more.
"Change of Control": the occurrence of any of the following
events: (i) the GSCP Group shall in the aggregate beneficially,
directly or indirectly, own shares of Capital Stock having less than
51% of the total voting power of all of the outstanding Capital Stock
of Holdings, (ii) one or more members of the GSCP Group shall not have
the power (whether or not exercised), by virtue of owning shares of the
Capital Stock of Holdings or by contract or otherwise, to elect or
cause the election of a majority of the board of directors of Holdings,
(iii) Holdings shall cease to own 100% of the Capital Stock of the
Borrower or (iv) a "Change of Control" as defined in the
<PAGE> 14
8
Senior Subordinated Credit Agreement or the Senior Subordinated
Indenture shall have occurred at a time when any principal amount of
Indebtedness is outstanding under, respectively, such agreement or
indenture.
"Chase": The Chase Manhattan Bank, a New York banking
corporation.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral": all assets of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by any
Security Document.
"Commercial Letter of Credit": as defined in subsection
3.1(a).
"Commitments": the collective reference to the Revolving
Credit Commitments, the Swing Line Commitment, the Term Loan
Commitments and the L/C Commitment; individually, a "Commitment".
"Commitment Percentage": as to any Lender, the percentage of
the aggregate Revolving Credit Commitments and Term Loan Commitments
constituted by such Lender's Revolving Credit Commitment and Term Loan
Commitment, or following the Effective Date, the percentage
representing a fraction the numerator of which is the sum of (i) the
aggregate principal amount of such Lender's Term Loans then outstanding
plus (ii) the Revolving Credit Commitment of such Lender (or, following
the termination or expiration of the Revolving Credit Commitments, the
sum of (x) the aggregate principal amount of such Lender's Revolving
Credit Loans then outstanding plus (y) such Lender's Revolving
Commitment Percentage of all L/C Obligations and Swing Line Loans then
outstanding), and the denominator of which is the sum of (i) the
aggregate principal amount of Term Loans of all Lenders then
outstanding plus (ii) the aggregate Revolving Credit Commitments of all
Lenders (or, following the termination or expiration of the Revolving
Credit Commitments, the sum of (x) the aggregate principal amount of
all Revolving Credit Loans then outstanding plus (y) the aggregate
principal amount of all L/C Obligations and Swing Line Loans then
outstanding).
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with Acquisition Co. within
the meaning of Section 4001 of ERISA or is part of a group which
includes the Borrower and which is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of Section
302 of ERISA and Section 412 of the Code, is treated as a single
employer under Sections 414(m) and (o) of the Code.
"Consolidated EBITDA": for any period, Consolidated Net Income
for such period adjusted to exclude the following items (without
duplication) of income or expense to the extent that such items are
included in the calculation of Consolidated Net Income: (a)
Consolidated Interest Expense, (b) any non-cash expenses and charges,
(c) total income tax expense, (d) depreciation expense, (e) the expense
associated with
<PAGE> 15
9
amortization of intangible and other assets (including amortization or
other expense recognition of any costs associated with asset write-ups
in accordance with APB Nos. 16 and 17), (f) non-cash provisions for
reserves for discontinued operations, (g) any gain or loss associated
with the sale or write-down of assets not in the ordinary course of
business, (h) all cash expenses relating to the Transactions, (i) any
income or loss accounted for by the equity method of accounting (except
in the case of income to the extent of the amount of cash dividends or
cash distributions paid to the Borrower or any of its Subsidiaries by
the entity accounted for by the equity method of accounting) and (j),
except for purposes of calculating "Excess Cash Flow", cash payments
made to GSCP permitted by subsection 8.10(ii) hereof for the rendering
of management consulting or financial advisory services.
"Consolidated Funded Indebtedness": at the date of
determination thereof, all Indebtedness of the Borrower and its
consolidated Subsidiaries which by its terms matures more than one year
after the date of calculation, including, in any event, under this
Agreement, the Senior Subordinated Credit Agreement and the Senior
Subordinated Notes, and any such Indebtedness maturing within one year
from such date which is renewable or extendable at the option of the
obligor to a date more than one year from such date, including, in any
event, the Term Loans, the Revolving Credit Loans and the Swing Line
Loans, in each case determined on a consolidated basis in accordance
with GAAP.
"Consolidated Fixed Charges": for any period the sum of: (i)
Consolidated Interest Expense; (ii) required amortization of
Indebtedness for the period involved and any discount or premium
relating to any such Indebtedness for any period involved, whether
expensed or capitalized; (iii) Capital Expenditures; and (iv) taxes
paid in cash for the period involved, net of tax credits and benefits
(including tax benefits arising from net operating losses) created in
such year and available for use in reducing cash taxes payable in
subsequent years; in each case of the Borrower and its consolidated
Subsidiaries determined on a consolidated basis in accordance with
GAAP.
"Consolidated Fixed Charges Ratio": for any period the ratio
of (i) Consolidated EBITDA for such period to (ii) Consolidated Fixed
Charges for such period.
"Consolidated Interest Expense": for any period, the sum of
(a) interest expense (accrued and paid or payable in cash for such
period, and in any event excluding any amortization or write-off of
financing costs) on Indebtedness of the Borrower and its consolidated
Subsidiaries for such period minus (b) interest income (accrued and
received or receivable in cash for such period) of the Borrower and its
consolidated Subsidiaries for such period, in each case determined on a
consolidated basis in accordance with GAAP.
<PAGE> 16
10
"Consolidated Interest Coverage Ratio": for any period, the
ratio of (a) Consolidated EBITDA for such period to (b) Consolidated
Interest Expense for such period.
"Consolidated Net Income": for any period, net income of the
Borrower and its consolidated Subsidiaries for such period, determined
on a consolidated basis in accordance with GAAP.
"Consolidated Net Worth": means as to any Person, the
consolidated common stockholders' equity of such Person and its
consolidated Subsidiaries, as determined in accordance with GAAP.
"Contractual Obligation": as to any Person, any provision of
any material security issued by such Person or of any material
agreement, instrument or other undertaking to which such Person is a
party or by which it or any of its property is bound.
"Debt Portion": the portion of any Adjustment Payment
representing the percentage of the initial capitalization of the
Borrower constituted by the Loans, the aggregate principal amount of
the loans under the Senior Subordinated Credit Agreement and any the
aggregate principal amount of any other Indebtedness of the Borrower.
"Default": any of the events specified in Section 9, whether
or not any requirement for the giving of notice (other than, in the
case of Section 9(e), a Default Notice), the lapse of time, or both, or
any other condition, has been satisfied.
"Defaulted Account": any Account of the Borrower or its
Subsidiaries which has been or should have been charged- off as not
collectable in conformity with the accounting policies of the Borrower
and its Subsidiaries as in effect from time to time.
"Default Notice": as defined in Section 9(e).
"Disposition": as defined in the definition of the term "Asset
Sale" in this subsection 1.1.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Domestic Subsidiary": any Subsidiary of the Borrower which is
not a Foreign Subsidiary or EVI Audio (it being understood that as of
the Effective Date and after giving effect to the Mergers, there are no
Domestic Subsidiaries of the Borrower in existence).
"Effective Date": the date on which all the conditions
precedent set forth in subsection 6.1 shall be satisfied or waived.
<PAGE> 17
11
"Eligible Accounts Receivable": at any time, an amount equal
to the aggregate outstanding balance of all Accounts of the Borrower
and its Domestic Subsidiaries payable in the United States of America
in Dollars, as set forth in the aging reports of billed Accounts for
the Borrower and its Domestic Subsidiaries as of such time, provided
that, unless otherwise approved in writing by the Administrative Agent,
no amount owing in respect of any Account of the Borrower or any of its
Domestic Subsidiaries shall be deemed to be included in any calculation
of Eligible Accounts Receivable if:
(a) (i) such Account is not a bona fide, valid and legally enforceable
obligation of the Obligor thereon arising from the actual sale and delivery of
goods to or rendition to and acceptance of services by such Obligor, (ii) the
goods giving rise to such Account have not been shipped and delivered to the
Obligor thereon or the services giving rise to such Account have not been
performed, (iii) such Account arises from a progress billing or percentage of
completion invoice, but only to the extent the amount billed exceeds the value
of the goods sold and delivered or the services performed with respect thereto,
or (iv) such Account otherwise does not represent a final sale or transfer of
title to such Obligor;
(b) such Account has been adjusted to reflect the return or rejection
of, or any loss of or damage to, any of the Inventory giving rise to
such Account; provided that amounts owing in respect of such Account
shall only be excluded to the extent of such adjustment;
(c) such Account includes any material financing charges or late or
other fees; provided that amounts owing in respect of such Account
shall only be excluded to the extent of such charges or fees;
(d) the Obligor thereon is the Borrower or any Subsidiary or Affiliate
thereof or any employee, officer, sales representative, agent (other
than any such sales representative or agent which has an independent
contractor relationship with the Borrower or its Subsidiaries),
director or stockholder of the Borrower or any of its Subsidiaries or
Affiliates or the sale giving rise to such Account is to an Obligor in
any jurisdiction outside the United States unless the obligations of
such Obligor thereunder are backed by a letter of credit acceptable to
the Administrative Agent;
(e) the Obligor thereon is any Governmental Authority unless all
Requirements of Law relating to the creation and perfection of a Lien
thereon in favor of the Administrative Agent for the benefit of the
Lenders shall have been satisfied in all material respects;
(f) such Account was, at the date of the original issuance of the
respective invoice therefor, payable more than 90 days after such date;
<PAGE> 18
12
(g) such Account remains unpaid for more than 60 days after the date
set forth for payment in the invoice originally issued therefor;
provided that amounts owing in respect of such Account shall only be
excluded to the extent of the amount which remains unpaid for more than
60 days after the date set forth for payment in the invoice originally
issued therefor;
(h) greater than 50% of the aggregate amount owing in respect of
Accounts by the Obligor thereon to the Borrower and its Subsidiaries
remain unpaid more than 60 days after the date set forth for payment in
the respective invoices originally issued therefor;
(i) such Account is a Defaulted Account, unless the obligations of the
Obligor under such Account are supported by a letter of credit issued
by a bank or other credit insurance reasonably acceptable to the
Administrative Agent;
(j) the Obligor thereon has been the Obligor in respect of Defaulted
Accounts at any time during the immediately preceding 12-month period
unless the payment of Accounts from such Obligor is secured in a manner
reasonably satisfactory to the Administrative Agent or, if the Account
arises subsequent to a decree or order for relief with respect to such
Obligor under the federal bankruptcy laws, as now or hereinafter in
effect, the timely payment and collection of such Account will not be
impaired, as determined by the Administrative Agent in its reasonable
judgment;
(k) a proceeding under bankruptcy or similar laws has occurred and is
continuing with respect to the Obligor thereon unless the payment of
Accounts from such Obligor is secured in a manner reasonably
satisfactory to the Administrative Agent or, if the Account arises
subsequent to a decree or order for relief with respect to such Obligor
under the federal bankruptcy laws, as now or hereinafter in effect, the
timely payment and collection of such Account will not be impaired, as
determined by the Administrative Agent in its reasonable judgment;
(l) it is an Account which pursuant to any agreement between the
Borrower or any of its Domestic Subsidiaries, on the one hand, and the
Obligor thereon, on the other hand, may be set off or charged against
(i) any adverse security deposit or other similar deposit made by or
for the benefit of such Obligor or (ii) any trade payable, rebate
obligation or other similar liability owing to such Obligor; provided
that amounts owing in respect of such Account shall only be excluded to
the extent of such set-off or charge against such adverse security
deposit, payable, rebate obligation or other similar liability;
(m) if the aggregate amount owing in respect of Accounts by the Obligor
thereon to the Borrower and its Domestic Subsidiaries exceeds 20% of
the aggregate of all amounts owing in respect of all Accounts of the
Borrower and its Domestic Subsidiaries at such time; provided that
amounts owing by such Obligor in respect of Accounts shall only be
excluded to the extent such amounts exceed 20% of the
<PAGE> 19
13
aggregate of all amounts owing in respect of all Accounts of the
Borrower and its Domestic Subsidiaries at such time;
(n) such Account is the result of a chargeback, debit memo or a
reinvoice of a disputed Account or Defaulted Account;
(o) such Account arises from (i) the sale to the Obligor on a
bill-and-hold, guarantied sale, sale-or-return, sale on approval,
consignment, sample or trial basis, (ii) a sale subject to any
retainages or holdbacks of any type or (iii) any other sale to the
Obligor made pursuant to any other written agreement providing for
repurchase or return; provided that no amount owing in respect of such
Account shall be excluded pursuant to this clause solely as a result of
customary quality warranties or the general right to return goods
provided by the Borrower or any of its Domestic Subsidiaries;
(p) the Obligor thereon has disputed its liability on, or the Obligor
thereon has made any claim or defense with respect to, such Account or
any other Account due from such Obligor to any Loan Party, which has
not been resolved; provided that (x) amounts owing in respect of such
Account shall only be excluded to the extent of the amount owed by such
Loan Party to the Obligor thereon or the amount of such dispute, claim
or defense, as applicable, and (y) routine adjustments to an Account
common in the industry in which the Borrower and its Domestic
Subsidiaries participate and common to their businesses, such as for
volume or quantity differences or returned goods, will be deemed not to
constitute a dispute, claim, defense or set-off;
(q) such Account does not comply in all material respects with all
applicable legal requirements;
(r) such Account is not owned solely by the Borrower or any of its
Domestic Subsidiaries free and clear of all Liens or other rights or
claims of any other Person (except in favor of the Administrative
Agent);
(s) such Account is subject to any material restrictions on the
transfer, assignability or sale thereof, enforceable against the
assignee, except pursuant to any Loan Document or any other agreement
or instrument governing any Indebtedness of the Borrower or any of its
Domestic Subsidiaries which is permitted to be incurred by the Borrower
or such Domestic Subsidiary pursuant to this Agreement; or
(t) the Administrative Agent does not have a valid and perfected first
priority security interest in such Account for the benefit of the
Lenders (except for liens arising by operation of law, appropriate
reserves for which have been reasonably established for borrowing base
purposes by the Borrower or a Domestic Subsidiary) or such Account does
not conform in all material respects to the representations and
warranties contained in this Agreement or any of the Security
Documents.
<PAGE> 20
14
For purposes of determining Eligible Accounts Receivable, the aggregate
amount owing in respect of Accounts meeting the foregoing criteria for
inclusion in the determination of Eligible Accounts Receivable shall be
reduced by (i) an amount equal to the amount of any reserve for the
value of an accrual for the estimated current liability for rebates and
return and credit memos with respect to such Accounts, determined in
conformity with the accounting policies of the Borrower and its
Subsidiaries as in effect from time to time and (ii) an amount equal to
the portion of any Account representing delivery or freight which has
been or should have been charged-off as not collectable in conformity
with the accounting policies of the Borrower and its Subsidiaries as in
effect from time to time.
"Eligible Inventory": at any time, an amount equal to the
aggregate value of all Inventory of the Borrower and its Domestic
Subsidiaries, excluding (i) 50% of the aggregate value of any Service
Center Inventory, (ii) 40% of the aggregate value of raw materials or
stockroom inventory (net of any applicable reserves), (iii) 100% of the
aggregate value of work in process and (iv) 100% of the aggregate value
of other supplies or materials used or consumed in the business of the
Borrower and its Domestic Subsidiaries. In determining the amount to be
so included, such Inventory shall be valued at the standard cost
maintained on a basis consistent with the Borrower's or such Domestic
Subsidiary's current and historical accounting practice less reserves
taken and adjustments made, if any,
(i) on account of physical inventory adjustments, (ii) for standard cost
variances and shrinkage accruals, (iii) for obsolete or slow moving goods as
determined by Inventory remaining unsold or not placed into production for a
period of 52 weeks, (iv) for goods returned or rejected by the Borrower's or
such Domestic Subsidiary's customers as damaged or defective, obsolete or
otherwise nonsalable, (v) for goods in transit to third parties that are not
excluded pursuant to clause (a), (b), (c) or (d) below, (vi) for Liens referred
to in clause (c)(i) below and (vii) for Liens referred to in clause (c)(ii)
below as established by the Administrative Agent in its sole discretion. Unless
otherwise approved in writing by the Administrative Agent, no amount with
respect to any Inventory shall be deemed to be included in any calculation of
Eligible Inventory if:
(a) the Inventory is not owned solely by the Borrower or such Domestic
Subsidiary or is leased or on consignment or the Borrower or such Domestic
Subsidiary does not have good and valid title thereto;
(b) the Inventory is not located at or in transit to property that is
owned or leased by the Borrower or such Domestic Subsidiary in the
United States and that is set forth on Schedule 5 to the Guarantee and
Collateral Agreement, provided that Inventory in transit to the United
States from outside the United States shall be included in the
calculation of Eligible Inventory only if the delivery of such
Inventory to the United States is guaranteed by a letter of credit from
a bank acceptable to the Administrative Agent;
<PAGE> 21
15
(c) the Inventory is not subject to a perfected Lien in favor of the
Administrative Agent for the benefit of the Lenders prior to all other
Liens except (i) for Liens in favor of landlords with respect to which
either (x) a Landlord Lien Waiver has been obtained or (y) a Rent
Adjustment has been subtracted from the calculation of Eligible
Inventory, provided that if the Borrower or the respective Domestic
Subsidiary fails to make all rental payments with respect to the
property at which such Inventory is located for a period of three
consecutive months, such Inventory shall not be included in the
calculation of Eligible Inventory and (ii) with respect to Eligible
Inventory located at or in transit to sites described in clause (b)
above, for Liens for normal and customary warehousing and
transportation charges (appropriate reserves for which have been
reasonably established for Borrowing Base purposes by the Borrower or
such Domestic Subsidiary); or
(d) the Inventory does not conform in all material respects to the
representations and warranties contained in this Agreement or any of
the Security Documents.
"Environmental Costs": any and all costs or expenses
(including, without limitation, attorney's and consultant's fees,
investigation and laboratory fees, response costs, court costs and
litigation expenses, fines, penalties, damages, settlement payments,
judgments and awards), of whatever kind or nature, known or unknown,
contingent or otherwise, arising out of, or in any way relating to, any
violation of, noncompliance with or liability under any Environmental
Laws or any orders, requirements, demands, or investigations of any
person related to any Environmental Laws. Environmental Costs include
any and all of the foregoing, without regard to whether they arise out
of or are related to any past, pending or threatened proceeding of any
kind.
"Environmental Laws": any and all foreign, Federal, state,
local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, and such requirements of any Governmental
Authority properly promulgated and having the force and effect of law
or other Requirements of Law (including common law) regulating,
relating to or imposing liability or standards of conduct concerning
protection of human health or the environment, as have been, or now or
at any relevant time hereafter are, in effect.
"Environmental Permits": any and all permits, licenses,
registrations, notifications, exemptions and any other authorization
required under any Environmental Law.
"Environmental Program": as defined in subsection 7.8(c).
"Equity Portion": that portion of any Adjustment Payment
representing the percentage of the initial capitalization of the
Borrower not represented by the Debt Portion.
<PAGE> 22
16
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate (grossed-up
for maximum statutory reserve requirements for eurodollar liabilities)
per annum determined by the Administrative Agent to be the arithmetic
mean (rounded to the nearest 1/100th of 1%) of the offered rates for
deposits in Dollars with a term comparable to such Interest Period that
appears on the Telerate British Bankers Assoc. Interest Settlement
Rates Page (as defined below) at approximately 11:00 A.M., London time,
on the second full Business Day preceding the first day of such
Interest Period; provided, however, that if there shall at any time no
longer exist a Telerate British Bankers Assoc. Interest Settlement
Rates Page, "Eurodollar Base Rate" shall mean, with respect to each day
during each Interest Period pertaining to a Eurodollar Loan, the rate
(grossed-up for maximum statutory reserve requirements for eurodollar
liabilities) per annum equal to the rate at which Chase is offered
deposits in Dollars at approximately 11:00 A.M., London time, two
Business Days prior to the first day of such Interest Period in the
interbank eurodollar market where the eurodollar and foreign currency
and exchange operations in respect of Dollars are then being conducted
for delivery on the first day of such Interest Period for the number of
days comprised therein and in an amount comparable to the amount of its
Eurodollar Loan to be outstanding during such Interest Period.
"Telerate British Bankers Assoc. Interest Settlement Rates Page" shall
mean the display designated as Page 3750 on the Telerate System
Incorporated Service (or such other page as may replace such page on
such service for the purpose of displaying the rates at which Dollar
deposits are offered by leading banks in the London interbank deposit
market).
"Eurodollar Loans": Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
--------------------------------------
1.00 - Eurodollar Reserve Requirements
"Eurodollar Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board or other
Governmental Authority having jurisdiction with respect thereto)
dealing with reserve requirements prescribed for eurodollar funding
(currently referred to as "Eurodollar Liabilities" in Regulation D of
the Board) maintained by a member bank of the Federal Reserve System.
<PAGE> 23
17
"Event of Default": any of the events specified in Section 9,
provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"EVI Audio": as defined in the Recitals hereto.
"Excess Cash Flow": for any period, Consolidated EBITDA minus
(i) any Capital Expenditures made in cash during such period, minus
(ii) any principal payments (other than principal payments during such
period pursuant to subsection 4.4(b), (c) or (e) unless and to the
extent that the event giving rise to such mandatory prepayment causes
an increase in Consolidated EBITDA) on the Term Loans made during such
period, minus (iii) any principal payments resulting in a permanent
reduction of any other Indebtedness of the Borrower or any of its
consolidated Subsidiaries made during such period, minus (iv)
Consolidated Interest Expense for such period minus (v) any taxes paid
or payable in cash for such period, minus (vi) the Net Cash Proceeds
from any Asset Sale to the extent that such Net Cash Proceeds (A)
(without duplication of clause (i) or (vii) of this definition) consist
of any Reinvested Amount or are otherwise applied in accordance with
subsection 4.4(b) and (B) are included in the calculation of
Consolidated EBITDA, minus (vii) (without duplication of clause (i) of
this definition) any Investment made in accordance with subsection
8.9(e), (g), (i), (l), (m) or (n), minus (viii) the proceeds of any
Sale and Leaseback Transactions entered into by the Borrower or any of
its Subsidiaries during such period.
"Exchange Act": the Securities Exchange Act of 1934, as
amended from time to time.
"Extension of Credit": as to any Lender, the making of, or the
issuance of, or participation in, a Loan by such Lender or the issuance
of, or participation in, a Letter of Credit by such Lender.
"FIRREA": the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended from time to time.
"Federal Funds Effective Rate": as defined in the definition
of the term "ABR" in this subsection 1.1.
"Financing Lease": any lease of property, real or personal,
the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the
lessee.
"First Merger": as defined in the Recitals hereto.
"Foreign Subsidiary": any Subsidiary of the Borrower which is
organized and existing under the laws of any jurisdiction outside of
the United States of America and EVI Audio.
<PAGE> 24
18
"Foreign Subsidiary Transfer": as defined in the Recitals
hereto.
"GAAP": with respect to the covenants contained in subsections
8.1, 8.2 and 8.8 and all defined terms relating thereto (including,
without limitation, the defined term "Consolidated Funded
Indebtedness") and the defined term "Excess Cash Flow", generally
accepted accounting principles in the United States of America in
effect on the Effective Date and, for all other purposes under this
Agreement, generally accepted accounting principles in the United
States of America in effect from time to time.
"GII": as defined in the Recitals hereto.
"Governmental Authority": any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without
limitation, the European Union.
"GSCP Equity Investment": as defined in subsection 6.1(c).
"GSCP Group": Greenwich Street Capital Partners, L.P.,
Greenwich Street Capital Offshore Fund, Ltd., The Travelers Insurance
Company, The Travelers Life and Annuity Company, TRV Employees Fund,
Inc., Smith Barney Holdings Inc. and their respective Affiliates; any
other investment fund or vehicle managed or sponsored by Greenwich
Street Capital Partners, Inc., The Travelers Insurance Company, The
Travelers Life and Annuity Company, Smith Barney Holdings Inc. or any
of their respective Affiliates; and any limited or general partners of,
or other investors in, any member of the GSCP Group.
"Guarantee": as defined in the definition of "Guarantor".
"Guarantee and Collateral Agreement": the Guarantee and
Collateral Agreement to be executed and delivered by Holdings, the
Borrower and each of its Domestic Subsidiaries and the Administrative
Agent, substantially in the form of Exhibit B, as the same may be
amended, supplemented or otherwise modified from time to time.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "primary obligations") of
any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any such
obligation of the guaranteeing person, whether or not contingent, (i)
to purchase any such primary obligation or any property constituting
direct or indirect security therefor, (ii) to advance or supply funds
(1) for
<PAGE> 25
19
the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor,
(iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of
any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the lower of (a) an amount
equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum
amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation, unless
such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in
which case the amount of such Guarantee Obligation shall be such
guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good faith.
"Guarantor": any Person which is now or hereafter a party to
(a) the Guarantee and Collateral Agreement or (b) any other guarantee
(a "Guarantee") hereafter delivered to the Administrative Agent
guaranteeing the obligations and liabilities of each of the Loan
Parties hereunder or under any other Loan Documents.
"Gulton Data Systems Contracts": the contracts of the Gulton
Data Systems division of GII set forth on Schedule 8 to the Guarantee
and Collateral Agreement on which a lien is not being granted to the
Administrative Agent for the benefit of the Lenders.
"Holdings": as defined in the Recitals hereto.
"Indebtedness": of any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than trade liabilities
incurred in the ordinary course of business and payable in accordance
with customary practices), (b) any other indebtedness of such Person
which is evidenced by a note, bond, debenture or similar instrument,
(c) all obligations of such Person under Financing Leases, (d) all
obligations of such Person in respect of acceptances issued or created
for the account of such Person, (e) for purposes of subsection 8.2 and
Section 9(e) only, all obligations of such Person in respect of
interest rate protection agreements, interest rate futures, interest
rate options, interest rate caps and any other interest rate hedge
arrangements and (f) all indebtedness or obligations of the types
referred to in the preceding clauses (a) through (e) secured by any
Lien on any property owned by such Person even though such Person has
not assumed or otherwise become liable for the payment thereof.
<PAGE> 26
20
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": as defined in subsection 5.9.
"Interest Payment Date": (a) as to any ABR Loan, the last day
of each January, April, July and October to occur while such Loan is
outstanding and, if such ABR Loan is a Term Loan, the date of each
payment of principal thereof, (b) as to any Eurodollar Loan having an
Interest Period of three months or less, the last day of such Interest
Period, and (c) as to any Eurodollar Loan having an Interest Period
longer than three months, (x) each day which is three months, or a
whole multiple thereof, after the first day of such Interest Period and
(y) the last day of such Interest Period.
"Interest Period": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the
borrowing or conversion date, as the case may be, with respect
to such Eurodollar Loan and ending one, two, three or six
months thereafter, as selected by the Borrower in its notice
of borrowing or notice of conversion, as the case may be,
given with respect thereto; and
(ii) thereafter, each period commencing on the
last day of the next preceding Interest Period applicable to
such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice
to the Administrative Agent not less than three Business Days
prior to the last day of the then current Interest Period with
respect thereto;
provided that all of the foregoing provisions relating to Interest
Periods are subject to the following:
(1) if any Interest Period would otherwise end on a
day that is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the result
of such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;
(2) any Interest Period that would otherwise extend
beyond the Termination Date shall (for all purposes other than
subsection 4.12) end on the Termination Date.
(3) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding
<PAGE> 27
21
day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month; and
(4) the Borrower shall select Interest Periods so as
not to require a scheduled payment of any Eurodollar Loan
during an Interest Period for such Loan.
"Interest Rate Protection Agreement": any interest rate
protection agreement, interest rate future, interest rate option,
interest rate cap or collar or other interest rate hedge arrangement
with (i) any Lender or (ii) any financial institution reasonably
acceptable to the Administrative Agent, to or under which the Borrower
is a party or a beneficiary on the Effective Date or becomes a party or
a beneficiary after the Effective Date.
"Inventory": as defined in the Uniform Commercial Code as in
effect in the State of New York from time to time, and including,
without limitation, raw materials and all sub-assemblies held for sale.
"Investment Company Act": the Investment Company Act of 1940,
as amended from time to time.
"Investments": as defined in subsection 8.9.
"Issuing Lender": Chase or any of its Affiliates, in its
capacity as issuer of any Letter of Credit.
"Landlord Lien Waiver": a written agreement in substantially
the form of Exhibit J or otherwise reasonably acceptable to the
Administrative Agent.
"L/C Fee Payment Date": with respect to any Letter of Credit,
the last day of each January, April, July and October to occur after
the date of issuance thereof to and including the first such day to
occur on or after the date of expiry thereof.
"L/C Obligations": at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then
outstanding Letters of Credit and (b) the aggregate amount of drawings
under Letters of Credit which have not then been reimbursed pursuant to
subsection 3.5(a).
"L/C Participants": the collective reference to all the
Revolving Credit Lenders other than the Issuing Lender.
"Lenders": as defined in the Preamble hereto.
"Letters of Credit": as defined in subsection 3.2(a).
<PAGE> 28
22
"Leverage Ratio": at the last day of each fiscal quarter of
the Borrower, the ratio of (a) Consolidated Funded Indebtedness at such
date to (b) Consolidated EBITDA for the period of four full fiscal
quarters ending on such date.
"Lien": any mortgage, pledge, hypothecation, assignment,
security deposit arrangement, encumbrance, lien (statutory or other),
charge or other security interest or any preference, priority or other
security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or
other title retention agreement and any Financing Lease having
substantially the same economic effect as any of the foregoing).
"Loan": a Revolving Credit Loan, a Term Loan or a Swing Line
Loan, as the context shall require; collectively, the "Loans".
"Loan Documents": this Agreement, any Notes, the Applications,
any Lockbox Agreements, the Guarantees and the Security Documents, each
as amended, supplemented, waived or otherwise modified from time to
time.
"Loan Parties": Holdings, the Borrower and each Subsidiary of
the Borrower which is a party to a Loan Document; individually, a "Loan
Party".
"Lockbox Agreement": each Lockbox Agreement, substantially in
the form of Exhibit L, with such changes or additions to such form as
shall be approved by the Administrative Agent (which approval shall not
be unreasonably withheld), among the Borrower or any of its
Subsidiaries, each Lockbox Bank and the Administrative Agent, as the
same may be amended, supplemented, waived or otherwise modified from
time to time.
"Lockbox Bank": each bank which shall enter into a Lockbox
Agreement as the "Lockbox Bank" thereunder and as defined therein,
which shall be (i) a Lender which is a bank or (ii) a bank approved by
the Administrative Agent (which approval will not be unreasonably
withheld). Each anticipated Lockbox Bank as of the Effective Date is
listed on Schedule III and has been approved by the Administrative
Agent.
"Management Investors": the collective reference to the
officers, directors, employees and other members of the management of
Holdings, the Borrower or any of their Subsidiaries, or family members
or relatives thereof or trusts for the benefit of any of the foregoing,
who at any particular date shall beneficially own or have the right to
acquire, directly or indirectly, common stock of Holdings.
"Mark IV": as defined in the Recitals hereto.
"Material Adverse Effect": a material adverse effect on (a)
the business, operations, property, condition (financial or otherwise)
or prospects of the Borrower and its Subsidiaries taken as a whole, or
(b) the validity or enforceability as to any
<PAGE> 29
23
Loan Party thereto of this Agreement, any of the Notes or any of the
other Loan Documents or the rights and remedies of the Administrative
Agent and the Lenders under the Loan Documents taken as a whole.
"Materials of Environmental Concern": any gasoline or
petroleum (including, without limitation, crude oil or any fraction
thereof) or petroleum products or any hazardous or toxic substances or
materials or wastes defined or regulated as such in or under or which
may give rise to liability under any applicable Environmental Law,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Mergers": as defined in the Recitals hereto.
"Mortgaged Properties": the collective reference to the real
properties owned in fee by the Loan Parties described on Schedule 5.8,
including, without limitation, all buildings, improvements, structures
and fixtures now or subsequently located thereon and owned by any such
Loan Party.
"Mortgages": (i) each of the mortgages executed and delivered
by the Borrower and its Subsidiaries encumbering each of the Mortgaged
Properties, substantially in the form of Exhibit E (with such
modifications thereto as the Administrative Agent on or before the
Effective Date shall reasonably determine is necessary in any state to
create a valid and enforceable first mortgage Lien securing the
obligations and liabilities of the Borrower or any of its Subsidiaries,
as the case may be, under the Loan Documents) and (ii) each of the
mortgages and deeds of trust, if any, executed and delivered by the
Borrower and its Subsidiaries to the Administrative Agent pursuant to
subsection 7.9, as the same may be amended, supplemented, waived or
otherwise modified from time to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": with respect to any Asset Sale
(including, without limitation, any Sale and Leaseback Transaction
permitted under subsection 8.11), any sale or issuance of equity
securities of the Borrower or any of its Subsidiaries, the issuance of
any debt securities or any borrowings by the Borrower or any of its
Subsidiaries (other than issuances and borrowings permitted pursuant to
subsection 8.2, except as otherwise specified), an amount equal to the
gross proceeds in cash and Cash Equivalents of such Asset Sale, sale,
issuance or borrowing, net of (i) reasonable attorneys' fees,
accountants' fees, brokerage, consultant and other customary fees,
underwriting commissions and other reasonable fees and expenses
actually incurred in connection with such Asset Sale, sale, issuance or
borrowing, (ii) taxes paid or reasonably estimated to be payable as a
result thereof, (iii) appropriate amounts provided or to be provided by
the Borrower or any of its Subsidiaries as a reserve, in accordance
with GAAP, with respect to any liabilities associated with such Asset
Sale
<PAGE> 30
24
and retained by the Borrower or any such Subsidiary after such Asset
Sale and other appropriate amounts to be used by the Borrower or any of
its Subsidiaries to discharge or pay on a current basis any other
liabilities associated with such Asset Sale and (iv) in the case of a
sale or Sale and Leaseback Transaction of or involving an asset subject
to a Lien securing any Indebtedness, payments made and installment
payments required to be made to repay such Indebtedness, including,
without limitation, payments in respect of principal, interest and
prepayment premiums and penalties.
"Non-Excluded Taxes": as defined in subsection 4.11.
"Notes": the collective reference to the Revolving Credit
Notes, the Swing Line Note and the Term Notes.
"Obligor": with respect to an Account, the purchaser of the
goods or services giving rise to such Account or any other Person
obligated to make payment in respect of such purchase of such goods or
services.
"Other Representatives": Chase Securities Inc. in its capacity
as arranger of the Commitments hereunder and the Issuing Lender in its
capacity as such.
"Participants": as defined in subsection 11.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA (or any successor thereto).
"Permitted Hedging Arrangement": as defined in subsection
8.16.
"Person": an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is an "employer" as defined in Section 3(5) of ERISA.
"Prime Rate": as defined in the definition of the term "ABR"
in this subsection 1.1.
"Pro Forma Balance Sheet": as defined in subsection 5.1(b).
"Pro Forma Date": as defined in subsection 5.1(b).
"Refunded Swing Line Loans": as defined in subsection 2.5(c).
"Register": as defined in subsection 11.6(d).
<PAGE> 31
25
"Regulation U": Regulation U of the Board as in effect from
time to time.
"Reimbursement Obligations": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to subsection 3.5(a) for amounts
drawn under Letters of Credit.
"Reinvested Amount": with respect to any Asset Sale permitted
by subsection 8.6(g), that portion of the Net Cash Proceeds thereof as
shall, according to a certificate of a Responsible Officer of the
Borrower delivered to the Administrative Agent within 30 days of such
Asset Sale, be reinvested in the business of the Borrower and its
Subsidiaries in a manner consistent with the requirements of subsection
8.15(a) and the other provisions hereof within one year of the receipt
of such Net Cash Proceeds or, if such reinvestment is in a project
authorized by the board of directors of the Borrower that will take
longer than one year to complete, the period of time necessary to
complete such project; provided that (i) if any such certificate of a
Responsible Officer is not delivered to the Administrative Agent on the
date of such Asset Sale, any Net Cash Proceeds of such Asset Sale shall
be immediately (x) deposited in a cash collateral account established
at Chase to be held as collateral in favor of the Administrative Agent
for the benefit of the Lenders on terms reasonably satisfactory to the
Administrative Agent and shall remain on deposit in such cash
collateral account until such certificate of a Responsible Officer is
delivered to the Administrative Agent or (y) used to make a prepayment
of the Revolving Credit Loans in accordance with subsection 4.4(a)(i);
provided that, notwithstanding anything in this Agreement to the
contrary, the Borrower may not request any Extension of Credit under
the Revolving Credit Commitments that would reduce the aggregate amount
of the Available Revolving Credit Commitments to an amount that is less
than the amount of any such prepayment until such certificate of a
Responsible Officer is delivered to the Administrative Agent and (ii)
any Net Cash Proceeds not so reinvested within one year or such later
day, as applicable, shall be utilized at the end of such period or to
prepay the Loans pursuant to subsection 4.4(e).
"Rent Adjustment": with respect to any property leased by the
Borrower or any of its Domestic Subsidiaries where any Inventory is
located which may become subject to Liens in favor of the landlord
thereof arising by operation of law, an amount equal to six months'
rent at such premises.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the thirty day
notice period is waived under subsections .13, .14, .16, .18, .19 or
.20 of PBGC Reg. Section 2615 or any successor regulation thereto.
<PAGE> 32
26
"Required Lenders": at any time, Lenders the Total Credit
Percentages of which aggregate at least 51%.
"Requirement of Law": as to any Person, the certificate of
incorporation and by-laws or other organizational or governing
documents of such Person, and any law, statute, ordinance, code,
decree, treaty, rule or regulation or determination of an arbitrator or
a court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its material property or to which
such Person or any of its material property is subject, including,
without limitation, laws, ordinances and regulations pertaining to
zoning, occupancy and subdivision of real properties; provided that the
foregoing shall not apply to any non-binding recommendation of any
Governmental Authority.
"Responsible Officer": as to any Person, any of the following
officers of such Person: (i) the chief executive officer or the
president of such Person and, with respect to financial matters, the
chief financial officer, the senior vice president - finance, the
treasurer or the controller of such Person, (ii) any vice president of
such Person or, with respect to financial matters, any assistant
treasurer or assistant controller of such Person, who has been
designated in writing to the Administrative Agent as a Responsible
Officer by such chief executive officer or president of such Person or,
with respect to financial matters, such chief financial officer of such
Person, (iii) with respect to subsection 7.7 and without limiting the
foregoing, the general counsel of such Person and (iv) with respect to
ERISA matters, the senior vice president - human resources (or
substantial equivalent) of such Person.
"Revolving Credit Commitment": as to any Revolving Credit
Lender, its obligation to make Revolving Credit Loans to, and/or make
or participate in Swing Line Loans made to, and/or issue or participate
in Letters of Credit issued on behalf of, the Borrower in an aggregate
amount not to exceed at any one time outstanding the amount set forth
opposite such Revolving Credit Lender's name in Schedule I under the
heading "Revolving Credit Commitment" or, in the case of any Lender
that is an Assignee, the amount of the assigning Lender's Revolving
Credit Commitment assigned to such Assignee pursuant to subsection
11.6(c) (in each case as such amount may be adjusted from time to time
as provided herein); collectively, as to all the Revolving Credit
Lenders, the "Revolving Credit Commitments".
"Revolving Credit Commitment Percentage": as to any Revolving
Credit Lender, the percentage of the aggregate Revolving Credit
Commitments constituted by its Revolving Credit Commitment (or, if the
Revolving Credit Commitments have terminated or expired, the percentage
which (i) the sum of (a) such Lender's then outstanding Revolving
Credit Loans plus (b) such Lender's interests in the aggregate L/C
Obligations and Swing Line Loans then outstanding then constitutes of
(ii) the sum of (a) the aggregate Revolving Credit Loans of all the
Revolving Credit Lenders then outstanding plus (b) the aggregate L/C
Obligations and Swing Line Loans then outstanding).
<PAGE> 33
27
"Revolving Credit Commitment Period": the period from and
including the Effective Date to but not including the Termination Date,
or such earlier date as the Revolving Credit Commitments shall
terminate as provided herein.
"Revolving Credit Lender": any Lender having a Revolving
Credit Commitment hereunder.
"Revolving Credit Loans": as defined in subsection 2.1.
"Revolving Credit Note": as defined in subsection 2.2.
"Sale and Leaseback Transaction": as defined in subsection
8.11.
"Second Merger": as defined in the Recitals hereto.
"Securities Act": the Securities Act of 1933, as amended from
time to time.
"Security Documents": the collective reference to the
Mortgages, the Guarantee and Collateral Agreement, the Borrower Patent
and Trademark Security Agreement, and all other similar security
documents hereafter delivered to the Administrative Agent granting a
Lien on any asset or assets of any Person to secure the obligations and
liabilities of the Borrower hereunder, under any Notes and/or under any
of the other Loan Documents or to secure any guarantee of any such
obligations and liabilities, including, without limitation, any
security documents executed and delivered or caused to be delivered to
the Administrative Agent pursuant to subsection 8.15(b) or 8.15(c).
"Senior PIK Preferred Stock": the senior pay-in-kind preferred
stock of Holdings acquired by GSCP Investors in the Acquisition.
"Senior Subordinated Credit Agreement": the credit agreement
dated as of February 10, 1997, as amended, modified or otherwise
supplemented from time to time in accordance with subsection 8.12 among
the Borrower, the several lenders party thereto, and Chase as
administrative agent.
"Senior Subordinated Facility Documents": the collective
reference to the Senior Subordinated Credit Agreement, the notes issued
pursuant thereto, the guarantees thereof, and each of the other
instruments and documents executed and delivered pursuant to any of the
foregoing (but excluding, for the avoidance of doubt, the Senior
Subordinated Indenture, the Senior Subordinated Notes and each of the
other instruments and documents executed and delivered pursuant to any
of the foregoing).
"Senior Subordinated Indenture": either of the following, in
each case as amended, waived, supplemented or otherwise modified from
time to time in accordance with subsection 8.12: (a) if and when
entered into, the Senior Subordinated Indenture, substantially in the
form of Exhibit C attached to the Senior Subordinated Credit
<PAGE> 34
28
Agreement (with such changes therein as the Administrative Agent and
the Borrower shall approve), if and when executed and delivered by the
Borrower and a trustee thereunder, relating to the Exchange Notes (as
defined in the Senior Subordinated Credit Agreement) or (b) in the
event that the Indebtedness under the Senior Subordinated Credit
Agreement is refinanced as contemplated thereby, the indenture or
credit agreement under which such refinancing Indebtedness is issued
and outstanding.
"Senior Subordinated Notes": the notes issued under the Senior
Subordinated Indenture.
"Senior Subordinated Notes Documents": the collective
reference to the Senior Subordinated Notes and the Senior Subordinated
Indenture and each of the other instruments and documents executed and
delivered pursuant to any of the foregoing, as the same may be amended,
supplemented, waived or otherwise modified from time to time in
accordance with subsection 8.12 to the extent applicable; individually
a "Senior Subordinated Note Document."
"Service Center Inventory": all Inventory of the Borrower and
its Domestic Subsidiaries located at the Buchanan Service Department -
Division #471, the Mark IV Audio West Service Department - Division
#477 or any location maintaining Inventory of the Borrower or any of
its Domestic Subsidiaries solely for the purpose of operating a service
department.
"Set": the collective reference to Eurodollar Loans, the then
current Interest Periods with respect to all of which begin on the same
date and end on the same later date (whether or not such Loans shall
originally have been made on the same day).
"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"Solvent" and "Solvency": with respect to any Person on a
particular date, the condition that, on such date, (a) the fair value
of the property of such Person is greater than the total amount of
liabilities, including, without limitation, contingent liabilities, of
such Person, (b) the present fair salable value of the assets of such
Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute
and matured, (c) such Person does not intend to, and does not believe
that it will, incur debts or liabilities beyond such Person's ability
to pay as such debts and liabilities mature, and (d) such Person is not
engaged in business or a transaction, and is not about to engage in
business or a transaction, for which such Person's property would
constitute an unreasonably small amount of capital.
"Standby Letter of Credit": as defined in subsection 3.1.
"Stock Purchase Agreement": as defined in the Recitals hereto.
<PAGE> 35
29
"Subsidiary": as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of (until the Second Merger shall have been
consummated) GII and (after the Second Merger shall have been
consummated) the Borrower.
"Swing Line Commitment": the Swing Line Lender's obligation to
make Swing Line Loans pursuant to subsection 2.5.
"Swing Line Lender": Chase, in its capacity as provider of the
Swing Line Loans.
"Swing Line Loan Participation Certificate": a certificate in
substantially the form of Exhibit K.
"Swing Line Loans": as defined in subsection 2.5(a).
"Swing Line Note": as defined in subsection 2.5(b).
"Sylmar Facility": the property located at 13278 Ralston
Avenue, Sylmar, California.
"Tax Sharing Agreement": the Tax Sharing Agreement, dated as
of February 10, 1997, among Holdings, the Borrower and EVI Audio (and
each of their permitted successors and assigns thereunder), as the same
may be amended, modified or supplemented from time to time.
"Term Loan": as defined in subsection 2.6(a) collectively, the
"Term Loans".
"Term Loan Commitment": as to any Term Loan Lender, its
obligation to make Term Loans to the Borrower on the Effective Date in
an aggregate amount not to exceed at any one time outstanding the
amount set forth opposite such Term Loan Lender's name in Schedule I
under the heading Term Loan Commitment"; collectively, as to all the
Term Loan Lenders, the "Term Loan Commitments".
"Term Loan Lender": any Lender having a Term Loan Commitment
hereunder and/or a Term Loan outstanding hereunder.
"Term Loan Percentage": as to any Term Loan Lender before the
Effective Date, the percentage which such Lender's Term Loan Commitment
constitutes of the
<PAGE> 36
30
aggregate Term Loan Commitments (or, after the Effective Date, the
percentage which such Lender's Term Loans then outstanding constitutes
of the aggregate Term Loans then outstanding).
"Term Note": as defined in subsection 2.7(a).
"Termination Date": August 10, 2002.
"Three Month Secondary CD Rate": as defined in the definition
of the term "ABR" in this subsection 1.1.
"Total Credit Percentage": as to any Lender at any time, the
percentage of the aggregate Revolving Credit Commitments and aggregate
Term Loan Commitments, then constituted by its Revolving Credit
Commitment and Term Loan Commitment (it being agreed that upon
termination or expiration of the Revolving Credit Commitments or the
Term Loan Commitments, the Total Credit Percentage of any Lender shall
be determined:
(i) in the case of the termination or
expiration of the Revolving Credit Commitments, by reference
to the aggregate amount of the Aggregate Outstanding Revolving
Credits of the Lenders and such Lender's Aggregate Outstanding
Revolving Credit; and
(ii) in the case of the termination or
expiration of the Term Loan Commitment by reference to the
aggregate principal amount of the Term Loans of the Lenders
and such Lender's Term Loans.
"Transaction Documents": the collective reference to the
Acquisition Documents and the Senior Subordinated Facility Documents.
"Transactions": the collective reference to the Acquisition,
the Mergers, the Foreign Subsidiary Transfer, the GSCP Equity
Investment and the issuances of Indebtedness under the Senior
Subordinated Credit Agreement and the issuance of the Senior
Subordinated Notes.
"Transferee": as defined in subsection 11.6(f).
"Type": as to any Loan, its nature as an ABR Loan or a
Eurodollar Loan.
"Underfunding": the excess of the present value of all accrued
benefits under a Plan (based on those assumptions used to fund such
Plan), determined as of the most recent annual valuation date, over the
value of the assets of such Plan allocable to such accrued benefits.
<PAGE> 37
31
"Uniform Customs": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
"U.S. Tax Compliance Certificate": as defined in subsection
4.11(b).
"Wholly Owned Subsidiary": as to any Person, any Subsidiary of
such Person of which such Person owns, directly or indirectly through
one or more Wholly Owned Subsidiaries, all of the Capital Stock of such
Subsidiary other than directors qualifying shares or shares held by
nominees.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Notes, any other Loan Document or any certificate or other
document made or delivered pursuant hereto.
(b) As used herein and in any Notes and any other Loan
Document, and any certificate or other document made or delivered pursuant
hereto or thereto, accounting terms relating to the Borrower and its
Subsidiaries not defined in subsection 1.1 and accounting terms partly defined
in subsection 1.1, to the extent not defined, shall have the respective meanings
given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section ,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("Revolving Credit Loans") to the Borrower from time to
time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Revolving Credit
Lender's Revolving Credit Commitment Percentage of the then outstanding L/C
Obligations and the then outstanding Swing Line Loans, does not exceed the
amount of such Lender's Revolving Credit Commitment then in effect. During the
Revolving Credit Commitment Period, the Borrower may use the Revolving Credit
Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions hereof,
provided that not more than $2,000,000 in Revolving Credit Loans will be
available for borrowing on the Effective Date.
<PAGE> 38
32
(b) The Revolving Credit Loans may be made from time to time
in (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as
determined by the Borrower and notified to the Administrative Agent in
accordance with subsections 2.3 and 4.2, provided that no Revolving Credit Loan
shall be made as a Eurodollar Loan after the day that is one month prior to the
Termination Date.
2.2 Revolving Credit Notes. The Borrower agrees that, upon the
request to the Administrative Agent by any Revolving Credit Lender made on or
prior to the Effective Date or in connection with any assignment pursuant to
subsection 11.6(c), in order to evidence such Lender's Revolving Credit Loans
the Borrower will execute and deliver to such Lender a promissory note
substantially in the form of Exhibit A-1, with appropriate insertions as to
payee, date and principal amount (each, as amended, supplemented, replaced or
otherwise modified from time to time, a "Revolving Credit Note"), payable to the
order of such Lender and in a principal amount equal to the aggregate unpaid
principal amount of all Revolving Credit Loans made by such Lender to the
Borrower. Each Revolving Credit Note shall (x) be dated the Effective Date, (y)
be stated to mature on the Termination Date and (z) provide for the payment of
interest in accordance with subsection 4.1. A Revolving Credit Note may be
assigned or otherwise transferred only by registration of such assignment or
transfer in the Register (and each Revolving Credit Note shall expressly so
provide). Any assignment or transfer of a Revolving Credit Note shall be
registered in the Register only upon surrender for registration of assignment or
transfer of the Revolving Credit Note accompanied by an Assignment and
Acceptance duly executed by the assigning Lender, and thereupon a new Revolving
Credit Note shall be issued to the designated Assignee and the surrendered
Revolving Credit Note shall be returned by the Administrative Agent to the
Borrower marked "cancelled". No assignment of a Revolving Credit Note shall be
effective unless it shall have been recorded in the Register by the
Administrative Agent as provided in this subsection 2.2.
2.3 Procedure for Revolving Credit Borrowing. The Borrower may
borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day, provided that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 12:30 P.M., New York City time, at least (a) three
Business Days prior to the requested Borrowing Date, if all or any part of the
requested Revolving Credit Loans are to be initially Eurodollar Loans or (b) one
Business Day prior to the requested Borrowing Date, otherwise), specifying (i)
the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the
borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof and
(iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the
respective amounts of each such Type of Loan and the respective lengths of the
initial Interest Periods therefor. Each borrowing under the Revolving Credit
Commitments shall be in an amount equal to (x) in the case of ABR Loans, except
any ABR Loan to be used solely to pay a like amount of outstanding Reimbursement
Obligations or Swing Line Loans, $1,000,000 or a whole multiple of $500,000 in
excess thereof (or, if the then Available Revolving Credit Commitments are less
than $1,000,000, such lesser amount) and (y) in the case of Eurodollar Loans,
$1,000,000 or a whole multiple of $500,000 in excess thereof. Upon receipt of
any such notice from the Borrower, the Administrative Agent shall promptly
notify each Revolving Credit Lender thereof. Subject to
<PAGE> 39
33
the satisfaction of the conditions precedent specified in subsection 6.2, each
Revolving Credit Lender will make the amount of its pro rata share of each
borrowing of Revolving Credit Loans available to the Administrative Agent for
the account of the Borrower identified in such notice at the office of the
Administrative Agent specified in subsection 11.2 prior to 12:30 P.M. (or 10:00
A.M., in the case of the initial borrowing hereunder), New York City time, or at
such other office of the Administrative Agent or at such other time as to which
the Administrative Agent shall notify such Revolving Credit Lender and the
Borrower reasonably in advance of the Borrowing Date with respect thereto on the
Borrowing Date requested by the Borrower and in funds immediately available to
the Administrative Agent. Such borrowing will then be made available to the
Borrower identified in the notice by the Administrative Agent crediting the
account of the Borrower on the books of such office with the aggregate of the
amounts made available to the Administrative Agent by the Revolving Credit
Lenders and in like funds as received by the Administrative Agent.
2.4 Termination or Reduction of Revolving Credit Commitments.
The Borrower shall have the right, upon not less than three Business Days'
notice to the Administrative Agent (which will promptly notify the Lenders
thereof), to terminate the Revolving Credit Commitments or, from time to time,
to reduce the amount of the Revolving Credit Commitments; provided that no such
termination or reduction shall be permitted if, after giving effect thereto and
to any prepayments of the Revolving Credit Loans and Swing Line Loans made on
the effective date thereof, the aggregate principal amount of the Revolving
Credit Loans then outstanding, when added to the then outstanding L/C
Obligations and the then outstanding Swing Line Loans, would exceed the
Revolving Credit Commitments then in effect. Any such reduction shall be in an
amount equal to $1,000,000 or a whole multiple of $500,000 in excess thereof and
shall reduce permanently the Revolving Credit Commitments then in effect.
2.5 Swing Line Commitment. (a) Subject to the terms and
conditions hereof, the Swing Line Lender agrees to make swing line loans
(individually, a "Swing Line Loan"; collectively, the "Swing Line Loans") to the
Borrower from time to time during the Revolving Credit Commitment Period in an
aggregate principal amount at any one time outstanding not to exceed $1,000,000,
provided that at no time may the sum of the then outstanding Swing Line Loans,
Revolving Credit Loans and L/C Obligations exceed the Revolving Credit
Commitments then in effect. Amounts borrowed by the Borrower under this
subsection 2.5 may be repaid and, through but excluding the Termination Date,
reborrowed. All Swing Line Loans shall be made as ABR Loans and shall not be
entitled to be converted into Eurocurrency Loans. The Borrower shall give the
Swing Line Lender irrevocable notice (which notice must be received by the Swing
Line Lender prior to 12:00 Noon, New York City time) on the requested Borrowing
Date specifying (i) the amount of the requested Swing Line Loan which shall be
in a minimum amount of $100,000 or whole multiples of $50,000 in excess thereof.
The proceeds of the Swing Line Loan will be made available by the Swing Line
Lender to the Borrower at the office of the Swing Line Lender by crediting the
account of the Borrower at such office with such proceeds in Dollars.
<PAGE> 40
34
(b) The Borrower agrees that, upon the request to the
Administrative Agent by the Swing Line Lender made on or prior to the Effective
Date or in connection with any assignment pursuant to subsection 11.6(c), in
order to evidence the Swing Line Loans the Borrower will execute and deliver to
the Swing Line Lender a promissory note substantially in the form of Exhibit
A-3, with appropriate insertions (as the same may be amended, supplemented,
replaced or otherwise modified from time to time, the "Swing Line Note"),
payable to the order of the Swing Line Lender and representing the obligation of
the Borrower to pay the amount of the Swing Line Commitment or, if less, the
unpaid principal amount of the Swing Line Loans made to the Borrower, with
interest thereon as prescribed in subsection 4.1. The Swing Line Note shall (i)
be dated the Effective Date, (i) be stated to mature on the Termination Date and
(iii) provide for the payment of interest in accordance with subsection 4.1.
(c) The Swing Line Lender, at any time in its sole and
absolute discretion may, and, at any time as there shall be a Swing Line Loan
outstanding for more than seven Business Days, the Swing Line Lender shall, on
behalf of the Borrower (which hereby irrevocably directs and authorizes the
Swing Line Lender to act on its behalf), request each Revolving Credit Lender,
including the Swing Line Lender, to make a Revolving Credit Loan as an ABR Loan
in an amount equal to such Revolving Credit Lender's Revolving Credit Commitment
Percentage of the principal amount of all of the Swing Line Loans (the "Refunded
Swing Line Loans") outstanding on the date such notice is given; provided that
the provisions of this subsection shall not affect the obligations of the
Borrower to prepay Swing Line Loans in accordance with the provisions of
subsection 4.4(i). Unless the Revolving Credit Commitments shall have expired or
terminated (in which event the procedures of paragraph (d) of this subsection
2.5 shall apply), each Revolving Credit Lender will make the proceeds of its
Revolving Credit Loan available to the Administrative Agent for the account of
the Swing Line Lender at the office of the Administrative Agent prior to 12:00
Noon, New York City time, in funds immediately available on the Business Day
next succeeding the date such notice is given. The proceeds of such Revolving
Credit Loans shall be immediately applied to repay the Refunded Swing Line
Loans.
(d) If the Revolving Credit Commitments shall expire or
terminate at any time while Swing Line Loans are outstanding, each Revolving
Credit Lender shall, at the option of the Swing Line Lender exercised
reasonably, either (i) notwithstanding the expiration or termination of the
Revolving Credit Commitments, make a Revolving Credit Loan as an ABR Loan (which
Revolving Credit Loan shall be deemed a "Revolving Credit Loan" for all purposes
of this Agreement and the other Loan Documents) or (ii) purchase an undivided
participating interest in such Swing Line Loans, in either case in an amount
equal to such Revolving Credit Lender's Revolving Credit Commitment Percentage
determined on the date of, and immediately prior to, the expiration or
termination of the Revolving Credit Commitments of the aggregate principal
amount of such Swing Line Loans. Each Revolving Credit Lender will make the
proceeds of any Revolving Credit Loan made pursuant to the immediately preceding
sentence available to the Administrative Agent for the account of the Swing Line
Lender at the office of the Administrative Agent prior to 12:00 Noon, New York
City time, in funds immediately available on the Business Day next succeeding
the date on
<PAGE> 41
35
which the Revolving Credit Commitments expire or terminate. The proceeds of such
Revolving Credit Loans shall be immediately applied to repay the Swing Line
Loans outstanding on the date of termination or expiration of the Revolving
Credit Commitments. In the event that the Revolving Credit Lenders purchase
undivided participating interests pursuant to the first sentence of this
paragraph (d), each Revolving Credit Lender shall immediately transfer to the
Swing Line Lender, in immediately available funds, the amount of its
participation and upon receipt thereof the Swing Line Lender will deliver to
such Revolving Credit Lender a Swing Line Loan Participation Certificate dated
the date of receipt of such funds and in such amount.
(e) Whenever, at any time after the Swing Line Lender has
received from any Revolving Credit Lender such Revolving Credit Lender's
participating interest in a Swing Line Loan, the Swing Line Lender receives any
payment on account thereof, the Swing Line Lender will distribute to such
Revolving Credit Lender its participating interest in such amount (appropriately
adjusted, in the case of interest payments, to reflect the period of time during
which such Revolving Credit Lender's participating interest was outstanding and
funded); provided, however, that in the event that such payment received by the
Swing Line Lender is required to be returned, such Revolving Credit Lender will
return to the Swing Line Lender any portion thereof previously distributed by
the Swing Line Lender to it.
2.6 Term Loans. Subject to the terms and conditions hereof,
each Term Loan Lender severally agrees to make a term loan (a "Term Loan") to
the Borrower in the principal amount set forth opposite such Lender's name in
Schedule I under the heading "Term Loan Commitment", on the Effective Date. The
Term Loans may be in (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination
thereof, as determined by the Borrower and notified to the Administrative Agent
in accordance with subsections 2.8 and 4.2.
2.7 Term Notes. (a) The Borrower agrees that, upon the request
to the Administrative Agent by any Term Loan Lender made on or prior to the
Effective Date or in connection with any assignment pursuant to subsection
11.6(c), in order to evidence such Lender's Term Loan, the Borrower will execute
and deliver to such Lender a promissory note substantially in the form of
Exhibit A-2 (each, as amended, supplemented, replaced or otherwise modified from
time to time, a "Term Note"), with appropriate insertions therein as to payee,
date and principal amount, payable to the order of such Term Loan Lender and in
a principal amount equal to the lesser of (a) the amount set forth opposite such
Term Loan Lender's name on Schedule I under the heading "Term Loan Commitment"
and (b) the then unpaid principal amount of the Term Loans made by such Term
Loan Lender to the Borrower. Each Term Note shall (i) be dated the Effective
Date, (ii) be payable as provided in subsection 2.8(b) and (iii) provide for the
payment of interest in accordance with subsection 4.1. A Term Note may be
assigned or otherwise transferred only by registration of such assignment or
transfer in the Register (and each Term Note shall expressly so provide). Any
assignment or transfer of a Term Note shall be registered in the Register only
upon surrender for registration of assignment or transfer of the Term Note
accompanied by an Assignment and Acceptance duly executed by the assigning
Lender, and thereupon a new Term Note shall be issued to the designated Assignee
and the surrendered Term Note shall be returned by the Administrative
<PAGE> 42
36
Agent to the Borrower marked "cancelled". No assignment of a Term Note shall be
effective unless it shall have been recorded in the Register by the
Administrative Agent as provided in this subsection 2.7(a).
(b) The aggregate Term Loans of all the Term Loan Lenders
shall be payable in 20 consecutive quarterly installments, commencing on
November 30, 1997, on the dates and in the principal amounts, equal to the
respective amounts set forth below (together with all accrued interest thereon)
opposite the applicable installment dates (or, if less in any case, the
aggregate amount of the Term Loans then outstanding):
<PAGE> 43
37
<TABLE>
<CAPTION>
Dates Amount
----- ------
<S> <C>
November 30, 1997 $ 972,183
February 28, 1998 $ 972,183
May 31, 1998 $ 972,183
August 31, 1998 $ 972,183
November 30, 1998 $ 972,183
February 28, 1999 $ 972,183
May 31, 1999 $1,466,725
August 31, 1999 $1,466,725
November 30, 1999 $1,466,725
February 28, 2000 $1,466,725
May 31, 2000 $1,750,000
August 31, 2000 $1,750,000
November 30, 2000 $1,750,000
February 28, 2001 $1,750,000
May 31, 2001 $2,100,000
August 31, 2001 $2,100,000
November 30, 2001 $2,100,000
February 28, 2002 $2,100,000
</TABLE>
<PAGE> 44
38
<TABLE>
<CAPTION>
Dates Amount
----- ------
<S> <C>
May 31, 2002 $3,956,522
Termination Date $3,943,480
</TABLE>
2.8 Procedure for Term Loan Borrowing. The Borrower shall give
the Administrative Agent irrevocable notice (which notice must be received by
the Administrative Agent prior to 12:30 P.M., New York City time, at least (a)
three Business Days prior to the Effective Date, if all or any part of the Term
Loans are to be initially Eurodollar Loans or (b) one Business Day prior to the
Effective Date otherwise requesting that the Term Loan Lenders make the Term
Loans on the Effective Date and specifying (i) the amount to be borrowed, (ii)
whether the Term Loans are to be initially Eurodollar Loans, ABR Loans or a
combination thereof, and (iii) if the Term Loans are to be entirely or partly
Eurodollar Loans, the respective amounts of each such Type of Loan and the
respective lengths of the initial Interest Periods therefor. Upon receipt of
such notice the Administrative Agent shall promptly notify each Term Loan Lender
thereof. Each Term Loan Lender will make the amount of its pro rata share of the
Term Loans available to the Administrative Agent for the account of the Borrower
at the office of the Administrative Agent specified in subsection 11.2 prior to
10:00 A.M., New York City time, on the Effective Date in Dollars and in funds
immediately available to the Administrative Agent. The Administrative Agent
shall on such date credit the account of the Borrower on the books of such
office of the Administrative Agent, c/o Loan and Agency Service Group, 1 Chase
Manhattan Plaza, 8th Floor, New York, New York 10001, with the aggregate of the
amounts made available to the Administrative Agent by the Term Loan Lenders and
in like funds as received by the Administrative Agent.
2.9 Repayment of Loans. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of:
(i) each Revolving Credit Lender, the then unpaid principal amount of each
Revolving Credit Loan of such Lender, on the Termination Date (or such earlier
date on which the Revolving Credit Loans become due and payable pursuant to
Section 9); (ii) the Swing Line Lender, the then unpaid principal amount of the
Swing Line Loans made to the Borrower, on the Termination Date (or such earlier
date on which the Swing Line Loans become due and payable pursuant to Section
9); and (iii) each Term Loan Lender, the amounts specified in subsection 2.7(b)
(or, if less in any case, the aggregate amount of the Term Loans then
outstanding), on the dates specified in subsection 2.7(b) (or such earlier date
on which the Term Loans become due and payable pursuant to Section 9). The
Borrower hereby further agrees to pay interest on the unpaid principal amount of
the Loans from time to time outstanding from the date hereof until payment in
full thereof at the rates per annum, and on the dates, set forth in subsection
4.1.
(b) Each Lender (including the Swing Line Lender) shall
maintain in accordance with its usual practice an account or accounts evidencing
indebtedness of the Borrower to such Lender resulting from each Loan of such
Lender from time to time, including, without limitation, the amounts of
principal and interest payable and paid to such Lender from time to time under
this Agreement.
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(c) The Administrative Agent shall maintain the Register
pursuant to subsection 11.6(d), and a subaccount therein for each Lender, in
which shall be recorded (i) the amount of each Loan made hereunder, the Type
thereof and each Interest Period, if any, applicable thereto, (ii) the amount of
any principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) both the amount of any sum received
by the Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
(d) The entries made in the Register and the accounts of each
Lender maintained pursuant to subsection 2.9(b) shall, to the extent permitted
by applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to
the Borrower by such Lender in accordance with the terms of this Agreement.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions
hereof, the Issuing Lender, in reliance on the agreements of the other Revolving
Credit Lenders set forth in subsection 3.4(a), agrees to issue letters of credit
("Letters of Credit") for the account of the Borrower on any Business Day during
the Revolving Credit Commitment Period in such form as may be approved from time
to time by the Issuing Lender; provided that the Issuing Lender shall not issue
any Letter of Credit if, after giving effect to such issuance, (i) the L/C
Obligations would exceed $10,000,000 or (ii) the Aggregate Outstanding Revolving
Credit of all the Revolving Credit Lenders would exceed the lesser of (x) the
Revolving Credit Commitments of all the Revolving Credit Lenders and (y) the
Borrowing Base then in effect. Each Letter of Credit shall be either (x) a
standby letter of credit issued to support obligations of the Borrower or any of
its Subsidiaries, contingent or otherwise, which finance the working capital and
business needs of the Borrower and its Subsidiaries incurred in the ordinary
course of business (a "Standby Letter of Credit"), or (y) a commercial letter of
credit in respect of the purchase of goods or services by the Borrower or any of
its Subsidiaries in the ordinary course of business (a "Commercial Letter of
Credit"), (ii) expire on the earlier of (i) one-year after the date of issuance
and (ii) five Business Days prior to the Termination Date, provided that a
one-year Letter of Credit may be renewed for additional one-year periods, but
may not be extended beyond five days prior to the Termination Date.
(b) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(c) The Issuing Lender shall not at any time issue any Letter
of Credit hereunder if such issuance would conflict with, or cause the Issuing
Lender or any L/C Participant to exceed any limits imposed by, any applicable
Requirement of Law.
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(d) As of the Effective Date, the letters of credit listed on
Schedule 3.1 shall be deemed to have been issued hereunder and be deemed to be
Letters of Credit for all purposes hereof.
3.2 Procedure for Issuance of Letters of Credit. The Borrower
may from time to time request that the Issuing Lender issue a Letter of Credit
by delivering to the Issuing Lender, at its address for notices specified
herein, an Application therefor, completed to the reasonable satisfaction of the
Issuing Lender, and such other certificates, documents and other papers and
information as the Issuing Lender may reasonably request. Upon receipt of any
Application, the Issuing Lender will process such Application and the
certificates, documents and other papers and information delivered to it in
connection therewith in accordance with its customary procedures and shall
promptly issue the Letter of Credit requested thereby (but in no event shall the
Issuing Lender be required to issue any Letter of Credit earlier than three
Business Days after its receipt of the Application therefor and all such other
certificates, documents and other papers and information relating thereto) by
issuing the original of such Letter of Credit to the beneficiary thereof or as
otherwise may be agreed by the Issuing Lender and the Borrower. The Issuing
Lender shall furnish a copy of such Letter of Credit to the Borrower promptly
following the issuance thereof.
3.3 Fees, Commissions and Other Charges. (a) The Borrower
shall pay to the Administrative Agent, for the account of the Issuing Lender and
the L/C Participants, a letter of credit commission with respect to each Letter
of Credit, computed for the period from and including the date of issuance of
such Letter of Credit to the expiration date of such Letter of Credit, computed
at a rate per annum equal to the Applicable Margin then in effect for Eurodollar
Loans that are Revolving Credit Loans calculated on the basis of a 360-day year,
of the aggregate amount available to be drawn under such Letter of Credit,
payable quarterly in arrears on each L/C Fee Payment Date with respect to such
Letter of Credit and on the Termination Date or such earlier date as the
Revolving Credit Commitments shall terminate as provided herein. Such commission
shall be payable to the Administrative Agent for the account of the Revolving
Credit Lenders to be shared ratably among them in accordance with their
respective Revolving Credit Commitment Percentages. The Borrower shall also pay
to the Administrative Agent, for the account of the Issuing Lender, a fee equal
to 1/4 of 1% per annum of the aggregate amount available to be drawn under such
Letter of Credit, payable quarterly in arrears on each L/C Fee Payment Date with
respect to such Letter of Credit and on the Termination Date or such other date
as the Revolving Credit Commitments shall terminate. Such commissions and fees
shall be nonrefundable.
(b) In addition to the foregoing commissions and fees, the
Borrower shall pay or reimburse the Issuing Lender for such normal and customary
costs and expenses as are incurred or charged by the Issuing Lender in issuing,
effecting payment under, amending or otherwise administering any Letter of
Credit.
(c) The Administrative Agent shall, promptly following its
receipt thereof, distribute to the Issuing Lender and the L/C Participants all
commissions and fees received by the Administrative Agent for their respective
accounts pursuant to this subsection.
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3.4 L/C Participations. (a) The Issuing Lender irrevocably
agrees to grant and hereby grants to each L/C Participant, and, to induce the
Issuing Lender to issue Letters of Credit hereunder, each L/C Participant
irrevocably agrees to accept and purchase and hereby accepts and purchases from
the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Credit Commitment Percentage (determined on the date of
issuance of the relevant Letter of Credit) in the Issuing Lender's obligations
and rights under each Letter of Credit issued hereunder and the amount of each
draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower in respect of such Letter or Credit in
accordance with subsection 3.5(a), such L/C Participant shall pay to the Issuing
Lender upon demand at the Issuing Lender's address for notices specified herein
an amount equal to such L/C Participant's Revolving Credit Commitment Percentage
of the amount of such draft, or any part thereof, which is not so reimbursed;
provided that nothing in this paragraph shall relieve the Issuing Lender of any
liability resulting from the gross negligence or willful misconduct of the
Issuing Lender, or otherwise affect any defense or other right that any L/C
Participant may have as a result of such gross negligence or willful misconduct.
(b) If any amount required to be paid by any L/C Participant
to the Issuing Lender on demand by the Issuing Lender pursuant to subsection in
respect of any unreimbursed portion of any payment made by the Issuing Lender
under any Letter of Credit is paid to the Issuing Lender within three Business
Days after the date such demand is made, such L/C Participant shall pay to the
Issuing Lender on demand an amount equal to the product of (i) such amount,
times (ii) the daily average Federal Funds Effective Rate during the period from
and including the date such payment is required to the date on which such
payment is immediately available to the Issuing Lender, times (iii) a fraction
the numerator of which is the number of days that elapse during such period and
the denominator of which is 360. If any such amount required to be paid by any
L/C Participant pursuant to subsection is not in fact made available to the
Issuing Lender by such L/C Participant within three Business Days after the date
such payment is due, the Issuing Lender shall be entitled to recover from such
L/C Participant, on demand, such amount with interest thereon calculated from
such due date at the rate per annum applicable to ABR Loans hereunder. A
certificate of the Issuing Lender submitted to any L/C Participant with respect
to any amounts owing under this subsection (which shall include calculations of
any such amounts in reasonable detail) shall be conclusive in the absence of
manifest error.
(c) Whenever, at any time after the Issuing Lender has made
payment under any Letter of Credit and has received from any L/C Participant its
pro rata share of such payment in accordance with subsection , the Issuing
Lender receives any payment related to such Letter of Credit (whether directly
from the Borrower in respect of such Letter of Credit or otherwise, including
proceeds of Collateral applied thereto by the Issuing Lender), or any payment of
interest on account thereof, the Issuing Lender will, if such payment is
received prior to 1:00 P.M., New York City time, on a Business Day, distribute
to such L/C Participant its pro rata share thereof prior to the end of such
Business Day and otherwise the
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Issuing Lender will distribute such payment on the next succeeding Business Day;
provided, however, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
3.5 Reimbursement Obligation of the Borrower. (a) The Borrower
agrees to reimburse the Issuing Lender, upon receipt by the Borrower of notice
from the Issuing Lender of the date and amount of a draft presented under any
Letter of Credit and paid by the Issuing Lender, for the amount of (i) such
draft so paid and (ii) any taxes, fees, charges or other costs or expenses
reasonably incurred by the Issuing Lender in connection with such payment. Each
such payment shall be made to the Issuing Lender, at its address for notices
specified herein in immediately available funds, on the date on which the
Borrower receives such notice, if received prior to 11:00 A.M., New York City
time, on a Business Day and otherwise on the next succeeding Business Day.
(b) Interest shall be payable on any and all amounts remaining
unpaid by the Borrower under this subsection (i) from the date the draft
presented under the affected Letter of Credit is paid to the date on which the
Borrower is required to pay such amounts pursuant to paragraph (a) above at the
rate which would then be payable on any outstanding ABR Loans that are Revolving
Credit Loans and (ii) thereafter until payment in full at the rate which would
be payable on any outstanding ABR Loans that are Term Loans which were then
overdue.
3.6 Obligations Absolute. (a) The Borrower's obligations under
this Section 3 shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment which the Borrower may have or have had against the Issuing Lender, any
L/C Participant or any beneficiary of a Letter of Credit, provided that this
paragraph shall not relieve the Issuing Lender or any L/C Participant of any
liability resulting from the gross negligence or willful misconduct of the
Issuing Lender or such L/C Participant, or otherwise affect any defense or other
right that the Borrower may have as a result of any such gross negligence or
willful misconduct.
(b) The Borrower also agrees with the Issuing Lender that the
Issuing Lender and the L/C Participants shall not be responsible for, and the
Borrower's Reimbursement Obligations under subsection shall not be affected by,
among other things, (i) the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or (ii) any dispute between or among such
Borrower and any beneficiary of any Letter of Credit or any other party to which
such Letter of Credit may be transferred or (iii) any claims whatsoever of the
Borrower against any beneficiary of such Letter of Credit or any such
transferee, provided that this paragraph shall not relieve the Issuing Lender or
any L/C Participant of any liability resulting from the gross negligence or
willful misconduct of the Issuing Lender or such L/C Participant, or otherwise
affect any defense or other right that the Borrower may have as a result of any
such gross negligence or willful misconduct.
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(c) Neither the Issuing Lender nor any L/C Participant shall
be liable for any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit, except for errors or omissions caused by
such Person's gross negligence or willful misconduct.
(d) The Borrower agrees that any action taken or omitted by
the Issuing Lender under or in connection with any Letter of Credit or the
related drafts or documents, if done in the absence of gross negligence or
willful misconduct and in accordance with the standards of care specified in the
Uniform Commercial Code of the State of New York, shall be binding on the
Borrower and shall not result in any liability of the Issuing Lender or any L/C
Participant to the Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented
for payment under any Letter of Credit, the Issuing Lender shall promptly notify
the Borrower of the date and amount thereof. The responsibility of the Issuing
Lender to the Borrower in respect of any Letter of Credit in connection with any
draft presented for payment under such Letter of Credit shall, in addition to
any payment obligation expressly provided for in such Letter of Credit, be
limited to determining that the documents (including each draft) delivered under
such Letter of Credit in connection with such presentment are in conformity with
such Letter of Credit, provided that this paragraph shall not relieve the
Issuing Lender of any liability resulting from the gross negligence or willful
misconduct of the Issuing Lender, or otherwise affect any defense or other right
that the Borrower may have as a result of any such gross negligence or willful
misconduct.
3.8 Application. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Section 3, the provisions of this Section 3 shall apply.
SECTION 4. GENERAL PROVISIONS APPLICABLE TO
LOANS AND LETTERS OF CREDIT
4.1 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin in effect for such day.
(b) Each ABR Loan shall bear interest for each day that it is
outstanding at a rate per annum equal to the ABR for such day plus the
Applicable Margin in effect for such day.
(c) If all or a portion of (i) the principal amount of any
Loan, (ii) any interest payable thereon or (iii) any commitment fee, letter of
credit commission, letter of credit fee or other amount payable hereunder,
including Reimbursement Obligations, shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), such overdue amount shall
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bear interest at a rate per annum which is (x) in the case of overdue principal,
the rate that would otherwise be applicable thereto pursuant to the relevant
foregoing provisions of this subsection plus 2.00% or (y) in the case of overdue
interest, fees, commissions or other amounts, the rate described in paragraph
(b) of this subsection for ABR Loans plus 2.00%, in each case from the date of
such non-payment until such amount is paid in full (as well after as before
judgment).
(d) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (c) of this
subsection shall be payable from time to time on demand.
(e) It is the intention of the parties hereto to comply
strictly with applicable usury laws; accordingly, it is stipulated and agreed
that the aggregate of all amounts which constitute interest under applicable
usury laws, whether contracted for, charged, taken, reserved, or received, in
connection with the indebtedness evidenced by this Agreement or any Notes, or
any other document relating or referring hereto or thereto, now or hereafter
existing, shall never exceed under any circumstance whatsoever the maximum
amount of interest allowed by applicable usury laws.
4.2 Conversion and Continuation Options. (a) The Borrower may
elect from time to time to convert outstanding Term Loans and Revolving Credit
Loans from Eurodollar Loans to ABR Loans by giving the Administrative Agent at
least two Business Days' prior irrevocable notice of such election, provided
that any such conversion of Eurodollar Loans may only be made on the last day of
an Interest Period with respect thereto. The Borrower may elect from time to
time to convert outstanding Term Loans and Revolving Credit Loans from ABR Loans
to Eurodollar Loans by giving the Administrative Agent at least three Business
Days' prior irrevocable notice of such election. Any such notice of conversion
to Eurodollar Loans shall specify the length of the initial Interest Period or
Interest Periods therefor. Upon receipt of any such notice the Administrative
Agent shall promptly notify each affected Lender thereof. All or any part of
outstanding Eurodollar Loans and ABR Loans may be converted as provided herein,
provided that (i) (unless the Required Lenders otherwise consent) no Loan may be
converted into a Eurodollar Loan when any Default or Event of Default has
occurred and is continuing and, in the case of any Default, the Administrative
Agent has given notice to the Borrower that no such conversions may be made and
(ii) no Loan may be converted into a Eurodollar Loan after the date that is one
month prior to the Termination Date.
(b) Any Eurodollar Loan may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Administrative Agent of the length of the next
Interest Period to be applicable to such Loan, determined in accordance with the
applicable provisions of the term "Interest Period" set forth in subsection 1.1,
provided that no Eurodollar Loan may be continued as such (i) (unless the
Required Lenders otherwise consent) when any Default or Event of Default has
occurred and is continuing and, in the case of any Default, the Administrative
Agent has given notice to the Borrower that no such continuations may be made or
(ii) after the date that is one month prior
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to the Termination Date. Upon receipt of any such notice of continuation
pursuant to this subsection 4.2(b), the Administrative Agent shall promptly
notify each affected Lender thereof.
4.3 Minimum Amounts of Sets. All borrowings, conversions and
continuations of Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, the aggregate principal amount of the
Eurodollar Loans outstanding comprising each Set shall be equal to $1,000,000 or
a whole multiple of $500,000 in excess thereof and so that there shall not be
more than 10 Sets at any one time outstanding.
4.4 Optional and Mandatory Prepayments. (a) The Borrower may
at any time and from time to time prepay the Loans made to it and the
Reimbursement Obligations in respect of Letters of Credit issued for its
account, in whole or in part, without premium or penalty, upon at least three
Business Days' irrevocable notice by the Borrower to the Administrative Agent
(in the case of Eurodollar Loans and Reimbursement Obligations) and at least one
Business Day's irrevocable notice by the Borrower to the Administrative Agent
(in the case of ABR Loans other than Swing Line Loans) or same-day irrevocable
notice by the Borrower to the Administrative Agent (in the case of Swing Line
Loans), specifying, in the case of any prepayment of Loans, the date and amount
of prepayment and whether the prepayment is (i) of Term Loans, Revolving Credit
Loans, or a combination thereof, and (ii) of Eurodollar Loans, ABR Loans or a
combination thereof or Swing Loans, and, in each case if a combination thereof,
the principal amount allocable to each and, in the case of any prepayment of
Reimbursement Obligations, the date and amount of prepayment, the identity of
the applicable Letter of Credit or Letters of Credit and the amount allocable to
each of such Reimbursement Obligations. Upon the receipt of any such notice the
Administrative Agent shall promptly notify each affected Lender thereof. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with (if a Eurodollar Loan is
prepaid other than at the end of the Interest Period applicable thereto) any
amounts payable pursuant to subsection 4.12 and, in the case of prepayments of
the Term Loans only, accrued interest to such date on the amount prepaid.
Partial prepayments of (i) the Term Loans pursuant to this subsection shall be
applied pro rata to the remaining installments, and (ii) the Revolving Credit
Loans and the Reimbursement Obligations pursuant to this subsection shall
(unless the Borrower otherwise directs) be applied, first, to payment of the
Swing Line Loans then outstanding, second, to payment of the Revolving Credit
Loans then outstanding, third, to payment of any Reimbursement Obligations then
outstanding and, last, to cash collateralize any outstanding L/C Obligation on
terms reasonably satisfactory to the Administrative Agent. Partial prepayments
pursuant to this subsection 4.4(a) (other than of Swing Line Loans) shall be in
an aggregate principal amount of $1,000,000 or a whole multiple of $500,000 in
excess thereof.
(b) If the Borrower shall issue Senior Subordinated Notes
(other than Exchange Notes, as defined in the Senior Subordinated Credit
Agreement) and the gross proceeds to the Borrower of such issuance exceed the
then outstanding principal amount of Indebtedness under the Senior Subordinated
Credit Agreement, then, after repayment in full of the Senior
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Subordinated Credit Agreement, to the extent such excess proceeds permit, an
amount equal to $12,000,000 of such excess proceeds shall be used to permanently
prepay the Term Loans.
(c) Commencing May 31, 1998, and on each May 31 thereafter,
the Borrower shall prepay, in accordance with subsection 4.4(j), the Loans and
cash collateralize the L/C Obligations in an amount equal to 75% of the
Borrower's Excess Cash Flow for the fiscal year ending on the preceding February
28.
(d) If, subsequent to the Effective Date, the Borrower or any
of its Subsidiaries shall incur any Indebtedness for borrowed money (other than
with respect to the Senior Subordinated Credit Agreement or the Senior
Subordinated Notes and other Indebtedness permitted by subsection 8.2), then an
amount equal to 100% of the Net Cash Proceeds thereof shall on the first
Business Day after receipt thereof be applied toward the prepayment of the Loans
and the permanent reduction of the Revolving Credit Commitments in accordance
with subsections 4.4(j), (k) and (l).
(e) If subsequent to the Effective Date, the Borrower or any
of its Subsidiaries shall receive Net Cash Proceeds from any Asset Sales or
dispositions permitted by subsection 8.6(g), 8.6(h) or 8.11 or not otherwise
permitted by subsection 8.6, then an amount equal to 100% of the Net Cash
Proceeds (less the Reinvested Amount applicable thereto) thereof shall on the
first Business Day after receipt thereof be applied toward the prepayment of the
Loans and the permanent reduction of the Revolving Credit Commitments in
accordance with subsections 4.4(j), (k) and (l).
(f) If subsequent to the Effective Date, the Borrower shall
issue any Capital Stock, then (except for shares of Capital Stock of Holdings
issued or sold to directors, officers and employees of, or consultants to,
Holdings or any of its Subsidiaries) an amount equal to 100% of the Net Cash
Proceeds thereof shall be applied toward the prepayment of the Loans and the
permanent reduction of the Revolving Credit Commitments in accordance with
subsections 4.4(j), (k) and (l).
(g) If subsequent to the Effective Date, the Borrower shall
receive any Adjustment Payment, then an amount equal to 100% of the Debt Portion
of such Adjustment Payment shall on the first Business Day after receipt thereof
be applied toward the prepayment of the Loans and the permanent reduction of the
Revolving Credit Commitments in accordance with subsections 4.4(j), 4.4(k) and
4.4(l).
(h) If, at any time the aggregate principal amount of the
Revolving Credit Loans and Reimbursement Obligations under Letters of Credit
then outstanding exceeds an amount equal to the lesser of (i) the Borrowing Base
on such date and (ii) the aggregate Revolving Credit Commitment on such date,
the Borrower shall first repay the Revolving Credit loans then outstanding;
second pay any Reimbursement Obligations then outstanding and, last, cash
collateralize any outstanding L/C Obligation in an amount equal to such excess.
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(i) The Borrower shall prepay all Swing Line Loans then
outstanding simultaneously with each borrowing of Revolving Credit Loans.
(j)(i) Prepayments pursuant to subsections 4.4(b), 4.4(d),
4.4(e), 4.4(f) and 4.4(g) shall be applied, first, to prepay Term Loans
(applied pro rata to the then remaining installments thereof) then
outstanding, second, to prepay Swing Line Loans then outstanding,
third, to prepay Revolving Credit Loans then outstanding, fourth, to
pay any Reimbursement Obligations then outstanding and, last, to cash
collateralize any outstanding L/C Obligations on terms reasonably
satisfactory to the Administrative Agent.
(ii) Prepayments pursuant to subsection 4.4(c) shall be
applied, first, to prepay Term Loans (applied first to the first two
installments thereof due on or after the date of such prepayment in the
order of their maturities and second pro rata to the then remaining
installments thereof) then outstanding, second, to prepay Swing Line
Loans then outstanding, third, to prepay Revolving Credit Loans then
outstanding, fourth, to pay any Reimbursement Obligations then
outstanding and, last, to cash collateralize any outstanding L/C
Obligations on terms reasonably satisfactory to the Administrative
Agent.
(k) Amounts prepaid on account of Term Loans pursuant to
subsection 4.4(b), 4.4(c), 4.4(d), 4.4(e), 4.4(f) and 4.4(g) may not be
reborrowed.
(l) Subject to subsection 4.4(j), the Revolving Credit
Commitments shall be permanently reduced by the amount of all prepayments of
Revolving Credit Loans, payments of Reimbursement Obligations and cash
collateral of L/C Obligations made under subsections 4.4(d), 4.4(e), 4.4(f) and
4.4(g).
(m) Notwithstanding the foregoing provisions of this
subsection 4.4, if at any time any prepayment of the Loans pursuant to
subsection 4.4(b), 4.4(c), 4.4(d), 4.4(e), 4.4(f), 4.4(g), or 4.4(h) would
result, after giving effect to the procedures set forth in this Agreement, in
the Borrower incurring breakage costs under subsection 4.12 as a result of
Eurodollar Loans being prepaid other than on the last day of an Interest Period
with respect thereto, then, the Borrower may, so long as no Default or Event of
Default shall have occurred and be continuing, in its sole discretion, initially
(x) deposit a portion (up to 100%) of the amounts that otherwise would have been
paid in respect of such Eurodollar Loans with the Administrative Agent (which
deposit must be equal in amount to the amount of such Eurodollar Loans not
immediately prepaid) to be held as security for the obligations of the Borrower
to make such prepayment pursuant to a cash collateral agreement to be entered
into on terms reasonably satisfactory to the Administrative Agent, with such
cash collateral to be directly applied upon the first occurrence thereafter of
the last day of an Interest Period with respect to such Eurodollar Loans (or
such earlier date or dates as shall be requested by the Borrower) or (y) make a
prepayment of the Revolving Credit Loans in accordance with subsection 4.4(a)
with an amount equal to a portion (up to 100%) of the amounts that otherwise
would have been paid in respect of such Eurodollar Loans (which prepayment,
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together with any deposits pursuant to clause (x) above, must be equal in amount
to the amount of such Eurodollar Loans not immediately prepaid); provided that,
notwithstanding anything in this Agreement to the contrary, the Borrower may not
request any Extension of Credit under the Revolving Credit Commitments that
would reduce the aggregate amount of the Available Revolving Credit Commitments
to an amount that is less than the amount of such prepayment until the related
portion of such Eurodollar Loans have been prepaid upon the first occurrence
thereafter of the last day of an Interest Period with respect to such Eurodollar
Loans; provided that, in the case of either clause (x) or (y), such unpaid
Eurodollar Loans shall continue to bear interest in accordance with subsection
4.1 until such unpaid Eurodollar Loans or the related portion of such Eurodollar
Loans, as the case may be, have or has been prepaid.
4.5 Commitment Fees. The Borrower agrees to pay to the
Administrative Agent for the account of each Revolving Credit Lender, a
commitment fee for the period from and including the first day of the Revolving
Credit Commitment Period to the Termination Date, computed at the rate of 1/2 of
1% per annum on the average daily amount of the Available Revolving Credit
Commitment of such Lender during the period for which payment is made, payable
quarterly in arrears on the last day of each January, April, July and October
and on the Termination Date or such earlier date as the Revolving Credit
Commitments shall terminate as provided herein, commencing on the Effective
Date.
4.6 Computation of Interest and Fees. (a) Interest and
commitment fees (other than interest based on the Prime Rate) shall be
calculated on the basis of a 360-day year for the actual days elapsed; and
interest based on the Prime Rate shall be calculated on the basis of a 365- (or
366-, as the case may be) day year for the actual days elapsed. The
Administrative Agent shall as soon as practicable notify the Borrower and the
affected Lenders of each determination of a Eurodollar Rate. Any change in the
interest rate on a Loan resulting from a change in the ABR, the Eurodollar
Reserve Requirements, the C/D Assessment Rate or the C/D Reserve Percentage
shall become effective as of the opening of business on the day on which such
change becomes effective. The Administrative Agent shall as soon as practicable
notify the Borrower and the affected Lenders of the effective date and the
amount of each such change in interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the Borrower
or any Lender, deliver to the Borrower or such Lender a statement showing in
reasonable detail the calculations used by the Administrative Agent in
determining any interest rate pursuant to subsection 4.1, excluding any
Eurodollar Base Rate which is based upon the Telerate British Bankers Assoc.
Interest Settlement Rates Page and any ABR which is based upon the Prime Rate.
4.7 Inability to Determine Interest Rate. If prior to the
first day of any Interest Period, the Administrative Agent shall have determined
(which determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the
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49
relevant market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate with respect to any Eurodollar Loan (the "Affected Eurodollar
Rate") for such Interest Period, the Administrative Agent shall give telecopy or
telephonic notice thereof to the Borrower and the Lenders as soon as practicable
thereafter. If such notice is given (x) any Eurodollar Loans the rate of
interest applicable to which is based upon the Affected Eurodollar Rate
requested to be made on the first day of such Interest Period shall be made as
ABR Loans (to the extent otherwise permitted by subsection 4.2), (y) any
outstanding Loans that were to have been converted on the first day of such
Interest Period to or continued as Eurodollar Loans the rate of interest
applicable to which is based upon the Affected Eurodollar Rate shall be
converted to or continued as ABR Loans (to the extent otherwise permitted by
subsection 4.2) and (z) any outstanding Eurodollar Loans that were to have been
converted on the first day of such Interest Period to or continued as Eurodollar
Loans the rate of interest applicable to which is based upon the Affected
Eurodollar Rate and that are not otherwise permitted to be converted to or
continued as ABR Loans by subsection 4.2 shall, upon demand by the Revolving
Credit Lenders the Revolving Credit Commitment Percentage of which aggregate at
least 51%, be immediately repaid by the applicable Borrower on the last day of
the then current Interest Period with respect thereto together with accrued
interest thereon or otherwise, at the option of the Borrower, shall remain
outstanding and bear interest at a rate which reflects, as to each of the
Revolving Credit Lenders, such Revolving Credit Lender's cost of funding such
Eurodollar Loans, as reasonably determined by such Revolving Credit Lender, plus
the Applicable Margin hereunder. If any such repayment occurs on a day which is
not the last day of the then current Interest Period with respect to such
affected Eurodollar Loan, the Borrower shall pay to each of the Revolving Credit
Lenders such amounts, if any, as may be required pursuant to subsection 4.12.
Until such notice has been withdrawn by the Administrative Agent, no further
Eurodollar Loans the rate of interest applicable to which is based upon the
Affected Eurodollar Rate shall be made or continued as such, nor shall the
Borrower have the right to convert ABR Loans to Eurodollar Loans the rate of
interest applicable to which is based upon the Affected Eurodollar Rate.
4.8 Pro Rata Treatment and Payments. (a) Subject to subsection
4.4(b), each borrowing of Revolving Credit Loans (other than Swing Line Loans)
by the Borrower from the Lenders hereunder shall be made, each payment by the
Borrower on account of any commitment fee in respect of the Revolving Credit
Commitments hereunder shall be allocated by the Administrative Agent, and any
reduction of the Revolving Credit Commitments of the Lenders shall be allocated
by the Administrative Agent, pro rata according to the relevant Revolving Credit
Commitment Percentages of the Lenders. Subject to subsection 4.4(b), each
payment (including each prepayment) by the Borrower on account of principal of
and interest on any Revolving Credit Loans shall be allocated by the
Administrative Agent pro rata according to the respective outstanding principal
amounts of such Revolving Credit Loans then held by the Revolving Credit
Lenders. Except as otherwise contemplated by clause (x) of subsection 4.4(n),
each payment (including each prepayment) by the Borrower on account of principal
of and interest on any Term Loans shall be allocated by the Administrative Agent
pro rata according to the respective outstanding principal amounts of such Term
Loans then held by the Term Loan Lenders. All payments (including prepayments)
to be made by the Borrower hereunder and under any Notes, whether on account of
principal, interest, fees,
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Reimbursement Obligations or otherwise, shall be made without set-off or
counterclaim and shall be made prior to 1:00 P.M., New York City time, on the
due date thereof to the Administrative Agent, for the account of the Lenders
holding the relevant Loans or the L/C Participants, as the case may be, at the
Administrative Agent's office specified in subsection 11.2 in immediately
available funds. Payments received by the Administrative Agent after such time
shall be deemed to have been received on the next Business Day. The
Administrative Agent shall distribute such payments to such Lenders, if any such
payment is received prior to 1:00 P.M., New York City time, on a Business Day,
in like funds as received prior to the end of such Business Day and otherwise
the Administrative Agent shall distribute such payment to such Lenders on the
next succeeding Business Day. If any payment hereunder (other than payments on
the Eurodollar Loans) becomes due and payable on a day other than a Business
Day, the maturity of such payment shall be extended to the next succeeding
Business Day, and, with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension. If any payment on
a Eurodollar Loan becomes due and payable on a day other than a Business Day,
the maturity of such payment shall be extended to the next succeeding Business
Day (and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension) unless the result of
such extension would be to extend such payment into another calendar month, in
which event such payment shall be made on the immediately preceding Business
Day.
(b) Unless the Administrative Agent shall have been notified
in writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its Revolving Credit Commitment Percentage of such
borrowing available to the Administrative Agent, the Administrative Agent may
assume that such Lender is making such amount available to the Administrative
Agent, and the Administrative Agent may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. If such amount is not made
available to the Administrative Agent by the required time on the Borrowing Date
therefor, such Lender shall pay to the Administrative Agent, on demand, such
amount with interest thereon at a rate equal to the daily average Federal Funds
Effective Rate for the period until such Lender makes such amount immediately
available to the Administrative Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest error. If such Lender's Revolving
Credit Commitment Percentage of such borrowing is not made available to the
Administrative Agent by such Lender within three Business Days of such Borrowing
Date, the Administrative Agent shall notify the Borrower of the failure of such
Lender to make such amount available to the Administrative Agent and the
Administrative Agent shall also be entitled to recover such amount with interest
thereon at the rate per annum applicable to ABR Loans hereunder on demand, from
the Borrower.
4.9 Illegality. Notwithstanding any other provision herein, if
the adoption of or any change in any Requirement of Law or in the interpretation
or application thereof occurring after the Effective Date shall make it unlawful
for any Lender to make or maintain any Eurodollar Loans as contemplated by this
Agreement ("Affected Eurodollar Loans"), (a) such Lender shall promptly give
written notice of such circumstances to the Borrower and the
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51
Administrative Agent (which notice shall be withdrawn whenever such
circumstances no longer exist), (b) the commitment of such Lender hereunder to
make Affected Eurodollar Loans, continue Affected Eurodollar Loans as such and
convert an ABR Loan to an Affected Eurodollar Loan shall forthwith be cancelled
and, until such time as it shall no longer be unlawful for such Lender to make
or maintain such Affected Eurodollar Loans, such Lender shall then have a
commitment only to make an ABR Loan when an Affected Eurodollar Loan is
requested (to the extent otherwise permitted by subsection 4.2), (c) such
Lender's Loans then outstanding as Affected Eurodollar Loans, if any, shall be
converted automatically to ABR Loans on the respective last days of the then
current Interest Periods with respect to such Loans or within such earlier
period as required by law (to the extent otherwise permitted by subsection 4.2)
and (d) such Lender's Loans then outstanding as Affected Eurodollar Loans, if
any, not otherwise permitted to be converted to ABR Loans by subsection 4.2
shall, upon notice to the Borrower, be prepaid with accrued interest thereon on
the last day of the then current Interest Period with respect thereto (or such
earlier date as may be required by any such Requirement of Law). If any such
conversion or prepayment of an Affected Eurodollar Loan occurs on a day which is
not the last day of the then current Interest Period with respect thereto, the
applicable Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to subsection 4.12.
4.10 Requirements of Law. (a) If the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof
applicable to any Lender, or compliance by any Lender with any request or
directive (whether or not having the force of law) from any central bank or
other Governmental Authority, in each case made subsequent to the Effective Date
(or, if later, the date on which such Lender becomes a Lender):
(i) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit, any Application or any
Eurodollar Loans made by it or its obligation to make Eurodollar Loans,
or change the basis of taxation of payments to such Lender in respect
thereof (except for Non Excluded Taxes covered by subsection 4.11
(including Non-Excluded Taxes imposed solely by reason of any failure
of such Lender to comply with its obligations (if any) under subsection
4.11(b)) and changes in taxes measured by or imposed upon the overall
net income, or franchise taxes, or taxes measured by or imposed upon
overall capital or net worth, or branch taxes (in the case of such
capital, net worth or branch taxes, imposed in lieu of such net income
tax), of such Lender or its applicable lending office, branch, or any
affiliate thereof);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Lender any other condition
(excluding any tax of any kind whatsoever);
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and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrower from such Lender,
through the Administrative Agent, in accordance herewith, the Borrower shall
promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable with
respect to such Eurodollar Loans or Letters of Credit, provided that, in any
such case, the Borrower may elect to convert Eurodollar Loans made by such
Lender hereunder to ABR Loans (to the extent otherwise permitted by subsection
4.2) by giving the Administrative Agent at least one Business Day's notice of
such election, in which case such Borrower shall promptly pay to such Lender,
upon demand, without duplication, amounts theretofore required to be paid to
such Lender pursuant to this subsection 4.10(a) and such amounts, if any, as may
be required pursuant to subsection 4.12. If any Lender becomes entitled to claim
any additional amounts pursuant to this subsection, it shall provide prompt
notice thereof to the Borrower, through the Administrative Agent, certifying (x)
that one of the events described in this paragraph (a) has occurred and
describing in reasonable detail the nature of such event, (y) as to the
increased cost or reduced amount resulting from such event and (z) as to the
additional amount demanded by such Lender and a reasonably detailed explanation
of the calculation thereof. Such a certificate as to any additional amounts
payable pursuant to this subsection submitted by such Lender, through the
Administrative Agent, to the Borrower shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority, in each case, made subsequent to the Effective Date (or, if later,
the date on which such Lender becomes a Lender), does or shall have the effect
of reducing the rate of return on such Lender's or such corporation's capital as
a consequence of such Lender's obligations hereunder or under or in respect of
any Letter of Credit to a level below that which such Lender or such corporation
could have achieved but for such change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time,
within ten Business Days after submission by such Lender to the Borrower (with a
copy to the Administrative Agent) of a written request therefor certifying (x)
that one of the events described in this paragraph (b) has occurred and
describing in reasonable detail the nature of such event, (y) as to the
reduction of the rate of return on capital resulting from such event and (z) as
to the additional amount or amounts demanded by such Lender or corporation and a
reasonably detailed explanation of the calculation thereof, the Borrower shall
pay to such Lender such additional amount or amounts as will compensate such
Lender or corporation for such reduction. Such a certificate as to any
additional amounts payable pursuant to this subsection submitted by such Lender,
through the Administrative Agent, to the Borrower shall
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be conclusive in the absence of manifest error. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
4.11 Taxes. (a) Except as provided below in this subsection,
all payments made by the Borrower under this Agreement and any Notes shall be
made free and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding taxes
measured by or imposed upon the overall net income of any Lender or its
applicable lending office, or any branch or affiliate thereof, and all franchise
taxes, branch taxes, taxes on doing business or taxes measured by or imposed
upon the overall capital or net worth of any Lender or its applicable lending
office, or any branch or affiliate thereof, in each case imposed: (i) by the
jurisdiction under the laws of which such Lender, applicable lending office,
branch or affiliate is organized or is located, or in which its principal
executive office is located, or any nation within which such jurisdiction is
located or any political subdivision thereof; or (ii) by reason of any
connection between the jurisdiction imposing such tax and such Lender,
applicable lending office, branch or affiliate other than a connection arising
solely from such Lender having executed, delivered or performed its obligations
under, or received payment under or enforced, this Agreement or any Notes. If
any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions
or withholdings ("Non-Excluded Taxes") are required to be withheld from any
amounts payable to the Administrative Agent or any Lender hereunder or under any
Notes, the amounts so payable to the Administrative Agent or such Lender shall
be increased to the extent necessary to yield to the Administrative Agent or
such Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement and any Notes, provided, however, that the Borrower shall be entitled
to deduct and withhold any Non-Excluded Taxes and shall not be required to
increase any such amounts payable to any Lender that is not organized under the
laws of the United States of America or a state thereof, as the case may be if
such Lender fails to comply with the requirements of paragraph (b) of this
subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as
promptly as possible thereafter the Borrower shall send to the Administrative
Agent for its own account or for the account of such Lender, as the case may be,
a certified copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes
when due to the appropriate taxing authority or fails to remit to the
Administrative Agent the required receipts or other required documentary
evidence, the Borrower shall indemnify the Administrative Agent and the Lenders
for any incremental taxes, interest or penalties that may become payable by the
Administrative Agent or any Lender as a result of any such failure. The
agreements in this subsection shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
(b) (1) Each Lender that is not incorporated under the laws of
the United States of America or a state thereof shall:
(X) (i) on or before the date of any payment by the Borrower
under this Agreement or any Notes to such Lender, deliver to the
Borrower and the
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Administrative Agent (A) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, or successor applicable
form, as the case may be, certifying that it is entitled to receive
payments under this Agreement and any Notes without deduction or
withholding of any United States federal income taxes and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable form,
as the case may be, certifying that it is entitled to an exemption from
United States backup withholding tax;
(ii) deliver to the Borrower and the Administrative
Agent two further copies of any such form or certification on or before
the date that any such form or certification expires or becomes
obsolete and after the occurrence of any event requiring a change in
the most recent form previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be requested by
the Borrower or the Administrative Agent; or
(Y) in the case of any such Lender that is not a "bank" within
the meaning of Section 881(c)(3)(A) of the Code, (i) represent to the
Borrower (for the benefit of the Borrower and the Administrative Agent)
that it is not a bank within the meaning of Section 881(c)(3)(A) of the
Code, (ii) agree to furnish to the Borrower on or before the date of
any payment by the Borrower, with a copy to the Administrative Agent,
(A) a certificate substantially in the form of Exhibit J (any such
certificate a "U.S. Tax Compliance Certificate") and (B) two accurate
and complete original signed copies of Internal Revenue Service Form
W-8, or successor applicable form certifying to such Lender's legal
entitlement at the date of such certificate to an exemption from U.S.
withholding tax under the provisions of Section 881(c) of the Code with
respect to payments to be made under this Agreement and any Notes (and
to deliver to the Borrower and the Administrative Agent two further
copies of such form on or before the date it expires or becomes
obsolete and after the occurrence of any event requiring a change in
the most recently provided form and, if necessary, obtain any
extensions of time reasonably requested by the Borrower or the
Administrative Agent for filing and completing such forms), and (iii)
agree, to the extent legally entitled to do so, upon reasonable request
by the Borrower, to provide to the Borrower (for the benefit of the
Borrower and the Administrative Agent) such other forms as may be
reasonably required in order to establish the legal entitlement of such
Lender to an exemption from withholding with respect to payments under
this Agreement and any Notes, provided that in determining the
reasonableness of a request under this clause (iii) such Lender shall
be entitled to consider the cost (to the extent unreimbursed by the
Borrower) which would be imposed on such Lender of complying with such
request;
unless in any such case any change in treaty, law or regulation has occurred
after the date such Person becomes a Lender hereunder which renders all such
forms inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and
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such Lender so advises the Borrower and the Administrative Agent. Each Person
that shall become a Lender or a Participant pursuant to subsection 11.6 shall,
upon the effectiveness of the related transfer, be required to provide all of
the forms, certifications and statements required pursuant to this subsection,
provided that in the case of a Participant the obligations of such Participant
pursuant to this paragraph (b) shall be determined as if such Participant were a
Lender except that such Participant shall furnish all such required forms,
certifications and statements to the Lender from which the related participation
shall have been purchased.
4.12 Indemnity. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur (other than through such Lender's gross negligence or willful
misconduct) as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment or conversion of Eurodollar Loans after the Borrower has given a
notice thereof in accordance with the provisions of this Agreement or (c) the
making of a payment or prepayment of Eurodollar Loans or the conversion of
Eurodollar Loans on a day which is not the last day of an Interest Period with
respect thereto. Such indemnification may include an amount equal to the excess,
if any, of (i) the amount of interest which would have accrued on the amount so
prepaid, or converted, or not so borrowed, converted or continued, for the
period from the date of such prepayment or conversion or of such failure to
borrow, convert or continue to the last day of the applicable Interest Period
(or, in the case of a failure to borrow, convert or continue, the Interest
Period that would have commenced on the date of such failure) in each case at
the applicable rate of interest for such Eurodollar Loans provided for herein
(excluding, however, the Applicable Margin included therein, if any) over (ii)
the amount of interest (as reasonably determined by such Lender) which would
have accrued to such Lender on such amount by placing such amount on deposit for
a comparable period with leading banks in the interbank eurodollar market. If
any Lender becomes entitled to claim any amounts under the indemnity contained
in this subsection 4.12, it shall provide prompt notice thereof to the Borrower,
through the Administrative Agent, certifying (x) that one of the events
described in clause (a), (b) or (c) has occurred and describing in reasonable
detail the nature of such event, (y) as to the loss or expense sustained or
incurred by such Lender as a consequence thereof and (z) as to the amount for
which such Lender seeks indemnification hereunder and a reasonably detailed
explanation of the calculation thereof. Such a certificate as to any
indemnification pursuant to this subsection submitted by such Lender, through
the Administrative Agent, to the Borrower shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
4.13 Certain Rules Relating to the Payment of Additional
Amounts. (a) Upon the request, and at the expense, of the Borrower, each Lender
to which the Borrower is required to pay any additional amount pursuant to
subsection 4.10 or 4.11, and any Participant in respect of whose participation
such payment is required, shall reasonably afford the Borrower the opportunity
to contest, and reasonably cooperate with the Borrower in contesting, the
imposition of any Non-Excluded Tax giving rise to such payment; provided
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that (i) such Lender shall not be required to afford the Borrower the
opportunity to so contest unless the Borrower shall have confirmed in writing to
such Lender its obligation to pay such amounts pursuant to this Agreement and
(ii) the Borrower shall reimburse such Lender for its reasonable attorneys' and
accountants' fees and disbursements incurred in so cooperating with the Borrower
in contesting the imposition of such Non-Excluded Tax; provided, however that
notwithstanding the foregoing no Lender shall be required to afford the Borrower
the opportunity to contest, or cooperate with the Borrower in contesting, the
imposition of any Non-Excluded Taxes, if such Lender in its sole discretion in
good faith determines that to do so would have an adverse effect on it.
(b) If a Lender changes its applicable lending office (other
than pursuant to paragraph (c) below) and the effect of such change, as of the
date of such change, would be to cause the Borrower to become obligated to pay
any additional amount under subsection 4.10 or 4.11, the Borrower shall not be
obligated to pay such additional amount.
(c) If a condition or an event occurs which would, or would
upon the passage of time or giving of notice, result in the payment of any
additional amount to any Lender by the Borrower pursuant to subsection 4.10 or
4.11, such Lender shall promptly notify the Borrower and the Administrative
Agent and shall take such steps as may reasonably be available to it to mitigate
the effects of such condition or event (which shall include efforts to rebook
the Loans held by such Lender at another lending office, or through another
branch or an affiliate, of such Lender); provided that such Lender shall not be
required to take any step that, in its reasonable judgment, would be materially
disadvantageous to its business or operations or would require it to incur
additional costs (unless such Borrower agrees to reimburse such Lender for the
reasonable incremental out-of-pocket costs thereof).
(d) If the Borrower shall become obligated to pay additional
amounts pursuant to subsection 4.10 or 4.11 and any affected Lender shall not
have promptly taken steps necessary to avoid the need for payments under
subsection 4.10 or 4.11, the Borrower shall have the right, for so long as such
obligation remains, (x) with the assistance of the Administrative Agent, to seek
one or more substitute Lenders reasonably satisfactory to the Administrative
Agent and the Borrower to purchase the affected Loan, in whole or in part, at an
aggregate price no less than such Loan's principal amount plus accrued interest,
and assume the affected obligations under this Agreement, or (y) upon at least
four Business Days irrevocable notice to the Administrative Agent, to prepay the
affected Loan, in whole or in part, subject to subsection 4.12, without premium
or penalty. In the case of the substitution of a Lender, the Borrower, the
Administrative Agent, the affected Lender, and any substitute Lender shall
execute and deliver an appropriately completed Assignment and Acceptance
pursuant to subsection 11.6(c) to effect the assignment of rights to, and the
assumption of obligations by, the substitute Lender; provided that any fees
required to be paid by subsection 11.6(e) in connection with such assignment
shall be paid by the Borrower or the substitute Lender. In the case of a
prepayment of an affected Loan, the amount specified in the notice shall be due
and payable on the date specified therein, together with any accrued interest to
such date on the amount prepaid. In the case of each of the substitution of a
Lender and of the prepayment of an affected Loan, the Borrower shall first pay
the affected Lender any
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additional amounts owing under subsections 4.10 and 4.11 (as well as any
commitment fees and other amounts then due and owing to such Lender, including,
without limitation, any amounts under subsection 4.13) prior to such
substitution or prepayment.
(e) If the Administrative Agent or any Lender or any
Participant receives a refund directly attributable to taxes for which the
Borrower has made additional payments pursuant to subsection 4.10(a) or 4.11(a),
the Administrative Agent or such Lender, as the case may be, shall promptly pay
such refund (together with any interest with respect thereto received from the
relevant taxing authority) to the Borrower, provided, however, that the Borrower
agrees promptly to return such refund (together with any interest with respect
thereto due to the relevant taxing authority) (free of all Non-Excluded Taxes)
to the Administrative Agent or the applicable Lender, as the case may be, upon
receipt of a notice that such refund is required to be repaid to the relevant
taxing authority.
(f) The obligations of a Lender or Participant under this
subsection 4.13 shall survive the termination of this Agreement and the payment
of the Loans and all amounts payable hereunder.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and each Lender to make the
Extensions of Credit requested to be made by it on the Effective Date and on
each Borrowing Date thereafter, the Borrower hereby represents and warrants, on
the Effective Date (both before and after giving effect to the Transactions),
and on every Borrowing Date thereafter, to the Administrative Agent and each
Lender that:
5.1 Financial Condition. (a) The audited combined balance
sheets of the Borrower and its combined Subsidiaries as of February 28, 1994,
February 28, 1995 and February 29, 1996 and the audited combined statements of
earnings, statements of shareholders' equity and statements of cash flows for
the years ended February 28, 1994, February 28, 1995 and February 29, 1996 have
heretofore been furnished to each Lender. Such financial statements (including
the notes thereto) (i) have been audited by Coopers & Lybrand L.L.P., (ii) have
been prepared in accordance with GAAP consistently applied throughout the
periods covered thereby and (iii) present fairly, in all material respects, the
combined financial condition, results of operations and cash flows of the
Borrower and its combined Subsidiaries as of such dates and for such periods.
During the period from February 29, 1996 to and including the Effective Date,
except as provided in the Transaction Documents, there has been no sale,
transfer or other disposition by GII and its combined Subsidiaries of any
material part of the business or property of GII and its combined Subsidiaries,
taken as a whole, and no purchase or other acquisition by any of them of any
business or property (including any Capital Stock of any other Person) material
in relation to the combined financial condition of GII and its combined
Subsidiaries, taken as a whole, in each case, which is not reflected in the
foregoing financial statements or in the notes thereto
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58
and has not otherwise been disclosed in a writing to the Lenders on or prior to
the Effective Date.
(b) The pro forma balance sheet of the Borrower and its
consolidated Subsidiaries (the "Pro Forma Balance Sheet"), copies of which have
heretofore been furnished to each Lender, is the balance sheet of the Borrower
and its consolidated Subsidiaries as of November 30, 1996 (the "Pro Forma
Date"), adjusted to give effect (as if such events had occurred on such date) to
(i) the consummation of the Acquisition and the other transactions contemplated
by the Acquisition Documents, (ii) the consummation of the Merger, (iii) the
receipt by the Borrower of at least $57,620,000 in gross cash proceeds from the
making of the GSCP Equity Investments, (iv) the making of the Extensions of
Credit to be made on the Effective Date and the application of the proceeds
thereof as contemplated hereby, and (v) the payment of estimated fees, expenses,
financing costs and estimated tax payments related to the transactions
contemplated hereby and thereby. The Pro Forma Balance Sheet was prepared in
accordance with Article 11 (Pro Forma Financial Information) of Regulation S-X
under the Securities Act.
5.2 No Change; Solvent. Since February 29, 1996, (a) except as
and to the extent disclosed on Schedule 5.2(a) hereto or Schedule 4.10 of the
Stock Purchase Agreement, there has been no development or event relating to or
affecting any Loan Party which has had or would be reasonably expected to have a
Material Adverse Effect (after giving effect to the transactions described in
clauses (i) through (iii) of subsection 5.1(b)) and (b) as of the Effective
Date, after giving effect to the consummation of the transactions described in
clauses (i) through (v) of subsection 5.1(b), the Borrower is Solvent.
5.3 Corporate Existence; Compliance with Law. Each of the Loan
Parties (a) is duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (b) has the corporate power
and authority, and the legal right, to own and operate its property, to lease
the property it operates as lessee and to conduct the business in which it is
currently engaged, except to the extent that the failure to have such legal
right would not be reasonably expected to have a Material Adverse Effect, (c) is
duly qualified as a foreign corporation and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification, other than in such
jurisdictions where the failure to be so qualified and in good standing would
not be reasonably expected to have a Material Adverse Effect, and (d) is in
compliance with all Requirements of Law, except to the extent that the failure
to comply therewith would not, in the aggregate, be reasonably expected to have
a Material Adverse Effect.
5.4 Corporate Power; Authorization; Enforceable Obligations.
Each Loan Party has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents and the Transaction Documents to
which it is a party and, in the case of the
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Borrower, to obtain Extensions of Credit hereunder, and each such Loan Party has
taken all necessary corporate action to authorize the execution, delivery and
performance of the Loan Documents and the Transaction Documents to which it is a
party and, in the case of the Borrower, to authorize the Extensions of Credit on
the terms and conditions of this Agreement, any Notes and the Applications. No
consent or authorization of, filing with, notice to or other similar act by or
in respect of, any Governmental Authority or any other Person is required to be
obtained or made by or on behalf of any Loan Party in connection with the
execution, delivery, performance, validity or enforceability of the Loan
Documents or Transaction Documents to which it is a party or, in the case of the
Borrower, with the Extensions of Credit hereunder, except for (i) consents,
authorizations, notices and filings described in Schedule 5.4, all of which have
been obtained or made prior to the Effective Date, (ii) filings to perfect the
Liens created by the Security Documents, (iii) filings pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727 et seq.),
in respect of Accounts Receivable of the Borrower and its Subsidiaries the
obligor in respect of which is the United States of America or any department,
agency or instrumentality thereof and (iv) consents, authorizations, notices and
filings which the failure to obtain or make would not reasonably be expected to
have a Material Adverse Effect. This Agreement has been duly executed and
delivered by the Borrower, and each other Loan Document and Transaction Document
to which any Loan Party is a party will be duly executed and delivered on behalf
of such Loan Party. This Agreement constitutes a legal, valid and binding
obligation of the Borrower, and each other Loan Document and Transaction
Document to which any Loan Party is a party when executed and delivered will
constitute a legal, valid and binding obligation of such Loan Party, enforceable
against such Loan Party in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
5.5 No Legal Bar. The execution, delivery and performance of
the Loan Documents and the Transaction Documents by any of the Loan Parties, the
Extensions of Credit hereunder and the use of the proceeds thereof (a) will not
violate any Requirement of Law or Contractual Obligation of such Loan Party in
any respect that would reasonably be expected to have a Material Adverse Effect
and (b) will not result in, or require, the creation or imposition of any Lien
(other than the Liens permitted by subsection 8.3) on any of its properties or
revenues pursuant to any such Requirement of Law or Contractual Obligation.
5.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrower, threatened by or against Holdings or any of
their respective Subsidiaries or against any of their respective properties or
revenues, (a) except as described on Schedule 5.6 hereto and Schedule 4.15 to
the Stock Purchase Agreement, which is so pending or threatened at any time on
or prior to the Effective Date and relates to any of the Loan Documents or the
Transaction Documents or any of the transactions contemplated hereby or thereby
or (b) which would be reasonably expected to have a Material Adverse Effect.
5.7 No Default. Neither the Borrower nor Holdings or any of
their respective Subsidiaries is in default under or with respect to any of its
Contractual Obligations including under the Senior Subordinated Credit Agreement
and the Senior Subordinated Notes in any
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respect which would be reasonably expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
5.8 Ownership of Property; Liens. Each of the Borrower,
Holdings and their Subsidiaries has good record and marketable title in fee
simple to, or a valid leasehold interest in, all its material real property, and
good title to, or a valid leasehold interest in, all its other material
property, and none of such property is subject to any Lien, except for Liens
permitted by subsection 8.3.
5.9 Intellectual Property. The Borrower and each of its
Subsidiaries owns, or has the legal right to use, all United States patents,
patent applications, trademarks, trademark applications, tradenames, copyrights,
technology, know-how and processes necessary for each of them to conduct its
business as currently conducted (the "Intellectual Property") except for those
the failure to own or have such legal right to use would not be reasonably
expected to have a Material Adverse Effect. Except as provided on Schedule 5.9,
no claim has been asserted and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor does the Borrower know of
any such claim, and, to the knowledge of the Borrower the use of such
Intellectual Property by the Borrower and its Subsidiaries does not infringe on
the rights of any Person, except for such claims and infringements which in the
aggregate, would not be reasonably expected to have a Material Adverse Effect.
5.10 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation of the Borrower, Holdings or any of their Subsidiaries
would be reasonably expected to have a Material Adverse Effect.
5.11 Taxes. To the knowledge of the Borrower, each of Holdings
and its Subsidiaries has filed or caused to be filed all United States federal
income tax returns and all other material tax returns which are required to be
filed and has paid (a) all taxes shown to be due and payable on such returns and
(b) all taxes shown to be due and payable on any assessments of which it has
received notice made against it or any of its property (including, without
limitation, the Mortgaged Properties) and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority and no tax
Lien has been filed, and no claim is being asserted, with respect to any such
tax, fee or other charge (other than any (i) taxes, fees or other charges with
respect to which the failure to pay, in the aggregate, would not have a Material
Adverse Effect or (ii) taxes, fees or other charges the amount or validity of
which are currently being contested in good faith by appropriate proceedings
diligently conducted and with respect to which reserves in conformity with GAAP
have been provided on the books of Holdings or its Subsidiaries, as the case may
be). The preceding sentence shall not apply to any taxes, fees or other charges
which are subject to indemnification by Mark IV under the Stock Purchase
Agreement and with respect to which the Borrower has promptly notified the
Administrative Agent upon becoming aware of such failure to file or pay, the
filing of a tax Lien or the assertion of a claim.
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5.12 Federal Regulations. No part of the proceeds of any
Extensions of Credit will be used for any purpose which violates the provisions
of the Regulations of the Board, including, without limitation, Regulation G,
Regulation U, Regulation T or Regulation X of the Board. If requested by any
Lender or the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form G-1, FR Form U-1 or such other
similar form referred to in Regulation G, Regulation U, Regulation T or
Regulation X of the Board, as the case may be.
5.13 ERISA. During the five year period prior to each date as
of which this representation is made, or deemed made, with respect to any Plan
(or, with respect to (vi) or (viii) below, as of the date such representation is
made or deemed made), none of the following events or conditions, either
individually or in the aggregate, has resulted or is reasonably likely to result
in a Material Adverse Effect: (i) a Reportable Event; (ii) an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA); (iii) any noncompliance with the applicable provisions of ERISA
or the Code; (iv) a termination of a Single Employer Plan (other than a standard
termination pursuant to Section 4041(b) of ERISA); (v) a Lien on the property of
the Borrower or its Subsidiaries in favor of the PBGC or a Plan; (vi) any
Underfunding with respect to any Single Employer Plan; (vii) a complete or
partial withdrawal from any Multiemployer Plan by the Borrower or any Commonly
Controlled Entity; (viii) any liability of the Borrower or any Commonly
Controlled Entity under ERISA if the Borrower or any such Commonly Controlled
Entity were to withdraw completely from all Multiemployer Plans as of the annual
valuation date most closely preceding the date on which this representation is
made or deemed made; or (ix) the Reorganization or Insolvency of any
Multiemployer Plan. There have been no transactions that resulted or could
result in any liability to the Borrower or any Commonly Controlled Entity under
Section 4069 of ERISA or Section 4212(c) of ERISA.
5.14 Collateral. Except with respect to (i) Liens on equipment
constituting fixtures, (ii) any reserved rights of the United States government
as required under law, (iii) Liens upon Patents, Patent Licenses, Trademarks and
Trademark Licenses (as such terms are defined in the Guarantee and Collateral
Agreement) to the extent that (a) such Liens are not otherwise perfected by the
filing of financing statements under the Uniform Commercial Code or by the
filing and acceptance thereof in the United States Patent and Trademark Office
or (b) such Patents, Patent Licenses, Trademarks and Trademark Licenses are not,
individually or in the aggregate, material to the business of the Borrower and
its Subsidiaries taken as a whole, (iv) Liens on uncertificated securities, (v)
Liens on Collateral the perfection of which requires filings in or other actions
under the laws of jurisdictions outside of the United States of America, any
State, territory or dependency thereof or the District of Columbia (except to
the extent that such filings or other actions have been made or taken), (vi)
Liens on contracts or Accounts Receivable on which the United States of America
or any department, agency, or instrumentality thereof is the obligor, (vii)
Liens on Proceeds of Accounts Receivable and Inventory, until transferred to or
deposited in the Collateral Proceeds Account (if any), and (viii) claims of
creditors of Persons receiving goods included as Collateral for "sale or return"
within the meaning of Section 2-326 of the Uniform Commercial Code of the
applicable
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jurisdiction, upon filing of the financing statements delivered to the
Administrative Agent by the Borrower and its Subsidiaries on the Effective Date
in the jurisdictions listed on Part II of Schedule 5.14 (which financing
statements are in proper form for filing in such jurisdictions) and the
recording of the Mortgages (and the recording of the Borrower Patent and
Trademark Security Agreement, and the making of filings after the Effective Date
in any other jurisdiction as may be necessary under any Requirement of Law) and
the delivery to, and continuing possession by, the Administrative Agent of all
Instruments, Chattel Paper and Documents a security interest in which is
perfected by possession, the Liens created pursuant to each Security Document,
when executed and delivered, will constitute valid Liens on and, to the extent
provided therein, perfected security interests in the collateral referred to in
such Security Document (but as to the Copyrights and the Copyright Licenses (as
defined in the Guarantee and Collateral Agreement) and accounts arising
therefrom, only to the extent the Uniform Commercial Code of the relevant
jurisdiction, from time to time in effect, is applicable) in favor of the
Administrative Agent for the benefit of the Lenders, which Liens will be prior
to all other Liens of all other Persons, except for Liens permitted pursuant to
the Loan Documents (including, without limitation, those permitted to exist
pursuant to subsection 8.3), and which Liens are enforceable as such as against
all other Persons (except, with respect to goods only, buyers in the ordinary
course of business to the extent provided in Section 9- 307(1) of the Uniform
Commercial Code as from time to time in effect in the applicable jurisdiction
and except to the extent that recording of an assignment or other transfer of
title to the Administrative Agent in the United States Patent and Trademark
Office may be necessary for such enforceability), except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law). Notwithstanding any other provision of this Agreement,
capitalized terms which are used in this subsection 5.14 and not defined in this
Agreement are so used as defined in the applicable Security Document.
5.15 Investment Company Act; Other Regulations. Neither
Holdings nor the Borrower is an "investment company", or a company "controlled"
by an entity required to be registered as an "investment company", within the
meaning of the Investment Company Act. Neither Holdings nor the Borrower is
subject to regulation under any Federal or State statute or regulation which
limits its ability to incur Indebtedness as contemplated hereby.
5.16 Subsidiaries. Schedule 5.16 sets forth all the
Subsidiaries of the Borrower at the Effective Date, the jurisdiction of their
incorporation and the direct or indirect ownership interest of the Borrower
therein.
5.17 Purpose of Loans. The proceeds of the Term Loans shall be
used to finance the Acquisition and to pay related fees and expenses. The
proceeds of the Revolving Credit Loans shall be used to provide for the working
capital requirements of the Borrower and its operating subsidiaries and for
their general corporate purposes (including the refinancing of existing
indebtedness of the Borrower and the financing of the Acquisition and the fees
and expenses relating thereto).
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5.18 Environmental Matters. Other than exceptions to any of
the following that are set forth in Schedules 4.19(a), 4.19(b), 4.19(c), 4.19(d)
and 4.19(e) of the Stock Purchase Agreement, or that would not, individually or
in the aggregate, reasonably be expected to give rise to a Material Adverse
Effect:
(i) The Borrower and its Subsidiaries: (A) are,
and within the period of all applicable statutes of limitation
have been, in compliance with all applicable Environmental
Laws; (B) hold all Environmental Permits (each of which is in
full force and effect) required for any of their current
operations or for any property owned, leased, or otherwise
operated by any of them and reasonably expect to timely obtain
without material expense all such Environmental Permits
required for planned operations; (C) are, and within the
period of all applicable statutes of limitation have been, in
compliance with all of their Environmental Permits; and (D)
have no reason to believe that any of their Environmental
Permits will not be, or will entail material expense to be,
timely renewed or complied with; any additional Environmental
Permits that may be required of any of them will not be, or
will entail material expense to be, timely granted or complied
with; or that compliance with any Environmental Law that is
applicable to any of them will not be, or will entail material
expense to be, timely attained and maintained.
(ii) Materials of Environmental Concern have not
been transported, disposed of, emitted, discharged, or
otherwise released or threatened to be released, to or at any
real property presently or formerly owned, leased or operated
by the Borrower or any of its Subsidiaries or at any other
location, which could reasonably be expected to (A) give rise
to liability of the Borrower or any of its Subsidiaries under
any applicable Environmental Law, or (B) interfere with the
Borrower's planned or continued operations, or (C) impair the
fair saleable value of any real property owned or leased by
the Borrower or any of its Subsidiaries.
(iii) There is no judicial, administrative, or
arbitral proceeding (including any notice of violation or
alleged violation) under any Environmental Law to which the
Borrower or any of its Subsidiaries is, or to the knowledge of
the Borrower or any of its Subsidiaries will be, named as a
party that is pending or, to the knowledge of the Borrower or
any of its Subsidiaries, threatened.
(iv) Neither the Borrower nor any of its
Subsidiaries has received any written request for information,
or been notified that it is a potentially responsible party,
under the federal Comprehensive Environmental Response,
Compensation, and Liability Act or any similar Environmental
Law, or received any other written request for information
with respect to any Materials of Environmental Concern.
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(v) Neither the Borrower nor any of its
Subsidiaries has entered into or agreed to any consent decree,
order, or settlement or other agreement, nor is subject to any
judgment, decree, or order or other agreement, in any
judicial, administrative, arbitral, or other forum, relating
to compliance with or liability under any Environmental Law.
5.19 No Material Misstatements. The written information,
reports, financial statements, exhibits and schedules furnished by or on behalf
of Holdings, Acquisition Co., GII or the Borrower to the Administrative Agent,
and the Lenders in connection with the negotiation of any Loan Document or
included therein or delivered pursuant thereto, taken as a whole, did not
contain as of the Effective Date any material misstatement of fact. It is
understood that (x) no representation or warranty is made concerning the
forecasts, estimates, pro forma information, projections and statements as to
anticipated future performance or conditions, and the assumptions on which they
were based, contained in any such information, reports, financial statements,
exhibits or schedules, except that as of the date such forecasts, estimates, pro
forma information, projections and statements were generated, (i) such
forecasts, estimates, pro forma information, projections and statements were
based on the good faith assumptions of the management of the Borrower and (ii)
such assumptions were believed by such management to be reasonable and (y) such
forecasts, estimates, pro forma information and statements, and the assumptions
on which they were based, may or may not prove to be correct.
5.20 Delivery of the Transaction Documents. The Administrative
Agent has received for itself and for each Lender a complete photocopy of each
of the Transaction Documents (including all exhibits, schedules and disclosure
letters referred to therein or delivered pursuant thereto, if any) and all
amendments thereto, waivers relating thereto and other side letters or
agreements affecting the terms thereof in any material respect.
5.21 Representations and Warranties Contained in the
Transaction Documents. Each of the Transaction Documents will have been duly
executed and delivered by each of the Loan Parties which is a party thereto
prior to the Effective Date and, to the knowledge of the Borrower, all other
parties thereto and is in full force and effect on the Effective Date. As of the
Effective Date, the representations and warranties of Holdings, the Borrower and
GSCP and, to the knowledge of the Borrower, and any of the other parties thereto
contained in any of the Transaction Documents (after giving effect to any
amendments, supplements, waivers or other modifications of any of the
Transaction Documents prior to the Effective Date in accordance with this
Agreement) and the Senior Subordinated Notes Documents are true and correct in
all material respects except as otherwise disclosed to the Administrative Agent
in writing prior to the Effective Date.
5.22 Labor Matters. There are no strikes pending or, to the
knowledge of the Borrower, reasonably expected to be commenced against the
Borrower or any of its Subsidiaries which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect. The hours worked
and payments made to employees of the Borrower and each of its Subsidiaries have
not been in violation of any applicable laws, rules or
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regulations, except where such violations would not reasonably be expected to
have a Material Adverse Effect. The consummation of the Transactions will not
give rise to a right of termination or right of renegotiation on the part of any
union under any collective bargaining agreement to which the Borrower or any of
its Subsidiaries (or any predecessor) is a party or by which the Borrower or any
of its Subsidiaries (or any predecessor) is bound.
SECTION 6. CONDITIONS PRECEDENT
6.1 Conditions to Initial Extension of Credit. This Agreement,
including, without limitation, the agreement of each Lender to make the initial
Extension of Credit requested to be made by it, shall become effective on the
date on which the following conditions precedent shall have been satisfied or
waived:
(a) Loan Documents. Subject to subsections 2.2, 2.7 and 2.9
regarding issuance of notes to individual Lenders, the Administrative
Agent shall have received the following Loan Documents, executed and
delivered as required below, with a copy for each applicable Lender:
(i) this Agreement, executed and delivered by a duly
authorized officer of the Borrower;
(ii) the Guarantee and Collateral Agreement, executed
and delivered by a duly authorized officer of each of Holdings
and the Borrower;
(iii) The Borrower Patent and Trademark Security
Agreement, executed and delivered by a duly authorized officer
of the Borrower;
(iv) each of the Mortgages, executed and delivered by
a duly authorized officer of the Loan Party thereto; and
(v) any Notes requested by the Lenders in accordance
with subsections 2.2, 2.5 and 2.7, executed by a duly
authorized officer of the Borrower.
(b) Subordinated Debt. The Borrower shall have received at
least $75,000,000 in cash from the issuance of senior subordinated debt
pursuant to the Senior Subordinated Credit Agreement.
(c) Corporate Structure. The corporate and capital structure
of each Loan Party after the Acquisition (including as to the ownership
of the voting stock thereof and the voting arrangements with respect to
such stock) shall be reasonably satisfactory in all respects. GSCP and
other investors identified by it and consisting of one or more of
Travelers Insurance Company or affiliates thereof, or funds managed by
any thereof or by GSCP, or otherwise acceptable to the Administrative
Agent, shall have directly
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66
or indirectly acquired in the Acquisition common stock of Holdings for
at least $44,620,000 in cash and Senior PIK Preferred Stock for
approximately $13,000,000 in cash (collectively, the "GSCP Equity
Investment"). Holdings shall have acquired common stock of Acquisition
Co. or the Borrower for, or shall otherwise have contributed to common
equity of Acquisition Co. or the Borrower, the full amount of the GSCP
Equity Investment.
(d) Acquisition. The Acquisition shall have been consummated
simultaneously with the closing hereof on terms and conditions
reasonably satisfactory to the Administrative Agent and pursuant to the
Acquisition Documentation and no material provision thereof shall have
been waived by GSCP, amended, supplemented or otherwise modified
(except as may be so reasonably satisfactory to the Administrative
Agent).
(e) Fees. The Administrative Agent and the Arranger shall have
received all fees and expenses required, and as agreed to in writing,
to be paid no later than immediately after the consummation of the
Transactions, and in any event no later than close of business on the
Effective Date.
(f) Governmental Approvals. All governmental and third party
approvals (including landlords' and other consents) necessary or
reasonably advisable in connection with the Acquisition, the financing
contemplated hereby and the continuing operations of the Borrower and
its subsidiaries shall have been obtained and be in full force and
effect, and all applicable waiting periods under applicable law shall
have expired without any action being taken or threatened by any
competent authority which would restrain, prevent or otherwise impose
material adverse conditions on the Acquisition or the financing
thereof.
(g) Financial Statements. The Lenders shall have received (i)
reasonably satisfactory audited consolidated and consolidating
financial statements of the Borrower for the three most recent fiscal
years ended prior to the Effective Date accompanied by an audit report
from Coopers & Lybrand, Arthur Andersen or another accounting firm
reasonably satisfactory to the Lenders, (ii) reasonably satisfactory
unaudited interim consolidated and consolidating financial statements
of the Borrower for each fiscal quarterly period ended subsequent to
the date of the latest financial statements delivered pursuant to
clause (i) of this paragraph for which such unaudited financial
statements are available and (iii) reasonably satisfactory unaudited
monthly financial statements for the Borrower for each fiscal month
ended subsequent to the date of the date of quarterly financial
statements delivered pursuant to clause (ii) of this paragraph for
which such unaudited financial statements are available.
(h) Pro forma Balance Sheet. The Lenders shall have received a
reasonably satisfactory pro forma consolidated balance sheet of the
Borrower as of the most recent fiscal quarter-end prior to the
Effective Date for which quarterly financial statements of the Borrower
are available, and after giving effect to the consummation on
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the Effective Date of the Acquisition and the financings contemplated
hereby (including any related schedules required by the SEC). The
Lenders shall be reasonably satisfied with respect to all material and
direct contingent liabilities of the Borrower after the Acquisition,
including any indebtedness or guarantees thereof and any tax and
similar governmental liabilities. The existing indebtedness of the
Borrower that shall continue after the Effective Date shall not exceed
$380,000.
(i) EBITDA Report. The Lenders shall have received a report
from the Borrower, in a form consistent with the projections previously
provided to Chase, confirming that the Consolidated EBITDA of the
Borrower for the twelve months ended October 31, 1996 (as adjusted to
include certain non-recurring costs and allocation of certain stand
alone costs, as reasonably identified by the Borrower) was at least
$22,800,000.
(j) Fees and Expenses. The Administrative Agent shall have
received reasonably satisfactory evidence that the fees and expenses to
be incurred by the Borrower in connection with the Acquisition and the
financing thereof (including this Agreement, the Senior Subordinated
Credit Agreement and the Senior Subordinated Notes) shall not exceed
$13,750,000 in the aggregate.
(k) Environmental Report. The Lenders shall have received a
reasonably satisfactory environmental report with respect to the real
property owned or leased by the Borrower and its subsidiaries, from
O'Brien & Gere or another firm reasonably satisfactory to the
Administrative Agent.
(l) Solvency. The Lenders shall have received a reasonably
satisfactory opinion as to the solvency of the Borrower after the
consummation of the Acquisition and the other transactions contemplated
hereby, from Appraisal Economics Inc. or another firm reasonably
satisfactory to the Administrative Agent.
(m) No Material Change. There shall not have occurred or
become known to any Lender any material adverse condition or material
adverse change in or affecting the business, operations, property,
condition (financial or otherwise) or prospects of the Borrower and its
subsidiaries taken as a whole.
(n) Lien Searches. The Administrative Agent shall have
received the results of a recent search by a Person reasonably
satisfactory to the Administrative Agent, of the Uniform Commercial
Code, judgment and tax lien filings which may have been filed with
respect to personal property of the Borrower and its Subsidiaries in
any of the jurisdictions set forth in Part I of Schedule 5.14, and the
results of such search shall not reveal any liens other than liens
permitted by subsection 8.3.
(o) Legal Opinions. The Administrative Agent shall
have received, with a photocopy for each Lender, the
following executed legal opinions:
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(i) the executed legal opinion of Debevoise &
Plimpton, special counsel to each of Acquisition Co., the
Borrower and the other Loan Parties, substantially in the form
of Exhibit I-1;
(ii) the executed legal opinions of special local
counsel in the jurisdictions set forth in Schedule 6.1(o) with
respect to collateral security matters, each in form and
substance reasonably satisfactory to the Administrative Agent;
and
(iii) the executed legal opinion of Amster,
Rothstein & Ebenstein, special intellectual property counsel
to the Lenders, in form and substance reasonably satisfactory
to the Administrative Agent.
In addition, the Administrative Agent shall have received, with a
photocopy for each Lender, the legal opinions referred to in Section
10.8 of the Stock Purchase Agreement.
(p) Actions to Perfect Liens. The Administrative Agent shall
have received evidence in form and substance reasonably satisfactory to
it that all filings, recordings, registrations and other actions,
including, without limitation, the filing of duly executed financing
statements on Form UCC-1 in each jurisdiction set forth on Schedule
5.14, necessary or, in the reasonable opinion of the Administrative
Agent, advisable to perfect the Liens created by the Security Documents
shall have been completed or shall be ready to be completed promptly
following the Effective Date, and all agreements, statements and other
documents relating thereto shall be in form and substance reasonably
satisfactory to the Administrative Agent.
(q) Pledged Stock; Stock Powers; Pledged Notes; Endorsements.
The Administrative Agent shall have received:
(i) the certificates representing the Pledged
Stock under (and as defined in) the Guarantee and Collateral
Agreement, together with an undated stock power for each such
certificate executed in blank by a duly authorized officer of
the pledgor thereof; and
(ii) the promissory notes representing each of
the Pledged Notes under (and as defined in) the Guarantee and
Collateral Agreement, duly endorsed as required by the
Guarantee and Collateral Agreement.
The Loan Parties shall have taken such other action as is reasonably
satisfactory to the Administrative Agent to perfect the security
interests created by the Guarantee and Collateral Agreement.
(r) Surveys. The Administrative Agent shall have received, and
the title insurance company issuing the policy referred to in
subsection 6.1(s) (the "Title
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Insurance Company") shall have received, maps or plats of an as-built
survey of the sites of each of the Mortgaged Properties certified to
the Administrative Agent and the Title Insurance Company in a manner
reasonably satisfactory to them, dated a date reasonably satisfactory
to the Administrative Agent and the Title Insurance Company by an
independent professional licensed land surveyor reasonably satisfactory
to the Administrative Agent and the Title Insurance Company, which maps
or plats and the surveys on which they are based shall be made in
accordance with the Minimum Standard Detail Requirements for Land Title
Surveys jointly established and adopted by the American Land Title
Association and the American Congress on Surveying and Mapping in 1992,
and, without limiting the generality of the foregoing, there shall be
surveyed and shown on such maps, plats or surveys the following: (i)
the locations on such sites of all the buildings, structures and other
improvements and the established building setback lines; (ii) the lines
of streets abutting the sites and width thereof; (iii) all access and
other easements appurtenant to the sites necessary to use the sites;
(iv) all roadways, paths, driveways, easements, encroachments and
overhanging projections and similar encumbrances affecting the sites,
whether recorded, apparent from a physical inspection of the sites or
otherwise known to the surveyor; (v) any encroachments on any adjoining
property by the building structures and improvements on the sites; and
(vi) if the site is described as being on a filed map, a legend
relating the survey to said map.
(s) Title Insurance Policy. The Administrative Agent shall
have received in respect of each of the Mortgaged Properties a
mortgagee's title policy (or policies) or marked up unconditional
binder for such insurance dated the Effective Date. Each such policy
shall (i) be in an amount reasonably satisfactory to the Administrative
Agent; (ii) insure that the Mortgage insured thereby creates a valid
first Lien on the Mortgaged Property encumbered thereby free and clear
of all defects and encumbrances, except those permitted by subsection
8.3 and such as may be approved by the Administrative Agent; (iii) name
the Administrative Agent for the benefit of the Lenders as the insured
thereunder; (iv) be in the form of an ALTA Loan Policy; (v) contain
such endorsements and affirmative coverage as the Administrative Agent
may reasonably request; provided that, in the case of zoning
endorsements, if any, no additional premiums will be required in excess
of $2,000 per property, (vi) be issued by title companies reasonably
satisfactory to the Administrative Agent (including any such title
companies acting as reinsurers, at the option of the Administrative
Agent) and (vii) be issued at ordinary rates (other than with respect
to affirmative insurance). The Administrative Agent shall have received
evidence reasonably satisfactory to it that all premiums in respect of
each such policy, and all charges for mortgage recording tax, if any,
have been paid. The Administrative Agent shall have also received a
copy of all recorded documents referred to, or listed as exceptions to
title in, the title policy or policies referred to in this subsection
and a copy, certified by such parties as the Administrative Agent may
deem reasonably appropriate, of all other documents affecting the
property covered by each Mortgage as shall have been reasonably
requested by the Administrative Agent.
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(t) Borrowing Certificate. The Administrative Agent shall have
received, with a photocopy for each Lender, (a)(i) a certificate of the
Borrower, dated the Effective Date, substantially in the form of
Exhibit I-1 and (ii) Borrowing Base Certificate, with appropriate
insertions and attachments, reasonably satisfactory in form and
substance to the Administrative Agent, executed by a Responsible
Officer and the Secretary or any Assistant Secretary of the Borrower
and (b) a report on the accounts receivable and inventory of the
Borrower from the Administrative Agent's collateral review group to be
included with the Borrowing Base, reasonably satisfactory in form and
substance to the Administrative Agent.
(u) Corporate Proceedings of the Loan Parties. The
Administrative Agent shall have received, with a photocopy for each
Lender, a copy of the resolutions, in form and substance reasonably
satisfactory to the Administrative Agent, of the board of directors of
each Loan Party authorizing, as applicable, (i) the execution, delivery
and performance of this Agreement, any Notes and the other Loan
Documents and the Transaction Documents to which it is or will be a
party as of the Effective Date, (ii), in the case of the Borrower, the
Extensions of Credit to the Borrower and (iii) the granting by it of
the Liens to be created pursuant to the Security Documents to which it
is or will be a party as of the Effective Date, certified by the
Secretary or an Assistant Secretary of such Loan Party as of the
Effective Date, which certificate shall be in form and substance
reasonably satisfactory to the Administrative Agent and shall state
that the resolutions thereby certified have not been amended, modified
(except as any later such resolution may modify any earlier such
resolution), revoked or rescinded and are in full force and effect.
(v) Incumbency Certificates of the Loan Parties. The
Administrative Agent shall have received, with a photocopy for each
Lender, a certificate of each Loan Party, dated the Effective Date, as
to the incumbency and signature of the officers of such Loan Party
executing any Loan Document, reasonably satisfactory in form and
substance to the Administrative Agent, executed by a Responsible
Officer and the Secretary or any Assistant Secretary of such Loan
Party.
(w) Governing Documents. The Administrative Agent shall have
received, with a photocopy for each Lender, copies of the certificate
or articles of incorporation and by-laws (or other similar governing
documents serving the same purpose) of each Loan Party, certified as of
the Effective Date as complete and correct copies thereof by the
Secretary or an Assistant Secretary of such Loan Party.
(x) Insurance. The Administrative Agent shall have received
evidence in form and substance reasonably satisfactory to it that all
of the requirements of subsection 7.5 of this Agreement and Section 5
of each Mortgage shall have been satisfied.
(y) Flood Insurance. With respect to any of the Mortgaged
Properties which is located in an area identified by the Secretary of
Housing and Urban Development as having special flood hazards, the
Administrative Agent shall have delivered notice(s)
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to, and received acknowledgement from, the relevant Loan Party as
required pursuant to Section 208.8(e)(3) of Regulation H of the Board.
The making of the initial Extensions of Credit by the Lenders hereunder shall
conclusively be deemed to constitute an acknowledgement by the Administrative
Agent and each Lender that each of the conditions precedent set forth in this
subsection 6.1 shall have been satisfied in accordance with its respective terms
or shall have been irrevocably waived by such Person.
6.2 Conditions to Each Other Extension of Credit. The
agreement of each Lender to make any Extension of Credit requested to be made by
it on any date (including, without limitation, the initial Extension of Credit
and each Swing Line Loan) is subject to the satisfaction or waiver of the
following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by any Loan Party pursuant to this
Agreement or any other Loan Document (or in any amendment, modification
or supplement hereto or thereto) to which it is a party, and each of
the representations and warranties contained in any certificate
furnished at any time by or on behalf of any Loan Party pursuant to
this Agreement or any other Loan Document, shall, except to the extent
that they relate to a particular date, be true and correct in all
material respects on and as of such date as if made on and as of such
date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
Extensions of Credit requested to be made on such date.
(c) Letter of Credit Application. With respect to the issuance
of any Letter of Credit, the Issuing Lender shall have received an
Application, completed to its satisfaction, and such other
certificates, documents and other papers and information as the Issuing
Lender may reasonably request.
Each borrowing by and Letter of Credit issued on behalf of any Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such borrowing or such issuance that the conditions contained in
this subsection 6.2 have been satisfied.
SECTION 7. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, from and after the Effective
Date and so long as the Revolving Credit Commitments remain in effect, and
thereafter until payment in full of the Loans, all Reimbursement Obligations and
any other amount then due and owing to any Lender or the Administrative Agent
hereunder and under any Note and termination or expiration of all Letters of
Credit, the Borrower shall and (except in the case of delivery of financial
information, reports and notices) shall cause each of its Subsidiaries to:
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7.1 Financial Statements. Furnish to the Administrative Agent
for delivery to each Lender (and the Administrative Agent agrees to make and so
deliver such copies):
(a) as soon as available, but in any event not later than the
90th day following the end of each fiscal year of the Borrower ending
on or after the Effective Date, a copy of the consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at the end
of such year and the related consolidated statements of operations,
changes in common stockholders' equity and cash flows for such year,
setting forth in each case, in comparative form the figures for and as
of the end of the previous year, reported on without a "going concern"
or like qualification or exception, or qualification arising out of the
scope of the audit, by Arthur Andersen LLP or other independent
certified public accountants of nationally recognized standing not
unacceptable to the Administrative Agent in its reasonable judgment;
(b) as soon as available, but in any event not later than the
45th day following the end of each of the first three quarterly periods
of each fiscal year of the Borrower, the unaudited consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at the end
of such quarter and the related unaudited consolidated statements of
operations and cash flows of the Borrower and its consolidated
Subsidiaries for such quarter and the portion of the fiscal year
through the end of such quarter, setting forth, in comparative form the
budgeted figures (as adjusted consistent with past practice) for the
relevant period and the figures for the corresponding period of the
previous fiscal year, certified by a Responsible Officer of the
Borrower as being fairly stated in all material respects (subject to
normal year-end audit and other adjustments); and
(c) as soon as available, but in any event not later than the
30th day following the end of each fiscal month of each fiscal year of
the Borrower (or the 45th day in the case of any such month ending on
the last day of a fiscal quarter), an unaudited consolidated balance
sheet for Borrower and its consolidated Subsidiaries as at the end of
such month and a related unaudited consolidated income statement,
setting forth in comparative form the figures as at the end of the
corresponding fiscal month of the previous fiscal year and, in the case
of such income statement, in comparative form the figures for the
corresponding fiscal month of the previous fiscal year;
all such financial statements delivered pursuant to subsection 7.1(a) or (b) to
be (and, in the case of any financial statements delivered pursuant to
subsection 7.1(b) shall be certified by a Responsible Officer of the Borrower as
being) complete and correct in all material respects in conformity with GAAP and
to be (and, in the case of any financial statements delivered pursuant to
subsection 7.1(b) shall be certified by a Responsible Officer of the Borrower as
being) prepared in reasonable detail in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
that began on or after the Effective Date (except as approved by such
accountants or officer, as the case may be, and disclosed therein, and except,
in the case of any financial statements delivered pursuant to subsection 7.1(b),
for the absence of certain notes).
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7.2 Certificates; Other Information. Furnish to the
Administrative Agent for delivery to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the audit necessary therefor no knowledge was
obtained of any Default or Event of Default insofar as the same relates
to any financial accounting matters covered by their audit, except as
specified in such certificate;
(b) concurrently with the delivery of the financial statements
and reports referred to in subsections 7.1(a) and (b), a certificate
signed by a Responsible Officer of the Borrower (i) stating that, to
the best of such Responsible Officer's knowledge, the Borrower and its
Subsidiaries during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition,
contained in this Agreement, any Notes or the other Loan Documents to
which it is a party to be observed, performed or satisfied by it, and
that such Responsible Officer has obtained no knowledge of any Default
or Event of Default, except, in each case, as specified in such
certificate, and (ii) setting forth the calculations required to
determine (A) compliance with all covenants set forth in subsection 8.1
(in the case of a certificate furnished with the financial statements
referred to in subsections 7.1(a) and (b)), and (B) compliance with the
covenant set forth in subsection 8.8 (in the case of a certificate
furnished with the financial statements referred to in subsection
7.1(a));
(c) as soon as available, but in any event not later than the
90th day after the beginning of each fiscal year of the Borrower, a
copy of the projections by the Borrower of the operating budget and
cash flow budget of the Borrower and its Subsidiaries for such fiscal
year, such projections to be accompanied by a certificate of a
Responsible Officer of the Borrower to the effect that such Responsible
Officer believes such projections to have been prepared on the basis of
reasonable assumptions;
(d) within five Business Days after the same are sent, copies
of all financial statements and reports which the Borrower sends to its
public security holders, and within five Business Days after the same
are filed, copies of all financial statements and periodic reports
which the Borrower may file with the Securities and Exchange Commission
or any successor or analogous Governmental Authority;
(e) on the 25th day of each calendar month (and at such other
times as the Administrative Agent reasonably may request), a Borrowing
Base Certificate, certified by a Responsible Officer of the Borrower as
being true and accurate in all material respects, setting forth the
Borrower's calculation of the Borrowing Base as of the date specified
in such certificate (which, with respect to the Borrowing Base
Certificate delivered on the 25th day of a calendar month, shall be as
of the last Business Day of the prior calendar month); and
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(f) promptly, such additional financial and other information
as any Lender may from time to time reasonably request, including
certificates setting forth calculations showing that the Borrower is in
compliance with subsections 8.2(h), 8.3(j), 8.3(k), 8.4(j), 8.6(g),
8.7(a) and 8.11 of this Agreement.
7.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its material obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings diligently conducted and reserves in conformity with GAAP with
respect thereto have been provided on the books of the Borrower or any of its
Subsidiaries, as the case may be.
7.4 Conduct of Business and Maintenance of Existence. Continue
to engage in business of the same general type as conducted by the Borrower and
its Subsidiaries on the Effective Date, taken as a whole, and preserve, renew
and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of the business of the Borrower and its
Subsidiaries, taken as a whole, except as otherwise expressly permitted pursuant
to subsection 8.5, provided that the Borrower and its Subsidiaries shall not be
required to maintain any such rights, privileges or franchises, if the failure
to do so would not reasonably be expected to have a Material Adverse Effect; and
comply with all Contractual Obligations and Requirements of Law except to the
extent that failure to comply therewith, in the aggregate, would not reasonably
be expected to have a Material Adverse Effect.
7.5 Maintenance of Property; Insurance. Keep all property
useful and necessary in the business of the Borrower and its Subsidiaries, taken
as a whole, in good working order and condition; maintain with financially sound
and reputable insurance companies insurance on all property material to the
business of the Borrower and its Subsidiaries, taken as a whole, in at least
such amounts and against at least such risks (but including in any event public
liability, product liability and business interruption) as are usually insured
against in the same general area by companies engaged in the same or a similar
business; and furnish to the Administrative Agent, upon written request,
information in reasonable detail as to the insurance carried.
7.6 Inspection of Property; Books and Records; Discussions.
(a) Keep proper books of records and account in which full, complete and correct
entries in conformity with GAAP and all material Requirements of Law shall be
made of all dealings and transactions in relation to its business and
activities; and permit representatives of any Lender to visit and inspect any of
its properties and examine and, to the extent reasonable, make abstracts from
any of its books and records and to discuss the business, operations, properties
and financial and other condition of the Borrower and its Subsidiaries with
officers and employees of the Borrower and its Subsidiaries and with its
independent certified public accountants, in each case at any reasonable time,
upon reasonable notice, and as often as may reasonably be desired.
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(b) At any time upon the reasonable request of the
Administrative Agent, permit the Administrative Agent or its professionals
(including consultants, accountants and appraisers) retained by the
Administrative Agent to conduct evaluations and appraisals of (i) the Borrower's
practices in the computation of the Borrowing Base, (ii) the assets included in
the Borrowing Base, (iii) systems and procedures relating to the Borrowing Base
items, and (iv) other related procedures deemed necessary by the Administrative
Agent and pay the reasonable fees and expenses thereof in connection therewith
(including, without limitation, the fees and expenses associated with services
performed by the Administrative Agent's Specialized Due Diligence Department);
provided, however, that the Administrative Agent shall not be entitled to
conduct such evaluations and appraisals more frequently than once per year
unless (x) an Event of Default has occurred and is continuing or (y) the
Administrative Agent reasonably determines in consultation with the Borrower
that any material event or material change has occurred with respect to the Loan
Parties, their inventory practices or the performance of the Collateral and that
as a result of such event or change more frequent evaluations or appraisals are
required to effectively monitor the Borrowing Base, in which case the Borrower
will permit the Administrative Agent to conduct such evaluations and appraisals
at such reasonable times and as often as may be reasonably requested, in each
case so long as any Revolving Credit Loans, Swing Line Loans or Letters of
Credit shall be outstanding or shall have been requested by the Borrower
hereunder.
(c) In connection with any evaluation and appraisal relating
to the computation of the Borrowing Base, agree to make such adjustments to its
parameters for including Eligible Inventory and Eligible Accounts Receivable in
the Borrowing Base as the Administrative Agent shall reasonably require based
upon the results of such evaluation and appraisal, provided that the
Administrative Agent shall specify to the Borrower in writing the reasons for
any such additional adjustments.
7.7 Notices. Promptly give notice to the
Administrative Agent and each Lender of:
(a) as soon as possible after a Responsible Officer of the
Borrower knows or reasonably should know thereof, the occurrence of any
Default or Event of Default;
(b) as soon as possible after a Responsible Officer of the
Borrower knows or reasonably should know thereof, any (i) default or
event of default under any Contractual Obligation of the Borrower or
any of its Subsidiaries, other than as previously disclosed in writing
to the Lenders, or (ii) litigation, investigation or proceeding which
may exist at any time between the Borrower or any of its Subsidiaries
and any Governmental Authority, which in either case, if not cured or
if adversely determined, as the case may be, would reasonably be
expected to have a Material Adverse Effect;
(c) as soon as possible after a Responsible Officer of the
Borrower knows or reasonably should know thereof, the occurrence of any
default or event of default under the Senior Subordinated Facility
Documents or Senior Subordinated Notes Documents;
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(d) as soon as possible after a Responsible Officer of the
Borrower knows or reasonably should know thereof, any litigation or
proceeding affecting the Borrower or any of its Subsidiaries in which
the amount involved (not covered by insurance) is $1,000,000 or more or
in which injunctive or similar relief is sought that would reasonably
be expected to have a Material Adverse Effect;
(e) the following events, as soon as possible and in any event
within 30 days after a Responsible Officer of the Borrower or any of
its Subsidiaries knows or reasonably should know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect
to any Single Employer Plan, a failure to make any required
contribution to a Single Employer Plan or Multiemployer Plan, the
creation of any Lien on the property of the Borrower or its
Subsidiaries in favor of the PBGC or a Plan or any withdrawal from, or
the termination, Reorganization or Insolvency of, any Multiemployer
Plan; (ii) the institution of proceedings or the taking of any other
formal action by the PBGC or the Borrower or any of its Subsidiaries or
any Commonly Controlled Entity or any Multiemployer Plan which could
reasonably be expected to result in the withdrawal from, or the
termination, Reorganization or Insolvency of, any Single Employer Plan
or Multiemployer Plan; provided, however, that no such notice will be
required under clause (i) or (ii) above unless the event giving rise to
such notice, when aggregated with all other such events under clause
(i) or (ii) above, could be reasonably expected to result in liability
to the Borrower or its Subsidiaries in an amount that would exceed
$5,000,000; or (iii) the existence of an Underfunding under a Single
Employer Plan that exceeds 10% of the value of the assets of such
Single Employer Plan, in each case, determined as of the most recent
annual valuation date of such Single Employer Plan on the basis of the
actuarial assumptions used to determine the funding requirements of
such Single Employer Plan as of such date;
(f) as soon as possible after a Responsible Officer of the
Borrower knows or reasonably should know thereof, any material adverse
change in the business, operations, property, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a
whole;
(g) as soon as possible after a Responsible Officer of the
Borrower knows or reasonably should know thereof, (i) any release or
discharge by the Borrower or any of its Subsidiaries of any Materials
of Environmental Concern required to be reported under applicable
Environmental Laws to any Governmental Authority, unless the Borrower
reasonably determines that the total Environmental Costs arising out of
such release or discharge are unlikely to exceed $1,000,000 or to have
a Material Adverse Effect; (ii) any condition, circumstance, occurrence
or event not previously disclosed in writing to the Administrative
Agent that could result in liability under applicable Environmental
Laws unless the Borrower reasonably determines that the total
Environmental Costs arising out of such condition, circumstance,
occurrence or event are unlikely to exceed $1,000,000 or to have a
Material Adverse Effect, or could result in the imposition of any lien
or other restriction on the title, ownership or transferability of any
facilities and properties owned, leased or operated by the
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Borrower or any of its Subsidiaries; and (iii) any proposed action to
be taken by the Borrower or any of its Subsidiaries that would
reasonably be expected to subject the Borrower or any of its
Subsidiaries to any material additional or different requirements or
liabilities under Environmental Laws, unless the Borrower reasonably
determines that the total Environmental Costs arising out of such
proposed action are unlikely to exceed $1,000,000 or to have a Material
Adverse Effect; and
(h) as soon as possible after a Responsible Officer of the
Borrower knows or reasonably should know thereof, the failure to make
any rental payment when due and payable with respect to any property
leased by the Borrower or any of its Domestic Subsidiaries at which
Inventory of the Borrower or any of its Domestic Subsidiaries is
located.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer of the Borrower (and, if applicable, the relevant Commonly
Controlled Entity or Subsidiary) setting forth details of the occurrence
referred to therein and stating what action the Borrower (or, if applicable, the
relevant Commonly Controlled Entity or Subsidiary) proposes to take with respect
thereto.
7.8 Environmental Laws. (a) (i) Comply substantially with, and
require substantial compliance by all tenants, subtenants, contractors, and
invitees with, all applicable Environmental Laws; (ii) obtain, comply
substantially with and maintain any and all Environmental Permits necessary for
its operations as conducted and as planned; and (iii) require that all tenants,
subtenants, contractors, and invitees obtain, comply substantially with and
maintain any and all Environmental Permits necessary for their operations as
conducted and as planned, with respect to any property leased or subleased from,
or operated by the Borrower or its Subsidiaries.
(b) Conduct and complete or cause to be conducted and
completed all investigations, studies, sampling and testing, and all remedial,
removal, and other actions required under applicable Environmental Laws; and
promptly comply with all orders and directives of all Governmental Authorities
regarding Environmental Laws, (i) except where non-compliance with any such
order or directive would not reasonably be expected to have a Material Adverse
Effect or (ii) other than any such order or directive as to which an appeal or
other appropriate contest is or has been timely and properly taken, is being
diligently pursued in good faith, and as to which appropriate reserves have been
established in accordance with GAAP, and, if the effectiveness of such order or
directive has not been stayed, the pendency of such appeal or other appropriate
contest does not give rise to a Material Adverse Effect.
(c) Maintain, update as appropriate, and implement in all
material respects an ongoing program to ensure that all the properties and
operations of the Borrower and its Subsidiaries are regularly and reasonably
reviewed by competent professionals to identify and promote compliance with and
to reasonably and prudently manage any liabilities or potential liabilities
under any Environmental Law that may affect the Borrower or any of its
Subsidiaries, including, without limitation, compliance and liabilities relating
to: discharges to
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78
air and water; acquisition, transportation, storage and use of hazardous
materials; waste disposal; repair, maintenance and improvement of properties;
employee health and safety; species protection; and recordkeeping (the
"Environmental Program").
7.9 After-Acquired Real Property and Fixtures. (a) With
respect to any owned real property or fixtures, in each case with a purchase
price or a fair market value of at least $500,000, in which the Borrower or any
of its Subsidiaries acquires ownership rights at any time after the Effective
Date, promptly grant to the Administrative Agent, for the benefit of the
Lenders, a Lien of record on all such owned real property and fixtures, upon
terms reasonably satisfactory in form and substance to the Administrative Agent
and in accordance with any applicable requirements of any Governmental Authority
(including, without limitation, any required appraisals of such property under
FIRREA); provided that (i) nothing in this subsection 7.9 shall defer or impair
the attachment or perfection of any security interest in any Collateral covered
by any of the Security Documents which would attach or be perfected pursuant to
the terms thereof without action by the Borrower, any of its Subsidiaries or any
other Person and (ii) no such Lien shall be required to be granted as
contemplated by this subsection 7.9 on any owned real property or fixtures the
acquisition of which is financed, or is to be financed within any time period
permitted by subsection 8.2(d) or (e), in whole or in part through the
incurrence of Indebtedness permitted by subsection 8.2(d) or (e), until such
Indebtedness is repaid in full (and not refinanced as permitted by subsection
8.2(d) or (e)) or, as the case may be, the Borrower determines not to proceed
with such financing or refinancing. In connection with any such grant to the
Administrative Agent, for the benefit of the Lenders, of a Lien of record on any
such real property in accordance with this subsection, the Borrower or such
Subsidiary shall deliver or cause to be delivered to the Administrative Agent
any surveys, title insurance policies, environmental reports and other documents
in connection with such grant of such Lien obtained by it in connection with the
acquisition of such ownership rights in such real property or as the
Administrative Agent shall reasonably request (in light of the value of such
real property and the cost and availability of such surveys, title insurance
policies, environmental reports and other documents and whether the delivery of
such surveys, title insurance policies, environmental reports and other
documents would be customary in connection with such grant of such Lien in
similar circumstances).
(b) At its own expense, execute, acknowledge and deliver, or
cause the execution, acknowledgement and delivery of, and thereafter register,
file or record in an appropriate governmental office, any document or instrument
reasonably deemed by the Administrative Agent to be necessary or desirable for
the creation, perfection and priority and the continuation of the validity,
perfection and priority of the foregoing Liens or any other Liens created
pursuant to the Security Documents.
(c) At its own expense, request, and use reasonable efforts to
obtain, (i) within 45 days after the Effective Date, a consent, substantially in
the form of Exhibit J or such other form as may be reasonably satisfactory to
the Administrative Agent, from the landlord of each of the existing facilities
located in the United States and listed in Schedule 7.9(c) in which Inventory of
any Loan Party is located, as of the Effective Date, in which such landlord
acknowledges the Administrative Agent's first priority security interest in the
Inventory
<PAGE> 85
79
pledged by each Loan Party to the Administrative Agent for the benefit of the
Lenders and (ii) prior to entering into a lease of a facility located in the
United States in which Inventory will be located on or after the Effective Date
(other than any such facility for which there is not a lease of more than one
year and which the Borrower and its Subsidiaries intends to use as a seasonal
storage facility), a consent, substantially in the form of Exhibit J or such
other form as may be reasonably satisfactory to the Administrative Agent, from
each landlord of any such facility, in which such landlord acknowledges the
Administrative Agent's first priority security interest in the Inventory pledged
by each Loan Party to the Administrative Agent for the benefit of the Lenders.
SECTION 8. NEGATIVE COVENANTS
The Borrower hereby agrees that, from and after the Effective
Date and so long as the Revolving Credit Commitments remain in effect, and
thereafter until payment in full of the Loans, all Reimbursement Obligations and
any other amount then due and owing to any Lender or the Administrative Agent
hereunder and under any Note and termination or expiration of all Letters of
Credit, the Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly:
8.1 Financial Condition Covenants.
(a) Minimum Consolidated EBITDA. Permit the Consolidated
EBITDA of the Borrower for any period of four consecutive fiscal
quarters of the Borrower ending on the dates set forth below to be less
than the amount set forth opposite such date below:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
May 31, 1997 $20,000,000
August 31, 1997 $20,000,000
November 30, 1997 $20,000,000
February 28, 1998 $20,000,000
May 31, 1998 $21,000,000
August 31, 1998 $21,000,000
November 30, 1998 $21,000,000
February 28, 1999 $21,000,000
May 31, 1999 $22,000,000
August 31, 1999 $22,000,000
November 30, 1999 $22,000,000
February 28, 2000 $22,000,000
May 31, 2000 $23,000,000
August 31, 2000 $23,000,000
November 30, 2000 $24,000,000
February 28, 2001 $24,000,000
May 31, 2001 $25,000,000
</TABLE>
<PAGE> 86
80
<TABLE>
<S> <C>
August 31, 2001 $25,000,000
November 30, 2001 $25,000,000
February 28, 2002 $25,000,000
May 31, 2002 $25,000,000
August 31, 2002 $26,000,000
November 30, 2002 $26,000,000
February 28, 2003 $26,000,000
</TABLE>
(b) Maintenance of Consolidated Fixed Charges Ratio. Permit,
for any period of four consecutive fiscal quarters of the Borrower
ending on the dates set forth below, the Consolidated Fixed Charges
Ratio at the last day of such consecutive fiscal quarter, to be less
than the ratio set forth opposite such date below:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
November 30, 1997 1.00 to 1
February 28, 1998 1.00 to 1
May 31, 1998 1.00 to 1
August 31, 1998 1.00 to 1
November 30, 1998 1.00 to 1
February 28, 1999 1.05 to 1
May 31, 1999 1.05 to 1
August 31, 1999 1.05 to 1
November 30, 1999 1.05 to 1
February 28, 2000 1.05 to 1
May 31, 2000 1.10 to 1
August 31, 2000 1.10 to 1
November 30, 2000 1.10 to 1
February 28, 2001 1.10 to 1
May 31, 2001 1.10 to 1
August 31, 2001 1.10 to 1
November 30, 2001 1.10 to 1
February 28, 2002 1.10 to 1
May 31, 2002 1.10 to 1
August 31, 2002 1.10 to 1
November 30, 2002 1.10 to 1
February 28, 2003 1.10 to 1
</TABLE>
(c) Maintenance of Leverage Ratio. Permit, for any period of
four consecutive fiscal quarters of the Borrower ending on the dates
set forth below, the Leverage Ratio of the Borrower to be greater than
the ratio set forth opposite such date below:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
May 31, 1997 6.00 to 1
</TABLE>
<PAGE> 87
81
<TABLE>
<S> <C>
August 31, 1997 6.00 to 1
November 30, 1997 6.00 to 1
February 28, 1998 6.00 to 1
May 31, 1998 6.00 to 1
August 31, 1998 5.75 to 1
November 30, 1998 5.75 to 1
February 28, 1999 5.50 to 1
May 31, 1999 5.50 to 1
August 31, 1999 5.25 to 1
November 30, 1999 5.25 to 1
February 28, 2000 5.00 to 1
May 31, 2000 4.75 to 1
August 31, 2000 4.75 to 1
November 30, 2000 4.75 to 1
February 28, 2001 4.75 to 1
May 31, 2001 4.00 to 1
August 31, 2001 4.00 to 1
November 30, 2001 4.00 to 1
February 28, 2002 4.00 to 1
May 31, 2002 4.00 to 1
August 31, 2002 4.00 to 1
November 30, 2002 4.00 to 1
February 28, 2003 4.00 to 1
</TABLE>
8.2 Limitation on Indebtedness. Create, incur, assume or
suffer to exist any Indebtedness (including any Indebtedness of any of its
Subsidiaries), except:
(a) Indebtedness of the Borrower under this Agreement and
under any Notes;
(b) Indebtedness under the Senior Subordinated Credit
Agreement or the Senior Subordinated Indenture or evidenced by the
Senior Subordinated Notes; provided that such Indebtedness shall not be
extended, renewed, replaced, refinanced or otherwise amended, except
(x) by the incurrence of Indebtedness under the Senior Subordinated
Indenture or evidenced by Senior Subordinated Notes, or (y), in the
case of amendments, as otherwise permitted by subsection 8.12(c);
(c) Indebtedness of the Borrower to any of its Subsidiaries
and of any Subsidiary to the Borrower or any other Subsidiary;
(d) Indebtedness of the Borrower and any of its Subsidiaries
incurred to finance or refinance the acquisition of fixed or capital
assets (whether pursuant to a loan, a Financing Lease or otherwise)
otherwise permitted pursuant to this Agreement, and any other Financing
Leases, in an aggregate principal amount not exceeding in the aggregate
as to the Borrower and its Subsidiaries $1,000,000 at any one time
outstanding, provided that such Indebtedness is incurred substantially
simultaneously
<PAGE> 88
82
with such acquisition or within six months after such acquisition or in
connection with a refinancing thereof;
(e) Indebtedness of the Borrower and any of its Subsidiaries
incurred to finance or refinance the purchase price of, or Indebtedness
of the Borrower and any of its Subsidiaries assumed in connection with
any acquisition otherwise permitted pursuant to this Agreement provided
that (i) such Indebtedness is incurred prior to, substantially
simultaneously with or within six months after such acquisition or in
connection with a refinancing thereof, (ii) if such Indebtedness is
owed to a Person, other than the Person from whom such acquisition is
made or any Affiliate thereof, such Indebtedness shall have terms and
conditions reasonably satisfactory to the Administrative Agent and
shall not exceed 65% of the purchase price of such acquisition
(including any Indebtedness assumed in connection with such
acquisition) and (iii) immediately after giving effect to such
acquisition no Default or Event of Default shall have occurred and be
continuing;
(f) to the extent that any Indebtedness may be incurred or
arise thereunder, Indebtedness of the Borrower and its Subsidiaries
under Permitted Hedging Arrangements;
(g) other Indebtedness outstanding or incurred under
facilities in existence on the Effective Date and listed on Schedule
8.2(g) hereto and Schedule 10.12 of the Stock Purchase Agreement, and
any refinancings, refundings, renewals or extensions thereof on
financial and other terms, in the reasonable judgment of the Borrower,
no more onerous to the Borrower or any of its Subsidiaries in the
aggregate than the financial and other terms of such Indebtedness,
provided that the amount of such Indebtedness is not increased at the
time of such refinancing, refunding, renewal or extension except by an
amount equal to the premium or other amounts paid, and fees and
expenses incurred, in connection with such refinancing, refunding,
renewal or extension;
(h) Indebtedness of Foreign Subsidiaries for working capital
purposes or pursuant to Section 8.6(c) (including in respect of
overdrafts) not exceeding, as to all such Foreign Subsidiaries,
$10,000,000 in aggregate principal amount at any one time outstanding,
provided that such Indebtedness may exceed $10,000,000 but the
Available Revolving Credit Commitments shall be reduced by the amount
by which such Indebtedness exceeds $10,000,000;
(i) to the extent that any Guarantee Obligation permitted
under subsection 8.4 constitutes Indebtedness, such Indebtedness;
(j) Indebtedness of the Borrower or any of its Subsidiaries in
respect of Sale and Leaseback Transactions permitted under subsection
8.11;
<PAGE> 89
83
(k) Indebtedness of the Borrower or any of its Subsidiaries
incurred to finance insurance premiums in the ordinary course of
business;
(l) Indebtedness arising from the honoring of a check, draft
or similar instrument against insufficient funds; provided that such
Indebtedness is extinguished within two Business Days of its
incurrence; and
(m) Indebtedness not otherwise permitted by the preceding
clauses of this subsection 8.2 not exceeding $1,000,000 in aggregate
principal amount at any one time outstanding.
With respect to any Indebtedness denominated in a foreign currency, for purposes
of determining compliance with any Dollar-denominated restriction on the
Incurrence of such Indebtedness under this Section 8.2, the amount of such
Indebtedness shall be calculated monthly based on the currency exchange rate in
effect at such time.
8.3 Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, except for:
(a) Liens for taxes, assessments and similar charges not yet
delinquent or the nonpayment of which in the aggregate would not
reasonably be expected to have a Material Adverse Effect, or which are
being contested in good faith by appropriate proceedings diligently
conducted and adequate reserves with respect thereto are maintained on
the books of the Borrower or its Subsidiaries, as the case may be, in
conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings
diligently conducted;
(c) Liens of landlords or of mortgagees of landlords arising
by operation of law or pursuant to the terms of real property leases,
provided that the rental payments secured thereby are not yet due and
payable;
(d) pledges, deposits or other Liens in connection with
workers' compensation, unemployment insurance, other social security
benefits or other insurance related obligations (including, without
limitation, pledges or deposits securing liability to insurance
carriers under insurance or self-insurance arrangements);
(e) Liens arising by reason of any judgment, decree or order
of any court or other Governmental Authority, if appropriate legal
proceedings which may have been duly initiated for the review of such
judgment, decree or order, are being diligently
<PAGE> 90
84
prosecuted and shall not have been finally terminated or the period
within which such proceedings may be initiated shall not have expired;
(f) Liens to secure the performance of bids, trade contracts
(other than for borrowed money), obligations for utilities, leases,
statutory obligations, surety and appeal bonds, performance bonds,
judgment and like bonds, replevin and similar bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(g) zoning restrictions, easements, rights-of-way,
restrictions on the use of property, other similar encumbrances
incurred in the ordinary course of business and minor irregularities of
title which do not materially interfere with the ordinary conduct of
the business of the Borrower and its Subsidiaries taken as a whole;
(h) Liens securing or consisting of Indebtedness of the
Borrower and its Subsidiaries permitted by subsection 8.2(d) incurred
to finance the acquisition of fixed or capital assets or Indebtedness
of the Borrower and its Subsidiaries permitted by subsection 8.2(e)
incurred to finance the purchase price of, or assumed in connection
with any acquisition otherwise permitted pursuant to this Agreement,
provided that (i) such Liens shall be created no later than the later
of the date of such acquisition or the date of the incurrence or
assumption of such Indebtedness, and (ii) such Liens do not at any time
encumber any property other than the property financed by such
Indebtedness and, in the case of Indebtedness assumed in connection
with any such acquisition, the property subject thereto immediately
prior to such acquisition;
(i) Liens existing on assets or properties at the time of the
acquisition thereof by the Borrower or any of its Subsidiaries which do
not materially interfere with the use, occupancy, operation and
maintenance of structures existing on the property subject thereto or
extend to or cover any assets or properties of the Borrower or such
Subsidiary other than the assets or property being acquired;
(j) Liens (i) in existence on the Effective Date and listed in
Schedule 8.3(j) hereto or Schedule 4.11 of the Stock Purchase Agreement
and other Liens securing Indebtedness of the Borrower and its
Subsidiaries permitted by subsection 8.2(g), provided that no such Lien
is spread to cover any additional property after the Effective Date and
that the amount of Indebtedness secured thereby is not increased except
as permitted by subsection 8.2(g), or (ii) not otherwise permitted
hereunder, all of which Liens permitted pursuant to this subsection
8.3(j)(ii) secure obligations not exceeding (as to the Borrower and all
its Subsidiaries) $1,000,000 in aggregate amount at any time
outstanding;
(k) Liens securing Guarantee Obligations permitted under
subsection 8.4(d) not exceeding (as to the Borrower and all its
Subsidiaries) $1,000,000 in aggregate amount at any time outstanding;
<PAGE> 91
85
(l) Liens created pursuant to the Security Documents
or otherwise securing Indebtedness permitted by subsection
8.2(a);
(m) any encumbrance or restriction (including, without
limitation, put and call agreements) with respect to the Capital Stock
of any joint venture or similar arrangement pursuant to the joint
venture or similar agreement with respect to such joint venture or
similar arrangement, provided that no such encumbrance or restriction
affects in any way the ability of the Borrower or any of its
Subsidiaries to comply with subsection 8.15(b);
(n) Liens on property subject to Sale and Leaseback
Transactions permitted under subsection 8.11 and general intangibles
related thereto;
(o) Liens on property of any Foreign Subsidiary of the
Borrower securing Indebtedness of such Foreign Subsidiary permitted by
subsection 8.2(h) or otherwise permitted under this Agreement; and
(p) Liens on Intellectual Property (as defined in subsection
5.9) and foreign patents, patent applications, trademarks, trademark
applications, tradenames, copyrights, technology, know-how and
processes to the extent such Liens arise from the granting of licenses
to use such Intellectual Property and foreign patents, patent
applications, trademarks, trademark applications, tradenames,
copyrights, technology, know-how and processes to any Person in the
ordinary course of business of the Borrower or any of its Subsidiaries.
8.4 Limitation on Guarantee Obligations. Create, incur, assume
or suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations in existence on the Effective Date
and listed in Schedule 8.4(a) hereto or Schedule 9.4 of the Stock
Purchase Agreement, and any refinancings, refundings, extensions or
renewals thereof, provided that the amount of such Guarantee Obligation
shall not be increased at the time of such refinancing, refunding,
extension or renewal except to the extent that the amount of
Indebtedness in respect of such Guarantee Obligations is permitted to
be increased by subsection 8.2(h);
(b) Guarantee Obligations for performance, appeal, judgment,
replevin and similar bonds and suretyship arrangements, all in the
ordinary course of business;
(c) Reimbursement Obligations in respect of the Letters of
Credit;
(d) Guarantee Obligations in respect of third-party loans and
advances to officers or employees of the Borrower or any of its
Subsidiaries (i) for travel and entertainment expenses incurred in the
ordinary course of business, (ii) for relocation expenses incurred in
the ordinary course of business, or (iii) for other purposes in an
aggregate amount (as to the Borrower and all its Subsidiaries),
together with the
<PAGE> 92
86
aggregate amount of all Investments permitted under subsection
8.9(e)(iv), of up to 1,000,000 outstanding at any time;
(e) obligations to insurers required in connection with
worker's compensation and other insurance coverage incurred in the
ordinary course of business;
(f) obligations of the Borrower and its Subsidiaries under
Permitted Hedging Arrangements;
(g) Guarantee Obligations incurred in connection with
acquisitions otherwise permitted pursuant to this Agreement, provided
that if any such Guarantee Obligation inures to the benefit of any
Person other than the Person from whom such acquisition is made or any
Affiliate thereof, such Guarantee Obligation shall not exceed, with
respect to any such acquisition, 65% of the purchase price of such
acquisition (including any Indebtedness assumed in connection with any
such acquisition) or such greater percentage as shall be reasonably
satisfactory to the Administrative Agent;
(h) guarantees made in the ordinary course of its business by
the Borrower or any of its Subsidiaries of obligations of the Borrower
or any of its Subsidiaries, which obligations are otherwise permitted
under this Agreement;
(i) Guarantee Obligations in connection with sales or other
dispositions permitted under subsection 8.6, including indemnification
obligations with respect to leases, and guarantees of collectability in
respect of accounts receivable or notes receivable for up to face
value;
(j) Guarantee Obligations in respect of Indebtedness of a
Person in connection with a joint venture or similar arrangement in
respect to which no other coinvestor or other Person has a greater
legal or beneficial ownership interest than the Borrower or any of its
Subsidiaries, and as to all of such Persons does not at any time exceed
$1,000,000 in aggregate principal amount;
(k) Guarantee Obligations incurred pursuant to the Guarantees
or otherwise in respect of Indebtedness permitted by subsection 8.2(a);
(l) guarantees by Subsidiaries of the Borrower set forth in
the Senior Subordinated Facility Documents and the Senior Subordinated
Notes Documents, which guarantees are subordinated as provided in each
such document;
(m) guarantees of Indebtedness of Foreign Subsidiaries
permitted by subsection 8.2(h);
(n) Guarantee Obligations in respect of letters of credit
issued for the account of Foreign Subsidiaries, and guarantees thereof,
provided that the aggregate amount of such Guarantee Obligations, taken
together with the aggregate amount of other
<PAGE> 93
87
Indebtedness of Foreign Subsidiaries outstanding pursuant to subsection
8.2(h), shall not exceed the aggregate amount of such Indebtedness
permitted pursuant to such subsection; and
(o) Guarantee Obligations made by the Borrower or any of its
Subsidiaries to enable customers of the Borrower or any of its
Subsidiaries to obtain financing for the purchase of goods or services
of the Borrower or any of its Subsidiaries, provided the aggregate
amount of all such Guarantee Obligations shall not at any one time
exceed $250,000.
8.5 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, except:
(a) any Subsidiary of the Borrower may be merged or
consolidated with or into the Borrower (provided that the Borrower
shall be the continuing or surviving corporation) or with or into any
one or more Wholly Owned Subsidiaries of the Borrower (provided that
the Wholly Owned Subsidiary or Subsidiaries of the Borrower shall be
the continuing or surviving entity);
(b) any Subsidiary of the Borrower may sell, lease, transfer
or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or any Wholly Owned
Subsidiary of the Borrower;
(c) as expressly permitted by subsection 8.6 and 8.15; and
(d) the Borrower and its Subsidiaries may consummate the
Foreign Subsidiary Transfer.
8.6 Limitation on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Subsidiary of the
Borrower, issue or sell any shares of such Subsidiary's Capital Stock, to any
Person other than the Borrower or any Wholly Owned Subsidiary of the Borrower,
except:
(a) the sale or other Disposition of obsolete, worn out or
surplus property, whether now owned or hereafter acquired, in the
ordinary course of business;
(b) the sale or other Disposition of any property (including
Inventory) in the ordinary course of business;
(c) the sale or discount without recourse of accounts
receivable or notes receivable arising in the ordinary course of
business, or the conversion or exchange of
<PAGE> 94
88
accounts receivable into or for notes receivable, in connection with
the compromise or collection thereof provided that, in the case of any
Foreign Subsidiary of the Borrower, any such sale or discount may be
with recourse if such sale or discount is consistent with customary
practice in such Foreign Subsidiary's country of business and the
aggregate amount of any such recourse shall be included in the
determination of such Foreign Subsidiary's Indebtedness for purposes of
subsection 8.2(h);
(d) as permitted by subsection 8.5(b) and pursuant to Sale and
Leaseback Transactions permitted by subsection 8.11;
(e) Dispositions of any assets or property by the Borrower or
any of its Subsidiaries to the Borrower or any Wholly Owned Subsidiary
of the Borrower, including, without limitation, the Foreign Subsidiary
Transfer;
(f) the abandonment or other Disposition of patents,
trademarks or other intellectual property that are, in the reasonable
judgment of the Borrower, no longer economically practicable to
maintain or useful in the conduct of the business of the Borrower and
its Subsidiaries taken as a whole;
(g) Asset Sales by the Borrower or any of its Subsidiaries the
Net Cash Proceeds of which do not exceed $5,000,000 in the aggregate
after the Effective Date, provided that an amount equal to 100% of the
Net Cash Proceeds of any such Asset Sale less the Reinvested Amount is
applied in accordance with subsection 4.4(e);
(h) the sale of the Sylmar Facility for approximately
$1,500,000, provided that 100% of the Net Cash Proceeds of such sale
less the Reinvested Amount with respect thereto is applied in
accordance with subsection 4.4(e); and
(i) the assignment of the Gulton Data Systems Contracts to
Mark IV or any of its Subsidiaries.
8.7 Limitation on Restricted Payments. Declare or pay any
dividend (other than dividends payable solely in common stock of the Borrower or
options, warrants or other rights to purchase common stock of the Borrower) on,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of Capital Stock of the Borrower or any
warrants or options to purchase any such Capital Stock, whether now or hereafter
outstanding, or make any other distribution (other than distributions payable
solely in common stock of the Borrower or options, warrants or other rights to
purchase common stock of the Borrower) in respect thereof, either directly or
indirectly, whether in cash or property or in obligations of the Borrower,
except that:
(a) the Borrower may pay cash dividends in an amount
sufficient to allow Holdings to pay expenses incurred in the ordinary
course of business in an aggregate amount not to exceed $750,000 in any
fiscal year;
<PAGE> 95
89
(b) the Borrower may pay cash dividends in an amount
sufficient to allow Holdings to pay all fees and expenses incurred in
connection with the Transactions and the transactions expressly
contemplated by this Agreement and the other Loan Documents in an
aggregate amount which, together with all other such fees and expenses
of the Borrower shall not exceed $13,750,000;
(c) the Borrower may pay cash dividends to Holdings in an
amount equal to the Equity Portion of the Adjustment Payment;
(d) after making the prepayment required by subsection 4.4(b),
the Borrower may pay cash dividends in an amount equal to the sum of
(i) the amount, if any, by which the gross proceeds of the Senior
Subordinated Notes exceeds the principal amount of Indebtedness under
the Senior Subordinated Credit Agreement by more than $12,000,000, plus
(ii), so long as no Default has occurred and is continuing at such
time, an amount equal to the accrued dividends on the aggregate amount
of the Senior PIK Preferred Stock being redeemed with the dividends
described in clause (i) above for a period not exceeding six months;
(e) the Borrower may pay cash dividends in an amount
sufficient to cover reasonable and necessary expenses (including
professional fees and expenses) incurred by Holding in connection with
indemnification and reimbursement of directors, officers and employees
in respect of liabilities relating to their serving in any such
capacity;
(f) the Borrower may pay cash dividends in amount sufficient
to pay tax liabilities of Holdings which are paid in cash by Holdings
to any taxing authority; and
(g) the Borrower may pay cash dividends in amount sufficient
to allow Holdings to repurchase shares of its common stock or rights,
option or units in respect thereof from Management Investors (but not
from Greenwich Street Audio LLC or any member of the GSCP Group) for an
aggregate purchase price not to exceed $750,000.
8.8 Limitation on Capital Expenditures. Make or commit to make
any Capital Expenditures (excluding any expenses incurred in connection with
normal replacement and maintenance programs properly charged to current
operations and excluding any Reinvested Amounts); provided that the Borrower and
its Subsidiaries may make Capital Expenditures in an amount not to exceed, for
any test period set forth below, the amount set forth opposite such test period
below:
<TABLE>
<CAPTION>
Test Period Amount
----------- ------
<S> <C>
Effective Date - February 28, 1998 $6,500,000
March 1, 1998 - February 28, 1999 $6,000,000
March 1, 1999 - February 28, 2000 $6,000,000
March 1, 2000 - February 28, 2001 $6,000,000
March 1, 2001 - February 28, 2002 $6,000,000
</TABLE>
<PAGE> 96
90
<TABLE>
<S> <C>
March 1, 2002 - February 28, 2003 $6,000,000
</TABLE>
; provided that any Capital Expenditures permitted to be made during any test
period and not made during such test period may be carried over and expended
during the next succeeding test period.
8.9 Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment, in cash or by
transfer of assets or property, in (each an "Investment"), any Person, except:
(a) extensions of trade credit in the ordinary course of
business;
(b) Investments in cash and Cash Equivalents;
(c) Investments existing on the Effective Date and described
in Schedule 8.9(c), setting forth the respective amounts of such
Investments as of a recent date;
(d) Investments in notes receivable and other instruments and
securities obtained in connection with transactions permitted by
subsection 8.6(c);
(e) loans and advances to officers, directors or employees of
Holdings, the Borrower or any of their respective Subsidiaries (i) in
the ordinary course of business for travel and entertainment expenses,
(ii) existing on the Effective Date and described in Schedule 8.9(c),
(iii) made after the Effective Date for relocation expenses in the
ordinary course of business, (iv) made for other purposes in an
aggregate amount (as to Holdings and all its Subsidiaries), together
with the aggregate amount of all Guarantee Obligations permitted
pursuant to subsection 8.4(d), of up to $500,000 outstanding at any
time or (v) relating to indemnification or reimbursement of any
officers, directors or employees in respect of liabilities relating to
their serving in any such capacity or as otherwise specified in
subsection 8.10;
(f) Investments by the Borrower in its Wholly Owned
Subsidiaries and by such Wholly Owned Subsidiaries in the Borrower and
in Wholly Owned Subsidiaries of the Borrower;
(g) Investments of the Borrower and its subsidiaries under
Permitted Hedging Arrangements;
(h) Investments in the nature of pledges or deposits with
respect to leases or utilities provided to third parties in the
ordinary course of business or otherwise described in subsection
8.3(c), (d) or (f);
<PAGE> 97
91
(i) Investments representing non-cash consideration received
by the Borrower or any of its Subsidiaries in connection with any Asset
Sale, provided that in the case of any Asset Sale permitted under
subsection 8.6(g), such non-cash consideration constitutes not more
than 25% of the aggregate consideration received in connection with
such Asset Sale and any such non-cash consideration received by the
Borrower or any of its Domestic Subsidiaries is pledged to the
Administrative Agent for the benefit of the Lenders pursuant to the
Security Documents;
(j) Investments representing evidences of Indebtedness,
securities or other property received from another Person by the
Borrower or any of its Subsidiaries in connection with any bankruptcy
proceeding or other reorganization of such other Person or as a result
of foreclosure, perfection or enforcement of any Lien or exchange for
evidences of Indebtedness, securities or other property of such other
Person held by the Borrower or any of its Subsidiaries; provided that
any such securities or other property received by the Borrower or any
of its Domestic Subsidiaries is pledged to the Administrative Agent for
the benefit of the Lenders pursuant to the Security Documents;
(k) acquisitions of the business or assets of, or stock or
other evidences of beneficial ownership of, any Person, so long as (i)
such acquisition is expressly permitted by subsection 8.5 or (ii) the
aggregate consideration paid by the Borrower and its Subsidiaries in
connection with all such acquisitions made pursuant to this clause (ii)
since the Effective Date does not exceed at any time an amount equal to
$7,500,000;
(l) Investments by the Borrower or any of its Subsidiaries in
a Person in connection with a joint venture or similar arrangement in
respect of which no other co-investor or other Person has a greater
legal or beneficial ownership interest than the Borrower or such
Subsidiary in an aggregate amount not to exceed at any time an amount
equal to $2,500,000; and
(m) the consummation of the Foreign Subsidiary Transfer.
8.10 Limitation on Transactions with Affiliates. Enter into
any transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, and (b) upon
terms no less favorable to the Borrower or such Subsidiary, as the case may be,
than it would obtain in a comparable arm's length transaction with a Person
which is not an Affiliate; provided that nothing contained in this subsection
8.10 shall be deemed to prohibit:
(i) the payment of transaction expenses in connection with
this Agreement and the Transaction.
<PAGE> 98
92
(ii) the Borrower or any of its Subsidiaries from entering
into or performing an agreement with GSCP for the rendering of
management consulting or financial advisory services for compensation
not to exceed in the aggregate $750,000 per year plus reasonable
out-of-pocket expenses;
(iii) the Borrower or any of its Subsidiaries from entering
into, making payments pursuant to and otherwise performing an
indemnification and contribution agreement in favor of any person who
is or becomes a director, officer, agent or employee of the Borrower or
any of its Subsidiaries, in respect of liabilities (A) arising under
the Securities Act, the Exchange Act and any other applicable
securities laws or otherwise, in connection with any offering of
securities by the Borrower or any of its Subsidiaries, (B) incurred to
third parties for any action or failure to act of the Borrower or any
of its Subsidiaries, predecessors or successors, (C) arising out of the
performance by GSCP of management consulting or financial advisory
services provided to the Borrower or any of its Subsidiaries, (D)
arising out of the fact that any indemnitee was or is a director,
officer, agent or employee of the Borrower or any of its Subsidiaries,
or is or was serving at the request of any such corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or enterprise or (E) to the fullest
extent permitted by Delaware or other applicable state law, arising out
of any breach or alleged breach by such indemnitee of his or her
fiduciary duty as a director or officer of the Borrower or any of its
Subsidiaries;
(iv) the Borrower or any of its Subsidiaries from performing
any agreements or commitments with or to any Affiliate existing on the
Effective Date and described on Schedule 8.10;
(v) any transaction permitted under subsection 8.3(k), 8.4(d),
8.4(j), 8.4(k), 8.5, 8.7, 8.9(e) or 8.9(l), or any transaction with a
Wholly Owned Subsidiary of the Borrower; or
(vi) the Borrower or any of its Subsidiaries from performing
its obligations under the Tax Sharing Agreement.
For purposes of this subsection 8.10, (A) any transaction with any Affiliate
shall be deemed to have satisfied the standard set forth in clause (b) of the
first sentence hereof if (i) such transaction is approved by a majority of the
Disinterested Directors of the board of directors of the Borrower or such
Subsidiary, or (ii) in the event that at the time of any such transaction, there
are no Disinterested Directors serving on the board of directors of the Borrower
or such Subsidiary, such transaction shall be approved by a nationally
recognized expert with expertise in appraising the terms and conditions of the
type of transaction for which approval is required, and (B) "Disinterested
Director" shall mean, with respect to any Person and transaction, a member of
the board of directors of such Person who does not have any material direct or
indirect financial interest in or with respect to such transaction.
<PAGE> 99
93
8.11 Limitation on Sale and Leaseback Transactions. Enter into
any arrangement with any Person providing for the leasing by the Borrower or any
of its Subsidiaries of real or personal property which has been or is to be sold
or transferred by the Borrower or any such Subsidiary to such Person or to any
other Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of the Borrower or such
Subsidiary (any of such arrangements, a "Sale and Leaseback Transaction"), other
than in connection with any Disposition permitted under subsection 8.6 and
except for Sale and Leaseback Transactions entered into by the Borrower or any
such Subsidiary with respect to real or personal property with an aggregate book
value not to exceed $1,000,000 at any one time.
8.12 Limitation on Optional Payments and Modifications of Debt
Instruments and Other Documents. (a) Make any optional payment or prepayment on
or repurchase or redemption of the Senior Subordinated Credit Agreement or any
Senior Subordinated Notes, including, without limitation, any payments on
account of, or for a sinking or other analogous fund for, the repurchase,
redemption, defeasance or other acquisition thereof, except mandatory payments
of principal, interest, fees and expenses required by the terms of the Senior
Subordinated Credit Agreement, the Senior Subordinated Notes and the Senior
Subordinated Note Indenture, as the case may be, only to the extent permitted
under the subordination provisions, if any, applicable thereto.
(b) In the event of the occurrence of a Change of Control,
repurchase the Senior Subordinated Notes or any portion thereof, unless the
Borrower shall have (i) made payment in full of the Loans, all Reimbursement
Obligations and any other amounts then due and owing to any Lender or the
Administrative Agent hereunder and under any Note and cash collateralized the
L/C Obligations on terms reasonably satisfactory to the Administrative Agent or
(ii) made an offer to pay the Loans, all Reimbursement Obligations and any
amounts then due and owing to each Lender and the Administrative Agent hereunder
and under any Note and to cash collateralize the L/C Obligations in respect of
each Lender and shall have made payment in full thereof to each such Lender or
the Administrative Agent which has accepted such offer and cash collateralized
the L/C Obligations in respect of each such Lender which has accepted such
offer.
(c) Amend, supplement, waive or otherwise modify any of the
provisions of any of the Senior Subordinated Facility Notes and Senior
Subordinated Notes or the Senior Subordinated Facility Documents or the Senior
Subordinated Notes Documents:
(i) which amends or modifies the subordination
provisions, if any, contained therein;
(ii) which shortens the fixed maturity or increases the
principal amount of, or increases the rate or shortens the time of
payment of interest on, or increases the amount or shortens the time of
payment of any principal or premium payable whether at maturity, at a
date fixed for prepayment or by acceleration or otherwise of the
Indebtedness under the Senior Subordinated Credit Facility or evidenced
by the Senior
<PAGE> 100
94
Subordinated Notes, or increases the amount of, or accelerates the time
of payment of, any fees or other amounts payable in connection
therewith;
(iii) which relates to any material affirmative or negative
covenants or any events of default or remedies thereunder and the
effect of which is to subject the Borrower or any of its Subsidiaries,
to any more onerous or more restrictive provisions; or
(iv) which otherwise adversely affects the interests of the
Lenders as senior creditors with respect to the Senior Subordinated
Credit Facility or the Senior Subordinated Notes or the interests of
the Lenders under this Agreement or any other Loan Document in any
material respect.
8.13 Limitation on Changes in Fiscal Year. Permit the
fiscal year of the Borrower to end on a day other than February
28 (or 29, as the case may be).
8.14 Limitation on Negative Pledge Clauses. Enter into with
any Person any agreement, other than (a) this Agreement, the other Loan
Documents and any related documents and (b) any purchase money mortgages,
acquisition agreements, Financing Leases or operating leases of real property
entered into in the ordinary course of business, which prohibits or limits the
ability of the Borrower or any of its Subsidiaries to create, incur, assume or
suffer to exist any Lien in favor of the Lenders in respect of obligations and
liabilities under this Agreement, any Notes or any other Loan Documents upon any
of its property, assets or revenues, whether now owned or hereafter acquired
except for any such agreement relating to Indebtedness of a Foreign Subsidiary
permitted by subsection 8.2(h) or otherwise permitted under this Agreement.
8.15 Limitation on Lines of Business; Creation of
Subsidiaries. (a) Enter into any business, either directly or through any
Subsidiary or joint venture, except for those businesses of the same general
type as those in which the Borrower and its Subsidiaries are engaged on the
Effective Date or which are directly related thereto.
(b) Create any new Subsidiaries of the Borrower other than any
new Subsidiary that (i) (in the case of a new Domestic Subsidiary) shall execute
and deliver to the Administrative Agent, as applicable, the Guarantee and
Collateral Agreement and appropriate Mortgages and other security documents and
take any necessary steps to perfect the security interests to be created thereby
and (ii) for which the relevant parent corporation (if such parent corporation
is the Borrower or a Domestic Subsidiary) shall execute and deliver to the
Administrative Agent a Stock Pledge Agreement and take any necessary steps to
perfect the security interest to be created thereby (which security interest
shall not apply to more than 65% of such parent corporation's ownership interest
in any Foreign Subsidiary).
(c) To the extent not prohibited by this Agreement, convey,
sell or otherwise transfer shares of Capital Stock of a Foreign Subsidiary to
the Borrower or any Domestic Subsidiary of the Borrower unless at the time of
such conveyance, sale or transfer (or promptly
<PAGE> 101
95
thereafter) the Borrower or such Domestic Subsidiary shall execute and deliver
to the Administrative Agent the Guarantee and Collateral Agreement and take any
necessary steps to perfect the security interest to be created thereby (which
security interest shall not apply to (i) more than 65% of the Borrower's or such
Domestic Subsidiary's ownership interest in any Foreign Subsidiary or (ii) any
ownership interest in a non-Wholly Owned Foreign Subsidiary to the extent that
the grant of such security interest would violate the terms of any agreements
under which the Investment by the Borrower or any or its Subsidiaries was made
therein).
8.16 Limitations on Currency and Commodity Hedging
Transactions. Enter into, purchase or otherwise acquire agreements or
arrangements relating to currency, commodity or other hedging except, to the
extent and only to the extent that, such agreements or arrangements are entered
into, purchased or otherwise acquired in the ordinary course of business of the
Borrower or any of its Subsidiaries with reputable financial institutions and
not for purposes of speculation (any such agreement or arrangement permitted by
this subsection, a "Permitted Hedging Arrangement").
8.17 Holding Company Status of EVI Audio. In the case of EVI
Audio, permit EVI Audio to engage in any business other than (i) the owning of
the Capital Stock of the other Foreign Subsidiaries, (ii) owning the promissory
note of Dynacord Audio GmbH and (iii) any business or other activities
reasonably related to the foregoing, or to incur any material liabilities other
than any liabilities (x) reasonably related to the foregoing or (y) arising by
operation of law.
8.18 Establishment and Maintenance of Lockbox Accounts. (a)
Establish or maintain, or cause to be established or maintained, any bank or
trust account in which any Collateral or the proceeds thereof is to be deposited
by or on behalf of any Obligor subsequent to the date 30 days after the
Effective Date, except:
(i) a "Lockbox Account" established in accordance with a
Lockbox Agreement; and
(ii) any trust account for the deposit of funds payable
under any contract covered by any surety or performance bond, which is
not a "Lockbox Account".
(b) Take any action, or omit to take any action, under any
Lockbox Agreement which would reasonably be expected to have a material adverse
effect on the validity or enforceability of such Agreement (including, without
limitation, the orderly collection of amounts due from Obligors), except as
otherwise contemplated hereby or by the terms of such Lockbox Agreement.
SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
<PAGE> 102
96
(a) The Borrower shall fail to pay any principal of any Loan
or any Reimbursement Obligation when due in accordance with the terms
hereof (whether at stated maturity, by mandatory prepayment or
otherwise); or the Borrower shall fail to pay any interest or fees on
any Loan, or any other amount payable hereunder, within five days after
any such interest, fees or other amount becomes due in accordance with
the terms hereof; or
(b) Any representation or warranty made or deemed made by any
Loan Party herein or in any other Loan Document (or in any amendment,
modification or supplement hereto or thereto) or which is contained in
any certificate furnished at any time by or on behalf of any Loan Party
pursuant to this Agreement or any such other Loan Document shall prove
to have been incorrect in any material respect on or as of the date
made or deemed made; or
(c) Any Loan Party shall default in the observance or
performance of any agreement contained in (i) subsection 7.7(a) or
Section 8 of this Agreement or (ii) Section 5.11 of the Guarantee and
Collateral Agreement, and, in the case of a default in the observance
or performance of its obligations under subsection 7.7(a) hereof, such
default shall have continued unremedied for a period of two days after
a Responsible Officer of the Borrower shall have discovered or should
have discovered such default; or
(d) Any Loan Party shall default in the observance or
performance of any other agreement contained in this Agreement or any
other Loan Document (other than as provided in paragraphs (a) through
(c) of this Section 9), and such default shall continue unremedied for
a period ending on the earlier of (i) the date 30 days after a
Responsible Officer of the Borrower shall have discovered or should
have discovered such default and (ii) the date 15 days after written
notice has been given to the Borrower by the Administrative Agent or
the Required Lenders; or
(e) Holdings or any of its Subsidiaries shall (i) default in
(x) any payment of principal of or interest on any Indebtedness (other
than the Loans and the Reimbursement Obligations) in excess of
$1,000,000 or (y) in the payment of any Guarantee Obligation in excess
of $1,000,000, beyond the period of grace (not to exceed 30 days), if
any, provided in the instrument or agreement under which such
Indebtedness or Guarantee Obligation was created; or (ii) default in
the observance or performance of any other agreement or condition
relating to any Indebtedness or Guarantee Obligation referred to in
clause (i) above or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders
or beneficiary or beneficiaries) to cause, with the giving of notice or
lapse of time if required, such Indebtedness to become due prior to its
stated maturity or such Guarantee Obligation to become payable (an
"Acceleration"), and such time shall have
<PAGE> 103
97
lapsed and, if any notice (a "Default Notice") shall be required to
commence a grace period or declare the occurrence of an event of
default before notice of Acceleration may be delivered, such Default
Notice shall have been given; or
(f) (i) Any Loan Party shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization
or relief of debtors, seeking to have an order for relief entered with
respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to
it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or
any substantial part of its assets, or any Loan Party shall make a
general assignment for the benefit of its creditors; or (ii) there
shall be commenced against any Loan Party any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in
the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged, unstayed or
unbonded for a period of 60 days; or (iii) there shall be commenced
against any Loan Party any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results
in the entry of an order for any such relief which shall not have been
vacated, discharged, stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) any Loan Party shall take any corporate
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or
(iii) above; or (v) any Loan Party shall be generally unable to, or
shall admit in writing its general inability to, pay its debts as they
become due; or
(g) (i) Any Person shall engage in any non-exempt "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan or any Lien in favor of the PBGC or a Plan
shall arise on the assets of either of the Borrower or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect
to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any Single
Employer Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is in the reasonable opinion of the
Administrative Agent likely to result in the termination of such Plan
for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) either of the Borrower
or any Commonly Controlled Entity shall, or in the reasonable opinion
of the Administrative Agent is likely to, incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization
of, a Multiemployer Plan, or (vi) any other event or condition shall
occur or exist with respect to a Plan; and in each case in clauses (i)
through (vi) above, such event or condition, together with all other
such events or conditions, if any, could be reasonably expected to
result in a Material Adverse Effect; or
<PAGE> 104
98
(h) One or more judgments or decrees shall be entered against
the Borrower or any of its Subsidiaries involving in the aggregate at
any time a liability (net of any insurance or indemnity payments
actually received in respect thereof prior to or within 90 days from
the entry thereof, or to be received in respect thereof in the event
any appeal thereof shall be unsuccessful) of $1,000,000 or more, and
all such judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 90 days from the entry thereof;
or
(i) The Senior Subordinated Credit Agreement or the Senior
Subordinated Notes, for any reason, shall not be or shall cease to be
validly subordinated as provided therein and in the Senior Subordinated
Facility Documents and the Senior Subordinated Notes Documents to the
obligations of the Borrower under this Agreement, any Notes and the
other Loan Documents, or the obligations of any other Loan Party under
a guarantee of the Senior Subordinated Credit Agreement or the Senior
Subordinated Notes, for any reason, shall not be or shall cease to be
validly subordinated as provided therein and in the Senior Subordinated
Facility Documents and the Senior Subordinated Notes Documents to the
obligations of such Loan Party under the Guarantee to which it is a
party; or
(j) (i) Any of the Security Documents shall cease for any
reason to be in full force and effect (other than pursuant to the terms
hereof or thereof), or any Loan Party which is a party to any of the
Security Documents shall so assert in writing, or (ii) the Lien created
by any of the Security Documents shall cease to be perfected and
enforceable in accordance with its terms or of the same effect as to
perfection and priority purported to be created thereby with respect to
any significant portion of the Collateral (other than in connection
with any termination of such Lien in respect of any Collateral as
permitted hereby or by any Security Document), and such failure of such
Lien to be perfected and enforceable with such priority shall have
continued unremedied for a period of 20 days; or
(k) Any Guarantee shall cease for any reason to be in full
force and effect (other than pursuant to the terms hereof or thereof)
or any Guarantor shall so assert in writing; or
(l) Any Loan Document (other than this Agreement, any of the
Security Documents or any Guarantee) shall cease for any reason to be
in full force and effect (other than pursuant to the terms hereof or
thereof) or any Loan Party shall so assert in writing; or
(m) A Change of Control shall have occurred
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph 9(f) above with respect to the Borrower,
automatically the Revolving Credit Commitments and the Term Loan Commitments, if
any, shall immediately terminate and the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this
<PAGE> 105
99
Agreement (including, without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder) and any Notes shall
immediately become due and payable, and (B) if such event is any other Event of
Default, either or both of the following actions may be taken: (i) with the
consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders the Administrative Agent shall, by notice to the
Borrower, declare the Revolving Credit Commitments and the Term Loan Commitments
to be terminated forthwith, whereupon the Revolving Credit Commitments and the
Term Loan Commitments, if any, shall immediately terminate; and (ii) with the
consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower, declare the Loans hereunder (with accrued interest thereon) and
all other amounts owing under this Agreement (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) and any Notes to be due and payable forthwith, whereupon the same
shall immediately become due and payable.
With respect to any Letter of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Borrower in respect of such Letter of
Credit shall at such time deposit in a cash collateral account opened by the
Administrative Agent an amount equal to the aggregate then undrawn and unexpired
amount of such Letter of Credit. Such Borrower hereby grants to the
Administrative Agent, for the benefit of the Issuing Lender and the L/C
Participants, a security interest in such cash collateral to secure all
obligations of such Borrower in respect of such Letter of Credit under this
Agreement and the other Loan Documents. Such Borrower shall execute and deliver
to the Administrative Agent, for the account of the Issuing Lender and the L/C
Participants, such further documents and instruments as the Administrative Agent
may request to evidence the creation and perfection of such security interest in
such cash collateral account. Amounts held in such cash collateral account shall
be applied by the Administrative Agent to the payment of drafts drawn under such
Letter of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay other obligations of the Borrower hereunder and under any Notes. After all
Letters of Credit shall have expired or been fully drawn upon, all Reimbursement
Obligations shall have been satisfied and all other obligations of the Borrower
hereunder and under any Notes shall have been paid in full, the balance, if any,
in such cash collateral account shall be returned to the Borrower.
Except as expressly provided above in this Section 9,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
<PAGE> 106
100
SECTION 10. THE ADMINISTRATIVE AGENT AND THE OTHER
REPRESENTATIVES
10.1 Appointment. Each Lender hereby irrevocably designates
and appoints Chase as the Administrative Agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes Chase, as the Administrative Agent for such Lender, to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Administrative Agent and the Other Representatives shall not
have any duties or responsibilities, except, in the case of the Administrative
Agent and the Issuing Lender, those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent or the Other Representatives.
10.2 Delegation of Duties. The Administrative Agent may
execute any of its duties under this Agreement and the other Loan Documents by
or through agents or attorneys-in-fact, and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact or counsel selected by it with reasonable care.
10.3 Exculpatory Provisions. None of the Administrative Agent
or any Other Representative nor any of their officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by such Person under or in connection with
this Agreement or any other Loan Document (except for the gross negligence or
willful misconduct of such Person or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates) or (ii) responsible in any manner to
any of the Lenders for any recitals, statements, representations or warranties
made by the Borrower or any other Loan Party or any officer thereof contained in
this Agreement or any other Loan Document or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement or any other
Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any Notes or any other Loan
Document or for any failure of the Borrower or any other Loan Party to perform
its obligations hereunder or thereunder. Neither the Administrative Agent nor
any Other Representative shall be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower or any
other Loan Party. Each Lender agrees that, except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder or given to the Administrative Agent for the
account of or with copies for the Lenders, the Administrative Agent and the
Other Representatives shall not have any duty or responsibility to provide any
Lender with any
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credit or other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness of the
Borrower or any other Loan Party which may come into the possession of the
Administrative Agent and the Other Representatives or any of their officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
10.4 Reliance by Administrative Agent. The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified as between itself and the Lenders
in failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders and/or such other requisite percentage of the Lenders as is
required pursuant to subsection 11.1(a) as it deems appropriate or it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
and any Notes and the other Loan Documents in accordance with a request of the
Required Lenders and/or such other requisite percentage of the Lenders as is
required pursuant to subsection 11.1(a), and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Loans.
10.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give notice thereof to the Lenders. The Administrative Agent shall
take such action reasonably promptly with respect to such Default or Event of
Default as shall be directed by the Required Lenders and/or such other requisite
percentage of the Lenders as is required pursuant to subsection 11.1(a);
provided that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the
Lenders.
10.6 Acknowledgements and Representations by Lenders. Each
Lender expressly acknowledges that none of the Administrative Agent or the Other
Representatives nor any of their officers, directors, employees, agents,
attorneys-in-fact or Affiliates has made any representations or warranties to it
and that no act by the Administrative Agent or any Other Representative
hereafter taken, including any review of the affairs of the Borrower or
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any other Loan Party, shall be deemed to constitute any representation or
warranty by the Administrative Agent or such Other Representative to any Lender.
Each Lender represents to the Administrative Agent, the Other Representatives
and each of the Loan Parties that, independently and without reliance upon the
Administrative Agent, the Other Representatives or any other Lender, and based
on such documents and information as it has deemed appropriate, it has made and
will make its own appraisal of and investigation into the business, operations,
property, financial and other condition and creditworthiness of each of the
Borrower and the other Loan Parties, it has made its own decision to make its
Loans hereunder and enter into this Agreement and it will make its own decisions
in taking or not taking action under this Agreement and the other Loan
Documents. Each Lender represents to each other party hereto that it is a bank,
savings and loan association or other similar savings institution, insurance
company, investment fund or company or other financial institution which makes
or acquires commercial loans in the ordinary course of its business, that it is
participating hereunder as a Lender for its account and for such commercial
purposes, and that it has the knowledge and experience to be and is capable of
evaluating the merits and risks of being a Lender hereunder. Each Lender
acknowledges and agrees to comply with the provisions of subsection 11.6
applicable to the Lenders hereunder.
10.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent and the Other Representatives in their capacities as such
(to the extent not reimbursed by the Borrower and without limiting the
obligation of the Borrower and the Borrower to do so), ratably according to
their respective Total Credit Percentages in effect on the date on which
indemnification is sought under this subsection (or, if indemnification is
sought after the date upon which the Revolving Credit Commitments shall have
terminated and the Loans shall have been paid in full, ratably in accordance
with their Total Credit Percentages immediately prior to such date), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against the Administrative Agent or any Other Representative in any way relating
to or arising out of this Agreement, any of the other Loan Documents or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Administrative Agent or any Other Representative under or in connection with
any of the foregoing; provided that no Lender shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements to the extent
arising from (i) the Administrative Agent's or any Other Representative's gross
negligence or willful misconduct or (ii) claims made or legal proceedings
commenced against the Administrative Agent or any Other Representative by any
securityholder or creditor thereof arising out of and based upon rights afforded
any such securityholder or creditor solely in its capacity as such. The
obligations to indemnify the Issuing Lender and Swing Line Lender shall be
ratable among the Revolving Credit Lenders in accordance with their respective
Revolving Credit Commitments (or, if the Revolving Credit Commitments have been
terminated, the outstanding principal amount of their respective Revolving
Credit Loans and L/C Obligations and their respective participating interests in
the outstanding Letters of Credit and shall be payable only by the Revolving
Credit Lenders). The
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agreements in this subsection shall survive the payment of the Loans and all
other amounts payable hereunder.
10.8 Administrative Agent and Other Representatives in Their
Individual Capacity. The Administrative Agent, the Other Representatives and
their Affiliates may make loans to, accept deposits from and generally engage in
any kind of business with the Borrower or any other Loan Party as though the
Administrative Agent and the Other Representatives were not the Administrative
Agent and the Other Representatives hereunder and under the other Loan
Documents. With respect to Loans made or renewed by them and any Note issued to
them and with respect to any Letter of Credit issued or participated in by them,
the Administrative Agent and the Other Representatives shall have the same
rights and powers under this Agreement and the other Loan Documents as any
Lender and may exercise the same as though they were not the Administrative
Agent or an Other Representative, and the terms "Lender" and "Lenders" shall
include the Administrative Agent in its individual capacity.
10.9 Successor Administrative Agent. The Administrative Agent
may resign as Administrative Agent upon 10 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent (which shall be a bank) for the Lenders, which
successor agent shall be approved by the Borrower (such approval not to be
unreasonably withheld), whereupon such successor agent shall succeed to the
rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this subsection shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement and the
other Loan Documents.
10.10 Swing Line Lender. The provisions of this Section 10
shall apply to the Swing Line Lender in its capacity as such to the same extent
that such provisions apply to the Administrative Agent.
SECTION 11. MISCELLANEOUS
11.1 Amendments and Waivers. Neither this Agreement nor any
other Loan Document, nor any terms hereof or thereof, may be amended,
supplemented or modified except in accordance with the provisions of this
subsection. The Required Lenders may, or, with the written consent of the
Required Lenders, the Administrative Agent may, from time to time, (x) enter
into with the Loan Parties hereto or thereto, as the case may be, written
amendments, supplements or modifications hereto and to the other Loan Documents
for the purpose of adding any provisions to this Agreement or to the other Loan
Documents or changing in any manner the rights or obligations of the Lenders or
the Loan Parties hereunder
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or thereunder or (y) waive at any Loan Party's request, on such terms and
conditions as the Required Lenders or the Administrative Agent, as the case may
be, may specify in such instrument, any of the requirements of this Agreement or
the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall:
(i) reduce the amount or extend the scheduled date of
maturity of any Loan or any Reimbursement Obligation or of any
scheduled installment thereof or reduce the stated rate of any interest
or fee payable hereunder or extend the scheduled date of any payment
thereof, increase the amount or extend the expiration date of any
Lender's Revolving Credit Commitment, in each case without the consent
of each Lender directly affected thereby;
(ii) amend, modify or waive any provision of this
subsection 11.1 or reduce the percentage specified in the definition of
Required Lenders, in each case without the written consent of all the
Lenders;
(iii) release any Guarantee or, in the aggregate (in a
single transaction or a series of related transactions), substantially
all of the Collateral without the consent of all the Lenders, except as
expressly permitted hereby or by any Guarantee or Security Document (as
such documents are in effect on the date hereof or, if later, the date
of execution and delivery thereof in accordance with the terms hereof);
(iv) amend or modify the definition of "Borrowing Base",
"Eligible Inventory" or "Eligible Accounts Receivable", in each case
without the consent of each Revolving Credit Lender;
(v) amend, modify or waive any provision of Section 10
without the written consent of the then Administrative Agent and of any
Other Representative affected thereby;
(vi) amend, modify or waive the provisions of any Letter
of Credit or any L/C Obligation without the written consent of the
Issuing Lender and each affected L/C Participant; or
(vii) amend, modify or waive any provision of the Swing
Line Note (if any) or subsection 2.5 without the written consent of the
Swing Line Lender and each other Lender, if any, which holds, or is
required to purchase, a participation in any Swing Line Loan pursuant
to subsection 2.5(d).
Any waiver and any amendment, supplement or modification pursuant to this
subsection 11.1 shall apply to each of the Lenders and shall be binding upon the
Loan Parties, the Lenders, the Administrative Agent and all future holders of
the Loans. In the case of any waiver, each of the Loan Parties, the Lenders and
the Administrative Agent shall be restored to their former position and rights
hereunder and under the other Loan Documents, and any Default or Event
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105
of Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
11.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, or, in the case of delivery by a nationally recognized overnight
courier, when received, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth in Schedule I in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto and any future holders of the Loans:
The Borrower: EV International, Inc.
600 Cecil Street
Buchanan, Michigan 49107
Attention: John G. Bolstetter
Telecopy: (616) 695-4742
with a copy to: Greenwich Street Capital Partners
388 Greenwich Street, 36th Floor
New York, New York 10013
Attention: Nick Somers
Telecopy: (212) 816-0166
with a copy to: Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: David Brttenham
Telecopy: (212) 909-6386
The Administrative Chase Securities Inc.
Agent, Swing Line 10 South LaSalle Street
Lender and Issuing Suite 2300
Lender: Chicago, Illinois 60603
Attention: Jonathan Twichell
Telecopy: (312) 807-4077
with a copy to: Loan & Agency Services Group
1 Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Patricia Ciocco
Telecopy: (212) 552-5662
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provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.3, 2.8, 4.2, 4.4, 4.8 or 4.14 shall not
be effective until received.
11.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Administrative Agent or any
Lender, any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
11.4 Survival of Representations and Warranties. All
representations and warranties made hereunder and in the other Loan Documents
(or in any amendment, modification or supplement hereto or thereto) and in any
certificate delivered pursuant hereto or such other Loan Documents shall survive
the execution and delivery of this Agreement and the making of the Loans
hereunder.
11.5 Payment of Expenses and Taxes. The Borrower agrees (a) to
pay or reimburse the Administrative Agent and the Other Representatives for all
their reasonable out-of-pocket costs and expenses incurred in connection with
the preparation, execution and delivery of, and any amendment, supplement,
waiver or modification to, this Agreement and the other Loan Documents and any
other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions (including the syndication
of the Revolving Credit Commitments and Term Loans (including the reasonable
expenses of the Administrative Agent's due diligence investigation) and the
monitoring of the Collateral) contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements of one firm of counsel
to the Administrative Agent and the Other Representatives, (b) to pay or
reimburse each Lender, each Other Representative and the Administrative Agent
for all its reasonable costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement, the other Loan
Documents and any such other documents, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent, the
Other Representatives and the several Lenders, and any reasonable Environmental
Costs incurred by any of them arising out of or in any way relating to any Loan
Party or any property in which any Loan Party has had any interest at any time,
(c) to pay, and indemnify and hold harmless each Lender, the Administrative
Agent and the Other Representatives from and against, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other similar taxes, if any, which may be
payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents, and (d) to pay, and indemnify and hold harmless each
Lender, the Administrative Agent and the Other Representatives (and their
respective directors, trustees, officers, employees, agents, successors and
assigns) from and against, any and all
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107
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
(whether or not caused by any such Person's own negligence (other than gross
negligence) and including, without limitation, the reasonable fees and
disbursements of counsel) with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents and
any such other documents (regardless of whether the Administrative Agent, any
such Other Representative or any Lender is a party to the litigation or other
proceeding giving rise thereto and regardless of whether any such litigation or
other proceeding is brought by the Borrower or any other Person), including,
without limitation, any of the foregoing relating to the violation of,
noncompliance with, or liability under, any Environmental Laws or any orders,
requirements or demands of Governmental Authorities related thereto applicable
to the operations of the Borrower, any of its Subsidiaries or any of the
facilities and properties owned, leased or operated by the Borrower or any of
its Subsidiaries (all the foregoing in this clause (d), collectively, the
"indemnified liabilities"), provided that the Borrower shall not have any
obligation hereunder to the Administrative Agent, any such Other Representative
or any Lender with respect to Environmental Costs or indemnified liabilities
arising from (i) the gross negligence or willful misconduct of the
Administrative Agent, any Other Representative or any such Lender (or any of
their respective directors, trustees, officers, employees, agents, successors
and assigns) or (ii) claims made or legal proceedings commenced against the
Administrative Agent, any Other Representative or any such Lender by any
securityholder or creditor thereof arising out of and based upon rights afforded
any such securityholder or creditor solely in its capacity as such.
Notwithstanding the foregoing, except as provided in clauses (b) and (c) above,
the Borrower shall have no obligation under this subsection 11.5 to the
Administrative Agent, any Other Representative or any Lender with respect to any
tax, levy, impost, duty, charge, fee, deduction or withholding imposed, levied,
collected, withheld or assessed by any Governmental Authority. The agreements in
this subsection shall survive repayment of the Loans and all other amounts
payable hereunder.
11.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of each of the
Loan Parties party hereto, the Lenders, the Administrative Agent, the Other
Representatives, all future holders of the Loans and their respective successors
and assigns, except that none of the Loan Parties may, other than in accordance
with subsection 8.5, assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its business and
in accordance with applicable law, at any time sell to one or more banks or
other entities ("Participants") participating interests in any Loan owing to
such Lender, any Note held by such Lender, any Revolving Credit Commitment of
such Lender or any other interest of such Lender hereunder and under the other
Loan Documents. In the event of any such sale by a Lender of a participating
interest to a Participant, such Lender's obligations under this Agreement to the
other parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Loan (and any Note evidencing such Loan) for all purposes
under this Agreement and the other Loan Documents and the Loan Parties and the
Administrative Agent shall continue to deal
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solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. Any agreement
pursuant to which any Lender shall sell any such participating interest shall
provide that such Lender shall retain the sole right and responsibility to
exercise such Lender's rights and enforce each of the Loan Parties' obligations
hereunder, including the right to consent to any amendment, supplement,
modification or waiver of any provision of this Agreement or any of the other
Loan Documents, provided that such participation agreement may provide that such
Lender will not agree to any amendment, supplement, modification or waiver
described in clause (i) or (ii) of the proviso to the second sentence of
subsection 11.1(a) without the consent of the Participant. The Borrower agrees
that each Lender shall be entitled to the benefits of subsections 4.9, 4.10,
4.11, 4.12 and 11.5 without regard to whether it has granted any participating
interests, and that all amounts payable to a Lender under subsections 4.9, 4.10,
4.11 and 4.12 shall be determined as if such Lender had not granted any such
participating interests.
(c) Any Lender may, in the ordinary course of its business and
in accordance with applicable law, at any time and from time to time assign to
any Lender or any Affiliate thereof or, with the prior written consent of the
Borrower and the Administrative Agent (which in each case shall not be
unreasonably withheld), to an additional bank or financial institution (an
"Assignee") all or any part of its rights and obligations under this Agreement
and any Notes, including, without limitation, its Revolving Credit Commitment
and Loans, pursuant to an Assignment and Acceptance, substantially in the form
of Exhibit H, executed by such Assignee, such assigning Lender (and, in the case
of an Assignee that is not then a Lender or an Affiliate thereof, by the
Borrower and the Administrative Agent) and delivered to the Administrative Agent
for its acceptance and recording in the Register; provided that (unless the
Borrower and the Administrative Agent otherwise consent in writing) no such
transfer to an Assignee (other than a Lender or any Affiliate thereof) shall be
in an aggregate principal amount less than $3,000,000 in the aggregate (or, if
less, the full amount of such assigning Lender's Term Loans, Revolving Credit
Loans and Revolving Credit Commitment). Upon such execution, delivery,
acceptance and recording, from and after the effective date determined pursuant
to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder with a Revolving Credit Commitment
and the Term Loans, as set forth therein, and (y) the assigning Lender
thereunder shall be released from its obligations under this Agreement to the
extent that such obligations shall have been expressly assumed by the Assignee
pursuant to such Assignment and Acceptance (and, in the case of an Assignment
and Acceptance covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement, such assigning Lender shall cease
to be a party hereto but shall nevertheless continue to be entitled to the
benefits of subsections 4.10, 4.11, 4.12 and 11.5). Notwithstanding the
foregoing, no Assignee, which as of the date of any assignment to it pursuant to
this subsection 11.6(c) would be entitled to receive any greater payment under
subsection 4.10 or 4.11 than the assigning Lender would have been entitled to
receive as of such date under such subsections with respect to the rights
assigned, shall be entitled to receive such payments unless the Borrower has
expressly consented in writing to waive the benefit of this provision at the
time of the assignment.
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(d) The Administrative Agent, on behalf of the Borrower, shall
maintain at its address referred to in subsection 11.2 a copy of each Assignment
and Acceptance delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Lenders and the Revolving Credit
Commitment of, and the principal amount of the Loans owing to, and any Notes
evidencing such Loans owned by, each Lender from time to time. Notwithstanding
anything in this Agreement to the contrary, each of the Borrower, the
Administrative Agent and the Lenders shall treat each Person whose name is
recorded in the Register as the owner of any Loan, any Notes and the Revolving
Credit Commitments recorded therein for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower at any reasonable
time and from time to time upon reasonable prior notice.
(e) Notwithstanding anything in this Agreement to the
contrary, no assignment under subsection 11.6(c) of any rights or obligations
under or in respect of the Loans or the Notes evidencing such Loans shall be
effective unless and until the Administrative Agent shall have recorded the
assignment pursuant to subsection 11.6(d). Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an Assignee (and, in the case of
an Assignee that is not then a Lender or an Affiliate thereof, by the Borrower
and the Administrative Agent), together with payment to the Administrative Agent
of a registration and processing fee of $3,500 (which fee need not be paid in
the case of any assignment to an Affiliate of the assigning Lender), the
Administrative Agent shall (i) promptly accept such Assignment and Acceptance
and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give prompt notice of such
acceptance and recordation to the Borrower. On or prior to such effective date,
the assigning Lender shall surrender any outstanding Notes held by it all or a
portion of which are being assigned, and the Borrower, at its own expense,
shall, upon the request to the Administrative Agent by the assigning Lender or
the Assignee, as applicable, execute and deliver to the Administrative Agent (in
exchange for the outstanding Notes of the assigning Lender) a new Revolving
Credit Note, Term Note and/or Swing Line Note, as the case may be, to the order
of such Assignee in an amount equal to (i) in the case of a Revolving Credit
Note, the lesser of (A) the amount of such Assignee's Revolving Credit
Commitment and (B) the aggregate principal amount of all Revolving Credit Loans
made by such Assignee and (ii) in the case of a Term Note, the amount of such
Assignee's Term Loans, in each case with respect to the relevant Loan or
Revolving Credit Commitment after giving effect to such Assignment and
Acceptance and, if the assigning Lender has retained a Revolving Credit
Commitment or Term Loan hereunder, a new Revolving Credit Note, Term Note and/or
Swing Line Note, as the case may be, to the order of the assigning Lender in an
amount equal to (i) in the case of a Revolving Credit Note, the lesser of (A)
the amount of such Lender's Revolving Credit Commitment and (B) the aggregate
principal amount of all Revolving Credit Loans made by such Lender and (ii) in
the case of a Term Note the amount of such Lender's Term Loans and (iii) in the
case of a Swing Line Note, the lesser of (A) the Swing Line Commitment and (B)
the aggregate principal amount of all Swing Line Loans made by such Lender, in
each case with respect to the relevant Loan, Swing Line Commitment, Revolving
Credit Commitment or Term Loan Commitment after giving effect to such Assignment
and Acceptance. Any such new Notes shall be dated the Effective Date and shall
otherwise be in the form of the Note replaced
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thereby. Any Notes surrendered by the assigning Lender shall be returned by the
Administrative Agent to the Borrower marked "cancelled".
(f) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee,
subject to the provisions of subsection 11.16, any and all information in such
Lender's possession concerning the Borrower and their Affiliates which has been
delivered to such Lender by or on behalf of the Borrower pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Borrower in connection with such Lender's credit evaluation of each of the
Borrower and its Affiliates prior to becoming a party to this Agreement. No
assignment or participation made or purported to be made to any Transferee shall
be effective without the prior written consent of the Borrower if it would
require the Borrower to make any filing with any Governmental Authority or
qualify any Loan or Note under the laws of any jurisdiction, and the Borrower
shall be entitled to request and receive such information and assurances as it
may reasonably request from any Lender or any Transferee to determine whether
any such filing or qualification is required or whether any assignment or
participation is otherwise in accordance with applicable law.
(g) Nothing herein shall prohibit any Lender from pledging or
assigning any Loan or any Note to any Federal Reserve Bank in accordance with
applicable law.
11.7 Adjustments; Set-off. (a) If any Lender (a "benefitted
Lender") shall at any time receive any payment of all or part of its Revolving
Credit Loans, Term Loans or the Reimbursement Obligations owing to it, or
interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in Section 9(f), or otherwise (except pursuant to
subsection 4.4, 4.13(d) or 11.6)), in a greater proportion than any such payment
to or collateral received by any other Lender, if any, in respect of such other
Lender's Revolving Credit Loans, Term Loans or the Reimbursement Obligations, as
the case may be, owing to it, or interest thereon, such benefitted Lender shall
purchase for cash from the other Lenders an interest (by participation,
assignment or otherwise) in such portion of each such other Lender's Revolving
Credit Loans, Term Loans or the Reimbursement Obligations, as the case may be,
owing to it, or shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; provided, however, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
benefitted Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by such Borrower to the extent
permitted by applicable law, upon the occurrence of an Event of Default under
Section 9(a) to set-off and appropriate and apply against any amount then due
and payable under Section 9(a) any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
<PAGE> 117
111
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or any branch or agency thereof to or for the credit or the
account of the Borrower. Each Lender agrees promptly to notify such Borrower and
the Administrative Agent after any such set-off and application made by such
Lender, provided that the failure to give such notice shall not affect the
validity of such set-off and application.
11.8 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of such counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be delivered to the Borrower and the
Administrative Agent.
11.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.10 Integration. This Agreement and the other Loan Documents
represent the entire agreement of each of the Loan Parties party hereto, the
Administrative Agent and the Lenders with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by any of
the Loan Parties party hereto, the Administrative Agent or any Lender relative
to the subject matter hereof not expressly set forth or referred to herein or in
the other Loan Documents.
11.11 GOVERNING LAW. THIS AGREEMENT AND ANY NOTES AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND ANY NOTES SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
11.12 Submission To Jurisdiction; Waivers. Each party hereto
hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts
from any thereof;
(ii) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such
<PAGE> 118
112
action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient forum and agrees not to plead
or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the applicable Borrower, the applicable Lender or the
Administrative Agent, as the case may be, at the address specified in
subsection 11.2 or at such other address of which the Administrative
Agent, any such Lender and any such Borrower shall have been notified
pursuant thereto;
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(v) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any punitive damages.
11.13 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Other
Representative or Lender has any fiduciary relationship with or duty to
the Borrower arising out of or in connection with this Agreement or any
of the other Loan Documents, and the relationship between the
Administrative Agent and Lenders, on the one hand, and the Borrower, on
the other hand, in connection herewith or therewith is solely that of
debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby and thereby among the Lenders or among the Borrower
and the Lenders.
11.14 WAIVER OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY NOTES OR ANY
OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
11.15 Confidentiality. The Administrative Agent and each
Lender agrees to keep confidential any information (a) provided to it by or on
behalf of the Borrower or any of its Subsidiaries pursuant to or in connection
with this Agreement or (b) obtained by such Lender based on a review of the
books and records of the Borrower or any of its Subsidiaries; provided that
nothing herein shall prevent any Lender from disclosing any such information (i)
<PAGE> 119
113
to the Administrative Agent or any other Lender, (ii) to any Transferee or
prospective Transferee which agrees to comply with the provisions of this
subsection, (iii) to its affiliates and the employees, directors, agents,
attorneys, accountants and other professional advisors of it and its affiliates,
provided that such Lender shall inform each such Person of the agreement under
this subsection 11.15 and take reasonable actions to cause compliance by any
such Person referred to in this clause (iii) with this agreement (including,
where appropriate, to cause any such Person to acknowledge its agreement to be
bound by the agreement under this subsection 11.15), (iv) upon the request or
demand of any Governmental Authority having jurisdiction over such Lender or to
the extent required in response to any order of any court or other Governmental
Authority or as shall otherwise be required pursuant to any Requirement of Law,
provided that such Lender shall, unless prohibited by any Requirement of Law,
notify the Borrower of any disclosure pursuant to this clause (iv) as far in
advance as is reasonably practicable under such circumstances, (v) which has
been publicly disclosed other than in breach of this Agreement, (vi) in
connection with the exercise of any remedy hereunder, (vii) in connection with
periodic regulatory examinations and reviews conducted by the National
Association of Insurance Commissioners (to the extent applicable), (viii) in
connection with any litigation to which such Lender may be a party, subject to
the proviso in clause (iv), and (ix) if, prior to such information having been
so provided or obtained, such information was already in the Administrative
Agent's or a Lender's possession on a nonconfidential basis without a duty of
confidentiality to the Borrower being violated.
<PAGE> 120
114
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
GULTON ACQUISITION CORP.
By: /s/ CHRISTINE K. VANDEN BEUKEL
-------------------------------
Name: Christine K. Vanden Beukel
Title: Vice President and Secretary
THE CHASE MANHATTAN BANK,
as Administrative Agent, Swing Line Lender,
Issuing Lender and a Lender
By: /s/ LAWRENCE PALUMBO JR.
------------------------------
Name: L. Palumbo
Title: Vice President
<PAGE> 121
THE TRAVELERS INSURANCE COMPANY,
as a Lender
By: /s/ JORDAN M. STITZER
---------------------------
Name: Jordan M. Stitzer
Title: Vice President
<PAGE> 122
THE BANK OF NEW YORK,
as a Lender
By: /s/ JOHN LOKAY
------------------------
Name: John M. Lokay Jr.
Title: Vice-President
<PAGE> 123
BHF-BANK AKTIENGESELLSCHAFT, GRAND
CAYMAN BRANCH, as a Lender
By: /s/ JOHN SYKES /s/ PERRY FORMAN
------------------ -----------------
Name: John Sykes Perry Forman
Title: AVP VP
<PAGE> 124
COMERICA BANK,
as a Lender
By: /s/ KEVIN RINGENBERG
-------------------------------
Name: Kevin Ringenberg
Title: Vice President
<PAGE> 125
NBD BANK,
as a Lender
By: /s/ RICHARD C. ELLIS
-----------------------------
Name: Richard C. Ellis
Title: Vice President
<PAGE> 126
THE FIRST NATIONAL BANK OF BOSTON,
as a Lender
By: /s/ MARK M. ANDREW
------------------------------
Name: Mark M. Andrew
Title: Vice President
<PAGE> 127
FIRST SOURCE FINANCIAL LLP,
by FIRST SOURCE FINANCIAL INC., its
Agent/Manager, as a Lender
By: /s/ GARY L. FRANCIS
---------------------------------
Name: Gary L. Francis
Title: Senior Vice President
<PAGE> 128
HELLER FINANCIAL, INC.,
as a Lender
By: /s/ DANIEL J. MARSZALEK
--------------------------------
Name: Daniel J. Marszalek
Title: Senior Vice President
<PAGE> 129
MICHIGAN NATIONAL BANK,
as a Lender
By: /s/ JEFFREY W. BILLIG
---------------------------------------
Name: Jeffrey W. Billig
Title: Commercial Relationship Manager
<PAGE> 130
NATIONAL CITY BANK,
as a Lender
By: /s/ ROBERT ROWE
------------------------------
Name: Robert Rowe
Title: Vice President
<PAGE> 131
Schedule I
to Credit Agreement
Commitments and Addresses
<TABLE>
<CAPTION>
SCHEDULE I
Revolving Credit
Lender and Address Commitment Term Loss Commitment Total Commitment
- ------------------ ---------------- -------------------- ----------------
<S> <C> <C> <C>
THE CHASE MANHATTAN BANK $3,958,333.33 $5,541,666.67 $9,500,000.00
One Chase Manhattan Plaza,
8th Floor
New York, NY 10081
Attn: Patricia Ciocco
Telecopy: (212) 552-5662
THE TRAVELERS INSURANCE COMPANY $4,166,666.67 $5,833,333.33 $10,000,000.00
One Tower Square
Hartford, CT 06183-2030
Attn: John Petchler
Telecopy: (860) 954-5243
THE BANK OF NEW YORK $1,875,000.00 $2,625,000.00 $4,500,000.00
One Wall Street, 19th Floor
New York, NY 10286
Attn: John M. Lockay Jr.
Telecopy: (212) 635-1208
BHF-BANK AKTIENGESELLSCHAFT $1,875,000.00 $2,625,000.00 $4,500,000.00
590 Madison Avenue, 30th Floor
New York, NY 10022-2540
Attn: John Sykes
Telecopy: (212) 756-5536
COMERCIA BANK $1,875,000.00 $2,625,000.00 $4,500,000.00
99 Monroe Avenue, NW
Grand Rapids, MI 49503
Attn: Kevin Ringenberg
Telecopy: (616) 776-7885
NBD BANK $1,875,000.00 $2,625,000.00 $4,500,000.00
611 Woodward Avenue
Detroit, MI 49503
Attn: Ted Willet
Telecopy: (313) 225-1671
THE FIRST NATIONAL BANK OF BOSTON $1,875,000.00 $2,625,000.00 $4,500,000.00
100 Federal Street
Boston, MA 02110
Attn: Mark Andrew
Telecopy: (617) 434-4929
FIRST SOURCE FINANCIAL LLP $1,875,000.00 $2,625,000.00 $4,500,000.00
2850 West Golf Road
Rolling Meadows, IL 60008
Attn: Gary Francia
Telecopy: (847) 734-7910
HELLER FINANCIAL, INC $1,875,000.00 $2,625,000.00 $4,500,000.00
101 Park Avenue
New York, NY 10178
Attn: Steven Ekert
Telecopy: (212) 880-2002
MICHIGAN NATIONAL BANK $1,875,000.00 $2,625,000.00 $4,500,000.00
27777 Inkster Road
Farmington Hills, MI 48333-9086
Attn: Jeffrey W. Billig
Telecopy: (810) 473-4345
NATIONAL CITY BANK $1,875,000.00 $2,625,000.00 $4,500,000.00
1900 East Ninth Street, 10th Floor
Cleveland, OH 44114
Attn: Robert Rowe
Telecopy: (216) 575-9396
-------------- -------------- --------------
TOTAL $25,000,000.00 $35,000,000.00 $60,000,000.00
============== ============== ==============
</TABLE>
<PAGE> 132
Schedule II
to Credit Agreement
Applicable Margin Step-Downs(1)
<TABLE>
<CAPTION>
=========================================================================================================================
Consolidated
Interest Eurodollar ABR
Coverage Leverage Applicable Applicable Commitment
Ratio Ratio Margin Margin Fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
less than or = 2.25x greater than or = 4.50x 2.750% 1.750% 0.500%
- -------------------------------------------------------------------------------------------------------------------------
greater than 2.25x greater than 4.50x 2.500% 1.500% 0.500%
- -------------------------------------------------------------------------------------------------------------------------
greater than 2.50x greater than 4.00x 2.250% 1.250% 0.375%
- -------------------------------------------------------------------------------------------------------------------------
greater than 2.75x greater than 3.50x 2.000% 1.000% 0.375%
- -------------------------------------------------------------------------------------------------------------------------
greater than 3.00x greater than 3.00x 1.750% 0.750% 0.375%
=========================================================================================================================
</TABLE>
- ---------------------------
(1) If the calculation of the ratios set forth in the table would result in
different Applicable Margins, the greater Applicable Margin will apply.
<PAGE> 133
Schedule III
to Credit Agreement
Lockbox Banks
Lockbox Account
Bank of America, Illinois
Global Payment Services
231 S. LaSalle Street
Chicago, IL 60697
Depository Accounts
Bank of America, California
Account Administration -- 5693
1850 Gateway Boulevard, 4th Floor
Concord, CA 94520
Shoreline Bank
128 North Main Street
Buchanan, MI 49107
<PAGE> 134
Schedule 3.1
Letters of Credit
See Attached
<PAGE> 135
Attachment A
to Schedule 3.1
OUTSTANDING LETTERS OF CREDIT
**AS OF FEBRUARY 5, 1997** JANUARY, 1997 06-Feb-97
<TABLE>
<CAPTION>
Issuers Outstanding Expiration Issuer
L/C# Beneficiary Applicant Amount Amount Date Date
<S> <C> <C> <C> <C> <C> <C>
BANK: CHASE MANHATTAN BANK NEW YORK
B994445(C) Pen Shien Industrial Altec/E.V. 24,174.30 7,707.80 04/25/97 10/22/96
B994447(C) Pen Shien Industrial Altec/E.V. 10,530.65 4,430.65 03/25/97 11/21/96
B994448(C) Tytech, Inc. Altec/E.V. 311,800.00 311,800.00 02/28/97 12/10/96
BANK: CHASE MANHATTAN BANK DELAWARE
83144(C) Proton Electronic Industrial Co. E.V. 850,000.00 658,639.60 1/21/98 11/19/96
83167(C) Universal Electronics & Comp. E.V. 125,000.00 120,849.17 5/31/97 01/21/97
83170(C) Azden Corporation E.V. 60,000.00 60,000.00 5/31/97 01/21/97
83171(C) Pen Shien Industrial E.V. 35,000.00 35,000.00 5/31/97 01/21/97
83172(C) Tytech, Inc. E.V. 300,000.00 300,000.00 5/31/97 01/21/97
83173(C) Group West International E.V. 35,000.00 35,000.00 5/31/97 01/21/97
83174(C) Tory, LTD. E.V. 50,000.00 50,000.00 5/31/97 01/21/97
83175(C) Samick Musical Instruments E.V. 115,000.00 115,000.00 5/31/97 01/21/97
83176(C) Korea Ricetro-Devices MFG. E.V. 175,000.00 175,000.00 5/31/97 01/21/97
83177(C) Toryo Shaji Company, Inc. E.V. 85,000.00 75,857.60 5/31/97 01/21/97
83178(C) Inter M E.V. 350,000.00 300,000.00 5/31/97 01/21/97
83179(C) Phomic Corporation E.V. 40,000.00 40,000.00 5/31/97 01/21/97
Chase Manhattan Total $2,576,504.95 $2,349,284.82 (S) $0.00
(C) $2,349,284.87
TOTAL= $2,349,284.82
</TABLE>
Note: (S) = STANDBY
(C) = COMMERCIAL
<PAGE> 136
Schedule 5.2(a)
Material Adverse Effect Disclosure
See Schedule 4.10 of the Stock Purchase Agreement.
<PAGE> 137
Schedule 5.4
Consents Required
Landlord's consent required for Austin Sub-lease, between Mark IV Industries,
Inc. and Electro-Voice Incorporated, with respect to leased property located at
8004B Cameron Road, Austin, Texas (Travis County).
2
<PAGE> 138
Schedule 5.6
Litigation
See Schedule 4.15 of the Stock Purchase Agreement.
<PAGE> 139
Schedule 5.8
Mortgaged Real Property
9130 Glenoaks Boulevard
Sun Valley, CA 91352
Los Angeles County
13278 Ralston Avenue
Sylmar, CA 91342
Los Angeles County
600 Cecil Street
Buchanan, MI 49107
Berrien County
128 East Front Street
Buchanan, MI 49107
Berrien County
10500 West Reno Avenue
Oklahoma City, OK 73127
Canadian County
366 Industrial Road
Newport, TN 37821
Cocke County
1201 Dolly Parton Parkway
Sevierville, TN 37862
Sevier County
<PAGE> 140
Schedule 5.9
Intellectual Property Claims
None.
<PAGE> 141
Schedule 5.14
Lien Searches and Filing Jurisdictions
I. Lien Search Jurisdictions
Searches have been conducted against the following debtors in the
following locations:
A. ALTEC LANSING INTERNATIONAL
Secretary of State of:
Michigan
New York
Oklahoma
County or City of:
Berrien County, Michigan
Erie County, New York
Canadian County, Oklahoma
B. CETEC CORP. INC.
Secretary of State of:
California
Delaware
Michigan
New York
County or City of:
Los Angeles County, California
County of Newcastle, Delaware
Berrien County, Michigan
Erie County, New York
<PAGE> 142
C. ELECTROSOUND OR ELECTRO-SOUND
Secretary of State of:
California
Delaware
Michigan
New York
County or City of:
Los Angeles County, California
County of Newcastle, Delaware
Berrien County, Michigan
Erie County, New York
D. ELECTRO-VOICE, INCORPORATED
Secretary of State of:
Delaware
Indiana
Michigan
New York
Oklahoma
Tennessee
County or City of:
County of Newcastle, Delaware
St. Joseph County, Indiana
Berrien County, Michigan
Erie County, New York
Canadian County, Oklahoma
Sevier County, Tennessee
Cocke County, Tennessee
2
<PAGE> 143
E. GAUSS
Secretary of State of:
California
County or City of:
Los Angeles County, California
F. GULTON INDUSTRIES, INC.
Secretary of State of:
Delaware
Michigan
New York
Tennessee
County or City of:
County of Newcastle, Delaware
Berrien County, Michigan
Erie County, New York
Cocke County, Tennessee
G. LFE CORPORATION
Secretary of State of:
California
Delaware
Michigan
New York
County or City of:
Los Angeles County, California
County of Newcastle, Delaware
Berrien County, Michigan
Erie County, New York
3
<PAGE> 144
H. MARK IV AUDIO, INC.
Secretary of State of:
Delaware
Michigan
New York
Texas
County or City of:
County of Newcastle, Delaware
Berrien County, Michigan
Erie County, New York
Travis County, Texas
I. MARK IV AUDIO MAGNETIC, INC.
Secretary of State of:
California
Delaware
Michigan
New York
County or City of:
Los Angeles County, California
County of Newcastle, Delaware
Berrien County, Michigan
Erie County, New York
J. MARK IV INDUSTRIES, INC.
Secretary of State of:
Delaware
Michigan
New York
Texas
4
<PAGE> 145
County or City of:
County of Newcastle, Delaware
Berrien County, Michigan
Erie County, New York
Travis County, Texas
K. MARK IV PRO AUDIO
Secretary of State of:
Michigan
County or City of:
Berrien County, Michigan
L. MARK IV SALES, INC.
Secretary of State of:
Texas
M. MARK IV EQUIPMENT, INC.
Secretary of State of:
Texas
N. MARK IV ENTERPRISES, INC.
Secretary of State of:
Texas
O. MARK IV AUDIO NORTH AMERICA
Secretary of State of:
Michigan
County or City of:
Berrien County, Michigan
5
<PAGE> 146
P. MARK IV AUDIO SYSTEMS
Secretary of State of:
Texas
County or City of:
Travis County, Texas
Q. PINNACLE AUDIO
Secretary of State of:
California
Delaware
County or City of:
Los Angeles County, California
County of Newcastle, Delaware
R. UNIVERSITY SOUND
Secretary of State of:
California
Delaware
County or City of:
Los Angeles County, California
County of Newcastle, Delaware
S. VEGA
Secretary of State of:
California
County or City of:
Los Angeles County, California
6
<PAGE> 147
T. VEGA IND.
Secretary of State of:
California
Delaware
Michigan
New York
County or City of:
Los Angeles County, California
County of Newcastle, Delaware
Berrien County, Michigan
Erie County, New York
U. VEGA IND. INC.
Secretary of State of:
California
Delaware
Michigan
New York
County or City of:
Los Angeles County, California
County of Newcastle, Delaware
Berrien County, Michigan
Erie County, New York
V. VEGA INC.
Secretary of State of:
California
County or City of:
Los Angeles County, California
7
<PAGE> 148
II. Filing Jurisdictions
Secretary of State of:
California
Indiana
Michigan
Oklahoma
Tennessee
Texas
City or County:
Los Angeles County, California
St. Joseph County, Indiana
Berrien County, Michigan
Canadian County, Oklahoma
Cocke County, Tennessee
Sevier County, Tennessee
Travis County, Texas
8
<PAGE> 149
Schedule 5.16
Subsidiaries
FIRST TIER SUBSIDIARIES
EV International, Inc. is the direct owner of all of the issued and outstanding
stock of:
EVI Audio International Holding Corporation, Inc., a Delaware corporation, a
First Tier Subsidiary.
SECOND TIER SUBSIDIARIES
EVI Audio International Holding Corporation, Inc. is the owner of all the issued
or outstanding capital stock of the following Second Tier Subsidiaries except as
noted below*:
(a) Mark IV Audio Canada, Inc., a Canadian corporation;
(b) Altec Lansing International, a United Kingdom corporation;
(c) Mark IV Hong Kong Limited, a Hong Kong corporation ("Mark IV Hong
Kong"), with the exception of one share;
(d) Mark IV Audio Japan Ltd., a Japanese corporation;
(e) Mark IV Audio France S.A., a French corporation;
(f) Klark-Teknik PLC, a United Kingdom corporation ("Klark-Teknik");
- ------------------
* See Attachment A hereto for a list of changes expected to be made to
names of certain Second and Third Tier Subsidiaries following the
closing under the Stock Purchase Agreement and the consummation of the
Mergers.
<PAGE> 150
(g) Mark IV Audio (Europe) A.G., a Swiss corporation, with the exception of
three shares;
(h) Mark IV Audio Pty Ltd., an Australian corporation; and
(i) Dynacord Audio GmbH, a German corporation ("Dynacord GmbH")**, with the
exception of one share.
THIRD TIER SUBSIDIARIES
Mark IV Hong Kong is the owner of all the issued and outstanding stock of the
following Third Tier Subsidiary, except as noted below:
Audio Consultants Co., Limited, a Hong Kong corporation, with the exception of
one share.
Dynacord GmbH is the owner of all the issued and outstanding stock of the
following Third Tier Subsidiary, except as noted below:
(a) Dynacord S.A., a French corporation, with the exception of seven
shares; and
(b) EVI Audio GmbH, a German corporation.
Klark-Teknik is the owner of all the issued and outstanding stock of the
following Third Tier Subsidiaries:
(a) Cetec International Limited, a United Kingdom corporation;
(b) Rebis Audio Limited, a United Kingdom corporation;
(c) Dearden Davies Associates Limited, a United Kingdom corporation; and
- ------------------
** Beneficial ownership transferred pursuant to a Transfer Agreement on
2-10-97; registration of transfer to be effected.
2
<PAGE> 151
(d) Nivenfield (1992) Limited, a United Kingdom corporation.
FOURTH TIER SUBSIDIARIES
EVI Audio GmbH is the owner of all the issued and outstanding capital stock of
the following Fourth Tier Subsidiary:
Dynacord KG, a German partnership.
3
<PAGE> 152
Attachment A to Schedule 5.16
As of the date hereof, certain Second and Third Tier Subsidiaries are intended
to be renamed as follows:
1. Mark IV Audio (Europe) A.G. will become EVI Audio
(Switzerland) A.G.
2. Mark IV Audio Pty. Ltd. will become EVI Audio (Aust) Pty. Ltd.
3. Mark IV Audio France S.A. will become EVI Audio France S.A.
4. Mark IV Audio Japan Ltd. will become EVI Audio Japan Ltd.
5. Mark IV Audio Canada, Inc. will become EVI Audio Canada, Inc.
6. Klark-Teknik PLC will become EVI Audio (U.K.) PLC.
7. Dynacord Audio GmbH will become EVI Audio Holding Deutschland
GmbH.
8. Mark IV Hong Kong Limited will become EVI Audio (Hong Kong)
Limited.
4
<PAGE> 153
Schedule 6.1(o)
Local Counsel Jurisdictions
California
Michigan
Oklahoma
Tennessee
<PAGE> 154
Schedule 7.9(c)
Leased U.S. Inventory Locations
9900 Baldwin Place
El Monte, CA 91731
Los Angeles County
9983 Glenoaks Blvd.
Sun Valley, CA 91352
Los Angeles County
907 E. Jefferson Blvd.
Mishawaka, IN 46545
St. Joseph County
448 Post Road
Buchanan, MI 49107
Berrien County
Express One
429 Post Road
Buchanan, MI 49107
Berrien County
Building 2
901 Wayne Street
Niles, MI 49121
Berrien County
Rankin Rd.
Newport, TN 37821
Cocke County
8004 Cameron Road
Austin, TX 78754
Travis County
<PAGE> 155
Schedule 8.2(g)
Permitted Indebtedness
1. Domestic Indebtedness
As of the date hereof, funds have been deposited in an escrow account
to provide for the payment, after the Effective Date, of all of the
Indebtedness (and all accrued and unpaid interest thereon) evidenced by
a Deed of Trust Note, dated February 11, 1980, by Cetec Corporation
(predecessor corporation to LFE Corporation) to Teachers Insurance and
Annuity Association of America, in the original principal amount of
U.S. $490,000.
2
<PAGE> 156
Schedule 8.3(j)
Permitted Liens
1. UCC Financing Statements
[see attached]
2. Mark IV Audio Canada Inc.
Debtor: Mark IV Audio Canada, Inc.
345 Herbert Street
Ganaoque, Ontario, L7G 2V1
Secured Party: Pitney Bowes Leasing
a division of Pitney Bowes of
Canada Ltd.
2695 N. Sheridan Way,
Suite 200
Mississauga, Ontario, L5K 2N7
Registration No.: 920117 1018 0024 3064
Collateral: Miscellaneous office equipment
<PAGE> 157
Attachment to Schedule 8.3(j)
Uniform Commercial Code
Financing Statements
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Jurisdiction Debtor Secured Party Collateral File Date File No.
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INDIANA Electro- Voice Adams Remco, Inc. Savin 9520 3/9/95 1972127
Indiana Secretary of State Copier
- -------------------------------------------------------------------------------------------------------------------------
MICHIGAN
Michigan Secretary of State Electro- Voice, Inc. Ameritech Credit Telephone 11/2/88 C139915
Corp. Equipment
Michigan Secretary of State Electro- Voice, Inc. Ameritech Credit Telephone 6/10/91 C488243
Corp. Equipment Amendment to
C139915 -
Change of
Address of
Debtor
Michigan Secretary of State Electro- Voice, Inc. Ameritech Credit Addition of 9/29/93 35541B
Corp. excessions, Continuation
additions and of C139915
replacements to
above
Michigan Secretary of State Electro- Voice, Inc. Ameritech Credit Addition of 9/29/93 35542B
Corp. excessions,
additions and
replacements
to above
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 158
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Jurisdiction Debtor Secured Party Collateral File Date File No.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Michigan Secretary of State Electro- Voice, Inc. Mid West Commerce Copy Equipment 1/19/93 C675285
Leasing
Michigan Secretary of State Electro- Voice, Inc. Mid West Commerce Copy Equipment 2/8/93 C682853
Leasing
Michigan Secretary of State Electro- Voice, Inc. Ameritech Credit Tele- 3/22/93 29075B
Corp. communications
Equipment
Michigan Secretary of State Electro- Voice, Inc. Ameritech Credit Tele- 3/22/93 29076B
Corp. communications
Equipment
Michigan Secretary of State Electro- Voice, Inc. Mid West Commerce Copy Equipment 4/5/93 C702024
Leasing
Michigan Secretary of State Electro- Voice, Inc. Mid West
Commerce Leasing General Equipment 4/12/93 C704196
Michigan Secretary of State Electro- Voice, Inc. NBD Equipment Copy Equipment 12/15/95 D043383
Finance, Inc. Lease
- -----------------------------------------------------------------------------------------------------------------------------------
TENNESSEE
Cocke County Register of Deeds Electro- Voice, Inc. Biltmore Copy Equipment 6/16/87 42417
Leasing, Inc. and General
Office
Equipment
Lease
- -----------------------------------------------------------------------------------------------------------------------------------
OKLAHOMA
Oklahoma Secretary of State Altec Lansing Zeno Systems Copy Equipment 12/28/93 067692
Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 159
Schedule 8.4(a)
Permitted Guarantee Obligations
1. German Guarantee Obligation
Guarantee by EVI Audio Gmbh in favor of Banque Hervet to secure
indebtedness of Mark IV Audio France S.A. under a line of credit of
Mark IV Audio France S.A.
2. Hong Kong Guarantee Obligations
1. Guarantees provided by Mark IV Audio (Hong Kong) Limited dated
September 29, 1995 in favor of Audio Consultants Co. Limited
in the maximum amount of HKD $14,250,000.00.
2. Guarantee provided by Audio Consultants Co. Limited dated
September 29, 1995 in favor of Mark IV Audio (Hong Kong)
Limited in the maximum amount of HKD $14,250,000.00.
3. Guarantee of LFE Corporation
Guarantee of LFE Corporation (formerly Cetec Corporation) of the
underlease of Unit 2F, IS Rothfield Industrial Estate, Wembley, leased
by Cetec International Limited.
4. Guarantee of Mark IV Audio A.G.
Guarantee of Mark IV Audio A.G. of obligation of Shuttlesound Limited
to pay Mark Burgin a sum as compensation for loss of employment at
Shuttlesound Limited.
<PAGE> 160
Schedule 8.9(c)
Permitted Investments
1. Any Investment arising as a result of the exercise of the option
granted pursuant to an Option Agreement, dated May 26, 1995, between
A.W. Oates, Esq., and Mark IV Audio A.G. Under such Option Agreement
Mark IV Audio A.G. has an option to purchase such of the Option Shares
(as defined below) of Shuttlesound Limited as are owned by A.W. Oates,
Esq. at a price of pound sterling1.82 per share. (The "Option Shares"
are defined as 17,000 shares of stock of pound sterling1 each, fully
paid in).
2. Any Investment arising as a result of the exercise of the option
granted pursuant to an Option Agreement, dated November 30, 1994,
between Mark Patrick Leslie Burgin, Patrick Leslie Burgin (together,
the "Grantors") and Mark IV Audio A.G. Under such Option Agreement Mark
IV Audio A.G. has the right to purchase such of the Option Shares (as
defined below) as are owned by the Grantors, at a price of pound
sterling1.82 per share. (The "Option Shares" are defined as 27,500
shares of stock of pound sterling1 each, fully paid in.)
3. Loan Agreement between Mark IV Audio A.G. and Philip Alexander Mutton
in the amount of pound sterling 10,010.
2
<PAGE> 161
Schedule 8.10
Permitted Transactions with Affiliates
Mark IV Audio Canada
1. Indemnity agreements by Mark IV Audio Canada, Inc., dated March 19,
1992, in favor of the following directors and officers of Mark IV Audio Canada,
Inc.:
a. Sal H. Alfiero
b. William P. Montague
c. Clement R. Arrison
d. John J. Byrne
e. Frederic L. Cook
f. Gerald S. Lippes
g. James R. Young
h. Violet Dennison
i. Harry Bradley, Jr.
j. Douglas MacCallum
k. Paul A. McGuire
l. Robert D. Pabst
m. Clifford M. Goldlist
n. Sheldon Godfrey
2. Mark IV Audio Canada, Inc. guarantees three MasterCard accounts on
behalf of three of its employees, with a maximum liability of $15,000 Canadian
Dollars.
<PAGE> 162
EXHIBIT A-1 TO
CREDIT AGREEMENT
FORM OF REVOLVING CREDIT NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO
BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE
TERMS OF SUCH CREDIT AGREEMENT.
$_____________ New York, New York
February __, 1997
FOR VALUE RECEIVED, the undersigned, EV INTERNATIONAL, INC., a
Delaware corporation formerly named Electro-Voice, Incorporated (the
"Borrower"), hereby unconditionally promises to pay to the order of
_____________ (the "Lender") and its successors and assigns, at the office of
The Chase Manhattan Bank, located at 270 Park Avenue, New York, New York 10017,
in lawful money of the United States of America and in immediately available
funds, the aggregate unpaid principal amount of the Revolving Credit Loans made
by the Lender to the undersigned pursuant to subsection 2.1 of the Senior
Secured Credit Agreement, as defined below, which sum shall be payable on the
Termination Date.
The Borrower further agrees to pay interest in like money at
such office on the unpaid principal amount hereof from time to time at the
applicable rates per annum and on the dates set forth in subsection 4.1 of the
Senior Secured Credit Agreement until such principal amount is paid in full
(both before and after judgment).
This Revolving Credit Note is one of the Revolving Credit
Notes referred to in, and is subject in all respects to, the Credit Agreement,
dated as of February __, 1997 (as amended, supplemented, waived or otherwise
modified from time to time, the "Senior Secured Credit Agreement"), among the
Borrower, the several banks and other financial institutions from time to time
parties thereto (including the Lender), and The Chase Manhattan Bank, as
administrative agent for such banks and financial institutions, and is entitled
to the benefits thereof, is secured and guaranteed as provided therein and is
subject to optional and mandatory prepayment in whole or in part as provided
therein. Each holder hereof, by its acceptance of this Revolving Credit Note,
agrees to the terms of, and to be bound by and to observe the provisions
applicable to the Lenders contained in, the Senior Secured Credit Agreement.
Terms used herein which are defined in the Senior Secured Credit Agreement shall
have such defined meanings unless otherwise defined herein or unless the context
otherwise requires.
<PAGE> 163
2
Upon the occurrence of any one or more of the Events of
Default specified in the Senior Secured Credit Agreement, all amounts then
remaining unpaid on this Revolving Credit Note shall become, or may be declared
to be, immediately due and payable, all as provided therein.
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
EV INTERNATIONAL, INC.
By:_____________________________________
Title:
<PAGE> 164
EXHIBIT A-2 TO
CREDIT AGREEMENT
FORM OF TERM NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO
BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE
TERMS OF SUCH CREDIT AGREEMENT.
$____________ New York, New York
February __, 1997
FOR VALUE RECEIVED, the undersigned, EV INTERNATIONAL, INC., a
Delaware corporation formerly named Electro-Voice, Incorporated (the
"Borrower"), hereby unconditionally promises to pay to the order of
_____________ (the "Lender") and its successors and assigns, at the office of
The Chase Manhattan Bank, located at 270 Park Avenue, New York, New York 10017,
in lawful money of the United States of America and in immediately available
funds, the principal amount of the lesser of (a) ___________________________
DOLLARS ($____________) and (b) the aggregate unpaid principal amount of the
Term Loan made by the Lender to the undersigned pursuant to subsection 2.6 of
the Senior Secured Credit Agreement, as defined below, which sum shall be
payable in accordance with subsection 2.7(b) of the Senior Secured Credit
Agreement in __ consecutive __________ installments, commencing on _________ __,
199_, each such installment to be in an amount equal to the Lender's Term Loan
Percentage of the amount set forth next to the applicable installment date in
such subsection 2.7(b).
The Borrower further agrees to pay interest in like money at
such office on the unpaid principal amount hereof from time to time at the
applicable rates per annum and on the dates set forth in subsection 4.1 of the
Senior Secured Credit Agreement until such principal amount is paid in full
(both before and after judgment).
This Term Note is one of the Term Notes referred to in, and is
subject in all respects to, the Credit Agreement, dated as of February __, 1997
(as amended, supplemented, waived or otherwise modified from time to time, the
"Senior Secured Credit Agreement"), among the Borrower, the several banks and
other financial institutions from time to time parties thereto (including the
Lender), and The Chase Manhattan Bank, as administrative agent for such banks
and financial institutions, and is entitled to the benefits thereof, is secured
and guaranteed as provided therein and is subject to optional and mandatory
prepayment in whole or in part as provided therein. Each holder hereof, by its
acceptance of this Term Note, agrees
<PAGE> 165
2
to the terms of, and to be bound by and to observe the provisions applicable to
the Lenders contained in, the Senior Secured Credit Agreement. Terms used herein
which are defined in the Senior Secured Credit Agreement shall have such defined
meanings unless otherwise defined herein or unless the context otherwise
requires.
Upon the occurrence of any one or more of the Events of
Default specified in the Senior Secured Credit Agreement, all amounts then
remaining unpaid on this Term Note shall become, or may be declared to be,
immediately due and payable, all as provided therein.
THIS TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
EV INTERNATIONAL, INC.
By:_____________________________________
Title:
<PAGE> 166
EXHIBIT A-3 TO
CREDIT AGREEMENT
FORM OF SWING LINE NOTE
$____________ New York, New York
February __, 1997
FOR VALUE RECEIVED, the undersigned, EV INTERNATIONAL, INC., a
Delaware corporation formerly named Electro-Voice, Incorporated (the
"Borrower"), hereby unconditionally promises to pay to the order of THE CHASE
MANHATTAN BANK (the "Swing Line Lender") and its successors and assigns, at the
office of Chemical Bank, 270 Park Avenue, New York, New York 10017, in lawful
money of the United States of America and in immediately available funds, the
principal amount of the lesser of (a) __________________________ DOLLARS
($____________) and (b) the aggregate unpaid principal amount of all Swing Line
Loans made by the Swing Line Lender to the undersigned pursuant to subsection
2.5 of the Senior Secured Credit Agreement, as defined below, which sum shall be
payable on the Termination Date.
The Borrower further agrees to pay interest in like money at
such office on the unpaid principal amount hereof from time to time at the
applicable rates per annum and on the dates set forth in subsection 4.1 of the
Credit Agreement until paid in full (both before and after judgment).
This Swing Line Note is the Swing Line Note referred to in,
and is subject in all respects to, the Credit Agreement, dated as of February
__, 1997 (as amended, supplemented, waived or otherwise modified from time to
time, the "Senior Secured Credit Agreement"), among the Borrower, the several
banks and other financial institutions from time to time parties thereto
(including the Swing Line Lender), and The Chase Manhattan Bank, as
administrative agent for such banks and financial institutions, and is entitled
to the benefits thereof, is secured and guaranteed as provided therein and is
subject to optional and mandatory prepayment in whole or in part as provided
therein. Each holder hereof, by its acceptance of this Swing Line Note, agrees
to the terms of, and to be bound by and to observe the provisions applicable to
the Lenders contained in, the Senior Secured Credit Agreement. Terms used herein
which are defined in the Credit Agreement shall have such defined meanings
unless otherwise defined herein or unless the context otherwise requires.
Upon the occurrence of any one or more of the Events of
Default specified in the Credit Agreement, all amounts remaining unpaid on this
Swing Line Note shall become, or may be declared to be, immediately due and
payable all as provided therein.
<PAGE> 167
2
THIS SWING LINE NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
EV INTERNATIONAL, INC.
By:_____________________________________
Title:
<PAGE> 168
EXHIBIT B TO
CREDIT AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT
made by
EV INTERNATIONAL, INC.
and its parent
EVI AUDIO HOLDING, INC.
in favor of
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of February 10, 1997
<PAGE> 169
Page
----
SCHEDULES
1 Notice Addresses of Guarantors
2 Description of Pledged Securities
3 Location of Jurisdiction of Organization and Chief Executive Office or
Sole Place of Business
4 Location of Inventory and Equipment
5 Copyrights and Copyright Licenses; Patents and Patent Licenses; Trademarks
and Trademark Licenses
6 Existing Prior Liens
7 Accounts
8 Contracts
ANNEXES
1 Assumption Agreement
iv
<PAGE> 170
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINED TERMS.................................................. 2
1.1 Definitions..................................................... 2
1.2 Other Definitional Provisions................................... 8
SECTION 2. GUARANTEE...................................................... 8
2.1 Guarantee....................................................... 8
2.2 Right of Contribution........................................... 9
2.3 No Subrogation.................................................. 9
2.4 Amendments, etc. with respect to the Borrower Obligations....... 10
2.5 Guarantee Absolute and Unconditional............................ 10
2.6 Reinstatement................................................... 11
2.7 Payments........................................................ 12
SECTION 3. GRANT OF SECURITY INTEREST..................................... 12
SECTION 4. REPRESENTATIONS AND WARRANTIES................................. 13
4.1 Representations and Warranties of Each Guarantor.............. 13
4.2 Representations and Warranties of Each Grantor................ 13
4.2.1 Title; No Other Liens......................................... 13
4.2.2 Perfected First Priority Liens................................ 14
4.2.3 Chief Executive Office........................................ 15
4.2.4 Inventory and Equipment....................................... 15
4.2.5 Farm Products................................................. 15
4.2.6 Accounts...................................................... 15
4.2.7 Intellectual Property......................................... 15
4.3 Representations and Warranties of Each Pledgor................ 15
SECTION 5. COVENANTS...................................................... 16
5.1 Covenants of Each Guarantor................................... 16
5.2 Covenants of Each Grantor..................................... 16
5.2.1 Delivery of Instruments and Chattel Paper..................... 17
5.2.2 Maintenance of Insurance...................................... 17
5.2.3 Payment of Obligations........................................ 17
5.2.4 Maintenance of Perfected Security Interest; Further
Documentation ................................................ 17
5.2.5 Changes in Locations, Name, etc............................... 18
5.2.6 Notices....................................................... 18
5.2.7 Pledged Securities............................................ 19
i
<PAGE> 171
5.2.8 Accounts...................................................... 19
5.2.9 Maintenance of Records........................................ 19
5.2.10 Acquisition of Intellectual Property......................... 19
5.2.11 Protection of Trade Secrets.................................. 20
5.3 Covenants of Each Pledgor................................... 20
5.4 Covenants of Holdings........................................... 21
SECTION 6. REMEDIAL PROVISIONS............................................ 22
6.1 Certain Matters Relating to Accounts............................ 22
6.2 Communications with Obligors; Grantors Remain Liable............ 25
6.3 Pledged Stock................................................... 25
6.4 Proceeds to be Turned Over To Administrative Agent.............. 26
6.5 Application of Proceeds......................................... 27
6.6 Code and Other Remedies......................................... 27
6.7 Registration Rights............................................. 28
6.8 Waiver; Deficiency.............................................. 29
SECTION 7. THE ADMINISTRATIVE AGENT....................................... 29
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc..... 29
7.2 Duty of Administrative Agent.................................... 31
7.3 Execution of Financing Statements............................... 32
7.4 Authority of Administrative Agent............................... 32
7.5 Right Of Inspection............................................. 32
SECTION 8. MISCELLANEOUS.................................................. 33
8.1 Amendments in Writing........................................... 33
8.2 Notices......................................................... 33
8.3 No Waiver by Course of Conduct; Cumulative Remedies............. 33
8.4 Enforcement Expenses; Indemnification........................... 33
8.5 Successors and Assigns.......................................... 34
8.6 Set-Off......................................................... 34
8.7 Counterparts.................................................... 34
8.8 Severability.................................................... 34
8.9 Section Headings................................................ 35
8.10 Integration.................................................... 35
8.11 GOVERNING LAW.................................................. 35
8.12 Submission To Jurisdiction; Waivers............................ 35
8.13 Acknowledgements............................................... 36
8.14 WAIVER OF JURY TRIAL........................................... 36
ii
<PAGE> 172
Page
----
8.15 Additional Granting Parties.................................... 36
8.16 Releases....................................................... 36
iii
<PAGE> 173
FORM OF GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of February __, 1997,
made by EVI Audio Holding, Inc. a Delaware corporation formerly named Gulton
Holding Corp. ("Holdings"), EV International, Inc., a Delaware corporation
formerly named Electro-Voice, Incorporated (the "Borrower") and successor by
merger to the Merged Companies referred to below (Holdings and the Borrower,
together with any other Subsidiary of the Borrower that becomes a party hereto
from time to time after the date hereof, the ("Granting Parties"), in favor of
The Chase Manhattan Bank, as administrative agent (in such capacity, the
"Administrative Agent") for the banks and other financial institutions (the
"Lenders") from time to time parties to the Credit Agreement, dated as of
February __, 1997 (as amended, waived, supplemented or otherwise modified from
time to time, the "Senior Secured Credit Agreement"), among the Borrower (as
successor by merger to Gulton Acquisition Corp.), the Lenders and the
Administrative Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Senior Secured Credit Agreement, the
Lenders have severally agreed to make extensions of credit to the Borrower upon
the terms and subject to the conditions set forth therein;
WHEREAS, on the date hereof, the following transactions have
occurred or are occurring:
(i) Holdings through its subsidiary Gulton Acquisition Corp., a
Delaware corporation ("Acquisition Co."), is acquiring the capital stock
of Gulton Industries, Inc., a Delaware corporation ("GII"), the parent of
each of LFE Corporation, Mark IV Audio, Inc. and Mark IV Audio Magnetic,
Inc., each a Delaware corporation (together with Acquisition Co. and GII,
the "Merged Companies"), and the parent of the Borrower,
(ii) Acquisition Co. is merging with and into GII, with GII
surviving, and GII and the other Merged Companies are merging with and
into the Borrower, with the Borrower surviving and being renamed EV
International, Inc., and succeeding by operation of such mergers to all
the rights and obligations of Acquisition Co. under the Senior Secured
Credit Agreement and becoming the Borrower thereunder, and
(iii) the Borrower is contributing, assigning and transferring to
its wholly owned subsidiary EVI Audio International Holding Corporation,
Inc., a Delaware corporation ("EVI Audio"), all of the capital stock of
the Borrower's other subsidiaries
<PAGE> 174
2
held by the Borrower on the date hereof, other than the Excluded Foreign
Subsidiary Stock (as defined herein);
WHEREAS, the Borrower is a member of an affiliated group of
companies that includes or will include each other Granting Party;
WHEREAS, the proceeds of the extensions of credit will be used in
part to enable the Borrower to make valuable transfers to one or more of the
other Granting Party in connection with the operation of their respective
businesses;
WHEREAS, the Borrower and the other Granting Parties are engaged in
related businesses, and each such Granting Party will derive substantial direct
and indirect benefit from the making of the extensions of credit under the
Senior Secured Credit Agreement; and
WHEREAS, it is a condition to the obligation of the Lenders to make
their respective extensions of credit to the Borrower under the Senior Secured
Credit Agreement that the Granting Parties shall execute and deliver this
Agreement to the Administrative Agent for the benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Senior Secured Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Granting Party hereby agrees with the
Administrative Agent, for the ratable benefit of the Secured Parties, as
follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined
in the Senior Secured Credit Agreement and used herein shall have the meanings
given to them in the Senior Secured Credit Agreement, and the following terms
which are defined in the Code (as defined below) are used herein as so defined:
Chattel Paper, Documents, Equipment, Farm Products, Fixtures, Instruments and
Inventory.
(b) The following terms shall have the following meanings:
"Accounts": all accounts (as defined in the Code) of the Borrower,
including, without limitation all Accounts (as defined in the Senior
Secured Credit Agreement) of the Borrower.
"Agreement": this Guarantee and Collateral Agreement, as the same
may be amended, supplemented or otherwise modified from time to time.
<PAGE> 175
3
"Borrower Obligations": the collective reference to the unpaid
principal of and interest on the Loans and Reimbursement Obligations and
all other obligations and liabilities of the Borrower (including, without
limitation, interest accruing at the then applicable rate provided in the
Senior Secured Credit Agreement after the maturity of the Loans and
Reimbursement Obligations and interest accruing at the then applicable
rate provided in the Senior Secured Credit Agreement after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding) to the Administrative Agent or any Lender (or, in the case of
any Hedge Agreement referred to below, any Affiliate of any Lender),
whether direct or indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, which may arise under, out of, or
in connection with, the Senior Secured Credit Agreement, this Agreement,
the other Loan Documents and any Letter of Credit or any Hedge Agreement
entered into by the Borrower with any Lender (or, in the case of any Hedge
Agreement, any Affiliate of any Lender) or any other document made,
delivered or given in connection therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to the Administrative Agent or to
the Lenders that are required to be paid by the Borrower pursuant to the
terms of any of the foregoing agreements).
"Code": the Uniform Commercial Code as from time to time in effect
in the State of New York.
"Collateral": as defined in Section 3.
"Collateral Account Bank": The Chase Manhattan Bank or another bank
which at all times is a Lender as selected by the Borrower and notified to
the Administrative Agent in writing promptly following such selection.
"Collateral Proceeds Account": the cash collateral account
established by the relevant Grantor at an office of the Collateral Account
Bank in the name of the Administrative Agent.
"Commitments": the collective reference to the Revolving Credit
Commitments, the Swing Line Commitment, the Term Loan Commitments and the
L/C Commitment; individually, a "Commitment".
"Contracts" with respect to any Grantor, all contracts, agreements,
instruments and indentures in any form, and portions thereof (except for
the contracts listed on Schedule 8), to which such Grantor is a party or
under which such Grantor has any right, title or interest or to which such
Grantor or any property of such Grantor is subject, as the same may from
time to time be amended, supplemented or otherwise modified, including,
without limitation, (i) all rights of such Grantor to receive moneys
<PAGE> 176
4
due and to become due to it thereunder or in connection therewith, (ii)
all rights of such Grantor to damages arising thereunder and (iii) all
rights of such Grantor to perform and to exercise all remedies thereunder.
"Copyright Licenses": with respect to any Grantor, all United States
written license agreements of such Grantor providing for the grant by or
to such Grantor of any right to use any Copyright of such Grantor, other
than intercompany agreements, including, without limitation, any license
agreements listed on Schedule 5 hereto subject, in each case, to the terms
of such license agreements, and the right to prepare for sale, sell and
advertise for sale, all Inventory now or hereafter covered by such
licenses.
"Copyrights": with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States copyrights, whether
or not the underlying works of authorship have been published or
registered, United States copyright registrations and copyright
applications, and (a) all renewals thereof, (b) all income, royalties,
damages and payments now and hereafter due and/or payable with respect
thereto, including, without limitation, payments under all licenses
entered into in connection therewith, and damages and payments for past or
future infringements thereof and (c) the right to sue or otherwise recover
for past, present and future infringements and misappropriations thereof.
"Default": a "Default" as defined in the Senior Secured Credit
Agreement.
"Event of Default": an "Event of Default" as defined in the Senior
Secured Credit Agreement.
"Excluded Foreign Subsidiary Stock": one share of EVI Audio GmbH, a
German company; three shares of Mark IV Audio (Europe) AG, a Swiss
company; seven shares of Mark IV France S.A., a French company; seven
shares of Dynacord France S.A., a French company; one share of Mark IV
(Hong Kong) Limited, a Hong Kong company; and one share of Audio
Consultants Co., Limited, a Hong Kong company.
"General Fund Account": the general fund account of the relevant
Grantor established at the same office of the Collateral Account Bank as
the Collateral Proceeds Account.
"General Intangibles": all "general intangibles" as such term is
defined in Section 9-106 of the Uniform Commercial Code in effect in the
State of New York on the date hereof.
"Granting Parties": as defined in the initial paragraph hereof.
<PAGE> 177
5
"Grantor": the Borrower and each Domestic Subsidiary of the Borrower
that from time to time becomes a party hereto.
"Guarantor Obligations": with respect to any Guarantor, the
collective reference to (i) the Borrower Obligations and (ii) all
obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement or any other Loan Document to which such
Guarantor is a party, in each case whether on account of guarantee
obligations, reimbursement obligations, fees, indemnities, costs, expenses
or otherwise (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required to
be paid by such Guarantor pursuant to the terms of this Agreement or any
other Loan Document).
"Guarantors": the collective reference to each Granting Party other
than the Borrower.
"Hedge Agreements": as to any Grantor, all interest rate swaps, caps
or collar agreements or similar arrangements entered into by such Person
providing for protection against fluctuations in interest rates or
currency exchange rates or the exchange of nominal interest obligations,
either generally or under specific contingencies, including, without
limitation, all Interest Rate Protection Agreements and Permitted Hedging
Arrangements with respect to currency exchange rates.
"Intellectual Property": with respect to any Grantor, the collective
reference to such Grantor's Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trade Secrets, Trademarks and Trademark Licenses.
"Intercompany Note": with respect to any Grantor, any promissory
note evidencing loans made by such Grantor to the Borrower or any of its
Subsidiaries.
"Issuers": the collective reference to the Persons identified on
Schedule 2 as the issuers of the Pledged Stock.
"Inventory": with respect to any Grantor, all inventory (as defined
in the Code) of such Grantor, including, without limitation, all Inventory
(as defined in the Senior Secured Credit Agreement) of the Borrower.
"Loan Documents": the collective reference to the "Loan Documents"
as defined in the Senior Secured Credit Agreement.
"Loans": the collective reference to the "Loans" as defined in the
Senior Secured Credit Agreement.
"Lockbox System": the system, if any, of lockboxes and related
deposit accounts established and maintained pursuant to Section 6.1(d) of
this Agreement.
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"Notes": the collective reference to the "Notes" as defined in the
Senior Secured Credit Agreement.
"Obligations": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"Patent Licenses": with respect to any Grantor, all United States
written license agreements of such Grantor with any Person who is not an
Affiliate or a Subsidiary in connection with any of the Patents of such
Grantor or such other Person's patents, whether such Grantor is a licensor
or a licensee under any such agreement, including, without limitation, the
license agreements listed on Schedule 5, subject, in each case, to the
terms of such license agreements, and the right to prepare for sale, sell
and advertise for sale, all Inventory now or hereafter covered by such
licenses.
"Patents": with respect to any Grantor, all of such Grantor's right,
title and interest in and to all United States patents, patent
applications and patentable inventions and all reissues and extensions
thereof, including, without limitation, all patents and patent
applications identified in Schedule 5, and including, without limitation,
(a) all inventions and improvements described and claimed therein, and
patentable inventions, (b) the right to sue or otherwise recover for any
and all past, present and future infringements and misappropriations
thereof, (c) all income, royalties, damages and other payments now and
hereafter due and/or payable with respect thereto (including, without
limitation, payments under all licenses entered into in connection
therewith, and damages and payments for past or future infringements
thereof), and (d) all other rights corresponding thereto in the United
States and all reissues, divisions, continuations, continuations-in-part,
substitutes, renewals, and extensions thereof, all improvements thereon,
and all other rights of any kind whatsoever of such Grantor accruing
thereunder or pertaining thereto.
"Pledged Collateral": as defined in Section 3.
"Pledged Notes": with respect to any Pledgor, all Intercompany Notes
at any time issued to such Pledgor and all other promissory notes issued
to or held by such Pledgor (other than promissory notes issued in
connection with extensions of trade credit by any Pledgor in the ordinary
course of business).
"Pledged Securities": the collective reference to the Pledged Notes
and the Pledged Stock.
"Pledged Stock": with respect to any Pledgor, the shares of Capital
Stock listed on Schedule 2 as held by such Pledgor, together with any
other shares, stock certificates, options or rights of any nature
whatsoever in respect of the Capital Stock of any Issuer that may be
issued or granted to, or held by, such Pledgor while this Agreement is in
effect (provided that in no event shall there be pledged, nor shall any
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Pledgor be required to pledge, directly or indirectly, (x) more than 65%
of any series of the outstanding Capital Stock of any Foreign Subsidiary
pursuant to this Agreement) or (y) any Excluded Foreign Subsidiary Stock).
"Pledgor": Holdings (with respect to Pledged Stock of the Borrower),
the Borrower (with respect to Pledged Stock of EVI Audio and any other
Subsidiary of the Borrower and any other Pledged Securities held by the
Borrower) and any other Granting Party (with respect to Pledged Securities
held by such Granting Party).
"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New York
on the date hereof and, in any event, Proceeds of Pledged Securities shall
include, without limitation, all dividends or other income from the
Pledged Securities, collections thereon or distributions or payments with
respect thereto.
"Revolving Credit Commitments": the collective reference to the
"Revolving Credit Commitments" as defined in the Senior Secured Credit
Agreement.
"Secured Parties": the collective reference to the Administrative
Agent, the Lenders (including, without limitation the Issuing Lender and
the Swing Line Lender) and any Affiliate of any Lender which has entered
into any Interest Rate Protection Agreement or Permitted Hedging
Arrangement with the Borrower or any of its Subsidiaries, and their
respective successors and assigns.
"Securities Act": the Securities Act of 1933, as amended from time
to time.
"Security Collateral": as defined in Section 3.
"Trade Secrets": with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States trade secrets,
including, without limitation, know-how, processes, formulae,
compositions, designs, and confidential business and technical
information, and all rights of any kind whatsoever accruing thereunder or
pertaining thereto, including, without limitation, (a) all income,
royalties, damages and payments now and hereafter due and/or payable with
respect thereto, including, without limitation, payments under all
licenses, non-disclosure agreements and memoranda of understanding entered
into in connection therewith, and damages and payments for past or future
misappropriations thereof, and (b) the right to sue or otherwise recover
for past, present or future misappropriations thereof.
"Trademark Licenses": with respect to any Grantor, all United States
written license agreements of such Grantor with any Person who is not an
Affiliate or a Subsidiary in connection with any of the Trademarks of such
Grantor or such other Person's names or trademarks, whether such Grantor
is a licensor or a licensee under any such agreement, including, without
limitation, the license agreements listed on
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Schedule 5, subject, in each case, to the terms of such license
agreements, and the right to prepare for sale, sell and advertise for
sale, all Inventory now or hereafter covered by such licenses.
"Trademarks": with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States trademarks, service
marks, trade names, trade dress or other indicia of trade origin or
business identifiers, trademark and service mark registrations, and
applications for trademark or service mark registrations (except for
"intent to use" applications for trademark or service mark registrations
filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. Section 1051,
unless and until an Amendment to Allege Use or a Statement of Use under
Sections 1(c) and 1(d) of said Act has been filed), and any renewals
thereof, including, without limitation, each registration and application
identified in Schedule 5, and including, without limitation, (a) the right
to sue or otherwise recover for any and all past, present and future
infringements and misappropriations thereof, (b) all income, royalties,
damages and other payments now and hereafter due and/or payable with
respect thereto (including, without limitation, payments under all
licenses entered into in connection therewith, and damages and payments
for past or future infringements thereof), and (c) all other rights
corresponding thereto in the United States and all other rights of any
kind whatsoever of such Grantor accruing thereunder or pertaining thereto,
together in each case with the goodwill of the business connected with the
use of, and symbolized by, each such trademark, service mark, trade name,
trade dress or other indicia of trade origin or business identifiers.
"Vehicles": all cars, trucks, trailers, construction and earth
moving equipment and other vehicles covered by a certificate of title law
of any state and all tires and other appurtenances to any of the
foregoing.
1.2 Other Definitional Provisions. (a) The words "hereof," "herein",
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section, Schedule and Annex references are to this Agreement
unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral,
Pledged Collateral or Security Collateral, or any part thereof, when used in
relation to a Granting Party shall refer to such Granting Party's Collateral,
Pledged Collateral or Security Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
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2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Secured Parties and their respective
successors, indorsees, transferees and assigns, the prompt and complete payment
and performance by the Borrower when due and payable (whether at the stated
maturity, by acceleration or otherwise) of the Borrower Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable law, including applicable federal and state
laws relating to the insolvency of debtors.
(c) Each Guarantor agrees that the Borrower Obligations may at any
time and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guarantee contained in this Section 2 or
affecting the rights and remedies of the Administrative Agent or any other
Secured Party hereunder.
(d) The guarantee contained in this Section 2 shall remain in full
force and effect until the earlier to occur of (i) the first date on which all
the Loans, any Reimbursement Obligations, all other Borrower Obligations then
due and owing, and the obligations of each Guarantor under the guarantee
contained in this Section 2 then due and owing shall have been satisfied by
payment in full, no Letter of Credit shall be outstanding and the Commitments
shall be terminated, notwithstanding that from time to time during the term of
the Senior Secured Credit Agreement the Borrower may be free from any Borrower
Obligations or (ii) as to any Guarantor, the sale or other disposition of all of
the Capital Stock of such Guarantor permitted under the Senior Secured Credit
Agreement.
(e) No payment made by the Borrower, any of the Guarantors, any
other guarantor or any other Person or received or collected by the
Administrative Agent or any other Secured Party from the Borrower, any of the
Guarantors, any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time or from
time to time in reduction of or in payment of the Borrower Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability of any
Guarantor hereunder which shall, notwithstanding any such payment (other than
any payment made by such Guarantor in respect of the Borrower Obligations or any
payment received or collected from such Guarantor in respect of the Borrower
Obligations), remain liable for the Borrower Obligations up to the maximum
liability of such Guarantor hereunder until the earlier to occur of (i) the
first date on which the Loans, any Reimbursement Obligations, and all other
Borrower Obligations then due and owing, are paid in full, no Letter of Credit
shall be outstanding and the Commitments are terminated or (ii) the sale or
other disposition of all of the Capital Stock of such Guarantor permitted under
the Senior Secured Credit Agreement.
2.2 Right of Contribution. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder,
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such Guarantor shall be entitled to seek and receive contribution from and
against any other Guarantor hereunder which has not paid its proportionate share
of such payment. Each Guarantor's right of contribution shall be subject to the
terms and conditions of Section 2.3. The provisions of this Section 2.2 shall in
no respect limit the obligations and liabilities of any Guarantor to the
Administrative Agent and the other Secured Parties, and each Guarantor shall
remain liable to the Administrative Agent and the Lenders for the full amount
guaranteed by such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Administrative Agent or any other Secured Party, no Guarantor shall be
entitled to be subrogated to any of the rights of the Administrative Agent or
any other Secured Party against the Borrower or any other Guarantor or any
collateral security or guarantee or right of offset held by the Administrative
Agent or any other Secured Party for the payment of the Borrower Obligations,
nor shall any Guarantor seek or be entitled to seek any contribution or
reimbursement from the Borrower or any other Guarantor in respect of payments
made by such Guarantor hereunder, until all amounts owing to the Administrative
Agent and the other Secured Parties by the Borrower on account of the Borrower
Obligations are paid in full, no Letter of Credit shall be outstanding and the
Commitments are terminated. If any amount shall be paid to any Guarantor on
account of such subrogation rights at any time when all of the Borrower
Obligations shall not have been paid in full, such amount shall be held by such
Guarantor in trust for the Administrative Agent and the other Secured Parties,
segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor, be turned over to the Administrative Agent in the exact form
received by such Guarantor (duly indorsed by such Guarantor to the
Administrative Agent, if required), to be applied against the Borrower
Obligations, whether matured or unmatured, in such order as the Administrative
Agent may determine.
2.4 Amendments, etc. with respect to the Borrower Obligations. To
the maximum extent permitted by law, each Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against any
Guarantor and without notice to or further assent by any Guarantor, any demand
for payment of any of the Borrower Obligations made by the Administrative Agent
or any other Secured Party may be rescinded by the Administrative Agent or such
other Secured Party and any of the Borrower Obligations continued, and the
Borrower Obligations, or the liability of any other Person upon or for any part
thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Administrative Agent or any other Secured Party, and the Senior
Secured Credit Agreement and the other Loan Documents and any other documents
executed and delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the Administrative Agent (or
the Required Lenders, as the case may be) may deem advisable from time to time,
and any collateral security, guarantee or right of offset at any time held by
the Administrative Agent or any other Secured Party for the payment of the
Borrower Obligations may be sold,
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11
exchanged, waived, surrendered or released. Neither the Administrative Agent nor
any other Secured Party shall have any obligation to protect, secure, perfect or
insure any Lien at any time held by it as security for the Borrower Obligations
or for the guarantee contained in this Section 2 or any property subject
thereto, except to the extent required by applicable law.
2.5 Guarantee Absolute and Unconditional. Each Guarantor waives, to
the maximum extent permitted by applicable law, any and all notice of the
creation, renewal, extension or accrual of any of the Borrower Obligations and
notice of or proof of reliance by the Administrative Agent or any other Secured
Party upon the guarantee contained in this Section 2 or acceptance of the
guarantee contained in this Section 2; the Borrower Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon the guarantee
contained in this Section 2; and all dealings between the Borrower and any of
the Guarantors, on the one hand, and the Administrative Agent and the other
Secured Parties, on the other hand, likewise shall be conclusively presumed to
have been had or consummated in reliance upon the guarantee contained in this
Section 2. Each Guarantor waives, to the maximum extent permitted by applicable
law, diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon the Borrower or any of the other Guarantors with
respect to the Borrower Obligations. Each Guarantor understands and agrees, to
the extent permitted by law, that the guarantee contained in this Section 2
shall be construed as a continuing, absolute and unconditional guarantee of
payment. Each Guarantor hereby waives, to the maximum extent permitted by
applicable law, any and all defenses that it may have arising out of or in
connection with any and all of the following: (a) the validity or enforceability
of the Senior Secured Credit Agreement or any other Loan Document, any of the
Borrower Obligations or any other collateral security therefor or guarantee or
right of offset with respect thereto at any time or from time to time held by
the Administrative Agent or any other Secured Party, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by the Borrower against the Administrative
Agent or any other Secured Party, (c) any change in the time, place, manner or
place of payment, amendment, or waiver or increase in the Obligations, (d) any
exchange, taking, or release of Collateral, (e) any change in the corporate
structure or existence of the Borrower, (f) any application of Collateral to
Obligations or (g) any other circumstance whatsoever (with or without notice to
or knowledge of the Borrower or such Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Borrower for the
Borrower Obligations, or of such Guarantor under the guarantee contained in this
Section 2, in bankruptcy or in any other instance. When making any demand
hereunder or otherwise pursuing its rights and remedies hereunder against any
Guarantor, the Administrative Agent or any other Secured Party may, but shall be
under no obligation to, make a similar demand on or otherwise pursue such rights
and remedies as it may have against the Borrower, any other Guarantor or any
other Person or against any collateral security or guarantee for the Borrower
Obligations or any right of offset with respect thereto, and any failure by the
Administrative Agent or any other Secured Party to make any such demand, to
pursue such other rights or remedies or to collect any payments from the
Borrower, any other Guarantor or any other Person or to realize upon any such
collateral security or guarantee or to exercise any such right
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of offset, or any release of the Borrower, any other Guarantor or any other
Person or any such collateral security, guarantee or right of offset, shall not
relieve any Guarantor of any obligation or liability hereunder, and shall not
impair or affect the rights and remedies, whether express, implied or available
as a matter of law, of the Administrative Agent or any other Secured Party
against any Guarantor. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings.
2.6 Reinstatement. The guarantee contained in this Section 2 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations is rescinded or
must otherwise be restored or returned by the Administrative Agent or any other
Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrower or any Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the office of the Administrative Agent located at 270
Park Avenue, New York, New York 10017.
SECTION 3. GRANT OF SECURITY INTEREST
Each Granting Party (1) that is a Grantor hereby grants to the
Administrative Agent, for the ratable benefit of the Secured Parties, a security
interest in all of the following property now owned or at any time hereafter
acquired by such Grantor or in which such Grantor now has or at any time in the
future may acquire any right, title or interest (collectively, the
"Collateral"), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations of such Grantor:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Documents;
(e) all Equipment (other than Vehicles);
(f) all General Intangibles;
(g) all Instruments;
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(h) all Intellectual Property;
(i) all Inventory;
(j) all books and records pertaining to any of the foregoing;
(k) the Collateral Proceeds Account; and
(l) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing and all collateral security and guarantees
given by any Person with respect to any of the foregoing;
and (2) that is a Pledgor hereby grants to the Administrative Agent, for the
ratable benefit of the Secured Parties, a security interest in all of the
Pledged Securities now owned or at any time hereafter acquired by such Pledgor,
and any Proceeds thereof (the "Pledged Collateral"; the Collateral (if any) and
the Pledged Collateral (if any) of any Granting Party being collectively
referred to herein as such Granting Party's "Security Collateral");
provided however, that (x) Collateral shall not include any Pledged Collateral,
or any property or assets specifically excluded from Pledged Collateral
(including any Excluded Foreign Subsidiary Stock, and any Capital Stock of any
Foreign Subsidiary in excess of 65% of any series of such stock); and (y) in the
case of any Instruments, Contracts, Chattel Paper, General Intangibles,
Copyright Licenses, Patent Licenses, Trademark Licenses or other contracts or
agreements with or issued by Persons (other than a Subsidiary of the Borrower)
that would otherwise be included in the Security Collateral, no security
interest in the right, title and interest of any Granting Party thereunder or
therein will be granted pursuant to this Section 2 (and such Instruments,
Contracts, Chattel Paper, General Intangibles, Copyright Licenses, Patent
Licenses, Trademark Licenses or other contracts or agreements shall not be
deemed to constitute a part of the Security Collateral) for so long as, and to
the extent that, the granting of a security interest in the right, title and
interest of such Grantor thereunder or therein pursuant to the terms hereof
would result in a breach, default or termination of such Instruments, Contracts,
Chattel Paper, General Intangibles, Copyright Licenses, Patent Licenses,
Trademark Licenses or other contracts or agreements and (z) in the case of the
Equipment that would otherwise be included in the foregoing Collateral, the
foregoing will not be deemed to grant a security interest therein under this
Agreement (and such Equipment shall not be deemed to constitute a part of the
Collateral) if such Equipment is subject to a Lien permitted by subsection
8.3(h) of the Senior Secured Credit Agreement.
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SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Each Guarantor. To induce the
Administrative Agent and the Lenders to enter into the Senior Secured Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Guarantor hereby represents and warrants
to the Administrative Agent and each other Secured Party that the
representations and warranties set forth in Section 5 of the Senior Secured
Credit Agreement as they relate to such Guarantor or to the Loan Documents to
which such Guarantor is a party or to the Transaction Documents to which such
Guarantor is a party, each of which representations and warranties is hereby
incorporated herein by reference, are true and correct in all material respects,
and the Administrative Agent and each other Secured Party shall be entitled to
rely on each of such representations and warranties as if fully set forth
herein; provided that each reference in each such representation and warranty to
the Borrower's knowledge shall, for the purposes of this Section 4.1, be deemed
to be a reference to such Guarantor's knowledge.
4.2 Representations and Warranties of Each Grantor. To induce the
Administrative Agent and the Lenders to enter into the Senior Secured Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Grantor hereby represents and warrants
to the Administrative Agent and each other Secured Party that:
4.2.1 Title; No Other Liens. Except for the security interest
granted to the Administrative Agent, for the ratable benefit of the Secured
Parties, pursuant to this Agreement and the other Liens permitted to exist on
such Grantor's Collateral by the Senior Secured Credit Agreement (including
without limitation subsection 8.3 thereof), such Grantor owns each item of such
Grantor's Collateral free and clear of any and all Liens. Except as set forth on
Schedule 6, no financing statement or other similar public notice with respect
to all or any part of such Grantor's Collateral is on file or of record in any
public office, except such as have been filed in favor of the Administrative
Agent, for the ratable benefit of the Secured Parties, pursuant to this
Agreement or as are permitted by the Senior Secured Credit Agreement (including
without limitation subsection 8.3 thereof) or any other Loan Document or for
which termination statements will be delivered on the Closing Date.
4.2.2 Perfected First Priority Liens. (i) This Agreement is
effective to create, as collateral security for the Obligations of such Grantor,
valid and enforceable Liens on such Grantor's Collateral in favor of the
Administrative Agent, for the benefit of the Secured Parties, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditor's rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
(ii) Except with respect to (A) Liens on Equipment constituting
Fixtures, (B) any rights reserved in favor of the United States government as
required under law, (C) Liens
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upon Patents, Patent Licenses, Trademarks and Trademark Licenses to the extent
that (I) such Liens cannot be perfected by the filing of financing statements
under the Uniform Commercial Code or by the filing and acceptance thereof in the
United States Patent and Trademark Office or (II) such Patents, Patent Licenses,
Trademarks and Trademark Licenses are not, individually or in the aggregate,
material to the business of the Borrower and its Subsidiaries taken as a whole,
(D) Liens on uncertificated securities, (E) Liens on Collateral the perfection
of which requires filings in or other actions under the laws of jurisdictions
outside of the United States of America, any State, territory or dependency
thereof or the District of Columbia (except to the extent that such filings or
other actions have been made or taken), (F) Liens on contracts or receivables on
which the United States of America or any department, agency, or instrumentality
thereof is the obligor, (G) Liens on Proceeds of receivables and Inventory,
until transferred to or deposited in the Collateral Proceeds Account (if any),
and (H) claims of creditors of Persons receiving goods included as Collateral
for "sale or return" within the meaning of Section 2-326 of the Uniform
Commercial Code of the applicable jurisdiction, upon filing of the financing
statements delivered to the Administrative Agent by such Grantor on the
Effective Date in the jurisdictions listed on Schedule 5.14 to the Senior
Secured Credit Agreement (which financing statements are in proper form for
filing in such jurisdictions) and the recording of the Mortgages (and the
recording of any Patent and Trademark Security Agreement, as set forth therein,
and the making of filings after the Effective Date in any other jurisdiction as
may be necessary under any Requirement of Law) and the delivery to, and
continuing possession by, the Administrative Agent of all Instruments, Chattel
Paper and Documents a security interest in which is perfected by possession, the
Liens created pursuant to this Agreement will constitute valid Liens on and, to
the extent provided herein, perfected security interests in such Grantor's
Collateral (but as to the Copyrights and Copyright Licenses and accounts arising
therefrom, only to the extent the Uniform Commercial Code of the relevant
jurisdiction, from time to time in effect, is applicable) in favor of the
Administrative Agent for the benefit of the Secured Parties, which Liens will be
prior to all other Liens of all other Persons, except for Liens permitted
pursuant to the Loan Documents (including, without limitation, those permitted
to exist pursuant to subsection 8.3 of the Senior Secured Credit Agreement), and
which Liens are enforceable as such as against all other Persons (except to the
extent that the recording of an assignment or other transfer of title to the
Administrative Agent in the United States Patent and Trademark Office may be
necessary for enforceability, and except, with respect to goods only, buyers in
the ordinary course of business to the extent provided in Section 9-307(1) of
the Code), except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law) or by an implied
covenant of good faith and fair dealing.
4.2.3 Chief Executive Office. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business are specified on Schedule 3.
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4.2.4 Inventory and Equipment. On the date hereof, such Grantor's
Inventory and Equipment (other than mobile goods) are kept at the locations
listed on Schedule 4.
4.2.5 Farm Products. None of such Grantor's Collateral constitutes,
or is the Proceeds of, Farm Products.
4.2.6 Accounts. The amount represented by such Grantor to the
Administrative Agent or the other Secured Parties from time to time as owing by
each account debtor or by all account debtors in respect of such Grantor's
Accounts will at such time be the correct amount, in all material respects,
actually owing by such account debtor or debtors thereunder, except to the
extent that appropriate reserves therefor have been established on the books of
such Grantor in accordance with GAAP. The places where such Grantor keeps its
records concerning such Grantor's Accounts are listed on Schedule 7 or such
other location or locations of which such Grantor shall have provided prior
written notice to the Administrative Agent pursuant to Section 5.2.5 hereof.
Unless otherwise indicated in writing to the Administrative Agent, each Account
of such Grantor arises out of a bona fide sale and delivery of goods or
rendition of services by such Grantor. Such Grantor has not given any account
debtor any deduction in respect of the amount due under any such Account, except
as such Grantor may otherwise advise the Administrative Agent in writing.
4.2.7 Intellectual Property. Schedule 5 lists all material
Trademarks and material Patents (including, without limitation, Trademarks and
Patents registered in the United States Patent and Trademark Office) owned by
such Grantor in its own name as of the date hereof and all material Trademark
Licenses and all material Patent Licenses (including, without limitation,
material Trademark Licenses for registered Trademarks and material Patent
Licenses for registered Patents) owned by such Grantor in its own name as of the
date hereof.
4.3 Representations and Warranties of Each Pledgor. To induce the
Administrative Agent and the Lenders to enter into the Senior Secured Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Pledgor hereby represents and warrants
to the Administrative Agent and each other Secured party that:
4.3.1 The shares of Pledged Stock pledged by such Pledgor hereunder
constitute (i) in the case of each Domestic Subsidiary, all the issued and
outstanding shares of all classes of the Capital Stock of each such Domestic
Subsidiary owned by such Pledgor and (ii) in the case of each Foreign Subsidiary
such percentage (not more than 65%) as is specified on Schedule 2 of all the
issued and outstanding shares of all classes of the Capital Stock of each such
Foreign Subsidiary.
4.3.2 All the shares of the Pledged Stock pledged by such Pledgor
hereunder have been duly and validly issued and are fully paid and
nonassessable.
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4.3.3 Such Pledgor is the record and beneficial owner of, and has
good and valid title to, the Pledged Securities pledged by it hereunder, free of
any and all Liens or options in favor of, or claims of, any other Person, except
the security interest created by this Agreement and Liens imposed by operation
of law.
4.3.4 Upon delivery to the Administrative Agent of the certificates
evidencing the Pledged Securities held by such Pledgor, the security interest
created by this Agreement in such Pledged Collateral, assuming the continuing
possession of such Pledged Securities by the Administrative Agent, will
constitute a valid, perfected first priority security interest in such Pledged
Collateral to the extent provided in the Code, enforceable in accordance with
its terms against all creditors of such Pledgor and any persons purporting to
purchase such Pledged Collateral from such Pledgor, except as enforceability may
be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
SECTION 5. COVENANTS
5.1 Covenants of Each Guarantor. Each Guarantor covenants and agrees
with the Administrative Agent and the other Secured Parties that, from and after
the date of this Agreement until the Loans, any Reimbursement Obligations, and
all other Obligations then due and owing, shall have been paid in full, no
Letter of Credit shall be outstanding and the Commitments shall have terminated,
such Guarantor shall take, or shall refrain from taking, as the case may be,
each action that is necessary to be taken or not taken, as the case may be, so
that no Default or Event of Default is caused by the failure to take such action
or to refrain from taking such action by such Guarantor or any of its
Subsidiaries.
5.2 Covenants of Each Grantor. Each Grantor covenants and agrees
with the Administrative Agent and the other Secured Parties that, from and after
the date of this Agreement until the Loans, any Reimbursement Obligations, and
all other Obligations then due and owing, shall have been paid in full, no
Letter of Credit shall be outstanding and the Commitments shall have terminated:
5.2.1 Delivery of Instruments and Chattel Paper. If any amount
payable under or in connection with any of such Grantor's Collateral shall be or
become evidenced by any Instrument or Chattel Paper, such Instrument or Chattel
Paper shall be promptly delivered to the Administrative Agent, duly indorsed in
a manner satisfactory to the Administrative Agent, to be held as Collateral
pursuant to this Agreement.
5.2.2 Maintenance of Insurance. (a) Such Grantor will maintain, with
financially sound and reputable companies, insurance policies (i) insuring such
Grantor's Inventory and Equipment against loss by fire, explosion, theft and
such other casualties as may be reasonably satisfactory to the Administrative
Agent and (ii) insuring such Grantor, the Administrative Agent and the other
Secured Parties against liability for personal injury and
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18
property damage relating to such Inventory and Equipment, such policies to be in
such form and amounts and having such coverage as may be reasonably satisfactory
to the Administrative Agent.
(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Administrative Agent of
written notice thereof, (ii) name the Administrative Agent as an additional
insured party or loss payee, (iii) include deductibles consistent with past
practice or otherwise reasonably satisfactory to the Administrative Agent and
(iv) be reasonably satisfactory in all other respects to the Administrative
Agent.
(c) Such Grantor (if the Borrower) shall deliver to the
Administrative Agent and the other Secured Parties reports of one or more
reputable insurance brokers of the individual insurance companies with respect
to such insurance as the Administrative Agent may from time to time reasonably
request.
5.2.3 Payment of Obligations. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon such Grantor's Collateral or in respect of income or profits therefrom, as
well as all claims of any kind (including, without limitation, claims for labor,
materials and supplies) against or with respect to such Grantor's Collateral,
except that no such tax, assessment, charge or levy need be paid or satisfied if
the amount or validity thereof is currently being contested in good faith by
appropriate proceedings, reserves in conformity with GAAP with respect thereto
have been provided on the books of such Grantor and such proceedings would not
reasonably be expected to result in the sale, forfeiture or loss of any material
portion of the Collateral or any interest therein.
5.2.4 Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Grantor shall maintain the security interest created by
this Agreement in such Grantor's Collateral as a perfected security interest
having at least the priority described in Section 4.2.2 and shall defend such
security interest against the claims and demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Administrative Agent from time
to time statements and schedules further identifying and describing such
Grantor's Collateral and such other reports in connection with such Grantor's
Collateral as the Administrative Agent may reasonably request in writing, all in
reasonable detail.
(c) At any time and from time to time, upon the written request of
the Administrative Agent, and at the sole expense of such Grantor, such Grantor
will promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted by
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19
such Grantor, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code (or other similar
laws) in effect in any jurisdiction with respect to the security interests
created hereby.
5.2.5 Changes in Locations, Name, etc. Such Grantor will not, except
upon not less than 30 days' prior written notice to the Administrative Agent and
delivery to the Administrative Agent, if applicable, of a written supplement to
Schedule 4 showing any additional location at which such Grantor's Inventory or
Equipment shall be kept:
(i) permit any of such Grantor's Inventory or Equipment to be kept
at a location other than the location(s) applicable to such Grantor listed
on Schedule 4 (other than Inventory or Equipment being conveyed, sold,
leased, assigned, transferred or otherwise disposed of as permitted by the
Senior Secured Credit Agreement);
(ii) change the location of its chief executive office or sole place
of business from that referred to in Section 4.2.3; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become misleading;
provided that, prior to taking any such action, or promptly after receiving a
written request therefor from the Administrative Agent, such Grantor shall
deliver to the Administrative Agent all additional executed financing statements
and other documents reasonably requested by the Administrative Agent to maintain
the validity, perfection and priority of the security interests provided for
herein.
5.2.6 Notices. Such Grantor will advise the Administrative Agent
promptly, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Senior Secured Credit Agreement) on any of such Grantor's
Collateral which would adversely affect the ability of the Administrative Agent
to exercise any of its remedies hereunder; and
(b) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of such
Grantor's Collateral or on the security interests created hereby.
5.2.7 Pledged Securities. In the case of each Grantor which is an
Issuer, such Issuer agrees that (i) it will be bound by the terms of this
Agreement relating to the Pledged Stock issued by it and will comply with such
terms insofar as such terms are applicable to it, (ii) it will notify the
Administrative Agent promptly in writing of the occurrence of any of the events
described in Section 5.3.1 with respect to the Pledged Stock issued by it and
(iii) the
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20
terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with
respect to all actions that may be required of it pursuant to Section 6.3(c) or
6.7 with respect to the Pledged Stock issued by it.
5.2.8 Accounts. (a) Other than in the ordinary course of business,
such Grantor will not (i) grant any extension of the time of payment of any of
such Grantor's Accounts, (ii) compromise or settle any such Account for less
than the full amount thereof, (iii) release, wholly or partially, any Person
liable for the payment of any Account, (iv) allow any credit or discount
whatsoever on any such Account or (v) amend, supplement or modify any Account in
any manner that could adversely affect the value thereof.
(b) Such Grantor will deliver to the Administrative Agent a copy of
each material demand, notice or document received by it that questions or calls
into doubt the validity or enforceability of more than 10% of the aggregate
amount of the then outstanding Accounts.
5.2.9 Maintenance of Records. Such Grantor will keep and maintain at
its own cost and expense reasonably satisfactory and complete records of its
Collateral, including, without limitation, a record of all payments received and
all credits granted with respect to such Collateral, and shall mark such records
to evidence this Agreement and the Liens and the security interests created
hereby. For the Administrative Agent's and the other Secured Parties' further
security, the Administrative Agent, for the benefit of the Secured Parties,
shall have a security interest in all of such Grantor's books and records
pertaining to such Grantor's Collateral.
5.2.10 Acquisition of Intellectual Property. Within 45 days after
the end of each calendar quarter, such Grantor will notify the Administrative
Agent of any acquisition by such Grantor of (i) any material registration of
Copyright, Patent or Trademark or (ii) any exclusive rights under a material
Copyright License, Patent License or Trademark License, and shall take such
actions as may be reasonably requested by the Administrative Agent (but only to
the extent such actions are within such Grantor's control) to perfect the
security interest granted to the Administrative Agent and the other Secured
Parties therein (including, without limitation, (x) the execution and delivery
of a Patent and Trademark Security Agreement (or amendments to any such
agreement previously executed or delivered by such Grantor) or other comparable
agreements with respect to Copyrights or Copyright Licenses and (y) the making
of appropriate filings (I) of financing statements under the Uniform Commercial
Code of any applicable jurisdiction and/or (II) in the United States Patent and
Trademark Office, or with respect to Copyrights and Copyright Licenses, other
applicable office).
5.2.11 Protection of Trade Secrets. Such Grantor shall take all
steps which it deems commercially reasonable to preserve and protect the secrecy
of all material Trade Secrets of such Grantor.
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5.3 Covenants of Each Pledgor. Each Pledgor covenants and agrees
with the Administrative Agent and the other Secured Parties that, from and after
the date of this Agreement until the Loans, any Reimbursement Obligations, and
all other Obligations then due and owing shall have been paid in full, no Letter
of Credit shall be outstanding and the Commitments shall have terminated:
5.3.1 If such Pledgor shall become entitled to receive or shall
receive any stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights in respect of the Capital
Stock of any Issuer, whether in addition to, in substitution of, as a conversion
of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect
thereof, such Pledgor shall accept the same as the agent of the Administrative
Agent and the other Secured Parties, hold the same in trust for the
Administrative Agent and deliver the same forthwith to the Administrative Agent
in the exact form received, duly indorsed by such Pledgor to the Administrative
Agent, if required, together with an undated stock power covering such
certificate duly executed in blank by such Grantor and with, if the
Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations (provided that in no event shall there be pledged,
nor shall any Pledgor be required to pledge, more than 65% of any series of the
outstanding Capital Stock of any Foreign Subsidiary pursuant to this Agreement).
Any sums paid upon or in respect of the Pledged Securities upon the liquidation
or dissolution of any Issuer or Maker (except any liquidation or dissolution of
any Subsidiary of the Borrower in accordance with the Senior Secured Credit
Agreement) shall be paid over to the Administrative Agent to be held by it
hereunder as additional collateral security for the Obligations, and in case any
distribution of capital shall be made on or in respect of the Pledged Stock or
any property shall be distributed upon or with respect to the Pledged Stock
pursuant to the recapitalization or reclassification of the capital of any
Issuer or pursuant to the reorganization thereof, the property so distributed
shall, unless otherwise subject to a perfected security interest in favor of the
Administrative Agent, be delivered to the Administrative Agent to be held by it
hereunder as additional collateral security for the Obligations. If any sums of
money or property so paid or distributed in respect of the Pledged Securities
shall be received by such Pledgor, such Pledgor shall, until such money or
property is paid or delivered to the Administrative Agent, hold such money or
property in trust for the Secured Parties, segregated from other funds of such
Pledgor, as additional collateral security for the Obligations.
5.3.2 Without the prior written consent of the Administrative Agent,
such Pledgor will not (except pursuant to a transaction permitted by the Senior
Secured Credit Agreement) (i) vote to enable, or take any other action to
permit, any Issuer to issue any stock or other equity securities of any nature
or to issue any other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities of any nature of
any Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or
grant any option with respect to, the Pledged Securities or Proceeds thereof or
(iii) create, incur or permit to exist any Lien or option in favor of, or any
claim of any Person with respect to, any
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22
of the Pledged Securities or Proceeds thereof, or any interest therein, except
for the security interests created by this Agreement or Liens arising by
operation of law.
5.3.3 Such Pledgor shall maintain the security interest created by
this Agreement in such Pledgor's Pledged Collateral as a perfected security
interest having at least the priority described in Section 4.3.4 and shall
defend such security interest against the claims and demands of all Persons
whomsoever. At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of such Pledgor, such Pledgor will
promptly and duly execute and deliver such further instruments and documents and
take such further actions as the Administrative Agent may reasonably request for
the purpose of obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted by such Pledgor.
5.4 Covenants of Holdings. Holdings covenants and agrees with the
Administrative Agent and the other Secured Parties that, from and after the date
of this Agreement until the Loans, any Reimbursement Obligations, and all other
Obligations then due and owing have been paid in full, no Letter of Credit shall
be outstanding and the Commitments shall have terminated:
5.4.1 Holding shall not conduct or otherwise engage, in any business
or operations other than (i) transactions contemplated by the Loan Documents or
the provision of administrative, legal, accounting and management services to or
on behalf of the Borrower or any of its Subsidiaries, (ii) the ownership of the
Capital Stock of the Borrower (or any successor thereto), and the exercise of
rights and performance of obligations in connection therewith, (iii) the entry
into, and exercise of rights and performance of obligations in respect of, (A)
the Transaction Documents and Senior Subordinated Notes Documents to which
Holdings is a party, this Guarantee and Collateral Agreement and the other Loan
Documents to which Holdings is a party, and any other agreement to which
Holdings is a party on the date hereof, in each case as amended, supplemented,
waived or otherwise modified from time to time, and any refinancings,
refundings, renewals or extensions thereof, (B) contracts and agreements with
officers, directors and employees of the Holdings or a Subsidiary thereof
relating to their employment or directorships, (C) insurance policies and
related contracts and agreements, and (D) equity subscription agreements,
registration rights agreements, voting and other stockholder agreements,
engagement letters, underwriting agreements and other agreements in respect of
its equity securities or any offering, issuance or sale thereof, (iv) the
offering, issuance and sale of its equity securities, (v) the filing of
registration statements, and compliance with applicable reporting and other
obligations, under federal, state or other securities laws, (vi) the listing of
its equity securities and compliance with applicable reporting and other
obligations in connection therewith, (vii) the retention of transfer agents,
private placement agents, underwriters, counsel, accountants and other advisors
and consultants, (viii) the performance of obligations under and compliance with
its certificate of incorporation and by-laws, or any applicable law, ordinance,
regulation, rule, order, judgment, decree or permit, including, without
limitation, as a result of or in connection with the activities of the Borrower
and its Subsidiaries, (ix) the incurrence and payment of its operating and
business expenses
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23
and any taxes for which it may be liable, and (x) other activities incidental or
related to the foregoing.
5.4.2 Holdings shall not own, lease, manage or otherwise operate any
properties or assets (other than in connection with the activities described in
Section 5.4.1 above), or incur, create, assume or suffer to exist any
Indebtedness or Guarantee Obligations of Holdings (other than such as may be
incurred, created or assumed or exist in connection with the activities
described in Section 5.4.1 above.
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Accounts. (a) At any time and from
time to time after the occurrence and during the continuance of an Event of
Default, the Administrative Agent shall have the right to make test
verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and the relevant Grantor shall furnish all such
assistance and information as the Administrative Agent may require in connection
with such test verifications. At any time and from time to time after the
occurrence and during the continuance of an Event of Default, upon the
Administrative Agent's reasonable request and at the expense of the relevant
Grantor, such Grantor shall cause independent public accountants or others
reasonably satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts.
(b) The Administrative Agent hereby authorizes each Grantor to
collect such Grantor's Accounts and the Administrative Agent may curtail or
terminate said authority at any time after the occurrence and during the
continuance of an Event of Default. If required by the Administrative Agent at
any time after the occurrence and during the continuance of an Event of Default,
any Proceeds constituting collections of such Accounts, when collected by such
Grantor (excluding any such collections through the Lockbox System), (i) shall
be forthwith (and, in any event, within two Business Days) deposited by such
Grantor in the exact form received, duly indorsed by such Grantor to the
Administrative Agent if required, in the Collateral Proceeds Account established
by such Grantor maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the
account of the Secured Parties only as provided in Section 6.5, and (ii) until
so turned over, shall be held by such Grantor in trust for the Administrative
Agent and the other Secured Parties, segregated from other funds of such
Grantor. Each such deposit of Proceeds of Accounts shall be accompanied by a
report identifying in reasonable detail the nature and source of the payments
included in the deposit. All Proceeds constituting collections of Accounts while
held by the Collateral Account Bank (or by any Guarantor in trust for the
benefit of the Administrative Agent and the other Secured Parties) shall
continue to be collateral security for all of the Obligations and shall not
constitute payment thereof until applied as hereinafter provided. At any time
when an Event of Default has occurred and is continuing, at the Administrative
Agent's election, the Administrative Agent may apply all or any part of the
funds on deposit in the Collateral Proceeds Account established by the relevant
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Grantor to the payment of the Obligations of such Grantor then due and owing,
such application to be made as set forth in Section 6.5 hereof. So long as no
Event of Default has occurred and is continuing, the funds on deposit in the
Collateral Proceeds Account shall be remitted as provided in Section 6.9 hereof.
At any time when an Event of Default has occurred and is continuing, at the
Administrative Agent's request, each Grantor shall deliver to the Administrative
Agent all original and other documents evidencing, and relating to, the
agreements and transactions which gave rise to such Grantor's Accounts,
including, without limitation, all statements relating to such Grantor's
Accounts.
(c) At any time and from time to time after the occurrence and
during the continuance of an Event of Default, at the Administrative Agent's
request, each Grantor shall deliver to the Administrative Agent all original and
other documents evidencing, and relating to, the agreements and transactions
which gave rise to such Grantor's Accounts, including, without limitation, all
original orders, invoices and shipping receipts.
(d) Lockbox System; Collateral Proceeds Account. (i) Solely to the
extent required under subsection 8.18(a) of the Senior Secured Credit Agreement,
on or prior to the date required pursuant to such subsection 8.18(a), each
Grantor shall (subject to subsection 8.18(a) of the Senior Secured Credit
Agreement) establish or cause to be established in the name of the
Administrative Agent, and subject to the control of the Administrative Agent
pursuant to such Grantor's Lockbox Agreements, for the benefit of the
Administrative Agent and the other Secured Parties, such Grantor's Lockbox
System into which the Proceeds of all such Grantor's Accounts (except as
permitted under and in accordance with subsection 8.18(a) of the Senior Secured
Credit Agreement) shall be deposited and forwarded to the Collateral Account
Bank in accordance with and to the extent and when required under such Lockbox
Agreements. On and after the date, if any, on which any Grantor is required to
establish any Lockbox System for so long as such Grantor is required to maintain
such system (subject to subsection 8.18(a) of the Senior Secured Credit
Agreement), (x) such Grantor shall ensure that all account debtors in respect of
such Grantor's Accounts payable in Dollars shall have been given instructions
reasonably satisfactory to the Administrative Agent directing such account
debtors to make all payments on such Accounts by means of deposits into such
Grantor's Lockbox System, (y) without the prior consent of the Administrative
Agent (which consent shall not be unreasonably withheld), such Grantor shall
not, in a manner materially adverse to the Secured Parties, change the form of
any such instructions given to account debtors, and (z) unless and until the
Administrative Agent shall have advised such Grantor to the contrary, such
Grantor shall, and the Administrative Agent hereby authorizes such Grantor to,
enforce and collect all amounts owing on such Grantor's Accounts, for the
benefit and on behalf of the Administrative Agent and the other Secured Parties
in accordance with and subject to the provisions of such Grantor's Lockbox
Agreements; provided, however, that such privilege shall automatically be
suspended upon the occurrence and during the continuance of an Event of Default
specified in Section 9(f) of the Senior Secured Credit Agreement with respect to
such Grantor and may at the option of the Administrative Agent be terminated
upon the occurrence and during the continuance of any other Event of Default
with respect to such Grantor or any other Grantor.
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(ii) All Proceeds of such Grantor's Accounts which have been received on
any Business Day through such Grantor's Lockbox System will be transferred into
such Grantor's Collateral Proceeds Account on such Business Day to the extent
required by the applicable Lockbox Agreement. All of such Grantor's Proceeds
received on any Business Day by the Collateral Account Bank pursuant to
paragraph (b) above will be transferred into such Grantor's Collateral Proceeds
Account on such Business Day. Such Collateral Proceeds Account is, and shall
remain, under the sole dominion and control of the Administrative Agent. Each
Grantor acknowledges and agrees that (A) such Grantor has no right of withdrawal
from its Collateral Proceeds Account, (B) the funds on deposit in such Grantor's
Collateral Proceeds Account shall be collateral security for all of such
Grantor's Obligations and (C) upon the occurrence and during the continuance of
an Event of Default, at the Administrative Agent's election, the funds on
deposit in such Grantor's Collateral Proceeds Account may be applied by the
Administrative Agent to the payment of such Grantor's Obligations then due and
owing, such application to be made in the order of priority set forth in Section
6.5 hereof.
(e) General Fund Account. So long as no Event of Default has
occurred and is continuing, and whether or not any Lockbox System shall have
been established or maintained, the Administrative Agent shall instruct the
Collateral Account Bank to promptly remit any funds on deposit in each Grantor's
Collateral Proceeds Account to such Grantor's General Fund Account. In the event
that an Event of Default has occurred and is continuing, the Administrative
Agent and the Grantors agree that the Administrative Agent, at its option, may
require that each Collateral Proceeds Account be established at The Chase
Manhattan Bank. Each Grantor shall have the right, at any time and from time to
time, to withdraw such of its own funds from its own General Fund Account, and
to maintain such balances in its General Fund Account, as it shall deem to be
necessary or desirable.
(f) Restructuring of Deposit Accounts. If (a) any Collateral
Proceeds Account is maintained at a Collateral Account Bank located in a state
within the United States in which Article 9 of the Uniform Commercial Code in
effect in such state has been expressly made applicable to (and only for so long
as it is applicable to) demand deposit accounts and all filings have been made
in such state which are necessary to perfect the Secured Parties' security
interest in such Collateral Proceeds Account or (b) after the Effective Date the
relevant Grantor demonstrates to the Administrative Agent, and the
Administrative Agent in its sole discretion agrees, that the costs associated
with maintaining both a Collateral Proceeds Account and a General Fund Account
outweigh any benefits to the Secured Parties in terms of any additional
protection to their rights in such Grantor's Collateral that could not be
achieved with the use of a single account, then upon the request of such
Grantor, the Administrative Agent may amend this Agreement to delete the
requirement that a separate General Fund Account be maintained and provide that
such Grantor be entitled to withdraw funds on deposit in such Collateral
Proceeds Account at any time so long as no Event of Default has occurred and is
continuing.
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6.2 Communications with Obligors; Grantors Remain Liable. (a) The
Administrative Agent in its own name or in the name of others may at any time
and from time to time after the occurrence and during the continuance of an
Event of Default communicate with obligors under the Accounts and parties to the
Contracts (in each case, to the extent constituting Collateral) to verify with
them to the Administrative Agent's satisfaction the existence, amount and terms
of any Receivables or Contracts.
(b) Upon the request of the Administrative Agent at any time after
the occurrence and during the continuance of an Event of Default, each Grantor
shall notify obligors on such Grantor's Accounts and parties to such Grantor's
Contracts (in each case, to the extent constituting Collateral) that such
Accounts and such Contracts have been assigned to the Administrative Agent, for
the ratable benefit of the Secured Parties, and that payments in respect thereof
shall be made directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of such Grantor's Accounts to observe and perform
all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. Neither the Administrative Agent nor any Lender shall have any
obligation or liability under any Account (or any agreement giving rise thereto)
by reason of or arising out of this Agreement or the receipt by the
Administrative Agent or any other Secured Party of any payment relating thereto,
nor shall the Administrative Agent or any other Secured Party be obligated in
any manner to perform any of the obligations of any Grantor under or pursuant to
any Account (or any agreement giving rise thereto) to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party thereunder, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
6.3 Pledged Stock. (a) Unless an Event of Default shall have
occurred and be continuing and the Administrative Agent shall have given notice
to the relevant Pledgor of the Administrative Agent's intent to exercise its
corresponding rights pursuant to Section 6.3(b), each Pledgor shall be permitted
to receive all cash dividends paid in respect of the Pledged Stock and all
payments made in respect of the Pledged Notes, to the extent permitted in the
Senior Secured Credit Agreement, and to exercise all voting and corporate rights
with respect to the Pledged Stock; provided, however, that no vote shall be cast
or corporate right exercised or such other action taken (other than in
connection with a transaction expressly permitted by the Senior Secured Credit
Agreement) which, in the Administrative Agent's reasonable judgment, would
materially impair the Pledged Collateral or the related rights or remedies of
the Secured Parties or which would be inconsistent with or result in any
violation of any provision of the Senior Secured Credit Agreement, this
Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the relevant Pledgor or Pledgors,
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(i) the Administrative Agent shall have the right to receive any and all cash
dividends, payments or other Proceeds paid in respect of the Pledged Stock and
make application thereof to the Obligations in such order as the Administrative
Agent may determine, and (ii) any or all of the Pledged Stock shall be
registered in the name of the Administrative Agent or its nominee, and the
Administrative Agent or its nominee may thereafter exercise (x) all voting,
corporate and other rights pertaining to such Pledged Stock at any meeting of
shareholders of the relevant Issuer or Issuers or otherwise and (y) any and all
rights of conversion, exchange, subscription and any other rights, privileges or
options pertaining to such Pledged Stock as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its discretion
any and all of the Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate structure of any
Issuer, or upon the exercise by the relevant Pledgor or the Administrative Agent
of any right, privilege or option pertaining to such Pledged Stock, and in
connection therewith, the right to deposit and deliver any and all of the
Pledged Stock with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the Administrative Agent may
reasonably determine), all without liability (other than for its gross
negligence or willful misconduct) except to account for property actually
received by it, but the Administrative Agent shall have no duty to any Pledgor
to exercise any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing, provided that the Administrative
Agent shall not exercise any voting or other consensual rights pertaining to the
Pledged Stock in any way that would constitute an exercise of the remedies
described in Section 7 other than in accordance with Section 7.
(c) Each Pledgor hereby authorizes and instructs each Issuer or
Maker of any Pledged Securities pledged by such Pledgor hereunder to (i) comply
with any instruction received by it from the Administrative Agent in writing
that (x) states that an Event of Default has occurred and (y) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from such Pledgor, and each Pledgor agrees that each Issuer or
Maker shall be fully protected in so complying, and (ii) unless otherwise
expressly permitted hereby, pay any dividends or other payments with respect to
the Pledged Securities directly to the Administrative Agent.
6.4 Proceeds to be Turned Over To Administrative Agent. In addition
to the rights of the Administrative Agent and the other Secured Parties
specified in Section 6.1 with respect to payments of Accounts, if an Event of
Default shall occur and be continuing, and the Administrative Agent shall have
instructed any Grantor to do so, all Proceeds received by such Grantor
consisting of cash, checks and other Cash Equivalent items shall be held by such
Grantor in trust for the Administrative Agent and the other Secured Parties,
segregated from other funds of such Grantor, and shall, forthwith upon receipt
by such Grantor, be turned over to the Administrative Agent in the exact form
received by such Grantor (duly indorsed by such Grantor to the Administrative
Agent, if required). All Proceeds received by the Administrative Agent hereunder
shall be held by the Administrative Agent in the relevant Collateral Proceeds
Account maintained under its sole dominion and control. All Proceeds while held
by the Administrative Agent in such Collateral Proceeds Account (or by such
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Grantor in trust for the Administrative Agent and the other Secured Parties)
shall continue to be held as collateral security for all the Obligations and
shall not constitute payment thereof until applied as provided in Section 6.5.
6.5 Application of Proceeds. It is agreed that if an Event of
Default shall occur and be continuing, any and all Proceeds of the relevant
Granting Party's Security Collateral received by the Administrative Agent
(whether from the relevant Granting Party or otherwise) shall be held by the
Administrative Agent for the benefit of the Secured Parties as collateral
security for the Obligations of the relevant Granting Party (whether matured or
unmatured), and/or then or at any time thereafter may, in the sole discretion of
the Administrative Agent, be applied by the Administrative Agent against the
Obligations of the relevant Granting Party then due and owing in the following
order of priority:
FIRST, to the payment of all reasonable costs and expenses incurred
by the Administrative Agent in connection with this Agreement, the Senior
Secured Credit Agreement, any other Loan Document or any of the
Obligations of the relevant Granting Party, including, without limitation,
all court costs and the reasonable fees and expenses of its agents and
legal counsel, and any other reasonable costs or expenses incurred in
connection with the exercise by the Administrative Agent of any right or
remedy under this Agreement, the Senior Secured Credit Agreement, or any
other Loan Document;
SECOND, to the ratable satisfaction of all other Obligations of the
relevant Granting Party; and
THIRD, to the relevant Granting Party or its successors or assigns,
or to whomsoever may be lawfully entitled to receive the same.
6.6 Code and Other Remedies. If an Event of Default shall occur and
be continuing, the Administrative Agent, on behalf of the Secured Parties, may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code or any other applicable law. Without limiting the generality of the
foregoing, to the extent permitted by applicable law, the Administrative Agent,
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon any Granting Party or any other Person (all and each of
which demands, defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and realize upon the
Security Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of and deliver
the Security Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Administrative Agent or any other
Secured Party or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
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future delivery without assumption of any credit risk. The Administrative Agent
or any other Secured Party shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Security Collateral so sold, free of
any right or equity of redemption in any Granting Party, which right or equity
is hereby waived or released. Each Granting Party further agrees, at the
Administrative Agent's request, to assemble the Security Collateral and make it
available to the Administrative Agent at places which the Administrative Agent
shall reasonably select, whether at such Granting Party's premises or elsewhere.
The Administrative Agent shall apply the net proceeds of any action taken by it
pursuant to this Section 6.6, after deducting all reasonable costs and expenses
of every kind incurred in connection therewith or incidental to the care or
safekeeping of any of the Security Collateral or in any way relating to the
Security Collateral or the rights of the Administrative Agent and the other
Secured Parties hereunder, including, without limitation, reasonable attorneys'
fees and disbursements, to the payment in whole or in part of the Obligations of
the relevant Granting Party, in the order of priority specified in Section 6.5
above, and only after such application and after the payment by the
Administrative Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code, need the
Administrative Agent account for the surplus, if any, to any Granting Party. To
the extent permitted by applicable law, each Granting Party waives all claims,
damages and demands it may acquire against the Administrative Agent or any other
Secured Party arising out of the exercise by them of any rights hereunder,
except to the extent arising as a result of the gross negligence or willful
misconduct of the Administrative Agent or such other Secured Party. If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 10
days before such sale or other disposition.
6.7 Registration Rights. (a) If the Administrative Agent shall
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to Section 6.6, and if in the reasonable opinion of the Administrative Agent it
is necessary or reasonably advisable to have the Pledged Stock, or that portion
thereof to be sold, registered under the provisions of the Securities Act, the
relevant Pledgor will use its reasonable best efforts to cause the Issuer
thereof to (i) execute and deliver, and use its best efforts to cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to
register such Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
such Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the reasonable
opinion of the Administrative Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. Such
Pledgor agrees to cause such Issuer to comply with the provisions of the
securities or "Blue Sky" laws of any and all jurisdictions which the
Administrative Agent shall reasonably designate and to make available to its
security holders,
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as soon as practicable, an earnings statement (which need not be audited) which
will satisfy the provisions of Section 11(a) of the Securities Act.
(b) Such Pledgor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all such Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Such
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(c) Such Pledgor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of such Pledged Stock pursuant to this Section 6.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Such Pledgor further agrees that a breach of any of the covenants contained in
this Section 6.7 will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and the Lenders have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 6.7 shall be specifically enforceable
against such Pledgor, and to the extent permitted by applicable law, such
Pledgor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no Event of
Default has occurred under the Senior Secured Credit Agreement.
6.8 Waiver; Deficiency. Each Granting Party (other than the
Borrower) waives and agrees not to assert any rights or privileges which it may
acquire under Section 9-112 of the Code, to the extent permitted by applicable
law. Each Granting Party shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Security Collateral are insufficient to
pay its Obligations and the fees and disbursements of any attorneys employed by
the Administrative Agent or any other Secured Party to collect such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc. (a)
Each Granting Party hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Granting Party and in the
name of such Granting Party or in its own name, for the purpose of carrying out
the terms
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31
of this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be reasonably necessary or desirable to
accomplish the purposes of this Agreement to the extent permitted by applicable
law. Without limiting the generality of the foregoing, at any time when an Event
of Default has occurred and is continuing (in each case to the extent permitted
by applicable law), (x) each Pledgor hereby gives the Administrative Agent the
power and right, on behalf of such Pledgor, without notice or assent by such
Pledgor, to execute, in connection with any sale provided for in Section 6.6 or
6.7, any indorsements, assessments or other instruments of conveyance or
transfer with respect to such Pledgor's Pledged Collateral, and (y) each Grantor
hereby gives the Administrative Agent the power and right, on behalf of such
Grantor, without notice to or assent by such Grantor, to do any or all of the
following:
(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Account of such Grantor or with respect to any other Collateral of such
Grantor and file any claim or take any other action or proceeding in any
court of law or equity or otherwise deemed appropriate by the
Administrative Agent for the purpose of collecting any and all such moneys
due under any Account of such Grantor or with respect to any other
Collateral of such Grantor whenever payable;
(ii) in the case of any Copyright, Patent or Trademark constituting
Collateral of such Grantor, execute and deliver any and all agreements,
instruments, documents and papers as the Administrative Agent may
reasonably request to evidence the Administrative Agent's and the Lenders'
security interest in such Copyright, Patent or Trademark and the goodwill
and general intangibles of such Grantor relating thereto or represented
thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral of such Grantor, effect any repairs or
any insurance called for by the terms of this Agreement and pay all or any
part of the premiums therefor and the costs thereof; and
(iv) (i) direct any party liable for any payment under any of the
Collateral of such Grantor to make payment of any and all moneys due or to
become due thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (ii) ask or demand for, collect,
receive payment of and receipt for, any and all moneys, claims and other
amounts due or to become due at any time in respect of or arising out of
any Collateral of such Grantor; (iii) sign and indorse any invoices,
freight or express bills, bills of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications, notices and other
documents in connection with any of the Collateral of such Grantor; (iv)
commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the Collateral of
such Grantor or any portion thereof and to enforce any other right in
respect of any Collateral of
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such Grantor; (v) defend any suit, action or proceeding brought against
such Grantor with respect to any Collateral of such Grantor; (vi) settle,
compromise or adjust any such suit, action or proceeding and, in
connection therewith, to give such discharges or releases as the
Administrative Agent may deem appropriate; (vii) subject to any existing
reserved rights or licenses, assign any Copyright, Patent or Trademark
constituting Collateral of such Grantor (along with the goodwill of the
business to which any such Copyright, Patent or Trademark pertains), for
such term or terms, on such conditions, and in such manner, as the
Administrative Agent shall in its sole discretion determine; and (viii)
generally, sell, transfer, pledge and make any agreement with respect to
or otherwise deal with any of the Collateral of such Grantor as fully and
completely as though the Administrative Agent were the absolute owner
thereof for all purposes, and do, at the Administrative Agent's option and
such Grantor's expense, at any time, or from time to time, all acts and
things which the Administrative Agent deems necessary to protect, preserve
or realize upon the Collateral of such Grantor and the Administrative
Agent's and the other Secured Parties' security interests therein and to
effect the intent of this Agreement, all as fully and effectively as such
Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
(b) If any Granting Party fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(c) The reasonable expenses of the Administrative Agent incurred in
connection with actions undertaken as provided in this Section 7.1, together
with interest thereon at a rate per annum equal to the rate per annum at which
interest would then be payable on past due ABR Loans which are Term Loans under
the Senior Secured Credit Agreement, from the date of payment by the
Administrative Agent to the date reimbursed by the relevant Granting Party,
shall be payable by such Granting Party to the Administrative Agent on demand.
(d) Each Granting Party hereby ratifies all that said attorneys
shall lawfully do or cause to be done by virtue hereof. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable as to the relevant Granting Party until this
Agreement is terminated as to such Granting Party, and the security interests in
the Security Collateral of such Granting Party created hereby are released.
7.2 Duty of Administrative Agent. The Administrative Agent's sole
duty with respect to the custody, safekeeping and physical preservation of the
Security Collateral in its possession, under Section 9-207 of the Code or
otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account. Neither the
Administrative Agent, any other Secured Party nor any of their respective
officers,
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directors, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Security Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Security
Collateral upon the request of any Granting Party or any other Person or to take
any other action whatsoever with regard to the Security Collateral or any part
thereof. The powers conferred on the Administrative Agent and the other Secured
Parties hereunder are solely to protect the Administrative Agent's and the other
Secured Parties' interests in the Security Collateral and shall not impose any
duty upon the Administrative Agent or any other Secured Party to exercise any
such powers. The Administrative Agent and the other Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Granting Party for any act or
failure to act hereunder, except for their own gross negligence or willful
misconduct.
7.3 Execution of Financing Statements. Pursuant to Section 9-402 of
the Code and any other applicable law, each Granting Party authorizes the
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to such Granting Party's
Security Collateral without the signature of such Granting Party in such form
and in such offices as the Administrative Agent reasonably determines
appropriate to perfect the security interests of the Administrative Agent under
this Agreement. A photographic or other reproduction of this Agreement shall be
sufficient as a financing statement or other filing or recording document or
instrument for filing or recording in any jurisdiction.
7.4 Authority of Administrative Agent. Each Granting Party
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement or any amendment, supplement or other
modification of this Agreement shall, as between the Administrative Agent and
the Secured Parties, be governed by the Senior Secured Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Granting Parties the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Secured Parties with full and valid authority so to act or refrain from
acting, and no Granting Party shall be under any obligation, or entitlement, to
make any inquiry respecting such authority.
7.5 Right Of Inspection. Upon reasonable written advance notice to
any Grantor and at reasonable intervals, or at any time and from time to time
after the occurrence and during the continuation of an Event of Default, the
Administrative Agent shall have reasonable access during normal business hours
to all the books, correspondence and records of such Granting Party, and the
Administrative Agent and its representatives may examine the same, and to the
extent reasonable take extracts therefrom and make photocopies thereof, and such
Granting Party agrees to render to the Administrative Agent, at such Granting
Party's reasonable cost and expense, such clerical and other assistance as may
be reasonably requested
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with regard thereto. The Administrative Agent and its representatives shall also
have the right, upon reasonable advance written notice to such Granting Party,
to enter during normal business hours into and upon any premises owned, leased
or operated by such Granting Party where any of such Granting Party's Inventory
or Equipment is located for the purpose of inspecting the same, observing its
use or otherwise protecting its interests therein.
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by each affected Granting Party and the
Administrative Agent, provided that any provision of this Agreement imposing
obligations on any Granting Party may be waived by the Administrative Agent in a
written instrument executed by the Administrative Agent.
8.2 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Granting Party hereunder shall be effected in the
manner provided for in subsection 11.2 of the Senior Secured Credit Agreement;
provided that any such notice, request or demand to or upon any Guarantor shall
be addressed to such Guarantor at its notice address set forth on Schedule 1,
unless and until such Guarantor shall change such address by notice to the
Administrative Agent given in accordance with subsection 11.2 of the Senior
Secured Credit Agreement.
8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the
Administrative Agent nor any other Secured Party shall by any act (except by a
written instrument pursuant to Section 8.1), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default. No failure to exercise, nor any
delay in exercising, on the part of the Administrative Agent or any other
Secured Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent or
any other Secured Party of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Administrative
Agent or such other Secured Party would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any other rights or remedies provided
by law.
8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor agrees
to pay or reimburse each Secured Party and the Administrative Agent for all
their respective reasonable costs and expenses incurred in collecting against
such Guarantor under the guarantee contained in Section 2 or otherwise enforcing
or preserving any rights under this Agreement against such Guarantor and the
other Loan Documents to which such Guarantor is a
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party, including, without limitation, the reasonable fees and disbursements of
one firm of counsel to the Secured Parties and the Administrative Agent.
(b) Each Guarantor agrees to pay, and to save the Administrative
Agent and the Secured Parties harmless from, (x) any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp, excise,
sales or other similar taxes which may be payable or determined to be payable
with respect to any of the Security Collateral or in connection with any of the
transactions contemplated by this Agreement and (y) any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement (collectively, the "indemnified liabilities"), in each case to the
extent the Borrower would be required to do so pursuant to Section 11.5 of the
Senior Secured Credit Agreement, and in any event excluding any taxes or other
indemnified liabilities arising from gross negligence or willful misconduct of
the Administrative Agent or any Secured Party.
(c) The agreements in this Section 8.4 shall survive repayment of
the Obligations and all other amounts payable under the Senior Secured Credit
Agreement and the other Loan Documents.
8.5 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the Granting Parties, the Administrative Agent and
the Secured Parties and their respective successors and assigns; provided that
no Granting Party may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent.
8.6 Set-Off. Each Guarantor hereby irrevocably authorizes the
Administrative Agent and each other Secured Party at any time and from time to
time without notice to such Guarantor, any other Guarantor or the Borrower, any
such notice being expressly waived by each Guarantor and by the Borrower, to the
extent permitted by applicable law, upon the occurrence and during the
continuance of an Event of Default under Section 9(a) of the Senior Secured
Credit Agreement and any amount remaining unpaid after it becomes due and
payable by such Guarantor hereunder, to set-off and appropriate and apply
against any such amount any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Administrative Agent or such other Secured Party to or for the
credit or the account of such Guarantor, or any part thereof in such amounts as
the Administrative Agent or such other Secured Party may elect. The
Administrative Agent and each other Secured Party shall notify such Guarantor
promptly of any such set-off and the application made by the Administrative
Agent or such other Secured Party of the proceeds thereof; provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Administrative Agent and each other Secured Party
under this Section 8.6 are in addition to
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other rights and remedies (including, without limitation, other rights of
set-off) which the Administrative Agent or such other Secured Party may have.
8.7 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
8.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.9 Section Headings. The Section headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
8.10 Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Granting Parties, the Administrative Agent
and the other Secured Parties with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by the
Granting Parties, the Administrative Agent or any other Secured Party relative
to subject matter hereof not expressly set forth or referred to herein or in the
other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 Submission To Jurisdiction; Waivers. Each party hereto hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgement
in respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
<PAGE> 209
37
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
party at its address referred to in Section 8.2 or at such other address
of which the Administrative Agent (in the case of any other party hereto)
or the Borrower (in the case of the Administrative Agent) shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred
to in this Section any punitive damages.
8.13 Acknowledgements. Each Guarantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a
party;
(b) neither the Administrative Agent nor any other Secured Party has
any fiduciary relationship with or duty to any Guarantor arising out of or
in connection with this Agreement or any of the other Loan Documents, and
the relationship between the Guarantors, on the one hand, and the
Administrative Agent and the Secured Parties, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor;
and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Secured Parties or among the Guarantors and the Secured
Parties.
8.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
8.15 Additional Granting Parties. Each new Domestic Subsidiary of
the Borrower that is required to become a party to this Agreement pursuant to
Section 8.15 of the Senior Secured Credit Agreement shall become a Granting
Party for all purposes of this Agreement upon execution and delivery by such
Subsidiary of an Assumption Agreement in the form of Annex 1 hereto.
8.16 Releases. (a) At such time as the Loans, the Reimbursement
Obligations and the other Obligations then due and owing shall have been paid in
full, the Commitments
<PAGE> 210
38
have been terminated and no Letters of Credit shall be outstanding, all Security
Collateral shall be released from the Liens created hereby, and this Agreement
and all obligations (other than those expressly stated to survive such
termination) of the Administrative Agent and each Granting Party hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Security Collateral shall revert to the
Granting Parties. At the request and sole expense of any Granting Party
following any such termination, the Administrative Agent shall deliver to such
Granting Party any Security Collateral held by the Administrative Agent
hereunder, and execute and deliver to such Granting Party such documents
(including without limitation UCC termination statements) as such Granting Party
shall reasonably request to evidence such termination.
(b) In connection with the sale or other disposition of all of the
Capital Stock of any Guarantor or the sale or other disposition of Security
Collateral permitted under the Senior Secured Credit Agreement and the release
of such Guarantor from its Guarantee or the release of the Security Collateral
subject to such sale or other disposition, the Borrower shall deliver to the
Administrative Agent, a written request for release identifying such Guarantor
or the relevant Security Collateral and the terms of the sale or other
disposition in reasonable detail, including the price thereof and any expenses
in connection therewith,
<PAGE> 211
39
together with a certification by the Borrower stating that such transaction is
in compliance with the Senior Secured Credit Agreement and the other Loan
Documents. The Administrative Agent shall execute and deliver to the relevant
Granting Party (at the sole cost and expense of such Granting Party) all
releases or other documents (including without limitation UCC termination
statements) necessary or reasonably desirable for the release of the Liens
created hereby on such Security Collateral as such Granting Party may reasonably
request.
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee and Collateral Agreement to be duly executed and delivered as of the
date first above written.
EV INTERNATIONAL, INC.
By: ____________________________
Title
EVI AUDIO HOLDING, INC.
By: ____________________________
Title:
Acknowledged and Agreed to as
of the date hereof by:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By: ________________________
Title:
<PAGE> 212
Schedule 1
NOTICE ADDRESSES OF GUARANTORS
EVI Audio Holding, Inc.
c/o EV International, Inc.
600 Cecil Street
Buchanan, Michigan 49107
Attention:
Telephone:
Telecopy:
with Copies to:
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, New York 10013
re: EVI Audio Holding, Inc.
Attention: Nicholas Somers
Telephone: (212) 816-2889
Telecopy: (212) 816-0166
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10013
Attention: David A. Brittenham, Esq.
Telephone: (212) 909-6000
Telecopy: (212) 909-6836
<PAGE> 213
Schedule 2
DESCRIPTION OF PLEDGED SECURITIES
PLEDGED STOCK:
Stock Certificate
Issuer Class of Stock No. No. of Shares
- -------------------- -------------- ----------------- -------------
<PAGE> 214
Schedule 3
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE
OR SOLE PLACE OF BUSINESS
Granting Party Location
-------------- --------
<PAGE> 215
Schedule 4
LOCATION OF INVENTORY AND EQUIPMENT
Granting Party Locations
-------------- ---------
<PAGE> 216
Schedule 5
PATENTS AND PATENT LICENSES
TRADEMARKS AND TRADEMARK LICENSES
<PAGE> 217
Schedule 6
EXISTING PRIOR LIENS
<PAGE> 218
Schedule 7
ACCOUNTS
<PAGE> 219
3
Schedule 8
CONTRACTS
<PAGE> 220
Annex 1 to
Guarantee and Collateral Agreement
ASSUMPTION AGREEMENT, dated as of _________ __, 199_, made by
______________________________, a ______________ corporation (the "Additional
Granting Party"), in favor of THE CHASE MANHATTAN BANK, as administrative agent
(in such capacity, the "Administrative Agent") for the banks and other financial
institutions (the "Lenders") from time to time parties to the Senior Secured
Credit Agreement referred to below and the other Secured Parties (as defined
below). All capitalized terms not defined herein shall have the meaning ascribed
to them in such the Guarantee and Collateral Agreement referred to below, or if
not defined therein, in Senior Secured Credit Agreement.
W I T N E S S E T H :
WHEREAS, EV International, Inc., a Delaware corporation (the
"Borrower"), the Lenders and the Administrative Agent are parties to a Credit
Agreement, dated as of February __, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Senior Secured Credit Agreement");
WHEREAS, in connection with the Senior Secured Credit Agreement, the
Borrower and certain of its Affiliates and Subsidiaries are, or are to become,
parties to the Guarantee and Collateral Agreement, dated as of February __, 1997
(as amended, supplemented or otherwise modified from time to time, the
"Guarantee and Collateral Agreement") in favor of the Administrative Agent, for
the ratable benefit of the Secured Parties (as defined in the Guarantee and
Collateral Agreement);
WHEREAS, the Additional Grantor is a member of an affiliated group
of companies that includes the Borrower and each other Granting Party to the
Guarantee and Collateral Agreement; the proceeds of the extensions of credit
under the Senior Secured Credit Agreement will be used in part to enable the
Borrower to make valuable transfers to one or more of the other Granting Parties
(including the Additional Grantor) in connection with the operation of their
respective businesses; and the Borrower and the other Granting Parties
(including the Additional Grantor) are engaged in related businesses, and each
such Granting Party (including the Additional Grantor) will derive substantial
direct and indirect benefit from the making of the extensions of credit under
the Senior Secured Credit Agreement;
WHEREAS, the Senior Secured Credit Agreement requires the Additional
Granting Party to become a party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Granting Party has agreed to execute and
deliver this Assumption Agreement in order to become a party to the Guarantee
and Collateral Agreement;
<PAGE> 221
2
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and delivering
this Assumption Agreement, the Additional Granting Party, as provided in Section
8.15 of the Guarantee and Collateral Agreement, hereby becomes a party to the
Guarantee and Collateral Agreement as a Granting Party thereunder with the same
force and effect as if originally named therein as a Guarantor [, Grantor and
Pledgor] [and Grantor] [and Pledgor] (1) and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Guarantor [, Grantor and Pledgor] [and Grantor] [and Pledgor] (2) thereunder.
The information set forth in Annex 1-A hereto is hereby added to the information
set forth in Schedules ____________ to the Guarantee and Collateral Agreement,
and such Schedules are hereby amended and modified to include such information.
The Additional Granting Party hereby represents and warrants that each of the
representations and warranties of such Additional Grantor, in its capacities as
a Guarantor [, Grantor and Pledgor] [and Grantor] [and Pledgor], (3) contained
in Section 4 of the Guarantee and Collateral Agreement is true and correct in
all material respects on and as the date hereof (after giving effect to this
Assumption Agreement) as if made on and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTING PARTY]
By:_________________________________________
Name:
Title:
- --------
(1) Indicate the capacities in which the Additional Grantor is becoming a
Granting Party.
(2) Indicate the capacities in which the Additional Grantor is becoming a
Granting Party.
(3) Indicate the capacities in which the Additional Grantor is becoming a
Granting Party.
<PAGE> 222
Annex 1-A to
Assumption Agreement
<PAGE> 223
EXHIBIT C TO
CREDIT AGREEMENT
FORM OF PATENT AND TRADEMARK SECURITY AGREEMENT
PATENT AND TRADEMARK SECURITY AGREEMENT, dated as of
February __, 1997, made by [EV International, Inc., a Delaware corporation
formerly named Electro-Voice, Incorporated and successor by merger to Gulton
Acquisition Corp., Gulton Industries, Inc., LFE Corporation, Mark IV Audio, Inc.
and Mark IV Audio Magnetic, Inc., each a Delaware corporation] [name of Domestic
Subsidiary of the Borrower] (the "Grantor"), in favor of The Chase Manhattan
Bank, a New York banking corporation ("Chase"), as administrative agent (in such
capacity, the "Administrative Agent") for the banks and other financial
institutions (the "Lenders") from time to time parties to the Credit Agreement,
dated as of February __, 1997 (as amended, waived, supplemented or otherwise
modified from time to time, the "Senior Secured Credit Agreement"), among [the
Grantor] [EV International, Inc., a Delaware corporation as the Borrower
thereunder] (as successor by merger to Gulton Acquisition Corp.) (in such
capacity, the "Borrower"), the Lenders and the Administrative Agent.
W I T N E S S E T H :
WHEREAS, pursuant to the Senior Secured Credit Agreement, the
Lenders have severally agreed to make extensions of credit to the Borrower upon
the terms and subject to the conditions set forth therein; and
[WHEREAS, the Grantor is party to the Guarantee and Collateral
Agreement, dated as of February __, 1997 (as amended, waived, supplemented or
otherwise modified from time to time, the "Guarantee and Collateral Agreement"),
in favor of the Administrative Agent, and the Borrower and one or more other
Granting Parties (as defined therein) are also parties thereto; and]1
[WHEREAS, the Grantor is a member of an affiliated group of
companies that includes the Borrower and each other Granting Party; the proceeds
of the extensions of credit under the Senior Secured Credit Agreement will be
used in part to enable the Borrower to make valuable transfers to one or more of
the other Granting Parties (including the Grantor) in connection with the
operation of their respective businesses; and the Borrower and the other
Granting Parties including the Grantor) are engaged in related businesses, and
each such
- --------
1. Include in any future Patent and Trademark Agreement to which a Domestic
Subsidiary is to be a party.
<PAGE> 224
2
granting Party (including the Grantor) will derive substantial direct and
indirect benefit from the making of the extensions of credit under the Senior
Secured Credit Agreement; and]2
WHEREAS, it is a condition to the obligation of the Lenders to make
their respective extensions of credit to the Borrower under the Senior Secured
Credit Agreement that the Grantor shall execute and deliver this Agreement to
the Administrative Agent for the ratable benefit of the Secured Parties (as
defined below);
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Senior Secured Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, the Grantor hereby agrees with the
Administrative Agent, for the ratable benefit of the Secured Parties, as
follows:
1. Defined Terms. (a) Unless otherwise defined herein, capitalized terms which
are defined in the Senior Secured Credit Agreement and used herein shall have
the meanings given to them in the Senior Secured Credit Agreement.
(b) The following terms shall have the following meanings:
"Agreement": this Patent and Trademark Security Agreement, as the
same may be amended, supplemented, waived or otherwise modified from time
to time.
"Code": the Uniform Commercial Code as from time to time in effect
in the State of New York.
"Collateral": as defined in Section 2 of this Agreement.
"Default": a "Default" as defined in the Senior Secured Credit
Agreement.
"Event of Default": an "Event of Default" as defined in the Senior
Secured Credit Agreement.
"General Intangibles": as defined in Section 9-106 of the Code,
including, without limitation, all Patents and Trademarks now or hereafter
owned by the Grantor to the extent such Patents and Trademarks would be
included in General Intangibles under the Code.
"Loan Documents": the collective reference to the "Loan Documents"
as defined in the Senior Secured Credit Agreement.
- --------
2. Include in any future Patent and Trademark Agreement to which a Domestic
Subsidiary is to be a party.
<PAGE> 225
3
"Loans": the collective reference to the "Loans" as defined in the
Senior Secured Credit Agreement.
"Obligations": the Obligations (as defined in the Guarantee and
Collateral Agreement) of the Grantor.
"Patent Licenses": all United States written license agreements of
the Grantor with any Person who is not an Affiliate or Subsidiary of the
Grantor in connection with any of the Patents or such other Person's
patents, whether the Grantor is a licensor or a licensee under any such
agreement, including, without limitation, the license agreements listed on
Schedule II hereto, subject, in each case, to the terms of such license
agreements, and the right to prepare for sale, sell and advertise for
sale, all Inventory (as defined in the Guarantee and Collateral Agreement)
now or hereafter covered by such licenses.
"Patents": all of the Grantor's right, title and interest in and to
all United States patents, patent applications and patentable inventions
and all reissues and extensions thereof, including, without limitation,
all patents and patent applications identified in Schedule II hereto, and
including, without limitation, (a) all inventions and improvements
described and claimed therein, and patentable inventions, (b) the right to
sue or otherwise recover for any and all past, present and future
infringements and misappropriations thereof, (c) all income, royalties,
damages and other payments now and hereafter due and/or payable with
respect thereto (including, without limitation, payments under all
licenses entered into in connection therewith, and damages and payments
for past or future infringements thereof), and (d) all other rights
corresponding thereto in the United States and all reissues, divisions,
continuations, continuations-in-part, substitutes, renewals, and
extensions thereof, all improvements thereon, and all other rights of any
kind whatsoever of the Grantor accruing thereunder or pertaining thereto
(Patents and Patent Licenses being, collectively, the "Patent
Collateral").
"Proceeds": as defined in Section 9-306(1) of the Code.
"Revolving Credit Commitments": the collective reference to the
"Revolving Credit Commitments" as defined in the Senior Secured Credit
Agreement.
"Secured Parties": the collective reference to the Administrative
Agent, the Lenders (including, without limitation, the Issuing Lender and
the Swing Line Lender), any Affiliate of any Lender which has entered into
any Interest Rate Protection Agreement or Permitted Hedging Arrangement
with the Borrower or any of its Subsidiaries, and their respective
successors and assigns.
"Trademark Licenses": all United States written license agreements
of the Grantor with any Person who is not an Affiliate or Subsidiary of
the Grantor in
<PAGE> 226
4
connection with any of the Trademarks or such other Person's names or
trademarks, whether the Grantor is a licensor or a licensee under any such
agreement, including, without limitation, the license agreements listed on
Schedule I hereto, subject, in each case, to the terms of such license
agreements, and the right to prepare for sale, sell and advertise for
sale, all Inventory (as defined in the Guarantee and Collateral Agreement)
now or hereafter covered by such licenses.
"Trademarks": all of the Grantor's right, title and interest in and
to all United States trademarks, service marks, trade names, trade dress
or other indicia of trade origin or business identifiers, trademark and
service mark registrations, and applications for trademark or service mark
registrations (except for "intent to use" applications for trademark or
service mark registrations filed pursuant to Section 1(b) of the Lanham
Act, 15 U.S.C. Section 1051, unless and until an Amendment to Allege Use
or a Statement of Use under Sections 1(c) and 1(d) of said Act has been
filed), and any renewals thereof, including, without limitation, each
registration and application identified in Schedule I hereto, and
including, without limitation, (a) the right to sue or otherwise recover
for any and all past, present and future infringements and
misappropriations thereof, (b) all income, royalties, damages and other
payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all licenses entered into
in connection therewith, and damages and payments for past or future
infringements thereof), and (c) all other rights corresponding thereto in
the United States and all other rights of any kind whatsoever of the
Grantor accruing thereunder or pertaining thereto, together in each case
with the goodwill of the business connected with the use of, and
symbolized by, each such trademark, service mark, trade name, trade dress
or other indicia of trade origin or business identifiers (Trademarks and
Trademark Licenses being, collectively, the "Trademark Collateral").
(b) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(d) Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to the Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
2. Grant of Security Interest. The Grantor hereby grants, subject to
existing licenses granted by such Grantor in the ordinary course of business
with respect to the Collateral (as hereinafter defined), to the Administrative
Agent for the ratable benefit of the Secured Parties a security interest in all
of the following property now owned or at any time
<PAGE> 227
5
hereafter acquired by such Grantor or in which such Grantor now has or at any
time in the future may acquire any right, title or interest (collectively, the
"Collateral"), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations of such Grantor:
(i) all Patents;
(ii) all Patent Licenses;
(iii) all Trademarks;
(iv) all Trademark Licenses;
(v) all General Intangibles connected with the use of or symbolized
by the Trademarks and Patents; and
(vi) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing and all collateral security and guarantees
given by any Person with respect to any of the foregoing;
provided, that the foregoing grant of a security interest with respect to
General Intangibles, Patent Licenses and Trademark Licenses shall not include a
security interest in, and the Collateral shall not include, any Patent License
or Trademark License with or issued by Persons other than a Subsidiary of the
Grantor that would otherwise be included in the Collateral to the extent that
the grant by such Grantor of such security interest is prohibited by the terms
and provisions of the written agreement or document or instrument creating or
evidencing such license or permit or Patent License or Trademark License, or
gives the other party thereto the right to terminate such Patent License or
Trademark License in the event of the grant of a security interest with respect
thereto. All references in this Agreement to any of the property described in
clauses (i) through (vi) of the preceding sentence, or to any Proceeds thereof,
shall be deemed to be references to such property or Proceeds to the extent such
property or Proceeds constitutes Collateral.
3. Representations and Warranties. The Grantor hereby represents and
warrants to the Administrative Agent on behalf of the Secured Parties that:
(a) Power and Authority. As of the date hereof, the Grantor has the
corporate power and authority, and the legal right, to make, deliver and
perform its obligations under, and to grant the security interest in the
Trademark Collateral and the Patent Collateral to the extent provided in,
and pursuant to, this Agreement and has taken all necessary corporate
action to authorize the execution, delivery and performance of, and grant
of the security interest in the Trademark Collateral and the Patent
Collateral to the extent provided in, and pursuant to, this Agreement.
<PAGE> 228
6
(b) Title; No Other Liens. As of the date hereof, except for the
Liens granted to the Administrative Agent, for the benefit of the Secured
Parties, pursuant to this Agreement and the other Liens permitted to exist
on the Collateral pursuant to the Loan Documents (including, without
limitation, any Liens permitted to exist on the Collateral pursuant to
subsection 8.3 of the Senior Secured Credit Agreement), the Grantor is
(or, in the case of after-acquired Collateral, will be) the sole, legal
and beneficial owner of the entire right, title and interest in and to the
material Trademarks set forth on Schedule I hereto and the material
Patents set forth in Schedule II hereto free and clear of any and all
Liens. As of the date hereof, except as set forth on Schedule III hereto,
no security agreement, financing statement or other public notice similar
in effect with respect to all or any part of the Collateral is on file or
of record in any public office (including, without limitation, the United
States Patent and Trademark Office), except such as may have been filed in
favor of the Administrative Agent, for the benefit of the Secured Parties,
pursuant to this Agreement or in respect of such Liens as may be permitted
pursuant to the Loan Documents (including, without limitation, any Liens
permitted to exist on the Collateral pursuant to subsection 8.3 of the
Senior Secured Credit Agreement).
(c) Perfected First Priority Liens. (i) As of the date hereof, this
Agreement is effective to create, as collateral security for the
Obligations, valid and enforceable Liens on the Collateral in favor of the
Administrative Agent, for the benefit of the Secured Parties, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.
(ii) As of the date hereof, except with respect to Liens upon
Patents and Trademarks and Patent Licenses and Trademark Licenses, which
Liens, to the extent not otherwise perfected by the filing of financing
statements under the Code in accordance herewith, would in the case of
Patents and Trademarks listed in Schedules I and II hereto, or in the case
of Patent Licenses and Trademark Licenses listed in Schedules I and II
hereto may be perfected upon the filing, acceptance and recordation
thereof in the United States Patent and Trademark Office, upon filing of
the financing statements delivered to the Administrative Agent by the
Grantor on the Effective Date in the jurisdictions listed on Schedule 5.14
to the Senior Secured Credit Agreement (which financing statements are in
proper form for filing in such jurisdictions) (and the recording of this
Agreement in the United States Patent and Trademark Office, and the making
of filings after the Effective Date in any other jurisdiction in the
United States as may be necessary under any Requirement of Law) the Liens
created pursuant to this Agreement will constitute valid and perfected
Liens on the Collateral in the United States in favor of the
Administrative Agent for the benefit of the Secured Parties, which Liens
will be prior to all other Liens of all other Persons with respect to the
Collateral, except for Liens permitted pursuant to the Loan Documents
(including,
<PAGE> 229
7
without limitation, those permitted to exist pursuant to subsection 8.3 of
the Senior Secured Credit Agreement), and which Liens are enforceable as
such against all creditors of and purchasers (except to the extent that
the recording of an assignment or other transfer of title to the
Administrative Agent in the United States Patent and Trademark Office may
be necessary for such enforceability) from the Grantor, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (whether enforcement is
sought by proceedings in equity or at law) or by an implied covenant of
good faith and fair dealing.
(d) Consents. No consent of any party (other than the Grantor) to
any material Patent License or material Trademark License constituting
Collateral is required, or purports to be required, to be obtained by or
on behalf of the Grantor in connection with the execution, delivery and
performance of this Agreement that has not been obtained. Each Patent
License and Trademark License constituting Collateral is in full force and
effect and constitutes a valid and legally enforceable obligation of the
Grantor and (to the knowledge of the Grantor) each other party thereto
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditor's rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law) or by an implied
covenant of good faith and fair dealing and except to the extent the
failure of any such Patent License or Trademark License constituting
Collateral to be in full force and effect or valid or legally enforceable
would not be reasonably expected, in the aggregate, to have a material
adverse effect on the value of the Collateral (as such term is defined in
the Senior Secured Credit Agreement). No consent or authorization of,
filing with or other act by or in respect of any Governmental Authority is
required in connection with the execution, delivery, performance, validity
or enforceability of any of the Patent Licenses or Trademark Licenses
constituting Collateral by any party thereto other than those which have
been duly obtained, made or performed and are in full force and effect and
those the failure of which to make or obtain would not be reasonably
expected, in the aggregate, to have a material adverse effect on the value
of the Collateral (as such term is defined in the Senior Secured Credit
Agreement). Neither such Grantor nor (to the knowledge of such Grantor)
any other party to any Patent License or Trademark License constituting
Collateral is in default in the performance or observance of any of the
terms thereof, except for such defaults as would not reasonably be
expected, in the aggregate, to have a material adverse effect on the value
of the Collateral (as such term is defined in the Senior Secured Credit
Agreement). Except for rights reserved in favor of the United States
government, as required under law, the right, title and interest of the
Grantor in, to and under each Patent License and Trademark License
constituting Collateral are not subject to any defense, offset,
counterclaim or claim which would be reasonably expected, either
individually or in the aggregate, to have a material adverse effect on the
value of the Collateral (as such term is defined in the Senior Secured
Credit Agreement).
<PAGE> 230
8
(e) Schedules I and II are Complete; All Filings Have Been Made. Set
forth in Schedules I and II is a complete and accurate list of all
material Trademarks and material Patents owned by the Grantor as of the
date hereof. As of the date hereof, the Grantor will have made all
necessary filings to protect and maintain its interest in the Trademarks
and Patents set forth in Schedules I and II, including, without
limitation, all necessary filings and payments of all maintenance fees, in
the United States Patent and Trademark Office to the extent such
Trademarks and Patents are material to such Grantor's business. Set forth
in Schedules I and II is a complete and accurate list of all of the
material Trademark Licenses and material Patent Licenses owned by the
Grantor as of the date hereof.
(f) The Trademarks and Trademark Licenses are Subsisting and Not
Adjudged Invalid. As of the date hereof, each trademark registration and
trademark application of the Grantor set forth in Schedule I is subsisting
as of the date hereof, and has not been adjudged invalid, unregisterable
or unenforceable, in whole or in part, and, to the best of such Grantor's
knowledge, is valid, registrable and enforceable. As of the date hereof,
each of the Trademark Licenses set forth in Schedule I is validly
subsisting and has not been adjudged invalid or unenforceable, in whole or
in part, and, to the best of such Grantor's knowledge, is valid and
enforceable. As of the date hereof, each Grantor has notified the
Administrative Agent in writing of all uses of any item of Trademark
Collateral material to such Grantor's business of which such Grantor is
aware which could reasonably be expected to lead to such item becoming
invalid or unenforceable, including unauthorized uses by third parties and
uses which were not supported by the goodwill of the business connected
with such Collateral.
(g) The Patent and Patent Licenses are Subsisting and Not Adjudged
Invalid. As of the date hereof, each Patent and patent application of the
Grantor set forth in Schedule II is subsisting and has not been adjudged
invalid, unpatentable or unenforceable, in whole or in part, and, to the
best of such Grantor's knowledge, is valid, patentable and enforceable. As
of the date hereof, each of the Patent Licenses set forth in Schedule II
is validly subsisting and has not been adjudged invalid or unenforceable,
in whole or in part, and, to the best of such Grantor's knowledge, is
valid and enforceable. As of the date hereof, the Grantor has notified the
Administrative Agent in writing of all uses of any item of Patent
Collateral material to such Grantor's business of which such Grantor is
aware which could reasonably be expected to lead to such item becoming
invalid or unenforceable.
(h) No Previous Assignments or Releases. As of the date hereof, the
Grantor has not made an agreement constituting a present or future
assignment, sale, transfer or encumbrance of any of the Collateral (except
for any such assignment, sale, transfer or encumbrance permitted under the
Loan Documents). Except as permitted by the Loan Documents or as required
by law, the Grantor has not granted any license, shop right, release,
covenant not to sue, or non-assertion assurance to any Person with respect
to any material part of the Collateral which would have a Material Adverse
Effect.
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(i) Proper Statutory Notice. The Grantor has marked its products
with the trademark registration symbol (R), the numbers of all appropriate
patents, the common law trademark symbol (TM), or the designation "patent
pending," as the case may be, to the extent that it is reasonably and
commercially practicable.
(j) No Knowledge of Claims Likely to Arise. Except for the Trademark
Licenses and Patent Licenses listed in Schedules I and II hereto, the
Grantor has no knowledge of the existence of any right or any claim (other
than as permitted by this Agreement or the Loan Documents) that is likely
to be made under or against any item of Collateral contained on Schedules
I and II which would have a Material Adverse Effect.
(k) No Knowledge of Existing or Threatened Claims. No claim has been
made and is continuing or, to the Grantor's knowledge, threatened that the
use by such Grantor of any item of Collateral is invalid or unenforceable
or that the use by such Grantor of any Collateral does or may violate the
rights of any Person, which would have a Material Adverse Effect. To the
Grantor's knowledge, there is currently no infringement or unauthorized
use of any item of Collateral contained on Schedules I and II hereto which
would have a Material Adverse Effect.
The Grantor agrees that the foregoing representations and warranties
shall be deemed to have been made by the Grantor on and as of each date on which
an extension of credit is made by the Lenders to the Borrower under the Senior
Secured Credit Agreement, in each case as though made on and as of each such
date (or, if any such representation or warranty is expressly stated to have
been made as of a specific date, as of such specific date).
4. Covenants. The Grantor covenants and agrees with the
Administrative Agent and the other Secured Parties that, from and after the date
of this Agreement until the payment in full of the Loans, the Reimbursement
Obligations and to the extent then due and owing, all other Obligations, the
termination of the Revolving Credit Commitments and the expiration, termination
or return to the Issuing Lender of any Letters of Credit:
(a) Further Documentation; Pledge of Instruments and Chattel Paper.
At any time and from time to time, upon the written request of the
Administrative Agent or the Grantor, as the case may be, and at the sole
expense of such Grantor, such Grantor or the Administrative Agent, as the
case may be, will promptly and duly execute and deliver such further
instruments and documents and take such further action as the
Administrative Agent or such Grantor, as the case may be, may reasonably
request for the purpose of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements
under the Uniform Commercial Code in effect in any jurisdiction with
respect to the Liens created hereby. The Grantor also hereby authorizes
the Administrative Agent to file any such financing or continuation
statement without the signature of such Grantor to the extent permitted by
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applicable law. A carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction. The Administrative Agent agrees to notify such Grantor and
such Grantor agrees to notify the Administrative Agent of any financing or
continuation statement filed by it pursuant to this Section 4(a), provided
that any failure to give any such notice shall not affect the validity or
effectiveness of any such filing.
(b) Indemnification and Expenses. The Grantor agrees to pay, and to
save the Administrative Agent, the other Secured Parties and their
respective agents, officers, directors and successors harmless from, any
and all liabilities and reasonable costs and expenses (including, without
limitation, reasonable legal fees and expenses) (i) with respect to, or
resulting from, any delay by such Grantor in complying with any material
Requirement of Law applicable to any of the Collateral, or (ii) in
connection with any of the transactions contemplated by this Agreement,
provided that such indemnity shall not, as to the Administrative Agent,
any of the other Secured Parties or any of their respective agents,
officers, directors and successors, be available to the extent that such
liabilities, costs and expenses resulted from the gross negligence or
willful misconduct of any of the same. In any suit, proceeding or action
brought by the Administrative Agent or any other Secured Party under any
of the Collateral for any sum owing thereunder, or to enforce any of the
Collateral, the Grantor will save, indemnify and keep the Administrative
Agent, such Secured Party and their respective agents, officers, directors
and successors harmless from and against all expense, loss or damage
suffered by reason of any defense or counterclaim raised in any such suit,
proceeding or action, except to the extent such expense, loss or damage
resulted from the gross negligence or willful misconduct of any of the
same.
(c) Maintenance of Records. The Grantor will keep and maintain at
its own cost and expense reasonably satisfactory and complete records of
the Collateral, and shall mark such records to evidence this Agreement and
the Liens and the security interests created hereby. For the
Administrative Agent's and the other Secured Parties' further security,
the Administrative Agent, for the benefit of the Secured Parties, shall
have a security interest in all of the Grantor's books and records
pertaining to the Collateral.
(d) Right of Inspection. Upon reasonable written advance notice to
the Grantor and at reasonable intervals, or at any time and from time to
time after the occurrence and during the continuation of an Event of
Default, the Administrative Agent shall have reasonable access during
normal business hours to all the books, correspondence and records of such
Grantor, and the Administrative Agent and its representatives may examine
the same, and to the extent reasonable take extracts therefrom and make
photocopies thereof, and the Grantor agrees to render to the
Administrative Agent, at such Grantor's reasonable cost and expense, such
clerical and other assistance as may be reasonably requested with regard
thereto.
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(e) Compliance with Laws, etc. The Grantor will comply in all
material respects with all material Requirements of Law applicable to the
Collateral or any part thereof, except to the extent that the failure to
so comply would not be reasonably expected to materially adversely affect
in the aggregate the Administrative Agent's or the other Secured Parties'
rights hereunder, the priority of their Liens on the Collateral or the
value of the Collateral.
(f) Further Identification of Collateral. The Grantor will furnish
to the Administrative Agent from time to time such statements and
schedules further identifying and describing the Collateral, and such
other reports in connection with the Collateral, as the Administrative
Agent may reasonably request, all in reasonable detail.
(g) Security Interest in Any Newly Acquired Collateral. The Grantor
agrees that, should it obtain an ownership interest in any material
Trademark, Patent, Trademark License or Patent License, which is not now a
part of the Collateral, (i) the provisions of Section 2 shall
automatically apply thereto, (ii) any such Trademark, Patent, Trademark
License and Patent License shall automatically become part of the
Collateral, and (iii) with respect to any ownership interest in any such
Trademark, Patent, Trademark License or Patent License that such Grantor
should obtain, it shall give notice thereof to the Administrative Agent in
writing, in reasonable detail, at its address set forth in each of the
Credit Agreements within 45 days after the end of the calendar quarter in
which it obtains such ownership interest. The Grantor authorizes the
Administrative Agent to modify this Agreement by amending Schedules I and
II (and will cooperate reasonably with the Administrative Agent in
effecting any such amendment) to include on Schedule I any Trademark and
Trademark License and on Schedule II any Patent or Patent License of which
it receives notice under this Section, or to prepare and file with the
United States Patent and Trademark Office a supplement to this Agreement
to include any Patent or Trademark of which it receives notice to under
this Section.
(h) Maintenance of the Trademark Collateral. Except as permitted in
the Loan Documents the Grantor agrees to take all reasonably necessary
steps, including, without limitation, in the United States Patent and
Trademark Office or in any court, to (i) maintain each trademark
registration and each Trademark License identified on Schedule I hereto,
and (ii) pursue each trademark application now or hereafter identified in
Schedule I hereto, including, without limitation, the filing of responses
to office actions issued by the United States Patent and Trademark Office,
the filing of applications for renewal, the filing of affidavits under
Sections 8 and 15 of the United States Trademark Act, and the
participation in opposition, cancellation, infringement and
misappropriation proceedings, except, in each case in which such Grantor
has reasonably determined that any of the foregoing is not of material
economic value to it. The Grantor agrees to take corresponding steps with
respect to each new or acquired trademark or service mark
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12
registration, or application for trademark or service mark registration,
or any rights obtained under any Trademark License, in each case, which it
is now or later becomes entitled, except in each case in which such
Grantor has reasonably determined that any of the foregoing is not of
material economic value to it. Any expenses incurred in connection with
such activities shall be borne by such Grantor.
(i) Maintenance of the Patent Collateral. The Grantor agrees to take
all necessary steps, including, without limitation, in the United States
Patent and Trademark Office or in any court, to (i) maintain each patent
and each Patent License identified on Schedule II hereto, and (ii) pursue
each patent application, now or hereafter identified in Schedule II
hereto, including, without limitation, the filing of divisional,
continuation, continuation-in-part and substitute applications, the filing
of applications for reissue, renewal or extensions, the payment of
maintenance fees, and the participation in interference, reexamination,
opposition, infringement and misappropriation proceedings, except, in each
case in which such Grantor has reasonably determined that any of the
foregoing is not of material economic value to it. The Grantor agrees to
take corresponding steps with respect to each new or acquired patent,
patent application, or any rights obtained under any Patent License, in
each case, which it is now or later becomes entitled, except in each case
in which such Grantor has reasonably determined that any of the foregoing
is not of material economic value to it. Any expenses incurred in
connection with such activities shall be borne by the Grantor.
(j) Preservation and Protection of the Trademark Collateral and
Patent Collateral. Except as provided in Section 4(k) hereof, the Grantor
shall take all steps which it or the Administrative Agent deems reasonably
appropriate under the circumstances to preserve and protect its material
Trademark Collateral and Patent Collateral.
(k) Grantor Shall Not Abandon any Collateral. The Grantor shall not
abandon any trademark registration, patent or any pending trademark or
patent application, in each case listed on Schedule I or Schedule II,
without the written consent of the Administrative Agent, unless such
Grantor shall have previously determined that such use or the pursuit or
maintenance of such trademark registration, patent or pending trademark or
patent application is not of material economic value to it, in which case,
such Grantor will, at least annually, give notice of any such abandonment
to the Administrative Agent in writing, in reasonable detail, at its
address set forth in the Senior Secured Credit Agreement.
(l) Infringement of Any Collateral. In the event that any Grantor
becomes aware that any item of the Collateral which such Grantor has
reasonably determined to be material to its business is infringed or
misappropriated by a third party, which infringement or misappropriation
would reasonably be expected to have a Material Adverse Effect, such
Grantor shall notify the Administrative Agent promptly and in
<PAGE> 235
13
writing, in reasonable detail, at its address set forth in the Senior
Secured Credit Agreement, and shall take such actions as such Grantor or
the Administrative Agent deems reasonably appropriate under the
circumstances to protect such Collateral, including, without limitation,
suing for infringement or misappropriation and for an injunction against
such infringement or misappropriation. Any expense incurred in connection
with such activities shall be borne by such Grantor. The Grantor will
advise the Administrative Agent promptly and in writing, in reasonable
detail, at its address set forth in the Senior Secured Credit Agreement,
of any adverse determination or the institution of any proceeding
(including, without limitation, the institution of any proceeding in the
United States Patent and Trademark Office or any court) regarding any item
of the Collateral which has a Material Adverse Effect.
(m) Use of Statutory Notice. The Grantor shall mark its products
with the trademark registration symbol (R), the numbers of all appropriate
patents, the common law trademark symbol (TM), or the designation "patent
pending," as the case may be, to the extent that it is reasonably and
commercially practicable.
(n) Limitation on Liens on Collateral. The Grantor will not create,
incur or permit to exist, will defend the Collateral against, and will
take such other action as is reasonably necessary to remove, any material
Lien or material adverse claim on or to any of the Collateral, other than
Liens created hereby and other than as permitted pursuant to the Loan
Documents (including, without limitation, any Liens permitted to exist on
the Collateral pursuant to subsection 8.3 of the Senior Secured Credit
Agreement), and will defend the right, title and interest of the
Administrative Agent and the other Secured Parties in and to any of the
Collateral against the claims and demands of all Persons whomsoever,
except where failure to defend would not have a Material Adverse Effect.
(o) Limitations on Dispositions of Collateral. Without the prior
written consent of the Administrative Agent, the Grantor will not sell,
assign, transfer, exchange or otherwise dispose of, or grant any option
with respect to, the Collateral, or attempt, offer or contract to do so,
except with respect to licenses in the ordinary course of business or as
permitted by this Agreement or the Loan Documents.
(p) Notices. The Grantor will advise the Administrative Agent
promptly and in writing, in reasonable detail, at its address set forth in
the Senior Secured Credit Agreement, (i) of any Lien (other than Liens
created hereby or permitted under the Loan Documents, including, without
limitation, any Liens permitted to exist on the Collateral pursuant to
subsection 8.3 of the Senior Secured Credit Agreement) on any Patents or
Trademarks and (ii) of the occurrence of any other event which would
reasonably be expected in the aggregate to have a material adverse effect
on the aggregate value of the Collateral taken as a whole or the Liens
created hereunder.
5. Administrative Agent's Appointment as Attorney-in-Fact.
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14
(a) Powers. The Grantor hereby irrevocably constitutes and appoints
the Administrative Agent and any officer or agent of the Administrative Agent,
with full power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of such Grantor and
in the name of such Grantor or in its own name, for the purpose of carrying out
the terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be reasonably necessary
or desirable to accomplish the purposes of this Agreement to the extent
permitted by law, and, without limiting the generality of the foregoing, to the
extent permitted by law, the Grantor hereby gives the Administrative Agent the
power and right, on behalf of such Grantor, without notice to or assent by such
Grantor, to do, at any time when an Event of Default has occurred and is
continuing, the following:
(i) to execute and deliver any and all agreements, instruments,
documents, and papers as the Administrative Agent may reasonably request
to evidence the Administrative Agent's and the other Secured Parties'
security interest in any of the Collateral and the goodwill of such
Grantor relating thereto or represented thereby;
(ii) in the name of such Grantor or its own name, or otherwise, to
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
General Intangible (to the extent that the foregoing constitute
Collateral) or with respect to any other Collateral and to file any claim
or to take any other action or institute any proceeding in any court of
law or equity or otherwise deemed appropriate by the Administrative Agent
for the purpose of collecting any and all such moneys due under such
General Intangible or with respect to any other Collateral whenever
payable;
(iii) to pay or discharge Liens placed on the Collateral, other than
Liens permitted under this Agreement or the other Loan Documents,
including, without limitation, any Liens permitted to exist on the
Collateral pursuant to subsection 8.3 of the Senior Secured Credit
Agreement; and
(iv) (A) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; (B) to ask for, or demand, collect, receive payment of
and receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral; (C)
to sign and indorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with
any of the Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any thereof and to enforce any other right in
respect of any Collateral; (E) to defend any suit, action or proceeding
brought against the Grantor with respect to any of the Collateral; (F) to
settle, compromise or adjust any suit, action or proceeding described in
clause (E) above and, in connection
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15
therewith, to give such discharges or releases as the Administrative Agent
may deem appropriate; (G) subject to any pre-existing reserved rights or
licenses, to assign any Patent or Trademark constituting Collateral (along
with the goodwill of the business to which any such Patent or Trademark
pertains), for such term or terms, on such conditions, and in such manner,
as the Administrative Agent shall in its sole discretion determine; and
(H) generally, to sell, transfer, pledge and make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Administrative Agent were the absolute owner
thereof for all purposes, and to do, at the Administrative Agent's option
and the Grantor's expense, at any time, or from time to time, all acts and
things which the Administrative Agent deems reasonably necessary to
protect, preserve or realize upon the Collateral and the Administrative
Agent's and the other Secured Parties' Liens thereon and to effect the
intent of this Agreement, all as fully and effectively as such Grantor
might do.
The Grantor hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable until the payment in full of the Loans, the
Reimbursement Obligations and the other Obligations then due and owing, the
termination of the Revolving Credit Commitments and the expiration, termination
or return to the Issuing Lender of any Letters of Credit.
(b) Other Powers. The Grantor also authorizes the Administrative
Agent, from time to time if an Event of Default shall have occurred and be
continuing, to execute, in connection with any sale provided for in Section 8
hereof, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
(c) No Duty on the Part of Administrative Agent or Secured Parties.
The powers conferred on the Administrative Agent and the other Secured Parties
hereunder are solely to protect the Administrative Agent's and the other Secured
Parties' interests in the Collateral and shall not impose any duty upon the
Administrative Agent or any other Secured Party to exercise any such powers. The
Administrative Agent and the other Secured Parties shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers,
and neither they nor any of their officers, directors, employees, affiliates,
agents or successors shall be responsible to the Grantor for any act or failure
to act hereunder, except for gross negligence or willful misconduct of any of
the same.
6. Performance by Administrative Agent of Grantor's Obligations. If
the Grantor fails to perform or comply with any of its agreements contained
herein and the Administrative Agent, as provided for by the terms of this
Agreement, shall perform or comply, or otherwise cause performance or
compliance, with such agreements, the reasonable expenses of the Administrative
Agent incurred in connection with such performance or compliance, together with
interest thereon at a rate per annum equal to 1.75% above the rate applicable to
ABR Loans that are Term Loans, shall be payable by such Grantor to the
Administrative Agent on demand, and such Grantor's obligations to make such
payments shall constitute Obligations secured hereby.
<PAGE> 238
16
7. Proceeds. It is agreed that if an Event of Default shall occur
and be continuing, (a) all Proceeds of any Collateral received by the Grantor
consisting of cash, checks and other near-cash items shall be held by such
Grantor in trust for the Administrative Agent and the other Secured Parties,
segregated from other funds of such Grantor, and shall, forthwith upon receipt
by such Grantor, be turned over to the Administrative Agent in the exact form
received by such Grantor (duly indorsed by such Grantor to the Administrative
Agent, if required), and (b) any and all such Proceeds received by the
Administrative Agent (whether from the Grantor or otherwise) shall be held by
the Administrative Agent for the benefit of the Secured Parties as collateral
security for the Obligations (whether matured or unmatured), and/or then or at
any time thereafter may, in the sole discretion of the Administrative Agent, be
applied by the Administrative Agent against the Obligations then due and owing
in the following order of priority:
FIRST, to the payment of all reasonable costs and expenses incurred
by the Administrative Agent (including, without limitation, in its
capacity as Senior Secured Credit Agreement Administrative Agent) in
connection with this Agreement, the Guarantee and Collateral Agreement,
the Senior Secured Credit Agreement, any other Loan Document or any of the
Obligations, including, without limitation, all court costs and the
reasonable fees and expenses of its agents and legal counsel, and any
other reasonable costs or expenses incurred in connection with the
exercise by the Administrative Agent (including, without limitation, in
its capacity as Senior Secured Credit Agreement Administrative Agent) of
any right or remedy under this Agreement, the Senior Secured Credit
Agreement, or any other Loan Document;
SECOND, to the ratable satisfaction of all other Obligations; and
THIRD, to the Grantor or its successors or assigns, or to whomsoever
may be lawfully entitled to receive the same.
8. Remedies. If an Event of Default shall occur and be continuing,
the Administrative Agent, on behalf of the Secured Parties, may exercise all
rights and remedies of a secured party under the Code, and, to the extent
permitted by law, all other rights and remedies granted to the Administrative
Agent or any Secured Party in this Agreement and the other Loan Documents and in
any other instrument or agreement securing, evidencing or relating to the
Obligations. Without limiting the generality of the foregoing, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances, to the extent permitted by law, forthwith
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, lease, assign, give option or options to
purchase, or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker's board or office of the
Administrative Agent or any other Secured Party or elsewhere
<PAGE> 239
17
upon such terms and conditions as it may deem advisable and at such prices as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk. The Administrative Agent or any other Secured Party shall
have the right, to the extent permitted by law, upon any such sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in the Grantor, which right or equity is hereby waived and
released. The Grantor further agrees, at the Administrative Agent's request, to
assemble the Collateral and make it available to the Administrative Agent at
places which the Administrative Agent shall reasonably select, whether at such
Grantor's premises or elsewhere. In the event of any sale, assignment, or other
disposition of any of the Collateral, the goodwill of the business connected
with and symbolized by any Trademark Collateral subject to such disposition
shall be included, and such Grantor shall supply to the Administrative Agent or
its designee such Grantor's know-how and expertise relating to the Collateral
subject to such disposition, and such Grantor's notebooks, studies, reports,
records, documents and things embodying the same or relating to the inventions,
processes or ideas covered by, and to the manufacture of any products under or
in connection with, the Collateral subject to such disposition, and such
Grantor's customer's lists, studies and surveys and other records and documents
relating to the distribution, marketing, advertising and sale of products
relating to the Collateral subject to such disposition. The Administrative Agent
shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred therein or incidental to the care or safekeeping
of any of the Collateral or in any way relating to the Collateral or the rights
of the Administrative Agent and the other Secured Parties hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the payment
and performance in whole or in part of the Obligations then due and owing, in
the order of priority specified in Section 7 hereof, and only after such
application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Administrative Agent account for the surplus,
if any, to the Grantor. To the extent permitted by applicable law, (a) the
Grantor waives all claims, damages and demands it may acquire against the
Administrative Agent or any other Secured Party arising out of the repossession,
retention or sale of the Collateral, other than any such claims, damages and
demands that may arise from the gross negligence or willful misconduct of any of
them, and (b) any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition. The Grantor shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay in full the Loans, the
Reimbursement Obligations, and, to the extent then due and owing, all other
Obligations, including, without limitation, the reasonable fees and
disbursements of any attorneys employed by the Administrative Agent or any other
Secured Party to collect such deficiency, as provided in the Senior Secured
Credit Agreement.
9. Limitation on Duties Regarding Preservation of Collateral. The
Administrative Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar
<PAGE> 240
18
property for its own account. Neither the Administrative Agent, any other
Secured Party, nor any of their respective directors, officers, employees,
affiliates or agents shall be liable for failure to demand, collect or realize
upon all or any part of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Grantor or any other Person.
10. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are powers coupled with an
interest and are irrevocable until the payment in full of the Loans, the
Reimbursement Obligations and, to the extent then due and owing, all other
Obligations, the termination of the Revolving Credit Commitments and the
expiration, termination or return to the Issuing Lender of any Letters of
Credit.
11. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. Section Headings. The Section headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
13. No Waiver; Cumulative Remedies. Neither the Administrative Agent
nor any other Secured Party nor the Grantor shall by any act (except by a
written instrument pursuant to Section 14 hereof), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent, any other Secured Party or
the Grantor, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent,
any other Secured Party or the Grantor of any right or remedy hereunder on any
one occasion shall not be construed as a bar to any right or remedy which the
Administrative Agent, such other Secured Party or the Grantor would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
rights or remedies provided by law.
14. Waivers and Amendments; Successors and Assigns. None of the
terms or provisions of this Agreement may be amended, supplemented, waived or
otherwise modified except by a written instrument executed by the Grantor and
the Administrative Agent, provided that, if requested by the Grantor, any
provision of this Agreement for the benefit of the Administrative Agent and/or
the other Secured Parties may be waived by the Administrative Agent in a written
letter or agreement executed by the Administrative Agent or
<PAGE> 241
19
by telex or facsimile transmission from the Administrative Agent. This Agreement
shall be binding upon and shall inure to the benefit of the Grantor and its
successors and assigns, and the Administrative Agent and the other Secured
Parties and their respective successors, indorsees, transferees and assigns,
except that (other than in accordance with subsection 8.5 of the Senior Secured
Credit Agreement) the Grantor shall not assign, transfer or delegate any of its
rights or obligations under this Agreement without the prior written consent of
the Administrative Agent.
15. Notices. All notices, requests and demands to or upon the
respective parties hereto shall be made in accordance with subsection 11.2 of
the Senior Secured Credit Agreement. The Administrative Agent, the Secured
Parties and the Grantor may change their respective addresses and transmission
numbers for notices by notice in the manner provided in this Section 15.
16. Authority of Administrative Agent. The Grantor acknowledges that
the rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Administrative Agent and the other
Secured Parties, be governed by the Senior Secured Credit Agreement and by such
other agreements with respect thereto as may exist from time to time among them,
but, as between the Administrative Agent and such Grantor, the Administrative
Agent shall be conclusively presumed to be acting as agent for the Secured
Parties with full and valid authority so to act or refrain from acting, and such
Grantor shall not be under any obligation to make any inquiry respecting such
authority.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
18. Release of Collateral and Termination. (a) This Agreement shall
remain in full force and effect and be binding in accordance with and to the
extent of its terms and the security interest created by this Agreement shall
not be released until the payment in full of the Loans, the Reimbursement
Obligations and the other Obligations then due and owing shall have occurred,
the Revolving Credit Commitments shall have been terminated and any Letters of
Credit shall have expired or been terminated or returned to the Issuing Lender,
at which time the Collateral shall be released from the Liens created hereby,
and this Agreement and all obligations (other than those expressly stated to
survive such termination) of the Administrative Agent and the Grantor hereunder
shall terminate, all without delivery of any instrument or performance of any
act by any party, and all rights to the Collateral shall revert to the Grantor,
provided that if any payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Administrative Agent
or any other Secured Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Grantor or
<PAGE> 242
20
any other Loan Party, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or a trustee or similar officer for, the Grantor
or any other Loan Party or any substantial part of its property, or otherwise,
this Agreement, all rights hereunder and the Liens created hereby shall continue
to be effective, or be reinstated, as though such payments had not been made.
Upon request of the Grantor following any such termination, the Administrative
Agent shall reassign (at the sole cost and expense of such Grantor) to such
Grantor any Collateral held by the Administrative Agent hereunder, and execute
and deliver (at the sole cost and expense of such Grantor) to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination
and reassignment.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by the Grantor in a transaction permitted by the Senior Secured
Credit Agreement, then the Administrative Agent shall execute and deliver to the
Grantor (at the sole cost and expense of such Grantor) all releases or other
documents reasonably necessary or desirable for the release of the Liens created
hereby on such Collateral.
19. Incorporation of Provisions of Guarantee and Collateral
Agreement. The Grantor hereby acknowledges and affirms that the rights and
remedies of the Administrative Agent with respect to the security interest in
the Collateral made and granted hereby are more fully set forth in the Guarantee
and Collateral Agreement, the terms, conditions and other provisions of which,
in so far as they relate to the Collateral, such security interest and such
rights and remedies, are incorporated by reference herein as if fully set forth
herein. Nothing in this Agreement shall defer or impair the attachment or
perfection of any security interest in any collateral described in the Guarantee
and Collateral Agreement which would attach or be perfected pursuant to the
terms of the Guarantee and Collateral Agreement without action by the Grantor or
any other Person.
20. Interpretation. In the event of a conflict between any term of
this Agreement and the terms of the Senior Secured Credit Agreement, the terms
of the Senior Secured Credit Agreement shall control.
21. Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Grantor and the Administrative Agent with
respect to the subject matter hereof and there are no promises or
representations by the Grantor, the Administrative Agent or any other Secured
Party relative to the subject matter hereof not reflected or referred to herein
or therein.
22. Submission To Jurisdiction; Waivers. Each party hereto hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgement
in respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the
<PAGE> 243
21
United States of America for the Southern District of New York, and
appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient forum and agrees not
to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Grantor or the applicable Secured Party, as the case may be, at the
address referred to in Section 15 or at such other address of which the
Administrative Agent and the Grantor shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred
to in this Section 22 any punitive damages.
23. WAIVER OF JURY TRIAL. THE GRANTOR AND THE ADMINISTRATIVE AGENT
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
24. Counterparts. This Agreement may be executed and acknowledged by
one or more of the parties to this Agreement on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
<PAGE> 244
22
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed and delivered as of the date first above written.
[GRANTOR]
By: __________________________
Title:
ACKNOWLEDGED AND AGREED AS OF
THE DATE HEREOF BY:
THE CHASE MANHATTAN BANK, as Administrative Agent
By:__________________________________________________
Title:
<PAGE> 245
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ___________ day of _________, 1997, before me personally came
______________ to me known, who, being by me duly sworn, did depose and say he
resides at ____________________________________________________________________
____________________________ and that he is the_________________________________
of [GRANTOR], the corporation described in and which executed the above
instrument; that he has been authorized to execute said instrument on behalf of
said corporation; and that he signed said instrument on behalf of said
corporation pursuant to said authority.
--------------------------
Notary Public
[Notarial Seal]
<PAGE> 246
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the _______ day of _________, 1997, before me personally came
____________ to me known, who, being by me duly sworn, did depose and say he
resides at ____________________________________________________________________
___________________________ and that he is the ________________________________
of THE CHASE MANHATTAN BANK, the national banking association described in and
which executed the above instrument; that he has been authorized to execute said
instrument on behalf of said association; and that he has signed said instrument
on behalf of said association pursuant to said authority.
--------------------------
Notary Public
[Notarial Seal]
<PAGE> 247
Schedule I
TRADEMARKS AND TRADEMARK LICENSES
<PAGE> 248
Schedule II
PATENTS AND PATENT LICENSES
<PAGE> 249
Schedule III
EXISTING SECURITY INTERESTS
<PAGE> 250
EXHIBIT D TO
CREDIT AGREEMENT
[California]
Recording requested by, and when
recorded, please return to:
Simpson Thacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
ATTN: Emily R. Steinman, Esq.
THIS INSTRUMENT IS TO BE INDEXED IN THE OFFICE OF THE LOS ANGELES
COUNTY RECORDS AS BOTH A DEED OF TRUST AND A FIXTURE FILING
DEED OF TRUST, ASSIGNMENT OF
RENTS AND LEASES, SECURITY
AGREEMENT AND FIXTURE FILING
from
EV INTERNATIONAL, INC., Grantor
to
CHICAGO TITLE INSURANCE COMPANY, Trustee
for the use and
benefit of
THE CHASE MANHATTAN BANK, as Administrative Agent, Beneficiary
DATED AS OF FEBRUARY __, 1997
<PAGE> 251
[California]
DEED OF TRUST, ASSIGNMENT OF RENTS
AND LEASES, SECURITY AGREEMENT AND FIXTURE FILING
THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES, SECURITY
AGREEMENT AND FIXTURE FILING, dated as of February __, 1997 is made by EV
INTERNATIONAL, INC., a Delaware corporation, as successor by merger and name
change to LFE Corporation ("GRANTOR"), whose address is 600 Cecil Street,
Buchanan, Michigan 49107, to CHICAGO TITLE INSURANCE COMPANY, a ____________
corporation, ("TRUSTEE") whose address is ___________________________________for
the use and benefit of THE CHASE MANHATTAN BANK, a New York banking corporation
whose address is 270 Park Avenue, New York, New York 10017, as Administrative
Agent (in such capacity, "BENEFICIARY") for the several banks and other
financial institutions (the "LENDERS") from time to time parties to the Credit
Agreement dated as of February __, 1997, (as the same may be amended,
supplemented, waived or otherwise modified from time to time the "SENIOR SECURED
CREDIT AGREEMENT") among Gulton Acquisition Corp., a Delaware corporation
("BORROWER"), the Lenders and Beneficiary. References to this "Deed of Trust"
shall mean this instrument and any and all renewals, modifications, amendments,
supplements, extensions, consolidations, substitutions, spreaders and
replacements of this instrument. Capitalized terms used and not otherwise
defined herein shall have the meanings assigned thereto in the Senior Secured
Credit Agreement.
Background
A. Gulton Holdings Corp., a Delaware corporation which, on or
after the Effective Date, will be renamed EVI Audio Holding, Inc. ("HOLDINGS")
and Borrower, its direct Wholly Owned Subsidiary, are newly formed companies
organized by an investor group led by Greenwich Street Capital Partners, Inc., a
Delaware corporation ("GSCP").
B. Borrower acquired Gulton Industries Inc., a Delaware
corporation ("GII") which was a subsidiary of Mark IV Industries, Inc. ("MARK
IV") through the purchase from Mark IV and Mark IV PLC of the capital stock of
GII (the "ACQUISITION") pursuant to the Stock Purchase Agreement, dated as of
December 12, 1996, by and among Mark IV, Mark IV PLC and Borrower (as amended,
supplemented, waived or otherwise modified from time to time in accordance with
the Senior Secured Credit Agreement, the "STOCK PURCHASE AGREEMENT").
C. Borrower merged with and into GII (the "FIRST MERGER"), and
GII as surviving corporation of the First Merger merged (the "SECOND MERGER";
the First Merger
<PAGE> 252
2
together with the Second Merger, the "MERGERS") with and into Electro-Voice,
Incorporated, a Delaware corporation and a Wholly Owned Subsidiary of GII, which
was thereupon renamed EV International, Inc.
D. In order to (i) finance a portion of the Acquisition
Consideration, (ii) refinance a portion of the existing indebtedness of GII and
its subsidiaries, (iii) pay certain fees, taxes and expenses related to (x) the
Acquisition and the financing thereof and (y) the refinancing of such existing
indebtedness of GII and its subsidiaries and (iv) finance the working capital
and other business requirements of Grantor and its subsidiaries following the
consummation of the Acquisition and the Merger, Acquisition Co. has requested
that the Lenders make the Loans and issue and participate in the Letters of
Credit in accordance with the terms of the Senior Secured Credit Agreement.
E. Grantor is the owner of the parcel(s) of real property
described on Schedule A attached hereto (such real property, together with all
of the buildings, improvements, structures and fixtures now or subsequently
located thereon (the "IMPROVEMENTS"), being collectively referred to as the
"REAL ESTATE").
F. Pursuant to the terms of the Senior Secured Credit
Agreement, the Lenders have agreed, among other things, to make the Loans and
the Issuing Lender has agreed to issue, and the L/C Participants have agreed to
acquire undivided participating interests in, the Letter(s) of Credit for the
account of the Borrower upon the terms and subject to the conditions set forth
in the Senior Secured Credit Agreement which conditions include the grant by
Grantor to Beneficiary of a first lien upon and perfected security interest in,
among other things, all estate, right, title and interest of Grantor in and to
the Real Estate pursuant to the terms hereof.
G. Grantor is the successor by merger to Borrower, and it is
to the advantage and benefit of Grantor that the Lenders make the Loans to
Borrower.
Granting Clauses
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor agrees that to secure:
(a) the repayment of principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans
and Reimbursement Obligations and interest accruing after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Loan Party, whether
or not a claim for post-filing or post-petition interest is allowed in
such proceeding) the Loans (as they may be evidenced by the Notes from
time to time) and all other obligations (including the Reimbursement
Obligations) and liabilities of Grantor to Beneficiary, the Issuing
Lender and the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Senior
Secured Credit Agreement, the Loans,
<PAGE> 253
3
the Letters of Credit, the Security Documents, any Guarantee Obligation
of Grantor as to which any Lender is a beneficiary, any Permitted
Hedging Arrangement with any Lender or any banking affiliate of any
Lender (whether entered into directly, or guaranteed, by Grantor), the
Guarantee and Collateral Agreement dated as of February __, 1997
between Grantor, Holdings and Beneficiary (the "GUARANTEE") or any
other document made, delivered or given in connection therewith, in
each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees, charges and disbursements of
counsel to the Administrative Agent, the Issuing Lender or any Lender
that are required to be paid by any Loan Party pursuant to the Senior
Secured Credit Agreement) (the items set forth above being referred to
collectively as the "INDEBTEDNESS"); and
(b) the performance of all covenants, agreements, obligations
and liabilities of Grantor (the "OBLIGATIONS") under or pursuant to the
provisions of the Senior Secured Credit Agreement, the Loans, this Deed
of Trust, the Guarantee, any other document securing payment of the
Indebtedness (the "SECURITY DOCUMENTS") and any amendments,
supplements, extensions, renewals, restatements, replacements or
modifications of any of the foregoing (the Senior Secured Credit
Agreement, the Loans, the Letters of Credit, this Deed of Trust, the
Guarantee and all other documents and instruments from time to time
evidencing, securing or guaranteeing the payment of the Indebtedness or
the performance of the Obligations, as any of the same may be amended,
supplemented, extended, renewed, restated, replaced or modified from
time to time, are collectively referred to as the "LOAN DOCUMENTS");
GRANTOR HEREBY IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS TO TRUSTEE, IN TRUST,
WITH POWER OF SALE, THE FOLLOWING:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever
of Grantor, in possession or expectancy, in and to the Real Estate or
any part thereof;
(C) all right, title and interest of Grantor in, to and under
all easements, rights of way, gores of land, streets, ways, alleys,
passages, sewer rights, waters, water courses, water and riparian
rights, development rights, air rights, mineral rights and all estates,
rights, titles, interests, privileges, licenses, tenements,
hereditaments and appurtenances belonging, relating or appertaining to
the Real Estate, and any reversions, remainders, rents, issues, profits
and revenue thereof and all land lying in the bed of any street, road
or avenue, in front of or adjoining the Real Estate to the center line
thereof;
(D) all right, title and interest of Grantor in and to all of
the fixtures, chattels, business machines, machinery, apparatus,
equipment, furnishings, fittings and articles
<PAGE> 254
4
of personal property of every kind and nature whatsoever, and all
appurtenances and additions thereto and substitutions or replacements
thereof (together with, in each case, attachments, components, parts
and accessories) currently owned or subsequently acquired by Grantor
and now or subsequently attached to, or contained in or used or usable
in any way in connection with any operation or letting of the Real
Estate, including but without limiting the generality of the foregoing,
all screens, awnings, shades, blinds, curtains, draperies, artwork,
carpets, rugs, storm doors and windows, furniture and furnishings,
heating, electrical, and mechanical equipment, lighting, switchboards,
plumbing, ventilating, air conditioning and air-cooling apparatus,
refrigerating, and incinerating equipment, escalators, elevators,
loading and unloading equipment and systems, stoves, ranges, laundry
equipment, cleaning systems (including window cleaning apparatus),
telephones, communication systems (including satellite dishes and
antennae), televisions, computers, sprinkler systems and other fire
prevention and extinguishing apparatus and materials, security systems,
motors, engines, machinery, pipes, pumps, tanks, conduits, appliances,
fittings and fixtures of every kind and description (all of the
foregoing in this paragraph (D) being referred to as the "EQUIPMENT");
(E) all right, title and interest of Grantor in and to all
substitutes and replacements of, and all additions and improvements to,
the Real Estate and the Equipment, subsequently acquired by or released
to Grantor or constructed, assembled or placed by Grantor on the Real
Estate, immediately upon such acquisition, release, construction,
assembling or placement, including, without limitation, any and all
building materials to be used by Grantor whether stored at the Real
Estate or offsite, and, in each such case, without any further
mortgage, conveyance, assignment or other act by Grantor;
(F) all right, title and interest of Grantor in, to and under
all leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or
occupancy of the Real Estate or the Equipment or any part thereof, now
existing or subsequently entered into by Grantor and whether written or
oral and all guarantees of any of the foregoing (collectively, as any
of the foregoing may be amended, restated, extended, renewed or
modified from time to time, the "LEASES"), and all rights of Grantor in
respect of cash and securities deposited thereunder and the right to
receive and collect the revenues, income, rents, issues and profits
thereof, together with all other rents, royalties, issues, profits,
revenue, income and other benefits arising from the use and enjoyment
of the Trust Property (as defined below) (collectively, the "RENTS");
(G) all books and records relating to or used in connection
with the operation of the Real Estate or the Equipment or any part
thereof;
(H) all right, title and interest of Grantor, to the extent
assignable, in and to (i) all unearned premiums under insurance
policies now or subsequently obtained by
<PAGE> 255
5
Grantor relating to the Real Estate or Equipment, (ii) any such
insurance policies, (iii) all proceeds of any such insurance policies
(including title insurance policies) including the right to collect and
receive such proceeds, subject to the provisions relating to insurance
generally set forth below, and (iv) all awards and other compensation,
including the interest payable thereon and the right to collect and
receive the same, made to the present or any subsequent owner of the
Real Estate or Equipment for the taking by eminent domain, condemnation
or otherwise, of all or any part of the Real Estate or any easement or
other right therein, subject to the provisions relating to condemnation
awards generally set forth below;
(I) all right, title and interest of Grantor, to the extent
assignable, in and to (i) all contracts from time to time executed by
Grantor or any manager or agent on its behalf relating to the
ownership, construction, maintenance, repair, operation, occupancy,
sale or financing of the Real Estate or Equipment or any part thereof
and all agreements relating to the purchase or lease of any portion of
the Real Estate or any property which is adjacent or peripheral to the
Real Estate, together with the right to exercise such options
(collectively, the "CONTRACTS"), (ii) all consents, licenses, building
permits, certificates of occupancy and other governmental approvals
relating to construction, completion, occupancy, use or operation of
the Real Estate or any part thereof (collectively, the "PERMITS") and
(iii) all drawings, plans, specifications and similar or related items
relating to the Real Estate (collectively, the "PLANS");
(J) any and all monies now or subsequently on deposit for the
payment of real estate taxes or special assessments against the Real
Estate or for the payment of premiums on insurance policies covering
the foregoing property or otherwise on deposit with or held by
Beneficiary as provided in this Deed of Trust;
(K) all accounts and revenues arising from the operation of
the Improvements; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now
owned or held or subsequently acquired by Grantor and described in the foregoing
clauses (A) through (E) are collectively referred to as the "PREMISES", and
those described in the foregoing clauses (A) through (L) are collectively
referred to as the "TRUST PROPERTY").
TO HAVE AND TO HOLD the Trust Property and the rights and
privileges hereby granted unto Trustee, its successors and assigns for the uses
and purposes set forth, until the Indebtedness is fully paid and the Obligations
fully performed or as otherwise expressly provided in the Section of this Deed
of Trust entitled "Release of Deed of Trust".
<PAGE> 256
6
Terms and Conditions
Grantor further represents, warrants, covenants and agrees
with Trustee and Beneficiary as follows:
1. Warranty of Title. Grantor warrants that Grantor has good
title to the Real Estate in fee simple and good title to the rest of the Trust
Property, subject only to the matters that are set forth in Schedule B of the
title insurance policy or policies being issued to Beneficiary to insure the
lien of this Deed of Trust and Liens expressly permitted under the Senior
Secured Credit Agreement (collectively, the "PERMITTED EXCEPTIONS") and Grantor
shall warrant, defend and preserve such title and the rights granted by this
Deed of Trust with respect thereto against all claims of all persons and
entities. Grantor further warrants that it has the right to grant this Deed of
Trust.
2. Payment of Indebtedness. Grantor shall pay the Indebtedness
at the times and places and in the manner specified in the Senior Secured Credit
Agreement and shall perform all the Obligations.
3. Requirements. (a) Grantor shall promptly comply with, or
cause to be complied with, and conform to all present and future laws, statutes,
codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements, and irrespective of the nature of the work to be done, of each of
the United States of America, any State and any municipality, local government
or other political subdivision thereof and any agency, department, bureau,
board, commission or other instrumentality of any of them, now existing or
subsequently created (collectively, "GOVERNMENTAL AUTHORITY") which has
jurisdiction over the Trust Property and all covenants, restrictions and
conditions now or later of record which may be applicable to any of the Trust
Property, or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration, repair or reconstruction of any of the Trust Property,
except to the extent that failure to comply therewith, in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. All present and
future laws, statutes, codes, ordinances, orders, judgments, decrees, rules,
regulations and requirements of every Governmental Authority applicable to
Grantor or to any of the Trust Property and all covenants, restrictions, and
conditions which now or later may be applicable to any of the Trust Property are
collectively referred to as the "LEGAL REQUIREMENTS".
(b) From and after the date of this Deed of Trust, except as
expressly permitted under the Senior Secured Credit Agreement or herein, Grantor
shall not by act or omission permit, other than Permitted Exceptions, any
building or other improvement on any premises not subject to this Deed of Trust
to rely on the Premises or any part thereof or any interest therein to fulfill
any Legal Requirement, and Grantor hereby assigns to Beneficiary any and all
rights to give consent for all or any portion of the Premises or any interest
therein to be so used. Grantor shall not by act or omission impair the integrity
of any of the Real Estate as a single zoning lot separate and apart from all
other premises. Grantor represents that each parcel of the Real Estate
constitutes a legally subdivided lot, in compliance with all subdivision
<PAGE> 257
7
laws and similar Legal Requirements, except to the extent that failure to comply
therewith, in the aggregate, would not reasonably be expected to have a Material
Adverse Effect. Any act or omission by Grantor which would result in a violation
of any of the provisions of this subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Except as
expressly permitted under the Senior Secured Credit Agreement, Grantor, prior to
delinquency, shall pay and discharge all taxes of every kind and nature
(including, without limitation, all real and personal property, income,
franchise, withholding, transfer, gains, profits and gross receipts taxes), all
charges for any easement or agreement maintained for the benefit of any of the
Trust Property, all general and special assessments, levies, permits, inspection
and license fees, all water and sewer rents and charges and all other public
charges even if unforeseen or extraordinary, imposed upon or assessed against or
which may become a lien on any of the Trust Property, or arising in respect of
the occupancy, use or possession thereof, together with any penalties or
interest on any of the foregoing (all of the foregoing are collectively referred
to as the "IMPOSITIONS"). Grantor shall within 30 days after the request of
Beneficiary deliver to Beneficiary (i) original or copies of receipted bills and
cancelled checks or other evidence of payment of such Imposition if it is a real
estate tax or other public charge and (ii) evidence acceptable to Beneficiary in
its reasonable discretion showing the payment of any other such Imposition. If
by law any Imposition, at Grantor's option, may be paid in installments (whether
or not interest shall accrue on the unpaid balance of such Imposition), Grantor
may elect to pay such Imposition in such installments and shall be responsible
for the payment of such installments with interest, if any.
(b) Nothing herein shall affect any right or remedy of Trustee
or Beneficiary under this Deed of Trust or otherwise, without notice or demand
to Grantor, to pay any Imposition after the date such Imposition shall have
become delinquent, and to add to the Indebtedness the amount so paid, together
with interest from the time of payment at the rate of interest described in
paragraph 4.1(c) of the Senior Secured Credit Agreement (the "DEFAULT RATE").
Any sums paid by Trustee or Beneficiary in discharge of any Impositions shall be
(i) a charge on the Premises secured hereby prior to any right or title to,
interest in, or claim upon the Premises subordinate to the lien of this Deed of
Trust, and (ii) payable on demand by Grantor to Trustee or Beneficiary, as the
case may be, together with interest at the Default Rate as set forth above.
(c) Grantor shall not claim, demand or be entitled to receive
any credit or credits toward the satisfaction of this Deed of Trust or on any
interest payable thereon for any taxes assessed against the Trust Property or
any part thereof, and shall not claim any deduction from the taxable value of
the Trust Property by reason of this Deed of Trust.
(d) Grantor shall have the right pursuant to subsection 7.3 of
the Senior Secured Credit Agreement to contest in good faith to the amount or
validity of any Imposition by appropriate proceedings diligently conducted with
reserves in conformity with GAAP, provided that Grantor shall demonstrate to
Beneficiary's reasonable satisfaction that such
<PAGE> 258
8
proceedings shall operate conclusively to prevent the sale of the Trust
Property, or any part thereof, to satisfy such Imposition prior to final
determination of such proceedings.
(e) Upon written notice to Grantor, Beneficiary during the
continuance of an Event of Default (as defined below) shall be entitled to
require Grantor to pay monthly in advance to Beneficiary the equivalent of
1/12th of the estimated annual Impositions. Beneficiary may commingle such funds
with its own funds but Grantor shall be entitled to interest thereon at a rate
mutually agreed upon by Grantor and Beneficiary.
5. Insurance. (a) Grantor shall maintain or cause to be
maintained on all of the Premises:
(i) property insurance against loss or damage by fire,
lightning, windstorm, tornado, water damage, flood, earthquake and by
such other further risks and hazards as now are or subsequently may be
covered by an "all risk" policy or a fire policy covering "special"
causes of loss (provided, however, that the maintenance of insurance
against earthquake, windstorm, flood and freeze risks shall be subject
to availability of such insurance coverage on commercially reasonable
terms). The policy shall include building ordinance law endorsements
and the policy limits shall be automatically reinstated after each loss
(other than with respect to flood and earthquake coverage which shall
be reinstated on a commercially reasonable basis);
(ii) commercial general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language or similar language of such endorsement), covering all claims
for personal injury, bodily injury or death, or property damage,
subject to standard policy terms, conditions and exclusions, occurring
on, in or about the Premises in an amount not less than $10,000,000
combined single limit with respect to personal injury, bodily injury or
death, or property damage, relating to any one occurrence plus such
excess limits as Beneficiary shall reasonably request from time to
time;
(iii) when and to the extent reasonably required by
Beneficiary, insurance against loss or damage by any other risk
commonly insured against by persons occupying or using like properties
in the locality or localities in which the Real Estate is situated;
(iv) during the course of any construction or repair of
Improvements, commercial general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language or similar language of such endorsement), (including coverage
for elevators and escalators, if any). The policy shall include
coverage for independent contractors and completed operations. The
completed operations coverage shall stay in effect for two years after
construction of any Improvements has been completed. The policy shall
provide coverage on an occurrence basis against claims for personal
injury, including, without limitation,
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bodily injury and death, and property damage resulting from Grantor's
negligence or other behavior for which Grantor may be adjudged
tortiously liable, subject to standard policy terms, conditions and
exclusions, occurring on, in or about the Premises and the adjoining
streets, sidewalks and passageways, such insurance to afford immediate
minimum protection to a limit of not less than that reasonably required
by Beneficiary with respect to personal injury, bodily injury or death
to any one or more persons or damage to property;
(v) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Grantor engaged on or with
respect to the Premises in such amounts no less than the limits
established by law or in the case of employer's liability insurance, no
less than $500,000, provided that Grantor may self-insure any or all
workers' compensation liabilities;
(vi) during the course of any construction, addition,
alteration or repair of the Improvements, builder's risk completed
value property insurance form against "all risks of physical loss"
(subject to standard policy exclusions), including collapse, water
damage, flood and earthquake and transit coverage, during construction
or repairs of the Improvements, with deductible approved by Beneficiary
in its reasonable discretion, in reporting form, covering the total
replacement value of work performed and equipment, supplies and
materials furnished (with an appropriate limit for soft costs in the
case of construction); provided, however, that the maintenance of
insurance against earthquake and flood risks shall be subject to
availability of such insurance coverage on commercially reasonable
terms;
(vii) boiler and machinery property insurance covering
pressure vessels, air tanks, boilers, machinery, pressure piping,
heating, air conditioning and elevator equipment and escalator
equipment, provided the Improvements contain equipment of such nature,
in such amounts as are reasonably satisfactory to Beneficiary but not
less than the lesser of $1,000,000 or 10% of the value of the
Improvements;
(viii) if any portion of the Premises are located in an area
identified in the Federal Register as having special flood hazards by
the Secretary of Housing and Urban Development or other applicable
agency, flood insurance covering any parcel of the Trust Property which
contains improvements in an amount satisfactory to Beneficiary in its
reasonable discretion, but in no event less than the maximum limit of
coverage available with respect to the particular type of property
under the National Flood Insurance Act of 1968, as amended and with a
term ending not later than the maturity of the Indebtedness and
Beneficiary shall receive confirmation that Grantor has received the
notice required pursuant to Section 208.8(e)(3) of Regulation H of the
Board of Governors of The Federal Reserve System; and
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10
(ix) such other insurance in such amounts as Beneficiary may
reasonably request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or, in the case of
property and boiler and machinery insurance, materially amended without 30-days'
prior written notice to Beneficiary, (ii) with respect to all property
insurance, subject to availability on commercially reasonable terms, provide for
deductibles not to exceed $250,000, other than with respect to (a) flood,
freeze, windstorm and earthquake perils for which deductibles shall not exceed
the greater of $500,000 or 5% of values at risk per location involved in loss
and (b) boiler and machinery coverage for which deductibles shall not exceed the
greater of $500,000 or five times 100% of the daily time element value, contain
a "Replacement Cost Endorsement" without any deduction made for depreciation and
with no co-insurance penalty (or attaching an agreed amount endorsement
satisfactory to Beneficiary in its reasonable discretion), with loss payable
solely to Beneficiary (modified, if necessary and to the extent available under
such policy, to provide that proceeds in the amount of replacement cost may be
retained by Beneficiary without the obligation to rebuild) as its interest may
appear, without contribution, under a "standard" or "New York" mortgagee clause
acceptable to Beneficiary in its reasonable discretion and be written by
insurance companies having an A.M. Best Company, Inc. rating of A- or higher and
a financial size category of not less than VII, or otherwise as approved by
Beneficiary in its reasonable discretion and (iii) contain a "manuscript"
endorsement providing that Grantor may not unilaterally cancel such policy
without Beneficiary's prior written consent. Liability insurance policies shall
name Beneficiary as an additional insured and contain a waiver of subrogation
against Beneficiary; all such policies shall indemnify and hold Beneficiary
harmless from all liability claims occurring on, in or about the Premises and
the adjoining streets, sidewalks and passageways, subject to standard policy
terms, conditions and exclusions. The amounts of each insurance policy and the
form of each such policy shall at all times be satisfactory to Beneficiary in
its reasonable discretion. Each policy shall expressly provide that any proceeds
which are payable to Beneficiary shall be paid by check payable to the order of
Beneficiary only and requiring the endorsement of Beneficiary only. If any
required insurance shall expire, be withdrawn, become void by breach of any
condition thereof by Grantor or by any lessee of any part of the Trust Property
or become void or unsafe by reason of the failure or impairment of the capital
of any insurer, Grantor shall immediately obtain new or additional insurance
satisfactory to Beneficiary in its reasonable discretion. Grantor shall not take
out any separate or additional insurance which is contributing in the event of
loss unless it is properly endorsed and otherwise satisfactory to Beneficiary in
all respects in its reasonable discretion.
(b) Grantor shall deliver to Beneficiary an original of each
insurance policy required to be maintained, or a certificate of such insurance
acceptable to Beneficiary in its reasonable discretion, together with a copy of
the declaration page for each such policy. Grantor shall (i) pay as they become
due all premiums for such insurance, (ii) not later than seven days prior to the
expiration of each policy to be furnished pursuant to the provisions of
<PAGE> 261
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this Section , deliver a renewed policy or policies, or certificates of
insurance acceptable to Beneficiary, in its reasonable discretion, or duplicate
original or originals thereof. Upon the reasonable request of Beneficiary,
Grantor shall cause its insurance underwriter or broker to certify to
Beneficiary in writing that all the requirements of this Deed of Trust governing
insurance have been satisfied.
(c) If Grantor is in default of its obligations to insure or
deliver any such policy or policies, or certificates of insurance acceptable to
Beneficiary, in its reasonable discretion, then Beneficiary, at its option and
without notice, may effect such insurance from year to year, and pay the premium
or premiums therefor, and Grantor shall pay to Beneficiary on demand such
premium or premiums so paid by Beneficiary with interest from the time of
payment at the Default Rate and the same shall be deemed to be secured by this
Deed of Trust and shall be collectible in the same manner as the Indebtedness
secured by this Deed of Trust.
(d) Grantor shall increase the amount of property insurance
required to equal 100% replacement cost pursuant to the provisions of this
Section at the time of each renewal of each policy (but not later than 12 months
from the date of this Deed of Trust and each successive 12 month period to occur
thereafter) by using the Morgan & Swift Building Cost Index to determine whether
there shall have been an increase in the replacement value since the most recent
adjustment and, if there shall have been such an increase, the amount of
insurance required shall be adjusted accordingly.
(e) Grantor promptly shall in all material respects comply
with and conform to (i) all provisions of each such insurance policy, and (ii)
all requirements of the insurers applicable to Grantor or to any of the Trust
Property or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of any of the Trust Property. Grantor shall
not use or permit the use of the Trust Property in any manner which would permit
any insurer to cancel any insurance policy or void coverage required to be
maintained by this Deed of Trust.
(f) (i) If the Trust Property, or any part thereof, shall be
destroyed or damaged by fire or any other casualty, whether insured or
uninsured, or in the event any claim is made against Grantor for any
personal injury, bodily injury or property damage incurred on or about
the Premises, Grantor shall promptly give notice thereof to
Beneficiary.
(ii) If the Trust Property is damaged by fire or other
casualty and the cost to repair such damage is less than $1,000,000,
then provided that no Event of Default shall have occurred and be
continuing, Grantor shall have the right to adjust such loss, and the
insurance proceeds relating to such loss may be paid over to Grantor;
provided that Grantor shall, promptly after any such damage, repair
such damage to the extent required by subsection 7.5 of the Senior
Secured Credit Agreement regardless of whether any insurance proceeds
have been received or whether such proceeds, if received, are
sufficient to pay for the costs of repair.
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12
(iii) If the Trust Property is damaged by fire or other
casualty, and the cost to repair such damage exceeds the limit in
Section 5(f)(ii) above, or if an Event of Default shall have occurred
and be continuing, then Grantor authorizes and empowers Beneficiary, at
Beneficiary's option and in Beneficiary's reasonable discretion, as
attorney-in-fact for Grantor, to make proof of loss, to adjust and
compromise any claim under any insurance policy, to appear in and
prosecute any action arising from any policy, to collect and receive
insurance proceeds and to deduct therefrom Beneficiary's reasonable
expenses incurred in the collection process. Each insurance company
concerned is hereby authorized and directed to make payment for such
loss directly to Beneficiary. Beneficiary shall have the right to
require Grantor to repair or restore the Trust Property to the extent
required by subsection 7.5 of the Senior Secured Credit Agreement, and
Grantor hereby designates Beneficiary as its attorney-in-fact for the
purpose of making any election required or permitted under any
insurance policy relating to such repair or restoration. The insurance
proceeds or any part thereof received by Beneficiary may be applied by
Beneficiary toward reimbursement of all reasonable costs and expenses
of Beneficiary in collecting such proceeds, and the balance, at
Beneficiary's option in its sole and absolute discretion, to the
principal (to the installments in inverse order of maturity, if payable
in installments) and interest due or to become due under the Notes, the
Senior Secured Credit Agreement or the other Loan Documents, to fulfill
any other Obligation of Grantor, to the restoration or repair of the
property damaged, or released to Grantor. Application by Beneficiary of
any insurance proceeds toward the last maturing installments of
principal and interest due or to become due on the Loans shall not
excuse Grantor from making any regularly scheduled payments due
thereunder, nor shall such application extend or reduce the amount of
such payments. In the event Beneficiary elects to release such proceeds
to Grantor, Grantor shall be obligated to use such proceeds to restore
or repair the Trust Property to the extent required by subsection 7.5
of the Senior Secured Credit Agreement.
(g) In the event of foreclosure of this Deed of Trust or other
transfer of title to the Trust Property in extinguishment of the Indebtedness,
all right, title and interest of Grantor in and to any insurance policies then
in force, to the extent assignable or transferable, shall pass to the purchaser
or grantee and Grantor hereby appoints Beneficiary its attorney-in-fact, in
Grantor's name, to assign and transfer all such policies and proceeds to such
purchaser or grantee.
(h) Upon written notice to Grantor, Beneficiary, during the
continuance of an Event of Default, shall be entitled to require Grantor to pay
monthly in advance to Beneficiary the equivalent of 1/12th of the estimated
annual premiums due on such insurance. Beneficiary may commingle such funds with
its own funds but Grantor shall be entitled to interest thereon at a rate
mutually agreed upon by Grantor and Beneficiary.
(i) Grantor may maintain insurance required under this Deed of
Trust by means of one or more blanket insurance policies maintained by Grantor;
provided, however,
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13
that (A) any such policy shall specify, or Grantor shall furnish to Beneficiary
a written statement from the insurer so specifying, the maximum amount of the
total insurance afforded by such blanket policy that is allocated to the
Premises and the other Trust Property and any sublimits and aggregates in such
blanket policy applicable to the Premises and the other Trust Property, (B) each
such blanket policy shall include an endorsement providing that, in the event of
a loss resulting from an insured peril, insurance proceeds shall be allocated to
the Trust Property in an amount equal to the coverages required to be maintained
by Grantor as provided above (subject to applicable sublimits and aggregates)
and (C) the protection afforded under any such blanket policy shall be no less
than that which would have been afforded under a separate policy or policies
relating only to the Trust Property (subject to applicable sublimits and
aggregates).
6. Restrictions on Liens and Encumbrances. Except for the lien
of this Deed of Trust and the Permitted Exceptions and except as otherwise
permitted pursuant to the terms of the Senior Secured Credit Agreement, Grantor
shall not further mortgage, nor otherwise encumber the Trust Property nor create
or suffer to exist any lien, charge or encumbrance on the Trust Property, or any
part thereof, whether superior or subordinate to the lien of this Deed of Trust
and whether recourse or non-recourse.
7. Due on Sale and Other Transfer Restrictions. Except as may
be otherwise expressly permitted under the Senior Secured Credit Agreement,
Grantor shall not sell, transfer, convey or assign all or any portion of, or any
interest in, the Trust Property.
8. Maintenance; No Alteration; Inspection; Utilities. (a)
Grantor shall maintain or cause to be maintained all the Improvements in good
condition and repair and shall not commit or suffer any waste of the
Improvements. To the extent required under subsection 7.5 of the Senior Secured
Credit Agreement, Grantor shall repair, restore, replace or rebuild promptly any
part of the Premises which may be damaged or destroyed by any casualty
whatsoever to a condition substantially equivalent to its condition prior to the
damage or destruction. Except as permitted by the Senior Secured Credit
Agreement, the Improvements shall not be demolished or materially altered, nor
any material additions built, without the prior written consent of Beneficiary,
provided that Grantor may make alterations or additions without the consent of
Beneficiary that do not materially reduce the value of the Trust Property.
(b) Beneficiary and any persons authorized by Beneficiary
shall, upon reasonable notice and at any reasonable time, have the right to
enter and inspect the Premises and the right to inspect all work done, labor
performed and materials furnished in and about the Improvements and the right to
inspect and make copies, to the extent reasonable, of all books, contracts and
records of Grantor relating to the Trust Property.
(c) Except as permitted under subsection 7.3 of the Senior
Secured Credit Agreement, Grantor shall pay or cause to be paid prior to
delinquency, all utility charges which are incurred for gas, electricity, water
or sewer services furnished to the Premises and
<PAGE> 264
14
all other assessments or charges of a similar nature, whether public or private,
affecting the Premises or any portion thereof, whether or not such assessments
or charges are liens thereon.
9. Condemnation/Eminent Domain. Promptly upon obtaining
knowledge of the institution of any proceedings for the condemnation of the
Trust Property, or any portion thereof, Grantor will notify Beneficiary of the
pendency of such proceedings. Grantor authorizes Beneficiary, at Beneficiary's
option and in Beneficiary's reasonable discretion, as attorney-in-fact for
Grantor, to commence, appear in and prosecute, in Beneficiary's or Grantor's
name, any action or proceeding relating to any condemnation of the Trust
Property, or any portion thereof, and to settle or compromise any claim in
connection with such condemnation upon the occurrence and during the continuance
of an Event of Default. If Beneficiary elects not to participate in such
condemnation proceeding, then Grantor shall, at its expense, diligently
prosecute any such proceeding and shall consult with Beneficiary, its attorneys
and experts and cooperate with them in any defense of any such proceedings. All
awards and proceeds of condemnation shall be applied in the same manner as
insurance proceeds, and to the extent such awards and proceeds exceed $1,000,000
and no Event of Default shall have occurred and be continuing, such awards and
proceeds shall be assigned to Beneficiary to be applied in the same manner as
insurance proceeds, as provided above in subsection 5(f)(iii) above, and Grantor
agrees to execute any such assignments of all such awards as Beneficiary may
request.
10. Restoration. If Beneficiary elects or is required
hereunder to release funds to Grantor for restoration of any of the Trust
Property, then such restoration shall be performed in accordance with such
conditions as Beneficiary shall impose in its reasonable discretion, and as are
customarily imposed by construction lenders.
11. Leases. (a) Grantor shall not (i) execute an assignment or
pledge of any Lease relating to all or any portion of the Trust Property other
than in favor of Beneficiary, or (ii) without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed,
execute or permit to exist any Lease of any of the Trust Property, except for
Permitted Exceptions and except as may be otherwise expressly permitted under
the Senior Secured Credit Agreement.
(b) As to any Lease consented to by Beneficiary under
subsection 11(a) above, Grantor shall:
(i) promptly perform in all material respects all of the
provisions of the Lease on the part of the lessor thereunder to be
performed;
(ii) promptly enforce all of the material provisions of the
Lease on the part of the lessee thereunder to be performed;
<PAGE> 265
15
(iii) appear in and defend any action or proceeding arising
under or in any manner connected with the Lease or the obligations of
Grantor as lessor or of the lessee thereunder;
(iv) exercise, within 5 business days after a reasonable
request by Beneficiary, any right to request from the lessee a
certificate with respect to the status thereof;
(v) promptly deliver to Beneficiary copies of any notices of
default which Grantor may at any time forward to or receive from the
lessee;
(vi) promptly deliver to Beneficiary a fully executed
counterpart of the Lease; and
(vii) promptly deliver to Beneficiary, upon Beneficiary's
reasonable request, if permitted under such Lease, an assignment of the
Grantor's interest under such Lease.
(c) Grantor shall deliver to Beneficiary, within 10 business
days after a reasonable request by Beneficiary, a written statement, certified
by Grantor as being true, correct and complete, containing the names of all
lessees and other occupants of the Trust Property, the terms of all Leases and
the spaces occupied and rentals payable thereunder, and a list of all Leases
which are then in default, including the nature and magnitude of the default;
such statement shall be accompanied by such other information as Beneficiary may
reasonably request.
(d) All Leases entered into by Grantor after the date hereof,
if any, and all rights of any lessees thereunder shall be subject and
subordinate in all respects to the lien and provisions of this Deed of Trust
unless Beneficiary shall otherwise elect in writing.
(e) In the event of the enforcement by Beneficiary of any
remedy under this Deed of Trust, the lessee under each Lease shall, if requested
by Beneficiary or any other person succeeding to the interest of Beneficiary as
a result of such enforcement, and if provided, at such lessee's request, with a
nondisturbance agreement from Beneficiary or such person, attorn to Beneficiary
or to such person and shall recognize Beneficiary or such successor in interest
as lessor under the Lease without change in the provisions thereof; provided
however, that Beneficiary or such successor in interest shall not be: (i) bound
by any payment of an installment of rent or additional rent which may have been
made more than 30 days before the due date of such installment; (ii) bound by
any amendment or modification to the Lease made without the consent of
Beneficiary or such successor in interest; (iii) liable for any previous act or
omission of Grantor (or its predecessors in interest); (iv) responsible for any
monies owing by Grantor to the credit of such lessee or subject to any credits,
offsets, claims, counterclaims, demands or defenses which the lessee may have
against Grantor (or its predecessors in interest); (v) bound by any covenant to
undertake or complete any construction of the Premises or any portion thereof;
or (vi) obligated to make any payment to such lessee other than any security
deposit actually delivered to Beneficiary or such successor in interest. Each
lessee or other occupant, upon request by Beneficiary or such successor in
interest, shall
<PAGE> 266
16
execute and deliver an instrument or instruments confirming such attornment. In
addition, Grantor agrees that each Lease entered into after the date of this
Deed of Trust shall include language to the effect of subsections (d)-(e) of
this Section and language to the effect that if any act or omission of Grantor
would give any lessee under such Lease the right, immediately or after lapse of
a period of time, to cancel or terminate such Lease, or to abate or offset
against the payment of rent or to claim a partial or total eviction, such lessee
shall not exercise such right until it has given written notice of such act or
omission to Beneficiary and until a reasonable period for remedying such act or
omission shall have elapsed following the giving of such notice without a remedy
being effected; provided that the provisions of such subsections shall be
self-operative and any failure of any Lease to include such language shall not
impair the binding effect of such provisions on any lessee under such Lease.
12. Further Assurances/Estoppel Certificates. To further
assure Beneficiary's and Trustee's rights under this Deed of Trust, Grantor
agrees upon demand of Beneficiary or Trustee to do any act or execute any
additional documents (including, but not limited to, security agreements on any
personalty included or to be included in the Trust Property and a separate
assignment of each Lease in recordable form) as may be reasonably required by
Beneficiary or Trustee to confirm the rights or benefits conferred on
Beneficiary or Trustee by this Deed of Trust.
13. Beneficiary's Right to Perform. If Grantor fails to
perform any of the covenants or agreements of Grantor, Beneficiary or Trustee,
without waiving or releasing Grantor from any obligation or default under this
Deed of Trust, may, at any time (but shall be under no obligation to) pay or
perform the same, and the amount or cost thereof, with interest at the Default
Rate, shall immediately be due from Grantor to Beneficiary or Trustee (as the
case may be) and the same shall be secured by this Deed of Trust and shall be an
encumbrance on the Trust Property prior to any right, title to, interest in or
claim upon the Trust Property attaching subsequent to the date of this Deed of
Trust. No payment or advance of money by Beneficiary or Trustee under this
Section shall be deemed or construed to cure Grantor's default or waive any
right or remedy of Beneficiary or Trustee.
14. Events of Default. The occurrence of an Event of Default
under the Senior Secured Credit Agreement shall constitute an Event of Default
hereunder.
15. Remedies. (a) Upon the occurrence of any Event of Default,
in addition to any other rights and remedies Beneficiary may have pursuant to
the Loan Documents, or as provided by law, and without limitation, the
Indebtedness and all other amounts payable with respect to the Loans, the
Letters of Credit, the Senior Secured Credit Agreement, this Deed of Trust and
the other Security Documents shall become due and payable as provided in the
Senior Secured Credit Agreement. Except as expressly provided above in this
Section , presentment, demand, protest and all other notices of any kind are
hereby expressly waived. In addition, upon the occurrence of any Event of
Default, Beneficiary may immediately take such action, without notice or demand,
as it deems advisable to protect and enforce its rights against Grantor and in
and to the Trust Property, including, but not limited to, the following
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actions, each of which may be pursued concurrently or otherwise, at such time
and in such manner as Beneficiary may determine, in its sole discretion, without
impairing or otherwise affecting the other rights and remedies of Beneficiary:
(i) Enter upon and take possession of the Trust Property or
any part thereof, with or without legal action, and do any acts which it deems
necessary or desirable to preserve the value, marketability or rentability of
the Trust Property, or any part thereof or the value of this Deed of Trust
(including, without limitation, entering into new leases of all or any part of
the Trust Property) and, with or without taking possession of the Trust
Property, sue for or otherwise collect the rents, issues and profits thereof,
including those past due and unpaid, and apply the same, less costs and expenses
of operation and collection including reasonable attorneys' fees, upon the
Indebtedness, all in such order as Beneficiary may determine. The entering upon
and taking possession of the Trust Property, the collection of such rents,
issues and profits and the application thereof as aforesaid, shall not cure or
waive any default or notice of default hereunder or invalidate any act done in
response to such default or pursuant to such notice of default and,
notwithstanding the continuance in possession of the Trust Property or the
collection, receipt and application of rents, issues or profits, Beneficiary
shall be entitled to exercise every right provided for in any of the Loan
Documents or by law.
(ii) Bring an action in any court of competent jurisdiction to
foreclose this Deed of Trust or to enforce any of the covenants, terms or
conditions hereof and Beneficiary shall have the right to specific performance,
injunction and any other equitable right or remedy as though other remedies were
not provided in this Deed of Trust.
(iii) Elect to cause the Trust Property or any part thereof to
be sold as follows, Grantor hereby expressly waiving any right which it may have
to direct the order in which any of the Trust Property may be sold:
(a) Beneficiary may proceed as if all of the Trust Property
were real property, in accordance with subparagraph (c) below, or
Beneficiary may elect to treat any of the Trust Property which consists
of personal property, in accordance with the Section of this Deed of
Trust entitled "Security Agreement Under Uniform Commercial Code",
separate and apart from the sale of real property, the remainder of the
Trust Property being treated as real property;
(b) Beneficiary may cause any such sale or other disposition
to be conducted immediately following the expiration of any grace
period, if any, herein provided or Beneficiary may delay any such sale
or other disposition for such period of time as Beneficiary deems to be
in its best interest. Should Beneficiary desire that more than one such
sale or other disposition be conducted, Beneficiary may, at its option,
cause the same to be conducted simultaneously, or successively on the
same day, or at such different days or times and in such order as
Beneficiary may deem to be in its best interest;
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(c) Should Beneficiary elect to sell the Trust Property upon
which Beneficiary elects to proceed under the laws governing
foreclosure of or sales pursuant to Deeds of Trust, Beneficiary or
Trustee shall give such notice of default and election to sell as may
then be required by law. Thereafter, upon the expiration of such time
and the giving of such notice of sale as may then be required by law,
Trustee, at the time and place specified by the notice of sale, shall
sell such Trust Property, or any portion thereof specified by
Beneficiary, at public auction to the highest bidder for cash in lawful
money of the United States, subject, however, to the provisions of the
Section of this Deed of Trust entitled "Right of Beneficiary to Credit
Sale". Trustee may, and upon request of Beneficiary shall, from time to
time, postpone the sale by public announcement thereof at the time and
place noticed therefor. If the Trust Property consists of several lots
or parcels, Beneficiary may elect to sell the Trust Property either as
a whole or in separate lots or parcels. If Beneficiary elects to sell
in separate lots or parcels, Beneficiary may designate the order in
which such lots or parcels shall be offered for sale or sold. Any
person, including Grantor, Trustee or Beneficiary, may purchase at the
sale. Upon any sale, Trustee shall execute and deliver to the purchaser
or purchasers a deed or deeds conveying the property so sold, but
without any covenant or warranty whatsoever, express or implied,
whereupon such purchaser or purchasers shall be let into immediate
possession;
(d) In the event of a sale or other disposition of any such
property, or any part thereof, and the execution of a deed or other
conveyance pursuant thereto, the recitals therein of facts, such as an
Event of Default, the giving of notice of default and notice of sale,
demand that such sale should be made, postponement of sale, terms of
sale, sale, purchase, payments of purchase money, and any other fact
affecting the regularity or validity of such sale or disposition shall
be conclusive proof of the truth of such facts; and any such deed or
conveyance shall be conclusive against all persons as to such facts
recited therein;
(e) Beneficiary and/or Trustee shall apply the proceeds of any
sale or disposition hereunder in the order as provided in the Section
of this Deed of Trust entitled "Sale of the Properties; Application of
Proceeds"; and
(iv) Exercise all other rights and remedies provided herein, in the
other Loan Documents or otherwise available at law or equity.
16. Sale of the Properties; Application of Proceeds. (a)
Subject to the requirements of applicable law, the proceeds or avails of any
foreclosure sale and all moneys received by Beneficiary pursuant to any right
given or action taken under the provisions of this Deed of Trust shall be
applied as follows:
First: To the payment of the costs and expenses of any such
sale or other enforcement proceedings in accordance with the terms
hereof and of any judicial proceeding wherein the same may be made, and
in addition thereto,
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reasonable compensation to Beneficiary, its agents and counsel, and all
actual out of pocket expenses, advances, liabilities and sums made or
furnished or incurred by Beneficiary or the holder of this Deed of
Trust under this Deed of Trust and the other Loan Documents, together
with interest at the Default Rate (or such lesser amount as may be the
maximum amount permitted by law), and all taxes, assessments or other
charges, except any taxes, assessments or other charges subject to
which the Trust Property shall have been sold;
Second: To the payment of the aggregate amount when due, owing
and unpaid (whether by acceleration or otherwise) upon the Indebtedness
for principal and interest; and in case such proceeds shall be
insufficient to pay in full the whole aggregate amount so due and
unpaid, then first, to the payment of all amounts of interest at the
time due and payable on the Indebtedness, without preference or
priority of any installment of interest over any other installment of
interest, and with payment of interest on the Notes and other
instruments evidencing the Indebtedness being applied pro rata based on
the amount of interest then due pursuant to the Notes, the Senior
Secured Credit Agreement and other instrument evidencing the
Indebtedness, and second, to the payment of all amounts of principal,
with payment of principal due under the Notes, the Senior Secured
Credit Agreement and other instruments evidencing the Indebtedness
being applied pro rata based on the amount of principal due under the
Notes, the Senior Secured Credit Agreement and other instrument
evidencing the Indebtedness; all such payments of principal and
interest to be made ratably to the holders entitled thereto.
Third: To the payment of any other sums required to be paid by
Grantor pursuant to any provision of this Deed of Trust, or any other
Loan Document.
Fourth: To the payment of the surplus, if any, to whomsoever
may be lawfully entitled to receive the same.
17. Trustee's Powers and Liabilities.
(a) Powers of Trustee. At any time or from time to time,
without liability therefor and without notice, upon the written request of
Beneficiary and presentation of the Notes and the other instruments evidencing
the indebtedness and this Deed of Trust for endorsement, without affecting the
personal liability of any person for the payment of the indebtedness secured
hereby, and without affecting the lien of this Deed of Trust upon the Trust
Property for the full amount of all amounts secured hereby, Trustee may (i)
reconvey all or any part of the Trust Property, (ii) consent to the making of
any map or plat thereof, (iii) join in granting any easement thereon or in
creating any covenants or conditions restricting use or occupancy thereof, or
(iv) join in any extension agreement or in any agreement subordinating the lien
or charge hereof.
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(b) Reconveyance. Upon written request of Beneficiary stating
that all sums secured hereby have been paid, and upon surrender of this Deed of
Trust and the Notes and the other instruments evidencing the Indebtedness to
Trustee for cancellation and retention, and upon payment of its fees, Trustee
shall reconvey, without warranty, the property then held hereunder. The recitals
in any such reconveyance of any matters or facts shall be conclusive proof of
the truth thereof. The grantee in such reconveyance may be described as "the
person or persons legally entitled thereto."
(c) Trustee Notice. Trustee is not obligated to notify any
party hereto of any pending sale under any other deed of trust or of any action
or proceeding in which Grantor, Beneficiary or Trustee shall be a party, unless
brought by Trustee.
(d) Compensation and Indemnification of Trustee. Trustee shall
be entitled to reasonable compensation for all services rendered or expenses
incurred in the administration or execution of the trusts hereby created and
Grantor hereby agrees to pay the same. Trustee shall be indemnified, held
harmless and reimbursed by Grantor for any liability, damage or expense,
including reasonable attorneys' fees and amounts paid in settlement, which
Trustee may incur or sustain in connection with this Deed of Trust or in the
doing of any act which Trustee is required or permitted to do by the terms
hereof or by law.
(e) Substitute Trustees. Beneficiary may substitute the
Trustee hereunder in any manner now or hereafter provided by law, or in lieu
thereof, Beneficiary may from time to time, by an instrument in writing,
substitute a successor or successors to any Trustee named herein or acting
hereunder, which instrument, executed and acknowledged by Beneficiary and
recorded in the office of the recorder of the county or counties where the Trust
Property is situated, shall be conclusive proof of proper substitution of such
successor Trustee or Trustees, who shall thereupon, and without conveyance from
the predecessor Trustee, succeed to all its title, estate, rights, powers and
duties. Such instrument must contain the name of the original Grantor, Trustee
and Beneficiary hereunder, the book and page where this Deed of Trust is
recorded, the legal description of the Land and the name and address of the new
Trustee.
(f) Acceptance by Trustee. The acceptance by Trustee of this
trust shall be evidenced when this Deed of Trust, duly executed and
acknowledged, is made a public record as provided by law.
(g) Trust Irrevocable; No Offset. The trust created hereby is
irrevocable by Grantor. No offset or claim that Grantor now or may in the future
have against Beneficiary shall relieve Grantor from paying installments or
performing any other obligation herein or secured hereby.
(h) Corrections. Grantor will, upon request of Beneficiary or
Trustee, promptly correct any defect, error or omission which may be discovered
in the contents of this Deed of Trust or in the execution or acknowledgement
hereof, and will execute, acknowledge and deliver such further instruments and
do such further acts as may be necessary or as may be
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21
reasonably requested by Beneficiary or Trustee to carry out more effectively the
purposes of this Deed of Trust, to subject to the lien and security interests
hereby created any of Grantor's properties, rights or interest covered or
intended to be covered hereby, and to perfect and maintain such lien and
security interest.
18. Request for Notice. In accordance with California Civil
Code Section 2924b, a request is hereby made by Grantor that a copy of any
notice of default and a copy of any notice of sale under this Deed of Trust be
mailed to Grantor at Grantor's address set forth in the first paragraph of this
Deed of Trust.
19. Successor Grantor. In the event ownership of the Trust
Property or any portion thereof becomes vested in a person other than the
Grantor herein named, Beneficiary may, without notice to the Grantor herein
named, whether or not Beneficiary has given written consent to such change in
ownership, deal with such successor or successors in interest with reference to
this Deed of Trust and the Indebtedness and the Obligations, and in the same
manner as with the Grantor herein named, without in any way vitiating or
discharging Grantor's liability hereunder or under the Indebtedness and the
Obligations.
20. Right of Beneficiary to Credit Sale. Upon the occurrence
of any sale made under this Deed of Trust, whether made under the power of sale
or by virtue of judicial proceedings or of a judgment or decree of foreclosure
and sale, Beneficiary may bid for and acquire the Trust Property or any part
thereof. In lieu of paying cash therefor, Beneficiary may make settlement for
the purchase price by crediting upon the Indebtedness or other sums secured by
this Deed of Trust the net sales price after deducting therefrom the expenses of
sale and the cost of the action and any other sums which Beneficiary is
authorized to deduct under this Deed of Trust. In such event, this Deed of
Trust, the Notes and other instruments evidencing the Indebtedness and any and
all documents evidencing expenditures secured hereby may be presented to the
person or persons conducting the sale in order that the amount so used or
applied may be credited upon the Indebtedness as having been paid.
21. Appointment of Receiver. If an Event of Default shall have
occurred and be continuing, Beneficiary as a matter of right and without notice
to Grantor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Trust Property or any other collateral as
security for the Indebtedness and Obligations or the interest of Grantor
therein, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers or other manager of the Trust Property, without
requiring the posting of a surety bond and without reference to the adequacy or
inadequacy of the value of the Trust Property or the solvency or insolvency of
Grantor or any other party obligated for payment of all or any part of the
Indebtedness, and whether or not waste has occurred with respect to the Trust
Property. Grantor hereby irrevocably consents to such appointment and waives
notice of any application therefor (except as may be required by law). Any such
receiver or receivers shall have all the usual powers and duties of receivers in
like or similar cases and all the powers and duties of Beneficiary in case of
entry as provided in this Deed of Trust, including, without limitation and to
the extent permitted by law, the right to enter into leases of all or any
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22
part of the Trust Property, and shall continue as such and exercise all such
powers until the date of confirmation of sale of the Trust Property unless such
receivership is sooner terminated.
22. Extension, Release, etc. (a) Without affecting the
encumbrance or charge of this Deed of Trust upon any portion of the Trust
Property not then or theretofore released as security for the full amount of the
Indebtedness, Beneficiary may, from time to time and without notice, agree to
(i) release any person liable for the Indebtedness, (ii) extend the maturity or
alter any of the terms of the Indebtedness or any guaranty thereof, (iii) grant
other indulgences, (iv) release or reconvey, or cause to be released or
reconveyed at any time at Beneficiary's option any parcel, portion or all of the
Trust Property, (v) take or release any other or additional security for any
obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Deed of Trust shall secure
less than all of the principal amount of the Indebtedness, it is expressly
agreed that any repayments of the principal amount of the Indebtedness shall not
reduce the amount of the encumbrance of this Deed of Trust until the encumbrance
amount shall equal the principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Beneficiary and no levy of
an execution under any judgment upon the Trust Property or upon any other
property of Grantor shall affect the encumbrance of this Deed of Trust or any
liens, rights, powers or remedies of Beneficiary or Trustee hereunder, and such
liens, rights, powers and remedies shall continue unimpaired.
(c) If Beneficiary shall have the right to foreclose this Deed
of Trust or to direct the Trustee to exercise its power of sale, Grantor
authorizes Beneficiary at its option to foreclose the lien of this Deed of Trust
(or direct the Trustee to sell the Trust Property, as the case may be) subject
to the rights of any tenants of the Trust Property. The failure to make any such
tenants parties defendant to any such foreclosure proceeding and to foreclose
their rights, or to provide notice to such tenants as required in any statutory
procedure governing a sale of the Trust Property by Trustee, or to terminate
such tenant's rights in such sale will not be asserted by Grantor as a defense
to any proceeding instituted by Beneficiary to collect the Indebtedness or to
foreclose this Deed of Trust.
(d) Unless expressly provided otherwise, in the event that
Beneficiary's interest in this Deed of Trust and title to the Trust Property or
any estate therein shall become vested in the same person or entity, this Deed
of Trust shall not merge in such title but shall continue as a valid charge on
the Trust Property for the amount secured hereby.
23. Security Agreement under Uniform Commercial Code. (a) It
is the intention of the parties hereto that this Deed of Trust shall constitute
a Security Agreement within the meaning of the Uniform Commercial Code (the
"CODE") of the State in which the Trust Property is located, and Grantor hereby
grants a security interest in all of the personal property of Grantor described
in the Granting Clauses of this Deed of Trust. If an Event of Default shall
occur under this Deed of Trust, then in addition to having any other right or
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remedy available at law or in equity, Beneficiary shall have the option of
either (i) proceeding under the Code and exercising such rights and remedies as
may be provided to a secured party by the Code with respect to all or any
portion of the Trust Property which is personal property (including, without
limitation, taking possession of and selling such property) or (ii) treating
such property as real property and proceeding with respect to both the real and
personal property constituting the Trust Property in accordance with
Beneficiary's rights, powers and remedies with respect to the real property (in
which event the default provisions of the Code shall not apply). If Beneficiary
shall elect to proceed under the Code, then five days' notice of sale of the
personal property shall be deemed reasonable notice and the reasonable expenses
of retaking, holding, preparing for sale, selling and the like incurred by
Beneficiary shall include, but not be limited to, reasonable attorneys' fees and
legal expenses. At Beneficiary's request, during the continuance of an Event of
Default, Grantor shall assemble the personal property and make it available to
Beneficiary at a place designated by Beneficiary which is reasonably convenient
to both parties.
(b) Grantor and Beneficiary agree, to the extent permitted by
law, that: (i) all of the goods described within the definition of the word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Deed of
Trust upon recording or registration in the real estate records of the proper
office shall constitute a financing statement filed as a "fixture filing" within
the meaning of Sections 9-313 and 9-402 of the Code; (iii) Grantor is the record
owner of the Real Estate; and (iv) the addresses of Grantor and Beneficiary are
as set forth on the first page of this Deed of Trust.
(c) Grantor, upon request by Beneficiary from time to time,
shall execute, acknowledge and deliver to Beneficiary one or more separate
security agreements, in form satisfactory to Beneficiary in its reasonable
discretion, covering all or any part of the Trust Property and will further
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, any financing statement, affidavit, continuation statement or
certificate or other document as Beneficiary may request in order to perfect,
preserve, maintain, continue or extend the security interest under and the
priority of this Deed of Trust and such security instrument. Grantor further
agrees to pay to Beneficiary on demand all reasonable costs and expenses
incurred by Beneficiary in connection with the preparation, execution,
recording, filing and re-filing of any such document and all reasonable costs
and expenses of any record searches for financing statements Beneficiary shall
reasonably require. If Grantor shall fail to furnish any financing or
continuation statement within 10 days after request by Beneficiary, then
pursuant to the provisions of the Code, Grantor hereby authorizes Beneficiary,
without the signature of Grantor, to execute and file any such financing and
continuation statements. The filing of any financing or continuation statements
in the records relating to personal property or chattels shall not be construed
as in any way impairing the right of Beneficiary to proceed against any personal
property encumbered by this Deed of Trust as real property, as set forth above.
24. Assignment of Rents. Grantor hereby absolutely and
unconditionally assigns, transfers, conveys and sets over to Beneficiary, the
Rents as further security for the
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payment of the Indebtedness and performance of the Obligations, and Grantor
grants to Beneficiary the right to enter the Trust Property for the purpose of
collecting the same and to let the Trust Property or any part thereof and to
apply the Rents on account of the Indebtedness. The foregoing assignment and
grant is present and absolute and shall continue in effect until the
Indebtedness is paid in full, but Beneficiary and Trustee hereby waive the right
to enter the Trust Property for the purpose of collecting the Rents, letting the
Trust Property or any part thereof or applying the Rents and Grantor shall be
entitled to collect, receive, use and retain the Rents until the occurrence of
an Event of Default under this Deed of Trust; such right of Grantor to collect,
receive, use and retain the Rents may be revoked by Beneficiary upon the
occurrence of any Event of Default under this Deed of Trust by giving not less
than five days' written notice of such revocation to Grantor; in the event such
notice is given, Grantor shall pay over to Beneficiary, or to any receiver
appointed to collect the Rents, any lease security deposits, and shall pay
monthly in advance to Beneficiary, or to any such receiver, the fair and
reasonable rental value as determined by Beneficiary for the use and occupancy
of the Trust Property or of such part thereof as may be in the possession of
Grantor or any affiliate of Grantor, and upon default in any such payment
Grantor and any such affiliate will vacate and surrender the possession of the
Trust Property to Beneficiary or to such receiver, and in default thereof may be
evicted by summary proceedings or otherwise. Grantor shall not accept
prepayments of installments of Rent to become due for a period of more than one
month in advance (except for security deposits and estimated payments of
percentage rent, if any).
25. Trust Funds. All lease security deposits of the Real
Estate shall be treated as trust funds not to be commingled with any other funds
of Grantor. Within 10 days after request by Beneficiary, Grantor shall furnish
Beneficiary satisfactory evidence of compliance with this subsection, together
with a statement of all lease security deposits by lessees and copies of all
Leases not previously delivered to Beneficiary under which such security
deposits are held, which statement shall be certified by Grantor.
26. Additional Rights. The holder of any subordinate lien or
subordinate deed of trust on the Trust Property shall have no right to terminate
any Lease whether or not such Lease is subordinate to this Deed of Trust nor
shall any holder of any subordinate lien or subordinate deed of trust join any
tenant under any Lease in any trustee's sale or action to foreclose the lien or
modify, interfere with, disturb or terminate the rights of any tenant under any
Lease. By recordation of this Deed of Trust all subordinate lienholders and the
trustees and beneficiaries under subordinate deeds of trust are subject to and
notified of this provision, and any action taken by any such lienholder or
trustee or beneficiary contrary to this provision shall be null and void. Upon
the occurrence of any Event of Default, Beneficiary may, in its sole discretion
and without regard to the adequacy of its security under this Deed of Trust,
apply all or any part of any amounts on deposit with Beneficiary under this Deed
of Trust against all or any part of the Indebtedness. Any such application shall
not be construed to cure or waive any Default or Event of Default or invalidate
any act taken by Beneficiary on account of such Default or Event of Default.
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27. Changes in Method of Taxation. In the event of the passage
after the date hereof of any law of any Governmental Authority deducting from
the value of the Premises for the purposes of taxation any lien or deed of trust
thereon, or changing in any way the laws for the taxation of mortgages or deeds
of trust or debts secured thereby for federal, state or local purposes, or the
manner of collection of any such taxes, and imposing a tax, either directly or
indirectly, on mortgages or deeds of trust or debts secured thereby, the holder
of this Deed of Trust shall have the right to declare the Indebtedness due on a
date to be specified by not less than 30 days' written notice to be given to
Grantor unless within such 30-day period Grantor shall assume as an Obligation
hereunder the payment of any tax so imposed until full payment of the
Indebtedness and such assumption shall be permitted by law.
28. Notices. All notices, requests, demands and other
communications hereunder shall be deemed to have been sufficiently given or
served when served in the same manner as set forth for notices in the Senior
Secured Credit Agreement. The Trustee's address for notices shall be the
Trustee's address given on the first page of this Deed of Trust.
29. No Oral Modification. This Deed of Trust may not be
changed or terminated orally. Any agreement made by Grantor and Beneficiary
after the date of this Deed of Trust relating to this Deed of Trust shall be
superior to the rights of the holder of any intervening or subordinate deed of
trust, lien or encumbrance. Trustee's execution of any written agreement between
Grantor and Beneficiary shall not be required for the effectiveness thereof as
between Grantor and Beneficiary.
30. Partial Invalidity. In the event any one or more of the
provisions contained in this Deed of Trust shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included. Notwithstanding to the contrary anything contained in this Deed of
Trust or in any provisions of the Indebtedness or Loan Documents, the
obligations of Grantor and of any other obligor under the Indebtedness or Loan
Documents shall be subject to the limitation that Beneficiary shall not charge,
take or receive, nor shall Grantor or any other obligor be obligated to pay to
Beneficiary, any amounts constituting interest in excess of the maximum rate
permitted by law to be charged by Beneficiary.
31. Grantor's Waiver of Rights. To the fullest extent
permitted by law, Grantor waives the benefit of all laws now existing or that
may subsequently be enacted providing for (i) any appraisement before sale of
any portion of the Trust Property, (ii) any extension of the time for the
enforcement of the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Trust Property from attachment, levy or sale under execution or
exemption from civil process. To the full extent Grantor may do so, Grantor
agrees that Grantor will not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, exemption, extension or redemption, or requiring
foreclosure of this Deed of Trust before exercising any other remedy
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26
granted hereunder and Grantor, for Grantor and its successors and assigns, and
for any and all persons ever claiming any interest in the Trust Property, to the
extent permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the secured indebtedness and marshalling in the event
of exercise by Trustee or Beneficiary of the power of sale or other rights
hereby created.
32. Remedies Not Exclusive. Beneficiary and Trustee shall be
entitled to enforce payment of the Indebtedness and performance of the
Obligations and to exercise all rights and powers under this Deed of Trust or
under any of the other Loan Documents or other agreement or any laws now or
hereafter in force, notwithstanding some or all of the Indebtedness and
Obligations may now or hereafter be otherwise secured, whether by deed of trust,
mortgage, security agreement, pledge, lien, assignment or otherwise. Neither the
acceptance of this Deed of Trust nor its enforcement, shall prejudice or in any
manner affect Beneficiary's or Trustee's right to realize upon or enforce any
other security now or hereafter held by Beneficiary or Trustee, it being agreed
that Beneficiary and Trustee shall be entitled to enforce this Deed of Trust and
any other security now or hereafter held by Beneficiary or Trustee in such order
and manner as Beneficiary may determine in its absolute discretion. No remedy
herein conferred upon or reserved to Trustee or Beneficiary is intended to be
exclusive of any other remedy herein or by law provided or permitted, but each
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. Every
power or remedy given by any of the Loan Documents to Beneficiary or Trustee or
to which either may otherwise be entitled, may be exercised, concurrently or
independently, from time to time and as often as may be deemed expedient by
Beneficiary or Trustee, as the case may be. In no event shall Beneficiary or
Trustee, in the exercise of the remedies provided in this Deed of Trust
(including, without limitation, in connection with the assignment of Rents, or
the appointment of a receiver and the entry of such receiver on to all or any
part of the Trust Property), be deemed a "mortgagee in possession," and neither
Beneficiary nor Trustee shall in any way be made liable for any act, either of
commission or omission, in connection with the exercise of such remedies.
33. Multiple Security. If (a) the Premises shall consist of
one or more parcels, whether or not contiguous and whether or not located in the
same county, or (b) in addition to this Deed of Trust, Beneficiary shall now or
hereafter hold or be the beneficiary of one or more additional mortgages, liens,
deeds of trust or other security (directly or indirectly) for the Indebtedness
upon other property in the State in which the Premises are located (whether or
not such property is owned by Grantor or by others) or (c) both the
circumstances described in clauses (a) and (b) shall be true, then to the
fullest extent permitted by law, Beneficiary may, at its election, commence or
consolidate in a single trustee's sale or foreclosure action all trustee's sale
or foreclosure proceedings against all such collateral securing the Indebtedness
(including the Trust Property), which action may be brought or consolidated in
the courts of, or sale conducted in, any county in which any of such collateral
is located. Grantor acknowledges that the right to maintain a consolidated
trustee's sale or foreclosure action is a specific inducement to Beneficiary to
extend the Indebtedness, and Grantor expressly and
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irrevocably waives any objections to the commencement or consolidation of the
foreclosure proceedings in a single action and any objections to the laying of
venue or based on the grounds of forum non conveniens which it may now or
hereafter have. Grantor further agrees that if Trustee or Beneficiary shall be
prosecuting one or more foreclosure or other proceedings against a portion of
the Trust Property or against any collateral other than the Trust Property,
which collateral directly or indirectly secures the Indebtedness, or if
Beneficiary shall have obtained a judgment of foreclosure and sale or similar
judgment against such collateral (or, in the case of a trustee's sale, shall
have met the statutory requirements therefor with respect to such collateral),
then, whether or not such proceedings are being maintained or judgments were
obtained in or outside the State in which the Premises are located, Beneficiary
may commence or continue any trustee's sale or foreclosure proceedings and
exercise its other remedies granted in this Deed of Trust against all or any
part of the Trust Property and Grantor waives any objections to the commencement
or continuation of a foreclosure of this Deed of Trust or exercise of any other
remedies hereunder based on such other proceedings or judgments, and waives any
right to seek to dismiss, stay, remove, transfer or consolidate either any
action under this Deed of Trust or such other proceedings on such basis. The
commencement or continuation of proceedings to sell the Trust Property in a
trustee's sale, to foreclose this Deed of Trust or the exercise of any other
rights hereunder or the recovery of any judgment by Beneficiary or the
occurrence of any sale by the Trustee in any such proceedings shall not
prejudice, limit or preclude Beneficiary's right to commence or continue one or
more trustee's sales, foreclosure or other proceedings or obtain a judgment
against (or, in the case of a trustee's sale, to meet the statutory requirements
for, any such sale of) any other collateral (either in or outside the State in
which the Real Estate is located) which directly or indirectly secures the
Indebtedness, and Grantor expressly waives any objections to the commencement
of, continuation of, or entry of a judgment in such other sales or proceedings
or exercise of any remedies in such sales or proceedings based upon any action
or judgment connected to this Deed of Trust, and Grantor also waives any right
to seek to dismiss, stay, remove, transfer or consolidate either such other
sales or proceedings or any sale or action under this Deed of Trust on such
basis. It is expressly understood and agreed that to the fullest extent
permitted by law, Beneficiary may, at its election, cause the sale of all
collateral which is the subject of a single trustee's sale or foreclosure action
at either a single sale or at multiple sales conducted simultaneously and take
such other measures as are appropriate in order to effect the agreement of the
parties to dispose of and administer all collateral securing the Indebtedness
(directly or indirectly) in the most economical and least time-consuming manner.
34. Successors and Assigns. All covenants of Grantor contained
in this Deed of Trust are imposed solely and exclusively for the benefit of
Beneficiary and Trustee and their respective successors and assigns, and no
other person or entity shall have standing to require compliance with such
covenants or be deemed, under any circumstances, to be a beneficiary of such
covenants, any or all of which may be freely waived in whole or in part by
Beneficiary or Trustee at any time if in the sole discretion of either of them
such waiver is deemed advisable. All such covenants of Grantor shall run with
the land and bind Grantor, the successors and assigns of Grantor (and each of
them) and all subsequent owners, encumbrancers and tenants
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of the Trust Property, and shall inure to the benefit of Beneficiary, Trustee
and their respective successors and assigns. Without limiting the generality of
the foregoing, any successor to Trustee appointed by Beneficiary shall succeed
to all rights of Trustee as if such successor had been originally named as
Trustee hereunder. The word "Grantor" shall be construed as if it read
"Grantors" whenever the sense of this Deed of Trust so requires and if there
shall be more than one Grantor, the obligations of the Grantors shall be joint
and several.
35. No Waivers, etc. Any failure by Beneficiary to insist upon
the strict performance by Grantor of any of the terms and provisions of this
Deed of Trust shall not be deemed to be a waiver of any of the terms and
provisions hereof, and Beneficiary or Trustee, notwithstanding any such failure,
shall have the right thereafter to insist upon the strict performance by Grantor
of any and all of the terms and provisions of this Deed of Trust to be performed
by Grantor. Beneficiary may release, regardless of consideration and without the
necessity for any notice to or consent by the beneficiary of any subordinate
deed of trust or the holder of any subordinate lien on the Trust Property, any
part of the security held for the obligations secured by this Deed of Trust
without, as to the remainder of the security, in anywise impairing or affecting
this Deed of Trust or the priority of this Deed of Trust over any subordinate
lien or deed of trust.
36. Governing Law, etc. This Deed of Trust shall be governed
by and construed in accordance with the laws of the State in which the Premises
are located, except that Grantor expressly acknowledges that by its terms the
Senior Secured Credit Agreement shall be governed and construed in accordance
with the laws of the State of New York, without regard to principles of conflict
of law, and for purposes of consistency, Grantor agrees that in any in personam
proceeding related to this Deed of Trust the rights of the parties to this Deed
of Trust shall also be governed by and construed in accordance with the laws of
the State of New York governing contracts made and to be performed in that
State, without regard to principles of conflict of law.
37. Waiver of Trial by Jury. Grantor, Trustee and Beneficiary
each hereby irrevocably and unconditionally waive trial by jury in any action,
claim, suit or proceeding relating to this Deed of Trust and for any
counterclaim brought therein.
38. Certain Definitions. Unless the context clearly indicates
a contrary intent or unless otherwise specifically provided herein, words used
in this Deed of Trust shall be used interchangeably in singular or plural form
and the word "Grantor" shall mean "each Grantor or any subsequent owner or
owners of the Trust Property or any part thereof or interest therein," the word
"Beneficiary" shall mean "Beneficiary or any successor Administrative Agent,"
the word "Trustee" shall mean "Trustee and any successor trustee hereunder," the
word "Notes" shall mean "the notes that may from time to time be given pursuant
to the terms of the Senior Secured Credit Agreement or any other evidence of
indebtedness secured by this Deed of Trust," the word "person" shall include any
individual, corporation, partnership, trust, unincorporated association,
government, governmental authority, or other entity, and the words "Trust
Property" shall include any portion of the
<PAGE> 279
29
Trust Property or interest therein. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa. The captions in this Deed of Trust are for convenience or
reference only and in no way limit or amplify the provisions hereof.
39. Reconveyance of Deed Of Trust. Upon payment in full of the
Indebtedness, the termination of all Commitments under the Senior Secured Credit
Agreement secured hereby and the compliance with the Obligations then required
to be complied with, Beneficiary shall release the encumbrance of this Deed of
Trust. If any of the Trust Property shall be sold, transferred or otherwise
disposed of by Grantor in a transaction expressly permitted by the Senior
Secured Credit Agreement, then Beneficiary shall execute and deliver, and shall
cause Trustee to execute and deliver to Grantor (at the sole cost and expense of
Grantor) all releases, reconveyances or other documents reasonably necessary or
desirable for the release of such Trust Property from the encumbrance of this
Deed of Trust.
40. Conflict With Senior Secured Credit Agreement. In the
event of any conflict or inconsistency between the terms and provisions of this
Deed of Trust and the terms and provisions of the Senior Secured Credit
Agreement, the terms and provisions of the Senior Secured Credit Agreement shall
govern, other than with respect to the Section of this Deed of Trust captioned
"Governing Law, etc.". By their execution of the Senior Secured Credit
Agreement, each Lender hereby agrees that it shall not have the right to
institute any suit for enforcement of Notes or any other Indebtedness secured by
this Deed of Trust or any other Security Document, if and to the extent that the
institution or prosecution thereof or the entry of judgment therein would, under
applicable law, result in the surrender, impairment, waiver or loss of the Lien
of this Deed of Trust or any other Security Document or impede or delay the
enforcement of the Lien of this Deed of Trust or any other Security Document.
41. Receipt of Copy. Grantor acknowledges that it has received
a true copy of this Deed of Trust.
<PAGE> 280
30
This Deed of Trust has been duly executed by Grantor as of the
date first above written.
Signed, sealed and EV INTERNATIONAL, INC.
delivered in our
presence: By:
-----------------------
Name:
Title:
- ---------------------------
Name:
- ---------------------------
Name:
<PAGE> 281
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this ________ day of _____________ in the year 1997 before
me, ________, a Notary Public of said State, duly commissioned and sworn,
personally appeared _____________________ , personally known to me (or proved to
me on the basis of satisfactory evidence _______________) to be the person who
executed the within instrument as president (or secretary) or on behalf of the
corporation therein and acknowledged to me that such corporation executed the
same.
In Witness Whereof, I have hereunto set my hand and affixed by
official seal the day and year in this certificate first above written.
_____________________________
Notary Public
[Notarial Stamp]
<PAGE> 282
CERTIFICATION PURSUANT TO CALIFORNIA GOVERNMENT CODE 27361.7:
I certify under penalty of perjury that the notary seal on the document to which
this statement is attached reads as follows:
Name of Notary: __________________________________________
Date Commission Expires: _________________________________
County where qualification
or bond is filed: ________________________________________
Place of execution: ______________________________________
Signature: _______________________________________________
Print Name:
<PAGE> 283
Schedule A
Description of the Premises
[Attach Legal Description of all parcels]
<PAGE> 284
411 Hackensack Avenue Telephone 201 487 5900
Hackensack, NJ 07601 FAX 201 487 5533
EXHIBIT E TO
CREDIT
AGREEMENT
APPRAISAL ECONOMICS INC.
February 10, 1997
Greenwich Street Capital Partners, Inc.
388 Greenwich Street
New York, NY 10013
and
The Chase Manhattan Bank
as Administrative Agent under the Senior Secured Credit Agreement referred to
below, and as Agent under the Senior Subordinated Credit Agreement referred to
below 270 Park Avenue
New York, NY 10017
and
Greenwich Street Capital Partners, L.P.,
Greenwich Street Offshore Fund, Ltd.,
The Travelers Insurance Company,
The Travelers Life and Annuity Company,
TRV Employees Fund, L.P.
c/o Greenwich Street Capital Partners, Inc.
338 Greenwich Street
New York, New York 10013
and
The Lenders from time to time party to either Credit Agreement referred to below
Dear Ladies and Gentlemen:
At your request, we have undertaken and completed an analysis and a valuation of
the audio products business of Gulton Industries, Inc. and its subsidiaries
("GII" or the "Company") which are being acquired by Gulton Acquisition
Corporation ("Acquisition
- --------------------------------------------------------------------------------
HACKENSACK, NEW JERSEY RANCHO CORDOVA, CALIFORNIA BARRINGTON, ILLINOIS
<PAGE> 285
Greenwich Street Capital Partners, Inc.
February 10, 1997
Page 2
Co." or the "Borrower"), through the purchase from Mark IV Industries, Inc.
("Mark IV Industries") and Mark IV PLC of the capital stock of GII (the
"Acquisition"). Greenwich Street Capital Partners, Inc. ("Greenwich") has formed
Acquisition Co., a Delaware corporation, to undertake this transaction.
Following the Acquisition, Acquisition Co. will merge with and into GII (the
"First Merger") with GII as the surviving corporation. GII will merge with and
into its subsidiary Electro-Voice, Incorporated (the "Second Merger") and
together with the First Merger, (the "Mergers"), with Electro-Voice,
Incorporated being the surviving corporation and changing its name to EV
International, Inc. ("EV International"). The purpose of our analysis and
valuation is to provide our opinion as to the solvency of EV International.
Capitalized terms used and not otherwise defined herein shall have the meanings
ascribed to such terms in the Senior Secured Credit Agreement referred to below.
The Company is engaged in the manufacture and sale of high quality, high
performance sound system products for musical concerts, stadiums, theaters,
churches, and other places where music or speech is amplified. The principal
product lines include wired and wireless microphones, mixing consoles. signal
processors, amplifiers, loudspeakers and loudspeaker systems. The Company
operates on a worldwide basis with approximately 55 percent of sales occurring
outside the United States. The Company is headquartered in Buchanan, Michigan,
and also owns facilities in Tennessee, Oklahoma, California, Germany, England,
and Canada. The Company also leases facilities in the United States, England,
Switzerland, France, Australia, Japan, China and Hong Kong. The Company employs
approximately 1,700 people and has been in existence for approximately 60 years.
As used in this letter, prior to the consummation of the Transactions (as
defined below), GII shall mean the audio products business of Gulton Industries,
Inc. prior to its merger with and into Acquisition Co., and after the
consummation of the Transactions referred to below, the term "Borrower" shall
mean EV International. Consummation of the Facilities (as defined below)
provided under the Senior Secured Credit Agreement is conditioned upon the
concurrent consummation of the Acquisition and the transactions contemplated
thereby including the indirect contribution of $57,600,000 in proceeds from the
issuance by EV International of capital stock (comprised of $13,000,000 of
Senior PIK Preferred Stock, and $44,600,000 of Common Stock) to Gulton and the
consummation of the issuance by EV International of $75,000,000 in principal
amount of Subordinated Loans (the "Subordinated Debt"), and $35,000,000 in
principal amount of Senior Secured Term Loan ("Term Loan") (collectively the
"Loans").
Following the closing of the Acquisition, it is anticipated that EV
International will refinance the Subordinated Debt and $12,000,000 of the Term
Loan, and its parent will
<PAGE> 286
Greenwich Street Capital Partners, Inc.
February 10, 1997
Page 3
redeem the Senior Preferred Stock. from the proceeds of a subordinated debt
offering by EV International.
The consummation of the Acquisition, the aforesaid Mergers, the contributions of
proceeds from the issuance by EV International of capital stock, the financial
accommodations under the Credit Agreement, the issuance by EV International of
the Subordinated Debt and all the transactions contemplated in connection with
each of the foregoing are hereinafter referred to as the "Transactions."
The Borrower has entered into the Senior Secured Credit Agreement (the "Senior
Secured Credit Agreement"), dated as of the date hereof, with the financial
institutions parties thereto, as lenders, and The Chase Manhattan Bank as
administrative agent ("Administrative Agent"), pursuant to which up to
$25,000,000 in Revolving Credit Loans, the $35,000,000 Term Loan and other
financial accommodations (collectively the "Facilities") will be made available
to the Borrower, and the Senior Subordinated Credit Agreement, dated as of the
date hereof (the "Senior Subordinated Credit Agreement"), and together with the
Senior Secured Credit Agreement (the "Credit Agreements"), with the financial
institution parties thereto, as lenders, and The Chase Manhattan Bank as agent
("Agent"), pursuant to which the Subordinated Debt will be made available to the
Borrower.
Interest on the Facilities may accrue at the ABR Rate or Eurodollar Rate.
The Facilities under the Senior Secured Credit Agreement are secured by (i)
pledges of the stock of Borrower and (ii) security interests in and liens upon
(except as otherwise agreed by the Agent) substantially all other assets now or
hereafter owned by the Borrower and its domestic subsidiaries, including, but
not limited to, accounts receivable, inventory, general intangibles, and real
property of the Borrower and such subsidiaries.
We further understand mandatory repayments of the Facilities under the Senior
Secured Credit Agreement are required from (i) the net cash proceeds from
certain assets sales, (ii) the net proceeds from equity issuances of the
Borrower or any of its subsidiaries, (iii) for each fiscal year of the Borrower
commencing in Fiscal Year 1999 a specified percentage of annual excess cash
flow, (iv) any purchase price adjustments paid by the sellers of GII to the
Borrower. These mandatory payments are to be applied first to permanently repay
Term Loans then outstanding, second, to repay Revolving Credit Loans then
outstanding, third, to pay any Reimbursement Obligations then outstanding, and,
last, to cash collateralize any outstanding L/C Obligations on terms reasonably
satisfactory to the Agent.
<PAGE> 287
Greenwich Street Capital Partners, Inc.
February 10, 1997
Page 4
The scheduled amortizations on and final maturity of the Term Loans are as
presented in Schedule II. Scheduled amortization begins November 30, 1997.
We have reviewed and understand each of the limitations on Borrower set forth in
each of the covenants contained in the Credit Agreement.
The following terms are used herein as defined below:
- "Fair Value" means the value which would be realized in an exchange or
series of exchanges between a willing buyer and a willing seller,
within a commercially reasonable period of time, neither being under
any compulsion to act and each having reasonable knowledge of all
relevant facts. Further, "Fair Value" assumes the retention of all
operating assets within the economic entity and continuation of the
operations as a going concern.
- "Present Fair Salable Value" means the value which would be realized
from a willing, independent purchaser aware of all relevant information
relating to the assets or group of assets being sold and who is willing
to purchase in an arm's-length transaction under ordinary selling
conditions in an existing and not theoretical market for the sale of
assets of a comparable business enterprise if the assets or group of
assets are disposed of with reasonable promptness. The term "reasonable
promptness" is normally defined to mean a period of six months to one
year.
- "Identified Contingent Liabilities" means the estimated maximum amount
of liability that may result from pending litigation, asserted claims
and assessments, guarantees, uninsured risks and any other contingent
liability (including environmental clean-up and unfunded liability for
retiree welfare benefits), whether subordinated, matured, unmatured,
liquidated or unliquidated, as identified to us by responsible officers
of the Company, accountants, financial advisors and such other experts
as we deemed necessary to consult and valued by us after consultation
with responsible officers and employees of the Company, as the case may
be, and/or such industry, economic, statistical, and other experts as
we deemed necessary to consult (the valuation of contingent liabilities
to be computed in light of all the facts and circumstances existing at
the time of such valuation as the maximum amount that can reasonably be
expected to become an actual or matured liability), which contingent
liabilities may not meet the criteria for accrual under Statement of
Financial Accounting Standards No. 5 and therefore may not be recorded
as liabilities under generally accepted accounting principles ("GAAP").
<PAGE> 288
Greenwich Street Capital Partners, Inc.
February 10, 1997
Page 5
- "Stated Liabilities" means the matured, contingent, subordinated,
unmatured, liquidated and unliquidated liabilities of the Company as of
November 30, 1996, determined in accordance with GAAP, assuming the
Transactions have been consummated as proposed (and taking into
consideration amounts currently outstanding, and additional borrowing
capacity under the Facilities and also assuming the full utilization of
the Facilities and full issuance of the Subordinated Debt), during the
period covered by the Projections (as defined below) prepared by
management of the Company
- "able to pay its debts as they mature" means that during the period
covered by the Projections the Borrower will have positive cash flow
after paying its Stated Liabilities; the realization of current assets
in the ordinary course of business of the Borrower will be sufficient
to pay its Stated Liabilities, including Identified Contingent
Liabilities, as such obligations mature; and that the Borrower has
sufficient ability to obtain cash necessary to repay its long-term
indebtedness as such debt matures.
- "will not have unreasonably small capital" means that during the period
covered by the Projections, the Borrower has and will have sufficient
capital levels during the ordinary course of business after payment of
principal and interest on the Facilities and interest on the
Subordinated Debt to operate its business without interruption due to
lack of capital.
In providing the following opinions, we have performed reviews, analyses,
appraisals and inquiries as we deemed necessary and appropriate under the
circumstances. In the normal course of our studies, we have performed the
following:
1. Reviewed the audited, unaudited, pro forma and other consolidated
financial statements of the Company prepared by the Company and set
forth in the Memorandum dated January 1997 prepared by Chase Securities
Inc. for the syndication of the Facilities as well as the latest
interim financial statements of the Company dated November 30, 1996.
The independent accounting firm of Coopers & Lybrand LLP performed the
audits of the audited financial statements.
2. Reviewed forecasts and projections prepared for the Company as of
January 1997 for the fiscal years ended on the last day in February
1997 through February 2007 (the "Projections") and inquired of
management of the Company as to the foundation for such material and
the basic assumptions made in the preparation of the Projections
relating to the type of business, geographic markets, domestic and
international economic conditions, capital facilities and working
capital
<PAGE> 289
Greenwich Street Capital Partners, Inc.
February 10, 1997
Page 6
requirements. We have extended the Projections beyond the fiscal year
ended February 28, 2007 at a constant rate utilizing the projected
growth rate for 2007. We believe the assumptions used in preparing the
Projections (and our extension thereof) are reasonable.
3. Met with certain responsible members of the Company's management to
discuss the operations, financial condition, future prospects and
projected operations and performance of the Company.
4. Reviewed the proposed capital structure of the Borrower as it relates
to the debt service and repayment schedule of all senior and
subordinated debt and other obligations outstanding, including, without
limitation, the Facilities and the Subordinated Debt.
5. Made a site visit to the Company's corporate headquarters located in
Buchanan, Michigan, and discussed with management the historical and
projected operating results and industry data, including the impact of
future trends on the industry and the Company, as well as the effects
of the limitations of business operations and other provisions of the
Facilities and Subordinated Debt.
6. Reviewed internal financial analyses and other internally generated
data of the Company.
7. Reviewed certain publicly available economic, financial and market
information as it relates to the respective business operations of the
Company.
8. Reviewed each of the Credit Agreements, and the respective Exhibits and
Schedules thereto.
9. Performed such other studies, analyses and investigations and met with
such experts as we have deemed appropriate and have relied on generally
accepted valuation principles and procedures.
In conjunction with our work, we have assumed, without independent verification,
that the data was reasonably prepared, complete and without material
misstatement or omission and that the sources such as the management of the
Company and Coopers & Lybrand LLP are reliable. Management of the Company has
each represented to us, and we have relied on management's representations, that
no adverse changes have occurred since November 30, 1996 to the date of this
letter that would materially affect the content of the Projections. Nothing has
come to our attention during the course of our
<PAGE> 290
Greenwich Street Capital Partners, Inc.
February 10, 1997
Page 7
engagement which has led us to believe that any information reviewed by us or
presented to us in connection with our rendering of the solvency opinions set
forth herein is unreasonable in any material respect or that it was unreasonable
for us to use, utilize and rely upon the Projections (and our extension thereof
beyond February 28, 2007), financial statements, assumptions, estimates, and
judgments or statements, as the case may be, of the management of the Company or
their respective counsel, accountants and financial advisors and experts
referred to herein.
These opinions value the Borrower (including its assets both tangible and
intangible in their entirety) as a going concern (including goodwill), both
immediately before and after giving effect to the financial accommodations under
the Facilities, the issuance of the Subordinated Debt and the application of the
proceeds of the foregoing. We believe that this is a reasonable basis on which
to value the Borrower and nothing has come to our attention that indicates that
the entity, both before and after the related financing, was not and is not a
going concern that is capable of continuing its current operations.
Our analysis of the Borrower assumes that the Funded Debt incurred in connection
with the acquisition of the Company will only consist of the $110,000,000
principal amount of the Facilities, Subordinated Debt, and other debt and
scheduled interest thereon. Furthermore, our opinions are necessarily based on
economic, market and other conditions as they exist and could be evaluated by us
at the date of this letter.
Based on our analysis, it is our opinion as of the date hereof, that both
immediately before and after giving effect to the consummation of the
Transactions:
a) The Fair Value and Present Fair Salable Value of the assets of the
Borrower will exceed the sum of its Stated Liabilities, including
Identified Contingent Liabilities;
b) The Borrower is and will continue to be able to pay its debts including
the principal of the Facilities and the interest accrued thereon, the
principal of and interest on the Subordinated Debt as they mature in
the normal course of business through various means which may include
refinancing and assets sales; and
c) The Borrower did not and will not have unreasonably small capital with
which to engage in its business as such business is conducted and is
proposed to be conducted following the consummation of the
Transactions.
<PAGE> 291
Greenwich Street Capital Partners, Inc.
February 10, 1997
Page 8
This opinion is subject to the Statement of Limiting Conditions attached hereto
as Schedule I. Work notes from which this opinion has been prepared are retained
in our files and are available for inspection on request.
Respectfully submitted,
APPRAISAL ECONOMICS INC.
<PAGE> 292
Greenwich Street Capital Partners, Inc.
February 10, 1997
Page 9
Schedule I
STATEMENT OF LIMITING CONDITIONS
We have made no independent investigation of, and have relied on management's
representations to us as to title to the assets of the Company and, other than
as set forth in the attached opinion letter, we have made no investigation of
and have relied on management's representations to us as to the liabilities of
the Company.
Neither Appraisal Economics Inc. nor any of its employees has any present,
prospective, direct or indirect interest (financial or other) in GII, EV
International, Mark IV Industries, Greenwich Street Capital Partners, Inc., The
Chase Manhattan Bank, or any of their respective assets.
The information and data supplied by others, which have been considered in the
analysis, are from sources believed to be reliable but no further responsibility
is assumed for their accuracy.
We assume that there are no undisclosed conditions relating to either the real
or personal property which would adversely affect the economic prospects of the
Company.
Neither all nor any part of the contents of this solvency opinion shall be
conveyed to the public through advertising, public relations, news, sales or
other media without the written consent and approval of Appraisal Economics Inc.
Documentation of the premises and procedures utilized has been prepared in a
manner to fully support our conclusions and will be retained in our files.
However, any testimony or appearance in court required is outside the initial
scope of our engagement but will be provided at our then prevailing per diem fee
The fee for the solvency opinion is not contingent upon the conclusions
reported.
Except for matters of which we have actual knowledge based on discussions,
studies, analyses and investigations undertaken in connection herewith,
Appraisal Economics Inc. accepts as being materially correct the financial
statements, both audited and unaudited, and other financial data provided by the
Company without further investigation.
In the event that this solvency opinion is used as a basis to set market price,
no responsibility is assumed for the inability to obtain a purchaser or the
conclusion reported herein.
<PAGE> 293
Greenwich Street Capital Partners, Inc.
February 10, 1997
Page 10
Schedule II
AMORTIZATION SCHEDULE
<TABLE>
<CAPTION>
SENIOR SENIOR SECURED
SENIOR SECURED SUBORDINATED REVOLVING CREDIT
FISCAL YEAR TERM LOAN LOANS LOANS
- ----------- -------------- ------------ ----------------
<S> <C> <C> <C>
1998 $ 1,944,366 $ 0 $ 0
1999 $ 3,888,732 $ 0 $ 0
2000 $ 5,866,900 $ 0 $ 0
2001 $ 7,000,000 $ 0 $ 0
2002 $ 8,400,000 $ 0 $ 0
2003 $ 7,900,002 $ 0 $ 25,00,000
2004 $ 0 $ 0 not applicable
2005 $ 0 $ 0 not applicable
2006 $ 0 $ 0 not applicable
2007 $ 0 $75,000,000 not applicable
----------- ----------- --------------
Total $35,000,000 $75,000,000 $ 25,000,000
=========== =========== ==============
</TABLE>
<PAGE> 294
EXHIBIT F TO
CREDIT AGREEMENT
February 10, 1997
The Chase Manhattan Bank,
as Administrative Agent
under the Credit Agreement referred to below
270 Park Avenue
New York, New York 10017
Each of the Lenders named in Annex A
attached hereto that are parties
to the Credit Agreement referred to below
We have acted as special counsel to EVI Audio Holding, Inc., a
Delaware corporation ("Holdings"), and its wholly owned subsidiary Gulton
Acquisition Corp., a Delaware corporation ("Acquisition Co."), in connection
with (a) the preparation, and the execution and delivery today, of (i) the
Credit Agreement, dated as of February 10, 1997 (the "Senior Credit Agreement"
or "Credit Agreement"), among Acquisition Corp., the several banks and other
financial institutions parties thereto named on the signature pages thereof
(collectively, the "Senior Lenders"), and The Chase Manhattan Bank, a New York
banking corporation, as administrative agent for the Senior Lenders (in such
capacity, the "Administrative Agent" and together with the Senior Lenders, the
"Secured Parties"), (ii) the Guarantee and Collateral Agreement, dated as of
February 10, 1997 (the "Guarantee and
<PAGE> 295
The Chase Manhattan Bank,
as Administrative Agent
Each of the Lenders
named in Annex A -2- February 10, 1997
Collateral Agreement"), made by Holdings and EV International (as hereinafter
benefit of the Senior Lenders, (iii) the Patent and Trademark Security
Agreement, dated as of February 10, 1997 (the "Patent and Trademark Security
Agreement"), made by EV International (as hereinafter defined) in favor of the
Administrative Agent for the benefit of the Senior Lenders, and (iv) the other
Loan Documents (as hereinafter defined), and (b) the consummation today of the
Acquisition and the Mergers (as each such term is hereinafter defined) and the
other transactions contemplated by the Loan Documents.
The opinions expressed below are furnished to you pursuant to
subsection 6.1 (o)(i) of the Senior Credit Agreement. Unless otherwise defined
herein or in any Schedule hereto, capitalized terms defined in the Credit
Agreement are used herein as defined therein. As used herein, the following
terms shall have the following meanings: The term "Acquisition" means the
acquisition by Acquisition Co. of Gulton Industries, Inc. ("Gulton"), a Delaware
corporation and a wholly owned subsidiary of Mark IV Industries, Inc. ("Mark
IV"), pursuant to the terms of the Stock Purchase Agreement, dated as of
December 12, 1996, by and among Mark IV, Gulton, Mark IV PLC and Acquisition
Co., as amended by Amendment and Supplement thereto, dated as of December 18,
1996, among the original parties to the Stock Purchase Agreement and Amendment
and Supplement thereto, dated as of February 7, 1997, among the original parties
to the Stock Purchase Agreement (as so amended, the "Stock Purchase Agreement").
The term "Foreign Holding Co." means EVI Audio International Holding
Corporation, Inc., a Delaware corporation and a wholly owned subsidiary of EV
International (as defined below). The term "First Merger" refers to the merger
today of Acquisition Co. with and into Gulton, with Gulton being the surviving
corporation of such merger. The term "Second Merger" refers to the merger today
of Gulton with and into Electro-Voice, Incorporated, a Delaware corporation and
a wholly owned subsidiary of Gulton, with Electro-Voice, Incorporated being the
surviving corporation of such merger and being renamed EV International, Inc.
("EV International"). The term "Mergers" refers collectively to the First Merger
and the Second Merger. The term "Material Adverse Effect" means a material
adverse effect on the business, operations, property or condition (financial or
otherwise) of Holdings and its Subsidiaries taken as a whole. The term "DGLC"
means the General Corporation Law of the State of Delaware as in effect on the
date hereof. The term
<PAGE> 296
The Chase Manhattan Bank,
as Administrative Agent
Each of the Lenders
named in Annex A -3- February 10, 1997
"UCC" means the Uniform Commercial Code as in effect in the State of New York on
the date hereof.
In arriving at the opinions expressed below,
(1) we have examined and relied on the following (including, but not limited to,
the representations and warranties contained therein):
(a) originals, or copies certified or otherwise identified to
our satisfaction, of the Credit Agreement, any Notes issued today
pursuant thereto, the Guarantee and Collateral Agreement, the Patent
and Trademark Security Agreement and the Mortgages to which EV
International is today a party listed in Schedule 2 hereto (such
Mortgages, together with the Credit Agreement, the Guarantee and
Collateral Agreement, and the Patent and Trademark Security Agreement,
the "Loan Documents"),
(b) originals or copies certified or otherwise identified to
our satisfaction of the contracts and agreements to which Holdings or
Acquisition Co. is today a party that are listed in Schedule 3 hereto
(collectively, the "Contracts"), and
(c) such corporate documents and records of Holdings,
Acquisition Co. or EV International and such other instruments and
certificates of public officials, officers and representatives of
Holdings, Acquisition Co., EV International and other Persons as we
have deemed necessary or appropriate for the purposes of this opinion;
and
(2) we have made such investigations of law as we have deemed appropriate as a
basis for this opinion.
In rendering the opinions expressed below, we have assumed,
with your permission, without independent investigation or inquiry, (a) the
authenticity of all documents submitted to us as originals, (b) the genuineness
of all signatures on all documents that we examined (other than those of any
officer of Holdings or Acquisition Co., or following the Acquisition, of Gulton
or EV International), (c) the
<PAGE> 297
The Chase Manhattan Bank,
as Administrative Agent
Each of the Lenders
named in Annex A -4- February 10, 1997
conformity to authentic originals of documents submitted to us as certified,
conformed or photostatic copies and (d) the due authorization, execution and
delivery of the Loan Documents by each party thereto (other than Holdings or
Acquisition Co., or following the Acquisition, of Gulton or EV International).
Based upon and subject to the foregoing and the qualifications
hereinafter set forth, we are of the opinion that:
1. Each of Holdings, Acquisition Co. and Foreign Holding Co.
(i) is duly incorporated, validly existing and in good standing under the laws
of the State of Delaware, and (ii) has the corporate power and authority to own
and operate its respective property, to lease the property each operates as
lessee and to conduct the business in which each is currently engaged.
2. Each of Holdings, Acquisition Co. and (after giving effect
to the Acquisition and the Mergers) EV International has the corporate power and
authority to make, deliver and perform its obligations under each of the Loan
Documents to which it is today a party and, in the case of Acquisition Co., to
borrow today under the Credit Agreement. Each of Holdings, Acquisition Co. and
(after giving effect to the Acquisition and the Mergers) EV International has
taken all necessary corporate action to authorize the execution, delivery and
performance of the Loan Documents to which it is today a party, and in the case
of Acquisition Co., to authorize its borrowings today on the terms and
conditions of the Credit Agreement. Except for (a) any consents, authorizations,
approvals, notices and filings that have been obtained or made, (b) filings in
the United States Patent and Trademark Office, the United States Copyright
Office, and appropriate offices under any applicable state trademark laws, (c)
filings to perfect the security interests created by the Guarantee and
Collateral Agreement or any Mortgage, (d) mortgage filings related to any of the
Loan Documents and (e) those consents, authorizations, approvals, notices and
filings that if not made, obtained or done, would not, to our knowledge, have a
Material Adverse Effect, to our knowledge no consent or authorization of,
approval by, notice to, or filing with, any Federal, New York or Delaware
(insofar as the DGCL is concerned) court or governmental authority is required
to be obtained or made on or prior to the date hereof by Holdings, Acquisition
Co. or EV International, as the case may be, in connection with its respective
execution, delivery or performance of the Loan Documents to which it is
<PAGE> 298
The Chase Manhattan Bank,
as Administrative Agent
Each of the Lenders
named in Annex A -5- February 10, 1997
today a party or, in the case of Acquisition Co., with the borrowings today
under the Credit Agreement, or in connection with the validity or enforceability
against it of the Loan Documents to which it is today a party.
3. (a) The Senior Credit Agreement, as in effect today, has
been duly executed and delivered on behalf of Acquisition Co. The Senior Credit
Agreement, as in effect today and after giving effect to the Acquisition and the
Mergers, constitutes the legal, valid and binding obligation of EV International
enforceable against EV International in accordance with its terms.
(b) After giving effect to the Acquisition and the Mergers,
the Guarantee and Collateral Agreement has been duly executed and delivered on
behalf of EV International and constitutes the legal, valid and binding
obligation of EV International enforceable against EV International in
accordance with its terms.
(c) The Guarantee and Collateral Agreement has been duly
executed and delivered on behalf of Holdings, and constitutes the legal, valid
and binding obligation of Holdings enforceable against Holdings in accordance
with its terms.
4. (a) The execution and delivery by Acquisition Co. of the
Senior Credit Agreement, the performance by Acquisition Co. of its obligations
thereunder, and the borrowings today by Acquisition Co. under the Senior Credit
Agreement, all as provided therein, (x) will not violate (i) the certificate of
incorporation or by-laws of Acquisition Co., (ii) any existing Federal, New York
or DGCL law, rule or regulation known to us to be applicable to Acquisition Co.
or any of its material properties, (iii) any existing judgment, order or decree
known to us of any arbitrator, court or other governmental authority binding
upon Acquisition Co. or any of its material properties or to which Acquisition
Co. or any of its material properties is subject or (iv) any Contract to which
Acquisition Co. is a party, except, in the case of clauses (ii), (iii) and (iv),
for such violations that to our knowledge would not have a Material Adverse
Effect, and (y) will not result in, or require, the creation or imposition of
any Lien (other than under the Loan Documents) on any of the properties or
revenues of Acquisition Co., by operation of any law, rule, regulation,
judgment, order or decree referred to in the preceding clause (x) or pursuant to
any such Contract.
<PAGE> 299
The Chase Manhattan Bank,
as Administrative Agent
Each of the Lenders
named in Annex A -6- February 10, 1997
(b) After giving effect to the Acquisition and the Mergers,
the execution and delivery by EV International of the Guarantee and Collateral
Agreement, the performance by EV International of its obligations under any Loan
Document to which it is today a party, and the creation today and perfection of
any security interest upon or with respect to any of the properties of EV
International, all as provided therein, will not violate (i) the certificate of
incorporation or by-laws of EV International, or (ii) any existing Federal, New
York or DGCL law, rule or regulation known to us to be applicable to EV
International or any of its material properties, except, in each case, for such
violations that to our knowledge would not have a Material Adverse Effect.
(c) The execution and delivery by Holdings of the Guarantee
and Collateral Agreement, the performance by Holdings of its obligations
thereunder, and the creation and perfection today of any security interest upon
or with respect to any of the properties of Holdings, all as provided therein,
(x) will not violate (i) the certificate of incorporation or by-laws of
Holdings, (ii) any existing Federal, New York or DGCL law, rule or regulation
known to us to be applicable to Holdings or any of its material properties,
(iii) any existing judgment, order or decree known to us of any arbitrator,
court or other governmental authority binding upon Holdings or any of its
material properties or to which Holdings or any of its material properties is
subject or (iv) any Contract to which Holdings is a party, except, in the case
of clauses (ii), (iii) and (iv), for such violations that to our knowledge would
not have a Material Adverse Effect, and (y) will not result in, or require, the
creation or imposition of any Lien (other than under the Loan Documents) on any
of the properties or revenues of Holdings, by operation of any law, rule,
regulation, judgment, order or decree referred to in the preceding clause (x) or
pursuant to any such Contract.
5. (a) The provisions of the Guarantee and Collateral
Agreement that purport to create security interests are effective to create
security interests in favor of the Administrative Agent, for the benefit of the
Secured Parties, in all of the collateral of Holdings or EV International
described therein that is of the type in which a security interest can be
created under Article 9 of the UCC (the "Collateral"), to the extent the UCC is
applicable to the creation of such security interests.
(b) The Administrative Agent will have a valid and perfected
security interest, for the benefit of the Secured Parties, in the Collateral of
Holdings or EV
<PAGE> 300
The Chase Manhattan Bank,
as Administrative Agent
Each of the Lenders
named in Annex A -7- February 10, 1997
International that consists of Pledged Stock (as defined in the Guarantee and
Collateral Agreement) pledged today, upon the execution and delivery of the
Guarantee and Collateral Agreement, and the delivery of such Pledged Stock to
(and retention of possession thereof by) the Administrative Agent. Assuming the
Administrative Agent (i) acquires its security interest in such Pledged Stock in
good faith and without notice of any adverse claim (as defined in Section
8-302(2) of the UCC) and (ii) the Administrative Agent takes possession of each
certificate evidencing shares of such Pledged Stock either in bearer form or
registered form, issued or endorsed in the name of the Administrative Agent or
in blank, the Administrative Agent will acquire its security interest in such
Pledged Stock free of adverse claims (as so defined) governed by the UCC.
6. To our knowledge, except as described in the Credit
Agreement, no litigation, investigation or proceeding of or before any
arbitrator, court or other governmental agency is pending or threatened by or
against Holdings or Acquisition Co. or against any of its or their respective
properties or revenues with respect to the Credit Agreement or any of the other
Loan Documents or the transactions contemplated by the Stock Purchase Agreement.
7. Neither Holdings nor Acquisition Co. is (a) an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or "controlled" by an entity required to be registered as an "investment
company" under such Act, or (b) a "holding company" as defined in, or otherwise
subject to regulation under, the Public Utility Holding Company Act of 1935.
8. Acquisition Co. is not subject to regulation under any
Federal or New York state statute or regulation that limits its ability to
borrow under the Credit Agreement.
Our opinions set forth in paragraphs 2, 3, 4, 5 and 8 above
are subject to the effects of (a) bankruptcy, insolvency, fraudulent conveyance,
fraudulent transfer, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights or remedies generally, and (b) general
equitable principles (whether considered in a proceeding in equity or at law).
Our opinions set forth in paragraphs 2, 3, 4, 5 and 8 above are also subject to
the effects of (i) an implied covenant of good faith,
<PAGE> 301
The Chase Manhattan Bank,
as Administrative Agent
Each of the Lenders
named in Annex A -8- February 10, 1997
reasonableness and fair dealing, (ii) applicable laws and interpretations which
may affect the validity or enforceability of certain remedies provided for in
the Loan Documents, which limitations, however, do not, in our opinion, make the
remedies provided for therein inadequate for the practical realization of the
rights and benefits in tended to be provided thereby (subject to the other
qualifications expressed herein), and (iii) limitations on enforceability of
rights to indemnification under securities laws or regulations or to the extent
any indemnification would violate public policy. We express no opinion as to (1)
the enforceability of any waiver of any statutory right, (2) the security
interest referred to in the next to last paragraph of Section 9 of the Senior
Credit Agreement, (3) Section 11.12(i) of the Senior Credit Agreement, Section
8.12(a) of the Guarantee and Collateral Agreement, Section 22(a) of the Patent
and Trademark Security Agreement and any similar provision in any other Loan
Document, insofar as such provisions relate to the subject matter jurisdiction
of the United States District Court for the Southern District of New York to
adjudicate ally controversy, (4) the waiver of inconvenient forum set forth in
Section 11.12(ii) of the Senior Credit Agreement, Section 8.12(b) of the
Guarantee and Collateral Agreement, and Section 22(b) of the Patent and
Trademark Security Agreement and any similar provision in any other Loan
Document and (5) Section 36 of any of the Mortgages.
We express no opinion as to the validity or perfection of any
security interest, or the validity, binding effect or enforceability of any Loan
Document to the extent that such Loan Document grants or purports to grant a
security interest, (i) that is not governed by the UCC (including but not
limited to any such security interest with respect to (x) Copyrights, Copyright
Licenses, Patents, Patent Licenses, Trademarks and Trademark Licenses, as such
terms are defined in the Guarantee and Collateral Agreement, and the Patent and
Trademark Security Agreement), (y) the Collateral Proceeds Account, the General
Fund Account and any Lockbox System, as such terms are defined in the Guarantee
and Collateral Agreement and (z) any other deposit accounts, insurance policies,
and real property and fixtures), (ii) in any collateral of a type described in
Section 9-401(1)(a) or (b) of the UCC, or (iii) in any collateral that contains
or is governed by provisions that purport to void or prohibit the assignment
thereof, or that are otherwise violated, if it is assigned pursuant to a
document such as the Guarantee and Collateral Agreement or any other Loan
Document, including, without limitation, any Accounts the obligor for which is
the United States of America or any department, agency or instrumentality
thereof. No security interest will exist
<PAGE> 302
The Chase Manhattan Bank,
as Administrative Agent
Each of the Lenders
named in Annex A -9- February 10, 1997
with respect to after-acquired property of Holdings of EV International until
such party has rights therein within the meaning of Section 9-203 of the UCC. We
express no opinion herein as to the title or any other interest of Holdings or
EV International in or to any of the collateral described in the Loan Documents.
Without limiting the foregoing, we have not made or undertaken to have made any
investigation of the state of title to any real property, fixtures or personal
property referred to in the Mortgages, and we express no opinion as to (i) the
title to or other ownership rights in, or the description of, such property,
(ii) the creation of any lien or security interest, or absence of any
conflicting rights of others, with respect to such property, or due recordation
of the Mortgages, (iv) the enforceability of any of the remedies set forth in
the Mortgages with respect to such property, or (v) any law relating to the
protection of the environment.
Except as set forth in paragraph 5 above, we express no
opinion as to the validity or perfection of the security interests purported to
be created by the Loan Documents. We express no opinion as to the validity or
perfection of such security interests:
(i) with respect to collateral sold, exchanged or otherwise
disposed of by a Loan Party;
(ii) to the extent such security interests may be affected by
(A) Section 552 of the United States Bankruptcy Code, under which a
bankruptcy court has discretion as to the extent to which post-petition
proceeds may be subject to a lien arising from a security agreement
entered into by the debtor before the commencement of the case, or (B)
Section 547(b) of the United States Bankruptcy Code, relating to the
power to avoid a preference;
(iii) with respect to proceeds, to the extent of limitations
under Section 9-306 of the UCC on the perfection of a security interest
in proceeds;
(iv) as to any collateral acquired by the party granting such
security interest more than four months after such party changes its
name, identity or corporate structure so as to make the relevant
financing statements seriously misleading, unless new appropriate
financing statements indicating the new
<PAGE> 303
The Chase Manhattan Bank,
as Administrative Agent
Each of the Lenders
named in Annex A -10- February 10, 1997
name, identity or corporate structure of such party are properly filed
before the expiration of such four months; and
(v) as to any securities, to the extent of limitations under
Section 8-321 of the UCC on the creation, perfection and continuation
of a security interest therein.
We call to your attention that (i) in the event that a debtor that maintains a
place of business in more than one county in the State of New York should at any
time in the future maintain a place of business in only one county in such
state, or a debtor that maintains a place of business in only one county in the
State of New York relocates such place of business to another county in such
state, continued perfection of a security interest granted by such debtor may
require filing of an appropriate financing statement in the office of the filing
officer of such county, (ii) the UCC requires periodic filing of continuation
statements in order to maintain the effectiveness of financing statements filed
pursuant thereto and (iii) Sections 8-304 and 8-311 of the UCC may in certain
circumstances limit the rights of a secured party in respect of any unauthorized
endorsement with respect to certificated securities constituting collateral
under the Loan Documents not registered in the name of or issued to the
Administrative Agent and not originally issued in bearer form.
Except as set forth in the last sentence of paragraph 5(b)
above, we express no opinion as to the priority of the security interests
purported to be created by the Loan Documents. Our opinion in paragraph 5 above
with respect to the Pledged Stock is subject to the effects of the attachment
provisions of Section 324 of the DGCL. In rendering the opinion set forth in
paragraph 5 above, we have assumed, with your consent, that all of the Pledged
Stock will be held at all times by the Administrative Agent in the State of New
York.
We express no opinion as to the validity, binding effect or
enforceability of any provision of the Loan Documents that purports (i) to
waive, release or vary any right of, or any duties owing to, any Loan Party, to
the extent limited by Section 1-102(3) or 9-501(3) of the UCC or other
provisions of applicable law, (ii) to prohibit any Loan Party from transferring
its respective rights in the collateral described in the Loan Documents or any
proceeds thereof, as a result of the operation of Section 9-311
<PAGE> 304
The Chase Manhattan Bank,
as Administrative Agent
Each of the Lenders
named in Annex A -11- February 10, 1997
of the UCC, or (iii) to permit the Administrative Agent to vote or otherwise
exercise any rights with respect to any of the collateral under the Loan
Documents absent compliance with the requirements of applicable laws and
regulations as to the voting of or other exercise of rights with respect to such
collateral.
We express no opinion as to the effect of, or compliance with,
any Federal or State laws regarding fraudulent transfers or conveyances, or
provisions of Delaware or New York law restricting dividends, loans or other
distributions by a corporation or for the benefit of its stockholders, or any
Federal or State securities laws, rules or regulations, including without
limitation, as to the effect thereof on the validity, binding effect or
enforceability of any of the Loan Documents.
We express no opinion as to the laws of any jurisdiction other
than the laws of the State of New York, the General Corporation Law of the State
of Delaware and the Federal laws of the United States of' America.
The opinions expressed herein are solely for your benefit and,
without our prior consent, neither our opinion nor this opinion letter may be
disclosed publicly to or relied upon by any other person.
Very truly yours,
<PAGE> 305
Annex A
LENDERS
1. Comerica Bank
2. The Travelers Insurance Company
3. The First National Bank of Boston
4. National CityBank (Cleveland)
5. BHF-Bank Aktiengefellschaft
6. NBD Bank
7. Michigan National Bank
8. The Bank of New York
9. Heller Financial, Inc.
10. The Chase Manhattan Bank
11. First Source Financial LL-P
<PAGE> 306
Schedule 2
OTHER LOAN DOCUMENTS
The following Mortgages and Deeds of Trust (collectively, the
"Mortgages"):
1. Deed of Trust, Assignment of Rents and Leases, Security
Agreement and Fixture Filing, dated as of February 10, 1997,
from EV International, Inc., as Grantor, for the benefit of
The Chase Manhattan Bank, as Administrative Agent, regarding
property located in Sun Valley, California.
2. Deed of Trust, Assignment of Rents and Leases, Security
Agreement and Fixture Filing, dated as of February 10, 1997,
from EV International, Inc., as Grantor, for the benefit of
The Chase Manhattan Bank, as Administrative Agent, regarding
property located in Sylmar, California.
3. Mortgage, Assignment of Rents and Leases, Security Agreement
and Fixture Filing, dated as of February 10, 1997, from EV
International, Inc., as Mortgagor, to The Chase Manhattan
Bank, as Administrative Agent, as Mortgagee, regarding the
property located on Cecil Street in Buchanan, Michigan.
4. Mortgage, Assignment of Rents and Leases, Security Agreement
and Fixture Filing, dated as of February 10, 1997, from EV
International, Inc., as Mortgagor, to The Chase Manhattan
Bank, as Administrative Agent, regarding the property located
on East Front Street in Buchanan, Michigan.
5. Mortgage, Assignment of Rents and Leases and Security
Agreement, dated as of February 10, 1997, from EV
International, Inc., as Mortgagor, to The Chase Manhattan
Bank, as Administrative Agent, as Mortgagee, regarding
property located in Oklahoma City, Oklahoma.
6. Deed of Trust, Assignment of Rents and Leases and Security
Agreement, dated as of February 10, 1997, from EV
International, Inc., as Grantor, for the benefit of The Chase
Manhattan Bank, as Administrative Agent, regarding property
located in Newport, Tennessee.
<PAGE> 307
7. Deed of Trust and Security Agreement, dated as of February 10,
1997, from EV International, Inc., as Grantor, for the benefit
of The Chase Manhattan Bank, as Administrative Agent,
regarding property located in Sevierville, Tennessee.
2
<PAGE> 308
Schedule 3
CONTRACTS
1. The Stock Purchase Agreement (as defined in the body of this letter).
1
<PAGE> 309
EXHIBIT G TO
CREDIT AGREEMENT
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
Reference is made to the Loan(s) held by the undersigned
pursuant to the Credit Agreement (as amended, supplemented, waived or otherwise
modified from time to time, the "Credit Agreement"), dated as of February 10,
1997 among EV International, Inc., a Delaware corporation formerly named
Electro-Voice, Incorporated (the "Borrower"), the several banks and other
financial institutions from time to time parties thereto (the "Lenders"), and
The Chase Manhattan Bank, a New York banking corporation, as administrative
agent for the Lenders (in such capacity, the "Administrative Agent"). The
undersigned hereby certifies under penalty of perjury that:
(1) The undersigned is the beneficial owner of the Loan(s) (as
well as any Note(s) evidencing such Loan(s)) registered in its name;
(2) The undersigned is not a bank (as such term is used in
Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended
(the "Code")), is not subject to regulatory or other legal requirements
as a bank in any jurisdiction, and has not been treated as a bank for
purposes of any tax, securities law or other filing or submission made
to any governmental authority, any application made to a rating agency
or any qualification for any exemption from any tax, securities law or
other legal requirements;
(3) The undersigned is not a 10-percent shareholder within the
meaning of Section 881(c)(3)(B) of the Code; and
(4) The undersigned is not a controlled foreign corporation
receiving interest from a related person within the meaning of Section
881(c)(3)(C) of the Code.
Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
[NAME OF LENDER]
By:_____________________________________
[Address]
Dated: ____________, 199_
<PAGE> 310
EXHIBIT H TO
CREDIT AGREEMENT
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Senior Secured Credit Agreement,
dated as of February __, 1997 (as amended, supplemented, waived or otherwise
modified from time to time, the "Senior Secured Credit Agreement"), among EV
International, Inc., a Delaware corporation formerly named Electro-Voice,
Incorporated (the "Borrower"), the several banks and other financial
institutions from time to time parties thereto (the "Lenders"), and The Chase
Manhattan Bank, as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"). Unless otherwise defined herein, terms defined in the
Senior Secured Credit Agreement and used herein shall have the meanings given to
them in the Senior Secured Credit Agreement.
_________________________ (the "Assignor") and
_____________________ (the "Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the
Assignee without recourse to the Assignor, and the Assignee hereby
irrevocably purchases and assumes from the Assignor without recourse to
the Assignor, as of the Transfer Effective Date (as defined below), a
percentage interest (the "Assigned Interest") as set forth in Schedule
1 hereto in and to the Assignor's rights and obligations under the
Senior Secured Credit Agreement and the other Loan Documents with
respect to those credit facilities provided for in the Senior Secured
Credit Agreement as are set forth on Schedule 1 hereto (individually,
an "Assigned Facility"; collectively, the "Assigned Facilities"), in a
principal amount for each Assigned Facility as set forth on Schedule 1
hereto.
2. The Assignor (a) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Senior Secured Credit
Agreement, any other Loan Document or any other instrument or document
furnished pursuant thereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Senior Secured
Credit Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto, other than that it has not created
any adverse claim upon the interest being assigned by it hereunder and
that such interest is free and clear of any such adverse claim; (b)
makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower, any of its
Subsidiaries or any other obligor or the performance or observance by
the Borrower, any of its Subsidiaries or any other obligor of any of
their respective obligations under the Senior Secured Credit Agreement,
any other Loan Document or any other instrument or document furnished
pursuant hereto or thereto; and (c) attaches the Note(s), if any, held
by it evidencing the Assigned Facilities and requests that the
Administrative Agent exchange such Note(s) for a new Note or Notes
payable to the Assignee and (if the Assignor has
<PAGE> 311
2
retained any interest in the Assigned Facilities) a new Note or Notes
payable to the Assignor in the respective amounts which reflect the
assignment being made hereby (and after giving effect to any other
assignments which have become effective on the Transfer Effective Date)
and (d) represents and warrants that it is legally authorized to enter
into this Assignment and Acceptance.
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms
that it has received a copy of the Senior Secured Credit Agreement,
together with copies of the financial statements referred to in
subsection 5.1 thereof and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to
enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon the Assignor, the
Administrative Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the
Senior Secured Credit Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; (d)
appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers and discretion under
the Senior Secured Credit Agreement, the other Loan Documents or any
other instrument or document furnished pursuant hereto or thereto as
are delegated to the Administrative Agent by the terms thereof,
together with such powers as are incidental thereto; (e) hereby affirms
the acknowledgments and representations of such Assignee as a Lender
contained in subsection 10.6 of the Senior Secured Credit Agreement;
and (f) agrees that it will be bound by the provisions of the Senior
Secured Credit Agreement and will perform in accordance with the terms
of the Senior Secured Credit Agreement all the obligations which by the
terms of the Senior Secured Credit Agreement are required to be
performed by it as a Lender, including its obligations pursuant to
subsection 11.15 of the Senior Secured Credit Agreement, and, if it is
organized under the laws of a jurisdiction outside the United States,
its obligations pursuant to subsection 4.11(b) of the Senior Secured
Credit Agreement.
4. The effective date of this Assignment and Acceptance shall
__________ be , 19____ (the "Transfer Effective Date"). Following the
execution of this Assignment and Acceptance, it will be delivered to
the Administrative Agent for acceptance by it and recording by the
Administrative Agent pursuant to subsection 11.6 of the Senior Secured
Credit Agreement, effective as of the Transfer Effective Date (which
shall not, unless otherwise agreed to by the Administrative Agent, be
earlier than five Business Days after the date of such acceptance and
recording by the Administrative Agent).
5. Upon such acceptance and recording, from and after the
Transfer Effective Date, the Administrative Agent shall make all
payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignee whether
such amounts have accrued prior to the Transfer Effective Date or
accrued subsequent to the Transfer Effective Date. The Assignor and the
Assignee
<PAGE> 312
3
shall make all appropriate adjustments in payments by the
Administrative Agent for periods prior to the Transfer Effective Date
or with respect to the making of this assignment directly between
themselves.
6. From and after the Transfer Effective Date, (a) the
Assignee shall be a party to the Senior Secured Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the
rights and obligations of a Lender thereunder and under the other Loan
Documents and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and
Acceptance, relinquish its rights and be released from its obligations
under the Senior Secured Credit Agreement, but shall nevertheless
continue to be entitled to the benefits of subsections 4.10, 4.11, 4.12
and 11.5 thereof.
7. Notwithstanding any other provision hereof, if the consents
of the Borrower and the Administrative Agent hereto are required under
subsection 11.6 of the Senior Secured Credit Agreement, this Assignment
and Acceptance shall not be effective unless such consents shall have
been obtained.
8. This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of New York without
regard to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Acceptance to be executed as of the date indicated by their
respective duly authorized officers on Schedule 1 hereto.
<PAGE> 313
SCHEDULE 1 TO THE
ASSIGNMENT AND ACCEPTANCE
Re: Credit Agreement, dated as of February __, 1997 (as
amended, supplemented, waived or otherwise modified from time to time,
the "Senior Secured Credit Agreement"), among EV International, Inc., a
Delaware corporation formerly named Electro-Voice, Incorporated (the
"Borrower"), the several banks and other financial institutions from
time to time parties thereto (the "Lenders"), and The Chase Manhattan
Bank, as administrative agent for the Lenders (in such capacity, the
"Administrative Agent").
Name of Assignor:
Name of Assignee:
Transfer Effective Date of Assignment:
<TABLE>
<S> <C> <C> <C>
Percentage of
Credit Assignor's Interest Principal Commitment
Facility in Credit Facility Amount Percentage
Assigned Assigned Assigned Assigned
__________.% $__________ __________.%
</TABLE>
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By: _________________________ By: __________________________
Title: Title:
Accepted for recording in the Register: Consented To:
THE CHASE MANHATTAN BANK, as EV INTERNATIONAL, INC.
Administrative Agent
By: _________________________ By: __________________________
Title: Title:
<PAGE> 314
2
DATED: ______________________ THE CHASE MANHATTAN BANK, as
Administrative Agent
By: __________________________
Title:
<PAGE> 315
EXHIBIT I-1 TO
CREDIT AGREEMENT
FORM OF BORROWING CERTIFICATE
EV INTERNATIONAL, INC.
Pursuant to subsection 6.1(t) of the Credit Agreement, dated
as of February __, 1997 (the "Senior Secured Credit Agreement"; terms defined
therein being used herein as therein defined), among EV International, Inc., a
Delaware corporation formerly named Electro-Voice, Incorporated (the
"Borrower"), the several banks and other financial institutions from time to
time parties thereto (the "Lenders"), and The Chase Manhattan Bank, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), the Borrower hereby certifies that:
1. The representations and warranties of the Borrower set
forth in the Senior Secured Credit Agreement and each of the other Loan
Documents to which the Borrower is a party or which are contained in
any certificate furnished by or on behalf of the Borrower pursuant to
or in connection with the Senior Secured Credit Agreement or any of the
other Loan Documents are true and correct in all material respects on
and as of the date hereof with the same effect as if made on the date
hereof except for representations and warranties expressly stated to
relate to a specific earlier date, in which case such representations
and warranties are true and correct as of such earlier date; and
2. No Default or Event of Default has occurred and is
continuing as of the date hereof or after giving effect to the Loans to
be made on the date hereof and/or the issuance of any Letters of Credit
to be issued on the date hereof.
IN WITNESS WHEREOF, the Borrower has caused this certificate
to be duly executed and delivered on its behalf as of the date set forth below.
EV INTERNATIONAL, INC.
By:_______________________________
Title:
Date: February __, 1997
<PAGE> 316
EXHIBIT I-2 TO
CREDIT AGREEMENT
FORM OF
BORROWING BASE CERTIFICATE
Reference is made to the Credit Agreement, dated as of
February __, 1997 (as amended, supplemented or otherwise modified from time to
time, the "Senior Secured Credit Agreement"), among Gulton Acquisition Corp., a
Delaware corporation, the several banks and other financial institutions from
time to time parties thereto (the "Lenders"), and The Chase Manhattan Bank, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"). Unless otherwise defined herein, capitalized terms which are used
herein shall have the meanings assigned thereto in the Senior Secured Credit
Agreement.
The undersigned, _________________, a ___________________ (a
Responsible Officer of the Borrower) does hereby certify that, as of the date
hereof, the Borrowing Base, as set forth on Schedule A hereto, is
$___________________ and no Default or Event of Default has occurred and is
continuing.
Pursuant to subsection 7.2(e) of the Senior Secured Credit
Agreement, the Borrower hereby certifies, and represents and warrants, that this
Borrowing Base Certificate and the attached Schedule A are true, correct and
complete in all material respects and that the amounts set forth in such
Schedule are in compliance in all material respects with the provisions of the
Senior Secured Credit Agreement. The Borrower acknowledges that the
Administrative Agent and Lenders are relying upon the information contained
herein and therein in making the Loans.
IN WITNESS WHEREOF, the undersigned has caused this Borrowing
Base Certificate to be executed and delivered as of this ____ day of
________________, 199__.
EV INTERNATIONAL, INC.
By:________________________________
Name:
Title:
<PAGE> 317
SCHEDULE
EV INTERNATIONAL, INC.
SUMMARY OF BORROWING BASE RECEIVABLES
as of _____________ ____, 199__
<TABLE>
<CAPTION>
ADVANCE BASE
DESCRIPTION RECEIVABLE RATE RECEIVABLE TOTALS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic
[Debtor Name] $ % $
$ % $__________ $__________
Foreign Syndication
[Debtor Name] $ % $
$ % $__________ $__________
Other
Domestic Syndication:
[Debtor Name] $ % $
$ % $__________ $__________
Foreign Syndication:
[Debtor Name] $ % $
$ % $__________ $__________
TOTAL BORROWING BASE $
==========
</TABLE>
<PAGE> 318
EXHIBIT J TO THE
CREDIT AGREEMENT
[Form of Landlord Waiver]
[UNDERSIGNED's NAME AND ADDRESS]
-----------, ----
VIA OVERNIGHT SERVICE
[LANDLORD NAME]
[LANDLORD ADDRESS]
[ADDRESS OF LEASED PREMISES]
Dear Landlord:
The undersigned, [COMPANY NAME], is the tenant of the
above-described property (the "Property").
We have arranged for financing from a group of banks led by
The Chase Manhattan Bank, as Administrative Agent. These banks have agreed to
make loans to us secured, among other things, by a lien on any furniture,
fixtures, equipment, leasehold improvements and inventory that is now or in the
future may be located at the Property (collectively, the "Personal Property"),
which loans may be modified, refinanced, extended or restructured, from time to
time. The Administrative Agent has asked that we notify you and request that you
agree to the terms of this letter by returning it to us in the enclosed
postage-paid envelope.
By signing this letter you agree that any lien of any kind and
any and all rights, including levy, execution, sale and distraint for unpaid
rents, that you may have or obtain on the Personal Property shall be junior to
the Administrative Agent's lien, and that prior to taking any action to enforce
any lien, you will give the Administrative Agent at least ten (10) business
days' prior notice of your intent to take action at the following address:
<PAGE> 319
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: _______________
Fax: (212) 972-____/0009
Tel: (212) 270-____
If we should default to the banks, you agree that in all circumstances the
Administrative Agent may have access to the Property for the purpose of removing
or selling the Personal Property, provided that the Administrative Agent agrees
to pay you for the reasonable cost of repair of any physical damage to the
Property caused by the Administrative Agent in connection with any removal or
sale.
Because these loans are important for the future of our
company and because the bank group and the Administrative Agent will be relying
on this letter, we would greatly appreciate it if you would sign the enclosed
copy of this letter and return it to me by _________ ___, ____, in the enclosed
envelope. If you have any questions, please feel free to contact ___________ at
(___) ___-____.
Thank you in advance for your cooperation.
Sincerely,
[COMPANY NAME]
By:___________________________
[Name, Title]
Acknowledged and agreed as of the date first above written:
[LANDLORD NAME]
By:________________________________
Name:
Title:
2
<PAGE> 320
EXHIBIT K TO
CREDIT AGREEMENT
FORM OF SWING LINE PARTICIPATION CERTIFICATE
_________ __, 19__
[Name of Lender]
________________________
________________________
Ladies and Gentlemen:
Pursuant to subsection 2.5(d) of the Credit Agreement, dated
as of February __, 1997, among EV International, Inc., a Delaware corporation
formerly named Electro- Voice, Incorporated (the "Borrower"), the several banks
and other financial institutions from time to time parties thereto (the
"Lenders"), and The Chase Manhattan Bank, as administrative agent for the
Lenders, the undersigned hereby acknowledges receipt from you on the date hereof
of DOLLARS ($ ) as payment for a participating interest in the following Swing
Line Loan:
Date of Swing Line Loan:____________________________________
Principal Amount of Swing Line Loan:________________________
Very truly yours,
THE CHASE MANHATTAN BANK,
as Swing Line Lender
By:____________________________
Title:
<PAGE> 321
EXHIBIT L TO
CREDIT AGREEMENT
FORM OF LOCKBOX AGREEMENT
LOCKBOX AGREEMENT, dated as of February __, 1997, among
_______________ (the "Lockbox Bank"), EV International, Inc., a Delaware
corporation formerly named Electro-Voice, Incorporated (the "Borrower") and THE
CHASE MANHATTAN BANK, a New York banking corporation ("Chase"), as
administrative agent (in such capacity, the "Administrative Agent") for the
several banks and other financial institutions (the "Lenders") from time to time
parties to the Credit Agreement, dated as of February 10, 1997, (the "Senior
Secured Credit Agreement"), among the Borrower, the Lenders and the
Administrative Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Senior Secured Credit Agreement, the
Lenders have severally agreed to make extensions of credit to the Borrower upon
the terms and subject to the conditions set forth therein;
WHEREAS, the Borrower has delivered to the Administrative Agent for
the benefit of the Secured Parties a Guarantee and Collateral Agreement, dated
as of February __, 1997 (as amended, supplemented, waived or otherwise modified
from time to time, the "Guarantee and Collateral Agreement"), pursuant to which
the Borrower has granted a security interest in all of its Collateral referred
to therein, including, without limitation, all Accounts of the Borrower; and
WHEREAS, as contemplated by subsection 8.18 of the Senior Secured
Credit Agreement and the Guarantee and Collateral Agreement, the Borrower has
agreed to establish a lockbox and depositary account system (the "Lockbox
System"), and to establish the bank accounts listed on Schedule 1 hereto with
the Lockbox Bank to be maintained by the Borrower in the name of the
Administrative Agent (the "Lockbox Accounts");
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Senior Secured Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower under the Senior Secured Credit Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used herein but not defined herein
shall have the meanings assigned to such terms in the Guarantee and Collateral
Agreement or the Senior Secured Credit Agreement, as the context requires.
<PAGE> 322
2
2. Lockbox Accounts. (a) In order to secure the performance by the
Borrower of the Obligations, this Lockbox Agreement is intended to create a
security interest in, and the Borrower hereby pledges to, and grants and creates
a security interest in favor of, the Administrative Agent for the benefit of the
Secured Parties, all of its right, title and interest in and to the Lockbox
Accounts, and all cash, Cash Equivalents, instruments, investments and other
securities at any time on deposit in the Lockbox Accounts, and all proceeds of
any of the foregoing. All cash, Cash Equivalents, instruments, investments and
securities at any time on deposit in the Lockbox Accounts shall constitute
collateral security for the payment by the Borrower of the Obligations and the
performance and observance by the Borrower of all the covenants and conditions
contained herein with respect to the Lockbox Accounts.
(b) The Lockbox Bank shall be the Administrative Agent's agent for
the purpose of holding and collecting all of the items from time to time on
deposit in the Lockbox Accounts and their proceeds. The Lockbox Accounts shall
be under the sole dominion and control of the Administrative Agent. Neither the
Borrower nor any person or entity claiming by, through or under the Borrower
(except the Administrative Agent), shall have any control over the use of, or
any right to withdraw any amount from, the Lockbox Accounts. The Lockbox Bank
shall be entitled to rely on, and shall act in accordance with, all instructions
given to it by the Administrative Agent with respect to the Lockbox Accounts.
3. Duties of the Lockbox Bank. If instructed by the Borrower or the
Administrative Agent, the Lockbox Bank shall:
(a) Rent one or more post office boxes in the name of the
Administrative Agent relating to the Lockbox Accounts. The Lockbox Bank
shall have exclusive and unrestricted access, and shall collect the mail
delivered, to such post office box or boxes (even though addressed to the
Borrower or the Administrative Agent) on each business day on which the
Lockbox Bank is open in accordance with the Lockbox Bank's regular
collection schedule. The Lockbox Bank shall give the Administrative Agent
and the Borrower notice of the address or addresses of the post office box
or boxes and shall instruct the Administrative Agent and the Borrower how
mail intended for the Lockbox Accounts should be addressed.
(b) Open all mail (even though addressed to the Borrower or the
Administrative Agent) and promptly endorse all items and remittances
received in such post office box or boxes and credit such items and
remittances to the Lockbox Accounts. All such items and remittances shall
be endorsed in substantially the following form:
"Credited without prejudice to Account No.____________. Absence of
Endorsement Guaranteed - '[Name of Bank]'."
(c) Maintain a record of each check, draft, note, bill of exchange,
money order, commercial paper or other security instrument or document
(collectively, the "checks"; individually, a "check"), included in the
Lockbox Accounts, in accordance
<PAGE> 323
3
with its customary procedures for acting as a "lock box" or similar bank.
This record shall be available for inspection by the Administrative Agent
and the Borrower.
.
(d) Checks returned unpaid because of uncollected or insufficient
funds shall be redeposited without advice; checks returned a second time
shall be charged to the appropriate Lockbox Account and mailed under
appropriate advice to the Borrower or, at any time after written notice by
the Administrative Agent of the occurrence and continuance of an Event of
Default, to the Administrative Agent. Undated checks may be dated by the
Lockbox Bank to agree with the postmark date and included in the regular
deposit. Checks incorrectly made out, where the amount specified in
figures and the written amount differ, are to be deposited for the written
amount only, except where the figure amount agrees with the total of the
remittance notice. Checks bearing no signature are to be deposited with
notification to the drawer bank requesting that the signature be obtained.
Third-party checks may be deposited into the appropriate Lockbox Account
if properly endorsed. Checks bearing the legend "Payment in Full" or words
of similar import, either typed or handwritten, shall be withheld from the
clearing system and sent to the Borrower or, at any time after written
notice by the Administrative Agent of the occurrence and continuance of an
Event of Default, to the Administrative Agent.
(e) Apply and credit to the appropriate Lockbox Account all wire
transfers directed to such Lockbox Account even though such wire transfers
may identify such Lockbox Account as an account of the Borrower.
4. Transfer of Funds. (a) On each day on which both a branch office
of the Lockbox Bank at which any Lockbox Account is being maintained and the
office of the Collateral Account Bank in ___________, ______ are open, the
Lockbox Bank shall transfer all funds on deposit in such Lockbox Account (after
such funds become available to the Lockbox Bank, either through the Federal
Reserve System or other clearing mechanism used by the Lockbox Bank) to the
Collateral Proceeds Account referred to in the Guarantee and Collateral
Agreement, maintained at such office of the Collateral Account Bank. Unless
otherwise directed by the Administrative Agent, such funds shall be transferred
by the Lockbox Bank through the Automated Clearing House and shall be identified
as follows:
[Collateral Proceeds For the account of
Account: [EV International, Inc.]
Name,
Account # Account #
and address]
(b) Except as otherwise provided in the Guarantee and Collateral
Agreement, (i) neither the Borrower nor any person or entity claiming by,
through or under the Borrower shall have any control over the use of, or any
right to withdraw from, the Collateral Proceeds Account and its proceeds; (ii)
the Administrative Agent shall hold such funds in the Collateral Proceeds
Account and shall have sole dominion and control over all of
<PAGE> 324
4
the items in the Collateral Proceeds Account and the proceeds thereof; and (iii)
the Administrative Agent shall have sole dominion and control over all interest
earned on the funds on deposit in the Collateral Proceeds Account and the
proceeds thereof, which interest shall be held on deposit in the Collateral
Proceeds Account and shall constitute collateral security for the payment by the
Borrower of the Obligations as described in Section 2(a) hereof.
(c) Notwithstanding the foregoing, the Borrower shall not deposit
any funds into any Lockbox Account or the Collateral Proceeds Account other than
proceeds of Collateral.
5. Indemnity. The Borrower hereby agrees to pay, indemnify and hold
the Lockbox Bank harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including, without limitation,
reasonable legal fees) with respect to the performance of this Lockbox
Agreement, or any procedures agreement among the Lockbox Bank, the
Administrative Agent and the Borrower, by the Lockbox Bank or any of the Lockbox
Bank's directors, officers, agents or employees, unless arising from its or
their own gross negligence or willful misconduct. This Lockbox Agreement shall
not limit any limitation of liability afforded the Lockbox Bank under any
account agreement.
6. Fees and Expenses. The Borrower hereby agrees as follows:
(a) Fees and charges associated with the Lockbox Accounts shall from
time to time be mutually agreed upon by the Borrower and the Lockbox Bank.
(b) Reasonable Lockbox Bank expenses in connection with the
establishment and maintenance of the post office boxes rented pursuant to
this Lockbox Agreement shall also be included on the analysis statement.
7. Limitations on Liability of the Lockbox Bank. The Lockbox Bank
undertakes to perform such duties as are expressly set forth herein and such
other processing requirements as may be covered in any procedures agreement
among the Lockbox Bank, the Administrative Agent and the Borrower.
Notwithstanding any other provision of this Lockbox Agreement, it is agreed by
the parties hereto that the Lockbox Bank shall not be liable for any action
taken by it or any of its directors, officers, agents or employees in accordance
with this Lockbox Agreement except for its or their own gross negligence or
willful misconduct. In no event shall the Lockbox Bank be liable for losses or
delays resulting from force majeure, computer malfunctions, interruption of
communication facilities, labor difficulties or other causes beyond the Lockbox
Bank's reasonable control or for indirect, special or consequential damages.
8. Irrevocable Instructions. The Borrower acknowledges that the
agreements made by it and the authorizations granted in Sections 2, 3 and 4 are
irrevocable unless
<PAGE> 325
5
otherwise agreed to in writing by the Administrative Agent and are powers
coupled with an interest.
9. Account Information. The Lockbox Bank shall provide monthly
statements summarizing the activity of the Lockbox Accounts to the Borrower and,
upon request, to the Administrative Agent. In addition, the Lockbox Bank will
provide to the Administrative Agent and the Borrower copies of all information
reasonably requested by either of them.
10. Waiver of Right of Set-Off. The Lockbox Bank waives, until the
payment in full of the Loans, Reimbursement Obligations and other Obligations
then due and owing, the termination of the Revolving Credit Commitments and the
expiration of, termination of or return to the Issuing Lender of the Letters of
Credit, with respect to all of its existing and future claims against the
Borrower or any Affiliate thereof, all existing and future rights of set-off and
banker's liens against the Lockbox Accounts and all items (and proceeds thereof)
that come into its possession in connection with the Lockbox Accounts other than
as specifically granted under this Lockbox Agreement, provided that the Lockbox
Bank retains the right to charge any Lockbox Account for (i) all items deposited
in such Lockbox Account on or after the date hereof and subsequently returned to
the Lockbox Bank unpaid and (ii) for all past due compensation and expenses with
respect to the Lockbox Accounts as provided in Section 6 hereof.
11. Representations and Warranties. The Lockbox Bank represents and
warrants that:
(a) Only employees of the Lockbox Bank or its affiliates have access
to the post office box or boxes provided for herein.
(b) The Lockbox Accounts are the only accounts that have been or
will be maintained by the Lockbox Bank with respect to receivables of the
Borrower, other than bank accounts permitted to be maintained by
subsection 8.18 of the Senior Secured Credit Agreement.
12. Effectiveness; Integration; Amendments. This Lockbox Agreement
shall be effective as of the date first above written, and the Lockbox Bank
shall be in a position to process remittances as of that date. To the extent
that other agreements are inconsistent with this Lockbox Agreement, this Lockbox
Agreement shall supersede any other agreement relating to the matters referred
to herein, including any procedures agreement and any other agreement between
the Borrower and the Lockbox Bank relating to the collection of receivables of
the Borrower or its predecessors. Neither this Lockbox Agreement nor any
provisions hereof may be changed, amended, modified or waived orally, but only
by an instrument in writing signed by the parties hereto. Any provision of this
Lockbox Agreement which may prove unenforceable under any law or regulation
shall not affect the validity of any other provisions hereof.
<PAGE> 326
6
13. Termination. (a) This Lockbox Agreement shall automatically
terminate on the date of the payment in full of the Loans, Reimbursement
Obligations and other Obligations then due and owing, the termination of the
Revolving Credit Commitments and the expiration of, termination or return to the
Issuing Lender of the Letters of Credit. The Lockbox Bank shall be entitled to
rely on a certificate of the Administrative Agent to such effect. Upon such
termination, all amounts on deposit in any Lockbox Account shall be forwarded by
the Lockbox Bank by wire transfer of immediately available funds to an account
specified in writing by the Borrower.
(b) This Lockbox Agreement may be terminated by the Borrower (with
the consent of the Administrative Agent) or any other party hereto upon 60 days'
advance written notice to the other parties hereto.
(c) All rights of the Lockbox Bank under Sections 5, 6 and 7 hereof
shall survive termination of this Lockbox Agreement.
14. Notices. All notices, requests or other communications given to
the Borrower, the Administrative Agent or the Lockbox Bank shall be given in
writing (including facsimile transmission or similar writing) at the address or
facsimile number specified below:
Administrative Agent: The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: [ ]
Telecopy: (212) [ ]
Lockbox Bank: [Name of Bank]
[Address]
Attention:
Telecopy:
The Borrower: EV International, Inc.
602 Cecil Street
Buchanan, MI 49107
Attention: [ ]
Telecopy: (616) 695-4707
with a copy to: Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: David Brittenham
Telecopy: (212) 909-6836
<PAGE> 327
7
Any party may change its address or facsimile number for notices hereunder by
notice to each other party hereunder. All notices, requests and demands to or
upon the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered by hand, or three days
after being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when sent, confirmation of receipt received, provided that any notice,
request or demand to or upon the Administrative Agent or the other Secured
Parties shall not be effective until received.
15. Bankruptcy of the Borrower. In the event that a bankruptcy case
or receivership proceeding is commenced by or against the Borrower, the
Administrative Agent may pay the fees and charges of the Lockbox Bank payable by
the Borrower under this Lockbox Agreement from the date of commencement of such
case or proceeding until the earlier of the date of termination of this Lockbox
Agreement or the date of dismissal or termination of such case or proceeding to
the extent that such fees and charges are not being paid by the Borrower.
16. Relationship of the Parties. The relationship between the
Lockbox Bank and the Administrative Agent, as agent for the Secured Parties, is
and shall be construed to constitute the Lockbox Bank as an agent for the
benefit of the Administrative Agent and the other Secured Parties. The Lockbox
Bank agrees, for the benefit of the Administrative Agent and the other Secured
Parties, to act as custodian and bailee of the Administrative Agent and the
other Secured Parties in holding moneys and collections received pursuant hereto
pending their application in accordance herewith and acknowledges that such
moneys and collections are subject to the security interest granted to the
Administrative Agent by the Borrower under the Guarantee and Collateral
Agreement. It is intended that, by the Lockbox Bank's agreement pursuant to this
Section 16, the Administrative Agent, as secured party, shall be deemed to have
possession of such moneys and collections for purposes of Section 9-305 of the
Uniform Commercial Code of the State of New York.
17. GOVERNING LAW. EXCEPT TO THE EXTENT THAT THE
LAWS OF THE STATE IN WHICH THE LOCKBOX BANK IS LOCATED GOVERN THE LOCKBOX
ACCOUNT, THIS LOCKBOX AGREEMENT SHALL BE GOVERNED BY, AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS THEREOF.
18. Counterparts. This Lockbox Agreement may be executed in any
number of counterparts which together shall constitute one and the same
instrument.
<PAGE> 328
8
IN WITNESS WHEREOF, each of the parties hereto has caused this
Lockbox Agreement to be executed and delivered by its duly authorized officer as
of the date first set forth above.
[NAME OF BANK],
as Lockbox Bank
By:____________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:____________________________
Name:
Title:
EV INTERNATIONAL, INC.
By:________________________________
Name:
Title:
<PAGE> 329
SCHEDULE 1 to the
Lockbox Agreement
LOCKBOX ACCOUNTS
<PAGE> 1
Exhibit 4(e)
================================================================================
GUARANTEE AND COLLATERAL AGREEMENT
made by
EV INTERNATIONAL, INC.
and its parent
EVI AUDIO HOLDING, INC.
in favor of
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of February 10, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINED TERMS....................................................................................... 2
1.1 Definitions....................................................................................... 2
1.2 Other Definitional Provisions..................................................................... 8
SECTION 2. GUARANTEE........................................................................................... 8
2.1 Guarantee......................................................................................... 8
2.2 Right of Contribution............................................................................. 9
2.3 No Subrogation.................................................................................... 9
2.4 Amendments, etc. with respect to the Borrower Obligations......................................... 10
2.5 Guarantee Absolute and Unconditional.............................................................. 10
2.6 Reinstatement..................................................................................... 11
2.7 Payments.......................................................................................... 12
SECTION 3. GRANT OF SECURITY INTEREST.......................................................................... 12
SECTION 4. REPRESENTATIONS AND WARRANTIES...................................................................... 13
4.1 Representations and Warranties of Each Guarantor................................................ 13
4.2 Representations and Warranties of Each Grantor.................................................. 13
4.2.1 Title; No Other Liens........................................................................... 13
4.2.2 Perfected First Priority Liens.................................................................. 14
4.2.3 Chief Executive Office.......................................................................... 15
4.2.4 Inventory and Equipment......................................................................... 15
4.2.5 Farm Products................................................................................... 15
4.2.6 Accounts........................................................................................ 15
4.2.7 Intellectual Property........................................................................... 15
4.3 Representations and Warranties of Each Pledgor.................................................. 15
SECTION 5. COVENANTS........................................................................................... 16
5.1 Covenants of Each Guarantor..................................................................... 16
5.2 Covenants of Each Grantor....................................................................... 16
5.2.1 Delivery of Instruments and Chattel Paper....................................................... 17
5.2.2 Maintenance of Insurance........................................................................ 17
5.2.3 Payment of Obligations.......................................................................... 17
5.2.4 Maintenance of Perfected Security Interest; Further Documentation............................... 17
5.2.5 Changes in Locations, Name, etc................................................................. 18
5.2.6 Notices......................................................................................... 18
5.2.7 Pledged Securities.............................................................................. 19
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
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<S> <C>
5.2.8 Accounts....................................................................................... 19
5.2.9 Maintenance of Records......................................................................... 19
5.2.10 Acquisition of Intellectual Property........................................................... 19
5.2.11 Protection of Trade Secrets.................................................................... 20
5.3 Covenants of Each Pledgor...................................................................... 20
5.4 Covenants of Holdings.......................................................................... 21
SECTION 6. REMEDIAL PROVISIONS................................................................................. 22
6.1 Certain Matters Relating to Accounts.............................................................. 22
6.2 Communications with Obligors; Grantors Remain Liable.............................................. 25
6.3 Pledged Stock..................................................................................... 25
6.4 Proceeds to be Turned Over To Administrative Agent................................................ 26
6.5 Application of Proceeds........................................................................... 27
6.6 Code and Other Remedies........................................................................... 27
6.7 Registration Rights............................................................................... 28
6.8 Waiver; Deficiency................................................................................ 29
SECTION 7. THE ADMINISTRATIVE AGENT............................................................................ 29
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc....................................... 29
7.2 Duty of Administrative Agent...................................................................... 31
7.3 Execution of Financing Statements................................................................. 32
7.4 Authority of Administrative Agent................................................................. 32
7.5 Right Of Inspection............................................................................... 32
SECTION 8. MISCELLANEOUS....................................................................................... 33
8.1 Amendments in Writing............................................................................. 33
8.2 Notices........................................................................................... 33
8.3 No Waiver by Course of Conduct; Cumulative Remedies............................................... 33
8.4 Enforcement Expenses; Indemnification............................................................. 33
8.5 Successors and Assigns............................................................................ 34
8.6 Set-Off........................................................................................... 34
8.7 Counterparts...................................................................................... 34
8.8 Severability...................................................................................... 34
8.9 Section Headings.................................................................................. 35
8.10 Integration....................................................................................... 35
8.11 GOVERNING LAW..................................................................................... 35
8.12 Submission To Jurisdiction; Waivers............................................................... 35
8.13 Acknowledgements.................................................................................. 36
8.14 WAIVER OF JURY TRIAL.............................................................................. 36
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.15 Additional Granting Parties...................................................................... 36
8.16 Releases......................................................................................... 36
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
SCHEDULES
1 Notice Addresses of Guarantors
2 Description of Pledged Securities
3 Location of Jurisdiction of Organization and Chief Executive Office or Sole Place of
Business
4 Location of Inventory and Equipment
5 Copyrights and Copyright Licenses; Patents and Patent Licenses; Trademarks and
Trademark Licenses
6 Existing Prior Liens
7 Accounts
8 Contracts
ANNEXES
1 Assumption Agreement
</TABLE>
iv
<PAGE> 6
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of February 10,
1997, made by EVI Audio Holding, Inc. a Delaware corporation formerly named
Gulton Holding Corp. ("Holdings"), EV International, Inc., a Delaware
corporation formerly named Electro-Voice, Incorporated (the "Borrower") and
successor by merger to the Merged Companies referred to below (Holdings and the
Borrower, together with any other Subsidiary of the Borrower that becomes a
party hereto from time to time after the date hereof, the ("Granting Parties"),
in favor of The Chase Manhattan Bank, as administrative agent (in such capacity,
the "Administrative Agent") for the banks and other financial institutions (the
"Lenders") from time to time parties to the Credit Agreement, dated as of
February 10, 1997 (as amended, waived, supplemented or otherwise modified from
time to time, the "Senior Secured Credit Agreement"), among the Borrower (as
successor by merger to Gulton Acquisition Corp.), the Lenders and the
Administrative Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Senior Secured Credit Agreement, the
Lenders have severally agreed to make extensions of credit to the Borrower upon
the terms and subject to the conditions set forth therein;
WHEREAS, on the date hereof, the following transactions have
occurred or are occurring:
(i) Holdings through its subsidiary Gulton Acquisition Corp.,
a Delaware corporation ("Acquisition Co."), is acquiring the capital
stock of Gulton Industries, Inc., a Delaware corporation ("GII"), the
parent of each of LFE Corporation, Mark IV Audio, Inc. and Mark IV
Audio Magnetic, Inc., each a Delaware corporation (together with
Acquisition Co. and GII, the "Merged Companies"), and the parent of the
Borrower,
(ii) Acquisition Co. is merging with and into GII, with GII
surviving, and GII and the other Merged Companies are merging with and
into the Borrower, with the Borrower surviving and being renamed EV
International, Inc., and succeeding by operation of such mergers to all
the rights and obligations of Acquisition Co. under the Senior Secured
Credit Agreement and becoming the Borrower thereunder, and
(iii) the Borrower is contributing, assigning and transferring
to its wholly owned subsidiary EVI Audio International Holding
Corporation, Inc., a Delaware corporation ("EVI Audio"), all of the
capital stock of the Borrower's other subsidiaries held by the Borrower
on the date hereof, other than the Excluded Foreign Subsidiary Stock
(as defined herein);
<PAGE> 7
2
WHEREAS, the Borrower is a member of an affiliated group of
companies that includes or will include each other Granting Party;
WHEREAS, the proceeds of the extensions of credit will be used
in part to enable the Borrower to make valuable transfers to one or more of the
other Granting Party in connection with the operation of their respective
businesses;
WHEREAS, the Borrower and the other Granting Parties are
engaged in related businesses, and each such Granting Party will derive
substantial direct and indirect benefit from the making of the extensions of
credit under the Senior Secured Credit Agreement; and
WHEREAS, it is a condition to the obligation of the Lenders to
make their respective extensions of credit to the Borrower under the Senior
Secured Credit Agreement that the Granting Parties shall execute and deliver
this Agreement to the Administrative Agent for the benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Senior Secured Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Granting Party hereby agrees with the
Administrative Agent, for the ratable benefit of the Secured Parties, as
follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Senior Secured Credit Agreement and used herein shall have the
meanings given to them in the Senior Secured Credit Agreement, and the following
terms which are defined in the Code (as defined below) are used herein as so
defined: Chattel Paper, Documents, Equipment, Farm Products, Fixtures,
Instruments and Inventory.
(b) The following terms shall have the following meanings:
"Accounts": all accounts (as defined in the Code) of the
Borrower, including, without limitation all Accounts (as defined in the
Senior Secured Credit Agreement) of the Borrower.
"Agreement": this Guarantee and Collateral Agreement, as the
same may be amended, supplemented or otherwise modified from time to
time.
"Borrower Obligations": the collective reference to the unpaid
principal of and interest on the Loans and Reimbursement Obligations
and all other obligations and liabilities of the Borrower (including,
without limitation, interest accruing at the then applicable rate
provided in the Senior Secured Credit Agreement after the maturity of
the Loans and Reimbursement Obligations and interest accruing at the
then applicable
<PAGE> 8
3
rate provided in the Senior Secured Credit Agreement after the filing
of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or
not a claim for post-filing or post-petition interest is allowed in
such proceeding) to the Administrative Agent or any Lender (or, in the
case of any Hedge Agreement referred to below, any Affiliate of any
Lender), whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Senior Secured Credit
Agreement, this Agreement, the other Loan Documents and any Letter of
Credit or any Hedge Agreement entered into by the Borrower with any
Lender (or, in the case of any Hedge Agreement, any Affiliate of any
Lender) or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required
to be paid by the Borrower pursuant to the terms of any of the
foregoing agreements).
"Code": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Collateral": as defined in Section 3.
"Collateral Account Bank": The Chase Manhattan Bank or another
bank which at all times is a Lender as selected by the Borrower and
notified to the Administrative Agent in writing promptly following such
selection.
"Collateral Proceeds Account": the cash collateral account
established by the relevant Grantor at an office of the Collateral
Account Bank in the name of the Administrative Agent.
"Commitments": the collective reference to the Revolving
Credit Commitments, the Swing Line Commitment, the Term Loan
Commitments and the L/C Commitment; individually, a "Commitment".
"Contracts" with respect to any Grantor, all contracts,
agreements, instruments and indentures in any form, and portions
thereof (except for the contracts listed on Schedule 8), to which such
Grantor is a party or under which such Grantor has any right, title or
interest or to which such Grantor or any property of such Grantor is
subject, as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (i) all rights of
such Grantor to receive moneys due and to become due to it thereunder
or in connection therewith, (ii) all rights of such Grantor to damages
arising thereunder and (iii) all rights of such Grantor to perform and
to exercise all remedies thereunder.
<PAGE> 9
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"Copyright Licenses": with respect to any Grantor, all United
States written license agreements of such Grantor providing for the
grant by or to such Grantor of any right to use any Copyright of such
Grantor, other than intercompany agreements, including, without
limitation, any license agreements listed on Schedule 5 hereto subject,
in each case, to the terms of such license agreements, and the right to
prepare for sale, sell and advertise for sale, all Inventory now or
hereafter covered by such licenses.
"Copyrights": with respect to any Grantor, all of such
Grantor's right, title and interest in and to all United States
copyrights, whether or not the underlying works of authorship have been
published or registered, United States copyright registrations and
copyright applications, and (a) all renewals thereof, (b) all income,
royalties, damages and payments now and hereafter due and/or payable
with respect thereto, including, without limitation, payments under all
licenses entered into in connection therewith, and damages and payments
for past or future infringements thereof and (c) the right to sue or
otherwise recover for past, present and future infringements and
misappropriations thereof.
"Default": a "Default" as defined in the Senior Secured Credit
Agreement.
"Event of Default": an "Event of Default" as defined in the
Senior Secured Credit Agreement.
"Excluded Foreign Subsidiary Stock": one share of EVI Audio
GmbH, a German company; three shares of Mark IV Audio (Europe) AG, a
Swiss company; seven shares of Mark IV France S.A., a French company;
seven shares of Dynacord France S.A., a French company; one share of
Mark IV (Hong Kong) Limited, a Hong Kong company; and one share of
Audio Consultants Co., Limited, a Hong Kong company.
"General Fund Account": the general fund account of the
relevant Grantor established at the same office of the Collateral
Account Bank as the Collateral Proceeds Account.
"General Intangibles": all "general intangibles" as such term
is defined in Section 9-106 of the Uniform Commercial Code in effect in
the State of New York on the date hereof.
"Granting Parties": as defined in the initial paragraph
hereof.
"Grantor": the Borrower and each Domestic Subsidiary of the
Borrower that from time to time becomes a party hereto.
<PAGE> 10
5
"Guarantor Obligations": with respect to any Guarantor, the
collective reference to (i) the Borrower Obligations and (ii) all
obligations and liabilities of such Guarantor which may arise under or
in connection with this Agreement or any other Loan Document to which
such Guarantor is a party, in each case whether on account of guarantee
obligations, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Administrative Agent or to the Lenders
that are required to be paid by such Guarantor pursuant to the terms of
this Agreement or any other Loan Document).
"Guarantors": the collective reference to each Granting Party
other than the Borrower.
"Hedge Agreements": as to any Grantor, all interest rate
swaps, caps or collar agreements or similar arrangements entered into
by such Person providing for protection against fluctuations in
interest rates or currency exchange rates or the exchange of nominal
interest obligations, either generally or under specific contingencies,
including, without limitation, all Interest Rate Protection Agreements
and Permitted Hedging Arrangements with respect to currency exchange
rates.
"Intellectual Property": with respect to any Grantor, the
collective reference to such Grantor's Copyrights, Copyright Licenses,
Patents, Patent Licenses, Trade Secrets, Trademarks and Trademark
Licenses.
"Intercompany Note": with respect to any Grantor, any
promissory note evidencing loans made by such Grantor to the Borrower
or any of its Subsidiaries.
"Issuers": the collective reference to the Persons identified
on Schedule 2 as the issuers of the Pledged Stock.
"Inventory": with respect to any Grantor, all inventory (as
defined in the Code) of such Grantor, including, without limitation,
all Inventory (as defined in the Senior Secured Credit Agreement) of
the Borrower.
"Loan Documents": the collective reference to the "Loan
Documents" as defined in the Senior Secured Credit Agreement.
"Loans": the collective reference to the "Loans" as defined in
the Senior Secured Credit Agreement.
"Lockbox System": the system, if any, of lockboxes and related
deposit accounts established and maintained pursuant to Section 6.1(d)
of this Agreement.
"Notes": the collective reference to the "Notes" as defined in
the Senior Secured Credit Agreement.
<PAGE> 11
6
"Obligations": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"Patent Licenses": with respect to any Grantor, all United
States written license agreements of such Grantor with any Person who
is not an Affiliate or a Subsidiary in connection with any of the
Patents of such Grantor or such other Person's patents, whether such
Grantor is a licensor or a licensee under any such agreement,
including, without limitation, the license agreements listed on
Schedule 5, subject, in each case, to the terms of such license
agreements, and the right to prepare for sale, sell and advertise for
sale, all Inventory now or hereafter covered by such licenses.
"Patents": with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States patents, patent
applications and patentable inventions and all reissues and extensions
thereof, including, without limitation, all patents and patent
applications identified in Schedule 5, and including, without
limitation, (a) all inventions and improvements described and claimed
therein, and patentable inventions, (b) the right to sue or otherwise
recover for any and all past, present and future infringements and
misappropriations thereof, (c) all income, royalties, damages and other
payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all licenses entered
into in connection therewith, and damages and payments for past or
future infringements thereof), and (d) all other rights corresponding
thereto in the United States and all reissues, divisions,
continuations, continuations-in-part, substitutes, renewals, and
extensions thereof, all improvements thereon, and all other rights of
any kind whatsoever of such Grantor accruing thereunder or pertaining
thereto.
"Pledged Collateral": as defined in Section 3.
"Pledged Notes": with respect to any Pledgor, all Intercompany
Notes at any time issued to such Pledgor and all other promissory notes
issued to or held by such Pledgor (other than promissory notes issued
in connection with extensions of trade credit by any Pledgor in the
ordinary course of business).
"Pledged Securities": the collective reference to the Pledged
Notes and the Pledged Stock.
"Pledged Stock": with respect to any Pledgor, the shares of
Capital Stock listed on Schedule 2 as held by such Pledgor, together
with any other shares, stock certificates, options or rights of any
nature whatsoever in respect of the Capital Stock of any Issuer that
may be issued or granted to, or held by, such Pledgor while this
Agreement is in effect (provided that in no event shall there be
pledged, nor shall any Pledgor be required to pledge, directly or
indirectly, (x) more than 65% of any series of the outstanding Capital
Stock of any Foreign Subsidiary pursuant to this Agreement) or (y) any
Excluded Foreign Subsidiary Stock).
<PAGE> 12
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"Pledgor": Holdings (with respect to Pledged Stock of the
Borrower), the Borrower (with respect to Pledged Stock of EVI Audio and
any other Subsidiary of the Borrower and any other Pledged Securities
held by the Borrower) and any other Granting Party (with respect to
Pledged Securities held by such Granting Party).
"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New
York on the date hereof and, in any event, Proceeds of Pledged
Securities shall include, without limitation, all dividends or other
income from the Pledged Securities, collections thereon or
distributions or payments with respect thereto.
"Revolving Credit Commitments": the collective reference to
the "Revolving Credit Commitments" as defined in the Senior Secured
Credit Agreement.
"Secured Parties": the collective reference to the
Administrative Agent, the Lenders (including, without limitation the
Issuing Lender and the Swing Line Lender) and any Affiliate of any
Lender which has entered into any Interest Rate Protection Agreement or
Permitted Hedging Arrangement with the Borrower or any of its
Subsidiaries, and their respective successors and assigns.
"Securities Act": the Securities Act of 1933, as amended from
time to time.
"Security Collateral": as defined in Section 3.
"Trade Secrets": with respect to any Grantor, all of such
Grantor's right, title and interest in and to all United States trade
secrets, including, without limitation, know-how, processes, formulae,
compositions, designs, and confidential business and technical
information, and all rights of any kind whatsoever accruing thereunder
or pertaining thereto, including, without limitation, (a) all income,
royalties, damages and payments now and hereafter due and/or payable
with respect thereto, including, without limitation, payments under all
licenses, non-disclosure agreements and memoranda of understanding
entered into in connection therewith, and damages and payments for past
or future misappropriations thereof, and (b) the right to sue or
otherwise recover for past, present or future misappropriations
thereof.
"Trademark Licenses": with respect to any Grantor, all United
States written license agreements of such Grantor with any Person who
is not an Affiliate or a Subsidiary in connection with any of the
Trademarks of such Grantor or such other Person's names or trademarks,
whether such Grantor is a licensor or a licensee under any such
agreement, including, without limitation, the license agreements listed
on Schedule 5, subject, in each case, to the terms of such license
agreements, and the right to prepare for sale, sell and advertise for
sale, all Inventory now or hereafter covered by such licenses.
<PAGE> 13
8
"Trademarks": with respect to any Grantor, all of such
Grantor's right, title and interest in and to all United States
trademarks, service marks, trade names, trade dress or other indicia of
trade origin or business identifiers, trademark and service mark
registrations, and applications for trademark or service mark
registrations (except for "intent to use" applications for trademark or
service mark registrations filed pursuant to Section 1(b) of the Lanham
Act, 15 U.S.C. Section 1051, unless and until an Amendment to Allege
Use or a Statement of Use under Sections 1(c) and 1(d) of said Act has
been filed), and any renewals thereof, including, without limitation,
each registration and application identified in Schedule 5, and
including, without limitation, (a) the right to sue or otherwise
recover for any and all past, present and future infringements and
misappropriations thereof, (b) all income, royalties, damages and other
payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all licenses entered
into in connection therewith, and damages and payments for past or
future infringements thereof), and (c) all other rights corresponding
thereto in the United States and all other rights of any kind
whatsoever of such Grantor accruing thereunder or pertaining thereto,
together in each case with the goodwill of the business connected with
the use of, and symbolized by, each such trademark, service mark, trade
name, trade dress or other indicia of trade origin or business
identifiers.
"Vehicles": all cars, trucks, trailers, construction and earth
moving equipment and other vehicles covered by a certificate of title
law of any state and all tires and other appurtenances to any of the
foregoing.
1.2 Other Definitional Provisions. (a) The words "hereof,"
"herein", "hereto" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Section , Schedule and Annex references are to
this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the
Collateral, Pledged Collateral or Security Collateral, or any part thereof, when
used in relation to a Granting Party shall refer to such Granting Party's
Collateral, Pledged Collateral or Security Collateral or the relevant part
thereof.
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Secured Parties and their respective
successors, indorsees, transferees and assigns, the
<PAGE> 14
9
prompt and complete payment and performance by the Borrower when due and payable
(whether at the stated maturity, by acceleration or otherwise) of the Borrower
Obligations.
(b) Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of each Guarantor hereunder and
under the other Loan Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor under applicable law, including applicable federal
and state laws relating to the insolvency of debtors.
(c) Each Guarantor agrees that the Borrower Obligations may at
any time and from time to time exceed the amount of the liability of such
Guarantor hereunder without impairing the guarantee contained in this Section 2
or affecting the rights and remedies of the Administrative Agent or any other
Secured Party hereunder.
(d) The guarantee contained in this Section 2 shall remain in
full force and effect until the earlier to occur of (i) the first date on which
all the Loans, any Reimbursement Obligations, all other Borrower Obligations
then due and owing, and the obligations of each Guarantor under the guarantee
contained in this Section 2 then due and owing shall have been satisfied by
payment in full, no Letter of Credit shall be outstanding and the Commitments
shall be terminated, notwithstanding that from time to time during the term of
the Senior Secured Credit Agreement the Borrower may be free from any Borrower
Obligations or (ii) as to any Guarantor, the sale or other disposition of all of
the Capital Stock of such Guarantor permitted under the Senior Secured Credit
Agreement.
(e) No payment made by the Borrower, any of the Guarantors,
any other guarantor or any other Person or received or collected by the
Administrative Agent or any other Secured Party from the Borrower, any of the
Guarantors, any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time or from
time to time in reduction of or in payment of the Borrower Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability of any
Guarantor hereunder which shall, notwithstanding any such payment (other than
any payment made by such Guarantor in respect of the Borrower Obligations or any
payment received or collected from such Guarantor in respect of the Borrower
Obligations), remain liable for the Borrower Obligations up to the maximum
liability of such Guarantor hereunder until the earlier to occur of (i) the
first date on which the Loans, any Reimbursement Obligations, and all other
Borrower Obligations then due and owing, are paid in full, no Letter of Credit
shall be outstanding and the Commitments are terminated or (ii) the sale or
other disposition of all of the Capital Stock of such Guarantor permitted under
the Senior Secured Credit Agreement.
2.2 Right of Contribution. Each Guarantor hereby agrees that
to the extent that a Guarantor shall have paid more than its proportionate share
of any payment made hereunder, such Guarantor shall be entitled to seek and
receive contribution from and against any other Guarantor hereunder which has
not paid its proportionate share of such payment. Each Guarantor's right of
contribution shall be subject to the terms and conditions of Section 2.3.
<PAGE> 15
10
The provisions of this Section 2.2 shall in no respect limit the obligations and
liabilities of any Guarantor to the Administrative Agent and the other Secured
Parties, and each Guarantor shall remain liable to the Administrative Agent and
the Lenders for the full amount guaranteed by such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Administrative Agent or any other Secured Party, no Guarantor shall be
entitled to be subrogated to any of the rights of the Administrative Agent or
any other Secured Party against the Borrower or any other Guarantor or any
collateral security or guarantee or right of offset held by the Administrative
Agent or any other Secured Party for the payment of the Borrower Obligations,
nor shall any Guarantor seek or be entitled to seek any contribution or
reimbursement from the Borrower or any other Guarantor in respect of payments
made by such Guarantor hereunder, until all amounts owing to the Administrative
Agent and the other Secured Parties by the Borrower on account of the Borrower
Obligations are paid in full, no Letter of Credit shall be outstanding and the
Commitments are terminated. If any amount shall be paid to any Guarantor on
account of such subrogation rights at any time when all of the Borrower
Obligations shall not have been paid in full, such amount shall be held by such
Guarantor in trust for the Administrative Agent and the other Secured Parties,
segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor, be turned over to the Administrative Agent in the exact form
received by such Guarantor (duly indorsed by such Guarantor to the
Administrative Agent, if required), to be applied against the Borrower
Obligations, whether matured or unmatured, in such order as the Administrative
Agent may determine.
2.4 Amendments, etc. with respect to the Borrower Obligations.
To the maximum extent permitted by law, each Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against any
Guarantor and without notice to or further assent by any Guarantor, any demand
for payment of any of the Borrower Obligations made by the Administrative Agent
or any other Secured Party may be rescinded by the Administrative Agent or such
other Secured Party and any of the Borrower Obligations continued, and the
Borrower Obligations, or the liability of any other Person upon or for any part
thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Administrative Agent or any other Secured Party, and the Senior
Secured Credit Agreement and the other Loan Documents and any other documents
executed and delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the Administrative Agent (or
the Required Lenders, as the case may be) may deem advisable from time to time,
and any collateral security, guarantee or right of offset at any time held by
the Administrative Agent or any other Secured Party for the payment of the
Borrower Obligations may be sold, exchanged, waived, surrendered or released.
Neither the Administrative Agent nor any other Secured Party shall have any
obligation to protect, secure, perfect or insure any Lien at any
<PAGE> 16
11
time held by it as security for the Borrower Obligations or for the guarantee
contained in this Section 2 or any property subject thereto, except to the
extent required by applicable law.
2.5 Guarantee Absolute and Unconditional. Each Guarantor
waives, to the maximum extent permitted by applicable law, any and all notice of
the creation, renewal, extension or accrual of any of the Borrower Obligations
and notice of or proof of reliance by the Administrative Agent or any other
Secured Party upon the guarantee contained in this Section 2 or acceptance of
the guarantee contained in this Section 2; the Borrower Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon the guarantee
contained in this Section 2; and all dealings between the Borrower and any of
the Guarantors, on the one hand, and the Administrative Agent and the other
Secured Parties, on the other hand, likewise shall be conclusively presumed to
have been had or consummated in reliance upon the guarantee contained in this
Section 2. Each Guarantor waives, to the maximum extent permitted by applicable
law, diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon the Borrower or any of the other Guarantors with
respect to the Borrower Obligations. Each Guarantor understands and agrees, to
the extent permitted by law, that the guarantee contained in this Section 2
shall be construed as a continuing, absolute and unconditional guarantee of
payment. Each Guarantor hereby waives, to the maximum extent permitted by
applicable law, any and all defenses that it may have arising out of or in
connection with any and all of the following: (a) the validity or enforceability
of the Senior Secured Credit Agreement or any other Loan Document, any of the
Borrower Obligations or any other collateral security therefor or guarantee or
right of offset with respect thereto at any time or from time to time held by
the Administrative Agent or any other Secured Party, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by the Borrower against the Administrative
Agent or any other Secured Party, (c) any change in the time, place, manner or
place of payment, amendment, or waiver or increase in the Obligations, (d) any
exchange, taking, or release of Collateral, (e) any change in the corporate
structure or existence of the Borrower, (f) any application of Collateral to
Obligations or (g) any other circumstance whatsoever (with or without notice to
or knowledge of the Borrower or such Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Borrower for the
Borrower Obligations, or of such Guarantor under the guarantee contained in this
Section 2, in bankruptcy or in any other instance. When making any demand
hereunder or otherwise pursuing its rights and remedies hereunder against any
Guarantor, the Administrative Agent or any other Secured Party may, but shall be
under no obligation to, make a similar demand on or otherwise pursue such rights
and remedies as it may have against the Borrower, any other Guarantor or any
other Person or against any collateral security or guarantee for the Borrower
Obligations or any right of offset with respect thereto, and any failure by the
Administrative Agent or any other Secured Party to make any such demand, to
pursue such other rights or remedies or to collect any payments from the
Borrower, any other Guarantor or any other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or any
release of the Borrower, any other Guarantor or any other Person or any such
collateral security, guarantee or right of offset, shall not relieve any
Guarantor of any
<PAGE> 17
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obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the
Administrative Agent or any other Secured Party against any Guarantor. For the
purposes hereof "demand" shall include the commencement and continuance of any
legal proceedings.
2.6 Reinstatement. The guarantee contained in this Section 2
shall continue to be effective, or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any of the Borrower Obligations is
rescinded or must otherwise be restored or returned by the Administrative Agent
or any other Secured Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrower or any Guarantor, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Borrower or any Guarantor or any substantial
part of its property, or otherwise, all as though such payments had not been
made.
2.7 Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the office of the Administrative Agent located at 270
Park Avenue, New York, New York 10017.
SECTION 3. GRANT OF SECURITY INTEREST
Each Granting Party (1) that is a Grantor hereby grants to the
Administrative Agent, for the ratable benefit of the Secured Parties, a security
interest in all of the following property now owned or at any time hereafter
acquired by such Grantor or in which such Grantor now has or at any time in the
future may acquire any right, title or interest (collectively, the
"Collateral"), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations of such Grantor:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Documents;
(e) all Equipment (other than Vehicles);
(f) all General Intangibles;
(g) all Instruments;
(h) all Intellectual Property;
(i) all Inventory;
(j) all books and records pertaining to any of the foregoing;
<PAGE> 18
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(k) the Collateral Proceeds Account; and
(l) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing and all collateral security
and guarantees given by any Person with respect to any of the
foregoing;
and (2) that is a Pledgor hereby grants to the Administrative Agent, for the
ratable benefit of the Secured Parties, a security interest in all of the
Pledged Securities now owned or at any time hereafter acquired by such Pledgor,
and any Proceeds thereof (the "Pledged Collateral"), as collateral security for
the prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations of such Pledgor (the
Collateral (if any) and the Pledged Collateral (if any) of each Granting Party
being collectively referred to herein as such Granting Party's "Security
Collateral");
provided however, that (x) Collateral shall not include any Pledged Collateral,
or any property or assets specifically excluded from Pledged Collateral
(including any Excluded Foreign Subsidiary Stock, and any Capital Stock of any
Foreign Subsidiary in excess of 65% of any series of such stock); and (y) in the
case of any Instruments, Contracts, Chattel Paper, General Intangibles,
Copyright Licenses, Patent Licenses, Trademark Licenses or other contracts or
agreements with or issued by Persons (other than a Subsidiary of the Borrower)
that would otherwise be included in the Security Collateral, no security
interest in the right, title and interest of any Granting Party thereunder or
therein will be granted pursuant to this Section 2 (and such Instruments,
Contracts, Chattel Paper, General Intangibles, Copyright Licenses, Patent
Licenses, Trademark Licenses or other contracts or agreements shall not be
deemed to constitute a part of the Security Collateral) for so long as, and to
the extent that, the granting of a security interest in the right, title and
interest of such Grantor thereunder or therein pursuant to the terms hereof
would result in a breach, default or termination of such Instruments, Contracts,
Chattel Paper, General Intangibles, Copyright Licenses, Patent Licenses,
Trademark Licenses or other contracts or agreements and (z) in the case of the
Equipment that would otherwise be included in the foregoing Collateral, the
foregoing will not be deemed to grant a security interest therein under this
Agreement (and such Equipment shall not be deemed to constitute a part of the
Collateral) if such Equipment is subject to a Lien permitted by subsection
8.3(h) of the Senior Secured Credit Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Each Guarantor. To
induce the Administrative Agent and the Lenders to enter into the Senior Secured
Credit Agreement and to induce the Lenders to make their respective extensions
of credit to the Borrower thereunder, each Guarantor hereby represents and
warrants to the Administrative Agent and each other Secured Party that the
representations and warranties set forth in Section 5 of the Senior Secured
Credit Agreement as they relate to such Guarantor or to the Loan Documents to
which such Guarantor is a party or to the Transaction Documents to which such
Guarantor is a party,
<PAGE> 19
14
each of which representations and warranties is hereby incorporated herein by
reference, are true and correct in all material respects, and the Administrative
Agent and each other Secured Party shall be entitled to rely on each of such
representations and warranties as if fully set forth herein; provided that each
reference in each such representation and warranty to the Borrower's knowledge
shall, for the purposes of this Section 4.1, be deemed to be a reference to such
Guarantor's knowledge.
4.2 Representations and Warranties of Each Grantor. To induce
the Administrative Agent and the Lenders to enter into the Senior Secured Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Grantor hereby represents and warrants
to the Administrative Agent and each other Secured Party that:
4.2.1 Title; No Other Liens. Except for the security interest
granted to the Administrative Agent, for the ratable benefit of the Secured
Parties, pursuant to this
<PAGE> 20
15
Agreement and the other Liens permitted to exist on such Grantor's Collateral by
the Senior Secured Credit Agreement (including without limitation subsection 8.3
thereof), such Grantor owns each item of such Grantor's Collateral free and
clear of any and all Liens. Except as set forth on Schedule 6, no financing
statement or other similar public notice with respect to all or any part of such
Grantor's Collateral is on file or of record in any public office, except such
as have been filed in favor of the Administrative Agent, for the ratable benefit
of the Secured Parties, pursuant to this Agreement or as are permitted by the
Senior Secured Credit Agreement (including without limitation subsection 8.3
thereof) or any other Loan Document or for which termination statements will be
delivered on the Closing Date.
4.2.2 Perfected First Priority Liens. (i) This Agreement is
effective to create, as collateral security for the Obligations of such Grantor,
valid and enforceable Liens on such Grantor's Collateral in favor of the
Administrative Agent, for the benefit of the Secured Parties, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditor's rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
(ii) Except with respect to (A) Liens on Equipment
constituting Fixtures, (B) any rights reserved in favor of the United States
government as required under law, (C) Liens upon Patents, Patent Licenses,
Trademarks and Trademark Licenses to the extent that (I) such Liens cannot be
perfected by the filing of financing statements under the Uniform Commercial
Code or by the filing and acceptance thereof in the United States Patent and
Trademark Office or (II) such Patents, Patent Licenses, Trademarks and Trademark
Licenses are not, individually or in the aggregate, material to the business of
the Borrower and its Subsidiaries taken as a whole, (D) Liens on uncertificated
securities, (E) Liens on Collateral the perfection of which requires filings in
or other actions under the laws of jurisdictions outside of the United States of
America, any State, territory or dependency thereof or the District of Columbia
(except to the extent that such filings or other actions have been made or
taken), (F) Liens on contracts or receivables on which the United States of
America or any department, agency, or instrumentality thereof is the obligor,
(G) Liens on Proceeds of receivables and Inventory, until transferred to or
deposited in the Collateral Proceeds Account (if any), and (H) claims of
creditors of Persons receiving goods included as Collateral for "sale or return"
within the meaning of Section 2-326 of the Uniform Commercial Code of the
applicable jurisdiction, upon filing of the financing statements delivered to
the Administrative Agent by such Grantor on the Effective Date in the
jurisdictions listed on Schedule 5.14 to the Senior Secured Credit Agreement
(which financing statements are in proper form for filing in such jurisdictions)
and the recording of the Mortgages (and the recording of any Patent and
Trademark Security Agreement, as set forth therein, and the making of filings
after the Effective Date in any other jurisdiction as may be necessary under any
Requirement of Law) and the delivery to, and continuing possession by, the
Administrative Agent of all Instruments, Chattel Paper and Documents a security
interest in which is perfected by possession, the Liens created pursuant to this
Agreement will constitute valid Liens on and, to the extent provided herein,
perfected security interests in such Grantor's Collateral (but as to the
Copyrights and
<PAGE> 21
16
Copyright Licenses and accounts arising therefrom, only to the extent the
Uniform Commercial Code of the relevant jurisdiction, from time to time in
effect, is applicable) in favor of the Administrative Agent for the benefit of
the Secured Parties, which Liens will be prior to all other Liens of all other
Persons, except for Liens permitted pursuant to the Loan Documents (including,
without limitation, those permitted to exist pursuant to subsection 8.3 of the
Senior Secured Credit Agreement), and which Liens are enforceable as such as
against all other Persons (except to the extent that the recording of an
assignment or other transfer of title to the Administrative Agent in the United
States Patent and Trademark Office may be necessary for enforceability, and
except, with respect to goods only, buyers in the ordinary course of business to
the extent provided in Section 9-307(1) of the Code), except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law) or by an implied covenant of good faith and fair dealing.
4.2.3 Chief Executive Office. On the date hereof, such
Grantor's jurisdiction of organization and the location of such Grantor's chief
executive office or sole place of business are specified on Schedule 3.
4.2.4 Inventory and Equipment. On the date hereof, such
Grantor's Inventory and Equipment (other than mobile goods) are kept at the
locations listed on Schedule 4.
4.2.5 Farm Products. None of such Grantor's Collateral
constitutes, or is the Proceeds of, Farm Products.
4.2.6 Accounts. The amount represented by such Grantor to the
Administrative Agent or the other Secured Parties from time to time as owing by
each account debtor or by all account debtors in respect of such Grantor's
Accounts will at such time be the correct amount, in all material respects,
actually owing by such account debtor or debtors thereunder, except to the
extent that appropriate reserves therefor have been established on the books of
such Grantor in accordance with GAAP. The places where such Grantor keeps its
records concerning such Grantor's Accounts are listed on Schedule 7 or such
other location or locations of which such Grantor shall have provided prior
written notice to the Administrative Agent pursuant to Section 5.2.5 hereof.
Unless otherwise indicated in writing to the Administrative Agent, each Account
of such Grantor arises out of a bona fide sale and delivery of goods or
rendition of services by such Grantor. Such Grantor has not given any account
debtor any deduction in respect of the amount due under any such Account, except
as such Grantor may otherwise advise the Administrative Agent in writing.
4.2.7 Intellectual Property. Schedule 5 lists all material
Trademarks and material Patents (including, without limitation, Trademarks and
Patents registered in the United States Patent and Trademark Office) owned by
such Grantor in its own name as of the date hereof and all material Trademark
Licenses and all material Patent Licenses (including,
<PAGE> 22
17
without limitation, material Trademark Licenses for registered Trademarks and
material Patent Licenses for registered Patents) owned by such Grantor in its
own name as of the date hereof.
4.3 Representations and Warranties of Each Pledgor. To induce
the Administrative Agent and the Lenders to enter into the Senior Secured Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Pledgor hereby represents and warrants
to the Administrative Agent and each other Secured party that:
4.3.1 The shares of Pledged Stock pledged by such Pledgor
hereunder constitute (i) in the case of each Domestic Subsidiary, all the issued
and outstanding shares of all classes of the Capital Stock of each such Domestic
Subsidiary owned by such Pledgor and (ii) in the case of each Foreign Subsidiary
such percentage (not more than 65%) as is specified on Schedule 2 of all the
issued and outstanding shares of all classes of the Capital Stock of each such
Foreign Subsidiary.
4.3.2 All the shares of the Pledged Stock pledged by such
Pledgor hereunder have been duly and validly issued and are fully paid and
nonassessable.
4.3.3 Such Pledgor is the record and beneficial owner of, and
has good and valid title to, the Pledged Securities pledged by it hereunder,
free of any and all Liens or options in favor of, or claims of, any other
Person, except the security interest created by this Agreement and Liens imposed
by operation of law.
4.3.4 Upon delivery to the Administrative Agent of the
certificates evidencing the Pledged Securities held by such Pledgor, the
security interest created by this Agreement in such Pledged Collateral, assuming
the continuing possession of such Pledged Securities by the Administrative
Agent, will constitute a valid, perfected first priority security interest in
such Pledged Collateral to the extent provided in the Code, enforceable in
accordance with its terms against all creditors of such Pledgor and any persons
purporting to purchase such Pledged Collateral from such Pledgor, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
SECTION 5. COVENANTS
5.1 Covenants of Each Guarantor. Each Guarantor covenants and
agrees with the Administrative Agent and the other Secured Parties that, from
and after the date of this Agreement until the Loans, any Reimbursement
Obligations, and all other Obligations then due and owing, shall have been paid
in full, no Letter of Credit shall be outstanding and the Commitments shall have
terminated, such Guarantor shall take, or shall refrain from taking, as the case
may be, each action that is necessary to be taken or not taken, as the case
<PAGE> 23
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may be, so that no Default or Event of Default is caused by the failure to take
such action or to refrain from taking such action by such Guarantor or any of
its Subsidiaries.
5.2 Covenants of Each Grantor. Each Grantor covenants and
agrees with the Administrative Agent and the other Secured Parties that, from
and after the date of this Agreement until the Loans, any Reimbursement
Obligations, and all other Obligations then due and owing, shall have been paid
in full, no Letter of Credit shall be outstanding and the Commitments shall have
terminated:
5.2.1 Delivery of Instruments and Chattel Paper. If any amount
payable under or in connection with any of such Grantor's Collateral shall be or
become evidenced by any Instrument or Chattel Paper, such Instrument or Chattel
Paper shall be promptly delivered to the Administrative Agent, duly indorsed in
a manner satisfactory to the Administrative Agent, to be held as Collateral
pursuant to this Agreement.
5.2.2 Maintenance of Insurance. (a) Such Grantor will
maintain, with financially sound and reputable companies, insurance policies (i)
insuring such Grantor's Inventory and Equipment against loss by fire, explosion,
theft and such other casualties as may be reasonably satisfactory to the
Administrative Agent and (ii) insuring such Grantor, the Administrative Agent
and the other Secured Parties against liability for personal injury and property
damage relating to such Inventory and Equipment, such policies to be in such
form and amounts and having such coverage as may be reasonably satisfactory to
the Administrative Agent.
(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Administrative Agent of
written notice thereof, (ii) name the Administrative Agent as an additional
insured party or loss payee, (iii) include deductibles consistent with past
practice or otherwise reasonably satisfactory to the Administrative Agent and
(iv) be reasonably satisfactory in all other respects to the Administrative
Agent.
(c) Such Grantor (if the Borrower) shall deliver to the
Administrative Agent and the other Secured Parties reports of one or more
reputable insurance brokers of the individual insurance companies with respect
to such insurance as the Administrative Agent may from time to time reasonably
request.
5.2.3 Payment of Obligations. Such Grantor will pay and
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all taxes, assessments and governmental charges
or levies imposed upon such Grantor's Collateral or in respect of income or
profits therefrom, as well as all claims of any kind (including, without
limitation, claims for labor, materials and supplies) against or with respect to
such Grantor's Collateral, except that no such tax, assessment, charge or levy
need be paid or satisfied if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been
<PAGE> 24
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provided on the books of such Grantor and such proceedings would not reasonably
be expected to result in the sale, forfeiture or loss of any material portion of
the Collateral or any interest therein.
5.2.4 Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Grantor shall maintain the security interest created by
this Agreement in such Grantor's Collateral as a perfected security interest
having at least the priority described in Section 4.2.2 and shall defend such
security interest against the claims and demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Administrative Agent from
time to time statements and schedules further identifying and describing such
Grantor's Collateral and such other reports in connection with such Grantor's
Collateral as the Administrative Agent may reasonably request in writing, all in
reasonable detail.
(c) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of such Grantor,
such Grantor will promptly and duly execute and deliver such further instruments
and documents and take such further actions as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted by such Grantor,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code (or other similar laws) in effect
in any jurisdiction with respect to the security interests created hereby.
5.2.5 Changes in Locations, Name, etc. Such Grantor will not,
except upon not less than 30 days' prior written notice to the Administrative
Agent and delivery to the Administrative Agent, if applicable, of a written
supplement to Schedule 4 showing any additional location at which such Grantor's
Inventory or Equipment shall be kept:
(i) permit any of such Grantor's Inventory or Equipment to be
kept at a location other than the location(s) applicable to such
Grantor listed on Schedule 4 (other than Inventory or Equipment being
conveyed, sold, leased, assigned, transferred or otherwise disposed of
as permitted by the Senior Secured Credit Agreement);
(ii) change the location of its chief executive office or sole
place of business from that referred to in Section 4.2.3; or
(iii) change its name, identity or corporate structure to such
an extent that any financing statement filed by the Administrative
Agent in connection with this Agreement would become misleading;
provided that, prior to taking any such action, or promptly after receiving a
written request therefor from the Administrative Agent, such Grantor shall
deliver to the Administrative Agent all additional executed financing statements
and other documents reasonably requested by the
<PAGE> 25
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Administrative Agent to maintain the validity, perfection and priority of the
security interests provided for herein.
5.2.6 Notices. Such Grantor will advise the Administrative
Agent promptly, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or
Liens permitted under the Senior Secured Credit Agreement) on any of such
Grantor's Collateral which would adversely affect the ability of the
Administrative Agent to exercise any of its remedies hereunder; and
(b) of the occurrence of any other event which could
reasonably be expected to have a material adverse effect on the aggregate value
of such Grantor's Collateral or on the security interests created hereby.
5.2.7 Pledged Securities. In the case of each Grantor which is
an Issuer, such Issuer agrees that (i) it will be bound by the terms of this
Agreement relating to the Pledged Stock issued by it and will comply with such
terms insofar as such terms are applicable to it, (ii) it will notify the
Administrative Agent promptly in writing of the occurrence of any of the events
described in Section 5.3.1 with respect to the Pledged Stock issued by it and
(iii) the terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis,
with respect to all actions that may be required of it pursuant to Section
6.3(c) or 6.7 with respect to the Pledged Stock issued by it.
5.2.8 Accounts. (a) Other than in the ordinary course of
business, such Grantor will not (i) grant any extension of the time of payment
of any of such Grantor's Accounts, (ii) compromise or settle any such Account
for less than the full amount thereof, (iii) release, wholly or partially, any
Person liable for the payment of any Account, (iv) allow any credit or discount
whatsoever on any such Account or (v) amend, supplement or modify any Account in
any manner that could adversely affect the value thereof.
(b) Such Grantor will deliver to the Administrative Agent a
copy of each material demand, notice or document received by it that questions
or calls into doubt the validity or enforceability of more than 10% of the
aggregate amount of the then outstanding Accounts.
5.2.9 Maintenance of Records. Such Grantor will keep and
maintain at its own cost and expense reasonably satisfactory and complete
records of its Collateral, including, without limitation, a record of all
payments received and all credits granted with respect to such Collateral, and
shall mark such records to evidence this Agreement and the Liens and the
security interests created hereby. For the Administrative Agent's and the other
Secured Parties' further security, the Administrative Agent, for the benefit of
the Secured Parties, shall have a security interest in all of such Grantor's
books and records pertaining to such Grantor's Collateral.
<PAGE> 26
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5.2.10 Acquisition of Intellectual Property. Within 45 days
after the end of each calendar quarter, such Grantor will notify the
Administrative Agent of any acquisition by such Grantor of (i) any material
registration of Copyright, Patent or Trademark or (ii) any exclusive rights
under a material Copyright License, Patent License or Trademark License, and
shall take such actions as may be reasonably requested by the Administrative
Agent (but only to the extent such actions are within such Grantor's control) to
perfect the security interest granted to the Administrative Agent and the other
Secured Parties therein (including, without limitation, (x) the execution and
delivery of a Patent and Trademark Security Agreement (or amendments to any such
agreement previously executed or delivered by such
Grantor) or other comparable agreements with respect to Copyrights or Copyright
Licenses and (y) the making of appropriate filings (I) of financing statements
under the Uniform Commercial Code of any applicable jurisdiction and/or (II) in
the United States Patent and Trademark Office, or with respect to Copyrights and
Copyright Licenses, other applicable office).
5.2.11 Protection of Trade Secrets. Such Grantor shall take
all steps which it deems commercially reasonable to preserve and protect the
secrecy of all material Trade Secrets of such Grantor.
5.3 Covenants of Each Pledgor. Each Pledgor covenants and
agrees with the Administrative Agent and the other Secured Parties that, from
and after the date of this Agreement until the Loans, any Reimbursement
Obligations, and all other Obligations then due and owing shall have been paid
in full, no Letter of Credit shall be outstanding and the Commitments shall have
terminated:
5.3.1 If such Pledgor shall become entitled to receive or
shall receive any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in connection with
any reclassification, increase or reduction of capital or any certificate issued
in connection with any reorganization), option or rights in respect of the
Capital Stock of any Issuer, whether in addition to, in substitution of, as a
conversion of, or in exchange for, any shares of the Pledged Stock, or otherwise
in respect thereof, such Pledgor shall accept the same as the agent of the
Administrative Agent and the other Secured Parties, hold the same in trust for
the Administrative Agent and deliver the same forthwith to the Administrative
Agent in the exact form received, duly indorsed by such Pledgor to the
Administrative Agent, if required, together with an undated stock power covering
such certificate duly executed in blank by such Grantor and with, if the
Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations (provided that in no event shall there be pledged,
nor shall any Pledgor be required to pledge, more than 65% of any series of the
outstanding Capital Stock of any Foreign Subsidiary pursuant to this Agreement).
Any sums paid upon or in respect of the Pledged Securities upon the liquidation
or dissolution of any Issuer or Maker (except any liquidation or dissolution of
any Subsidiary of the Borrower in accordance with the Senior Secured Credit
Agreement) shall be paid over to the Administrative Agent to be held by it
hereunder as additional collateral security for the Obligations, and in case any
distribution of capital shall be made on or in respect of the
<PAGE> 27
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Pledged Stock or any property shall be distributed upon or with respect to the
Pledged Stock pursuant to the recapitalization or reclassification of the
capital of any Issuer or pursuant to the reorganization thereof, the property so
distributed shall, unless otherwise subject to a perfected security interest in
favor of the Administrative Agent, be delivered to the Administrative Agent to
be held by it hereunder as additional collateral security for the Obligations.
If any sums of money or property so paid or distributed in respect of the
Pledged Securities shall be received by such Pledgor, such Pledgor shall, until
such money or property is paid or delivered to the Administrative Agent, hold
such money or property in trust for the Secured Parties, segregated from other
funds of such Pledgor, as additional collateral security for the Obligations.
5.3.2 Without the prior written consent of the Administrative
Agent, such Pledgor will not (except pursuant to a transaction permitted by the
Senior Secured Credit Agreement) (i) vote to enable, or take any other action to
permit, any Issuer to issue any stock or other equity securities of any nature
or to issue any other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities of any nature of
any Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or
grant any option with respect to, the Pledged Securities or Proceeds thereof or
(iii) create, incur or permit to exist any Lien or option in favor of, or any
claim of any Person with respect to, any of the Pledged Securities or Proceeds
thereof, or any interest therein, except for the security interests created by
this Agreement or Liens arising by operation of law.
5.3.3 Such Pledgor shall maintain the security interest
created by this Agreement in such Pledgor's Pledged Collateral as a perfected
security interest having at least the priority described in Section 4.3.4 and
shall defend such security interest against the claims and demands of all
Persons whomsoever. At any time and from time to time, upon the written request
of the Administrative Agent, and at the sole expense of such Pledgor, such
Pledgor will promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted by such Pledgor.
5.4 Covenants of Holdings. Holdings covenants and agrees with
the Administrative Agent and the other Secured Parties that, from and after the
date of this Agreement until the Loans, any Reimbursement Obligations, and all
other Obligations then due and owing have been paid in full, no Letter of Credit
shall be outstanding and the Commitments shall have terminated:
5.4.1 Holding shall not conduct or otherwise engage, in any
business or operations other than (i) transactions contemplated by the Loan
Documents or the provision of administrative, legal, accounting and management
services to or on behalf of the Borrower or any of its Subsidiaries, (ii) the
ownership of the Capital Stock of the Borrower (or any successor thereto), and
the exercise of rights and performance of obligations in connection therewith,
(iii) the entry into, and exercise of rights and performance of obligations in
respect of, (A) the Transaction Documents and Senior Subordinated Notes
Documents to which
<PAGE> 28
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Holdings is a party, this Guarantee and Collateral Agreement and the other Loan
Documents to which Holdings is a party, and any other agreement to which
Holdings is a party on the date hereof, in each case as amended, supplemented,
waived or otherwise modified from time to time, and any refinancings,
refundings, renewals or extensions thereof, (B) contracts and agreements with
officers, directors and employees of the Holdings or a Subsidiary thereof
relating to their employment or directorships, (C) insurance policies and
related contracts and agreements, and (D) equity subscription agreements,
registration rights agreements, voting and other stockholder agreements,
engagement letters, underwriting agreements and other agreements in respect of
its equity securities or any offering, issuance or sale thereof, (iv) the
offering, issuance and sale of its equity securities, (v) the filing of
registration statements, and compliance with applicable reporting and other
obligations, under federal, state or other securities laws, (vi) the listing of
its equity securities and compliance with applicable reporting and other
obligations in connection therewith, (vii) the retention of transfer agents,
private placement agents, underwriters, counsel, accountants and other advisors
and consultants, (viii) the performance of obligations under and compliance with
its certificate of incorporation and by-laws, or any applicable law, ordinance,
regulation, rule, order, judgment, decree or permit, including, without
limitation, as a result of or in connection with the activities of the Borrower
and its Subsidiaries, (ix) the incurrence and payment of its operating and
business expenses and any taxes for which it may be liable, and (x) other
activities incidental or related to the foregoing.
5.4.2 Holdings shall not own, lease, manage or otherwise
operate any properties or assets (other than in connection with the activities
described in Section 5.4.1 above), or incur, create, assume or suffer to exist
any Indebtedness or Guarantee Obligations of Holdings (other than such as may be
incurred, created or assumed or exist in connection with the activities
described in Section 5.4.1 above.
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Accounts. (a) At any time and
from time to time after the occurrence and during the continuance of an Event of
Default, the Administrative Agent shall have the right to make test
verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and the relevant Grantor shall furnish all such
assistance and information as the Administrative Agent may require in connection
with such test verifications. At any time and from time to time after the
occurrence and during the continuance of an Event of Default, upon the
Administrative Agent's reasonable request and at the expense of the relevant
Grantor, such Grantor shall cause independent public accountants or others
reasonably satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts.
(b) The Administrative Agent hereby authorizes each Grantor to
collect such Grantor's Accounts and the Administrative Agent may curtail or
terminate said authority at any time after the occurrence and during the
continuance of an Event of Default. If required
<PAGE> 29
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by the Administrative Agent at any time after the occurrence and during the
continuance of an Event of Default, any Proceeds constituting collections of
such Accounts, when collected by such Grantor (excluding any such collections
through the Lockbox System), (i) shall be forthwith (and, in any event, within
two Business Days) deposited by such Grantor in the exact form received, duly
indorsed by such Grantor to the Administrative Agent if required, in the
Collateral Proceeds Account established by such Grantor maintained under the
sole dominion and control of the Administrative Agent, subject to withdrawal by
the Administrative Agent for the account of the Secured Parties only as provided
in Section , and (ii) until so turned over, shall be held by such Grantor in
trust for the Administrative Agent and the other Secured Parties, segregated
from other funds of such Grantor. Each such deposit of Proceeds of Accounts
shall be accompanied by a report identifying in reasonable detail the nature and
source of the payments included in the deposit. All Proceeds constituting
collections of Accounts while held by the Collateral Account Bank (or by any
Guarantor in trust for the benefit of the Administrative Agent and the other
Secured Parties) shall continue to be collateral security for all of the
Obligations and shall not constitute payment thereof until applied as
hereinafter provided. At any time when an Event of Default has occurred and is
continuing, at the Administrative Agent's election, the Administrative Agent may
apply all or any part of the funds on deposit in the Collateral Proceeds Account
established by the relevant Grantor to the payment of the Obligations of such
Grantor then due and owing, such application to be made as set forth in Section
6.5 hereof. So long as no Event of Default has occurred and is continuing, the
funds on deposit in the Collateral Proceeds Account shall be remitted as
provided in Section 6.9 hereof. At any time when an Event of Default has
occurred and is continuing, at the Administrative Agent's request, each Grantor
shall deliver to the Administrative Agent all original and other documents
evidencing, and relating to, the agreements and transactions which gave rise to
such Grantor's Accounts, including, without limitation, all statements relating
to such Grantor's Accounts.
(c) At any time and from time to time after the occurrence and
during the continuance of an Event of Default, at the Administrative Agent's
request, each Grantor shall deliver to the Administrative Agent all original and
other documents evidencing, and relating to, the agreements and transactions
which gave rise to such Grantor's Accounts, including, without limitation, all
original orders, invoices and shipping receipts.
(d) Lockbox System; Collateral Proceeds Account. (i) Solely to
the extent required under subsection 8.18(a) of the Senior Secured Credit
Agreement, on or prior to the date required pursuant to such subsection 8.18(a),
each Grantor shall (subject to subsection 8.18(a) of the Senior Secured Credit
Agreement) establish or cause to be established in the name of the
Administrative Agent, and subject to the control of the Administrative Agent
pursuant to such Grantor's Lockbox Agreements, for the benefit of the
Administrative Agent and the other Secured Parties, such Grantor's Lockbox
System into which the Proceeds of all such Grantor's Accounts (except as
permitted under and in accordance with subsection 8.18(a) of the Senior Secured
Credit Agreement) shall be deposited and forwarded to the Collateral Account
Bank in accordance with and to the extent and when required under such Lockbox
Agreements. On and after the date, if any, on which any Grantor is required to
establish any
<PAGE> 30
25
Lockbox System for so long as such Grantor is required to maintain such system
(subject to subsection 8.18(a) of the Senior Secured Credit Agreement), (x) such
Grantor shall ensure that all account debtors in respect of such Grantor's
Accounts payable in Dollars shall have been given instructions reasonably
satisfactory to the Administrative Agent directing such account debtors to make
all payments on such Accounts by means of deposits into such Grantor's Lockbox
System, (y) without the prior consent of the Administrative Agent (which consent
shall not be unreasonably withheld), such Grantor shall not, in a manner
materially adverse to the Secured Parties, change the form of any such
instructions given to account debtors, and (z) unless and until the
Administrative Agent shall have advised such Grantor to the contrary, such
Grantor shall, and the Administrative Agent hereby authorizes such Grantor to,
enforce and collect all amounts owing on such Grantor's Accounts, for the
benefit and on behalf of the Administrative Agent and the other Secured Parties
in accordance with and subject to the provisions of such Grantor's Lockbox
Agreements; provided, however, that such privilege shall automatically be
suspended upon the occurrence and during the continuance of an Event of Default
specified in Section 9(f) of the Senior Secured Credit Agreement with respect to
such Grantor and may at the option of the Administrative Agent be terminated
upon the occurrence and during the continuance of any other Event of Default
with respect to such Grantor or any other Grantor.
(ii) All Proceeds of such Grantor's Accounts which have been
received on any Business Day through such Grantor's Lockbox System will be
transferred into such Grantor's Collateral Proceeds Account on such Business Day
to the extent required by the applicable Lockbox Agreement. All of such
Grantor's Proceeds received on any Business Day by the Collateral Account Bank
pursuant to paragraph (b) above will be transferred into such Grantor's
Collateral Proceeds Account on such Business Day. Such Collateral Proceeds
Account is, and shall remain, under the sole dominion and control of the
Administrative Agent. Each Grantor acknowledges and agrees that (A) such Grantor
has no right of withdrawal from its Collateral Proceeds Account, (B) the funds
on deposit in such Grantor's Collateral Proceeds Account shall be collateral
security for all of such Grantor's Obligations and (C) upon the occurrence and
during the continuance of an Event of Default, at the Administrative Agent's
election, the funds on deposit in such Grantor's Collateral Proceeds Account may
be applied by the Administrative Agent to the payment of such Grantor's
Obligations then due and owing, such application to be made in the order of
priority set forth in Section 6.5 hereof.
(e) General Fund Account. So long as no Event of Default has
occurred and is continuing, and whether or not any Lockbox System shall have
been established or maintained, the Administrative Agent shall instruct the
Collateral Account Bank to promptly remit any funds on deposit in each Grantor's
Collateral Proceeds Account to such Grantor's General Fund Account. In the event
that an Event of Default has occurred and is continuing, the Administrative
Agent and the Grantors agree that the Administrative Agent, at its option, may
require that each Collateral Proceeds Account be established at The Chase
Manhattan Bank. Each Grantor shall have the right, at any time and from time to
time, to withdraw such of its
<PAGE> 31
26
own funds from its own General Fund Account, and to maintain such balances in
its General Fund Account, as it shall deem to be necessary or desirable.
(f) Restructuring of Deposit Accounts. If (a) any Collateral
Proceeds Account is maintained at a Collateral Account Bank located in a state
within the United States in which Article 9 of the Uniform Commercial Code in
effect in such state has been expressly made applicable to (and only for so long
as it is applicable to) demand deposit accounts and all filings have been made
in such state which are necessary to perfect the Secured Parties' security
interest in such Collateral Proceeds Account or (b) after the Effective Date the
relevant Grantor demonstrates to the Administrative Agent, and the
Administrative Agent in its sole discretion agrees, that the costs associated
with maintaining both a Collateral Proceeds Account and a General Fund Account
outweigh any benefits to the Secured Parties in terms of any additional
protection to their rights in such Grantor's Collateral that could not be
achieved with the use of a single account, then upon the request of such
Grantor, the Administrative Agent may amend this Agreement to delete the
requirement that a separate General Fund Account be maintained and provide that
such Grantor be entitled to withdraw funds on deposit in such Collateral
Proceeds Account at any time so long as no Event of Default has occurred and is
continuing.
6.2 Communications with Obligors; Grantors Remain Liable. (a)
The Administrative Agent in its own name or in the name of others may at any
time and from time to time after the occurrence and during the continuance of an
Event of Default communicate with obligors under the Accounts and parties to the
Contracts (in each case, to the extent constituting Collateral) to verify with
them to the Administrative Agent's satisfaction the existence, amount and terms
of any Receivables or Contracts.
(b) Upon the request of the Administrative Agent at any time
after the occurrence and during the continuance of an Event of Default, each
Grantor shall notify obligors on such Grantor's Accounts and parties to such
Grantor's Contracts (in each case, to the extent constituting Collateral) that
such Accounts and such Contracts have been assigned to the Administrative Agent,
for the ratable benefit of the Secured Parties, and that payments in respect
thereof shall be made directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of such Grantor's Accounts to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. Neither the Administrative Agent nor any Lender shall have any
obligation or liability under any Account (or any agreement giving rise thereto)
by reason of or arising out of this Agreement or the receipt by the
Administrative Agent or any other Secured Party of any payment relating thereto,
nor shall the Administrative Agent or any other Secured Party be obligated in
any manner to perform any of the obligations of any Grantor under or pursuant to
any Account (or any agreement giving rise thereto) to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party thereunder, to present or
file any
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27
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to it or to which it may be entitled
at any time or times.
6.3 Pledged Stock. (a) Unless an Event of Default shall have
occurred and be continuing and the Administrative Agent shall have given notice
to the relevant Pledgor of the Administrative Agent's intent to exercise its
corresponding rights pursuant to Section 6.3(b), each Pledgor shall be permitted
to receive all cash dividends paid in respect of the Pledged Stock and all
payments made in respect of the Pledged Notes, to the extent permitted in the
Senior Secured Credit Agreement, and to exercise all voting and corporate rights
with respect to the Pledged Stock; provided, however, that no vote shall be cast
or corporate right exercised or such other action taken (other than in
connection with a transaction expressly permitted by the Senior Secured Credit
Agreement) which, in the Administrative Agent's reasonable judgment, would
materially impair the Pledged Collateral or the related rights or remedies of
the Secured Parties or which would be inconsistent with or result in any
violation of any provision of the Senior Secured Credit Agreement, this
Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and
the Administrative Agent shall give notice of its intent to exercise such rights
to the relevant Pledgor or Pledgors, (i) the Administrative Agent shall have the
right to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Pledged Stock and make application thereof to the Obligations in
such order as the Administrative Agent may determine, and (ii) any or all of the
Pledged Stock shall be registered in the name of the Administrative Agent or its
nominee, and the Administrative Agent or its nominee may thereafter exercise (x)
all voting, corporate and other rights pertaining to such Pledged Stock at any
meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y)
any and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such Pledged Stock as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of any Issuer, or upon the exercise by the relevant Pledgor or the
Administrative Agent of any right, privilege or option pertaining to such
Pledged Stock, and in connection therewith, the right to deposit and deliver any
and all of the Pledged Stock with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as the
Administrative Agent may reasonably determine), all without liability (other
than for its gross negligence or willful misconduct) except to account for
property actually received by it, but the Administrative Agent shall have no
duty to any Pledgor to exercise any such right, privilege or option and shall
not be responsible for any failure to do so or delay in so doing, provided that
the Administrative Agent shall not exercise any voting or other consensual
rights pertaining to the Pledged Stock in any way that would constitute an
exercise of the remedies described in Section 7 other than in accordance with
Section 7.
(c) Each Pledgor hereby authorizes and instructs each Issuer
or Maker of any Pledged Securities pledged by such Pledgor hereunder to (i)
comply with any instruction
<PAGE> 33
28
received by it from the Administrative Agent in writing that (x) states that an
Event of Default has occurred and (y) is otherwise in accordance with the terms
of this Agreement, without any other or further instructions from such Pledgor,
and each Pledgor agrees that each Issuer or Maker shall be fully protected in so
complying, and (ii) unless otherwise expressly permitted hereby, pay any
dividends or other payments with respect to the Pledged Securities directly to
the Administrative Agent.
6.4 Proceeds to be Turned Over To Administrative Agent. In
addition to the rights of the Administrative Agent and the other Secured Parties
specified in Section 6.1 with respect to payments of Accounts, if an Event of
Default shall occur and be continuing, and the Administrative Agent shall have
instructed any Grantor to do so, all Proceeds received by such Grantor
consisting of cash, checks and other Cash Equivalent items shall be held by such
Grantor in trust for the Administrative Agent and the other Secured Parties,
segregated from other funds of such Grantor, and shall, forthwith upon receipt
by such Grantor, be turned over to the Administrative Agent in the exact form
received by such Grantor (duly indorsed by such Grantor to the Administrative
Agent, if required). All Proceeds received by the Administrative Agent hereunder
shall be held by the Administrative Agent in the relevant Collateral Proceeds
Account maintained under its sole dominion and control. All Proceeds while held
by the Administrative Agent in such Collateral Proceeds Account (or by such
Grantor in trust for the Administrative Agent and the other Secured Parties)
shall continue to be held as collateral security for all the Obligations and
shall not constitute payment thereof until applied as provided in Section 6.5.
6.5 Application of Proceeds. It is agreed that if an Event of
Default shall occur and be continuing, any and all Proceeds of the relevant
Granting Party's Security Collateral received by the Administrative Agent
(whether from the relevant Granting Party or otherwise) shall be held by the
Administrative Agent for the benefit of the Secured Parties as collateral
security for the Obligations of the relevant Granting Party (whether matured or
unmatured), and/or then or at any time thereafter may, in the sole discretion of
the Administrative Agent, be applied by the Administrative Agent against the
Obligations of the relevant Granting Party then due and owing in the following
order of priority:
FIRST, to the payment of all reasonable costs and expenses
incurred by the Administrative Agent in connection with this Agreement,
the Senior Secured Credit Agreement, any other Loan Document or any of
the Obligations of the relevant Granting Party, including, without
limitation, all court costs and the reasonable fees and expenses of its
agents and legal counsel, and any other reasonable costs or expenses
incurred in connection with the exercise by the Administrative Agent of
any right or remedy under this Agreement, the Senior Secured Credit
Agreement, or any other Loan Document;
SECOND, to the ratable satisfaction of all other Obligations
of the relevant Granting Party; and
<PAGE> 34
29
THIRD, to the relevant Granting Party or its successors or
assigns, or to whomsoever may be lawfully entitled to receive the same.
6.6 Code and Other Remedies. If an Event of Default shall
occur and be continuing, the Administrative Agent, on behalf of the Secured
Parties, may exercise, in addition to all other rights and remedies granted to
them in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the Code or any other applicable law. Without limiting the
generality of the foregoing, to the extent permitted by applicable law, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Granting Party or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Security Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give option or options to purchase, or
otherwise dispose of and deliver the Security Collateral or any part thereof (or
contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker's board or office of the
Administrative Agent or any other Secured Party or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Administrative Agent or any other Secured Party shall have the right upon
any such public sale or sales, and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the Security
Collateral so sold, free of any right or equity of redemption in any Granting
Party, which right or equity is hereby waived or released. Each Granting Party
further agrees, at the Administrative Agent's request, to assemble the Security
Collateral and make it available to the Administrative Agent at places which the
Administrative Agent shall reasonably select, whether at such Granting Party's
premises or elsewhere. The Administrative Agent shall apply the net proceeds of
any action taken by it pursuant to this Section 6.6, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or
incidental to the care or safekeeping of any of the Security Collateral or in
any way relating to the Security Collateral or the rights of the Administrative
Agent and the other Secured Parties hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Obligations of the relevant Granting Party, in the order of priority
specified in Section 6.5 above, and only after such application and after the
payment by the Administrative Agent of any other amount required by any
provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need the Administrative Agent account for the surplus, if any, to any
Granting Party. To the extent permitted by applicable law, each Granting Party
waives all claims, damages and demands it may acquire against the Administrative
Agent or any other Secured Party arising out of the exercise by them of any
rights hereunder, except to the extent arising as a result of the gross
negligence or willful misconduct of the Administrative Agent or such other
Secured Party. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other disposition.
<PAGE> 35
30
6.7 Registration Rights. (a) If the Administrative Agent shall
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to Section 6.6, and if in the reasonable opinion of the Administrative Agent it
is necessary or reasonably advisable to have the Pledged Stock, or that portion
thereof to be sold, registered under the provisions of the Securities Act, the
relevant Pledgor will use its reasonable best efforts to cause the Issuer
thereof to (i) execute and deliver, and use its best efforts to cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to
register such Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
such Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the reasonable
opinion of the Administrative Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. Such
Pledgor agrees to cause such Issuer to comply with the provisions of the
securities or "Blue Sky" laws of any and all jurisdictions which the
Administrative Agent shall reasonably designate and to make available to its
security holders, as soon as practicable, an earnings statement (which need not
be audited) which will satisfy the provisions of Section 11(a) of the Securities
Act.
(b) Such Pledgor recognizes that the Administrative Agent may
be unable to effect a public sale of any or all such Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Such
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(c) Such Pledgor agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of such Pledged Stock pursuant to this Section 6.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Such Pledgor further agrees that a breach of any of the covenants contained in
this Section 6.7 will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and the Lenders have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 6.7 shall be specifically enforceable
against such Pledgor, and to the extent permitted by applicable law, such
Pledgor hereby waives and agrees not to assert any
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31
defenses against an action for specific performance of such covenants except for
a defense that no Event of Default has occurred under the Senior Secured Credit
Agreement.
6.8 Waiver; Deficiency. Each Granting Party (other than the
Borrower) waives and agrees not to assert any rights or privileges which it may
acquire under Section 9- 112 of the Code, to the extent permitted by applicable
law. Each Granting Party shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Security Collateral are insufficient to
pay its Obligations and the fees and disbursements of any attorneys employed by
the Administrative Agent or any other Secured Party to collect such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Administrative Agent's Appointment as Attorney-in-Fact,
etc. (a) Each Granting Party hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Granting Party and in the
name of such Granting Party or in its own name, for the purpose of carrying out
the terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be reasonably necessary
or desirable to accomplish the purposes of this Agreement to the extent
permitted by applicable law. Without limiting the generality of the foregoing,
at any time when an Event of Default has occurred and is continuing (in each
case to the extent permitted by applicable law), (x) each Pledgor hereby gives
the Administrative Agent the power and right, on behalf of such Pledgor, without
notice or assent by such Pledgor, to execute, in connection with any sale
provided for in Section 6.6 or 6.7, any indorsements, assessments or other
instruments of conveyance or transfer with respect to such Pledgor's Pledged
Collateral, and (y) each Grantor hereby gives the Administrative Agent the power
and right, on behalf of such Grantor, without notice to or assent by such
Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise,
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under
any Account of such Grantor or with respect to any other Collateral of
such Grantor and file any claim or take any other action or proceeding
in any court of law or equity or otherwise deemed appropriate by the
Administrative Agent for the purpose of collecting any and all such
moneys due under any Account of such Grantor or with respect to any
other Collateral of such Grantor whenever payable;
(ii) in the case of any Copyright, Patent or Trademark
constituting Collateral of such Grantor, execute and deliver any and
all agreements, instruments, documents and papers as the Administrative
Agent may reasonably request to evidence the Administrative Agent's and
the Lenders' security interest in such Copyright, Patent or
<PAGE> 37
32
Trademark and the goodwill and general intangibles of such Grantor
relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral of such Grantor, effect any repairs
or any insurance called for by the terms of this Agreement and pay all
or any part of the premiums therefor and the costs thereof; and
(iv) (i) direct any party liable for any payment under any of
the Collateral of such Grantor to make payment of any and all moneys
due or to become due thereunder directly to the Administrative Agent or
as the Administrative Agent shall direct; (ii) ask or demand for,
collect, receive payment of and receipt for, any and all moneys, claims
and other amounts due or to become due at any time in respect of or
arising out of any Collateral of such Grantor; (iii) sign and indorse
any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications,
notices and other documents in connection with any of the Collateral of
such Grantor; (iv) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction
to collect the Collateral of such Grantor or any portion thereof and to
enforce any other right in respect of any Collateral of such Grantor;
(v) defend any suit, action or proceeding brought against such Grantor
with respect to any Collateral of such Grantor; (vi) settle, compromise
or adjust any such suit, action or proceeding and, in connection
therewith, to give such discharges or releases as the Administrative
Agent may deem appropriate; (vii) subject to any existing reserved
rights or licenses, assign any Copyright, Patent or Trademark
constituting Collateral of such Grantor (along with the goodwill of the
business to which any such Copyright, Patent or Trademark pertains),
for such term or terms, on such conditions, and in such manner, as the
Administrative Agent shall in its sole discretion determine; and (viii)
generally, sell, transfer, pledge and make any agreement with respect
to or otherwise deal with any of the Collateral of such Grantor as
fully and completely as though the Administrative Agent were the
absolute owner thereof for all purposes, and do, at the Administrative
Agent's option and such Grantor's expense, at any time, or from time to
time, all acts and things which the Administrative Agent deems
necessary to protect, preserve or realize upon the Collateral of such
Grantor and the Administrative Agent's and the other Secured Parties'
security interests therein and to effect the intent of this Agreement,
all as fully and effectively as such Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
(b) If any Granting Party fails to perform or comply with any
of its agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
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(c) The reasonable expenses of the Administrative Agent
incurred in connection with actions undertaken as provided in this Section 7.1,
together with interest thereon at a rate per annum equal to the rate per annum
at which interest would then be payable on past due ABR Loans which are Term
Loans under the Senior Secured Credit Agreement, from the date of payment by the
Administrative Agent to the date reimbursed by the relevant Granting Party,
shall be payable by such Granting Party to the Administrative Agent on demand.
(d) Each Granting Party hereby ratifies all that said
attorneys shall lawfully do or cause to be done by virtue hereof. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable as to the relevant Granting Party until this
Agreement is terminated as to such Granting Party, and the security interests in
the Security Collateral of such Granting Party created hereby are released.
7.2 Duty of Administrative Agent. The Administrative Agent's
sole duty with respect to the custody, safekeeping and physical preservation of
the Security Collateral in its possession, under Section 9-207 of the Code or
otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account. Neither the
Administrative Agent, any other Secured Party nor any of their respective
officers, directors, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Security Collateral or for any delay in doing
so or shall be under any obligation to sell or otherwise dispose of any Security
Collateral upon the request of any Granting Party or any other Person or to take
any other action whatsoever with regard to the Security Collateral or any part
thereof. The powers conferred on the Administrative Agent and the other Secured
Parties hereunder are solely to protect the Administrative Agent's and the other
Secured Parties' interests in the Security Collateral and shall not impose any
duty upon the Administrative Agent or any other Secured Party to exercise any
such powers. The Administrative Agent and the other Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Granting Party for any act or
failure to act hereunder, except for their own gross negligence or willful
misconduct.
7.3 Execution of Financing Statements. Pursuant to Section
9-402 of the Code and any other applicable law, each Granting Party authorizes
the Administrative Agent to file or record financing statements and other filing
or recording documents or instruments with respect to such Granting Party's
Security Collateral without the signature of such Granting Party in such form
and in such offices as the Administrative Agent reasonably determines
appropriate to perfect the security interests of the Administrative Agent under
this Agreement. A photographic or other reproduction of this Agreement shall be
sufficient as a financing statement or other filing or recording document or
instrument for filing or recording in any jurisdiction.
7.4 Authority of Administrative Agent. Each Granting Party
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the
<PAGE> 39
34
Administrative Agent of any option, voting right, request, judgment or other
right or remedy provided for herein or resulting or arising out of this
Agreement or any amendment, supplement or other modification of this Agreement
shall, as between the Administrative Agent and the Secured Parties, be governed
by the Senior Secured Credit Agreement and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Granting Parties the Administrative Agent shall be
conclusively presumed to be acting as agent for the Secured Parties with full
and valid authority so to act or refrain from acting, and no Granting Party
shall be under any obligation, or entitlement, to make any inquiry respecting
such authority.
7.5 Right Of Inspection. Upon reasonable written advance
notice to any Grantor and at reasonable intervals, or at any time and from time
to time after the occurrence and during the continuation of an Event of Default,
the Administrative Agent shall have reasonable access during normal business
hours to all the books, correspondence and records of such Granting Party, and
the Administrative Agent and its representatives may examine the same, and to
the extent reasonable take extracts therefrom and make photocopies thereof, and
such Granting Party agrees to render to the Administrative Agent, at such
Granting Party's reasonable cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto. The Administrative Agent and
its representatives shall also have the right, upon reasonable advance written
notice to such Granting Party, to enter during normal business hours into and
upon any premises owned, leased or operated by such Granting Party where any of
such Granting Party's Inventory or Equipment is located for the purpose of
inspecting the same, observing its use or otherwise protecting its interests
therein.
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions of
this Agreement may be waived, amended, supplemented or otherwise modified except
by a written instrument executed by each affected Granting Party and the
Administrative Agent, provided that any provision of this Agreement imposing
obligations on any Granting Party may be waived by the Administrative Agent in a
written instrument executed by the Administrative Agent.
8.2 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Granting Party hereunder shall be effected in the
manner provided for in subsection 11.2 of the Senior Secured Credit Agreement;
provided that any such notice, request or demand to or upon any Guarantor shall
be addressed to such Guarantor at its notice address set forth on Schedule 1,
unless and until such Guarantor shall change such address by notice to the
Administrative Agent given in accordance with subsection 11.2 of the Senior
Secured Credit Agreement.
8.3 No Waiver by Course of Conduct; Cumulative Remedies.
Neither the Administrative Agent nor any other Secured Party shall by any act
(except by a written
<PAGE> 40
35
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any other Secured Party,
any right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Administrative Agent or any other
Secured Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Administrative Agent or such
other Secured Party would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any other rights or remedies provided by law.
8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor
agrees to pay or reimburse each Secured Party and the Administrative Agent for
all their respective reasonable costs and expenses incurred in collecting
against such Guarantor under the guarantee contained in Section 2 or otherwise
enforcing or preserving any rights under this Agreement against such Guarantor
and the other Loan Documents to which such Guarantor is a party, including,
without limitation, the reasonable fees and disbursements of one firm of counsel
to the Secured Parties and the Administrative Agent.
(b) Each Guarantor agrees to pay, and to save the
Administrative Agent and the Secured Parties harmless from, (x) any and all
liabilities with respect to, or resulting from any delay in paying, any and all
stamp, excise, sales or other similar taxes which may be payable or determined
to be payable with respect to any of the Security Collateral or in connection
with any of the transactions contemplated by this Agreement and (y) any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement (collectively, the "indemnified liabilities"), in each case to the
extent the Borrower would be required to do so pursuant to Section 11.5 of the
Senior Secured Credit Agreement, and in any event excluding any taxes or other
indemnified liabilities arising from gross negligence or willful misconduct of
the Administrative Agent or any Secured Party.
(c) The agreements in this Section 8.4 shall survive repayment
of the Obligations and all other amounts payable under the Senior Secured Credit
Agreement and the other Loan Documents.
8.5 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the Granting Parties, the Administrative
Agent and the Secured Parties and their respective successors and assigns;
provided that no Granting Party may assign, transfer or delegate any of its
rights or obligations under this Agreement without the prior written consent of
the Administrative Agent.
<PAGE> 41
36
8.6 Set-Off. Each Guarantor hereby irrevocably authorizes the
Administrative Agent and each other Secured Party at any time and from time to
time without notice to such Guarantor, any other Guarantor or the Borrower, any
such notice being expressly waived by each Guarantor and by the Borrower, to the
extent permitted by applicable law, upon the occurrence and during the
continuance of an Event of Default under Section 9(a) of the Senior Secured
Credit Agreement and any amount remaining unpaid after it becomes due and
payable by such Guarantor hereunder, to set-off and appropriate and apply
against any such amount any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Administrative Agent or such other Secured Party to or for the
credit or the account of such Guarantor, or any part thereof in such amounts as
the Administrative Agent or such other Secured Party may elect. The
Administrative Agent and each other Secured Party shall notify such Guarantor
promptly of any such set-off and the application made by the Administrative
Agent or such other Secured Party of the proceeds thereof; provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Administrative Agent and each other Secured Party
under this Section 8.6 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Administrative Agent or
such other Secured Party may have.
8.7 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
8.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.9 Section Headings. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
8.10 Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Granting Parties, the Administrative Agent
and the other Secured Parties with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by the
Granting Parties, the Administrative Agent or any other Secured Party relative
to subject matter hereof not expressly set forth or referred to herein or in the
other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
<PAGE> 42
37
8.12 Submission To Jurisdiction; Waivers. Each party hereto
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such party at its address referred to in Section 8.2 or at
such other address of which the Administrative Agent (in the case of
any other party hereto) or the Borrower (in the case of the
Administrative Agent) shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section any punitive damages.
8.13 Acknowledgements. Each Guarantor hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents
to which it is a party;
(b) neither the Administrative Agent nor any other Secured
Party has any fiduciary relationship with or duty to any Guarantor
arising out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between the Guarantors, on the one
hand, and the Administrative Agent and the Secured Parties, on the
other hand, in connection herewith or therewith is solely that of
debtor and creditor; and
<PAGE> 43
38
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Secured Parties or among the Guarantors
and the Secured Parties.
8.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
8.15 Additional Granting Parties. Each new Domestic Subsidiary
of the Borrower that is required to become a party to this Agreement pursuant to
Section 8.15 of the Senior Secured Credit Agreement shall become a Granting
Party for all purposes of this Agreement upon execution and delivery by such
Subsidiary of an Assumption Agreement in the form of Annex 1 hereto.
8.16 Releases. (a) At such time as the Loans, the
Reimbursement Obligations and the other Obligations then due and owing shall
have been paid in full, the Commitments have been terminated and no Letters of
Credit shall be outstanding, all Security Collateral shall be released from the
Liens created hereby, and this Agreement and all obligations (other than those
expressly stated to survive such termination) of the Administrative Agent and
each Granting Party hereunder shall terminate, all without delivery of any
instrument or performance of any act by any party, and all rights to the
Security Collateral shall revert to the Granting Parties. At the request and
sole expense of any Granting Party following any such termination, the
Administrative Agent shall deliver to such Granting Party any Security
Collateral held by the Administrative Agent hereunder, and execute and deliver
to such Granting Party such documents (including without limitation UCC
termination statements) as such Granting Party shall reasonably request to
evidence such termination.
(b) In connection with the sale or other disposition of all of
the Capital Stock of any Guarantor or the sale or other disposition of Security
Collateral permitted under the Senior Secured Credit Agreement and the release
of such Guarantor from its Guarantee or the release of the Security Collateral
subject to such sale or other disposition, the Borrower shall deliver to the
Administrative Agent, a written request for release identifying such Guarantor
or the relevant Security Collateral and the terms of the sale or other
disposition in reasonable detail, including the price thereof and any expenses
in connection therewith,
<PAGE> 44
39
together with a certification by the Borrower stating that such transaction is
in compliance with the Senior Secured Credit Agreement and the other Loan
Documents. The Administrative Agent shall execute and deliver to the relevant
Granting Party (at the sole cost and expense of such Granting Party) all
releases or other documents (including without limitation UCC termination
statements) necessary or reasonably desirable for the release of the Liens
created hereby on such Security Collateral as such Granting Party may reasonably
request.
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee and Collateral Agreement to be duly executed and delivered as of the
date first above written.
EV INTERNATIONAL, INC.
By: /s/ CHRISTINE K. VANDEN BEUKEL
--------------------------------
Christine K. Vanden Beukel
Title: Vice Pres. and Secty
EVI AUDIO HOLDING, INC.
By: /s/ CHRISTINE K. VANDEN BEUKEL
------------------------------
Christine K. Vanden Beukel
Title: Vice Pres. and Secty
Acknowledged and Agreed to as
of the date hereof by:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By: /s/ LAWRENCE PALUMBO JR.
------------------------
Title: Vice President
Attorney-in-fact
<PAGE> 45
Schedule 1
NOTICE ADDRESSES OF GUARANTORS
EVI Audio Holdings, Inc.
c/o EV International, Inc.
600 Cecil Street
Buchanan, Michigan 49107
Attention:
Telephone:
Telecopy:
with Copies to:
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, New York 10013
re: EVI Audio Holding, Inc.
Attention: Nicholas Somers
Telephone: (212) 816-2889
Telecopy: (212) 816-0166
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10013
Attention: David A. Brittenham, Esq.
Telephone: (212) 909-6000
Telecopy: (212) 909-6836
<PAGE> 46
Schedule 2
DESCRIPTION OF PLEDGED SECURITIES
PLEDGED STOCK:
Stock Certificate
Issuer Class of Stock No. No. of Shares
- ----------------- ---------------- -------------------- -------------------
<PAGE> 47
Schedule 3
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE
OR SOLE PLACE OF BUSINESS
Granting Party Location
-------------- --------
<PAGE> 48
Schedule 4
LOCATION OF INVENTORY AND EQUIPMENT
Granting Party Locations
-------------- ---------
<PAGE> 49
Schedule 5
PATENTS AND PATENT LICENSES
TRADEMARKS AND TRADEMARK LICENSES
<PAGE> 50
Schedule 6
EXISTING PRIOR LIENS
<PAGE> 51
Schedule 7
ACCOUNTS
<PAGE> 52
3
Schedule 8
CONTRACTS
<PAGE> 53
Annex 1 to
Guarantee and Collateral Agreement
ASSUMPTION AGREEMENT, dated as of _________ __, 199_, made by
______________________________, a ______________ corporation (the "Additional
Granting Party"), in favor of THE CHASE MANHATTAN BANK, as administrative agent
(in such capacity, the "Administrative Agent") for the banks and other financial
institutions (the "Lenders") from time to time parties to the Senior Secured
Credit Agreement referred to below and the other Secured Parties (as defined
below). All capitalized terms not defined herein shall have the meaning ascribed
to them in such the Guarantee and Collateral Agreement referred to below, or if
not defined therein, in Senior Secured Credit Agreement.
W I T N E S S E T H :
WHEREAS, EV International, Inc., a Delaware corporation (the
"Borrower"), the Lenders and the Administrative Agent are parties to a Credit
Agreement, dated as of February 10, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Senior Secured Credit Agreement");
WHEREAS, in connection with the Senior Secured Credit
Agreement, the Borrower and certain of its Affiliates and Subsidiaries are, or
are to become, parties to the Guarantee and Collateral Agreement, dated as of
February 10, 1997 (as amended, supplemented or otherwise modified from time to
time, the "Guarantee and Collateral Agreement") in favor of the Administrative
Agent, for the ratable benefit of the Secured Parties (as defined in the
Guarantee and Collateral Agreement);
WHEREAS, the Additional Grantor is a member of an affiliated
group of companies that includes the Borrower and each other Granting Party to
the Guarantee and Collateral Agreement; the proceeds of the extensions of credit
under the Senior Secured Credit Agreement will be used in part to enable the
Borrower to make valuable transfers to one or more of the other Granting Parties
(including the Additional Grantor) in connection with the operation of their
respective businesses; and the Borrower and the other Granting Parties
(including the Additional Grantor) are engaged in related businesses, and each
such Granting Party (including the Additional Grantor) will derive substantial
direct and indirect benefit from the making of the extensions of credit under
the Senior Secured Credit Agreement;
WHEREAS, the Senior Secured Credit Agreement requires the
Additional Granting Party to become a party to the Guarantee and Collateral
Agreement; and
WHEREAS, the Additional Granting Party has agreed to execute
and deliver this Assumption Agreement in order to become a party to the
Guarantee and Collateral Agreement;
<PAGE> 54
2
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and
delivering this Assumption Agreement, the Additional Granting Party, as provided
in Section 8.15 of the Guarantee and Collateral Agreement, hereby becomes a
party to the Guarantee and Collateral Agreement as a Granting Party thereunder
with the same force and effect as if originally named therein as a Guarantor [,
Grantor and Pledgor] [and Grantor] [and Pledgor]1 and, without limiting the
generality of the foregoing, hereby expressly assumes all obligations and
liabilities of a Guarantor [, Grantor and Pledgor] [and Grantor] [and Pledgor]2
thereunder. The information set forth in Annex 1-A hereto is hereby added to the
information set forth in Schedules __________ to the Guarantee and Collateral
Agreement, and such Schedules are hereby amended and modified to include such
information. The Additional Granting Party hereby represents and warrants that
each of the representations and warranties of such Additional Grantor, in its
capacities as a Guarantor [, Grantor and Pledgor] [and Grantor] [and Pledgor],3
contained in Section 4 of the Guarantee and Collateral Agreement is true and
correct in all material respects on and as the date hereof (after giving effect
to this Assumption Agreement) as if made on and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTING PARTY]
By:
---------------------------
Name:
Title:
- --------
1. Indicate the capacities in which the Additional Grantor is becoming a
Granting Party.
2. Indicate the capacities in which the Additional Grantor is becoming a
Granting Party.
3. Indicate the capacities in which the Additional Grantor is becoming a
Granting Party.
<PAGE> 55
Annex 1-A to
Assumption Agreement
<PAGE> 1
EXHIBIT 4(f)
PATENT AND TRADEMARK SECURITY AGREEMENT
PATENT AND TRADEMARK SECURITY AGREEMENT, dated as of
February 10, 1997, made by EV International, Inc., a Delaware corporation
formerly named Electro-Voice, Incorporated and successor by merger to Gulton
Acquisition Corp., Gulton Industries, Inc., LFE Corporation, Mark IV Audio, Inc.
and Mark IV Audio Magnetic, Inc., each a Delaware corporation (the "Grantor"),
in favor of The Chase Manhattan Bank, a New York banking corporation ("Chase"),
as administrative agent (in such capacity, the "Administrative Agent") for the
banks and other financial institutions (the "Lenders") from time to time parties
to the Credit Agreement, dated as of February 10, 1997 (as amended, waived,
supplemented or otherwise modified from time to time, the "Senior Secured Credit
Agreement"), among the Grantor (as successor by merger to Gulton Acquisition
Corp.) (in such capacity, the "Borrower"), the Lenders and the Administrative
Agent.
W I T N E S S E T H :
WHEREAS, pursuant to the Senior Secured Credit Agreement, the
Lenders have severally agreed to make extensions of credit to the Borrower upon
the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition to the obligation of the Lenders to make
their respective extensions of credit to the Borrower under the Senior Secured
Credit Agreement that the Grantor shall execute and deliver this Agreement to
the Administrative Agent for the ratable benefit of the Secured Parties (as
defined below);
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Senior Secured Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, the Grantor hereby agrees with the
Administrative Agent, for the ratable benefit of the Secured Parties, as
follows:
1. Defined Terms. (a) Unless otherwise defined herein, capitalized
terms which are defined in the Senior Secured Credit Agreement and used herein
shall have the meanings given to them in the Senior Secured Credit Agreement.
(b) The following terms shall have the following meanings:
"Agreement": this Patent and Trademark Security Agreement, as the
same may be amended, supplemented, waived or otherwise modified from time
to time.
<PAGE> 2
2
"Code": the Uniform Commercial Code as from time to time in effect
in the State of New York.
"Collateral": as defined in Section 2 of this Agreement.
"Default": a "Default" as defined in the Senior Secured Credit
Agreement.
"Event of Default": an "Event of Default" as defined in the Senior
Secured Credit Agreement.
"General Intangibles": as defined in Section 9-106 of the Code,
including, without limitation, all Patents and Trademarks now or hereafter
owned by the Grantor to the extent such Patents and Trademarks would be
included in General Intangibles under the Code.
"Loan Documents": the collective reference to the "Loan Documents"
as defined in the Senior Secured Credit Agreement.
"Loans": the collective reference to the "Loans" as defined in the
Senior Secured Credit Agreement.
"Obligations": the Obligations (as defined in the Guarantee and
Collateral Agreement) of the Grantor.
"Patent Licenses": all United States written license agreements of
the Grantor with any Person who is not an Affiliate or Subsidiary of the
Grantor in connection with any of the Patents or such other Person's
patents, whether the Grantor is a licensor or a licensee under any such
agreement, including, without limitation, the license agreements listed on
Schedule II hereto, subject, in each case, to the terms of such license
agreements, and the right to prepare for sale, sell and advertise for
sale, all Inventory (as defined in the Guarantee and Collateral Agreement)
now or hereafter covered by such licenses.
"Patents": all of the Grantor's right, title and interest in and to
all United States patents, patent applications and patentable inventions
and all reissues and extensions thereof, including, without limitation,
all patents and patent applications identified in Schedule II hereto, and
including, without limitation, (a) all inventions and improvements
described and claimed therein, and patentable inventions, (b) the right to
sue or otherwise recover for any and all past, present and future
infringements and misappropriations thereof, (c) all income, royalties,
damages and other payments now and hereafter due and/or payable with
respect thereto (including, without limitation, payments under all
licenses entered into in connection therewith, and damages and payments
for past or future infringements thereof), and (d) all other rights
corresponding thereto in the United States and all reissues, divisions,
continuations,
<PAGE> 3
3
continuations-in-part, substitutes, renewals, and extensions thereof, all
improvements thereon, and all other rights of any kind whatsoever of the
Grantor accruing thereunder or pertaining thereto (Patents and Patent
Licenses being, collectively, the "Patent Collateral").
"Proceeds": as defined in Section 9-306(1) of the Code.
"Revolving Credit Commitments": the collective reference to the
"Revolving Credit Commitments" as defined in the Senior Secured Credit
Agreement.
"Secured Parties": the collective reference to the Administrative
Agent, the Lenders (including, without limitation, the Issuing Lender and
the Swing Line Lender), any Affiliate of any Lender which has entered into
any Interest Rate Protection Agreement or Permitted Hedging Arrangement
with the Borrower or any of its Subsidiaries, and their respective
successors and assigns.
"Trademark Licenses": all United States written license agreements
of the Grantor with any Person who is not an Affiliate or Subsidiary of
the Grantor in connection with any of the Trademarks or such other
Person's names or trademarks, whether the Grantor is a licensor or a
licensee under any such agreement, including, without limitation, the
license agreements listed on Schedule I hereto, subject, in each case, to
the terms of such license agreements, and the right to prepare for sale,
sell and advertise for sale, all Inventory (as defined in the Guarantee
and Collateral Agreement) now or hereafter covered by such licenses.
"Trademarks": all of the Grantor's right, title and interest in and
to all United States trademarks, service marks, trade names, trade dress
or other indicia of trade origin or business identifiers, trademark and
service mark registrations, and applications for trademark or service mark
registrations (except for "intent to use" applications for trademark or
service mark registrations filed pursuant to Section 1(b) of the Lanham
Act, 15 U.S.C. Section 1051, unless and until an Amendment to Allege Use
or a Statement of Use under Sections 1(c) and 1(d) of said Act has been
filed), and any renewals thereof, including, without limitation, each
registration and application identified in Schedule I hereto, and
including, without limitation, (a) the right to sue or otherwise recover
for any and all past, present and future infringements and
misappropriations thereof, (b) all income, royalties, damages and other
payments now and hereafter due and/or payable with respect thereto
(including, without limitation, payments under all licenses entered into
in connection therewith, and damages and payments for past or future
infringements thereof), and (c) all other rights corresponding thereto in
the United States and all other rights of any kind whatsoever of the
Grantor accruing thereunder or pertaining thereto, together in each case
with the goodwill of the business connected with the use of, and
symbolized by, each such trademark, service mark, trade name, trade dress
or other indicia of trade origin or
<PAGE> 4
4
business identifiers (Trademarks and Trademark Licenses being,
collectively, the "Trademark Collateral").
(b) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(d) Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to the Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
2. Grant of Security Interest. The Grantor hereby grants, subject to
existing licenses granted by such Grantor in the ordinary course of business
with respect to the Collateral (as hereinafter defined), to the Administrative
Agent for the ratable benefit of the Secured Parties a security interest in all
of the following property now owned or at any time hereafter acquired by such
Grantor or in which such Grantor now has or at any time in the future may
acquire any right, title or interest (collectively, the "Collateral"), as
collateral security for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations of such Grantor:
(i) all Patents;
(ii) all Patent Licenses;
(iii) all Trademarks;
(iv) all Trademark Licenses;
(v) all General Intangibles connected with the use of or
symbolized by the Trademarks and Patents; and
(vi) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the foregoing;
provided, that the foregoing grant of a security interest with respect to
General Intangibles, Patent Licenses and Trademark Licenses shall not include a
security interest in, and the Collateral shall not include, any Patent License
or Trademark License with or issued by Persons other than a Subsidiary of the
Grantor that would otherwise be included in the Collateral to the extent that
the grant by such Grantor of such security interest is prohibited by
<PAGE> 5
5
the terms and provisions of the written agreement or document or instrument
creating or evidencing such license or permit or Patent License or Trademark
License, or gives the other party thereto the right to terminate such Patent
License or Trademark License in the event of the grant of a security interest
with respect thereto. All references in this Agreement to any of the property
described in clauses (i) through (vi) of the preceding sentence, or to any
Proceeds thereof, shall be deemed to be references to such property or Proceeds
to the extent such property or Proceeds constitutes Collateral.
3. Representations and Warranties. The Grantor hereby represents and
warrants to the Administrative Agent on behalf of the Secured Parties that:
(a) Power and Authority. As of the date hereof, the Grantor has the
corporate power and authority, and the legal right, to make, deliver and
perform its obligations under, and to grant the security interest in the
Trademark Collateral and the Patent Collateral to the extent provided in,
and pursuant to, this Agreement and has taken all necessary corporate
action to authorize the execution, delivery and performance of, and grant
of the security interest in the Trademark Collateral and the Patent
Collateral to the extent provided in, and pursuant to, this Agreement.
(b) Title; No Other Liens. As of the date hereof, except for the
Liens granted to the Administrative Agent, for the benefit of the Secured
Parties, pursuant to this Agreement and the other Liens permitted to exist
on the Collateral pursuant to the Loan Documents (including, without
limitation, any Liens permitted to exist on the Collateral pursuant to
subsection 8.3 of the Senior Secured Credit Agreement), the Grantor is
(or, in the case of after-acquired Collateral, will be) the sole, legal
and beneficial owner of the entire right, title and interest in and to the
material Trademarks set forth on Schedule I hereto and the material
Patents set forth in Schedule II hereto free and clear of any and all
Liens. As of the date hereof, except as set forth on Schedule III hereto,
no security agreement, financing statement or other public notice similar
in effect with respect to all or any part of the Collateral is on file or
of record in any public office (including, without limitation, the United
States Patent and Trademark Office), except such as may have been filed in
favor of the Administrative Agent, for the benefit of the Secured Parties,
pursuant to this Agreement or in respect of such Liens as may be permitted
pursuant to the Loan Documents (including, without limitation, any Liens
permitted to exist on the Collateral pursuant to subsection 8.3 of the
Senior Secured Credit Agreement).
(c) Perfected First Priority Liens. (i) As of the date hereof, this
Agreement is effective to create, as collateral security for the
Obligations, valid and enforceable Liens on the Collateral in favor of the
Administrative Agent, for the benefit of the Secured Parties, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, general equitable principles
(whether considered in
<PAGE> 6
6
a proceeding in equity or at law) and an implied covenant of good faith
and fair dealing.
(ii) As of the date hereof, except with respect to Liens upon
Patents and Trademarks and Patent Licenses and Trademark Licenses, which
Liens, to the extent not otherwise perfected by the filing of financing
statements under the Code in accordance herewith, would in the case of
Patents and Trademarks listed in Schedules I and II hereto, or in the case
of Patent Licenses and Trademark Licenses listed in Schedules I and II
hereto may be perfected upon the filing, acceptance and recordation
thereof in the United States Patent and Trademark Office, upon filing of
the financing statements delivered to the Administrative Agent by the
Grantor on the Effective Date in the jurisdictions listed on Schedule 5.14
to the Senior Secured Credit Agreement (which financing statements are in
proper form for filing in such jurisdictions) (and the recording of this
Agreement in the United States Patent and Trademark Office, and the making
of filings after the Effective Date in any other jurisdiction in the
United States as may be necessary under any Requirement of Law) the Liens
created pursuant to this Agreement will constitute valid and perfected
Liens on the Collateral in the United States in favor of the
Administrative Agent for the benefit of the Secured Parties, which Liens
will be prior to all other Liens of all other Persons with respect to the
Collateral, except for Liens permitted pursuant to the Loan Documents
(including, without limitation, those permitted to exist pursuant to
subsection 8.3 of the Senior Secured Credit Agreement), and which Liens
are enforceable as such against all creditors of and purchasers (except to
the extent that the recording of an assignment or other transfer of title
to the Administrative Agent in the United States Patent and Trademark
Office may be necessary for such enforceability) from the Grantor, except
as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law) or by an implied
covenant of good faith and fair dealing.
(d) Consents. No consent of any party (other than the Grantor) to
any material Patent License or material Trademark License constituting
Collateral is required, or purports to be required, to be obtained by or
on behalf of the Grantor in connection with the execution, delivery and
performance of this Agreement that has not been obtained. Each Patent
License and Trademark License constituting Collateral is in full force and
effect and constitutes a valid and legally enforceable obligation of the
Grantor and (to the knowledge of the Grantor) each other party thereto
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditor's rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law) or by an implied
covenant of good faith and fair dealing and except to the extent the
failure of any such Patent License or Trademark License constituting
Collateral to be in full force and effect or valid or legally enforceable
would not be reasonably expected, in the aggregate, to have a material
adverse effect on the value of the Collateral (as such term
<PAGE> 7
7
is defined in the Senior Secured Credit Agreement). No consent or
authorization of, filing with or other act by or in respect of any
Governmental Authority is required in connection with the execution,
delivery, performance, validity or enforceability of any of the Patent
Licenses or Trademark Licenses constituting Collateral by any party
thereto other than those which have been duly obtained, made or performed
and are in full force and effect and those the failure of which to make or
obtain would not be reasonably expected, in the aggregate, to have a
material adverse effect on the value of the Collateral (as such term is
defined in the Senior Secured Credit Agreement). Neither such Grantor nor
(to the knowledge of such Grantor) any other party to any Patent License
or Trademark License constituting Collateral is in default in the
performance or observance of any of the terms thereof, except for such
defaults as would not reasonably be expected, in the aggregate, to have a
material adverse effect on the value of the Collateral (as such term is
defined in the Senior Secured Credit Agreement). Except for rights
reserved in favor of the United States government, as required under law,
the right, title and interest of the Grantor in, to and under each Patent
License and Trademark License constituting Collateral are not subject to
any defense, offset, counterclaim or claim which would be reasonably
expected, either individually or in the aggregate, to have a material
adverse effect on the value of the Collateral (as such term is defined in
the Senior Secured Credit Agreement).
(e) Schedules I and II are Complete; All Filings Have Been Made. Set
forth in Schedules I and II is a complete and accurate list of all
material Trademarks and material Patents owned by the Grantor as of the
date hereof. As of the date hereof, the Grantor will have made all
necessary filings to protect and maintain its interest in the Trademarks
and Patents set forth in Schedules I and II, including, without
limitation, all necessary filings and payments of all maintenance fees, in
the United States Patent and Trademark Office to the extent such
Trademarks and Patents are material to such Grantor's business. Set forth
in Schedules I and II is a complete and accurate list of all of the
material Trademark Licenses and material Patent Licenses owned by the
Grantor as of the date hereof.
(f) The Trademarks and Trademark Licenses are Subsisting and Not
Adjudged Invalid. As of the date hereof, each trademark registration and
trademark application of the Grantor set forth in Schedule I is subsisting
as of the date hereof, and has not been adjudged invalid, unregisterable
or unenforceable, in whole or in part, and, to the best of such Grantor's
knowledge, is valid, registrable and enforceable. As of the date hereof,
each of the Trademark Licenses set forth in Schedule I is validly
subsisting and has not been adjudged invalid or unenforceable, in whole or
in part, and, to the best of such Grantor's knowledge, is valid and
enforceable. As of the date hereof, each Grantor has notified the
Administrative Agent in writing of all uses of any item of Trademark
Collateral material to such Grantor's business of which such Grantor is
aware which could reasonably be expected to lead to such item becoming
invalid or unenforceable, including unauthorized uses by third parties and
uses which were not supported by the goodwill of the business connected
with such Collateral.
<PAGE> 8
8
(g) The Patent and Patent Licenses are Subsisting and Not Adjudged
Invalid. As of the date hereof, each Patent and patent application of the
Grantor set forth in Schedule II is subsisting and has not been adjudged
invalid, unpatentable or unenforceable, in whole or in part, and, to the
best of such Grantor's knowledge, is valid, patentable and enforceable. As
of the date hereof, each of the Patent Licenses set forth in Schedule II
is validly subsisting and has not been adjudged invalid or unenforceable,
in whole or in part, and, to the best of such Grantor's knowledge, is
valid and enforceable. As of the date hereof, the Grantor has notified the
Administrative Agent in writing of all uses of any item of Patent
Collateral material to such Grantor's business of which such Grantor is
aware which could reasonably be expected to lead to such item becoming
invalid or unenforceable.
(h) No Previous Assignments or Releases. As of the date hereof, the
Grantor has not made an agreement constituting a present or future
assignment, sale, transfer or encumbrance of any of the Collateral (except
for any such assignment, sale, transfer or encumbrance permitted under the
Loan Documents). Except as permitted by the Loan Documents or as required
by law, the Grantor has not granted any license, shop right, release,
covenant not to sue, or non-assertion assurance to any Person with respect
to any material part of the Collateral which would have a Material Adverse
Effect.
(i) Proper Statutory Notice. The Grantor has marked its products
with the trademark registration symbol (R), the numbers of all appropriate
patents, the common law trademark symbol (TM), or the designation "patent
pending," as the case may be, to the extent that it is reasonably and
commercially practicable.
(j) No Knowledge of Claims Likely to Arise. Except for the Trademark
Licenses and Patent Licenses listed in Schedules I and II hereto, the
Grantor has no knowledge of the existence of any right or any claim (other
than as permitted by this Agreement or the Loan Documents) that is likely
to be made under or against any item of Collateral contained on Schedules
I and II which would have a Material Adverse Effect.
(k) No Knowledge of Existing or Threatened Claims. No claim has been
made and is continuing or, to the Grantor's knowledge, threatened that the
use by such Grantor of any item of Collateral is invalid or unenforceable
or that the use by such Grantor of any Collateral does or may violate the
rights of any Person, which would have a Material Adverse Effect. To the
Grantor's knowledge, there is currently no infringement or unauthorized
use of any item of Collateral contained on Schedules I and II hereto which
would have a Material Adverse Effect.
The Grantor agrees that the foregoing representations and warranties
shall be deemed to have been made by the Grantor on and as of each date on which
an extension of credit is made by the Lenders to the Borrower under the Senior
Secured Credit Agreement, in
<PAGE> 9
9
each case as though made on and as of each such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date).
4. Covenants. The Grantor covenants and agrees with the
Administrative Agent and the other Secured Parties that, from and after the date
of this Agreement until the payment in full of the Loans, the Reimbursement
Obligations and to the extent then due and owing, all other Obligations, the
termination of the Revolving Credit Commitments and the expiration, termination
or return to the Issuing Lender of any Letters of Credit:
(a) Further Documentation; Pledge of Instruments and Chattel Paper.
At any time and from time to time, upon the written request of the
Administrative Agent or the Grantor, as the case may be, and at the sole
expense of such Grantor, such Grantor or the Administrative Agent, as the
case may be, will promptly and duly execute and deliver such further
instruments and documents and take such further action as the
Administrative Agent or such Grantor, as the case may be, may reasonably
request for the purpose of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements
under the Uniform Commercial Code in effect in any jurisdiction with
respect to the Liens created hereby. The Grantor also hereby authorizes
the Administrative Agent to file any such financing or continuation
statement without the signature of such Grantor to the extent permitted by
applicable law. A carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction. The Administrative Agent agrees to notify such Grantor and
such Grantor agrees to notify the Administrative Agent of any financing or
continuation statement filed by it pursuant to this Section 4(a), provided
that any failure to give any such notice shall not affect the validity or
effectiveness of any such filing.
(b) Indemnification and Expenses. The Grantor agrees to pay, and to
save the Administrative Agent, the other Secured Parties and their
respective agents, officers, directors and successors harmless from, any
and all liabilities and reasonable costs and expenses (including, without
limitation, reasonable legal fees and expenses) (i) with respect to, or
resulting from, any delay by such Grantor in complying with any material
Requirement of Law applicable to any of the Collateral, or (ii) in
connection with any of the transactions contemplated by this Agreement,
provided that such indemnity shall not, as to the Administrative Agent,
any of the other Secured Parties or any of their respective agents,
officers, directors and successors, be available to the extent that such
liabilities, costs and expenses resulted from the gross negligence or
willful misconduct of any of the same. In any suit, proceeding or action
brought by the Administrative Agent or any other Secured Party under any
of the Collateral for any sum owing thereunder, or to enforce any of the
Collateral, the Grantor will save, indemnify and keep the Administrative
Agent, such Secured Party and their respective agents, officers, directors
and successors harmless from and against all expense, loss or damage
suffered by reason of any defense or counterclaim raised in any such suit,
<PAGE> 10
10
proceeding or action, except to the extent such expense, loss or damage
resulted from the gross negligence or willful misconduct of any of the
same.
(c) Maintenance of Records. The Grantor will keep and maintain at
its own cost and expense reasonably satisfactory and complete records of
the Collateral, and shall mark such records to evidence this Agreement and
the Liens and the security interests created hereby. For the
Administrative Agent's and the other Secured Parties' further security,
the Administrative Agent, for the benefit of the Secured Parties, shall
have a security interest in all of the Grantor's books and records
pertaining to the Collateral.
(d) Right of Inspection. Upon reasonable written advance notice to
the Grantor and at reasonable intervals, or at any time and from time to
time after the occurrence and during the continuation of an Event of
Default, the Administrative Agent shall have reasonable access during
normal business hours to all the books, correspondence and records of such
Grantor, and the Administrative Agent and its representatives may examine
the same, and to the extent reasonable take extracts therefrom and make
photocopies thereof, and the Grantor agrees to render to the
Administrative Agent, at such Grantor's reasonable cost and expense, such
clerical and other assistance as may be reasonably requested with regard
thereto.
(e) Compliance with Laws, etc. The Grantor will comply in all
material respects with all material Requirements of Law applicable to the
Collateral or any part thereof, except to the extent that the failure to
so comply would not be reasonably expected to materially adversely affect
in the aggregate the Administrative Agent's or the other Secured Parties'
rights hereunder, the priority of their Liens on the Collateral or the
value of the Collateral.
(f) Further Identification of Collateral. The Grantor will furnish
to the Administrative Agent from time to time such statements and
schedules further identifying and describing the Collateral, and such
other reports in connection with the Collateral, as the Administrative
Agent may reasonably request, all in reasonable detail.
(g) Security Interest in Any Newly Acquired Collateral. The Grantor
agrees that, should it obtain an ownership interest in any material
Trademark, Patent, Trademark License or Patent License, which is not now a
part of the Collateral, (i) the provisions of Section 2 shall
automatically apply thereto, (ii) any such Trademark, Patent, Trademark
License and Patent License shall automatically become part of the
Collateral, and (iii) with respect to any ownership interest in any such
Trademark, Patent, Trademark License or Patent License that such Grantor
should obtain, it shall give notice thereof to the Administrative Agent in
writing, in reasonable detail, at its address set forth in each of the
Credit Agreements within 45 days after the end of the calendar quarter in
which it obtains such ownership interest. The Grantor authorizes
<PAGE> 11
11
the Administrative Agent to modify this Agreement by amending Schedules I
and II (and will cooperate reasonably with the Administrative Agent in
effecting any such amendment) to include on Schedule I any Trademark and
Trademark License and on Schedule II any Patent or Patent License of which
it receives notice under this Section, or to prepare and file with the
United States Patent and Trademark Office a supplement to this Agreement
to include any Patent or Trademark of which it receives notice to under
this Section.
(h) Maintenance of the Trademark Collateral. Except as permitted in
the Loan Documents the Grantor agrees to take all reasonably necessary
steps, including, without limitation, in the United States Patent and
Trademark Office or in any court, to (i) maintain each trademark
registration and each Trademark License identified on Schedule I hereto,
and (ii) pursue each trademark application now or hereafter identified in
Schedule I hereto, including, without limitation, the filing of responses
to office actions issued by the United States Patent and Trademark Office,
the filing of applications for renewal, the filing of affidavits under
Sections 8 and 15 of the United States Trademark Act, and the
participation in opposition, cancellation, infringement and
misappropriation proceedings, except, in each case in which such Grantor
has reasonably determined that any of the foregoing is not of material
economic value to it. The Grantor agrees to take corresponding steps with
respect to each new or acquired trademark or service mark registration, or
application for trademark or service mark registration, or any rights
obtained under any Trademark License, in each case, which it is now or
later becomes entitled, except in each case in which such Grantor has
reasonably determined that any of the foregoing is not of material
economic value to it. Any expenses incurred in connection with such
activities shall be borne by such Grantor.
(i) Maintenance of the Patent Collateral. The Grantor agrees to take
all necessary steps, including, without limitation, in the United States
Patent and Trademark Office or in any court, to (i) maintain each patent
and each Patent License identified on Schedule II hereto, and (ii) pursue
each patent application, now or hereafter identified in Schedule II
hereto, including, without limitation, the filing of divisional,
continuation, continuation-in-part and substitute applications, the filing
of applications for reissue, renewal or extensions, the payment of
maintenance fees, and the participation in interference, reexamination,
opposition, infringement and misappropriation proceedings, except, in each
case in which such Grantor has reasonably determined that any of the
foregoing is not of material economic value to it. The Grantor agrees to
take corresponding steps with respect to each new or acquired patent,
patent application, or any rights obtained under any Patent License, in
each case, which it is now or later becomes entitled, except in each case
in which such Grantor has reasonably determined that any of the foregoing
is not of material economic value to it. Any expenses incurred in
connection with such activities shall be borne by the Grantor.
<PAGE> 12
12
(j) Preservation and Protection of the Trademark Collateral and
Patent Collateral. Except as provided in Section 4(k) hereof, the Grantor
shall take all steps which it or the Administrative Agent deems reasonably
appropriate under the circumstances to preserve and protect its material
Trademark Collateral and Patent Collateral.
(k) Grantor Shall Not Abandon any Collateral. The Grantor shall not
abandon any trademark registration, patent or any pending trademark or
patent application, in each case listed on Schedule I or Schedule II,
without the written consent of the Administrative Agent, unless such
Grantor shall have previously determined that such use or the pursuit or
maintenance of such trademark registration, patent or pending trademark or
patent application is not of material economic value to it, in which case,
such Grantor will, at least annually, give notice of any such abandonment
to the Administrative Agent in writing, in reasonable detail, at its
address set forth in the Senior Secured Credit Agreement.
(l) Infringement of Any Collateral. In the event that any Grantor
becomes aware that any item of the Collateral which such Grantor has
reasonably determined to be material to its business is infringed or
misappropriated by a third party, which infringement or misappropriation
would reasonably be expected to have a Material Adverse Effect, such
Grantor shall notify the Administrative Agent promptly and in writing, in
reasonable detail, at its address set forth in the Senior Secured Credit
Agreement, and shall take such actions as such Grantor or the
Administrative Agent deems reasonably appropriate under the circumstances
to protect such Collateral, including, without limitation, suing for
infringement or misappropriation and for an injunction against such
infringement or misappropriation. Any expense incurred in connection with
such activities shall be borne by such Grantor. The Grantor will advise
the Administrative Agent promptly and in writing, in reasonable detail, at
its address set forth in the Senior Secured Credit Agreement, of any
adverse determination or the institution of any proceeding (including,
without limitation, the institution of any proceeding in the United States
Patent and Trademark Office or any court) regarding any item of the
Collateral which has a Material Adverse Effect.
(m) Use of Statutory Notice. The Grantor shall mark its products
with the trademark registration symbol (R), the numbers of all appropriate
patents, the common law trademark symbol (TM), or the designation "patent
pending," as the case may be, to the extent that it is reasonably and
commercially practicable.
(n) Limitation on Liens on Collateral. The Grantor will not create,
incur or permit to exist, will defend the Collateral against, and will
take such other action as is reasonably necessary to remove, any material
Lien or material adverse claim on or to any of the Collateral, other than
Liens created hereby and other than as permitted pursuant to the Loan
Documents (including, without limitation, any Liens permitted to exist on
the Collateral pursuant to subsection 8.3 of the Senior Secured Credit
<PAGE> 13
13
Agreement), and will defend the right, title and interest of the
Administrative Agent and the other Secured Parties in and to any of the
Collateral against the claims and demands of all Persons whomsoever,
except where failure to defend would not have a Material Adverse Effect.
(o) Limitations on Dispositions of Collateral. Without the prior
written consent of the Administrative Agent, the Grantor will not sell,
assign, transfer, exchange or otherwise dispose of, or grant any option
with respect to, the Collateral, or attempt, offer or contract to do so,
except with respect to licenses in the ordinary course of business or as
permitted by this Agreement or the Loan Documents.
(p) Notices. The Grantor will advise the Administrative Agent
promptly and in writing, in reasonable detail, at its address set forth in
the Senior Secured Credit Agreement, (i) of any Lien (other than Liens
created hereby or permitted under the Loan Documents, including, without
limitation, any Liens permitted to exist on the Collateral pursuant to
subsection 8.3 of the Senior Secured Credit Agreement) on any Patents or
Trademarks and (ii) of the occurrence of any other event which would
reasonably be expected in the aggregate to have a material adverse effect
on the aggregate value of the Collateral taken as a whole or the Liens
created hereunder.
5. Administrative Agent's Appointment as Attorney-in-Fact.
(a) Powers. The Grantor hereby irrevocably constitutes and appoints
the Administrative Agent and any officer or agent of the Administrative Agent,
with full power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of such Grantor and
in the name of such Grantor or in its own name, for the purpose of carrying out
the terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be reasonably necessary
or desirable to accomplish the purposes of this Agreement to the extent
permitted by law, and, without limiting the generality of the foregoing, to the
extent permitted by law, the Grantor hereby gives the Administrative Agent the
power and right, on behalf of such Grantor, without notice to or assent by such
Grantor, to do, at any time when an Event of Default has occurred and is
continuing, the following:
(i) to execute and deliver any and all agreements, instruments,
documents, and papers as the Administrative Agent may reasonably request
to evidence the Administrative Agent's and the other Secured Parties'
security interest in any of the Collateral and the goodwill of such
Grantor relating thereto or represented thereby;
(ii) in the name of such Grantor or its own name, or otherwise, to
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
General Intangible (to the extent that the foregoing constitute
Collateral) or with respect to any other Collateral and to file any claim
or to take any other action or institute any proceeding in any court of
law
<PAGE> 14
14
or equity or otherwise deemed appropriate by the Administrative Agent for
the purpose of collecting any and all such moneys due under such General
Intangible or with respect to any other Collateral whenever payable;
(iii) to pay or discharge Liens placed on the Collateral, other than
Liens permitted under this Agreement or the other Loan Documents,
including, without limitation, any Liens permitted to exist on the
Collateral pursuant to subsection 8.3 of the Senior Secured Credit
Agreement; and
(iv) (A) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; (B) to ask for, or demand, collect, receive payment of
and receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral; (C)
to sign and indorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with
any of the Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any thereof and to enforce any other right in
respect of any Collateral; (E) to defend any suit, action or proceeding
brought against the Grantor with respect to any of the Collateral; (F) to
settle, compromise or adjust any suit, action or proceeding described in
clause (E) above and, in connection therewith, to give such discharges or
releases as the Administrative Agent may deem appropriate; (G) subject to
any pre-existing reserved rights or licenses, to assign any Patent or
Trademark constituting Collateral (along with the goodwill of the business
to which any such Patent or Trademark pertains), for such term or terms,
on such conditions, and in such manner, as the Administrative Agent shall
in its sole discretion determine; and (H) generally, to sell, transfer,
pledge and make any agreement with respect to or otherwise deal with any
of the Collateral as fully and completely as though the Administrative
Agent were the absolute owner thereof for all purposes, and to do, at the
Administrative Agent's option and the Grantor's expense, at any time, or
from time to time, all acts and things which the Administrative Agent
deems reasonably necessary to protect, preserve or realize upon the
Collateral and the Administrative Agent's and the other Secured Parties'
Liens thereon and to effect the intent of this Agreement, all as fully and
effectively as such Grantor might do.
The Grantor hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable until the payment in full of the Loans, the
Reimbursement Obligations and the other Obligations then due and owing, the
termination of the Revolving Credit Commitments and the expiration, termination
or return to the Issuing Lender of any Letters of Credit.
(b) Other Powers. The Grantor also authorizes the Administrative
Agent, from time to time if an Event of Default shall have occurred and be
continuing, to execute, in
<PAGE> 15
15
connection with any sale provided for in Section 8 hereof, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral.
(c) No Duty on the Part of Administrative Agent or Secured Parties.
The powers conferred on the Administrative Agent and the other Secured Parties
hereunder are solely to protect the Administrative Agent's and the other Secured
Parties' interests in the Collateral and shall not impose any duty upon the
Administrative Agent or any other Secured Party to exercise any such powers. The
Administrative Agent and the other Secured Parties shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers,
and neither they nor any of their officers, directors, employees, affiliates,
agents or successors shall be responsible to the Grantor for any act or failure
to act hereunder, except for gross negligence or willful misconduct of any of
the same.
6. Performance by Administrative Agent of Grantor's Obligations. If
the Grantor fails to perform or comply with any of its agreements contained
herein and the Administrative Agent, as provided for by the terms of this
Agreement, shall perform or comply, or otherwise cause performance or
compliance, with such agreements, the reasonable expenses of the Administrative
Agent incurred in connection with such performance or compliance, together with
interest thereon at a rate per annum equal to 1.75% above the rate applicable to
ABR Loans that are Term Loans, shall be payable by such Grantor to the
Administrative Agent on demand, and such Grantor's obligations to make such
payments shall constitute Obligations secured hereby.
7. Proceeds. It is agreed that if an Event of Default shall occur
and be continuing, (a) all Proceeds of any Collateral received by the Grantor
consisting of cash, checks and other near-cash items shall be held by such
Grantor in trust for the Administrative Agent and the other Secured Parties,
segregated from other funds of such Grantor, and shall, forthwith upon receipt
by such Grantor, be turned over to the Administrative Agent in the exact form
received by such Grantor (duly indorsed by such Grantor to the Administrative
Agent, if required), and (b) any and all such Proceeds received by the
Administrative Agent (whether from the Grantor or otherwise) shall be held by
the Administrative Agent for the benefit of the Secured Parties as collateral
security for the Obligations (whether matured or unmatured), and/or then or at
any time thereafter may, in the sole discretion of the Administrative Agent, be
applied by the Administrative Agent against the Obligations then due and owing
in the following order of priority:
FIRST, to the payment of all reasonable costs and expenses incurred
by the Administrative Agent (including, without limitation, in its
capacity as Senior Secured Credit Agreement Administrative Agent) in
connection with this Agreement, the Guarantee and Collateral Agreement,
the Senior Secured Credit Agreement, any other Loan Document or any of the
Obligations, including, without limitation, all court costs and the
reasonable fees and expenses of its agents and legal counsel, and any
other reasonable costs or expenses incurred in connection with the
exercise by the Administrative Agent (including, without limitation, in
its capacity as Senior Secured
<PAGE> 16
16
Credit Agreement Administrative Agent) of any right or remedy under this
Agreement, the Senior Secured Credit Agreement, or any other Loan
Document;
SECOND, to the ratable satisfaction of all other Obligations; and
THIRD, to the Grantor or its successors or assigns, or to whomsoever
may be lawfully entitled to receive the same.
8. Remedies. If an Event of Default shall occur and be continuing,
the Administrative Agent, on behalf of the Secured Parties, may exercise all
rights and remedies of a secured party under the Code, and, to the extent
permitted by law, all other rights and remedies granted to the Administrative
Agent or any Secured Party in this Agreement and the other Loan Documents and in
any other instrument or agreement securing, evidencing or relating to the
Obligations. Without limiting the generality of the foregoing, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances, to the extent permitted by law, forthwith
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, lease, assign, give option or options to
purchase, or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker's board or office of the
Administrative Agent or any other Secured Party or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Administrative Agent or any other Secured Party shall have the right, to the
extent permitted by law, upon any such sale or sales, to purchase the whole or
any part of the Collateral so sold, free of any right or equity of redemption in
the Grantor, which right or equity is hereby waived and released. The Grantor
further agrees, at the Administrative Agent's request, to assemble the
Collateral and make it available to the Administrative Agent at places which the
Administrative Agent shall reasonably select, whether at such Grantor's premises
or elsewhere. In the event of any sale, assignment, or other disposition of any
of the Collateral, the goodwill of the business connected with and symbolized by
any Trademark Collateral subject to such disposition shall be included, and such
Grantor shall supply to the Administrative Agent or its designee such Grantor's
know-how and expertise relating to the Collateral subject to such disposition,
and such Grantor's notebooks, studies, reports, records, documents and things
embodying the same or relating to the inventions, processes or ideas covered by,
and to the manufacture of any products under or in connection with, the
Collateral subject to such disposition, and such Grantor's customer's lists,
studies and surveys and other records and documents relating to the
distribution, marketing, advertising and sale of products relating to the
Collateral subject to such disposition. The Administrative Agent shall apply the
net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the
<PAGE> 17
17
rights of the Administrative Agent and the other Secured Parties hereunder,
including, without limitation, reasonable attorneys' fees and disbursements, to
the payment and performance in whole or in part of the Obligations then due and
owing, in the order of priority specified in Section 7 hereof, and only after
such application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Administrative Agent account for the surplus,
if any, to the Grantor. To the extent permitted by applicable law, (a) the
Grantor waives all claims, damages and demands it may acquire against the
Administrative Agent or any other Secured Party arising out of the repossession,
retention or sale of the Collateral, other than any such claims, damages and
demands that may arise from the gross negligence or willful misconduct of any of
them, and (b) any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition. The Grantor shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay in full the Loans, the
Reimbursement Obligations, and, to the extent then due and owing, all other
Obligations, including, without limitation, the reasonable fees and
disbursements of any attorneys employed by the Administrative Agent or any other
Secured Party to collect such deficiency, as provided in the Senior Secured
Credit Agreement.
9. Limitation on Duties Regarding Preservation of Collateral. The
Administrative Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar property for its own account. Neither
the Administrative Agent, any other Secured Party, nor any of their respective
directors, officers, employees, affiliates or agents shall be liable for failure
to demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Grantor or any other Person.
10. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are powers coupled with an
interest and are irrevocable until the payment in full of the Loans, the
Reimbursement Obligations and, to the extent then due and owing, all other
Obligations, the termination of the Revolving Credit Commitments and the
expiration, termination or return to the Issuing Lender of any Letters of
Credit.
11. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. Section Headings. The Section headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
<PAGE> 18
18
13. No Waiver; Cumulative Remedies. Neither the Administrative Agent
nor any other Secured Party nor the Grantor shall by any act (except by a
written instrument pursuant to Section 14 hereof), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent, any other Secured Party or
the Grantor, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent,
any other Secured Party or the Grantor of any right or remedy hereunder on any
one occasion shall not be construed as a bar to any right or remedy which the
Administrative Agent, such other Secured Party or the Grantor would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
rights or remedies provided by law.
14. Waivers and Amendments; Successors and Assigns. None of the
terms or provisions of this Agreement may be amended, supplemented, waived or
otherwise modified except by a written instrument executed by the Grantor and
the Administrative Agent, provided that, if requested by the Grantor, any
provision of this Agreement for the benefit of the Administrative Agent and/or
the other Secured Parties may be waived by the Administrative Agent in a written
letter or agreement executed by the Administrative Agent or by telex or
facsimile transmission from the Administrative Agent. This Agreement shall be
binding upon and shall inure to the benefit of the Grantor and its successors
and assigns, and the Administrative Agent and the other Secured Parties and
their respective successors, indorsees, transferees and assigns, except that
(other than in accordance with subsection 8.5 of the Senior Secured Credit
Agreement) the Grantor shall not assign, transfer or delegate any of its rights
or obligations under this Agreement without the prior written consent of the
Administrative Agent.
15. Notices. All notices, requests and demands to or upon the
respective parties hereto shall be made in accordance with subsection 11.2 of
the Senior Secured Credit Agreement. The Administrative Agent, the Secured
Parties and the Grantor may change their respective addresses and transmission
numbers for notices by notice in the manner provided in this Section 15.
16. Authority of Administrative Agent. The Grantor acknowledges that
the rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Administrative Agent and the other
Secured Parties, be governed by the Senior Secured Credit Agreement and by such
other agreements with respect thereto as may exist from time to time among them,
but, as between the Administrative Agent and such Grantor, the Administrative
<PAGE> 19
19
Agent shall be conclusively presumed to be acting as agent for the Secured
Parties with full and valid authority so to act or refrain from acting, and such
Grantor shall not be under any obligation to make any inquiry respecting such
authority.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
18. Release of Collateral and Termination. (a) This Agreement shall
remain in full force and effect and be binding in accordance with and to the
extent of its terms and the security interest created by this Agreement shall
not be released until the payment in full of the Loans, the Reimbursement
Obligations and the other Obligations then due and owing shall have occurred,
the Revolving Credit Commitments shall have been terminated and any Letters of
Credit shall have expired or been terminated or returned to the Issuing Lender,
at which time the Collateral shall be released from the Liens created hereby,
and this Agreement and all obligations (other than those expressly stated to
survive such termination) of the Administrative Agent and the Grantor hereunder
shall terminate, all without delivery of any instrument or performance of any
act by any party, and all rights to the Collateral shall revert to the Grantor,
provided that if any payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Administrative Agent
or any other Secured Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Grantor or any other Loan Party, or upon or
as a result of the appointment of a receiver, intervenor or conservator of, or a
trustee or similar officer for, the Grantor or any other Loan Party or any
substantial part of its property, or otherwise, this Agreement, all rights
hereunder and the Liens created hereby shall continue to be effective, or be
reinstated, as though such payments had not been made. Upon request of the
Grantor following any such termination, the Administrative Agent shall reassign
(at the sole cost and expense of such Grantor) to such Grantor any Collateral
held by the Administrative Agent hereunder, and execute and deliver (at the sole
cost and expense of such Grantor) to such Grantor such documents as such Grantor
shall reasonably request to evidence such termination and reassignment.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by the Grantor in a transaction permitted by the Senior Secured
Credit Agreement, then the Administrative Agent shall execute and deliver to the
Grantor (at the sole cost and expense of such Grantor) all releases or other
documents reasonably necessary or desirable for the release of the Liens created
hereby on such Collateral.
19. Incorporation of Provisions of Guarantee and Collateral
Agreement. The Grantor hereby acknowledges and affirms that the rights and
remedies of the Administrative Agent with respect to the security interest in
the Collateral made and granted hereby are more fully set forth in the Guarantee
and Collateral Agreement, the terms, conditions and other provisions of which,
in so far as they relate to the Collateral, such security interest and such
rights and remedies, are incorporated by reference herein as if fully
<PAGE> 20
20
set forth herein. Nothing in this Agreement shall defer or impair the attachment
or perfection of any security interest in any collateral described in the
Guarantee and Collateral Agreement which would attach or be perfected pursuant
to the terms of the Guarantee and Collateral Agreement without action by the
Grantor or any other Person.
20. Interpretation. In the event of a conflict between any term of
this Agreement and the terms of the Senior Secured Credit Agreement, the terms
of the Senior Secured Credit Agreement shall control.
21. Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Grantor and the Administrative Agent with
respect to the subject matter hereof and there are no promises or
representations by the Grantor, the Administrative Agent or any other Secured
Party relative to the subject matter hereof not reflected or referred to herein
or therein.
22. Submission To Jurisdiction; Waivers. Each party hereto hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgement
in respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient forum and agrees not
to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Grantor or the applicable Secured Party, as the case may be, at the
address referred to in Section 15 or at such other address of which the
Administrative Agent and the Grantor shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred
to in this Section 22 any punitive damages.
<PAGE> 21
21
23. WAIVER OF JURY TRIAL. THE GRANTOR AND THE
ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.
24. Counterparts. This Agreement may be executed and acknowledged by
one or more of the parties to this Agreement on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
<PAGE> 22
22
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed and delivered as of the date first above written.
EV INTERNATIONAL, INC.
By: /s/ CHRISTINE K. VANDEN BEUKEL
------------------------------
Title: Vice President and Secretary
ACKNOWLEDGED AND AGREED AS OF
THE DATE HEREOF BY:
THE CHASE MANHATTAN BANK, as Administrative Agent
By: /s/ LAWRENCE PALUMBO, JR.
-------------------------
Title: Vice President
Attorney-in-Fact
<PAGE> 23
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 10th day of February, 1997, before me personally came
Christine K. Vanden Beukel to me known, who, being by me duly sworn, did depose
and say he resides at 48 West 68th Street, Apt. 5E, New York, New York 10023 and
that she is the VP, Secretary and Treasurer of EV International, Inc., the
corporation described in and which executed the above instrument; that he has
been authorized to execute said instrument on behalf of said corporation; and
that he signed said instrument on behalf of said corporation pursuant to said
authority.
/s/ NANCY LOMAZZO
--------------------------------
Notary Public
[Notarial Seal] Nancy L. Lomazzo
Notary Public, State of New York
No. 31-5061123
Qualified in New York County
Commission Expires June 3, 1998
<PAGE> 24
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 10th day of February, 1997, before me personally came
Lawrence Palumbo to me known, who, being by me duly sworn, did depose and say he
resides at 156 Lindbergh Blvd., Bloomfield, N.J. 07003 and that he is a Vice
President of THE CHASE MANHATTAN BANK, the national banking association
described in and which executed the above instrument; that he has been
authorized to execute said instrument on behalf of said association; and that he
has signed said instrument on behalf of said association pursuant to said
authority.
/s/ MAUREEN ANN RYAN
---------------------------------
Notary Public
[Notarial Seal] MAUREEN ANN RYAN
Notary Public, State of New York
No. 03-4949830
Qualified in Bronx County
Certificate Filed in New York County
Commission Expires April 17, 1997
<PAGE> 25
Schedule I
TRADEMARKS AND TRADEMARK LICENSES
<PAGE> 26
Schedule II
PATENTS AND PATENT LICENSES
<PAGE> 27
Schedule III
EXISTING SECURITY INTERESTS
<PAGE> 1
Exhibit 10(a)
CONSULTING AGREEMENT
This CONSULTING AGREEMENT, dated as of February __, 1997 (the
"Agreement"), is entered by and among EVI Audio Holding, Inc., a Delaware
corporation ("Holding"), EV International, Inc. a Delaware corporation (the
"Company"), and Greenwich Street Capital Partners, Inc., a Delaware corporation
("Greenwich"). Capitalized terms not otherwise defined herein shall have their
respective meanings set forth in the Purchase Agreement, referred to below.
W I T N E S S E T H:
WHEREAS, Mark IV Industries, Inc., a Delaware corporation,
Gulton Industries, Inc., a Delaware corporation ("Gulton"), Mark IV PLC, a
United Kingdom corporation and Gulton Acquisition Corp. ("Acquisition"), entered
into a Purchase Agreement, dated as of December 12, 1996 as amended (the
"Purchase Agreement"), pursuant to which Mark IV and PLC sold all the issued and
outstanding shares of Common Stock to Acquisition;
WHEREAS, immediately following the purchase by Acquisition of
all of the Common Stock of Gulton, Acquisition merged with and into Gulton (the
"Company Merger");
WHEREAS, immediately following the First Merger, Gulton and
its wholly owned subsidiaries, Mark IV Audio Magnetic, Inc., a Delaware
corporation, LFE Corporation, a Delaware corporation and Mark IV Audio, Inc., a
Delaware corporation merged, with and into Electro-Voice, Incorporated, a
Delaware corporation and a wholly owned subsidiary of Gulton ("Electro-Voice"),
which was the surviving corporation of such mergers, and the name of
Electro-Voice was changed to EV International, Inc. (such transactions and the
First Merger being referred to collectively as the "Mergers");
WHEREAS, as of January __, 1997, Holding, Acquisition and
Greenwich entered into an Indemnification Agreement and, as a result of the
Mergers, the Company succeeded to all of the rights and obligations of
Acquisition under such Indemnification Agreement;
WHEREAS, the Company and its direct and indirect subsidiaries
collectively referred to herein as the "Company Group") desire to receive
financial and
Consulting Agreement
<PAGE> 2
managerial advisory services from Greenwich, and Greenwich desires to provide
such services to the Company Group; and
NOW, THEREFORE, in consideration of the premises and the
respective agreements hereinafter set forth and the mutual benefits to be
derived herefrom, the parties hereto hereby agree as follows:
1. Engagement. Each member of the Company Group, jointly and
severally, hereby engage Greenwich as a consultant, and Greenwich hereby agrees
to provide financial and managerial advisory services to the Company Group, all
on the terms and subject to the conditions set forth below.
2. Services. (a) Greenwich hereby agrees during the term of
this Agreement to assist, advise and consult with the respective Boards of
Directors and management of each member of the Company Group and their
subsidiaries in such manner and on such business, management and financial
matters, and provide such other financial and managerial advisory services, as
may be reasonably requested from time to time by the respective Boards of
Directors of the members of the Company Group, including but not limited to
assistance in:
(i) the raising of additional debt and equity capital from
time to time for the Company Group;
(ii) establishing and maintaining banking, consulting,
advising and other business relationships for the
Company Group;
(iii) developing and implementing corporate and business
strategy and planning for the Company Group, including
plans and programs for improving operating, marketing
and financial performance, budgeting of future corporate
investments, acquisition and divestiture strategies, and
reorganizational programs;
(iv) providing individuals to serve as directors or officers
of the Company Group; and
(v) providing such other consulting and advisory services as
the Company Group may reasonable request.
(b) Each member of the Company Group will furnish Greenwich with such
information as Greenwich believes appropriate to its engagement hereunder (all
such
Consulting Agreement
2
<PAGE> 3
information so furnished being referred to herein as the "Information"). Each of
the Companies recognizes and confirms that (i) Greenwich will use and rely
primarily on the Information and on information available from generally
recognized public sources in performing the services to be performed hereunder
and (ii Greenwich does not assume responsibility for the accuracy or
completeness of the Information and such other information.
3. Fee. In consideration of providing the foregoing services,
the Companies will pay to Greenwich an annual advisory fee of $750,000, payable
quarterly in arrears (the "Fee"). The first payment will be due on the last day
of the end of the first full calendar quarter following the date hereof. If
Greenwich or any of its affiliates or designees invests additional equity in the
Company Group or any of its affiliates on one or more occasions after the date
hereof, then, in each such case, the Company Group and Greenwich will negotiate
in good faith to effect a mutually acceptable increase to such advisory fee.
4. Payment of Expenses. The Company Group will also reimburse
Greenwich promptly for Greenwich's reasonable out-of-pocket costs and expenses
incurred by Greenwich or its employees, agents or advisors in connection with
the performance of Greenwich's duties hereunder including but not limited to (a)
any fees and expenses of any reasonable legal, accounting or other professional
advisors to Greenwich engaged in connection with the services being provided
hereunder or (b) any fees associated with the maintenance or operation of EVI
Audio LLC ("Expenses").
5. Term, etc. (a) This Agreement shall be in effect until, and
shall terminate upon, the earlier to occur of (i) the tenth anniversary of the
date hereof and (ii) the date on which Greenwich Street Capital Partners, L.P.
directly or indirectly no longer owns any shares of the capital stock of
Holding, and may be earlier terminated by Greenwich, in its sole discretion,
upon 15 days' prior written notice to the Companies.
(b) Upon any consolidation or merger (other than the Mergers),
or any conveyance, transfer or lease of all or substantially all of the assets
of any of the members of the Company Group, the successor corporation (or other
entity) formed by such consolidation or into which such Company is merged or to
which such conveyance, transfer or lease is made shall succeed to, and be
substituted for, such Company under this Agreement with the same effect as if
such successor corporation had been a party thereto. No such consolidation,
merger or conveyance, transfer or lease of all or substantially all of the
assets of any of the Company Group shall have the effect of terminating this
Agreement or of releasing such Company or any such successor corporation from
its obligations hereunder.
Consulting Agreement
3
<PAGE> 4
(c) Upon any termination of this Agreement, any accrued and
unpaid installment of the Fee or portion thereof (pro-rated, with respect to the
month in which such termination occurs, for the portion of such month that
precedes such termination), and any unpaid and unreimbursed Expenses that shall
have been incurred prior to such termination (whether or not such Expenses shall
then have become payable), shall be immediately paid or reimbursed, as the case
may be, by the Company.
6. Indemnification. The obligations of the parties hereto are
in addition to, and shall in no way reduce or limit, the obligations thereof
under the Indemnification Agreement, which shall remain in full force and
effect.
7. Independent Contractor Status. The parties agree that
Greenwich shall perform services hereunder as an independent contractor,
retaining control over and responsibility for its own operations and personnel.
Neither Greenwich nor any of its employees or agents shall, solely by virtue of
this Agreement or the arrangements hereunder, be considered employees or agents
of any other party hereto or any member of the Company Group nor shall any of
them have authority to contract in the name of any such person, except as
expressly agreed to in writing by such person.
8. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage pre-paid, (c)
sent by next day or overnight mail or delivery or (d) sent by telecopy or
telegram, as follows:
(i) If to the Companies, to:
EV International, Inc.
602 Cecil Street
Buchanan Michigan 49107
Attention: Robert D. Pabst
or to such other person or address as the Company shall furnish to Greenwich in
writing.
(ii) If to Greenwich, to:
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, New York 10013
Attention: Nicholas E. Somers
Consulting Agreement
4
<PAGE> 5
with a copy to:
Andrew L. Sommer, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
or to such other person or address as Greenwich shall furnish to the Company in
writing.
All such notices, requests, demands, waivers and other
communications shall be deemed to have been received (w) if by personal
delivery, on the day after such delivery, (x) if by certified or registered
mail, on the fifth business day after the mailing thereof, (y) if by next-day or
overnight mail delivery, on the day delivered, or (z) if by telecopy or
telegram, on the day on which such telecopy or telegram was sent, provided that
a copy is also sent by certified or registered mail.
9. Entire Agreement. This Agreement and the Indemnification
Agreement contain the complete and entire understanding and agreement of each
party hereto with respect to the subject matter hereof and supersede all prior
and contemporaneous understandings, conditions and agreements, oral or written,
express or implied, in respect of the subject matter hereof.
10. Headings. The headings contained in this Agreement are for
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
11. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
12. Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties to this Agreement and their
respective successors and assigns, provided that no party hereto may assign any
of its rights or obligations under this Agreement without the express written
consent of each other party hereto. By operation of merger, this Agreement shall
be binding upon and inure to the benefit of the surviving entity of a merger.
This Agreement is not intended to confer any right or remedy hereunder upon any
person other than the parties to this Agreement and their respective successors
and permitted assigns.
Consulting Agreement
5
<PAGE> 6
13. Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the law of the State
of New York, regard less of the law that might be applied under principles of
conflicts of laws.
14. Amendment; Waivers. No amendment, modification, supplement
or discharge of this Agreement, and no waiver hereunder, shall be valid or
binding unless set forth in writing and duly executed by the party against whom
enforcement of the amendment, modification, supplement, discharge or waiver is
sought, and acknowledged by the other party. Any such waiver shall constitute a
waiver only with respect to the specific matter described in such writing and
shall in no way impair the rights of the party granting such waiver in any other
respect or at any other time. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity or otherwise.
Consulting Agreement
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
EV INTERNATIONAL, INC.
By: /s/ ROBERT D. PABST
----------------------------------
Name: Robert D. Pabst
Title: President
EVI AUDIO HOLDING, INC.
By: /s/ CHRISTINE K. VANDEN BEUKEL
------------------------------------
Name: Christine K. Vanden Beukel
Title: Vice President and Secretary
GREENWICH STREET CAPITAL PARTNERS, INC.
By: /s/ NICHOLAS E. SOMERS
------------------------------------
Name: Nicholas E. Somers
Title: Vice President and Treasurer
Consulting Agreement
S-1
<PAGE> 1
Exhibit 10(b)
GULTON ACQUISITION CORP.
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 11th day of
December, 1996, by and between Gulton Acquisition Corp., (hereinafter called the
"Corporation"), a Delaware corporation, and Robert D. Pabst (hereinafter called
the "Employee").
WITNESSETH THAT:
WHEREAS, the Employee presently serves as an employee of
Electro-Voice, Incorporated; and
WHEREAS, the parties desire to set forth in this Agreement the terms
and conditions of their continuing employment relationship from and after the
date of the closing (the "Closing Date") of the transactions contemplated by
the Purchase Agreement by and among Mark IV Industries, Inc., Gulton Industries,
Inc., Mark IV PLC and Gulton Acquisition Corp. (the "Purchase Agreement");
NOW, THEREFORE, the Corporation and the Employee, each intending to
be legally bound, hereby mutually covenant and agree as follows:
<PAGE> 2
1. Employment and Term. The Corporation hereby agrees to employ the
Employee in a full-time capacity for the term commencing on the Closing Date and
ending on the third anniversary thereof, and the Employee hereby accepts such
employment, subject to earlier termination in accordance with Section 6. The
term of the Agreement shall be automatically extended, upon the terms and
conditions set forth herein, for successive periods of one year each, unless
either party, at least 6 months prior to the expiration of the original term or
any extended term, shall give written notice to the other of its intention not
to renew such employment. The period during which the Employee is employed
pursuant to this Agreement, including any extension thereof in accordance with
the preceding sentence, shall be referred to as the "Employment Period".
2. Position and Duties. During the Employment Period, the Employee
shall serve the Corporation as Chief Executive Officer and President of the
Corporation and in such other position or positions with the Corporation and any
of its subsidiaries and affiliates as the Board of
2
<PAGE> 3
Directors of the Corporation (the "Board") shall from time to time specify, and
shall have such duties consistent with such position or positions and of a
senior executive nature as may be assigned to him or her from time to time by
the Board. The Employee shall not be required to move to a work location beyond
25 miles from that existing at the Closing Date, nor shall he or she be required
to accept a position or duties which entail a substantial increase in travel
relative to that which has been typical of his or her position held immediately
prior to the Closing Date. In case the Employee refuses to accept such
relocation or change in position or duties and, as a result is no longer able to
perform the duties described herein, he or she may resign, and the Corporation
shall be treated as having terminated the Employee's employment without Cause
under Section 6(c) hereof.
3. Compensation.
(a) Base Salary. For his or her services performed pursuant to this
Agreement, during the Employment Period, the Corporation shall pay the
3
<PAGE> 4
Employee a base salary at the rate of $230,000 per annum (the "Base
Salary"), which may be increased at the discretion of the Board, payable
in accordance with the Corporation's regular payroll practices but in no
event less than monthly.
(b) Vacation. During the Employment Period, the Employee shall be
entitled to not less than 5 weeks paid vacation annually.
(c) Annual Bonus. During the Employment Period, the Employee shall
be entitled to an annual bonus paid by the Corporation within 90 days
after the close of each fiscal year, in an amount determined in accordance
with the terms of the Corporation's Annual Bonus Plan as summarized in
this Section 3(c). For purposes of determining such annual bonus, the
Board, in its sole discretion, shall annually, on or before March 31 of
each year, establish a reasonable performance target based on the
Corporation's projected earnings before interest, tax, depreciation and
amortization (the "Target") for the next fiscal year of the Corporation
4
<PAGE> 5
(the "Fiscal Year"). If, for any Fiscal Year, at least 90% of the Target
for such Fiscal Year is achieved, then the Employee shall receive a bonus
of 25% of his or her Base Salary and shall receive an additional bonus of
2.5% of his or her Base Salary for each one percentage point by which the
actual result exceeds 90% of the Target, progressing linearly to a maximum
bonus of 100% of Base Salary when the actual result is 120%, or more, of
the Target.
4. Other Benefits. In addition to the compensation to be paid to
the Employee pursuant to Section 3, during the Employment Period, the Employee
shall be entitled to the following additional benefits (the "Benefits").
(a) The Employee shall be eligible to participate in those employee
pension and welfare benefit plans sponsored from time to time by the
Corporation in which employees of comparable positions are eligible to
par- ticipate, in each such case, at a level commensurate with the
Employee's position and duties with the Corporation and in accordance with
the generally appli-
5
<PAGE> 6
cable provisions thereof. It is the current intention of the Corporation
to maintain Benefits, other than defined benefit pension benefits, during
the term of this Agreement, at or about the level in effect immediately
after the Closing Date; although the Corporation reserves the right to
modify or terminate any such Benefits. In the event that Benefits are
reduced from the levels in effect immediately after the Closing Date,
without the provision of comparable or superior Benefits, the Corporation
shall make an additional payment, in cash, to the Employee to compensate
him for such reduction in Benefits. For purposes of the preceding
sentence, the amount of any additional payment shall be calculated within
90 days of the fiscal year-end and paid to the Employee as soon as
reasonably practicable thereafter.
(b) The Employee may be entitled to other perquisites as determined
by the Board after taking into account the type of perquisites which are
provided to
6
<PAGE> 7
employees in comparable positions with comparable companies.
5. Covenants of the Employee. In order to induce the Corporation to
enter into this Agreement, the Employee hereby agrees as follows:
(a) Confidentiality. The Employee shall keep confidential and shall
not divulge to any other person or entity, during the term of this
Agreement and there after, any of the business secrets or other confiden-
tial information regarding the customers, employees, operations, financial
condition, revenues or projections of the Corporation or any of its
subsidiaries or affiliates, which have not otherwise become public
knowledge, other than as a result of the Employee's breach of this Section
5(a); provided, however, that nothing in this Agreement shall preclude the
Employee from disclosing information (i) in the normal course of
conducting the business of the Corporation or any of its subsidiaries or
affiliates, (ii) as may be required by law, court or governmental
order or governmental
7
<PAGE> 8
regulation, (iii) which is disclosed to the Employee by one not under
obligations of confidentiality to the Corporation and is in the public
domain, or (iv) which the Corporation has expressly given the Employee the
right to use or disclose.
(b) Records. All papers, books and records, of every kind and
description and in whatever media, relating to the business or affairs of
the Corporation or any of its subsidiaries or affiliates, whether or not
prepared by the Employee, shall be the sole and exclusive property of the
Corporation or such subsidiary, and the Employee shall surrender them to
the Corporation at any time upon request of the Board.
(c) Non-Competition. The Employee shall not, during the Employment
Period and for a period ending on the earlier of the first anniversary of
(i) the expiration of the term of this Agreement or (ii) the termination
of the Employee's employment with the Corporation, its subsidiaries and
its affiliates for any reason, by himself or herself or in partnership or
8
<PAGE> 9
as an equity owner or in conjunction with or as a consultant, adviser,
manager, employee or agent of any other person, business, firm,
corporation or other entity, either directly or indirectly, undertake or
carry on or be engaged or have any financial or other interest in, or in
any other manner become associated with, any person, firm, corporation or
other entity engaged in the business of the manufacturing and sale of
professional sound system products for forums where music or speech is
amplified, including, without limitation, packaging, marketing,
distributing, advertising, promoting, merchandising or selling wired and
wireless microphones, mixing consoles, signal processors, amplifiers,
loudspeakers and loudspeaker systems; provided, however, that (x) nothing
in this paragraph 5(c) shall prohibit the Employee from holding up
to 2% of the outstanding voting shares of any publicly traded company, and
(y) the Employee shall not be in violation of the provisions hereof as a
result of providing general business advice, for which he or she
9
<PAGE> 10
does not receive compensation, on a non-substantial and non-recurring
basis. If the Employee is terminated without Cause, this paragraph 5(c)
shall not have any application to any period following such termination.
(d) Enforcement. The Employee agrees and war rants that the
covenants contained herein are reason able, that valid consideration has
been and will be received therefor and that the agreements set forth
herein are the result of arm's-length negotiations between the parties
hereto. The Employee recognizes that the provisions of this Section 5 are
vitally important to the continuing welfare of the Corporation, its
subsidiaries and its affiliates and that money damages constitute a
totally inadequate remedy for any violation or threatened violation
thereof. Accordingly, in the event of any such violation or threatened
violation by the Employee, the Corporation, its subsidiaries and its
affiliates, in addition to any other remedies they may have, shall have
the right to compel specific performance thereof or to obtain an injunc-
10
<PAGE> 11
tion, restraining order or other equitable relief (without the requirement
to post a bond) restraining the Employee from committing any violation of
any covenant or obligation of this Section 5. It is the desire of the
parties that the provisions of this Section 5 be enforced to the fullest
extent possible under the law and public policies in each jurisdiction in
which enforcement is sought. Accordingly, without in any way limiting the
general applicability of Sec tion 11 hereto, if any particular portion of
this Sec tion 5 shall be or become unenforceable in any respect, such
portion of this Section 5 shall be deemed reformed to make such portion
enforceable in a manner which provides the Corporation the maximum rights
permitted at law.
6. Termination.
(a) Termination due to death, disability or for Cause. This
Agreement, other than the provision of clauses (x), (y) and (z) set forth
below and the provisions of Section 5 hereof, shall terminate immediately
11
<PAGE> 12
in the event (i) of the Employee's death, (ii) that, in the reasonable and
sole judgment of the Board, the Employee is disabled so as to be unable to
perform his or her material duties hereunder and such disability has
continued for a period of at least six consecutive months (such a
termination, a "Disability Termination"); provided that if the Employee is
not absent from employment due to any such disability, the Employee will
not incur a Disability Termination until six months after he or she has
received written notice from the Corporation that it believes that the
Employee is not performing his or her material duties hereunder, or (iii)
the Board discharges the Employee from his or her employment hereunder for
Cause (as hereinafter defined), in each such case, without any further
liability to the Employee other than for (x) Base Salary earned, but
unpaid, for services rendered to the Corporation prior to the date of the
Employee's termination of employment ("Earned Salary"), (y) vacation
earned, but unpaid, as of the date of the Employee's
12
<PAGE> 13
termination of employment ("Accrued Vacation") and (z) for vested benefits
under, and payable in accordance with the terms of, the Corporation's
employee benefit plans ("Vested Benefits") pursuant to which the Employee
is entitled to benefits. Any discharge of the Employee for Cause, and the
effective date thereof, shall be communicated to the Employee in writing.
(b) Definition of Cause. For purposes of this Agreement, the term
"Cause" shall mean any of the following and shall be determined by the
Board in its sole discretion: (i) gross insubordination or gross
negligence on the part of the Employee in the performance of his or her
employment-related duties described herein, (ii) the Employee's theft of
Corporation-owned property, (iii) the material breach by the Employee of
any written covenant or agreement set forth in paragraph 5 hereof, or
(iv) any other material breach of any of the Employee's material
obligations under this Agreement.
11
<PAGE> 14
(c) Termination by the Corporation without Cause. This Agreement,
other than the provisions of clause (i), (ii) and (iii) set forth below
and the provisions of Paragraph 5 hereof, shall terminate immediately in
the event of the termination of the Employee's employment by the
Corporation other than for Cause. In the event of any such termination by
the Corporation with out Cause during the Employment Period, the Employee
will thereupon cease to be an employee of the Corporation and all
obligations of the Corporation to the Employee shall terminate, except
that (i) the Employee shall be entitled to payment of his or her Earned
Salary, Accrued Vacation and Vested Benefits, (ii) the Corporation shall
pay the Employee a pro rata annual bonus for the year of termination at
the herein specified time for such payments, and (iii) the Corporation
shall continue to pay the Base Salary in accordance with the regular
payroll practices and to provide Benefits at the level in effect at the
time of the termination for a severance period of 18 months
14
<PAGE> 15
from the anniversary of such termination. The amount of the bonus
described in clause (ii) above shall be determined at the end of the
Fiscal Year in which the termination occurs and shall be equal to the
amount of the Annual Bonus determined in accordance with the terms and
conditions of the Annual Bonus Plan (assuming that the applicable
performance Targets have been achieved for such Fiscal Year) multiplied by
a fraction, the numerator of which is the number of days in the Fiscal
Year until the date of Termination and the denominator of which is 360.
(d) Termination due to non-renewal. Notwithstanding paragraph (c)
above, if the Employee terminates employment with the Corporation upon
expiration of this Agreement and the Agreement expired because the
Corporation opted not to renew the Agreement in accordance with Section 1
hereof, (i) the Corporation will continue to pay the Employee his or her
Base Salary in accordance with the regular payroll practices for a
severance period of six months from the
15
<PAGE> 16
Anniversary of such termination and (ii) the Employee shall be entitled to
payment of his or her Earned Salary, Accrued Vacation and Vested Benefits.
(e) Discharge of Corporation's Obligations. Upon the payments by the
Corporation of the sums set forth in Sections 6(a)(x), (y) and (z),
Sections 6(c)(i), (ii) and (iii) and, if applicable, Sections 6(d) or
6(f), all of the Corporation's obligations to make any further payments to
the Employee pursuant to this Agreement shall be terminated.
(f) Severance Benefits. If the Corporation terminates the
Employee's employment without Cause within three months after the Closing
Date, Employee acknowledges and agrees that (i) he or she shall not be
entitled to receive any severance or other termination benefits from the
Corporation or any of its affiliates; (ii) the Corporation or any of its
affiliates shall have no further liability to the Employee other than as
is expressly set forth in Sections 6(c)(i) and (ii) above, and (iii) the
Employee's sole rights and reme-
16
<PAGE> 17
dies in respect of the Severance Policy for Mark IV Audio (or any
comparable policy thereto) shall be as and against Mark IV Industries and
not the Corporation. If the Corporation terminates the Employee's
employment other than for Cause more than three months after the Closing
Date, the Corporation's sole liability in respect of severance or other
termination benefits shall be determined in accordance with Sections
6(c)(i), (ii) and (iii) or 6(d) above.
7. Entire Agreement. This Agreement constitutes and expresses the
entire agreement of the parties with respect to the subject matter hereof and
supersedes and cancels all prior negotiations, discussions, agreements and
understandings (including, without limitation, any severance plan, policy or
other arrangement entered into prior to the Closing Date with Mark IV Industries
or any direct or indirect subsidiary thereof), relating to such subject matter;
provided, that, if the Employee's employment is terminated by the Corporation
without Cause prior to the date which is three months after the Closing Date,
this Agreement shall
17
<PAGE> 18
not supersede any claim the Employee may have against Mark
IV Industries under the Mark IV Audio Severance Policy referred to in Section
6(f) above.
8. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Corporation, to:
Gulton Acquisition Corp.
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, New York 10013
Attention: Nick Sommers
(b) if to the Employee, to the Employee's address
reflected in the personnel records of the
Corporation.
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
9. Survival. Sections 5, 6, 15 and 16 shall survive the termination
hereof, whether such termination shall be by expiration of the period of
employment provided
18
<PAGE> 19
in Section 1 hereof or as a result of the provisions of Section 6 hereof.
10. Binding Effect and Benefit. This Agreement may not be assigned
by either party, whether by operation of law or otherwise, without the prior
written consent of the other party, except that any right, title or interest of
the Corporation arising out of this Agreement may be assigned to any corporation
controlling, controlled by or under common control with the Corporation, or
succeeding to the business and substantially all of the assets of the
Corporation or any subsidiaries or affiliates for which the Employee per forms
substantial services; provided, however, that no such assignment shall relieve
the Corporation of its obligations hereunder without the express written consent
of the Employee. Subject to the foregoing, this Agreement shall be binding upon
and shall inure to the benefit of the parties and their respective heirs,
legatees, devises, personal representatives, successors and assigns.
11. Severability. In the event that any one or more of the
provisions of this Agreement shall be or become
19
<PAGE> 20
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining pro visions contained herein shall not be
affected thereby.
12. Amendment. This Agreement can be amended or modified only by a
written agreement of the parties hereto.
13. Withholding. The Corporation shall be entitled to withhold from
payments due hereunder any required federal, state or local withholding or other
taxes.
14. Counterparts. This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed to be an original, but all
such counterparts shall constitute one and the same instrument, and all
signatures need not appear on any one counterpart.
15. Applicable Law. This Agreement shall be construed and
interpreted in accordance with and governed by the laws of the State of
Delaware, other than the conflict of laws provisions of such laws.
16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL OR EQUITABLE
ACTION, SUIT, PRO-
20
<PAGE> 21
CEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR
THEREBY, THE SUBJECT MATTER OF ANY OF THE FOREGOING OR THE ACTIONS OF ANY PARTY
HERETO OR THERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT HEREOF OR THEREOF.
17. Effect of Agreement. This Agreement shall become effective upon
the completion of the sale of the Audio Products Group Companies (as defined in
the Purchase Agreement) to Gulton Acquisition Corp. (the "Sale"). Prior to the
Sale, or in the event that the Sale does not occur on or before March 31, 1997,
the Corporation and the Employee shall have no obligation or liability under
this Agreement and the Employee shall have no claim for any compensation or
other benefits from the Corporation.
21
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
GULTON ACQUISITION CORP.
By: /s/ NICHOLAS E. SOMERS
-----------------------------------
Name: Nicholas E. Somers
Title: President
/s/ ROBERT D. PABST
-----------------------------------
Robert D. Pabst
<PAGE> 1
Exhibit 10(c)
GULTON ACQUISITION CORP.
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 11th day of
December, 1996, by and between Gulton Acquisition Corp., (hereinafter called the
"Corporation"), a Delaware corporation, and Paul A. McGuire (hereinafter called
the "Employee").
WITNESSETH THAT:
WHEREAS, the Employee presently serves as an employee of
Electro-Voice, Incorporated; and
WHEREAS, the parties desire to set forth in this Agreement the terms
and conditions of their continuing employment relationship from and after the
date of the closing (the "Closing Date") of the transactions contemplated by
the Purchase Agreement by and among Mark IV Industries, Inc., Gulton Industries,
Inc., Mark IV PLC and Gulton Acquisition Corp. (the "Purchase Agreement");
NOW, THEREFORE, the Corporation and the Employee, each intending to
be legally bound, hereby mutually covenant and agree as follows:
<PAGE> 2
1. Employment and Term. The Corporation hereby agrees to employ the
Employee in a full-time capacity for the term commencing on the Closing Date and
ending on the third anniversary thereof, and the Employee hereby accepts such
employment, subject to earlier termination in accordance with Section 6. The
term of the Agreement shall be automatically extended, upon the terms and
conditions set forth herein, for successive periods of one year each, unless
either party, at least 6 months prior to the expiration of the original term or
any extended term, shall give written notice to the other of its intention not
to renew such employment. The period during which the Employee is employed
pursuant to this Agreement, including any extension thereof in accordance with
the preceding sentence, shall be referred to as the "Employment Period".
2. Position and Duties. During the Employment Period, the Employee
shall serve the Corporation as Vice President of the Corporation and in such
other position or positions with the Corporation and any of its subsidiaries and
affiliates as the Board of Directors of the Corporation
2
<PAGE> 3
(the "Board") shall from time to time specify, and shall have such duties
consistent with such position or positions and of a senior executive nature as
may be assigned to him or her from time to time by the Board. The Employee shall
not be required to move to a work location beyond 25 miles from that existing at
the Closing Date, nor shall he or she be required to accept a position or duties
which entail a substantial increase in travel relative to that which has been
typical of his or her position held immediately prior to the Closing Date. In
case the Employee refuses to accept such relocation or change in position or
duties and, as a result is no longer able to perform the duties described
herein, he or she may resign, and the Corporation shall be treated as having
terminated the Employee's employment without Cause under Section 6(c) hereof.
3. Compensation.
(a) Base Salary. For his or her services performed pursuant to this
Agreement, during the Employment Period, the Corporation shall pay the
Employee a base salary at the rate of $185,000 per
3
<PAGE> 4
annum (the "Base Salary"), which may be increased at the discretion of the
Board, payable in accordance with the Corporation's regular payroll
practices but in no event less than monthly.
(b) Vacation. During the Employment Period, the Employee shall be
entitled to not less than 5 weeks paid vacation annually.
(c) Annual Bonus. During the Employment Period, the Employee shall
be entitled to an annual bonus paid by the Corporation within 90 days
after the close of each fiscal year, in an amount determined in accordance
with the terms of the Corporation's Annual Bonus Plan as summarized in
this Section 3(c). For purposes of determining such annual bonus, the
Board, in its sole discretion, shall annually, on or before March 31 of
each year, establish a reasonable performance target based on the
Corporation's projected earnings before interest, tax, depreciation and
amortization (the "Target") for the next fiscal year of the Corporation
(the "Fiscal Year"). If, for any Fiscal Year, at least
4
<PAGE> 5
90% of the Target for such Fiscal Year is achieved, then the Employee
shall receive a bonus of 25% of his or her Base Salary and shall receive
an additional bonus of 2.5% of his or her Base Salary for each one
percentage point by which the actual result exceeds 90% of the Target,
progressing linearly to a maximum bonus of 100% of Base Salary when the
actual result is 120%, or more, of the Target.
4. Other Benefits. In addition to the compensation to be paid to
the Employee pursuant to Section 3, during the Employment Period, the Employee
shall be entitled to the following additional benefits (the "Benefits").
(a) The Employee shall be eligible to participate in those employee
pension and welfare benefit plans sponsored from time to time by the
Corporation in which employees of comparable positions are eligible to par
ticipate, in each such case, at a level commensurate with the Employee's
position and duties with the Corporation and in accordance with the
generally applicable provisions thereof. It is the current intention
5
<PAGE> 6
of the Corporation to maintain Benefits, other than defined benefit
pension benefits, during the term of this Agreement, at or about the level
in effect immediately after the Closing Date; although the Corporation
reserves the right to modify or terminate any such Benefits. In the event
that Benefits are reduced from the levels in effect immediately after the
Closing Date, without the provision of comparable or superior Benefits,
the Corporation shall make an additional payment, in cash, to the
Employee to compensate him for such reduction in Benefits. For purposes of
the pre ceding sentence, the amount of any additional payment shall be
calculated within 90 days of the fiscal year-end and paid to the Employee
as soon as reasonably practicable thereafter.
(b) The Employee may be entitled to other perquisites as determined
by the Board after taking into account the type of perquisites which are
provided to employees in comparable positions with comparable companies.
6
<PAGE> 7
5. Covenants of the Employee. In order to induce the Corporation to
enter into this Agreement, the Employee hereby agrees as follows:
(a) Confidentiality. The Employee shall keep confidential and shall
not divulge to any other person or entity, during the term of this
Agreement and there after, any of the business secrets or other confiden
tial information regarding the customers, employees, operations, financial
condition, revenues or projections of the Corporation or any of its
subsidiaries or affiliates, which have not otherwise become public
knowledge, other than as a result of the Employee's breach of this Section
5(a); provided, however, that nothing in this Agreement shall preclude the
Employee from disclosing information (i) in the normal course of
conducting the business of the Corporation or any of its subsidiaries or
affiliates, (ii) as may be required by law, court or governmental order or
governmental regulation, (iii) which is disclosed to the Employee by one
not under obligations of confidentiality to the
7
<PAGE> 8
Corporation and is in the public domain, or (iv) which the Corporation has
expressly given the Employee the right to use or disclose.
(b) Records. All papers, books and records, of every kind and
description and in whatever media, relating to the business or affairs of
the Corporation or any of its subsidiaries or affiliates, whether or not
prepared by the Employee, shall be the sole and exclusive property of the
Corporation or such subsidiary, and the Employee shall surrender them to
the Corporation at any time upon request of the Board.
(c) Non-Competition. The Employee shall not, during the Employment
Period and for a period ending on the earlier of the first anniversary of
(i) the expiration of the term of this Agreement or (ii) the termination
of the Employee's employment with the Corporation, its subsidiaries and
its affiliates for any reason, by himself or herself or in partnership or
as an equity owner or in conjunction with or as a consultant, adviser,
manager, employee or agent of any
8
<PAGE> 9
other person, business, firm, corporation or other entity, either directly
or indirectly, undertake or carry on or be engaged or have any financial
or other interest in, or in any other manner become associated with, any
person, firm, corporation or other entity engaged in the business of the
manufacturing and sale of professional sound system products for forums
where music or speech is amplified, including, without limitation,
packaging, marketing, distributing, advertising, promoting, merchandising
or selling wired and wireless microphones, mixing consoles, signal proces
sors, amplifiers, loudspeakers and loudspeaker systems; provided, however,
that (x) nothing in this paragraph 5(c) shall prohibit the Employee from
holding up to 2% of the outstanding voting shares of any publicly traded
company, and (y) the Employee shall not be in violation of the provisions
hereof as a result of providing general business advice, for which he or
she does not receive compensation, on a non-substantial and non-recurring
basis. If the Employee is terminated
9
<PAGE> 10
without Cause, this paragraph 5(c) shall not have any application to any
period following such termination.
(d) Enforcement. The Employee agrees and war rants that the
covenants contained herein are reason able, that valid consideration has
been and will be received therefor and that the agreements set forth
herein are the result of arm's-length negotiations between the parties
hereto. The Employee recognizes that the provisions of this Section 5 are
vitally important to the continuing welfare of the Corporation, its
subsidiaries and its affiliates and that money damages constitute a
totally inadequate remedy for any violation or threatened violation
thereof. Accordingly, in the event of any such violation or threatened
violation by the Employee, the Corporation, its subsidiaries and its
affiliates, in addition to any other remedies they may have, shall have
the right to compel specific performance thereof or to obtain an injunc
tion, restraining order or other equitable relief (without the requirement
to post a bond) restraining
10
<PAGE> 11
the Employee from committing any violation of any covenant or obligation
of this Section 5. It is the desire of the parties that the provisions of
this Section 5 be enforced to the fullest extent possible under the law
and public policies in each jurisdiction in which enforcement is sought.
Accordingly, without in any way limiting the general applicability of Sec
tion 11 hereto, if any particular portion of this Sec tion 5 shall be or
become unenforceable in any respect, such portion of this Section 5 shall
be deemed reformed to make such portion enforceable in a manner which pro
vides the Corporation the maximum rights permitted at law.
6. Termination.
(a) Termination due to death, disability or for Cause. This
Agreement, other than the provision of clauses (x), (y) and (z) set forth
below and the provisions of Section 5 hereof, shall terminate immediately
in the event (i) of the Employee's death, (ii) that, in the reasonable and
sole judgment of the Board, the
11
<PAGE> 12
Employee is disabled so as to be unable to perform his or her material
duties hereunder and such disability has continued for a period of at
least six consecutive months (such a termination, a "Disability
Termination"); provided that if the Employee is not absent from employment
due to any such disability, the Employee will not incur a Disability
Termination until six months after he or she has received written notice
from the Corporation that it believes that the Employee is not performing
his or her material duties hereunder, or (iii) the Board discharges the
Employee from his or her employment hereunder for Cause (as hereinafter
defined), in each such case, without any further liability to the
Employee other than for (x) Base Salary earned, but unpaid, for services
rendered to the Corporation prior to the date of the Employee's termi
nation of employment ("Earned Salary"), (y) vacation earned, but unpaid,
as of the date of the Employee's termination of employment ("Accrued
Vacation") and (z) for vested benefits under, and payable in accordance
12
<PAGE> 13
with the terms of, the Corporation's employee benefit plans ("Vested
Benefits") pursuant to which the Employee is entitled to benefits. Any
discharge of the Employee for Cause, and the effective date thereof, shall
be communicated to the Employee in writing.
(b) Definition of Cause. For purposes of this Agreement, the term
"Cause" shall mean any of the following and shall be determined by the
Board in its sole discretion: (i) gross insubordination or gross
negligence on the part of the Employee in the performance of his or her
employment-related duties described herein, (ii) the Employee's theft of
Corporation-owned property, (iii) the material breach by the Employee of
any written covenant or agreement set forth in paragraph 5 hereof, or
(iv) any other material breach of any of the Employee's material
obligations under this Agreement.
(c) Termination by the Corporation without Cause. This Agreement,
other than the provisions of clause (i), (ii) and (iii) set forth below
and the provisions
13
<PAGE> 14
of Paragraph 5 hereof, shall terminate immediately in the event of the
termination of the Employee's employment by the Corporation other than
for Cause. In the event of any such termination by the Corporation with
out Cause during the Employment Period, the Employee will thereupon cease
to be an employee of the Corporation and all obligations of the
Corporation to the Employee shall terminate, except that (i) the Employee
shall be entitled to payment of his or her Earned Salary, Accrued Vacation
and Vested Benefits, (ii) the Corporation shall pay the Employee a pro
rata annual bonus for the year of termination at the herein specified time
for such payments, and (iii) the Corporation shall continue to pay the
Base Salary in accordance with the regular payroll practices and to
provide Benefits at the level in effect at the time of the termination for
a severance period of 12 months from the anniversary of such termination.
The amount of the bonus described in clause (ii) above shall be determined
at the end of the Fiscal Year in which the
14
<PAGE> 15
termination occurs and shall be equal to the amount of the Annual Bonus
determined in accordance with the terms and conditions of the Annual Bonus
Plan (assuming that the applicable performance Targets have been achieved
for such Fiscal Year) multiplied by a fraction, the numerator of which is
the number of days in the Fiscal Year until the date of Termination and
the denominator of which is 360.
(d) Termination due to non-renewal. Notwithstanding paragraph (c)
above, if the Employee terminates employment with the Corporation upon
expiration of this Agreement and the Agreement expired because the
Corporation opted not to renew the Agreement in accordance with Section 1
hereof, (i) the Corporation will continue to pay the Employee his or her
Base Salary in accordance with the regular payroll practices for a
severance period of six months from the Anniversary of such termination
and (ii) the Employee shall be entitled to payment of his or her Earned
Salary, Accrued Vacation and Vested Benefits.
15
<PAGE> 16
(e) Discharge of Corporation's Obligations. Upon the payments by the
Corporation of the sums set forth in Sections 6(a)(x), (y) and (z),
Sections 6(c)(i), (ii) and (iii) and, if applicable, Sections 6(d) or
6(f), all of the Corporation's obligations to make any further payments to
the Employee pursuant to this Agreement shall be terminated.
(f) Severance Benefits. If the Corporation terminates the
Employee's employment without Cause within three months after the Closing
Date, Employee acknowledges and agrees that (i) he or she shall not be
entitled to receive any severance or other termination benefits from the
Corporation or any of its affiliates; (ii) the Corporation or any of its
affiliates shall have no further liability to the Employee other than as
is expressly set forth in Sections 6(c)(i) and (ii) above, and (iii) the
Employee's sole rights and remedies in respect of the Severance Policy
for Mark IV Audio (or any comparable policy thereto) shall be as and
against Mark IV Industries and not the Corporation.
16
<PAGE> 17
If the Corporation terminates the Employee's employment other than for
Cause more than three months after the Closing Date, the Corporation's
sole liability in respect of severance or other termination benefits shall
be determined in accordance with Sections 6(c)(i), (ii) and (iii) or 6(d)
above.
7. Entire Agreement. This Agreement constitutes and expresses the
entire agreement of the parties with respect to the subject matter hereof and
supersedes and cancels all prior negotiations, discussions, agreements and
understandings (including, without limitation, any severance plan, policy or
other arrangement entered into prior to the Closing Date with Mark IV Industries
or any direct or indirect subsidiary thereof), relating to such subject matter;
provided, that, if the Employee's employment is terminated by the Corporation
without Cause prior to the date which is three months after the Closing Date,
this Agreement shall not supersede any claim the Employee may have against Mark
IV Industries under the Mark IV Audio Severance Policy referred to in Section
6(f) above.
17
<PAGE> 18
8. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Corporation, to:
Gulton Acquisition Corp.
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, New York 10013
Attention: Nick Sommers
(b) if to the Employee, to the Employee's address reflected in the
personnel records of the Corporation.
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
9. Survival. Sections 5, 6, 15 and 16 shall survive the termination
hereof, whether such termination shall be by expiration of the period of
employment provided in Section 1 hereof or as a result of the provisions of
Section 6 hereof.
18
<PAGE> 19
10. Binding Effect and Benefit. This Agreement may not be assigned
by either party, whether by operation of law or otherwise, without the prior
written consent of the other party, except that any right, title or interest of
the Corporation arising out of this Agreement may be assigned to any corporation
controlling, controlled by or under common control with the Corporation, or
succeeding to the business and substantially all of the assets of the
Corporation or any subsidiaries or affiliates for which the Employee per forms
substantial services; provided, however, that no such assignment shall relieve
the Corporation of its obligations hereunder without the express written consent
of the Employee. Subject to the foregoing, this Agreement shall be binding upon
and shall inure to the benefit of the parties and their respective heirs,
legatees, devises, personal representatives, successors and assigns.
11. Severability. In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the
19
<PAGE> 20
validity, legality and enforceability of the remaining pro visions contained
herein shall not be affected thereby.
12. Amendment. This Agreement can be amended or modified only by a
written agreement of the parties hereto.
13. Withholding. The Corporation shall be entitled to withhold from
payments due hereunder any required federal, state or local withholding or other
taxes.
14. Counterparts. This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed to be an original, but all
such counterparts shall constitute one and the same instrument, and all
signatures need not appear on any one counterpart.
15. Applicable Law. This Agreement shall be construed and
interpreted in accordance with and governed by the laws of the State of
Delaware, other than the conflict of laws provisions of such laws.
16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL OR EQUITABLE
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
20
<PAGE> 21
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY OR THEREBY, THE SUBJECT MATTER OF ANY OF THE FOREGOING OR
THE ACTIONS OF ANY PARTY HERETO OR THERETO IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF OR THEREOF.
17. Effect of Agreement. This Agreement shall become effective upon
the completion of the sale of the Audio Products Group Companies (as defined in
the Purchase Agreement) to Gulton Acquisition Corp. (the "Sale"). Prior to the
Sale, or in the event that the Sale does not occur on or before March 31, 1997,
the Corporation and the Employee shall have no obligation or liability under
this Agreement and the Employee shall have no claim for any compensation or
other benefits from the Corporation.
21
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
GULTON ACQUISITION CORP.
By: /s/ NICHOLAS E. SOMERS
-------------------------
Name: Nicholas E. Somers
Title: President
/s/ PAUL A. MCGUIRE
-------------------------
Paul A. McGuire
22
<PAGE> 1
EXHIBIT 10(d)
GULTON ACQUISITION CORP.
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 11th day of
December, 1996, by and between Gulton Acquisition Corp., (hereinafter called the
"Corporation"), a Delaware corporation, and John G. Bolstetter (hereinafter
called the "Employee").
WITNESSETH THAT:
WHEREAS, the Employee presently serves as an employee of
Electro-Voice, Incorporated; and
WHEREAS, the parties desire to set forth in this Agreement the terms
and conditions of their continuing employment relationship from and after the
date of the closing (the "Closing Date") of the transactions contemplated by
the Purchase Agreement by and among Mark IV Industries, Inc., Gulton Industries,
Inc., Mark IV PLC and Gulton Acquisition Corp. (the "Purchase Agreement");
NOW, THEREFORE, the Corporation and the Employee, each intending to
be legally bound, hereby mutually covenant and agree as follows:
<PAGE> 2
1. Employment and Term. The Corporation hereby agrees to employ the
Employee in a full-time capacity for the term commencing on the Closing Date and
ending on the third anniversary thereof, and the Employee hereby accepts such
employment, subject to earlier termination in accordance with Section 6. The
term of the Agreement shall be automatically extended, upon the terms and
conditions set forth herein, for successive periods of one year each, unless
either party, at least 6 months prior to the expiration of the original term or
any extended term, shall give written notice to the other of its intention not
to renew such employment. The period during which the Employee is employed
pursuant to this Agreement, including any extension thereof in accordance with
the preceding sentence, shall be referred to as the "Employment Period".
2. Position and Duties. During the Employment Period, the Employee
shall serve the Corporation as Vice President of the Corporation and in such
other position or positions with the Corporation and any of its subsidiaries and
affiliates as the Board of Directors of the Corporation
2
<PAGE> 3
(the "Board") shall from time to time specify, and shall have such duties
consistent with such position or positions and of a senior executive nature as
may be assigned to him or her from time to time by the Board. The Employee shall
not be required to move to a work location beyond 25 miles from that existing at
the Closing Date, nor shall he or she be required to accept a position or duties
which entail a substantial increase in travel relative to that which has been
typical of his or her position held immediately prior to the Closing Date. In
case the Employee refuses to accept such relocation or change in position or
duties and, as a result is no longer able to perform the duties described
herein, he or she may resign, and the Corporation shall be treated as having
terminated the Employee's employment without Cause under Section 6(c) hereof.
3. Compensation.
(a) Base Salary. For his or her services performed pursuant to this
Agreement, during the Employment Period, the Corporation shall pay the
Employee a base salary at the rate of $140,000 per
3
<PAGE> 4
annum (the "Base Salary"), which may be increased at the discretion of the
Board, payable in accordance with the Corporation's regular payroll
practices but in no event less than monthly.
(b) Vacation. During the Employment Period, the Employee shall be
entitled to not less than 4 weeks paid vacation annually.
(c) Annual Bonus. During the Employment Period, the Employee shall
be entitled to an annual bonus paid by the Corporation within 90 days
after the close of each fiscal year, in an amount determined in accordance
with the terms of the Corporation's Annual Bonus Plan as summarized in
this Section 3(c). For purposes of determining such annual bonus, the
Board, in its sole discretion, shall annually, on or before March 31 of
each year, establish a reasonable performance target based on the
Corporation's projected earnings before interest, tax, depreciation and
amortization (the "Target") for the next fiscal year of the Corporation
(the "Fiscal Year"). If, for any Fiscal Year, at least
4
<PAGE> 5
90% of the Target for such Fiscal Year is achieved, then the Employee
shall receive a bonus of 25% of his or her Base Salary and shall receive
an additional bonus of 2.5% of his or her Base Salary for each one
percentage point by which the actual result exceeds 90% of the Target,
progressing linearly to a maximum bonus of 100% of Base Salary when the
actual result is 120%, or more, of the Target.
4. Other Benefits. In addition to the compensation to be paid to
the Employee pursuant to Section 3, during the Employment Period, the Employee
shall be entitled to the following additional benefits (the "Benefits").
(a) The Employee shall be eligible to participate in those employee
pension and welfare benefit plans sponsored from time to time by the
Corporation in which employees of comparable positions are eligible to
participate, in each such case, at a level commensurate with the
Employee's position and duties with the Corporation and in accordance with
the generally applicable provisions thereof. It is the current intention
5
<PAGE> 6
of the Corporation to maintain Benefits, other than defined benefit
pension benefits, during the term of this Agreement, at or about the level
in effect immediately after the Closing Date; although the Corporation
reserves the right to modify or terminate any such Benefits. In the event
that Benefits are reduced from the levels in effect immediately after the
Closing Date, without the provision of comparable or superior Benefits,
the Corporation shall make an additional payment, in cash, to the
Employee to compensate him for such reduction in Benefits. For purposes of
the preceding sentence, the amount of any additional payment shall be
calculated within 90 days of the fiscal year-end and paid to the Employee
as soon as reasonably practicable thereafter.
(b) The Employee may be entitled to other perquisites as determined
by the Board after taking into account the type of perquisites which are
provided to employees in comparable positions with comparable companies.
6
<PAGE> 7
5. Covenants of the Employee. In order to induce the Corporation to
enter into this Agreement, the Employee hereby agrees as follows:
(a) Confidentiality. The Employee shall keep confidential and shall
not divulge to any other person or entity, during the term of this
Agreement and there after, any of the business secrets or other confiden-
tial information regarding the customers, employees, operations, financial
condition, revenues or projections of the Corporation or any of its
subsidiaries or affiliates, which have not otherwise become public
knowledge, other than as a result of the Employee's breach of this Section
5(a); provided, however, that nothing in this Agreement shall preclude the
Employee from disclosing information (i) in the normal course of
conducting the business of the Corporation or any of its subsidiaries or
affiliates, (ii) as may be required by law, court or governmental order or
governmental regulation, (iii) which is disclosed to the Employee by one
not under obligations of confidentiality to the
7
<PAGE> 8
Corporation and is in the public domain, or (iv) which the Corporation has
expressly given the Employee the right to use or disclose.
(b) Records. All papers, books and records, of every kind and
description and in whatever media, relating to the business or affairs of
the Corporation or any of its subsidiaries or affiliates, whether or not
prepared by the Employee, shall be the sole and exclusive property of the
Corporation or such subsidiary, and the Employee shall surrender them to
the Corporation at any time upon request of the Board.
(c) Non-Competition. The Employee shall not, during the Employment
Period and for a period ending on the earlier of the first anniversary of
(i) the expiration of the term of this Agreement or (ii) the termination
of the Employee's employment with the Corporation, its subsidiaries and
its affiliates for any reason, by himself or herself or in partnership or
as an equity owner or in conjunction with or as a consultant, adviser,
manager, employee or agent of any
8
<PAGE> 9
other person, business, firm, corporation or other entity, either directly
or indirectly, undertake or carry on or be engaged or have any financial
or other interest in, or in any other manner become associated with, any
person, firm, corporation or other entity engaged in the business of the
manufacturing and sale of professional sound system products for forums
where music or speech is amplified, including, without limitation,
packaging, marketing, distributing, advertising, promoting, merchandising
or selling wired and wireless microphones, mixing consoles, signal proces-
sors, amplifiers, loudspeakers and loudspeaker systems; provided, however,
that (x) nothing in this paragraph 5(c) shall prohibit the Employee from
holding up to 2% of the outstanding voting shares of any publicly traded
company, and (y) the Employee shall not be in violation of the provisions
hereof as a result of providing general business advice, for which he or
she does not receive compensation, on a non-substantial and non-recurring
basis. If the Employee is terminated
9
<PAGE> 10
without Cause, this paragraph 5(c) shall not have any application to any
period following such termination.
(d) Enforcement. The Employee agrees and war rants that the
covenants contained herein are reason able, that valid consideration has
been and will be received therefor and that the agreements set forth
herein are the result of arm's-length negotiations between the parties
hereto. The Employee recognizes that the provisions of this Section 5 are
vitally important to the continuing welfare of the Corporation, its
subsidiaries and its affiliates and that money damages constitute a
totally inadequate remedy for any violation or threatened violation
thereof. Accordingly, in the event of any such violation or threatened
violation by the Employee, the Corporation, its subsidiaries and its
affiliates, in addition to any other remedies they may have, shall have
the right to compel specific performance thereof or to obtain an injunc-
tion, restraining order or other equitable relief (without the requirement
to post a bond) restraining
10
<PAGE> 11
the Employee from committing any violation of any covenant or obligation
of this Section 5. It is the desire of the parties that the provisions of
this Section 5 be enforced to the fullest extent possible under the law
and public policies in each jurisdiction in which enforcement is sought.
Accordingly, without in any way limiting the general applicability of Sec
tion 11 hereto, if any particular portion of this Sec tion 5 shall be or
become unenforceable in any respect, such portion of this Section 5 shall
be deemed reformed to make such portion enforceable in a manner which pro-
vides the Corporation the maximum rights permitted at law.
6. Termination.
(a) Termination due to death, disability or for Cause. This
Agreement, other than the provision of clauses (x), (y) and (z) set forth
below and the provisions of Section 5 hereof, shall terminate immediately
in the event (i) of the Employee's death, (ii) that, in the reasonable and
sole judgment of the Board, the
11
<PAGE> 12
Employee is disabled so as to be unable to perform his or her material
duties hereunder and such disability has continued for a period of at
least six consecutive months (such a termination, a "Disability
Termination"); provided that if the Employee is not absent from employment
due to any such disability, the Employee will not incur a Disability
Termination until six months after he or she has received written notice
from the Corporation that it believes that the Employee is not performing
his or her material duties hereunder, or (iii) the Board discharges the
Employee from his or her employment hereunder for Cause (as hereinafter
defined), in each such case, without any further liability to the
Employee other than for (x) Base Salary earned, but unpaid, for services
rendered to the Corporation prior to the date of the Employee's termi-
nation of employment ("Earned Salary"), (y) vacation earned, but unpaid,
as of the date of the Employee's termination of employment ("Accrued
Vacation") and (z) for vested benefits under, and payable in accor-
12
<PAGE> 13
dance with the terms of, the Corporation's employee benefit plans ("Vested
Benefits") pursuant to which the Employee is entitled to benefits. Any
discharge of the Employee for Cause, and the effective date thereof, shall
be communicated to the Employee in writing.
(b) Definition of Cause. For purposes of this Agreement, the term
"Cause" shall mean any of the following and shall be determined by the
Board in its sole discretion: (i) gross insubordination or gross
negligence on the part of the Employee in the performance of his or her
employment-related duties described herein, (ii) the Employee's theft of
Corporation-owned property, (iii) the material breach by the Employee of
any written covenant or agreement set forth in paragraph 5 hereof, or
(iv) any other material breach of any of the Employee's material
obligations under this Agreement.
(c) Termination by the Corporation without Cause. This Agreement,
other than the provisions of clause (i), (ii) and (iii) set forth below
and the provisions
13
<PAGE> 14
of Paragraph 5 hereof, shall terminate immediately in the event of the
termination of the Employee's employment by the Corporation other than
for Cause. In the event of any such termination by the Corporation with
out Cause during the Employment Period, the Employee will thereupon cease
to be an employee of the Corporation and all obligations of the
Corporation to the Employee shall terminate, except that (i) the Employee
shall be entitled to payment of his or her Earned Salary, Accrued Vacation
and Vested Benefits, (ii) the Corporation shall pay the Employee a pro
rata annual bonus for the year of termination at the herein specified time
for such payments, and (iii) the Corporation shall continue to pay the
Base Salary in accordance with the regular payroll practices and to
provide Benefits at the level in effect at the time of the termination for
a severance period of 12 months from the anniversary of such termination.
The amount of the bonus described in clause (ii) above shall be determined
at the end of the Fiscal Year in which the
14
<PAGE> 15
termination occurs and shall be equal to the amount of the Annual Bonus
determined in accordance with the terms and conditions of the Annual Bonus
Plan (assuming that the applicable performance Targets have been achieved
for such Fiscal Year) multiplied by a fraction, the numerator of which is
the number of days in the Fiscal Year until the date of Termination and
the denominator of which is 360.
(d) Termination due to non-renewal. Notwithstanding paragraph (c)
above, if the Employee terminates employment with the Corporation upon
expiration of this Agreement and the Agreement expired because the
Corporation opted not to renew the Agreement in accordance with Section 1
hereof, (i) the Corporation will continue to pay the Employee his or her
Base Salary in accordance with the regular payroll practices for a
severance period of six months from the Anniversary of such termination
and (ii) the Employee shall be entitled to payment of his or her Earned
Salary, Accrued Vacation and Vested Benefits.
15
<PAGE> 16
(e) Discharge of Corporation's Obligations. Upon the payments by the
Corporation of the sums set forth in Sections 6(a)(x), (y) and (z),
Sections 6(c)(i), (ii) and (iii) and, if applicable, Sections 6(d) or
6(f), all of the Corporation's obligations to make any further payments to
the Employee pursuant to this Agreement shall be terminated.
(f) Severance Benefits. If the Corporation terminates the
Employee's employment without Cause within three months after the Closing
Date, Employee acknowledges and agrees that (i) he or she shall not be
entitled to receive any severance or other termination benefits from the
Corporation or any of its affiliates; (ii) the Corporation or any of its
affiliates shall have no further liability to the Employee other than as
is expressly set forth in Sections 6(c)(i) and (ii) above, and (iii) the
Employee's sole rights and remedies in respect of the Severance Policy
for Mark IV Audio (or any comparable policy thereto) shall be as and
against Mark IV Industries and not the Corporation.
16
<PAGE> 17
If the Corporation terminates the Employee's employment other than for
Cause more than three months after the Closing Date, the Corporation's
sole liability in respect of severance or other termination benefits shall
be determined in accordance with Sections 6(c)(i), (ii) and (iii) or 6(d)
above.
7. Entire Agreement. This Agreement constitutes and expresses the
entire agreement of the parties with respect to the subject matter hereof and
supersedes and cancels all prior negotiations, discussions, agreements and
understandings (including, without limitation, any severance plan, policy or
other arrangement entered into prior to the Closing Date with Mark IV Industries
or any direct or indirect subsidiary thereof), relating to such subject matter;
provided, that, if the Employee's employment is terminated by the Corporation
without Cause prior to the date which is three months after the Closing Date,
this Agreement shall not supersede any claim the Employee may have against Mark
IV Industries under the Mark IV Audio Severance Policy referred to in Section
6(f) above.
17
<PAGE> 18
8. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Corporation, to:
Gulton Acquisition Corp.
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 36th Floor
New York, New York 10013
Attention: Nick Sommers
(b) if to the Employee, to the Employee's address
reflected in the personnel records of the
Corporation.
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
9. Survival. Sections 5, 6, 15 and 16 shall survive the termination
hereof, whether such termination shall be by expiration of the period of
employment provided in Section 1 hereof or as a result of the provisions of
Section 6 hereof.
18
<PAGE> 19
10. Binding Effect and Benefit. This Agreement may not be assigned
by either party, whether by operation of law or otherwise, without the prior
written consent of the other party, except that any right, title or interest of
the Corporation arising out of this Agreement may be assigned to any corporation
controlling, controlled by or under common control with the Corporation, or
succeeding to the business and substantially all of the assets of the
Corporation or any subsidiaries or affiliates for which the Employee per forms
substantial services; provided, however, that no such assignment shall relieve
the Corporation of its obligations hereunder without the express written consent
of the Employee. Subject to the foregoing, this Agreement shall be binding upon
and shall inure to the benefit of the parties and their respective heirs,
legatees, devises, personal representatives, successors and assigns.
11. Severability. In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the
19
<PAGE> 20
validity, legality and enforceability of the remaining pro visions contained
herein shall not be affected thereby.
12. Amendment. This Agreement can be amended or modified only by a
written agreement of the parties hereto.
13. Withholding. The Corporation shall be entitled to withhold from
payments due hereunder any required federal, state or local withholding or other
taxes.
14. Counterparts. This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed to be an original, but all
such counterparts shall constitute one and the same instrument, and all
signatures need not appear on any one counterpart.
15. Applicable Law. This Agreement shall be construed and
interpreted in accordance with and governed by the laws of the State of
Delaware, other than the conflict of laws provisions of such laws.
16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL OR EQUITABLE
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
20
<PAGE> 21
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY OR THEREBY, THE SUBJECT MATTER OF ANY OF THE FOREGOING OR
THE ACTIONS OF ANY PARTY HERETO OR THERETO IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF OR THEREOF.
17. Effect of Agreement. This Agreement shall become effective upon
the completion of the sale of the Audio Products Group Companies (as defined in
the Purchase Agreement) to Gulton Acquisition Corp. (the "Sale"). Prior to the
Sale, or in the event that the Sale does not occur on or before March 31, 1997,
the Corporation and the Employee shall have no obligation or liability under
this Agreement and the Employee shall have no claim for any compensation or
other benefits from the Corporation.
21
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
GULTON ACQUISITION CORP.
By: /s/ NICHOLAS E. SOMERS
-------------------------------
Name: Nicholas E. Somers
Title: President
/s/ JOHN G. BOLSTETTER 12/12/96
--------------------------------
John G. Bolstetter
22
<PAGE> 1
Exhibit 10(e)
TRADE NAME AND TRADEMARK LICENSE AGREEMENT
between
GULTON INDUSTRIES, INC.
and
MARK IV INDUSTRIES, INC.
Dated as of February 10, 1997
<PAGE> 2
TRADE NAME AND TRADEMARK LICENSE AGREEMENT
TRADE NAME AND TRADEMARK LICENSE AGREEMENT (the "License
Agreement"), dated as of February 10, 1997, between MARK IV INDUSTRIES, INC., a
Delaware corporation ("Licensor"), and GULTON INDUSTRIES, INC., a Delaware
corporation ("Licensee," and together with Licensor, the "Parties" or
individually a "Party").
W I T N E S S E T H
WHEREAS, Licensor, Licensee, Mark IV PLC and Greenwich Street Audio,
LLC are parties to a Purchase Agreement, dated as of December 12, 1996, and
amended as of December 18, 1996 (the "Purchase Agreement"), providing, among
other things, for execution and delivery of this License Agreement (capitalized
terms used herein without definition shall have the meanings set forth in the
Purchase Agreement);
WHEREAS, Licensor is the owner of, and, in connection with the Audio
Products Business, has used directly or indirectly through its subsidiaries the
trade names, service marks and trademarks "MARK IV", "MARK IV AUDIO CONTROL
TECHNOLOGY", "MARK IV AUDIO SYSTEMS", "MARK IV AUDIO NORTH AMERICA", "MARK IV
CINEMA SYSTEMS" and "MARK IV PRO AUDIO" (such names and marks, together with any
and all common law rights pertaining thereto, are referred to collectively as
the "Licensed Marks");
WHEREAS, Licensor desires to license to Licensee and Licensee
desires to obtain the right for itself and any Audio Products Group Company to
use the Licensed Marks in connection with the Audio Products Business on the
terms set forth herein;
<PAGE> 3
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual premises and covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties agree as follows:
1. Grant of License
1.1 Grant. (a) Subject to the terms and conditions set forth in this
License Agreement, Licensor hereby grants to Licensee and Licensee hereby
accepts, a nonexclusive royalty-free right and license, with the right to
sublicense as permitted by this Section 1, of utilizing all rights of Licensor
that exist on the date hereof in and to the Licensed Marks in any jurisdiction
in the world in which Licensee conducts the Audio Products Business (the
"Territory") as its trademarks, service marks and trade names, and the
trademarks, service marks and trade names of any or all of the Audio Products
Group Companies, for the purposes and the periods set forth in this Section 1.
(b) To the extent that any member of the Audio Products Group is, as
of the date hereof, using either or both of the Licensed Marks as part of its
corporate name, such Audio Products Group Company may continue to use such
Licensed Mark as necessary or useful in connection with the conduct of its
business until such time as the applicable corporate name change contemplated by
Section 1.3 has been effected. In addition, to the extent any member of the
Audio Products Group uses, as of the date hereof, either or both of the Licensed
Marks on stationery, signage, invoices, receipts, forms, packaging, products,
advertising, promotional materials, training and service literature and
materials and similar items ("Marked Materials"), and to the extent either or
both of the Licensed Marks appear on any inventory at the time of Closing, the
Audio Products Group Companies may (i) use the existing supplies of such Marked
Materials or (ii) sell such inventory without altering or modifying such Marked
Materials or inventory or removing such trademarks, service marks, brand names
or trade, cor-
2
<PAGE> 4
porate or business names for a period of eighteen months after the Closing. With
respect to tooling bearing either or both of the Licensed Marks, the Audio
Products Group Companies may use such tooling to manufacture products of the
Audio Products Business for a period of twelve months following the Closing and,
thereafter, may sell any inventories of such products bearing such Licensed Mark
until the earlier to occur of the following (x) such inventories are exhausted,
or (y) 36 months after the Closing. If requested in writing by Licensor
following the expiration of the time periods set forth in Section 1.3, Licensee
will provide written confirmation of its compliance with the requirements of
such Section .
(c) Licensee may grant a sublicense of any rights granted to
Licensee hereunder to any Audio Products Group Company during the Term (as
defined in Section 6.1 hereof), provided, however, that no sublicensee pursuant
to this Section 1 shall be permitted to sublicense to any other party the rights
granted to it, and provided, further, that any such permitted sublicensee shall
be bound by the terms and conditions of this License Agreement and expressly
shall acknowledge that Licensor is an intended third party beneficiary of such
sublicense with respect to the ownership, validity and maintenance of the
Licensed Marks and quality control and other restrictions on such sublicensee's
use of the Licensed Marks.
1.2 Alternative Grant. In the event that the laws of a specific
country in the Territory do not permit licensing of the Licensed Marks as
contemplated herein (e.g., because such Licensed Marks are not subject to a
trademark registration in such country), Licensor shall, at the request of
Licensee, enter into an agreement expressly allowing Licensee to use the
Licensed Marks on the terms and conditions of this License Agreement, to the
extent such terms and conditions are applicable and legally permissible, and
forebearing from objecting to any such use by Licensee of the Licensed Marks in
such country as contemplated herein.
3
<PAGE> 5
1.3 Restrictions on Use. Within 60 days of the Closing, Licensee
shall change the corporate names of the Audio Products Group Companies organized
in the United States so that such names do not include the Licensed Marks or any
name confusingly similar to the Licensed Marks. Within 6 months of the Closing,
Licensee shall change the corporate names of the Audio Products Group Companies
organized outside the United States so that such names do not include the
Licensed Marks or any name confusingly similar to the Licensed Marks.
1.4 Exceptions. Notwithstanding anything set forth in this License
Agreement to the contrary, if, prior to the Closing Date, Licensor or any of the
Audio Products Group Companies has licensed the Licensed Marks to any entity
pursuant to terms that Licensee cannot rescind or terminate without payment or
other costs or expenses, then, only with respect to such non-rescindable or
non-terminable licenses, Licensee shall not be required to cease use of the
Licensed Marks within the time periods otherwise specified herein.
2. Quality Standards and Control.
2.1 Quality Control. Licensee agrees to use the Licensed Marks in
accordance with such commercially reasonable quality standards and
specifications as may be set by Licensor and communicated in writing to Licensee
from time to time (the "Quality Standards"), provided, that Licensor
acknowledges that it is aware of the Quality Standards currently maintained by
the Audio Products Group Companies, that such Quality Standards are acceptable
to Licensor and that Licensee shall be in compliance with the terms of this
paragraph 2.1 throughout the Term so long as it maintains Quality Standards of
an equal or higher level.
2.2 Inspection and Approval. From time to time, upon Licensor's
reasonable request in writing, Licensee shall, at Licensor's expense, (i)
provide Licensor with representative samples of ways in which the Licensed Marks
4
<PAGE> 6
are then being used by Licensee (or photographs depicting the same), and (ii)
permit Licensor to inspect the places of business where the Licensed Marks are
used, in each case for Licensor's inspection and approval of such use.
2.3 Deficiencies. In the event Licensor notifies Licensee in writing
of its failure to maintain proper Quality Standards with respect to the use of
the Licensed Marks, Licensee shall use reasonably diligent efforts to cure the
cause of such failure or, if cure is not possible within a reasonable period of
time under the circumstances of the use at issue, to discontinue such
non-conforming uses; provided, however, that Licensee shall be deemed to have
maintained appropriate Quality Standards if the quality of such uses is not
materially different from uses previously approved by Licensor or made by
Licensor prior to the commencement of the Term hereof.
3. Compliance with Laws. Licensee shall use the Licensed Marks only
in compliance with applicable law. Upon Licensor's reasonable written request,
Licensee shall include any notice or legend concerning ownership and/or license
of the Licensed Marks that Licensor reasonably deems advisable or required by
law.
4. Ownership. (a) All uses to be made by Licensee of the Licensed
Marks shall inure to the benefit of the Licensor. Licensee shall acquire no
right, title or interest in the Licensed Marks or any goodwill associated
therewith apart from the rights granted to Licensee herein.
(b) This License Agreement shall not affect Licensor's right to
enjoin or obtain relief against any acts by third parties of trademark
infringement, dilution or unfair competition.
(c) At the reasonable request of Licensor, Licensee shall, at
Licensor's expense, execute and deliver any and all documents necessary to enter
Licensee as a
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<PAGE> 7
registered user of the Licensed Marks in each country of the Territory to the
extent required by law.
(d) Licensee shall not seek to register with the United States
Patent and Trademark Office, any state trade mark office, or the equivalent
trademark office in any foreign or other jurisdiction, either during or after
the Term, any name, mark, symbol, device, configuration, or other designation
confusingly similar to the Licensed Marks.
(e) Licensor makes no representation or warranty as to the scope or
validity of Licensor's right to use the Licensed Marks other than as provided
herein.
5. Infringement. Each Party will promptly notify the other upon
becoming aware of any and all infringement, imitation, dilution or illegal use
of the Licensed Marks. Licensor shall have the right, but not the obligation, to
bring action against any infringement, imitation, dilution or illegal use of the
Licensed Marks and to take any other actions that it may deem proper or
necessary for the protection of the Licensed Marks. Upon Licensor's request,
Licensee shall cooperate in connection with any such action brought by Licensor,
at Licensor's expense.
6. Term; Effects of Termination.
6.1 Term. The term (the "Term") of this License Agreement shall
commence upon the date hereof and shall continue in effect until the last right
and license granted herein has terminated.
6.2 Effects of Termination. Upon termination of this License
Agreement, all rights of Licensee to use the Licensed Marks shall cease, and
Licensee shall execute all documents reasonably necessary to evidence and record
with the proper authorities the termination of Licensee's trademark license
rights granted herein.
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<PAGE> 8
7. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given: (a) if delivered by hand, when delivered; (b) if sent by telex,
telecopy, cable (and confirmed by telephone) or by overnight delivery, when
received, or (c) if sent by mail,
five days after being mailed, certified or registered mail, with postage
prepaid:
(a) if to Licensor, to it at:
Mark IV Industries, Inc.
One Town Centre
501 John James Audubon Parkway
Amherst, New York 14226
Attention: John J. Byrne
Telecopy:
with a copy to:
Lippes, Silverstein, Mathias
& Wexler, LLP
700 Guaranty Building
28 Church Street
Buffalo, New York 14202
Attention: Gerald S. Lippes, Esq.
Telecopy: (716) 853-5199
or to such other person or address as Licensor shall furnish
to Licensee in writing.
(b) if to Licensee, to it at:
Gulton Industries, Inc.
602 Cecil Street
Buchanan, Michigan 49107
Attention: Robert D. Pabst
Telecopy: (616) 695-4709
7
<PAGE> 9
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Andrew L. Sommer, Esq.
Telecopy: (212) 909-6836
or to such other person or address as Licensee shall furnish to Licensor in
writing.
All such notices, requests, demands, waivers and other
communications shall be deemed to have been received (w) if by personal
delivery, on the day after such delivery, (x) if by certified or registered
mail, on the seventh business day after the mailing thereof, (y) if by next-day
or overnight mail or delivery, on the day delivered, (z) if by telecopy or
telegram, on the next day following the day on which such telecopy or telegram
was sent, provided that a copy is also sent by certified or registered mail.
8. Miscellaneous.
8.1 Entire License Agreement. This License Agreement sets forth the
entire agreement and understanding of the Parties hereto in respect of the
subject matter contained herein, and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, between the Parties with respect to the subject matter hereof.
8.2 Amendment and Modification. This License Agreement may be
amended, modified and supplemented only by written agreement of the Parties
hereto.
8.3 Waiver of Compliance. Any failure of Licensor or Licensee to
comply with any obligation, covenant, agreement or condition herein may be
expressly waived in writing by the President or a Vice President of
8
<PAGE> 10
Licensor or Licensee, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
8.4 Assignment. This License Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the Parties hereto and
their respective successors and permitted assigns, but neither this License
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either of the Parties hereto without the prior written consent of
the other Party; provided, that Licensee may assign this License Agreement to
any subsidiary of Licensee, or to any lender to Licensee or any subsidiary or
affiliate thereof as security for obligations to such lender, and provided,
further, that no assignment to any such lender shall in any way affect
Licensee's obligations or liabilities under this License Agreement.
8.5 No Agency. Licensor and Licensee are in dependent contractors
with respect to each other, and nothing herein shall create any association,
partnership, joint venture or agency relationship between them.
8.6 Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation other than the Parties hereto
and their successors or assigns, any rights or remedies under or by reason of
this License Agreement.
8.7 Severability. The invalidity, illegality or unenforceability of
any provision, term, or agreement contained in or made a part of this License
Agreement in a particular jurisdiction shall not affect the validity, legality
or enforceability of the remainder of this License Agreement in such
jurisdiction or the validity, legality or enforceability of the provision, term
or agreement at issue in any other jurisdiction, and the Parties shall negotiate
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<PAGE> 11
in good faith to replace the invalid, illegal or unenforceable provision, term
or agreement with a valid, legal and enforceable provision in such jurisdiction
that has the effect nearest to that of the provision, term, or agreement being
replaced.
8.8 Counterparts. This License Agreement may be executed
simultaneously 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.
8.9 Further Assurances. Each of the Parties hereto agrees to take
all further actions and to execute and deliver, in the name and on behalf of the
Licensee or the Licensor, all such documents and do, in the name and on behalf
of the Licensee or Licensor, all such other acts and things necessary, desirable
or proper to vest, perfect or confirm its right, title or interest in, to or
under any of the rights, privileges, immunities, powers, purposes, franchises,
properties or assets of the Licensee and otherwise to carry out the purposes of
this License Agreement.
8.10 Headings. The headings of the Sections of this License
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this License
Agreement.
8.11 Governing Law and Jurisdiction. This License Agreement and the
legal relations among the Parties hereto shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to its
conflicts of law doctrine.
8.12 Waiver of Jury Trial. EACH PARTY HERETO ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS LICENSE AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION DIRECTLY OR
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<PAGE> 12
INDIRECTLY ARISING OUT OF OR RELATING TO THIS LICENSE AGREEMENT, OR THE BREACH,
TERMINATION OR VALIDITY OF THIS LICENSE AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED BY THIS LICENSE AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) IT MAKES THIS WAIVER
VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS LICENSE AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
8.12.
8.13 Equitable Relief. Each Party (the "Breaching Party")
acknowledges that the other Party (the "Non-Breaching Party") will suffer
irreparable harm as a result of the material breach by the Breaching Party of
any covenant or agreement to be performed or observed by the Breaching Party
under this License Agreement, and acknowledges that the Non-Breaching Party
shall be entitled to apply for and receive from any court or administrative body
of competent jurisdiction a temporary restraining order, preliminary injunction
and/or permanent injunction, without any necessity of proving damages, enjoining
the Breaching Party from further breach of this License Agreement or further
infringement or impairment of the rights of the Non-Breaching Party.
8.14 Construction of this License Agreement. In any construction of
this License Agreement, the License Agreement shall not be construed against any
Party based upon the identity of the drafter of the License Agreement or any
provision of it.
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<PAGE> 13
IN WITNESS WHEREOF, the Parties hereto have caused this License
Agreement to be executed as of the date first above written.
MARK IV INDUSTRIES, INC.
By /s/ JOHN J. BYRNE
--------------------------
Name: John J. Byrne
Title: Vice President and
Chief Financial Officer
GULTON INDUSTRIES, INC.
By /s/ CHRISTINE K. VANDEN BEUKEL
-------------------------------
Name: Christine K. Vanden Beukel
Title: Vice President and
Secretary
12
<PAGE> 1
EXHIBIT 10(f)
TRANSITION SERVICES AGREEMENT
between
GULTON INDUSTRIES, INC.
and
MARK IV INDUSTRIES, INC.
Dated as of February 10, 1997
<PAGE> 2
This TRANSITION SERVICES AGREEMENT (together with all schedules
hereto, this "Agreement") is entered into as of this 10th day of February, 1997
by and between Mark IV Industries, Inc., a Delaware corporation ("Mark IV") and
Gulton Industries, Inc. a Delaware corporation ("Gulton").
RECITALS:
WHEREAS, Mark IV and Gulton Audio Corp., a Delaware corporation (the
"Buyer") have entered into a Purchase Agreement, dated as of December 12, 1996,
and amended as of December 18, 1996 (the "Purchase Agreement"), pursuant to
which the Buyer will purchase all of the issued and outstanding shares of common
stock, par value $1.00 per share ("Common Stock") of Gulton; and
WHEREAS, Gulton desires to purchase certain services described on
Schedule A hereto (the "Services") from Mark IV during a transition period of up
to one year from the date hereof;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants and representations contained herein, the parties hereto
agree as follows.
SECTION 1
PROVISION OF SERVICES
1.1. Provision of Services. (a) Mark IV shall, pursuant to the terms
of this Agreement, provide (or shall cause its Affiliates to provide) to Gulton
(or its Affiliates) the Services for the monthly fees set forth for such Service
on Schedule A. The parties acknowledge that the fees set forth on Schedule A
hereto include Mark IV's overhead expenses attributable to the provision of the
Services.
(b) Mark IV (or its Affiliates) shall provide the Services at a
level of quality and performance consistent
Transition Services Agreement
<PAGE> 3
with past practices during the twelve-month period preceding the date hereof.
(c) Mark IV (and its Affiliates) shall act under this Agreement
solely as independent contractors and not as agents of Gulton.
(d) For purposes of this Agreement, "Affiliate" shall mean, with
respect to any person, (i) any person that directly or indirectly controls, is
controlled by or under common control with, such person, or (ii) any director,
officer, partner, member or employee of such person.
1.2. Use of Services. Mark IV shall be required to provide Services
only to Gulton and its Affiliates and in connection with the conduct of the
business of the Audio Products Group. Gulton shall not, and shall not permit its
Affiliates to, resell any Services to any Person whatsoever or permit the use of
the Services by any Person other than in connection with the conduct of the
Audio Products Group business in the ordinary course by Gulton as currently
conducted.
1.3. Access. Gulton or its Affiliates shall make available on a
timely basis to Mark IV or its Affiliates all information and materials
reasonably requested by Mark IV to enable it to provide the Services.
1.4. Maintenance of Records. During the term of this Agreement, Mark
IV shall make available for inspection by Gulton or its representatives and
agents, during regular business hours and upon reasonable notice, records that
(a) Mark IV or its Affiliates have prepared or maintained in providing the
Services or (b) Gulton has requested that Mark IV or its Affiliates prepare or
maintain; provided, however, that any such inspection by Gulton or its
representatives or agents shall be conducted in a manner which does not
unreasonably interfere with the operation of the day-to-day business affairs of
Mark IV. Gulton shall pay its own costs of any such inspection.
2
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<PAGE> 4
1.5. Priorities. In providing Services, Mark IV shall accord Gulton
and its Affiliates' work on the Services substantially the same priority as it
accords its own operations.
SECTION 2
PAYMENT
2.1. Invoicing and Payment. Gulton shall pay Mark IV for the
Services rendered during the preceding month no later than the 15th day of the
next succeeding month. Subject to Section 2.2, Mark IV shall submit to the Audio
Products Group on a monthly basis an invoice for out-of-pocket expenses, if any,
incurred during the preceding month in connection with its performance of the
Services. Gulton shall pay all amounts due within 30 days of receipt of such
invoice in accordance with the payment instructions specified therein or, if no
instructions are so specified, in accordance with the standing payment
instructions in effect from time to time between Mark IV and Gulton.
2.2. Expenses. Gulton agrees to reimburse Mark IV for such
reasonable out-of-pocket expenses as may be incurred by Mark IV or its
Affiliates (and, for each expense exceeding $500, approved in advance in writing
by Gulton) in the course or on account of rendering of any of the Services
hereunder. For all expenses, Mark IV will render a detailed accounting of the
amount and nature of such expenses.
2.3. Taxes. The fees set forth in Schedule A have been grossed-up to
cover any sales tax, value-added tax, goods and services tax or similar tax
("Taxes") (but excluding any Tax based upon the net income of Mark IV) pay able
with respect to the provision of Services, and Mark IV shall be responsible for
paying any such Taxes to the appropriate court, supranational, national,
federal, state or local government or governmental authority or instrumentality,
whether domestic or foreign.
3
Transition Services Agreement
<PAGE> 5
SECTION 3
TERM OF PARTICULAR SERVICES
3.1. Term of Services. The provision of Services shall commence on
the date hereof and, with respect to each Service, shall terminate on the
one-year anniversary hereof; provided, that (a) Gulton may cancel any Service
upon 15 days' written notice to Mark IV, and thereupon its obligation to pay
fees relating to such Service in subsequent months shall cease and (b) Mark IV
may cease to provide a Service upon 30 days' written notice to Gulton if Mark IV
ceases to use such Service in its own operations or provide such Service to its
Affiliates; provided, however, that if Mark IV or its Affiliates make any
arrangements with any other Person for the provision of Services terminated by
Mark IV pursuant to this clause (c), Mark IV shall arrange for such Services to
be offered to Gulton on the same terms and conditions set forth herein.
3.2. System Migration. The parties hereto agree to use their
reasonable good faith efforts to cooperate with and assist each other in
connection with the transition from the performance of the Services by Mark IV
to the performance of such services by Gulton, taking into account the need to
minimize both the cost of such transition and the disruption to the ongoing
business activities of the parties hereto. The parties hereto acknowledge that
the foregoing may include the provision of services requested by Gulton in
connection with its transition to non-Mark IV systems, including but not limited
to migration of historical data, migration-specific enhancements and cooperation
with and assistance to third party consultants engaged by Gulton in connection
with the foregoing.
3.3. Return of Materials. Upon the termination of a Service or
Services with respect to which Mark IV holds books, records, files, data bases
or computer software or hardware (including, but not limited to, current and
archived copies of computer files) owned or leased by Gulton or its Affiliates
and used by Mark IV or its Affiliates in
4
Transition Services Agreement
<PAGE> 6
connection with the provision of a Service (the "Materials"), Mark IV will
return all of such Materials promptly, but not later than 30 business days after
such termination. Mark IV may make duplicate copies of the Materials for its
legal files at its own cost and subject to the confidentiality provisions of
Section 8.7 of the Recapitalization Agreement.
SECTION 4
FORCE MAJEURE
4.1. Mark IV shall not be liable for any interruption of Service or
delay or failure to perform under this Agreement when such interruption, delay
or failure results from causes beyond its reasonable control, including but not
limited to any strikes, lock-outs or other labor difficulties; acts of any
foreign government; riot, insurrection or other hostilities; embargo; fuel or
energy shortage; fire, flood or acts of God (each a "Force Majeure Event"). Mark
IV will promptly notify Gulton upon learning of the occurrence of any Force
Majeure Event. Upon the cessation of such Force Majeure Event, Mark IV will use
its best efforts to resume its performance of the Services hereunder.
SECTION 5
INDEMNITY
5.1. Indemnity. Each party hereto agrees that the other party hereto
will not be liable for any claims, demands, complaints, liabilities, losses,
damages, costs or expenses (collectively, "Losses") arising from or relating to
the provision of any Service provided to Gulton or its Affiliates pursuant
hereto, except to the extent of Losses arising out of the gross negligence,
fraud or willful misconduct of the other party or its Affiliates, employees,
directors, officers, agents or representatives.
5.2. Obligation to Correct or Reperform. In the event of any breach
of this Agreement by Mark IV with re-
5
Transition Services Agreement
<PAGE> 7
spect to any error or defect in the provision of any Service, Mark IV shall, at
Gulton's request, use its best efforts to correct such error or defect or
reperform such Services without the payment of any further fees by Gulton or its
Affiliates.
SECTION 6
TERMINATION
6.1. Termination. This Agreement shall terminate on the earliest to
occur of (a) twelve months after the Closing Date, (b) the date on which the
provision of all Services have been canceled pursuant to Section 3 and (c) the
date on which this Agreement is terminated pursuant to Section 6.2.
6.2. Breach of Agreement. If either party shall cause or suffer to
exist any breach of any of its obligations under this Agreement, including but
not limited to any failure to make payments when due, and said party does not
cure such default within 30 days after receiving written notice thereof from the
non-breaching party, the non-breaching party may terminate this Agreement,
including, as the case may be, the provision of Services pursuant hereto,
immediately by providing written notice of termination.
6.3. Sums Due. In the event of a termination of this Agreement, Mark
IV shall be entitled to all outstanding amounts due from Gulton for Services
performed during the month in which the date of termination occurs.
6.4. Effect of Termination. Sections 3.2, 5, 6.3 and 7 of this
Agreement and this Section 6.4 shall survive any termination of this Agreement.
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Transition Services Agreement
<PAGE> 8
SECTION 7
MISCELLANEOUS
7.1. Title to Data; Confidentiality. (a) Each of the parties hereto
acknowledges that any information of the other party received in the course of
performance of this Agreement shall be confidential information subject to the
confidentiality provisions of Section 8.7 of the Recapitalization Agreement.
(b) Gulton acknowledges that it will acquire no right, title or
interest (including any license rights or rights of use) in any software or the
licenses therefor which are owned by Mark IV, by reason of Mark IV's provision
of the Services.
(c) Mark IV agrees that all Materials and other information
received, compiled, prepared or computed for the benefit of Gulton or its
Affiliates and which relate to the conduct of the Audio Products Group are the
sole property of Gulton and that neither Mark IV nor its Affiliates will acquire
any right, title or interest (including any license rights or rights in use) in
any such Materials or other information by reason of its or their provision of
the Services.
7.2. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given: (a) if delivered by hand, when delivered; (b) if
sent by telex, telecopy or cable (and confirmed by telephone) or by overnight
delivery, when received, or (c) if sent by mail, five days after being mailed,
certified or registered mail, with postage prepaid:
7
Transition Services Agreement
<PAGE> 9
(a) If to Gulton, to:
Gulton Industries, Inc.
602 Cecil Street
Buchanan, Michigan 49107
Attention: Robert D. Pabst
Telecopy: (616) 695-4709
With a copy to:
Andrew L. Sommer, Esq.
Debevoise & Plimpton
875 Third Avenue
New York New York 10022
Telecopy: (212) 909-6836
or to such other person or address as Gulton shall furnish to Mark IV in
writing.
(b) If to Mark IV, to:
Mark IV Industries, Inc.
One Towne Centre
501 John James Audubon Parkway
Amherst, NY 14226
Attention: John J. Byrne
Telecopy:
With a copy to:
Gerald S. Lippes, Esq.
Lippes, Silverstein, Mathias & Wexler LLP
700 Guaranty Building
28 Church Street
Buffalo, NY 14202
Telecopy: (716) 853-5199
or to such other person or address as Mark IV shall furnish to Gulton in
writing.
8
Transition Services Agreement
<PAGE> 10
All such notices, requests, demands, waivers and other
communications shall be deemed to have been received (w) if by personal
delivery, on the day after such delivery, (x) if by certified or registered
mail, on the seventh business day after the mailing thereof, (y) if by next-day
or overnight mail or delivery, on the day delivered, (z) if by telecopy or
telegram, on the next day following the day on which such telecopy or telegram
was sent, provided that a copy is also sent by certified or registered mail.
7.3. Headings. The headings contained in this Agreement are for
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
7.4. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof.
7.5. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
7.6. Applicable Law. This Agreement and the legal relations among
the parties hereto will be governed by and construed in accordance with the
substantive laws of the State of New York, without giving effect to the
principles of conflict of laws thereof.
7.7. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, successors and
permitted as signs.
7.8. Assignment and Delegation. This Agreement shall not be
assignable by either party hereto without the prior written consent of the
other. No assignment hereunder shall in any way affect the parties' obligations
or
9
Transition Services Agreement
<PAGE> 11
liabilities under this Agreement. Mark IV may delegate performance of all or any
part of its obligations under this Agreement to (a) any subsidiary of Mark IV or
(b) third parties to the extent such third parties are routinely used to provide
such Services to Mark IV or its subsidiaries. Any purported assignment in
violation of this Section 7.8 shall be void.
7.9. No Third Party Beneficiaries. Nothing in this Agreement shall
confer any rights upon any person or entity other than Gulton and Mark IV and
each such party's respective successors and permitted assigns.
7.10. Amendment; Waivers, etc. No amendment, modification, discharge
or waiver of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party against whom
enforcement of the amendment, modification, discharge or waiver is sought. Any
such waiver shall constitute a waiver only with respect to the specific matter
described in such writing and shall in no way impair the rights of the party
granting such waiver in any other respect or at any other time.
[Rest of page intentionally left blank]
10
Transition Services Agreement
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
MARK IV INDUSTRIES, INC.
By /s/ JOHN J. BYRNE
-----------------------------
Name: John J. Byrne
Title: Vice President and
Chief Financial Officer
GULTON INDUSTRIES, INC.
By /s/ NICHOLAS E. SOMERS
-----------------------------
Name: Nicholas E. Somers
Title: President
11
Transition Services Agreement
<PAGE> 13
SCHEDULE A
Services to be Provided by Mark IV
Pursuant to the Agreement
Service Monthly Fees
------- ------------
1. Mark IV will provide accounting $925
services, and otherwise assist and
advise on, accounting issues,
including, but not limited to, in
connection with the preparation of
financial statements, consolidation
issues, GAAP adjustments and the use
and operation of the "FDC" software
program, provided, that any
assistance with respect to the use
and operation of the FDC software
will only be done at the Mark IV
headquarters in Amherst, NY.
2. Mark IV will provide services or $925
information as necessary with
respect to the data it has
maintained on employees of the Audio
Products Group, in the areas of
medical, pension, workers' compensa-
tion and dates of hire, and will
continue to enter and track data on
a post-closing basis as requested.
3. Mark IV will provide assistance in $925
preparing and filing Forms 5500 for
the Audio Products Group benefit
plans and with respect to other
regulatory reporting, including, but
not limited to, insurance, employee
benefits and securities matters.
Transition Services Agreement
<PAGE> 14
4. Mark IV will provide general tax $925
planning and advice, including, but
not limited to, assistance and
advice on the timely and accurate
preparation of all required U.S.
Federal, state and local and foreign
tax filings (including all required
attachments, elections, disclosures
and schedules); audits and appeals
of the Audio Products Group; the
computation of all quarterly or
periodic estimated tax payments; and
the calculation of the Audio
Products Group's tax provision, tax
basis and deferred taxes for
financial reporting purposes; and
Mark IV will make available the use
of tax preparation software and tax
research materials to accomplish the
foregoing.
5. For a period not to exceed 30 days $925
after the Closing, Mark IV will
permit Audio Products Group Company
employees employed in the United
States to participate in its
medical, dental or other welfare
benefit plans, in each case only to
the extent that such employees
participated in such plan
immediately prior to the Closing
Date or would have been eligible to
participate in such plan upon the
completion of the necessary
paperwork.
2
Transition Services Agreement
<PAGE> 15
6. Mark IV will assist in procuring $925
contracted arrangements with North
American Administrators and UNUM as
administrators of the death,
disability, medical and life
insurance benefits programs for the
employees of the Audio Products
Group immediately prior to the
Closing.
7. Until a transfer of assets is $925
effectuated in accordance with the
terms of the Purchase Agreement,
Mark IV will (a) cause the trustees
of its 401(k) plan (Marine Midland
Bank) to continue to hold and invest
assets that relate to employees of
any Audio Products Group Company who
were involved in such plan
immediately prior to the Closing,
and (b) cause Kwasha Lipton to
continue to serve as record keeper
and administrate the 401(k) plan (in
accordance with its terms) for such
employees during such period. After
the Closing Date, Mark IV will not
be required (i) to accept additional
contributions into its 401(k) plan
from employees of the Audio Products
Group, (ii) to make loans from its
401(k) plan to employees of the
Audio Products Group, or (iii) to
take any other actions with respect
to its 401(k) plan that would
contravene applicable law or
regulations.
3
Transition Services Agreement
<PAGE> 16
8. Mark IV will assist and advise on $925
the development of a foreign
currency hedging program for the
Audio Products Group and will
provide reports that (a) track
hedging obligations into which the
Audio Products Group may enter into
and (b) provide information
currently being generated by Mark IV
with respect to its hedging program,
including reports on net currency
exposures.
9. Mark IV will provide assistance and $925
advice with respect to daily cash
management, including, but not
limited to, forecasting, reconcilia-
tions and the use and operation of
cash management systems and software
programs.
Notwithstanding any of the foregoing descriptions of Services to the
contrary, Mark IV will not be required to provide any Services to the Audio
Products Group that are not provided to the Audio Products Group as of the
Closing Date.
4
Transition Services Agreement
<PAGE> 1
Exhibit 10(g)
SOFTWARE LICENSE AGREEMENT
between
GULTON INDUSTRIES, INC.
and
MARK IV INDUSTRIES, INC.
Dated as of February 10, 1997
<PAGE> 2
SOFTWARE LICENSE AGREEMENT
This Software License Agreement (this "Agreement") is made and
entered into as of this 10th day of February, 1997, by and between Mark IV
Industries, Inc., a Delaware corporation ("Mark IV") and Gulton Industries,
Inc., a Delaware corporation ("Gulton").
W I T N E S S E T H:
WHEREAS, Mark IV, Mark IV PLC, a United Kingdom corporation, Gulton
and Greenwich Street Audio, LLC, a Delaware limited liability company have
entered into a Purchase Agreement, dated as of December 12, 1996, and amended as
of December 18, 1996 (the "Purchase Agreement"), providing, among other things,
for the execution and delivery of this Agreement (capitalized terms used herein
but not defined shall have the meanings set forth in the Purchase Agreement);
and
WHEREAS, Mark IV, by itself and through its Affiliates (as defined
below), including the Audio Products Group Companies, has developed and owns
certain rights in the Licensed Software (as defined below) used by the Audio
Products Group; and
WHEREAS, Mark IV acknowledges that Gulton and its Affiliates
authored portions of the Licensed Software, that such portions are joint works
within the meaning of 17 U.S.C. Section 101, and that Gulton owns certain rights
therein and thereto by virtue of its authorship;
WHEREAS, Mark IV desires to license Gulton and Gulton desires to
obtain throughout the world (the "Territory") for itself and any Affiliate,
including the Audio Products Group Companies, a nonexclusive, royalty-free,
perpetual right and license, subject to the terms and conditions contained
herein, to those portions of the
<PAGE> 3
Licensed Software not authored by Gulton for use in connection with the Audio
Products Business;
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants hereinafter contained, the sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
SECTION 1
DEFINITIONS
1.1 "Licensed Software" means the computer programs, as they exist
on the date hereof, and any and all intellectual property rights therein and
thereto in all forms and media, including but not limited to source code, object
code, printed listings of code, copies on magnetic media and any existing
derivative works, data and documentation, algorithms, formulas, flow charts,
logic diagrams, computations, listings, instructions, statements, written
graphics, photographic, optic, electric, magnetic or electromagnetic forms,
developed by Mark IV or any Affiliate thereof (other than Gulton), and related
to, used in, held for use in connection with, necessary for the conduct of or
otherwise material to the operations of the Audio Products Group, including but
not limited to the computer programs listed on the attached Schedule A.
1.2 "Affiliate" shall mean, with respect to any person, (i) any
person that directly or indirectly controls, is controlled by or under common
control with, such person, or (ii) any director, officer, partner, member or
employee of such person.
SECTION 2
LICENSE
2.1 License Grant. (a) Subject to the terms and conditions set forth
in this Agreement, Mark IV hereby grants to Gulton and Gulton hereby accepts a
nonexclusive,
2
<PAGE> 4
perpetual, irrevocable, royalty-free and fully paid-up right and license
throughout the Territory to use, access, reproduce, distribute, display,
compile, modify and prepare derivative works from the Licensed Software, for the
internal use (except as provided herein) of Gulton and its Affiliates (the
"License"); provided, however, that neither Gulton nor Mark IV shall have any
rights to derivative works developed after the date hereof by the other party.
Mark IV acknowledges that Gulton currently possesses a copy of the source code
for the Licensed Software.
(b) The License granted herein permits Gulton to make any number of
copies of the Licensed Software and use the Licensed Software on any number or
type of processing units (CPUs) at any number of installations throughout the
world, including without limitation data center installations owned and/or
operated by third parties under contract to provide data center services for
Gulton or any of its Affiliates.
2.2 Sublicenses. Gulton may sublicense any and all of the rights to
the Licensed Software granted hereunder to any present or future Affiliates of
Gulton for the internal use of such Affiliate, provided, however, that Gulton
shall remain responsible for all use of the Licensed Software by such
sublicensees.
2.3 Export Controls. From and after the date hereof, the parties
agree that each party shall be responsible for obtaining any export license or
other permission to transfer the Licensed Software to its respective Affiliates
outside of the United States. Each party agrees to indemnify the other party
against any liability to the United States or other government arising out of
such export.
2.4 Third Party License. Gulton acknowledges that nothing herein
shall be construed as a license to any operating software owned by IBM for the
AS/400, that Gulton
3
<PAGE> 5
will need to obtain a separate license from IBM to use such operating software
and that Mark IV has no obligation to Gulton to assist it in obtaining such a
license from IBM.
SECTION 3
USER RESTRICTIONS
3.1 No Third Party Use. Except as otherwise provided in this
Agreement (including but not limited to Section 2.2 hereunder), Gulton agrees
not to disclose, publish, release, or transfer to any other person or entity any
Licensed Software without Mark IV's prior written consent (except to its
Affiliates and to third party contractors who agree in writing to hold the
Licensed Software in confidence).
3.2 Use of Copyright Notice. Gulton agrees to reproduce and include
the copyright notice and any other legend now existing on any copies of the
Licensed Software. Gulton may add its own proprietary notices to the Licensed
Software with respect to those portions authored by Gulton and its Affiliates.
SECTION 4
REPRESENTATIONS AND WARRANTIES
4.1 Ownership of Licensed Software. Mark IV represents and warrants
that it owns, individually or jointly, all right, title and interest in and to
the Licensed Software, that no consents are necessary in respect of the Licensed
Software, or the source code therefor, in connection with the licensing to
Gulton of the Licensed Software pursuant to this Agreement and that it has the
right and authority to grant to Gulton the rights granted to the Licensed
Software in accordance with this Agreement free and clear of all liens and
encumbrances.
4.2 Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH HEREIN,
(i) MARK IV DISCLAIMS ANY AND
4
<PAGE> 6
ALL REPRESENTATIONS OR WARRANTIES OF ANY KIND, WHETHER EXPRESSED OR IMPLIED,
MADE WITH RESPECT TO THE LICENSED SOFTWARE, INCLUDING BUT NOT LIMITED TO ANY
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE; AND
(ii) MARK IV SHALL NOT BE LIABLE WITH RESPECT TO THE LICENSED SOFTWARE, WHETHER
IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY), UNDER ANY
WARRANTY OR OTHERWISE, FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CON SEQUENTIAL
LOSS OR DAMAGE WHATSOEVER, OR FOR LOSS OR DAMAGE TO THE FACILITIES, LOSS OF USE
OR LOSS OF OR DAMAGE TO EQUIPMENT, COST OF CAPITAL, LOSS OF PROFITS OR REVENUES
OR THE LOSS OF USE THEREOF.
SECTION 5
MISCELLANEOUS
5.1 Governing Law. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the
internal laws of the State of New York without regard to its conflicts of law
doctrine.
5.2 Entire Agreement. This Agreement, including the Schedule hereto,
sets forth the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein, and supersedes all prior
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, between the parties with respect to the
subject matter hereof.
5.3 Amendment and Modification. This Agreement may be amended,
modified and supplemented only by written agreement of the parties hereto.
5.4 No Duty to Account. Each party hereby agrees to waive for itself
and its Affiliates any obligation that the other party or its Affiliates account
for any profits arising from any joint works created by the parties hereto or
any of their respective Affiliates.
5
<PAGE> 7
5.5 Severability. The invalidity, illegality or unenforceability of
any provision, term, or agreement contained in or made a part of this Agreement
in a particular jurisdiction shall not affect the validity, legality or
enforceability of the remainder of this Agreement in such jurisdiction or the
validity, legality or enforceability of the provision, term or agreement at
issue in any other jurisdiction, and the parties shall negotiate in good faith
to replace the invalid, illegal or unenforceable provision, term or agreement
with a valid, legal and enforceable provision in such jurisdiction that has the
effect nearest to that of the provision, term, or agreement being replaced.
5.6 Relationship of the Parties. The parties are independent
contractors with respect to each other and nothing herein shall be construed to
create an association, partnership, joint venture, employer-employee or agency
relationship between them.
5.7 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, and neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by either of
the parties hereto without the prior written consent of the other party, except
that, either party and their respective permitted assigns may assign its rights
and obligations under this Agreement to (a) any buyer of the operations and
businesses utilizing the Licensed Software, (b) any Affiliate or subsidiary or
(c) any lender to Gulton or any subsidiary or affiliate thereof as security for
obligations to such lender, provided, that no assignment to any such lender
shall in any way affect Gulton's obligations or liabilities under this
Agreement.
5.8 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, successors and
permitted assigns.
6
<PAGE> 8
5.9 Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation other than the parties hereto
and their successors or assigns, any rights or remedies under or by reason of
this Agreement.
5.10 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given: (a) if delivered by hand, when delivered; (b) if
sent by telex, telecopy or cable (and confirmed by telephone) or by overnight
delivery, when received, or (c) if sent by mail, five days after being mailed,
certified or registered mail, with postage prepaid:
(a) If to Gulton, to:
Gulton Industries, Inc.
602 Cecil Street
Buchanan, Michigan 49107
Attention: Robert D. Pabst
Telecopy: (616) 695-4709
With a copy to:
Andrew L. Sommer, Esq.
Debevoise & Plimpton
875 Third Avenue
New York New York 10022
Telecopy: (212) 909-6836
or to such other person or address as Gulton shall furnish to Mark IV in
writing.
7
<PAGE> 9
(b) If to Mark IV, to:
Mark IV Industries, Inc.
One Towne Centre
501 John James Audubon Parkway
Amherst, NY 14226
Attention: John J. Byrne
Telecopy:
With a copy to:
Gerald S. Lippes, Esq.
Lippes, Silverstein, Mathias & Wexler LLP
700 Guaranty Building
28 Church Street
Buffalo, NY 14202
Telecopy: (716) 853-5199
or to such other person or address as Mark IV shall furnish to Gulton in
writing.
All such notices, requests, demands, waivers and other
communications shall be deemed to have been received (w) if by personal
delivery, on the day after such delivery, (x) if by certified or registered
mail, on the seventh business day after the mailing thereof, (y) if by next-day
or overnight mail or delivery, on the day delivered, (z) if by telecopy or
telegram, on the next day following the day on which such telecopy or telegram
was sent, provided that a copy is also sent by certified or registered mail.
5.11 Headings. The headings of the Sections of this Agreement are
inserted for convenience only and shall not constitute a part hereof or affect
in any way the meaning or interpretation of this Agreement.
5.12 Waiver of Compliance. Any failure of either party thereto to
comply with any obligation, covenant, agreement or condition herein may be
expressly waived in
8
<PAGE> 10
writing by the President or a Vice President of such party, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
5.13 Further Assurances. Each of the parties hereto agrees to take
all further actions and to execute and deliver, in the name and on behalf of
Gulton or Mark IV, as the case may be, all such documents and do, in the name
and on behalf of Gulton or Mark IV, as the case may be, all such other acts and
things necessary, desirable or proper to vest, perfect or confirm its right,
title or interest, in, to or under any of the rights, privileges, immunities,
powers, purposes, franchises, properties or assets of the other party and
otherwise to carry out the purposes of this Agreement.
5.14 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which, taken together, shall constitute one agreement.
5.15 Construction of this Agreement. In any construction of this
Agreement, the Agreement shall not be construed against any party based upon the
identity of the drafter of the Agreement or any provision of it.
9
<PAGE> 11
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first hereinabove set forth.
MARK IV INDUSTRIES, INC.
By: /s/ JOHN J. BYRNE
---------------------------------
Name: John J. Byrne
Title: Vice President and
Chief Financial Officer
GULTON INDUSTRIES, INC.
By: /s/ CHRISTINE K. VANDEN BEUKEL
---------------------------------
Name: Christine K. Vanden Beukel
Title: VP & Secretary
10
<PAGE> 12
SCHEDULE A
Licensed Software
Mark IV Audio in the United States has two IBM AS/400's located in
Buchanan, Michigan and Oklahoma City, Oklahoma. These two AS/400's run
internally developed "homegrown" software which is written in RPG III. Source
code is maintained on each AS/400 for the applications running on that AS/400
and is maintained by the Information Systems staff based in Buchanan, Michigan
and Oklahoma City, Oklahoma. Below is a list of the applications running at each
location:
Buchanan
Manufacturing: MRP/Master Schedule
Inventory Control
Bill of Materials
Routings/Shop Scheduling
Work Orders
Purchase Orders
Work on Progress
Forecasting
Physical Inventory
Cycle Counting
Scrap Reporting
Finance: Accounts Payable
Accounts Receivable
General Ledger
Budgets
Fixed Assets
Payroll
Labor/Absence Reporting
Costing
11
<PAGE> 13
Marketing: Order Processing
Invoicing Distribution
Sales
Pricing
Finished Goods Reporting
Miscellaneous: Repairs
Service Awards
Mailing System
Menu System
Benefits Data Collection
Communication/Passthru Routines
Oklahoma City
Manufacturing: MRP/Master Schedule
Inventory Control
Bill of Materials
Routings
Work Orders
Purchase Orders
Work on Progress
Forecasting
Physical Inventory
Cycle Counting
Scrap Reporting
12
<PAGE> 1
EXHIBIT 10(h)
AGREEMENT
between
ELECTRO-VOICE, INC.
and
LOCAL 662
INTERNATIONAL UNION OF
ELECTRONIC, ELECTRICAL,
SALARIED, MACHINE &
FURNITURE WORKERS
AFL-CIO
1995-1998
<PAGE> 2
CONTENTS
AGREEMENT
ARTICLE 1 UNION RECOGNITION.......................................1
ARTICLE 2 PURPOSE OF AGREEMENT....................................1
ARTICLE 3 NON-DISCRIMINATION......................................2
ARTICLE 4 UNION SECURITY AND CHECK-OFF............................2
ARTICLE 5 UNION REPRESENTATION....................................4
ARTICLE 6 GRIEVANCE PROCEDURE - ARBITRATION.......................5
ARTICLE 7 SENIORITY...............................................9
ARTICLE 8 DISCIPLINE AND DISCHARGE...............................17
ARTICLE 9 HOURS AND OVERTIME.....................................18
ARTICLE 10 LEAVES OF ABSENCE......................................22
ARTICLE 11 CLASSIFICATIONS NOT SUBJECT TO BID
PROCEDURES.............................................24
ARTICLE 12 QUALIFYING FOR PREMIUM JOBS............................25
ARTICLE 13 HEALTH & SAFETY........................................26
ARTICLE 14 TIME STUDY.............................................26
ARTICLE 15 REPORT IN/CALL IN/CALL BACK PAY........................27
ARTICLE 16 REST PERIOD - RELIEF OPERATORS.........................28
ARTICLE 17 COMPENSATORY LEAVE FOR SICKNESS OR
COMPELLING PERSONAL REASONS............................28
<PAGE> 3
ARTICLE 18 VACATIONS..............................................30
ARTICLE 19 COST OF LIVING ALLOWANCE...............................33
ARTICLE 20 INSURANCE..............................................34
ARTICLE 21 HOLIDAYS...............................................36
ARTICLE 22 PENSIONS...............................................38
ARTICLE 23 MANAGEMENT RIGHTS......................................40
ARTICLE 24 GENERAL................................................41
ARTICLE 25 RATES OF PAY...........................................45
ARTICLE 26 DURATION OF AGREEMENT..................................45
APPENDIX A............................................................48
APPENDIX B............................................................50
APPENDIX C............................................................52
APPENDIX D............................................................54
APPENDIX E............................................................56
APPENDIX F............................................................58
APPENDIX G............................................................60
ii
<PAGE> 4
AGREEMENT
THIS AGREEMENT MADE AND ENTERED INTO ON THIS DAY OF MAY 15,1995 BY
ELECTRO-VOICE, INC., HEREINAFTER CALLED THE EMPLOYER, AND THE INTERNATIONAL
UNION OF ELECTRONIC, ELECTRICAL, SALARIED, MACHINE AND FURNITURE WORKERS,
AFL-CIO, AND ITS LOCAL 662, HEREINAFTER CALLED THE UNION.
ARTICLE 1
UNION RECOGNITION
All full-time and regular part-time production and maintenance
employees employed by Electro-Voice, Inc., Division of Mark IV Industries, at
its Newport, Tennessee plant, including all leadmen, truckdrivers, shipping and
receiving employees, stockhandlers and plant clerical employees, incoming
inspectors, quality control inspectors, and quality control technicians, BUT
EXCLUDING ALL office clerical employees, engineering department employees,
production engineering department employees, quality control department clerical
employees, production control department employees, assistant foremen, line
supervisors, professional employees, guards and supervisors as defined in the
Act.
ARTICLE 2
PURPOSE OF AGREEMENT
Section 1. It is the purpose of this Agreement to promote the mutual
interest of the Employees and the Employer, to secure a prompt and equitable
disposition of grievances, to establish fair wages, hours and working
conditions, to secure a peaceful and harmonious relationship and to provide a
safe and healthful working environment and to set forth the sole and entire
agreement between the Employer and the Union with respect to wages, hours and
all other terms and conditions of employment. The parties agree to cooperate
fully to secure the advancement and achievement of the above purposes. The
principle of a fair day's work for a fair day's pay is jointly recognized.
Section 2. The term "Employee" when used in this Agreement means an
employee of the Employer in the Bargaining Unit.
<PAGE> 5
ARTICLE 3
NON-DISCRIMINATION
Section 1. The provisions of this Agreement shall be applied to all
employees without discrimination or preferential treatment for any reason
including age, sex, race, color, handicapped, creed or national origin or any
other reason prohibited by law.
Section 2. During the first sixty (60) calendar days of continuous
employment, all new employees and employees hired after a break of service which
terminates their seniority under the provisions of Article 7, Section 8, shall
be on probation, have no seniority and may, at the Employees sole discretion be
terminated without recourse to the grievance or arbitration provisions and
without recall rights during such probationary period, upon completion of the
probationary period, their seniority shall be computed as of the latest hiring
date.
Section 3. The Employer agrees not to interfere with the rights of
its employees to become members of the Union, and there shall be no
discrimination, interference, restraint, or coercion by the Employer or any of
its agents against any employee because of Union membership or because of his
acting as an officer or in any other bonafide activity on behalf of the Union.
Section 4. The Union recognizes its responsibility to represent all
employees in the bargaining unit and agrees there will be no discrimination,
interference, restraint, or coercion by the Union or any of its agents against
any employee because of his refusal to join or participate in the Union or Union
activities.
Section 5. All employees male or female shall receive equal pay for
equal work as well as all other benefits and conditions and privileges.
ARTICLE 4
UNION SECURITY AND CHECK-OFF
Section 1. During the life of this Agreement the Employer will make
deductions of Union membership dues and initiation fees, if payable, for each
employee who signs an authorization card which will be furnished to the Employer
by the Union. The deduction shall be made from the third paycheck in each month.
Such deductions shall be paid promptly to the Financial Officer designated by
the Union
2
<PAGE> 6
together with two (2) lists of employees from whose pay such deductions were
made and the amount of each.
I hereby assign, from my earnings now and hereafter payable to me
from the Employer, to Local 662 of the International Union of Electronic,
Electrical, Salaried, Machine and Furniture Workers, AFL-CIO, a sum equal to
Union membership dues and owing by me, an initiation fee, as certified to the
Employer by the Local.
This Assignment and Authorization is voluntarily made in
consideration of the costs of representation and collective bargaining and is
not contingent upon my membership in the Union.
Pursuant to this assignment and irrespective of my present or future
membership status in the Union, I authorize and direct you to deduct, while I am
employed in the represented bargaining unit of the Employer, such a sum equal to
membership dues and, if owing by me, an initiation fee, as certified to the
Employer by the Local.
Regardless of my membership status, this Assignment and
Authorization shall be irrevocable until a date one year from its effective
date, or until the date on which the current collective bargaining agreement
between the Employer and the Union is terminated, whichever is earlier. I agree
and direct that this Assignment and Authorization shall be automatically
renewed, and shall be irrevocable for successive periods of one (1) year each
from its effective date, or for the period of each succeeding applicable
collective bargaining agreement between the Employer and the Union, whichever
period is shorter. This Assignment and Authorization may only be revoked by
written notice by individual registered or certified mail, given by me to the
Employer and the Union, postmarked not more than twenty (20) days and not less
then ten (10) days prior to the expiration date of each one-year period, or the
termination date of each applicable collective bargaining agreement between the
Employer and the Union, whichever date is earlier.
This Authorization and Assignment supersedes all previous
Authorizations and Assignments.
Section 2. The Union agrees to save the Company harmless from any
action or actions growing out of these deductions and assumes full
responsibility for the disposition of the funds so deducted once they have been
turned over to the Financial Secretary of the Union as above provided.
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ARTICLE 5
UNION REPRESENTATION
Section 1. Authorized International Representatives will be admitted
to the plant premises during working hours with the permission of the plant
manager or his designated representative.
Section 2. Local Union officers will be admitted to the plant
premises during hours other than their regular shift with the permission of the
plant manager or his designated representative to conduct legitimate Union
business.
Section 3. Local Union officers will be granted permission at
reasonable times to conduct legitimate Union business during their regular
shift.
Section 4. Local Union officers shall be designated as: President,
Vice President, Financial Secretary, Treasurer, Recording Secretary, Chief
Steward, Time Study Representative, Negotiating Committee and Stewards in their
area of jurisdiction.
Section 5. Stewards will be chosen from and assigned to the
following areas: Zones 1, 2, 3, 4.
Zone 1: Department 19, 26, 36, 37, 38, and 39
Zone 2: Department 27
Zone 3: Stockroom, Receiving Department, Quality Control
Inspector, Quality Control Technicians, Truck Drivers,
Material Handlers, Maintenance, Tool Room, Custodian,
Janitor, Matron, Tool Crib.
Zone 4: Shipping Department
Note: The Set-Up person shall be represented by the appropriate
Steward in the zone to which the person is assigned.
Section 6. Should there be a substantial change in the level of
employment, other than temporary lay-offs as provided in Article 7, Section 5
a, b, a commensurate change in the number of stewards may be made by mutual
agreement between the Employer and the Union. If by agreement the number of
stewards is reduced, which steward is to cease to function as a steward shall be
determined by the Union.
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Section 7. The second and/or third shifts in excess of three (3) or
more employees shall warrant a steward. Such Steward shall be assigned regular
full time work.
Section 8. If more than three (3) employees are working, a steward
shall also be offered work if he is qualified to perform the work available. If
not qualified, the Union may designate an alternate from among those employees
working.
Section 9. Should the Union seek a renewal of this Agreement it
shall select a negotiating committee of not to exceed five (5) members to
negotiate with the employer. In the event of such negotiations, the employer
will pay all hours in any day (8) that a meeting is scheduled with the employer.
This applies to each negotiating committee member.
Any meetings between the Company and Union deemed necessary by
mutual agreement to discuss contract provisions shall include the Negotiating
Committee and shall be held during working hours without loss of earnings. The
only exceptions to this agreement will be grievance meetings as outlined in
Article 6 of this contract.
ARTICLE 6
GRIEVANCE PROCEDURE - ARBITRATION
Section 1. Employees are encouraged to discuss day to day problems
with their immediate supervisors without resorting to the formal grievance
procedure. However, if an employee believes a provision of this contract has
been violated, he shall process his grievance as outlined below.
Section 1A. Grievances and all answers to grievances (other than
those settled in Section 3A, Step 1) shall be in writing and signed by the
aggrieved employee or employees and, or the Union and submitted within the time
limits hereinafter set forth.
Section 2A. Grievances concerning disciplinary action or discharge
must be filed in writing, within five (5) working days or receipt of
notification of such action, or such grievances shall not be valid. In the event
of disciplinary action or discharge the specific reason for such action will be
given in writing at the time to the employee with a copy to the union.
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Section 2B. All other grievances must be filed in writing within ten
(10) working days after the occurrences of the event on which it is predicated
provided, however, that grievances concerning payroll errors or wage adjustments
maybe filed in writing within twenty (20) working days, unless either party
shall request in writing an extension of time for further investigation of the
issue.
Section 3. All differences, disputes and grievances that may arise
between the Union and the Employer shall be taken up as follows:
(a) Step 1. Between the aggrieved employee on one hand and the
employee's foreman on the other. Either party may request the presence of the
area steward.
If no satisfactory settlement is reached between them within
twenty-four (24) hours the matter shall be reduced to writing and referred to
Step 2.
(b) Step 2. A meeting will be held within twenty-four (24) hours
between the Chief Steward, Steward, and the Company. Either party may request
the presence of the grieving employee and/or additional witnesses or the
supervisor for the purpose of giving testimony. Any settlement reached in this
step shall be in writing and signed by the Human Resource Manager and the Chief
Steward. If no settlement is reached in Step 2, the grievance may be appealed
within twenty-four (24) hours.
(c) Step 3. A meeting will be held within ten (10) consecutive
working days after notice of appeal from Step 2 is received with President or
Vice President, Chief Steward and the Recording Secretary of the Local and/or
representative of the International Union, and the Plant Manager or his
designated representative. Any settlement reached in this meeting shall be in
writing and signed by the Union and the Company. If settlement is not reached
the grievance will be submitted to arbitration within twenty (20) working days.
Time periods specified throughout this article may be extended by
mutual agreement.
(d) In respect to the steps of the grievance procedure, Union
officials will be paid a maximum number of hours in accordance with the
following:
Steward: (in area of jurisdiction) Six (6) hours per week. Chief
Steward: Eight (8) hours per week (accrue two hours). The Chief Steward will
also be allowed to use up to fifteen (15) hours of time unused by Zone Stewards
during the
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following week. Time Study Representative: Six (6) hours per week, subject to
additional paid time allowance by mutual agreement between the Company and the
Union. President or Vice-President: (as defined in Article 5, Section 4) Four
(4) hours per week. (total for the two officers for time spent in Step 3).
Recording Secretary: Four (4) hours per week for time spent in Step 3 grievance
meeting. However, the above identified officials shall be allowed to take off
such additional time as the legitimate processing of grievances might require
without pay from the employer. In Step 3 the Chief Steward will be entitled to a
maximum of an additional four (4) hours.
Section 4. The Union agrees that all stewards will investigate
grievances in the shortest time possible. Any shop steward (as differentiated
from a chief steward) when requested, shall have the right to investigate a
grievance within his area of jurisdiction during working hours on Step 1 and
Step 2 grievances. In the absence from work of a steward, his designated
alternate or his chief steward may act in his place. When a steward is called
upon to investigate or work on a grievance during working hours, he will do so
according to the following procedure. The employee's immediate supervisor will
be responsible for contacting the appropriate steward and will do so without
undue delay.
(a) The steward shall not leave his job without prior notice to his
immediate supervisor. In the event that the steward is working on a job where a
replacement is required, such replacement will be made within the shortest
possible time.
(b) Prior to leaving his job the steward will request a "Union
Affairs Pass" of the immediate supervisor and he must return the pass to such
supervisor when returning to the job. Such supervisor will indicate the time on
the "Union Affairs Pass" that the steward leaves his work and the time he
returns to work from his grievance investigation.
(c) If the steward is entering an area under the supervision of
someone other than the individual issuing the "Union Affairs Pass", he shall
inform the supervisor of the reasons for his entering the department.
(d) Upon receipt of the "Union Affairs Pass", the shop steward may
leave his work station. When finished with his Union business he must
immediately return to his work area, fill out an indirect labor ticket for the
time spent on Union business, turn it in to his supervisor and return to work.
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(e) Shop stewards will not investigate grievances in other areas of
jurisdiction.
(f) In the event any employee is to be discharged or disciplined and
is required to leave the plant, he shall remain in the Human Resource Department
and the Chief Steward shall be called in for discussion, without undue delay.
Section 5. The Union agrees there will not be any strike, sit down,
slow down, work stoppage, mass absenteeism for concerted action, boycott or any
other form of action which results in delays, stoppage of work or production
during the term of this Agreement, however, is not a violation of this provision
for the International or the Union to call a strike over work measurement
standards or new job classifications in accordance with the procedures provided
below.
In the event of such a work measurement standards or new job
classification dispute or difference, a grievance shall first be filed and
processed through the steps of the grievance procedure shod of arbitration.
Exercise of the aforementioned right to strike shall require previous reference
to this unsettled grievance together with the Company's final written grievance
answer to the International Union for its consideration, and an opportunity
thereafter for representatives of the Local and the International Union and the
Company to meet and discuss the question. If the grievance is not settled
following such a meeting and discussion, within thirty (30) days thereafter, the
International Union, by written notice signed by an officer thereof, may notify
the Company that the Local Union concerned and the International Union have
authorized a strike of the bargaining unit as provided by the Constitution of
the International Union.
A strike as provided herein shall not begin earlier than fifteen
(15) days, nor later than thirty (30) days, following Company receipt of a
strike notice.
The foregoing provides only a strike right, and does not permit any
other curtailment of or interference with operations, such as slowdown. The
Employer agrees that there will be no lockout during the term of this Agreement.
ARBITRATION
Section 1. All differences, disputes, and grievances between the
parties which shall not have been satisfactorily settled after following the
procedure, (except as provided for in Article 6, Section 5) hereinabove set
forth shall, at the request of either
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party, be appealed to arbitration within twenty (20) working days after the time
limitation set forth in C Step 3 of the grievance procedure.
(a) Upon the issuance of such an appeal, the parties will attempt to
select an arbitrator by agreement. If they fail to agree upon an arbitrator
within five (5) working days, a joint request will be submitted to the American
Arbitration Association within ten (10) working days by the President of the
Local or his designated representative and the Human Resource Manager or his
designated representative for a panel of seven (7) arbitrators.
(b) An arbitrator will be selected from this panel by the Union and
the Employer alternately striking names from the panel until one name remains.
(c) Should the entire panel be unacceptable to either party they
shall request another panel from the Association.
Section 2. It is the intent of the parties to settle differences,
disputes and grievances by responsible bargaining and not resorting to
arbitration as a substitute for such responsibility. It is agreed that the
parties shall equally bear the cost of the arbitrators fee and expense. An
arbitrator shall be authorized only to interpret and apply the provisions of
this agreement to the extent necessary to decide the submitted grievance and
shall not have authority to add to, detract from or alter in any way the
provisions of the agreement. The parties agree that more than one grievance may
be submitted to one arbitrator at any one time. Exceptions shall be made only by
mutual agreement.
Section 3. The Employer will furnish the hearing room. Legal fees
and expenses of case preparation shall be borne by the respective parties.
ARTICLE 7
SENIORITY
Section 1A. Seniority is the length of the employee's service with
the Employer from last date of hire.
Section 1B. Seniority will be accumulated during periods of lay-off
or for approved leave of absence for the length of time equal to continuous
service or nine (9) months whichever is greater at the time of lay-off or for
approved leave of absence
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providing the employee has at least sixty (60) days of service, with exception
of 3A of this Article and Article 10, Section 1C.
Section 1C. On the day following the effective date of this
Agreement a complete seniority list shall be posted in a conspicuous place at
all times. Any protest as to the proper seniority date of an employee after his
or her hire-in date must be made in writing within thirty (30) days. No protest
being filed within this thirty (30) day period, the seniority date as posted
shall be considered correct and final.
Section 2A. The Employer shall provide the Union with up-to-date
seniority lists each month, so arranged that the employee with the greatest
seniority will be first on the list; and the employee with the lowest seniority
will be last. The Employer shall notify the Union in writing of any changes as
they occur between issuance of the above lists.
Section 2B. Job classification seniority records shall be maintained
in the Human Resource Office and made available to the employee and/or the Union
on request. Separate job classifications seniority records shall be maintained
for each shift.
Section 3A. Employees will be granted leaves of absence for the
following reasons. Seniority will continue to accumulate during entire period of
leave of absence. Period of time of such leaves of absence shall apply as
credited service for pension benefits but shall be limited to four (4) years
with regard to public office.
1. Hold full time public office.
2. Upon written request to the Employer from the President of the
International Union or the President of District 7 of the International Union to
hold full time office in the IUE-AFL-CIO.
3. To hold full time office of the Local Union.
4. To serve short term mission for the Union such as delegates, etc.
5. To hold full time office in State and Central Labor Councils of
AFL-CIO State of Tennessee.
Section 3B. Leaves of absence shall not be granted for the purpose
of securing other employment. Employees on leave found to be in other
employment,
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without notifying the Employer, shall be considered as a voluntary quit, except
as provided for in 3A above.
Section 3C. On and after the effective date of this agreement
employees formerly advanced from bargaining unit jobs, or employees accepting
positions outside the bargaining unit shall have their seniority frozen as of
that date, with the privilege of accumulating thirty (30) calendar days in each
one (1) year period in which to make a determination to return to the bargaining
unit.
Said employees who do not return in the thirty (30) day period as
outlined above, shall be considered to have no bargaining unit seniority. (Any
time in any day counts as a full day.)
Those employees who choose to return to the bargaining unit shall
return to the job classification held at the time they left the bargaining unit,
seniority permitting.
A list of employees, along with seniority date, and job
classification held will be given to the Union prior to such movement as
described above.
Section 3D. Employees who are on leave for less than two (2) years
or vacation shall return to the job classification, shift, department, line or
normal permanently assigned job, Section 4A2, they held at the beginning of
leave or vacation. If such job classification, shift, department, line or normal
permanently assigned job they held are not available they shall exercise their
seniority to bump. (As determined by Union records.)
Section 3E. During the time of such leaves, the Employer shall fill
such jobs by posting and bid procedure and such bids will be designated as
replacement only job. However, the Employer will not be required to post such
jobs for a period of fourteen (14) calendar days or less. It any employee is
cutback from the classification and shift from where the employee is going on
leave, the cutback employee will be offered the opportunity to fill such
vacancy. If any employee is on a leave of absence in excess of two (2) years,
the job will be posted on a permanent basis.
Section 3F. The successful replacement bidder shall be returned to
the classification, shift, department, line or normal permanently assigned job
they held at the time of their bid when they are not on their replacement only
job or return right job. Replacement only bidders can be used as extra people in
the job classification they have replacement rights to for no more than three
(3) consecutive days.
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Section 3G. It is understood that in the event that second and/or
third shift is reopened, employees formerly holding those positions will be
given the option of those jobs.
Section 3H. When a vacancy occurs for which an employee is recalled,
should the job last more than three (3) working days, the employee shall be
considered permanent.
Section 4A. When a new job is created or a vacancy occurs the
Employer shall, without undue delay, but in no case longer than three (3)
working days, post a notice of such jobs on the bulletin boards, giving the
amount of openings available, pay rate and the shift on which the job opening is
available, unless an employee has job return rights to the vacant position in
which case he may exercise such rights. Such job openings shall remain posted
for two (2) full working days. The time and date of posting shall be written on
the notice at the time it is posted. However, the Employer may, when necessary,
fill such jobs on a temporary basis during the posting and bidding procedure.
Any operator temporarily transferred to a higher labor grade job
shall be compensated at the higher labor grade job progression rate which is
equivalent to the progression rate held by the employee in his or her regular
job, however, any employee who has previously qualified on a job and has
acquired return rights and has reached top rate of pay, shall receive top rate
of pay immediately upon transfer to that job. If such temporary assignment is to
a lower grade the employee shall retain his regular rate.
Section 4Al. Transfers made on a temporary basis from upgraded
classifications to fill temporary vacancies to which no one has job return
rights will be made from those employees in other classifications where the
Employer deems they are not needed, provided however, that such transfers shall
be made by transferring the least senior employees from a classification if to a
lateral or lower labor grade job or if to a higher labor grade job by offering
the higher labor grade job to the most senior employees in descending order of
seniority. If the more senior employees decline, the least senior employee will
be transferred,
Temporary transfers from labor grade 1 to higher grades will be
offered to the most senior grade 1 employee(s) in the department where the
vacancy exists. Should all decline the least senior grade 1 employee in that
department will be assigned.
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When an operation shuts down for more than the balance of the shift,
the employees affected will exercise their seniority in the same classification
and department, except grade 1 employees shall not displace grade 1 employees on
moving line. Employees who leave the department as a result of the shut down
will be returned to that department when the operation resumes.
Zone stewards shall remain in their assigned zone so long as there
is work which is required.
Section 4A2. Grade 1 employees that normally work on the following
lines will be permanently assigned until such time as they may be replaced due
to being transferred from their job. At that time they will be replaced by the
senior grade 1 employee in the department that is not permanently assigned:
Dome Tweeter, T-35, miscellaneous, Woofer - miscellaneous (4)
T-35 Coil Assembly Line (1)
Flat Wire Coil Assembly Line (11)
Coil and Diaphragm Assembly Line (3)
Driver Final Assembly Line (3)
Force Round Wire Assembly Line (3)
Force Line (3)
Coil Prep Line (3)
Gauss Coil Assembly (3)
S-40 Speakers (7)
The remaining grade 1 employees will be permanently assigned to departments. The
least senior employees in a department may be permanently reassigned to another
department, but will not have other employees reassigned to their original
assigned department for thirty (30) calendar days. Employees temporarily
transferred will be returned to their department when the temporary assignment
is completed.
When a transfer is to be made from any department, employees not
assigned to that department are the first to be sent out and the transfer is to
be made as follows:
If the transfer is back to the employees' assigned department, the
most senior is to be sent back first regardless of what job they are on.
If the transfer is to a department other than the employees'
assigned department, the least senior is to be sent out first regardless of what
job they are on.
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Section 4A3. Upgraded employees transferred will not have other
employees assigned to the job from which they have been transferred, except in
the case of Maintenance, Truck Driver and Set-Up.
Section 4B. The Employer shall be free to establish new jobs not
covered by this Agreement as the needs arise and to place such jobs in the
classification and wage group deemed appropriate. The Union shall be advised as
to the classification and wage group and given reasons supporting such
placement. The job shall be run for a period of thirty (30) working days. At the
end of the thirty (30) day period the Union shall be free to grieve the
placement. Any change in classification or wage group shall be retroactive to
the start of the job.
Section 4C. During the time of the posting, employees desiring to
bid on the job may sign the bid sheet. On request stewards may sign the bid
sheet for absent employees or employees on leave of absence. Awards to employees
on leave of absence will be made only if the employee is available by the time
the job is to be filled.
Section 4D. Posted jobs will be offered to the senior bidder
providing he (she) has the skill and/or ability to perform the work.
Section 4E. The job shall be awarded and the transfer made on or
before the start of the shift on the third day following the taking down of the
bid sheet. It the transfer cannot be made the successful bidder shall,
nevertheless, be paid the rate of the posted job.
Section 4F. If there are no successful bidders the Employer shall
offer the option of the job to the least senior grade l employee in the plant.
If that employee is unable to perform the job he shall be laid off. The most
senior person laid off that can perform the job will be recalled. (The top rate
of pay will apply.)
Employees recalled from layoff to fulfill the requirements of this
section, can not exercise rights to any other job(s) (which include bidding,
return rights and replacement rights) until this requirement is fulfilled. If an
employee is recalled from lay off to fulfill a Replacement Only job due to the
above paragraph, this employee will be considered the least senior grade 1.
Section 5A. If a reduction in force is necessary in any job
classification, the Employer will first try to absorb the effected employees in
another job. If it is a lateral or lower job classification such transfer shall
be at no reduction in earnings. If
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it is a higher classification the higher rate shall apply. If such transfers are
to a lateral or lower job classification the least senior employees will be
transferred. If the transfer is to a higher classification it will be offered to
employees in the classification, starting with the most senior. If all employees
in the effected classification decline, the least senior employees will then be
transferred. If employees cannot be absorbed in other classification for such
period other than provided for in Section 5B of this Article the lay-off
procedure shall apply.
Employees that are cutback from a premium job will be absorbed and
paid the rate of the classification they are leaving for no less than five (5)
days.
Section 5B. In cases where a line or section may have cutbacks due
to shortages of material or other necessary interruptions in production,
temporary lay-offs may be made without regard to seniority. This provision shall
be applicable to the employees directly affected. (Means only employees assigned
to the line or section.) Cutbacks of this nature shall not exceed three (3)
consecutive scheduled work days. No employee shall be affected by such temporary
lay-off for:
A. More than once in a thirty (30) day period.
B. More than eighty (80) hours in a calendar year.
Section 5C. When cutbacks are to be made in any job classification
the cutback employee(s) will be those with the lowest plant-wide seniority
providing the employees remaining in the classification have the skill and/or
ability to perform the work. (Successful bidders for premium jobs shall not have
their plantwide seniority credited to such premium jobs until they have
completed the required qualifying time.)
Section 5D. Such cutback employees may exercise their seniority to
bump the least senior employees in any other job classification within their
labor grade or a lower labor grade providing they have the skill and/or ability
to do the work.
Section 5E. Employees will have job return rights to only two (2)
jobs, one of which may be in an equal paying classification otherwise both will
be in higher classifications. When a vacancy occurs in any job the most senior
employees having return rights shall exercise such rights or sign a
relinquishment slip denying return rights to that job. Job return rights are
based on having the qualifying time completed (Employees being forced on job,
bidding on replacement only jobs will not lose return rights. Return rights to a
lower classification cannot be exercised until temporary requirement is
fulfilled).
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Section 6. In the event of a layoff for lack of work, the Employer
will begin with the employee having the least seniority plantwide and progress
upward from the bottom of the list, except where skill and ability are required
(pertains to Article 11, Classifications not subject to bid procedure) to
maintain critical support operations. The Company agrees to give the Union a
forty-eight (48) hour notice of a permanent lay-off.
Recall of employees shall be in the inverse order of layoff.
Employees will be given three (3) days notice to return to work unless the
employee has a valid excuse for not reporting. The Employer shall notify
employees either by telephone, certified mail, or personal notice. In the event
of personal notice, such notice shall be made directly to the employee only.
Section 7. In the case of layoff and recall the following elected
officers, representatives and stewards of the Local Union shall be deemed to
have top ranking seniority so long as they hold such office: President, Chief
Steward, and Zone Stewards.
Section 8. Employees shall lose seniority only by:
(a) Voluntary quitting.
(b) Failure to report for work from layoff within three (3) days
after receiving notice to report unless such failure is for valid reasons
acceptable to the Company.
(c) Discharge for just cause.
(d) Failure to report at termination of a leave of absence.
Employees who do not present themselves for re-employment by the close of the
next scheduled work day or submit proper evidence requesting extension of said
leave by the close of the next scheduled work day shall be considered as having
resigned.
(e) Being absent three (3) consecutive workdays and not reporting
for work at the start of the shift on the fourth day.
(f) Layoff or leave of absence for a length of time greater than
that accumulated seniority as outlined in Section I B.
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ARTICLE 8
DISCIPLINE AND DISCHARGE
Section l. Full power of discharge or discipline lies with the
Employer, but it is agreed that his power shall be exercised with justice and
with regard for the reasonable rights of the employees. If the Union, after
investigation, feels that an employee has been disciplined or discharged without
just cause and fails to reach an agreement or adjustment with the
representatives of the Employer, the case in question shall be referred to the
grievance procedure. The Union is to be notified at the time of any such
discharge or discipline (See Article 6, Section 4F).
Section 2. It is specifically pointed out that the Employer and
Union are in complete agreement that absence which is chronic can not be
condoned. Any absence of more than three (3) days must be covered by a leave of
absence.
Section 3. The Employer will from time to time issue Rules and
Regulations for the maintenance of orderly conditions of employment. These
rules will not be unfair or of discriminatory nature, nor will they conflict
with the terms of this Agreement. The Employer will give the Union a copy of any
deletions, amendments, or additions to the Rules and Regulations prior to the
time they are issued.
(a) The Employer will publish a list of rules classified into these
categories:
1. Suspension
2. Dismissal
Section 4. The publishing of the rules by the Employer shall not be
construed as limiting the right of the Employer to delete, amend or add rules as
changing conditions demand such changes. However, notification of such changes
will be made known to the President, Vice President, and Chief Steward of the
Union in advance of the publishing of the change.
Section 5. Infractions of the Company's rules may require
disciplinary action and the following procedure shall be used except in the
event of an infraction of a rule which may carry a mandatory dismissal:
(a) Infraction of rules shall be dealt with in an impartial and fair
manner. A first infraction may deserve a verbal warning. A record of the verbal
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warning shall be placed in the employee's personnel file and the employee will
be notified.
(b) A second violation of the same rule may require a written
warning.
(c) A third violation of the same rule may carry a one (1) day
suspension penalty.
(d) A fourth violation of the same rule within a six (6) month
period may be cause for dismissal.
(e) A copy of the above warning shall be furnished to the employee
and the Union.
(f) An accumulation of any four written warnings for various rule
infractions within a period of ninety (90) calendar days may carry a penalty of
1-day suspension.
Section 6. The Employer recognizes that the repeat violator is
penalized, so should the person who abides by the rules be given consideration.
Therefore, any reprimand which becomes six (6) months old, shall be removed from
the Employee's personnel record. (Exception attendance policy)
ARTICLE 9
HOURS AND OVERTIME
Section 1A. The regular workweek shall be forty (40) hours per week,
eight (8) hours per day, five (5) days per week from Monday through Friday,
inclusive.
(b) First shift 8:00 am - 4:30 pm Unless 3 shift operation in
machine shop.
(c) Second shift 4:30 pm-1:00 am Unless 3 shift operation in machine
shop.
(d) Third shift 12:00 Midnight - 8:00 am.
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(e) The existing half hour lunch periods, as currently scheduled,
will remain in effect unless changed by mutual agreement between the Employer
and the Union, except 3 shift operations in machine shop.
(f) Fifteen (15) minute paid breaks, as currently scheduled
including during overtime, will be in effect unless changed by mutual agreement
between the Employer and the Union.
Section 2. For timekeeping purposes the week shall commence at 12:01
am Monday and end at 12:00 pm the following Sunday, The work day shall commence
at 8:00 am and end at 8:00 am the following day.
Section 3. Overtime compensation will be one and one-half times the
hourly rate of the job for all hours over eight (8) in any day and over forty
(40) in any given week except overtime shall not be pyramided.
Section 4. Equal distribution of overtime will be maintained by the
utilization of turn sheets maintained by the Employer, and will start on the
first day of the first pay period after the effective date of each agreement,
and will continue for the length of each agreement. The turn sheets shall be
reviewed by the Employer and the Union each three (3) month period.
No employee shall be moved for the purpose of preferential treatment
for overtime.
Overtime shall be equally distributed among all employees in the
same classification within a department, however, such overtime shall not be
compulsory. Should the employees refuse the overtime, the overtime will then be
offered to the other employees in the classification beginning with the most
senior. If all employees in the classification decline, the overtime will then
be offered to the employees with return rights, starting with the most senior.
If all decline, the overtime will then be offered to the employees in the
department beginning with the most senior. Employees offered overtime and
refusing will be considered as having worked such overtime on the turn sheets
for equalization purposes.
Any employee refusing overtime in a classification shall not be
offered overtime in any other classification.
Employees entering a new classification shall assume the maximum
hours as credited on the turn sheets. When an employee is temporarily
transferred to a
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<PAGE> 23
classification other than their own, they will be equalized with the permanent
employees and shall assume the maximum hours as credited on the turn sheets when
entering. This will be indicated by writing (out) when leaving a classification
and (in) when entering a classification. When such employees return to their
legitimate classifications, they will assume the maximum overtime hours worked
during the time of their temporary transfer.
Any employee absent or on vacation shall not be charged with
overtime worked during their absence and/or vacations. When an employee is on a
leave of absence or is laid-off and has return rights to a classification, they
shall upon return, assume the maximum overtime hours worked during the time of
such leave or layoff.
Any employee on light duty (off their job) and due overtime in their
classification, will be charged on the turnsheet as having worked the overtime.
Overtime offered by department will be offered by seniority
beginning with the most senior and will be equalized (rotated, not offered to
the same employee each time). This overtime will be kept on a separate
turnsheet.
Overtime is to be offered in the following order:
1. Permanent employees by seniority as due per turnsheets.
2. Return Right employees by seniority.
3. Replacement employees by seniority.
4. Permanent employees in the department by seniority as due per
turnsheets.
5. Employees temporarily in the department irregardless of the
length of time. (by seniority)
6. Plant-wide seniority.
Section 5. In the event an employee is available for overtime and is
overlooked for overtime, such employee(s) shall be given the opportunity of
making up such lost overtime at the earliest possible time.
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<PAGE> 24
When hours equivalent to the overlooked hours are to be worked, the
arrangement with the employee shall be made twenty-four (24) hours in advance
unless shorter notice is agreeable to the employee involved. If such overlooked
overtime cannot be offered within a three (3) month period, the employee will be
compensated.
When an employee is denied overtime opportunities the employee shall
receive compensation equal to the earnings lost due to such denial.
Section 6. Holiday overtime shall be offered as far in advance as
possible but not later than the end of the shift on the second work day
preceding the holiday.
Section 7. Daly overtime shall be offered as far in advance as
possible but not less than four(4) hours before the end of the shift. Weekend
overtime shall be offered as far in advance as possible but not later than the
end of the working day Thursday.
Section 8. Employees accepting overtime are expected to perform such
overtime work. Unless legitimately excused, failure to do so may subject the
employee to disciplinary action, as outlined in Article 8, Section 5.
Section 9. Time and one half shall be paid for all work done on
Saturday.
Section 10. Double time shall be paid for all work done on Sunday.
Section 11. For work performed on the 2nd shift, there shall be a
twenty (20) cents an hour shift differential.
For work performed on the 3rd shift, there shall be a twenty-five
(25) cents an hour shift differential.
Section 12. Inventory overtime will be kept on a separate overtime
turn sheet. Inventory overtime will be equalized for inventory overtime only.
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<PAGE> 25
ARTICLE 10
LEAVES OF ABSENCE
Section 1. The Employer will grant leaves of absence to Employees as
follows:
(a) Absence for three (3) consecutive working days or less shall not
require a formal leave of absence.
(b) SICK LEAVE - Requests for medical leaves of four (4) days or
more must be accompanied by a physician's statement including date of first
treatment, fact that the employee is unable to work, and expected return to work
date. A diagnosis is also required unless the employee has compelling personal
reasons for not divulging this information. Upon return to work the employee
must present a physician's release.
(c) MATERNITY LEAVE - Maternity leave will be granted for the period
of time requested by the employee's physician. The employee will return to work
within six (6) weeks after delivery unless extenuating circumstances are
approved by the Plant Manager or unless the employee requests a personal leave
which will then be approved for a period not to exceed one (1) year.
(d) BEREAVEMENT LEAVE - Justifiable personal reasons - Such as time
for bereavement leave following death of member of immediate family, accidents
which might involve someone from the immediate family, etc., properly supported
by such evidence as may be required. If bereavement leave falls during an
employee's vacation, the vacation will be extended by the number of days that
bereavement pay is received. The first three (3) days shall be paid by the
Employer only for deaths in the immediate family as listed below:
Husband
Wife
Children
Step children
Mother or Step Mother (but not both)
Father or Step Father (but not both)
Brother
Sister
Grandchildren
Grandparents
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<PAGE> 26
Father-in-law or Step Father-in-law (but not both)
Mother-in-law or Step Mother-in-law (but not both)
Brother-in-law
Sister-in-law
Daughter-in-law
Son-in-law
The Employer will grant the employee one (1) day's pay for additional members of
the family as listed below:
Spouse's Grandparents
(e) MILITARY LEAVE - Any employee, covered by the terms of this
agreement who is drafted or who volunteers for service in the Armed Forces of
the United States under the provision of the "Universal Military Training and
Service Act" as amended and extended, shall be considered on a "Certified Leave
of Absence" for a period as defined in such Act.
This same provision will apply to all employee members of the
National Guard, Reserve Corps, or member of other recognized military reserve
components, if, and when, they are inducted into the Armed Forces.
An employee returning from such military service, will be reinstated
by the Employer, unless the Employees circumstances have so changed as to make
it impossible to do so, to a position of like continuous service, status, and
pay as he had prior to leaving, provided the employee applies for reinstatement
within ninety (90) days after being relieved from the Armed Forces and provided:
(1) He had left a position other than a temporary position.
(2) He has completed the required period of military training and
service and he presents a certificate of such effect.
(3) He is still qualified to perform the duties of re-employment
within ninety (90) days after he is relieved of his military duties.
(f) JURY DUTY - An employee summoned for or serving on jury duty on
a regularly scheduled work-day shall be paid the difference between his or her
regular rate of pay and the amount received for jury duty. This differential pay
is not to exceed eight (8) hours per day. An employee reporting for jury duty
and excused
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<PAGE> 27
prior to 11:30 am for the balance of the day shall report for work without undue
delay. An employee on the night shift shall be transferred to the first shift
for the period of time coinciding with such jury service without loss of
earnings. The employee must notify the Employer of such call to jury duty
promptly after receipt of notice. The employee must present to the Employer a
statement of dates and hours spent on jury duty and monies paid.
(g) PERSONAL LEAVES - Employees may be granted personal leave for
good reasons subject to approval of the Plant Manager. At the employee's
request, the reason(s) for requesting such leave will be treated as strictly
confidential information.
(h) Employees on a leave of absence to care for a sick or injured
person (immediate family) must produce a physician's statement in advance that
such is necessary or desired if advance knowledge of such a situation exists. If
such a situation exists and is of an emergency nature, statements will be
required, but may be produced later.
(i) An employee legally adopting a child shall be granted a leave of
absence to comply with applicable provisions of Tennessee adoption laws, Such
leave of absence will not exceed one (1) year.
(j) Employees who misrepresent facts to obtain a leave of absence
shall be subject to disciplinary action including discharge.
(k) Leaves of absence will be granted for reasons indicated in
Article 7, Section 3A.
ARTICLE 11
CLASSIFICATIONS NOT SUBJECT TO BID PROCEDURES
1. Tool and Die 1
2. Tool and Die 2
3. Maintenance 1
4. Q.C. Technician
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<PAGE> 28
5. First Aid Attendant
6. Truck Driver (exception to this job only)
Employees who are qualified by having met all DOT requirements and
regulations (ie: physical and license) will be allowed to bump into truck driver
classifications, seniority permitting.
Employees who believe themselves qualified for such positions may
file an advance application in the Human Resource Department.
Senior Employees will be given a period of time not to exceed five
(5) working days opportunity to demonstrate their qualifications when openings
occur. After the five (5) day trial period, if disqualified, discussion with the
appropriate steward and employee involved will be held to discuss the lack of
demonstrated qualifications.
ARTICLE 12
QUALIFYING FOR PREMIUM JOBS
Premium jobs (those above Labor Grade One (1)) require a period of
time for the employee to become qualified. Such jobs and their qualifying time
are outlined in this Agreement for all job classifications existing on the
effective date of this Agreement. Qualifying time for new job classifications
established during the term of the Agreement will be negotiated by the Employer
and the Union.
Successful bidders for premium jobs shall not have their plantwide
seniority credited to such premium jobs until they are qualified. This applies
to cutbacks from a classification and maintaining return rights to other
classifications.
If the Employer finds that the successful bidder is not qualified to
perform the work during the qualifying period, the individual may be
disqualified and removed from the job and have return rights to the job
previously held provided he/she has sufficient seniority. If not, the employee
shall exercise the right to bump. The disqualified employee shall have a right
to file a grievance if he/she believes the disqualification is not warranted.
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<PAGE> 29
ARTICLE 13
HEALTH & SAFETY
Section 1. The plant must be kept in a sanitary condition. The
Employer agrees to establish safe working conditions and to comply with the
applicable state and federal laws.
Section 2. The Company agrees to meet with a two (2) member Union
and a two (2) member Company safety committee to discuss and take steps to
correct any unsafe conditions at any time, if the unsafe condition could not be
resolved between the employee, or the Union Steward and the immediate
supervisor.
Section 3. An employee and/or the Union may resort to the grievance
procedure should they feel a violation exists.
Section 4. The company shall designate jobs or areas where safety
glasses must be worn. The Company shall furnish safety glasses for employees in
such jobs or areas. When an employee requires prescription glasses he shall, at
his expense, be examined by a doctor licensed to issue prescriptions. Upon
presentation to the Company of a prescription, the Company will furnish the
employee with safety glasses in standard frames which will conform to OSHA
standards.
Section 5. The Company will select four (4) employees on the first
shift, one (1) employee on the second shift, and one (1) employee on the third
shift and arrange for them, at Company expense, to secure first aid training.
Section 6. The Union will be notified when a government safety
inspector is in the plant, a Union officer will accompany him/her. Time so spent
for the above will be paid by the Employer at the employee's regular hourly
earnings.
ARTICLE 14
TIME STUDY
Section 1. The Union and Employer are in accord that established
time studies are necessary to price and sell a product.
Section 2. The time required on any job shall be on a basis of
fairness and equity consistent with quality of workmanship, efficiency of
operation, and reasonable working capacities of normal operators.
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<PAGE> 30
Section 3. In the event a rate is considered unattainable a review
of this study may be requested. In the event of a dispute regarding time study
procedure, both parties shall attempt to resolve the issue on a mutual basis.
Failing to resolve the issue on this basis, the matter shall be referred to the
grievance procedure.
Section 4. Because the partes recognize the need to resolve
standards disputes in an equitable manner, the Union shall have the right to
designate bargaining unit employee to act as a Time Study Representative. The
individual selected must be certificated to perform and evaluate time and
standard studies before the Union representative will be allowed to act in such
capacity. All expenses of the Union's Time Study Representative, including
equipment and all costs incurred in acquiring the necessary qualifications shall
be paid entirely by the Union. Should a dispute or difference arise as to
standards on any given operation, the matter shall be reduced to writing by the
Time Study Representative, co-signed by the Zone Steward involved, and presented
to the Human Resource Department. The complaint must specify in detail:
A. The operation in question.
B. The nature of the Problem, and
C. The reasons as to why additional information, company data, or
other company action is being requested.
Given such a showing of necessity, the Time Study Representative and
the Zone Steward will then be granted access to the company data, standards or
time studies then available which concern the operation so specified.
Until the qualified Time Study Representative is available, access
to appropriate information will be afforded to the Zone Steward to enable proper
representation in regard to the standard in question.
ARTICLE 15
REPORT IN/CALL IN/CALL BACK PAY
REPORT IN PAY - Employees who report to work at their regular
starting time without being notified not to report shall be guaranteed at least
four(4) hours work or pay at their regular earnings except in cases of acts of
God or explosives are stated to be located on the premises.
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<PAGE> 31
CALL IN PAY - Employees called to work before their regular starting
time of their shift shall be guaranteed two (2) hours work or pay at one and
one-half (1 1/2) times their regular earnings and will be given the opportunity
to work their full regular shift at straight time pay.
CALL BACK PAY - Any employee who has left the plant, after working
their regular shift, and who is called back and returns to work, shall be
guaranteed at least two (2) hours pay at one and one-half (1 1/2) times their
regular earnings.
ARTICLE 16
REST PERIOD - RELIEF OPERATORS
Section 1. Employees shall have a personal five (5) minute wash-up
period at the end of the day provided the nature of their work requires it. Any
questions concerning which jobs require wash-up period must be mutually agreed
upon by the Employer and the Union.
Section 2A. It is understood that relief operators are provided on
assembly lines and non-stop machines for the purpose of physical relief. The
provided time shall not exceed seven (7) minutes unless unusual physical
conditions require additional time.
Section 2B. Relief operators shall be assigned for jobs defined in
Section 2a of this Article. Lines which can be considered a convenient grouping
for relief purposes will be serviced by one relief operator provided the total
employees in such grouping does not exceed fifteen. (exception for the short
hours: the total employees in such grouping does not exceed twelve (12).)
ARTICLE 17
COMPENSATORY LEAVE FOR SICKNESS OR
COMPELLING PERSONAL REASONS
Section 1. Compensated days - subject to the conditions specified in
Section 2, beginning January 1, 1995 and at the beginning of each calendar year
thereafter, regular full time employees will be credited with a maximum of seven
(7) compensated days per calendar year which are earned in the previous calendar
year at
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<PAGE> 32
the rate of one (1) for each one and one halt (1 1/2) calendar months of active
service on the payroll.
Compensatory leave pay for sickness or compelling personal reasons
shall be computed on the basis of eight (8) hours straight time per day at the
employee's hourly rate of pay in effect when actual payment is made.
(Work injury accrue maximum of one-thousand (1000) hours in the
calendar year in which the injury occurs and one-thousand (1000) hours in the
year the employee returns.)
Section 2. Definitions
The occasions which qualify for compensatory leave pay as referred
to in this article shall include pregnancy, illness, accidents, inventory,
compelling personal reasons or Acts of God.
Section 3. Other Compensation - Holidays and Lay-Off
An employee may not receive compensatory leave pay for any day or
days for which other compensation is paid as a direct or indirect result of his
employment such as but not limited to, vacation pay, holiday pay, or
unemployment compensation. An employee shall be entitled to compensatory leave
pay for the day prior to or the day following a holiday. However, a compensatory
day will not serve as to qualify an employee for a holiday.
Section 4. Method of Payment
Payment for earned compensatory leave will be included in the next
regular paycheck covering the payroll period during which the request is
submitted or verification is completed, provided however, that in no event will
any payment be made for less than two (2) hours of earned compensatory leave
pay.
Section 5. Unused Compensatory Leave Days
An employee will be allowed to carry over one (1) day of unused
compensatory leave to the following year. Employees who have not received their
maximum compensatory leave allowance shall be paid an amount equal to their
unused earned compensatory pay entitlement on the date of the second pay period
in December of such year. Any employee who is permanently laid off, enters
military service,
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<PAGE> 33
retires or whose employment or seniority is terminated for any reason shall be
paid an amount equal to their unused earned compensatory leave pay entitlement.
Section 6. Abuse of compensatory leave pay
This plan is designed to assist employees in meeting expenses
arising from sickness, accidents or compelling personal reasons. Any employee
who submits a claim for compensatory leave pay based on a false statement will
be subject to disciplinary action. Any disputes as to the abuse of this plan or
disciplinary action taken as a result thereof will be subject to the grievance
and arbitration provisions set forth in Article 6.
ARTICLE 18
VACATIONS
Section 1. Employees shall be entitled to a vacation benefit
according to the following schedule:
1 week All Employees
2 weeks 3 years from date of hire
3 weeks 7 years from date of hire
4 weeks 12 years from date of hire
5 weeks 20 years from date of hire
Section 2. In order to be eligible for a vacation benefit an
employee must have worked a minimum of 1,000 hours during the period from
January l through December 31 of the previous calendar year. Vacation pay shall
be computed on the basis of 40 hours for each week of vacation entitlement at
the employee's straight time hourly rate in effect during the week preceding the
vacation, including cost of living adjustments and shift differential, if
applicable. Any employee who is prevented from working 1000 hours during the
period specified because he or she resigns or is laid off, or on leave of
absence, or retires, shall be entitled to 1/1 2 of the employee's applicable
vacation benefit for each month worked after January 1 of the previous calendar
year computed on the basis of the employee's straight time hourly rate in effect
at the time of resignation, layoff, leave of absence, or retirement plus cost of
living adjustment then in effect and shift premium, if applicable.
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<PAGE> 34
(Work injuries accrue maximum of 1000 hours in the calendar year in
which the injury occurs and one thousand (1000) hours in the year the employee
returns.)
Vacation Pay Adjustment: If an employee works twenty (20) hours or
more in an upgraded job during the week preceding the vacation, a vacation pay
adjustment shall be made at upgraded rate for full vacation pay.
Section 3. The employer shall designate the week of July 4th and
Christmas week for a plantwide vacation shutdown of two weeks. The dates for the
Christmas week shutdown are as follows:
1995
Vacation 12/20/95, 12/21/95, 12/22/95, 12/28/95, 12/29/95
Holidays 12/25/95, 12/26/95, 12/27/95, 1/l/96, 1/2/96
Last day worked - 1 2/1 9/95 (Not qualifying day)
Return - 1/3/96 (Qualifying day)
Regular paychecks and vacation check - 12/19/95
Pay for w/e 12/24/95 will be available - 12/29/95
Pay for w/e 12/31/95 will be available - 1/5/96
Holiday pay will be paid on - 1/5/96
1996
Vacation 12/19/96, 12/20/96, 12/23/96, 12/27/96, 12/30/96
Holidays 12/24/96, 12/25/96, 12/26/96, 12/31/96, 1/l/97
Last day worked - 12/18/96 (Not qualifying day)
Return - 1/2/97 (Qualifying day)
Regular paychecks and vacation check - 12/18/96
Pay for w/e 12/22/96 will be available - 12/27/96
Pay for w/e 12/29/96 will be available - 1/3/97
Holiday pay will be paid on 1/3/97
1997
Vacation 12/22/97, 12/23/97, 12/29/97, 12/30/97, 1/2/98
Holidays 12/24/97, 12/25/97, 12/26/97, 12/31/97, 1/1/98
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Last day worked - 12/19/97 (Not qualifying day)
Return - 1/5/98 (Not qualifying day)
Regular paychecks and vacation check - 12/19/97
Pay for w/e 12/21/97 will be available - 12/23/97
Pay for w/e 12/28/97 will be available - 1/2/98
Holiday pay will be paid on 1/2/98
Extra weeks shall be taken at the employee's convenience with mutual
agreement between the employee and the employer. Employees will give a two (2)
week notice of the additional weeks to be used as vacation up until August 15.
At that time all employees will be required to have scheduled all remaining
weeks. In the event there are more vacation requests than can be granted without
affecting production, the allocation of those who can be granted such vacation
will be determined by seniority. Employees shall not be permitted to work during
their vacation period, unless requested by the Employer. However, an employee
upon request, will receive 1 weeks pay in lieu of vacation, The employee should
give two (2) weeks prior notice to elect this pay option.
Section 4. Employees whose services are terminated for any cause
shall be paid for any full or fractional vacation to which they became eligible
but did not receive prior to termination. Vacation checks will be issued the
last work day prior to vacation.
Section 5. An employee hired in the final quarter of the year will
be permitted to take his vacation after January 1 of the vacation year, but will
not be paid until the eligibility date is reached. Should the employee who
avails himself of the opportunity hereunder quit or is discharged prior to the
eligibility date he will not receive the vacation pay to which he would
otherwise have been entitled had he continued in the employ of the Employer to
the eligibility date.
Section 6. Employees shall be allowed to take one (l) week of their
vacation time in one (1) or more day increments. An employee should notify the
Human Resource Department by the day preceding taking the vacation or no later
than 8:30 a.m. the day of the vacation request. Vacation pay will be included in
the normal week's pay at the rate in effect at the time the vacation time is
taken. Approval of this vacation request will be based on the following: (1)
Vacation in the stated increments will be granted based on the allotted numbers
of vacation request approvals per week, (see side letter), unless conditions
and/or requirements are such that time off can be
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granted. (2) Vacation form must be completed by the employee and approved by the
Human Resource Department.
Note: Vacation days per this section cannot be used by employees who are on
layoff and/or leave of absence to qualify for holiday pay.
ARTICLE 19
COST OF LIVING ALLOWANCE
Section 1. Subject to the limitations set forth in Section 2 of this
Article, hourly rates of pay shall be adjusted one (1) cent for each 0.4
(four-tenths) point change in the CPI Urban Wage Earners, Clerical Workers U.S.
City Average All Items (1967=100). This plan of adjustment shall be known as a
Cost of Living Allowance. The Cost of Living Allowance shall be considered as a
part of the hourly wage rate for all wages and benefits provided under this
Agreement.
A drop in the cost of living index will not result in reductions in
wage rates below those rates provided for in the wage schedules attached to and
made a part of this agreement. During this agreement COLA increases will be
folded into the base rate on the first pay period preceding June 16, 1996, 1997
and 1998.
The Cost of Living Allowance shall be computed and applied quarterly
and made effective the first day of the first pay period after the start of the
calendar quarters as outlined below:
1st month of quarter for which
Month of Index Allowance is applicable
May October
August January
November April
February July
The base amount shall be the index as of May 1995, and the first allowance (if
any) shall be made on October 1995.
Section 2. The limitations on cost of living adjustments shall be
computed on three separate annual installments, without pyramiding or carry over
of any fluctuation in the CPI index as follows:
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A. October l, 1995 to September 30, 1996
B. October l, 1996 to September 30, 1997
C. October l, 1997 to September 30, 1998
The total of such adjustments for the one-year period between October 1, 1995
and September 30, 1996, due to fluctuations in the CPI during the same period of
time, shall not exceed ten (.10) cents per hour. The total of such adjustments
for the one-year period between October 1, 1996 and September 30, 1997, due to
fluctuations in the CPI during the same period of time, shall not exceed ten
(.10) cents per hour. The total of such adjustments for the one-year period
between October 1, 1997 and September 30, 1998, due to fluctuations in the CPI
during the same period of time shall not exceed ten (.10) cents per hour.
ARTICLE 20
INSURANCE
The following insurance benefit plan for eligible employees will be
placed into effect May 22, 1995 and will be continued for the duration of this
agreement.
HOSPITAL AND MEDICAL COVERAGE BENEFIT
<TABLE>
<CAPTION>
IN NETWORK NON-NETWORK
BENEFITS BENEFITS
-------------------------------
<S> <C> <C>
COMPREHENSIVE MEDICAL
Deductible (Calendar Year)
Individual $150 $300
Family $450 $900
Co-insurance
In-Patient Services 90% 70%
Out-Patient Services 80% 60%
Maximum (Lifetime) Unlimited OK
Mental Illness/Drug Treatment 50% up to OK
Alcoholism Therapy Lifetime Max.
Out Patent of $10,000
Maximum Out of Pocket
Individual $400 $1200
</TABLE>
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<PAGE> 38
HOSPITAL AND MEDICAL COVERAGE BENEFIT
<TABLE>
<CAPTION>
IN NETWORK NON-NETWORK
BENEFITS BENEFITS
-------------------------------
<S> <C> <C>
Family $800 $2400
EXCEPTIONS
Out-Patent Surgery 90% 70%
Pre-Admission Testing 100% 80%
Extended Care Facility 100% 80%
(100 Days Per Year)
Home Health Care (60 Days Per Year) 100% 80%
Second Surgical Opinion (Voluntary) 100% 80%
X-Ray and Laboratory 90% 70%
Chiropractic 80% 60%
Newborn Nursery 80% 60%
</TABLE>
Well-Woman Benefit (Mammography& Pap Test) Max Per Year $200.00 for lab and
radiology.
The Prescription Drug Plan will no longer apply to the deductible or the
out-of-pocket amounts.
<TABLE>
<CAPTION>
The payment per prescription will be: IN NETWORK NON-NETWORK
---------------------------------
<S> <C> <C>
$5.00 generic $10.00 generic
$8.00 brand $17.00 brand
</TABLE>
EFFECTIVE JULY 1, 1995
LIFE INSURANCE
The Employer will furnish life insurance for each eligible employee
in the amount of:
Effective May 16,1995 - $19,000
Effective May 16,1996 - $20,000
Effective May 16,1997 - $21,000
The Employer will also furnish accidental death and dismemberment
for each eligible employee in the amount of:
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Effective May 16, 1995 - $19,000
Effective May 16, 1996 - $20,000
Effective May 16, 1997 - $21,000
SICKNESS AND ACCIDENT
Weekly sickness and accident benefits (first day accident - eighth
day illness - first day hospitalization) will be provided for each eligible
employee according to the amount and schedule listed below for a maximum of
twenty-six (26) weeks for sickness and accident.
Effective May 15, 1995 - $160.00 per week
Effective May 13, 1996 - $165.00 per week
Effective May 12, 1997 - $170.00 per week
Employees will become eligible for the above insurance when they
have completed the probationary period as provided in Article 3 of this
Agreement.
DEPENDENT INSURANCE: Employees may elect to cover eligible
dependents for insurance coverage. Employees who do elect to carry such
insurance shall contribute to the cost according to the following:
Single coverage - The employee shall pay:
Effective May 22, 1995 - $5.00 per week
Two (2) party coverage - The employee shall pay:
Effective May 22, 1995 - $10.00 per week
Full Family coverage - The employee shall pay:
Effective May 22, 1995 - $18.00 per week
Note: Contributions are "before taxes"
The above premiums will be in effect for the duration of this
agreement.
ARTICLE 21
HOLIDAYS
Section 1. The holidays recognized under this Agreement shall be as
follows:
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New Years Eve
New Years Day
Ground Hog Day (February 2)
Good Friday
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Day after Thanksgiving
Christmas Eve Day
Christmas Day
Day after Christmas
Section 2. If the holiday falls on a Saturday, Friday will be
observed as a holiday. If the holiday falls on a Sunday, Monday will be observed
as the holiday.
Section 3. Employees who have completed twenty (20) working days of
employment shall be paid eight (8) hours at the same rate they were paid the day
preceding the holiday. In the event the employee was paid multiple rates, they
shall be paid at the rate for the job for the most hours worked for all holidays
not worked, providing the employee works the last four (4) hours of the last day
the factory works prior to the holiday and works the first four (4) hours the
first day the factory works after the holiday. A maximum of one (1) hour of
tardiness is allowed on the workday following the holiday. Any employee working
a holiday shall receive double time plus regular holiday pay for all such time
worked.
Section 4. Should an employee be:
1. Laid off
2. Sustain a lost time factory injury
3. Be on leave for Union business
4. Be on leave of absence for extenuating circumstances
5. Be hospitalized or can provide medical substantiation
indicating the necessity for absence of employee or necessity
for being with a member of their family
37
<PAGE> 41
6. Jury Duty
7. Legal Matters (court appearance or subpoena only)
8. Be absent for the death of fellow employee (to attend funeral)
And is unable to meet the above requirements (Section 3) he shall be eligible to
receive holiday pay if he or she is entitled to pay for time worked the week
preceding the week of the holiday and/or has time worked in the week during
which the holiday falls, providing the week preceding the week of the holiday is
properly substantiated.
Section 5. Should a holiday fall within an employee's vacation
period or a bereavement leave, such vacation period or leave shall be extended
by the holiday(s) falling within such period.
Section 5 applies to all vacation or bereavement leaves with the
exception of the July 4th vacation shutdown for which there is a qualifying day,
the last day the factory works prior to the shutdown and the first day the
factory works following the shutdown.
ARTICLE 22
PENSIONS
Section 1. The Employer hereby agrees to establish a
non-contributory pension plan effective March 1, 1977 as amended May 15, 1995 as
hereinafter set forth.
Section 2. The plan shall provide:
A. Normal retirement at age 65
B. Monthly pension equal to $15.00 for each year of credited service
first year of contract; $16.00 for each of credited service second year of
contract; $17.00 for each year of credited service third year of contract.
C. Early retirement at age 55 actuarily reduced.
D. Full vesting after five (5) years of service. Vesting service to
begin one (1) year from date of hire.
38
<PAGE> 42
E. Survivor spouse option actuarily reduced.
F. Employees shall receive credited service for all time spent in
the employ of Electro-Voice (Newport) for pension purposes.
G. Permanent and total disability at any age with ten (10) or more
years of credited service.
H. A one time $500.00 assistance for any employee that retires after
reaching the age of 62 and prior to the age of 65 during the term of this
agreement.
I. Employees retiring during the term of the agreement shall be
entitled to all pension increases.
Section 3. Credited service prior to July 1, 1974 shall be based on
seniority as defined in Article 7 and shall be fractionalized to the closest
tenth of a year.
Credited service following July 1, 1974, shall be based on hours
worked as follows:
A. Any employee in the bargaining unit who works one thousand (1000)
hours during the course of a calendar year shall be credited with a full year of
credited service for pension purposes. (Work injury accrue maximum of one
thousand (1000) hours in the calendar year in which the injury occurs and one
thousand (1000) hours in the year the employee returns.)
B. Any employee in the bargaining unit who works less than one
thousand (1000) hours shall be credited with one-tenth (1/10) year of credited
service for each one-hundred (100) hours worked during the calendar year in
question.
Section 4. The Employer shall establish a trust to which it shall
make contributions from time to time sufficient to meet current costs and to
fund the initial past service cost over a period of no more than 30 years. Such
contribution requirements shall be determined by a qualified actuary selected by
the Employer and shall be in accordance with assumptions and procedures
generally acceptable to the Internal Revenue Service as a basis for determining
deductions for contributions to plans qualified under Section 401 of the
Internal Revenue Code.
39
<PAGE> 43
Section 5. The plan and the trust shall continue such provisions as
may be necessary to meet the requirements of existing legislation. They shall be
submitted to the Internal Revenue Service for approval as a qualified plan and
trust, and their adoption is contingent upon receipt of a favorable
determination. The Employer may make amendments required by the Internal Revenue
Service in order to obtain such favorable ruling and to maintain the qualified
status of the plan and the trust thereafter.
Section 6. The plan shall be administered by a Pension Committee
consisting of four (4) members. Two (2) members shall be appointed by the
Employer and two (2) members shall be appointed by the Union.
Section 7. The negotiation of this pension plan shall become a
subject of negotiation during the succeeding contract negotiations to this
Agreement. The termination date of the pension plan shall coincide with the
termination date of the labor agreement. The pension plan shall thereafter
expire with the agreed upon termination of the labor agreement(s).
Section 8. The parties having agreed to the foregoing to be included
in a pension plan, these terms shall not be subject to negotiations during the
period of this Agreement. As to all other terms and provisions of a pension
plan, the parties will meet and negotiate with respect thereto at least sixty
(60) days prior to the expiration date specified in Section 7 above.
Section 9. The parties agree the above provisions shall in no manner
be in conflict with the Pension Reform Act (H less than R less than 2-effective
September 2, 1974).
ARTICLE 23
MANAGEMENT RIGHTS
Section 1. The Management of the plant and the direction of the
working forces, promotions and demotions, including the right to hire, suspend,
discharge for just cause, to assign to jobs, to transfer employees within the
plant, to increase and decrease the working force, to determine products to be
handled, produced or manufactured, to transfer work, the schedule of production
and methods, process and means of production or handling, is vested exclusively
in the Company, provided this will not be used for the purpose of discriminating
against any employees or to avoid any of the provisions of this Agreement.
40
<PAGE> 44
ARTICLE 24
GENERAL
Section 1. All references to employees in this Agreement include
both sexes. Wherever the male gender is used it shall be construed to mean both
male and female employees.
Section 2. All hours spent in Union Activities (during working
hours) will be considered as hours worked for the purpose of accruing pension
and vacation benefits covered by this Agreement.
Should a Union Official fail to attain 1000 hours (worked) in any
year as a result of lost time for Union Business pertaining to the Newport
Facility outside the plant, a statement from the Union President Itemizing such
outside hours will be accepted by the Company in order to account toward the
1000 hours.
Section 3. Each employee covered by this Agreement is responsible at
all times for having his correct address and phone number on the file at the
Employers Human Resource office by completing a W-4 form. All notices to
employees to be given under the provisions of this Agreement shall be deemed to
have been properly given if mailed to the last address on file.
Section 4. Should any portion of this Agreement be determined
through appropriate legal processes to be contrary to any State or Federal law
that portion so found will be regarded as invalid and the balance of that
article and all other articles of this contract will continue in full force and
effect. The Union and the Employer shall have the right to negotiate the invalid
portion.
Section 5. The Employer will give written notice to the Union of all
hires, rehires, bids, and bid awards, rate changes, transfers (with reasons
thereto), cutbacks, bumps, layoffs, recalls, a list indicating employees on
leave of absence (vacations) as available, and terminations.
Section 6. It is agreed that inventory personnel will be selected
from bargaining unit employees by the posting and bid procedure. The senior
employees signing the posting will be given priority. For equalization purposes
on overtime turn sheets, employees working overtime during inventory will be
charged on a separate overtime turn sheet for inventory. Inventory overtime will
be equalized for inventory overtime only. Overtime for inventory pre-count will
be mandatory.
41
<PAGE> 45
If overtime is required to be worked by employees signing the
inventory bid sheet, the following procedure will be followed:
Offer the overtime starting with the most senior employee, if all
decline, the least senior employee will be forced to work the overtime.
This does not mean to offer to the most senior each time there is
overtime. The inventory overtime is equalized the same as all other overtime
except, the employees are the ones signing the bidsheet. If no one accepts, the
least senior signing to work inventory is always forced to work the overtime.
Section 7. The Employer will provide bulletin boards to be defined
in the following manner:
(a) Union Bulletin Board
The Union agrees that posted notices shall be non-controversial and
copies will be furnished to Human Resource Department prior to posting. The
Union shall be furnished a key to such board and a designated Union Official
shall be permitted to post such notices.
The Union Bulletin Board will be kept behind glass in both the
Newport plant 1 and Newport plant 2. (Plant 1 designates the main manufacturing
facility, Plant 2 designates the systems building.)
(b) Employee's Bulletin Board
This board will be used exclusively for employees in reference to
advertising, swapping, trading or general information. The Employer and Union
will be strictly prohibited from using this board for their official matters or
matters of controversy. The employee board will remain open where it will be
available to any employee.
Section 8. EMPLOYEES CONCESSION FUND. The Employee Con cession Fund
shall be administered by a committee of three (3) Bargaining Unit employees
appointed by the Union and three (3) members chosen by Management to represent
Salaried employees, one of which will be the Human Resource Manager or designee.
The committee shall select it's Chairman. Meetings will be held the first
Tuesday of each month.
42
<PAGE> 46
Bargaining Unit employees shall attend meetings at no loss of pay up
to a maximum of two (2) hours pay per month. Four (4) additional hours per
member per calendar year may be compensated for special meetings such as
planning a Christmas party, etc. The committee shall control the fund and its
uses and provide for receiving and paying bills.
Section 9. WEEKLY PAYCHECKS. All first shift employees covered by
this Agreement will be paid prior to their lunchtime on Friday of each week. The
second shift employees shall receive their checks prior to the end of Thursday's
second shift. The third shift employees shall receive their checks prior to the
end of the shift on Friday morning. Should a holiday occur on a Friday the above
schedules shall be advanced one day. An employee who does not return to work on
payday afternoon, without prior approval, shall have his check withheld until
after the afternoon break on the succeeding payday.
Section 10. INDUSTRIAL THEFT PLAN. The plan currently in effect will
remain the same until otherwise agreed upon and/or changed by the Union and the
Employer.
Section 11. SUPERVISORS WORKING. No employee of the Employer not
within the Bargaining Unit covered by this Agreement shall perform any work of
the Bargaining Unit at any time, except in extreme emergencies or Acts of God,
provided however, that supervisors or other management personnel may be utilized
for the purpose of instruction, of conducting a pilot run or for the purpose of
determining the cause of high failure or reject rate. The Union will be given
advance notice of the occurrence of any of the above (except instruction).
Section 12. The Union agrees that there shall be no solicitation of
membership, dues or other fees on the Employees time and that there shall be no
Union activity during working hours (exclusive of breaks or lunch) on Employer
property which shall in any way interfere with the work of the employees and the
operation of the plant. Violators of this section shall be subject to
disciplinary action.
Section 13. It is not the intent of the Employer to require the
issuance of unreasonable or unjust orders, however, if any employee or group of
employees feels that any order of a supervisor is unjust or unreasonable, the
employee or group of employees affected will comply but ff they choose,
institute a grievance over the matter.
43
<PAGE> 47
If the employee(s) is ordered to do work he feels is unsafe,
employee(s) shall notify his immediate supervisor. In the event that does not
produce satisfactory results, Article 13, Section 2 will apply.
Section 14. The Company agrees to establish an Education program
which will refund tuition upon satisfactory completion of courses. These courses
can be taken only at Walter State Community College, Morristown, Tennessee.
The company will not assume the responsibility of any payment except
the tuition.
The Company and Union will establish a committee of two (2) persons
each to designate occupational related courses. Not more than ten (10) employees
shall be enrolled in any one college quarter and shall not be entitled to take
more than one (1) course in a given quarter.
Section 15. One (l) hour compensated time shall be granted to
employees for voting time in the Tennessee General Primary elections and the
Tennessee General elections.
Section 16. The Employer will allow excused absence time for
bonafide medical reasons, dental appointments or legal appointments. It is
agreed that substantiation will be required of the time off for the
aforementioned reasons. The Employer agrees excused time off will be granted as
uniformly as possible. However, requests for excused time is not required to be
mandatorily granted. When possible employees will notify their supervisor in
advance of the excused absence.
It is agreed for medical statements for extended (continuing)
medical treatment being accepted for excused absence time off from work.
The Employer will grant an employee a reasonable amount of excused
time off from work due to the death of fellow employees upon request without
pay. (to attend funeral)
Section 17. The Employer agrees to pay the cost of printing a
sufficient supply of the proofread copies of this contract to make them
available to all employees as soon as possible. All employees will be given
updated pension and insurance handbooks. These handbooks will include
explanations of all benefits and exclusions as agreed in these negotiations.
44
<PAGE> 48
Section 18. Insurance premiums, union dues and other payroll
deductions will be deducted out of vacation checks.
ARTICLE 25
RATES OF PAY
Rates of pay applicable during the terms of this Agreement are
included in the attached schedules, Appendix B, C, D, E, F and G.
Starting rate only applies to newly hired employees, Employees
bidding from a lower labor grade into a higher labor grade, will receive three
(3) months rate as their minimum rate, however, in no event shall the employee
receive a rate less than the employee's existing rate. An employee previously
attaining the top rate in any labor grade shall retain the top rate in any
lateral bid, or rebid to a previously qualified job. Should an employee who has
attained the top rate of a labor grade enter a lower grade, he shall receive top
rate in that labor grade. Employees who are in the start of the three (3) months
range shall be placed in the appropriate step of the labor grade into which he
is bumped.
ARTICLE 26
DURATION OF AGREEMENT
Section 1. This Agreement shall become effective as of May 15, 1995
and shall remain in force and be effective until 11:59 pm June 16, 1998. It
shall be automatically renewed from year to year hereafter, unless notice of
termination is given by either party by certified mail at least 60 days prior to
11:59 pm June 16, 1998 or the next annual expiration date, whichever is
applicable.
Section 2. In the event that either the Union or the Employer shall
exercise its right to terminate, conferences shall be promptly commenced for the
purpose of negotiating and executing an extension, renewal or modification of
this Agreement.
45
<PAGE> 49
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT
THE DAY AND YEAR FIRST ABOVE WRITTEN.
Signed for:
LOCAL 662 - INTERNATIONAL UNION OF ELECTRONIC, ELECTRICAL, SALARIED, MACHINE AND
FURNITURE WORKERS (AFL-CIO)
/s/ IMA GENE MURRELL
__________________________________________
Ima Gene Murrell, President
/s/ MANZANIETA SHEPHERD
_________________________________________
Manzanieta Shepherd, Chief Steward
/s/ PATRICIA LOVELL
__________________________________________
Patricia Lovell, Recording Secretary
/s/ BARBARA SAMPLES
__________________________________________
Barbara Samples, Member At Large
/s/ FRANCES LEATHERWOOD
__________________________________________
Frances Leatherwood, Member At Large
/s/ GARY M. HOLLINGSWORTH
__________________________________________
Gary M. Hollingsworth, International
Representative
Signed for:
ELECTRO-VOICE, INC., NEWPORT, TENNESSEE
__________________________________________
Ron Graham, Vice President
Administration, Mark IV Audio
46
<PAGE> 50
- -----------------------------------------
Clell Tompkins, Operations Manager
/s/ FAYE BROOKS
- -----------------------------------------
Faye Brooks, Employee Human Resource
Manager
47
<PAGE> 51
APPENDIX A
JOB CLASSIFICATIONS
The following premium jobs require a period of time to be qualified as provided
for in Article 12 of this Agreement.
LABOR QUALIFYING
JOB TITLE GRADE TIME
Assembly Area Light 1
Assembly Area Light Packer 2 5 working days
Line Magnetizer 2 5 working days
Magnet Assembly-Light 2 5 working days
Spray Painter Helper 2 5 working days
Production Tester-Auto Equip 2 5 working days
Testing-Cables, Transformers 2 30 working days
Crossovers, & Light Mics. Testing
Plug Washing 2 5 working days
Janitor 3 30 working days
Scope Tester (Final Test) 3 90 working days
Material Handler 3 30 working days
Magnetizer-Off Line-Heavy 3 5 working days
Impact Machine 3 30 working days
Matron 3 30 working days
Assembly Area-Heavy 3 60 working days
PC Board Assembly 3 90 working days
Rework Operator 3 90 working days
Systems Unpack 3 10 working days
Cone Speaker Assembly-Heavy 3 60 working days
Cone Speaker Assembly-Heavy Test 4 90 working days
Cone Speaker & Systems Assembly- Heavy Rework 4 90 working days
Assembly Area Heavy Packer 4 30 working days
Mend, Relief & Salvage 4 120 working days
Punch Press-Large 4 30 working days
Custodian 4 120 working days
Coil Winding & Setting 4 60 working days
Tapping & Drilling 4 60 working days
Systems Test 4 90 working days
Plant Clerical (Shipping) 4 90 working days
30w, EVX & Gauss Off-Line Assembly 4 120 working days
First Aid Attendant 4 120 working days
48
<PAGE> 52
LABOR QUALIFYING
JOB TITLE GRADE TIME
Machine Shop Utility Operator 5 60 working days
Paint Booth Operator 5 120 working days
Stock Room Gen. Order Puller 5 120 working days
Glue Center Attendant 5 120 working days
Heavy Systems-Assembly 5 120 working days
Order Filler Shipping 5 90 working days
Truck Driver 5 30 working days
Coil Winding & Setting Epoxy 5 60 working days
Bostik Coil Winder 5 60 working days
Tool Crib Attendant 6 120 working days
Automatic Wire Cutter & Stripper 6 120 working days
Heavy Packer & Banding (Shipping) 6 90 working days
Set-up Person-Assembly 7 120 working days
Receiving Clerk 7 120 working days
Quality Control Inspector 7 120 working days
Maintenance - 2 9 120 working days
Maintenance - 1 10 120 working days
Quality Control Technician 10 120 working days
Tool & Die Maker - 2nd Class 10 120 working days
Tool & Die Maker - 1st Class 11 120 working days
49
<PAGE> 53
APPENDIX B
LABOR GRADES
Effective 5-15-95
(Wage increase of $.10)
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 9.89 10.01 10.14
2 9.97 10.17 10.26
3 10.07 10.27 10.40
4 10.17 10.41 10.57
5 10.32 10.57 10.87
6 10.57 10.77 11.09
7 10.92 11.14 11.37
8 11.14 11.42 11.62
9 11.42 11.67 11.87
10 11.67 11.82 12.02
11 12.27 12.52 12.77
</TABLE>
LABOR GRADES
Effective 5-15-95
New Hire Rates 1st Year
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 7.89 8.01 8.14
2 7.97 8.17 8.26
3 8.07 8.27 8.40
4 8.17 8.41 8.57
5 8.32 8.57 8.87
6 8.57 8.77 9.09
7 8.92 9.14 9.37
8 9.14 9.42 9.62
9 9.42 9.67 9.87
10 9.67 9.82 10.02
11 10.27 10.52 10.77
</TABLE>
50
<PAGE> 54
LABOR GRADES
Effective 5-15-95
New Hire Rates 2nd Year
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 8.89 9.01 9.14
2 8.97 9.17 9.26
3 9.07 9.27 9.40
4 9.17 9.41 9.57
5 9.32 9.57 9.87
6 9.57 9.77 10.09
7 9.92 10.14 10.37
8 10.14 10.42 10.62
9 10.42 10.67 10.87
10 10.67 10.82 11.02
11 11.27 11.52 11.77
</TABLE>
51
<PAGE> 55
APPENDIX C
LABOR GRADES
Effective 11-13-95
(Wage increase of $.10)
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 9.99 10.11 10.24
2 10.07 10.27 10.36
3 10.17 10.37 10.50
4 10.27 10.51 10.67
5 10.42 10.67 10.97
6 10.67 10.87 11.19
7 11.02 11.24 11.47
8 11.24 11.52 11.72
9 11.52 11.77 11.97
10 11.77 11.92 12.12
11 12.37 12.62 12.87
</TABLE>
LABOR GRADES
Effective 11-13-95
New Hire Rates 1st Year
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 7.99 8.11 8.24
2 8.07 8.27 8.36
3 8.17 8.37 8.50
4 8.27 8.51 8.67
5 8.42 8.67 8.97
6 8.67 8.87 9.19
7 9.02 9.24 9.47
8 9.24 9.52 9.72
9 9.52 9.77 9.97
10 9.77 9.92 10.12
11 10.37 10.62 10.87
</TABLE>
52
<PAGE> 56
LABOR GRADES
Effective 11-13-95
New Hire Rates 2nd Year
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 8.99 9.11 9.24
2 9.07 9.27 9.36
3 9.17 9.37 9.50
4 9.27 9.51 9.67
5 9.42 9.67 9.97
6 9.67 9.87 10.19
7 10.02 10.24 10.47
8 10.24 10.52 10.72
9 10.52 10.77 10.97
10 10.77 10.92 11.12
11 11.37 11.62 11.87
</TABLE>
53
<PAGE> 57
APPENDIX D
LABOR GRADES
Effective 5-13-96
(Wage Increase $.15)
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 10.14 10.26 10.39
2 10.22 10.42 10.51
3 10.32 10.52 10.65
4 10.42 10.66 10.82
5 10.57 10.82 11.12
6 10.82 11.02 11.34
7 11.17 11.39 11.62
8 11.39 11.67 11.87
9 11.67 11.92 12.12
10 11.92 12.07 12.27
11 12.52 12.77 13.02
</TABLE>
LABOR GRADES
Effective 5-13-96
New Hire Rates 1st Year
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 8.14 8.26 8.39
2 8.22 8.42 8.51
3 8.32 8.52 8.65
4 8.42 8.66 8.82
5 8.57 8.82 9.12
6 8.82 9.02 9.34
7 9.17 9.39 9.60
8 9.39 9.67 9.87
9 9.67 9.92 10.12
10 9.92 10.07 10.27
11 10.52 10.77 11.02
</TABLE>
54
<PAGE> 58
LABOR GRADES
Effective 5-13-96
New Hire Rates 2nd Year
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 9.14 9.26 9.39
2 9.22 9.42 9.51
3 9.32 9.52 9.65
4 9.42 9.66 9.82
5 9.57 9.82 10.12
6 9.82 10.02 10.34
7 10.17 10.39 10.62
8 10.39 10.67 10.87
9 10.67 10.92 11.12
10 10.92 11.07 11.27
11 11.52 11.77 12.02
</TABLE>
55
<PAGE> 59
APPENDIX E
LABOR GRADES
Effective 11-18-96
(Wage Increase of $.15)
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 10.29 10.41 10.54
2 10.37 10.57 10.66
3 10.47 10.67 10.80
4 10.57 10.81 10.97
5 10.72 10.97 11.27
6 10.97 11.17 11.49
7 11.32 11.54 11.77
8 11.54 11.82 12.02
9 11.82 12.07 12.27
10 12.07 12.22 12.42
11 12.67 12.92 13.17
</TABLE>
LABOR GRADES
Effective 11-18-96
New Hire Rates 1st Year
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 8.29 8.41 8.54
2 8.37 8.57 8.66
3 8.47 8.67 8.80
4 8.57 8.81 8.97
5 8.72 8.97 9.27
6 8.97 9.17 9.49
7 9.32 9.54 9.77
8 9.54 9.82 10.02
9 9.82 10.07 10.27
10 10.07 10.22 10.42
11 10.67 10.92 11.17
</TABLE>
56
<PAGE> 60
LABOR GRADES
Effective 11-18-96
New Hire Rates 2nd Year
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 9.29 9.41 9.54
2 9.37 9.57 9.66
3 9.47 9.67 9.80
4 9.57 9.81 9.97
5 9.72 9.97 10.27
6 9.97 10.17 10.49
7 10.32 10.54 10.77
8 10.54 10.82 11.02
9 10.82 11.07 11.27
10 11.07 11.22 11.42
11 11.67 11.92 12.17
</TABLE>
57
<PAGE> 61
APPENDIX F
LABOR GRADES
Effective 5-12-97
(Wage increase of $.15)
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 10.44 10.56 10.69
2 10.52 10.72 10.81
3 10.62 10.82 10.95
4 10.72 10.96 11.12
5 10.87 11.12 11.42
6 11.12 11.32 11.64
7 11.47 11.69 11.92
8 11.69 11.97 12.17
9 11.97 12.22 12.42
10 12.22 12.37 12.57
11 12.82 13.07 13.32
</TABLE>
LABOR GRADES
Effective 5-12-97
New Hire Rates 1st Year
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 8.44 8.56 8.69
2 8.52 8.72 8.81
3 8.62 8.82 8.95
4 8.72 8.96 9.12
5 8.87 9.12 9.42
6 9.12 9.32 9.64
7 9.47 9.69 9.92
8 9.69 9.97 10.17
9 9.97 10.22 10.42
10 10.22 10.37 10.57
11 10.82 11.07 11.32
</TABLE>
58
<PAGE> 62
LABOR GRADES
Effective 5-12-97
New Hire Rates 2nd Year
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 9.44 9.56 9.69
2 9.52 9.72 9.81
3 9.62 9.82 9.95
4 9.72 9.96 10.12
5 9.87 10.12 10.42
6 10.12 10.32 10.64
7 10.47 10.69 10.92
8 10.69 10.97 11.17
9 10.97 11.22 11.42
10 11.22 11.37 11.57
11 11.82 12.07 12.32
</TABLE>
59
<PAGE> 63
APPENDIX G
LABOR GRADES
Effective 11-17-97
(Wage increase of $.15)
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 10.59 10.71 10.84
2 10.67 10.87 10.96
3 10.77 10.97 11.10
4 10.87 11.11 11.27
5 11.02 11.27 11.57
6 11.27 11.47 11.79
7 11.62 11.84 12.07
8 11.84 12.12 12.32
9 12.12 12.37 12.57
10 12.37 12.52 12.72
11 12.97 13.22 13.47
</TABLE>
LABOR GRADES
Effective 11-17-97
New Hire Rates 1st Year
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 8.59 8.71 8.84
2 8.67 8.87 8.96
3 8.77 8.97 9.10
4 8.87 9.11 9.27
5 9.02 9.27 9.57
6 9.27 9.47 9.79
7 9.62 9.84 10.07
8 9.84 10.12 10.32
9 10.12 10.37 10.57
10 10.37 10.52 10.72
11 10.97 11.22 11.47
</TABLE>
60
<PAGE> 64
LABOR GRADES
Effective 11-17-97
New Hire Rates 2nd Year
<TABLE>
<CAPTION>
Labor Grades Start 3 mos. 6 mos. 9 mos.
<S> <C> <C> <C> <C>
1 9.59 9.71 9.84
2 9.67 9.87 9.96
3 9.77 9.97 10.10
4 9.87 10.11 10.27
5 10.02 10.27 10.57
6 10.27 10.47 10.79
7 10.62 10.84 11.07
8 10.84 11.12 11.32
9 11.12 11.37 11.57
10 11.37 11.52 11.72
11 11.97 12.22 12.47
</TABLE>
61
<PAGE> 65
1995
JANUARY 1995 MAY 1995 SEPTEMBER 1995
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 5 6 7 1 2 3 4 5 6 1 2
8 9 10 11 12 13 14 7 8 9 10 11 12 13 3 4 5 6 7 8 9
15 16 17 18 19 20 21 14 15 16 17 18 19 20 10 11 12 13 14 15 16
22 23 24 25 26 27 28 21 22 23 24 25 26 27 17 18 19 20 21 22 23
29 30 31 28 29 30 31 24 25 26 27 28 29 30
FEBRUARY 1995 JUNE 1995 OCTOBER 1995
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 1 2 3 1 2 3 4 5 6 7
5 6 7 8 9 10 11 4 5 6 7 8 9 10 8 9 10 11 12 13 14
12 13 14 15 16 17 18 11 12 13 14 15 16 17 15 16 17 18 19 20 21
19 20 21 22 23 24 25 18 19 20 21 22 23 24 22 23 24 25 26 27 28
26 27 28 25 26 27 28 29 30 29 30 31
MARCH 1995 JULY 1995 NOVEMBER 1995
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 1 1 2 3 4
5 6 7 8 9 10 11 2 3 4 5 6 7 8 5 6 7 8 9 10 11
12 13 14 15 16 17 18 9 10 11 12 13 14 15 12 13 14 15 16 17 18
19 20 21 22 23 24 25 16 17 18 19 20 21 22 19 20 21 22 23 24 25
26 27 28 29 30 31 23 24 25 26 27 28 29 26 27 28 29 30
30 31
APRIL 1995 AUGUST 1995 DECEMBER 1995
S M T W T F S S M T W T F S S M T W T F S
1 1 2 3 4 5 1 2
2 3 4 5 6 7 8 6 7 8 9 10 11 12 3 4 5 6 7 8 9
9 10 11 12 13 14 15 13 14 15 16 17 18 19 10 11 12 13 14 15 16
16 17 18 19 20 21 22 20 21 22 23 24 25 26 17 18 19 20 21 22 23
23 24 25 26 27 28 29 27 28 29 30 31 24 25 26 27 28 29 30
30 31 31
1996
JANUARY 1996 MAY 1996 SEPTEMBER 1996
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 5 6 1 2 3 4 1 2 3 4 5 6 7
7 8 9 10 11 12 13 5 6 7 8 9 10 11 8 9 10 11 12 13 14
14 15 16 17 18 19 20 12 13 14 15 16 17 18 15 16 17 18 19 20 21
21 22 23 24 25 26 27 19 20 21 22 23 24 25 22 23 24 25 26 27 28
28 29 30 31 26 27 28 29 30 31 29 30
FEBRUARY 1996 JUNE 1996 OCTOBER 1996
S M T W T F S S M T W T F S S M T W T F S
1 2 3 1 1 2 3 4 5
4 5 6 7 8 9 10 2 3 4 5 6 7 8 6 7 8 9 10 11 12
11 12 13 14 15 16 17 9 10 11 12 13 14 15 13 14 15 16 17 18 19
18 19 20 21 22 23 24 16 17 18 19 20 21 22 20 21 22 23 24 25 26
25 26 27 28 29 23 24 25 26 27 28 29 27 28 29 30 31
30
MARCH 1996 JULY 1996 NOVEMBER 1996
S M T W T F S S M T W T F S S M T W T F S
1 2 1 2 3 4 5 6 1 2
3 4 5 6 7 8 9 7 8 9 10 11 12 13 3 4 5 6 7 8 9
10 11 12 13 14 15 16 14 15 16 17 18 19 20 10 11 12 13 14 15 16
17 18 19 20 21 22 23 21 22 23 24 25 26 27 17 18 19 20 21 22 23
24 25 26 27 28 29 30 28 29 30 31 24 25 26 27 28 29 30
31
APRIL 1996 AUGUST 1996 DECEMBER 1996
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 5 6 1 2 3 1 2 3 4 5 6 7
7 8 9 10 11 12 13 4 5 6 7 8 9 10 8 9 10 11 12 13 14
14 15 16 17 18 19 20 11 12 13 14 15 16 17 15 16 17 18 19 20 21
21 22 23 24 25 26 27 18 19 20 21 22 23 24 22 23 24 25 26 27 28
28 29 30 31 25 26 27 28 29 30 31 29 30 31
62
<PAGE> 66
1997
JANUARY 1997 MAY 1997 SEPTEMBER 1997
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 1 2 3 1 2 3 4 5 6
5 6 7 8 9 10 11 4 5 6 7 8 9 10 7 8 9 10 11 12 13
12 13 14 15 16 17 18 11 12 13 14 15 16 17 14 15 16 17 18 19 20
19 20 21 22 23 24 25 18 19 20 21 22 23 24 21 22 23 24 25 26 27
26 27 28 29 30 31 25 26 27 28 29 30 31 28 29 30
FEBRUARY 1997 JUNE 1997 OCTOBER 1997
S M T W T F S S M T W T F S S M T W T F S
1 1 2 3 4 5 6 7 1 2 3 4
2 3 4 5 6 7 8 8 9 10 11 12 13 14 5 6 7 8 9 10 11
9 10 11 12 13 14 15 15 16 17 18 19 20 21 12 13 14 15 16 17 18
16 17 18 19 20 21 22 22 23 24 25 26 27 28 19 20 21 22 23 24 25
23 24 25 26 27 28 29 30 26 27 28 29 30 31
MARCH 1997 JULY 1997 NOVEMBER 1997
S M T W T F S S M T W T F S S M T W T F S
1 1 2 3 4 5 1
2 3 4 5 6 7 8 6 7 8 9 10 11 12 2 3 4 5 6 7 8
9 10 11 12 13 14 15 13 14 15 16 17 18 19 9 10 11 12 13 14 15
16 17 18 19 20 21 22 20 21 22 23 24 25 26 16 17 18 19 20 21 22
23 24 25 26 27 28 29 27 28 29 30 31 23 24 25 26 27 28 29
30 31 30
APRIL 1997 AUGUST 1997 DECEMBER 1997
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 5 1 2 1 2 3 4 5 6
6 7 8 9 10 11 12 3 4 5 6 7 8 9 7 8 9 10 11 12 13
13 14 15 16 17 18 19 10 11 12 13 14 15 16 14 15 16 17 18 19 20
20 21 22 23 24 25 26 17 18 19 20 21 22 23 21 22 23 24 25 26 27
27 28 29 30 24 25 26 27 28 29 30 28 29 30 31
31
1998
JANUARY 1998 MAY 1998 SEPTEMBER 1998
S M T W T F S S M T W T F S S M T W T F S
1 2 3 1 2 1 2 3 4 5
4 5 6 7 8 9 10 3 4 5 6 7 8 9 6 7 8 9 10 11 12
11 12 13 14 15 16 17 10 11 12 13 14 15 16 13 14 15 16 17 18 19
18 19 20 21 22 23 24 17 18 19 20 21 22 23 20 21 22 23 24 25 26
25 26 27 28 29 30 31 24 25 26 27 28 29 30 27 28 29 30
31
FEBRUARY 1998 JUNE 1998 OCTOBER 1998
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 5 6 7 1 2 3 4 5 6 1 2 3
8 9 10 11 12 13 14 7 8 9 10 11 12 13 4 5 6 7 8 9 10
15 16 17 18 19 20 21 14 15 16 17 18 19 20 11 12 13 14 15 16 17
22 23 24 25 26 27 28 21 22 23 24 25 26 27 18 19 20 21 22 23 24
25 26 27 28 28 29 30 25 26 27 28 29 30 31
MARCH 1998 JULY 1998 NOVEMBER 1998
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 5 6 7 1 2 3 4 1 2 3 4 5 6 7
8 9 10 11 12 13 14 5 6 7 8 9 10 11 8 9 10 11 12 13 14
15 16 17 18 19 20 21 12 13 14 15 16 17 18 15 16 17 18 19 20 21
22 23 24 25 26 27 28 19 20 21 22 23 24 25 22 23 24 25 26 27 28
29 30 31 26 27 28 29 30 31 29 30
APRIL 1998 AUGUST 1998 DECEMBER 1998
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 1 1 2 3 4 5
5 6 7 8 9 10 11 2 3 4 5 6 7 8 6 7 8 9 10 11 12
12 13 14 15 16 17 18 9 10 11 12 13 14 15 13 14 15 16 17 18 19
19 20 21 22 23 24 25 16 17 18 19 20 21 22 20 21 22 23 24 25 26
26 27 28 29 30 23 24 25 26 27 28 29 27 28 29 30 31
63
<PAGE> 1
Exhibit 10(i)
AGREEMENT
between
ELECTRO-VOICE, INC.
and
LOCAL 663
INTERNATIONAL UNION OF
ELECTRONIC, ELECTRICAL,
SALARIED, MACHINE &
FURNITURE WORKERS
AFL-CIO
1992-1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PREFACE
AGREEMENT ................................................................................1
ARTICLE 1 UNION RECOGNITION...............................................................1
ARTICLE 2 PURPOSE OF AGREEMENT............................................................1
ARTICLE 3 NO DISCRIMINATION...............................................................2
ARTICLE 4 UNION REPRESENTATION............................................................2
ARTICLE 5 UNION SECURITY & CHECK OFF......................................................4
ARTICLE 6 GRIEVANCE PROCEDURES ARBITRATION
GRIEVANCES......................................................................6
ARTICLE 7 SENIORITY.......................................................................9
ARTICLE 8 DISCIPLINE & DISCHARGE.........................................................14
ARTICLE 9 HOURS & OVERTIME...............................................................16
ARTICLE 10 LEAVE OF ABSENCE...............................................................19
ARTICLE 11 PROBATIONARY PERIOD............................................................23
ARTICLE 12 QUALIFYING FOR PREMIUM JOBS....................................................23
ARTICLE 13 ...............................................................................24
ARTICLE 14 HEALTH & SAFETY................................................................24
ARTICLE 15 TIME STUDY.....................................................................25
ARTICLE 16 REPORT IN/CALL IN/CALL BACK PAY................................................26
ARTICLE 17 MANAGEMENT RIGHTS..............................................................26
ARTICLE 18 COMPENSATORY LEAVE FOR SICKNESS
OR EMERGENCIES.................................................................27
ARTICLE 19 VACATION.......................................................................28
ARTICLE 20 COST OF LIVING ALLOWANCE.......................................................32
ARTICLE 21 INSURANCE......................................................................33
ARTICLE 22 HOLIDAYS.......................................................................36
ARTICLE 23 PENSION........................................................................37
ARTICLE 24 GENERAL........................................................................39
ARTICLE 25 WAGE PROGRESSIONS..............................................................44
APPENDIX A ...............................................................................45
APPENDIX B ...............................................................................47
APPENDIX C ...............................................................................48
APPENDIX D ...............................................................................49
APPENDIX E ...............................................................................50
APPENDIX F ...............................................................................51
APPENDIX G ...............................................................................52
APPENDIX B NEW HIRES RATES 1ST YEAR.......................................................53
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
APPENDIX B NEW HIRES RATES 2ND YEAR.......................................................54
APPENDIX C NEW HIRES RATES 1ST YEAR.......................................................55
APPENDIX C NEW HIRES RATES 2ND YEAR.......................................................56
APPENDIX D NEW HIRES RATES 1ST YEAR.......................................................57
APPENDIX D NEW HIRES RATES 2ND YEAR.......................................................58
APPENDIX E NEW HIRES RATES 1ST YEAR.......................................................59
APPENDIX E NEW HIRES RATES 2ND YEAR.......................................................60
APPENDIX F NEW HIRES RATES 1ST YEAR.......................................................61
APPENDIX F NEW HIRES RATES 2ND YEAR.......................................................62
APPENDIX G NEW HIRES RATES 1ST YEAR.......................................................63
APPENDIX G NEW HIRES RATES 2ND YEAR.......................................................64
ARTICLE 26 DURATION OF AGREEMENT..........................................................65
CALENDARS
</TABLE>
ii
<PAGE> 4
AGREEMENT
This Agreement made and entered into on this 1st day of June, 1992,
by ELECTRO-VOICE, INC., hereinafter called the EMPLOYER, and the INTERNATIONAL
UNION OF ELECTRONIC, ELECTRICAL, TECHNICAL, SALARIED and MA CHINE & FURNITURE
WORKERS, AFL-CIO and its LOCAL 663, hereinafter called the UNION.
ARTICLE 1
UNION RECOGNITION
The Employer recognizes the Union as the sole and exclusive
collective bargaining agent for all full time and regular part-time production
employees, at the Employers Sevierville, Tennessee plant, including truck
drivers, shipping and receiving employees, quality control department employees,
production control department employees and plant clerical employees, BUT
EXCLUDING office clerical employees, engineering department employees, assistant
foremen, and professional employees, guards and supervisors as defined in the
Act. The foregoing as provided for in Certification Case Number 10-RC-9817,
dated February 11, 1974.
ARTICLE 2
PURPOSE OF AGREEMENT
Section 2.01. It is the purpose of this agreement to promote the
mutual interest of the Employees and the Employer, to secure a prompt and
equitable disposition of grievances, to establish fair wages, hours and working
conditions, to secure a peaceful and harmonious relationship and to provide a
safe and healthful working environment and to set forth the sole and entire
agreement between the Employer and the Union with respect to wages, hours, and
all other terms and conditions of employment. The parties agree to co operate
fully to secure the advancement and achievement of the above purposes. The prin
ciple of a fair days work for a fair days pay is jointly recognized.
Section 2.02. The term "Employee" when used in this Agreement means
an employee of the Employer in the Bargaining Unit.
<PAGE> 5
ARTICLE 3
NO DISCRIMINATION
Section 3.01. The provisions of this Agreement shall be applied to
all employees without discrimination or preferential treatment for any reason
including age, sex, race, color, creed, national origin, handicap or any other
reason prohibited by law.
Section 3.02. The Employer agrees not to interfere with the rights of
its employees to become members of the Union, and there shall be no
discrimination, interference, restraint, or coercion by the Employer or any of
its agents against any employee be cause of Union membership or because of his
acting as an officer or in any other bonafide activity on behalf of the union.
Section 3.03. The Union recognizes its responsibility as a result of
NLRB certification to represent all employees in the bargaining unit and agrees
there will be no discrimination, interference, restraint, or coercion by the
Union or any of its agents against any employee because of his refusal to join
or participate in the Union or Union activities.
ARTICLE 4
UNION REPRESENTATION
Section 4.01. The officers or any authorized representative or
officials of the Union shall have admission, from the Employer, to the plant or
premises of the Employer at any time during working hours for the purpose of
ascertaining whether or not this Agreement is being observed by the parties
thereto, or for assisting in the adjustment of grievances. Such admission shall
be through the receptionist who will refer the representatives to the Personnel
Department for the issuance of a pass without undue delay.
Section 4.02. Authorized representatives shall be: Officers and
representatives of the IUE-AFL-CIO or District 7 of such Union: The President,
Chief Steward, Vice- President, Recording Secretary, Financial Secretary,
Trustees, Sgt.-At-Arms, and Stewards in their areas of representation.
The above identified officers shall be allowed to take a reasonable
amount of time off from work to attend to the affairs of the local without pay
from the Employer, provided that a Union Affairs Pass stating the general
purpose of the absence is submitted to the Personnel Manager in advance. This
time off will not be charged against these officers in any way. The Employer
reserves the right to postpone such absences in case of emer-
2
<PAGE> 6
gency. The Union agrees to control and regulate abuses in regard to the amount
of time and frequency of absences for such union business.
These authorized representatives shall be entitled to enter the plant
in hours other than their regular shift in accordance with Section 4.01 of this
Article. Should there be no receptionist on duty they may be admitted by
contacting the supervisor in charge and securing a "Union Affairs Pass."
Section 4.03. Stewards will be chosen from and assigned to the
following areas: Zones 1, 2, 3 and 4.
Zone 1. Lines 1 and 2, Quality Control, Roving inspectors, Tool Crib,
Tool and Die, Set-Up, Glue Center, Salvage, Custodian, Fabrication Area, Cable,
Engraver, Mini-Jector, and Tube and Damping.
Zone 2. Lines 3, 4 and 5.
Zone 3. Lines 6, 7, 8 and Back Electret.
Zone 4. Receiving Inspectors, Truck Driver, Material Handler,
Miscellaneous, Shipping Clerk, Stockroom, Head Line, Production Control, Charge
Machine and RE 2000 Specialist.
If the Employer places employees on the second shift or third shift,
there will be a steward appointed and elected to represent employees on the
shift in question. This elected steward will continue to represent all employees
until the number of employees exceeds twenty-five (25). When the number of
employees exceeds twenty-five (25), there will be another steward appointed
and/or elected.
Section 4.04. Should there be a substantial change in the level of
employment, a commensurate change in the number of stewards may be provided for
by mutual agreement between the Employer and the Union.
Should the number of stewards, under this section, be reduced or
increased the Union will determine the steward affected.
Section 4.05. If five (5) or more employees are scheduled to work at
any time other than the regular shift (Monday - Friday), the Employer will
notify the proper union steward, chief steward or representative as soon as
possible of the need for union representation. The steward or his designated
alternate, chosen at the option of the union, must
3
<PAGE> 7
be present. The steward or his designated alternate working solely to provide
representation shall be assigned any full time work in the zone which they are
representing in addition to the number of employees needed. The steward will
also be placed in the area with in the zone with the largest number of employees
working. If five (5) or more employees are working in various zones the steward
or his designated alternate shall be assigned work in the zone with the largest
number of employees working. These are exceptions to the above in this section:
(A) When the steward or designated alternate is one of the normal
operators asked to work overtime.
(B) When the steward or designated alternate is eligible by the turn
sheet to work the overtime.
Section 4.06. Should the union seek a renewal of this Agreement, it
shall select a Negotiating Committee of not to exceed five (5) members to
negotiate with the Employer the number of International Representatives not
included. In the event of such negotiations, the Employer will pay for all
scheduled work hours lost at the employee's regular earnings to each
Negotiating Committee member for all time spent in meetings with the Employer's
representatives.
ARTICLE 5
UNION SECURITY & CHECK OFF
Section 5.01. During the life of this Agreement, the Employer will
make deductions of Union membership dues and initiation fees, if payable for
each employee who signs an authorization cord which will be furnished to the
Employer by the Union. The deductions shall be made from the first and/or third
pay check of each month. Such deductions shall be paid promptly to the
Financial Officer designated by the Union together with a list of employees from
whose pay such deductions were made and the amount of each.
I hereby assign, from my earnings now or hereafter payable to me from
the Employer, to Local 663 of the International Union of Electronics,
Electrical, Salaried, Ma chine and Furniture Worker's AFL-CIO, a sum equal to
Union membership dues and, if owing by me, an initiation fee, as certified to
the Employer by the Local.
4
<PAGE> 8
This Assignment and Authorization is voluntarily made in
consideration of the costs of representation and collective bargaining and is
not contingent upon my member ship in the Union.
Pursuant to this Assignment and irrespective of my present or future
membership status in the Union, I authorize and direct you to deduct, while I am
employed in the rep resented bargaining unit of the Employer, such a sum equal
to membership dues, and it owing by me, an initiation fee, as certified to the
Employer by the Local.
Regardless of my membership status, this Assignment and Authorization
shall be irrevocable until a date one year from its effective date, or until the
date on which the cur rent collective bargaining agreement between the Employer
and the Union is terminated, whichever is earlier. I agree and direct that this
Assignment and Authorization shall be automatically renewed, and shall be
irrevocable for successive period of one (1) year each from its effective date,
or for the periods of each succeeding applicable collective bargaining
agreement between the Employer and the Union, whichever period is shorter.
This Assignment and Authorization may only be revoked by written
notice by individual registered or certified mail, given by me to the Employer
and the Union, post marked not more than twenty (20) days and not less than ten
(10) days prior to the expiration date of each one-year period, or the
termination date of each applicable collective bar gaining agreement between the
Employer and the union, whichever date is earlier.
This Authorization and Assignment supersedes all previous
Authorizations and Assignments.
Employees who have not previously authorized deductions or who have
revoked check-off as above provided may authorize deductions effective the first
day of any calendar month.
Section 5.02. The Union agrees to save the Company harmless from any
action or actions growing out of these deductions and assumes full
responsibility for the disposition of the funds so deducted once they have been
turned over to the Financial Secretary of the Union as above provided.
5
<PAGE> 9
ARTICLE 6
GRIEVANCE PROCEDURES
ARBITRATION GRIEVANCES
Section 6.01. Grievances and all answers to grievances (other than
those in 6.03A) shall be in writing and signed by the aggrieved employee or
employees and/or the union and submitted within the time limited hereinafter set
forth.
Section 6.02. (A) Grievances concerning disciplinary action or
discharge must be filed in writing, within five (5) working days of receipt of
notification of such action, or such grievances shall not be valid. In event of
disciplinary action or discharge the specific reason for such action will be
given in writing at the time to the employee with a copy to the Union.
(B) All other grievances must be filed in writing within ten (10)
working days after the occurrence of the event on which it is predicated
provided, however, that grievances concerning payroll errors or wage
adjustments must be filed in writing within sixty (60) working days, unless
either party shall request in writing an extension of time for further
investigation of the issue.
Section 6.03. All differences, disputes and grievances that may arise
between the Union and the Employer shall be taken up as follows:
(A) Step 1 - Between the aggrieved employee on the one hand and the
employee's foreman on the other. Either party may request the presence of
the area steward.
If no satisfactory settlement is reached between them within
twenty-four (24) hours, the matter shall be reduced to writing and
referred to Step 2. (The twenty-four (24) hour period may be extended by
mutual consent.)
(B) Step 2 - The Chief Steward, steward, department head, and a
representative of the Personnel Department. The Employer or the Union may
request the presence of the employee(s) or the foreman or additional
witnesses for the purpose of giving testimony.
If no satisfactory settlement is reached between them within twenty
four (24) hours the matter shall be referred to Step 3. (The twenty-four
(24) hour period may be extended by mutual consent.) Such settlement shall
be reduced to writing.
6
<PAGE> 10
(C) Step 3 - Three (3) Local Union representatives and/or
representative of the International Union on the one hand and up to four
(4) Management representatives on the other.
By mutual agreement, policy or Committee grievances will go directly
to the third step.
If no satisfactory settlement is reached between them within ten (10)
working days, the matter may be appealed to arbitration. The ten (10) day
period may be extended by mutual consent. Such settlement shall be in
writing.
(D) In respect to the steps of the grievance procedure, union
officials will be paid a maximum number of hours (31) per week. These
hours can be used by the President, Vice-President, Chief Steward or the
stewards.
Unused hours by the above officers and stewards may be accrued from
week to week. However, the above identified officials shall be allowed to
take off such additional time as the legitimate processing of grievances
might require without pay from the Employer. In addition the three (3)
Local Representatives four (4) hours in Step 3.
Section 6.04. The Union agrees that all stewards will investigate
grievances in the shortest period of time possible. Any zone steward (as
differentiated from a chief steward) when requested, shall have the right to
investigate a grievance within his area of jurisdiction during working hours on
Step 1 grievances. In the absence from work of a steward, his chief steward may
act in his place. When a steward is called upon to investigate or work on a
grievance during working hours, he must do so according to the following
procedure. The employee's immediate supervisor will be responsible for
contacting the appropriate steward and will do so without undue delay.
The chief steward and Personnel Manager may be requested to
participate in Step 1 of the grievance procedure for consultation purposes. The
purpose of this provision is to assure proper training and development of both
supervisors and stewards in the skills necessary for resolution of complaints
and grievances in Step 1 of the grievance procedure.
(A) The steward shall not leave his job without prior notice to his
immediate supervisor. In the event that the steward is working on a job
where a replacement is required, such replacement will be made within the
shortest possible time.
7
<PAGE> 11
(B) Prior to leaving his job, the steward will request a "Union
Affairs Pass" of the immediate supervisor and he must return the pass to
such supervisor when returning to the job. Such supervisor will indicate
the time on the "Union Affairs Pass" that the steward leaves his work and
the time he returns to work from his grievance investigation.
(C) If the steward is entering an area under the supervision of
someone other than the individual issuing the "Union Affairs Pass," he
shall inform the supervisor of the reasons for his entering the
department.
(D) Upon receipt of the "Union Affairs Pass," the Zone Steward may
leave his work station. When finished with his union business, he must
immediately return to his work area.
(E) Zone stewards will not investigate grievances in other areas of
jurisdiction.
(F) In the event any employee is to be discharged or disciplined and
is required to leave the plant, he shall remain in the Personnel
Department and the chief steward and steward shall be called in for
discussion.
Section 6.05. The Union agrees there will not be any strike, sit
down, slow down, work stoppage, mass absenteeism for concerted action, boycott,
sympathy strike, or any other form of action which results in delays, stoppage
of work or production during the term of this Agreement. The Employer shall have
the right to discharge or otherwise discipline any employee who engages in
conduct in violation of this clause. The Employer agrees that there will be no
lockout during the term of this Agreement.
ARBITRATION
Section 6.06. All differences, disputes, and grievances between the
parties which shall not have been satisfactorily settled after following the
procedure herein above set forth shall, at the request of either party, be
appealed to arbitration within ten (10) working days after the time limitation
set forth in 6.03(C) of the grievance procedure.
(A) Upon the issuance of such an appeal, the parties will attempt to
select an arbitrator by agreement. If they fail to agree upon an
arbitrator within five (5) working days, a joint request will be submitted
to the Federal Mediation and Conciliation Service within ten (10) working
days by the president of the Local or his designated representative and
the Industrial Relations Manager or his designated representative for
8
<PAGE> 12
a panel of seven (7) arbitrators. Such arbitrators shall be members of the
American Arbitration Association.
(B) An arbitrator will be selected from this panel by the Union and
the Employer alternately striking names from the panel until one name
remains.
(C) Should the entire panel be unacceptable to either party, they
shall request another panel from the Service.
Section 6.07. It is the intent of the parties to settle differences,
disputes, and grievances by responsible bargaining and not resorting to
arbitration as a substitute for such responsibility. It is agreed that the
parties shall equally bear the cost of the arbitrator's fee and expense. An
arbitrator shall be authorized only to interpret and apply the provisions of
this Agreement to the extent necessary to decide the submitted grievance and
shall not have authority to add to, detract from or alter in any way the
provisions of the Agreement. The parties agree that not more than two (2)
related grievances shall be heard by the same arbitrator at one (1) arbitration
hearing, or continuation thereof.
However, the two (2) such related grievances must be no more than
ninety (90) days apart in occurrence. Exceptions shall only be made by mutual
agreement.
Section 6.08. The employer will furnish the hearing room. Legal fees
and expenses of case preparation shall be borne by the respective parties.
ARTICLE 7
SENIORITY
Section 7.01. (A) Seniority is the length of the employee's service
with the Employer from last date of hire.
(B) On the day following the effective date of this Agreement a
complete seniority list shall be posted in a conspicuous place to be mutually
agreed upon by the Employer and the Union. It shall remain posted for twenty
(20) working days. Any protest as to the proper seniority of an employee must be
made in writing within this twenty (20) day period. No protest being filed
within this twenty (20) day period, the seniority date as posted shall be
considered correct and final.
Section 7.02. (A) The Employer shall provide the Union with
up-to-date seniority lists each month, so arranged that the employee with the
greatest seniority will
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<PAGE> 13
be first on the list, and the employee with the lowest seniority will be last.
The Employer shall also notify the Union in writing of any changes as they occur
between issuance of the above lists.
(B) Classification seniority records shall be maintained in the
Personnel Office and made available to the employee and/or the appropriate union
steward on request.
Section 7.03. (Al) Employees with sixty (60) calendar days and up to
six (6) months seniority shall accumulate seniority for six months from date of
lay-off or start of leave of absence unless otherwise provided for in Section
7.03 B2, 7.03 B3, 7.03 B4, or 7.03 B5, of this Article. If the duration of the
leave or lay-off exceeds six (6) months, the employee shall return to the lowest
labor grade.
(A2) Employees with six (6) months of seniority and up to two (2)
years seniority shall accumulate seniority for two (2) years from date of
lay-off or start of leave of absence unless otherwise provided for in Section
7.03 B2, 7.03 B3, 7.03 B4, or 7.03 B5, of this Article.
(A3) Employees with two (2) years up to five (5) years seniority
shall accumulate seniority equal to the seniority the employee had at the
beginning of a lay-off or leave of absence unless otherwise provided for in
Section 7.03 B2, 7.03 B3, 7.03 B4 or 7.03 B5 of this Article. Returning
employees may return to the job classification and shift from which they left.
(Bl) Employees with more than five (5) years of seniority shall
accumulate for the full period of the layoff or leave of absence.
(B2) Employees taking leaves of absence to hold full time public
office shall accumulate seniority during their term of office.
(B3) Employees elected or appointed to full time union position upon
written request to the Employer from the President of the International Union or
the President of District 7 of the International Union shall continue to
accumulate seniority during their term of office.
(B4) Employees elected to or appointed to full time office of the
Local Union upon written request of the Local union shall accumulate seniority
during their term of office.
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<PAGE> 14
(B5) Employees serving short term mission for the Union, such as
delegates, etc., shall accumulate seniority during such mission.
(B6) Leaves of absence shall not be granted for the purpose of
securing other employment. Employees on leave found to be in other employment,
without notifying the Employer, shall be considered as voluntary quit.
(C) After June 30, 1986, employees accepting positions outside the
bargaining unit will not continue to accumulate seniority but will have their
seniority "frozen" at the time they accept the position outside the bargaining
unit. If they re-enter the bargaining unit, their seniority date shall be
adjusted to reflect the cumulative limit imposed by this subsection.
Employees outside the bargaining unit who reenter the bargaining unit
shall only have return rights as assemblers. Employees hired from outside
directly into non-bargaining unit jobs shall not have seniority.
(Dl) Employees other than those covered under the provisions of Sec
tion 7.03 Al who go on leave shall be returned to the job classification and
shift they held at the beginning of the leave. If such job classification and
shift are not available, they shall exercise their seniority as outlined in
Article 7, Section 7.05D.
(D2) During the time of such leaves, the Employer shall fill such
jobs by first offering it to the cutback employee, then to the part time
employee. If neither is available and the period of the leave exceeds 30 days, a
temporary bid will be posted for the period of time required. When the needs of
the Company do not require that the Company fill the vacancy created by a leave
of absence of less than 30 days, the Company will endeavor to explain the reason
to any cutback employees or part time employees.
(D3) The successful temporary bidder shall be returned to the
classification and shift they held at the time of the bid when the other
employee returns from their leave of absence except those covered under the
provisions of Section 7.03 Al. The employee filling the vacancy will also return
to his job classification and shift.
Section 7.04. (A) When a new job is created or a vacancy occurs, the
Employer shall, without undue delay, but in no case longer than three (3)
working days, post a notice of such job on the bulletin boards, giving the
amount of openings available, pay rate and shift on which the job opening is
available. Such job openings shall remain posted for two (2) full working days.
The time of posting shall be written on the posting at the time it is posted in
addition to the date of the posting; however, the Employer may,
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<PAGE> 15
when necessary, fill such jobs on a temporary basis during the posting and
bidding procedure.
(B) The Employer shall be free to establish new jobs not covered by
this Agreement as the needs arise and to place such jobs in the classification
and wage group deemed appropriate. Current job descriptions as of the effective
date of this Agreement, will be given to the Union and will remain in effect
unless during this Agreement changes in processes, methods or equipment warrant
alteration. The Union shall be advised as to the classification and wage group
and given reasons supporting such placement.
The job shall run for a period of thirty (30) working days. At the
end of the thirty (30) day period, the Union shall be free to grieve the
placement.
Any change in classification or wage group shall be retroactive to
the start of the job.
(C) During the time of the posting, employees desiring to bid on the
job may sign the bid sheet. On request, supervisors or stewards may sign the bid
sheet for absent employees or employees on leave of absence. For an employee on
leave of absence to be awarded the job, he would have to be available within 20
calendar days from the time the bid is taken down. Should that employee not be
available, the next most senior person on that bid will be awarded the job.
(D) Posted jobs will be offered to the senior bidder providing he
(she) has the skill and ability to perform the work.
(E) The job shall be awarded and the transfer made on or before the
start of the shift on the third day following the taking down of the bid sheet.
If the transfer cannot be made the successful bidder shall, nevertheless, be
paid the rate of the posted job.
(F) If there are no successful bidders, the Employer shall be free to
hire from the outside.
(G) Job bid posting will remain open for the length of the qualifying
days required on the job after the bid is removed. Bidders signing the sheet
while posted will be considered for any openings or vacancies occurring on that
job during this period. A job bid remaining open will not need to be re-posted
unless there are no bidders on the bid or no bidders remaining to choose from.
Permanent, part-time, and temporary postings will be considered as separate
postings and a bid on one will not reflect on the other.
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(H) SHIFT CLASSIFICATION. First, second and third shift job
classifications will be considered separate job classifications for the purpose
of job bids, cutbacks and return rights.
Section 7.05. (A) If a reduction in force is necessary in any job
classification, the Employer will first try to absorb the affected employees in
Labor Grade 1, assembly, such transfer shall be at no reduction in earnings. The
least senior employees will be transferred. If employees cannot be absorbed for
such period other than provided for in Section 7.05B of this article, the
cutback and lay off procedure shall apply.
(B) In cases where a line or section may have cutbacks due to
shortages of material or other necessary interruptions in production, temporary
lay-offs may be made with out regard to seniority. This provision shall be
applicable to employees directly affected. No employee shall be affected more
than three (3) scheduled work days in a 30 day period. No employee shall be
affected by such temporary lay-off for more than eighty (80) hours in a calendar
year.
(C) When cutbacks are to be made in any job classification, the
cutback employee(s) will be those with the lowest plant-wide seniority
providing the employees remaining in the classification have skill and ability
to perform the work.
(D) A cutback or bumped employee may exercise their seniority to bump
the least senior employee in any shift or job classification within their labor
grade or a lower labor grade providing they have skill and ability to do the
work.
Section 7.06. (A) Layoff of employees other than temporary layoff
which is covered in Section 7.05(B) will be by plant-wide seniority beginning
with the least senior. The only exceptions being jobs not subject to the bid
procedure and officers and stewards with top-ranking seniority, which is covered
in Section 7.07.
(B) Recall of employees shall be in the inverse order of layoff.
Employees will be given two (2) days notice to return to work, unless the
employee has a valid excuse for not reporting. The Employer shall notify
employees either by telephone, certified mail, or personal notice. In the event
of personal notice, such notice shall be made directly to the employee only.
Section 7.07. (A) In the case of lay-off and recall, the following
elected officers and stewards of the Local Union shall be deemed to have top
ranking seniority so long as they hold such office and in the order as specified
below:
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(B) President, Chief Steward, Stewards in their areas of
representation.
Section 7.08. Employees shall lose seniority only by:
(A) Voluntary quitting.
(B) Failure to report for work within two (2) days after receiving
notice to report unless the employee has a valid excuse for not reporting
from lay off only.
(C) Discharge for just cause.
(D) Failure to report at termination of a leave of absence. Employees
who do not present themselves for re-employment by the close of the next
scheduled work day or submit proper evidence requesting extension of said
leave by the close of the next scheduled work day shall be considered as
having resigned. In emergencies exceptions will be made.
(E) Lay-off or leave of absence for a length of time greater than
accumulated seniority as outlined in Section 7.03 Al, 7.03 A2, 7.03 A3, of
this Article.
(F) Being absent three (3) consecutive work days and not reporting
for work at the start of the shift on the fourth day without proper
notification to the Company.
ARTICLE 8
DISCIPLINE & DISCHARGE
Section 8.01. Full power of discharge or discipline lies with the
Employer, but it is agreed that his power shall be exercised with justice and
with regard for the reasonable rights of the employees. If the Union, after
investigation, feels that an employee has been disciplined or discharged without
just cause and fails to reach an agreement or adjustment with the
representatives of the Employer, the case in question shall be referred to the
grievance procedure. The Union is to be notified at the time of any such
discharge or discipline (See Article 6, Section 6.04F).
Section 8.02. It is specifically pointed out that the Employer and
Union are in complete agreement that absence which is chronic cannot be
condoned. Any absence of more than three (3) days must be covered by a leave of
absence.
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Section 8.03. The Employer will from time to time issue Rules and
Regulations for the maintenance of orderly conditions of employment. These
rules will not be unfair or of discriminatory nature, nor will they conflict
with the terms of this Agreement. The Employer will give the Union a copy of any
deletions, amendments, or additions to the Rules and Regulations prior to the
time they are issued.
Section 8.04. The publishing of the rules by the Employer shall not
be construed as limiting the right of the Employer to delete, amend or add
rules as changing conditions demand such changes. However, notification of such
changes will be made known to the President, Vice President, and Chief Steward
of the Union in advance of the publishing of the change.
Section 8.05. Infractions of the Employer's Rules require progressive
discipline, as set forth below unless the Rules and Regulations shall specify
to the contrary.
(A) Infractions of rules shall be dealt with in an impartial and fair
manner. A first infraction may deserve a verbal warning. A record of the
verbal shall be placed in the employee's personnel file.
(B) Subsequent infractions of the same rule may require a written
reprimand. The second reprimand may carry a suspension penalty as noted in
the rules and the third may call for dismissal.
(C) An accumulation of three verbal warnings for various rule
infractions within a period of sixty (60) calendar days may carry a
penalty of 3-day suspension. An accumulation of two written reprimands for
various rule infractions during a ninety (90) day period may carry a 3-day
penalty. A third may require a dismissal.
(D) A copy of the above warnings, stating the exact violation, shall
be furnished to the employee and the union at the time of the violation,
whenever possible. Should the employee and the Union not be given a copy
as outlined above, such warning(s) will be invalid.
(E) The Employer agrees that it will not publish any new work rules
in addition to those in effect on June 9, 1977, which call for mandatory
dismissal unless the Company has the mutual consent of the Union.
Provided further, that the Employer will not amend any existing work rule
(in effect on June 9, 1977) to call for mandatory dismissal without mutual
consent.
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Section 8.06. The Employer recognizes that as the repeat violator is
penalized, so should the person who abides by the rules be given consideration.
Therefore, a reprimand/warning which becomes six (6) months old shall be
removed from the employee's personnel record.
ARTICLE 9
HOURS & OVERTIME
Section 9.01. (A) The regular work week shall be forty (40) hours per
week, eight (8) hours per day, five (5) days per week from Monday through Friday
inclusive.
(B) First Shift - 8 a.m. - 4:30 p.m.
(C) Second Shift - 5:00 p.m. - 1:30 a.m.
(D) Third Shift - Should there be a third shift, such hours will be
worked out between the Employer and the Union before any third shift
scheduling.
(E) Should the need for a second shift arise, or additionally, a
third shift such jobs will be offered by the job posting and bidding procedure.
(F) The existing half hour lunch period, as currently scheduled, will
remain in effect unless changed by mutual agreement between Employer and the
Union.
(G) Fifteen (15) minute paid breaks, as currently scheduled,
including during overtime, will be in effect unless changed by mutual agreement
between the Employer and the Union.
Section 9.02. For timekeeping purposes, the week shall commence at
12:01 a.m. Monday and end at 12:00 p.m. the following Sunday. The workday shall
commence at 8:00 a.m. and end at 8:00 a.m. the following day.
Section 9.03. Overtime compensation will be one and one-haft times
the hourly rate of the job for all hours over eight (8) in any day and over
forty (40) in any given week except overtime shall not be pyramided.
Section 9.04. (A) ASSEMBLY. The normal operator shall be defined as
the person on the job on which the overtime occurs.
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(Al) Should it be decided to work overtime, the Company will first
ask the normal operator. Should the normal operator refuse, the Company
will ask employees in that work center beginning with the employee with
the least amount of overtime on the turnsheet. Should additional employees
be needed, an overtime bid sheet will be posted. Employees who wish to be
considered for overtime can sign the overtime bid sheet. The requirement
will be filled by choosing the employees from the bid sheet with the least
amount of overtime on the turnsheet.
(A2) The parties agree that practices set forth in Section Al above
will not result in an imbalance of more than forty (40) hours per year
between all assembly operators on the assembly turnsheet.
(B) PREMIUM. In the event overtime is scheduled in premium jobs (as
defined in Appendix A), such overtime will be divided as equally as possible
among the employees performing the premium jobs.
The normal operator, as defined in Section 9.04A above, may be
requested to work the overtime, provided that this practice does not result in
an imbalance of more than 32 hours per year between classified operators.
(C) Such divisions of overtime shall be controlled by the use of a
turnsheet and in accordance with the provisions of this Agreement. The
turnsheets shall be maintained by the Employer and will start on the first day
of the first pay period after the effective date of this Agreement, and continue
for the length of the Agreement.
(D) Selection of overtime personnel from the turnsheets will be made
by choosing the employees with the least amount of overtime hours in the
classification first. Thus continuing the process until all employees have been
offered an equal amount of overtime hours as possible.
(E) For turnsheet purposes, any employee offered overtime hours but
refusing will be charged the amount of hours offered.
(F) To insure fair and equal distribution of overtime to all
employees, overtime offered will be posted to the turnsheet and noted as such
for the purpose of review.
(G1) Any employee on vacation shall not be charged with overtime
during his vacation period.
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(G2) Part time employees working on overtime will not be charged with
overtime on turnsheet.
(H) Employees entering into a new classification shall assume an
average of hours as charged to the turnsheet.
(I) In the event an employee is available for overtime and is
overlooked or is denied the opportunity for overtime, such employee(s) shall be
given the opportunity of making up such lost overtime.
When hours equivalent to the denied hours are to be worked the
arrangements with the employee shall be made twenty-four (24) hours in advance
unless shorter notice is agreeable to the employee involved.
(J) No employee shall be moved for the purpose of preferential
treatment for overtime.
(K) Should it be decided to work overtime on a regular work day, the
Employer's responsibility in informing personnel is limited to those in
attendance during the last four hours of the day. If the overtime is to be
worked on Saturday or Sunday and the employee is not in attendance during the
last four (4) hours of the Thursday preceding such overtime, the overtime will
not be offered to the employee.
(L) A copy of the turnsheets with all job classifications will be
furnished to the Chief Steward in two week increments with all handwritten
posting of hours worked, offered and refused.
Section 9.05. Holiday overtime shall be offered as far in advance as
possible but not later than the end of the shift on the second day preceding the
holiday.
Section 9.06. Daily overtime shall be offered as far in advance as
possible but not less than four (4) hours before the end of the shift. Weekend
overtime shall be offered as far in advance as possible but not later than the
end of the working day Thursday.
Section 9.07. Failure to report for overtime after accepting
assignment shall be subject to a one (1) day suspension, unless good and
sufficient reason exists for such failure to report.
Section 9.08. An employee working on Saturday shall be paid time and
one-half (1 1/2) for hours worked.
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Section 9.09. Double time shall be paid for all work done on Sunday.
Section 9.10. For work performed on the 2nd shift, there shall be a
twenty (20) cents an hour shift differential.
For work performed on the 3rd shift, there shall be a twenty-five
(25) cents an hour shift differential.
ARTICLE 10
LEAVE OF ABSENCE
Section 10.01. Employer will grant Leaves of Absence to employees as
follows:
(A) Absences for three (3) consecutive working days or less shall not
require a formal leave of absence.
(B) SICK LEAVES. Leaves of five (5) days or more for medical reasons
(personal injury or illness) must be supported by a physician's
recommendation. All physician's statements must include both the first
day of absence and the day the employee can be expected to return to
work.
Company will grant excused absence to an employee who is admitted to
the hospital on an out-patient basis, must be supported by a physician's
statement.
(C) BEREAVEMENT LEAVE. Justifiable personal reasons - such as time
for a bereavement leave following death of member of immediate family,
accidents which might involve someone from the immediate family, etc.,
properly supported by such evidence as may be required. The first three
(3) days shall be paid by the Employer only for deaths in the immediate
family as listed below:
<TABLE>
<CAPTION>
<S> <C> <C>
Husband Brother
Wife Sister
Children Grandchildren
Daughter-in-law Son-in-law
Step Children Step Grandchildren
</TABLE>
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The parties agree to allow the following types of relationships to be
counted on an "either-or but not both" basis:
<TABLE>
<CAPTION>
<S> <C> <C>
EITHER OR
Father Step Father
Mother Step Mother
Father-in-law Step Father-in-law
Mother-in-law Step Mother-in-law
Maternal Grandmother Maternal Step Grandmother
Maternal Grandfather Maternal Step Grandfather
Paternal Grandmother Paternal Step Grandmother
Paternal Grandfather Paternal Step Grandfather
</TABLE>
The Employer will grant the employee one (1) day bereavement leave
with pay for death of additional members of family as listed below:
<TABLE>
<CAPTION>
<S> <C> <C>
Brother-in-law Sister-in-law
Step Father Step Mother
</TABLE>
The parties agree to allow the following types of relationships to be
counted on an "either-or, but not both" basis:
<TABLE>
<CAPTION>
<S> <C> <C>
EITHER OR
Spouse's Maternal Grandfather Spouse's Maternal Step Grandfather
Spouse's Maternal Grandmother Spouse's Maternal Step Grandmother
Spouse's Paternal Grandfather Spouse's Paternal Step Grandfather
Spouse's Paternal Grandmother Spouse's Paternal Step Grandmother
</TABLE>
If an employee has counted one of the relatives listed under the
"either" category, then they would not be eligible to count the
corresponding relative in the "or" category. Of course, even if an
employee had already counted one relative (for example, father-in-law),
and later the corresponding relative died (step father-in-law), consider
ation would still be given to an application for a personal leave, if it
were necessary for the employee to be absent three or more working days.
The "step" relationships described above are the only relationships
to which this "either-or" option will apply.
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(Cl) The Employer will grant an employee a reasonable amount of
excused time off from work due to the death of fellow employees,
upon request, without pay, to attend funeral.
(D) MILITARY LEAVE. Any employee, covered by the terms of this Agree
ment who is drafted or who volunteers for service in the Armed Forces of
the United States under the provisions of the "Universal Military Training
and Service Act," as amended and extended, shall be considered on a
"Certified Leave of Absence" for a period as defined in such Act.
The same provision will apply to all employee members of the National
Guard, Reserve Corps, or members of other recognized military reserve
components, if, and when they are inducted into the Armed Forces. An
employee returning from such military service, will be reinstated by the
Employer unless the Employer's circumstances have so changed as to make
it impossible to do so, to a position of like continuous service, status,
and pay as he had prior to leaving provided the employee applies for
reinstatement within ninety (90) days after being relieved from the Armed
Forces and provided:
(1) He had left a position other than a temporary position.
(2) He has completed the required period of military training
and service and he presents a certificate to such effect.
(3) He is still qualified to perform the duties of reemployment
within ninety (90) days after he is relieved of his military duties.
(E) Employees taking leaves of absence to hold full time public
office shall accumulate seniority during their term of office.
(F) Employees elected or appointed to full time union position upon
written re quest to the Employer from the President of the International
Union or the President of District 7 of the International Union shall
continue to accumulate seniority during their term of office.
(G) Employees elected to or appointed to full time office of Local
Union upon written request of the Local Union shall accumulate seniority
during their term of office.
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(H) Employees serving short term missions for the Union, such as
delegates, etc., shall accumulate seniority during such mission.
(I) JURY DUTY. An employee summoned for or serving on jury duty on a
regularly scheduled work day shall be paid the difference between his or
her regular rate of pay and the amount received for jury duty. This
differential pay is not to exceed eight (8) hours per day. An employee
reporting for jury duty and excused prior to 11:30 a.m. for the balance of
the day shall report for work without undue delay. An employee excused
after 11:30 a.m. will not be required to report to work and will be paid
as provided for herein. An employee on the night shift shall be
transferred to the first shift for the period of time coinciding with such
jury service without loss of earnings. The employee must notify the
employer of such call of jury duty promptly after receipt of notice. The
employee must present to the employer a statement of dates and hours spent
on jury duty and monies paid.
(J) PERSONAL LEAVE. Personal leaves of absence may be granted to em
ployees for compelling personal reasons, hardship cases, and extenuating
circumstances.
(K) Employees on a leave of absence to care for a sick or injured
person (immediate family) must produce a physician's statement in advance
that such is necessary or desired if advance knowledge of such a situation
exists. If such a situation exists and is of an emergency nature,
statements will be required, but may be produced later.
(L) An employee legally adopting a child shall be granted a leave of
absence to comply with applicable provisions of Tennessee adoption laws.
Such leave of absence will not exceed one (l) year. Employees will be
granted a leave of absence not to exceed one (1) year for the birth of an
employee's child.
(M) Leaves of absence for the purpose of personal convenience, home
construction, (or remodeling), house cleaning, gardening or to assist
other persons for same, etc., shall not be granted.
(N) Leaves of absence for vacation purposes shall not be granted
(vacation shall be taken in accordance with the provisions set forth in
the vacation plan). Employees may be granted a once every five (5) years
vacation trip of not less than two or more than six (6) weeks. These extra
weeks must be tied to the employee's normal vacation and notice must be
given to the personnel department 30 days in advance. The Employer will
not deny such leaves except for good and substantial reasons.
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(O) Leaves of absence shall not be granted for the purpose of
securing other employment. Employees on leave found to be in other
employment, without notifying the Employer, shall be considered as a
voluntary quit.
(P) Employees who wilfully misrepresent facts to obtain a leave of
absence shall be subject to disciplinary action including discharge.
(Q) Employees returning from leaves shall be returned to the job
classification and shift they held at the start of the leave. If such job
classification and shift are not available, they shall exercise their
seniority as outlined in Article 7, Section 7.05D.
(R) The employee returning from the leave of absence shall report to
the Personnel Office before proceeding to his or her job classification
and shift.
(S) An employee incurring a work injury/illness accrues a maximum of
1,000 hours in the calendar year in which the injury/illness occurs and
the calendar year in which the employee returns to work for the purpose of
vacation, compensated days and pension credit.
ARTICLE 11
PROBATIONARY PERIOD
During the first sixty (60) calendar days of continuous employment,
all new em ployees and employees hired after a break of service which terminates
their seniority under the provisions of Article 7, Section 7.08 shall be on
probation, have no seniority and may, at the Employer's sole discretion, be
terminated without recourse to the grievance or arbitration provisions and
without recall rights during such probationary period. Upon completion of the
probationary period, their seniority shall be computed as of the latest hiring
date.
ARTICLE 12
QUALIFYING FOR PREMIUM JOBS
Premium jobs (those above the lowest labor grade) require a period of
time for the employee to become qualified. Such jobs and their qualifying time
are outlined in Appendix A of this agreement for all job classifications
existing on the effective date of this agreement. Qualifying time for new job
classifications established during the term of this agreement will be negotiated
by the Employer and the Union. Successful bidders for pre-
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<PAGE> 27
mium jobs shall not have their plant-wide seniority credited to such premium
jobs until they are qualified.
If the Employer finds that the successful bidder is not qualified to
perform the work during the qualifying period, the individual shall be
disqualified and removed from the job and have return rights to the job
previously held. The disqualified employee shall have a right to file a
grievance if he believes the disqualification is not warranted.
ARTICLE 13
Classifications not subject to the bid procedure:
1. Quality Control Technician
2. Machinist
3. Tool & Die Maker
Employees who believe themselves qualified for such positions may
file an ad vance application in the Personnel Department asking for
consideration when openings occur. Their application will be considered and
will be discussed with the appropriate steward. Employees within the plant with
qualifications will be given the job opportunity prior to hiring new employees.
ARTICLE 14
HEALTH & SAFETY
Section 14.01. The plant must be kept in a sanitary condition. The
Employer agrees to establish safe working conditions and to comply with
applicable state and federal laws.
Section 14.02. The Employer agrees to meet once a month if necessary
or at the request of any member of the safety committee with a two employee
safety committee of the Union to discuss and take steps to correct any unsafe
working conditions. The Union will be notified when a government safety
inspector is in the plant and a union officer will accompany him. Time so spent
for the above will be paid by the Employer at the employee's regular hourly
earnings.
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<PAGE> 28
Section 14.03. An employee and/or the Union may resort to the
grievance procedure should they feel a violation exists.
Section 14.04. The Employer shall designate jobs or areas where
safety glasses must be worn. The Employer shall furnish safety glasses for
employees in such jobs or areas. When an employee requires prescription glasses
he shall, at his expense, be examined by a doctor licensed to issue
prescriptions. Upon presentation to the Employer of the prescription the
Employer will furnish the employee with safety glasses in standard frames which
will conform to OSHA standards.
Section 14.05. If an employee has reason to believe that a condition
on the job creates a safety or health hazard endangering life, limb or health of
the employee, the employee's first obligation is to immediately inform his or
her supervisor of the problem. If the supervisor is not available, the employee
should contact the Employee Relations Manager. In either case, the company will
respond immediately to the problem.
Section 14.06. Employees who suffer lost time due to work related
illness/in jury will receive pay for all hours lost on day of incident.
ARTICLE 15
TIME STUDY
Section 15.01. The Union and Employer are in accord that established
time studies are necessary to price and sell a product.
Section 15.02. The time required on any job shall be on a basis of
fairness and equity consistent with quality of workmanship, efficiency of
operation, and reasonable working capacities of normal operators.
Section 15.03. In the event a rate is considered unattainable a
review of this study may be requested. In the event of a dispute regarding time
study procedure, both parties shall attempt to resolve the issue on a mutual
basis. Failing to resolve the issue on this basis, the matter shall be referred
to the grievance procedure.
25
<PAGE> 29
ARTICLE 16
REPORT IN/CALL IN/CALL BACK PAY
REPORT IN PAY. Employees who report to work at their regular starting
time and who were not notified prior to the end of their shift on their previous
scheduled work day not to report shall be guaranteed at least four (4) hours
work or pay at their regular earnings except in cases of a cause beyond the
employer's control.
CALL IN PAY. Employees called to work before their regular starting
time of their shift shall be guaranteed two (2) hours work or pay at one and one
half (1 1/2) times their regular earnings and will be given the opportunity to
work their full regular shift at straight time pay.
CALL BACK PAY. Any employee who has left the plant, after working
their regular shift, and who is called back and returns to work, shall be
guaranteed at least two (2) hours pay at one and one-haft (1 1/2) times their
regular earnings.
ARTICLE 17
MANAGEMENT RIGHTS
The Employer retains the sole, exclusive right to manage its
business and to direct the working force, except only to the extent that the
provisions of this Agreement specifically limit or quality this right. The
Employer's right to manage its business includes, but it is not limited to the
right to hire and direct employees, to layoff for lack of work, suspend and
discharge for just cause, to increase or decrease the work force, to determine
the product and the manufacturing processes to be employed, to make assignments
of jobs or goods to be handled, to contract out work, to establish work
schedules, to determine the length of the work day or work week for some or all
employees, to determine the classifications required as well as standards of
quality and production, to establish reasonable rules of conduct, to maintain
safety, efficiency and order at the plant, to open new units, assembly lines,
departments or operations and to terminate or close the same, and to dis-
continue or relocate all or any portion of the operations presently being
performed at the Sevierville, Tennessee, facility covered by this Agreement. The
rights of management will not be used to discriminate against any employee
because of his or her Union membership, religion, race, sex, age, national
origin or any other reason prohibited by law. However, the exercise or
non-exercise of rights retained by the Employer shall not be deemed to waive any
such right, discretion or exercise of any such right in some other way in the
future.
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<PAGE> 30
ARTICLE 18
COMPENSATORY LEAVE FOR SICKNESS OR EMERGENCIES
Section 18.01. Compensated Days. Subject to the conditions specified
in Section 18.02, commencing January 1, 1989, regular full-time employees with
one (1) year or more of seniority shall be credited with a maximum of seven (7)
compensated leave days (56 hours) for absence due to illness or personal
emergencies which are earned for the previous calendar year at the rate of one
(1) day for each one and one-half (1 1/2) months on the active payroll. Regular
full time employees with less than one (1) year of seniority at the beginning of
any calendar year thereafter, shall be credited with one (1) compensated day (8
hours) for each one and one-half (1 1/2) months on the active payroll up to a
maximum of seven (7) compensated leave days. Compensated leave pay for sick ness
or personal emergencies shall be computed on the basis of eight (8) hours
straight time per day at the employee's hourly rate of pay in effect when actual
payment is made.
One and one-half months will be interpreted to mean any 6 weeks. If
an employee receives pay for any part of a week, that week will be counted
toward the one and one-half months (6 weeks). (Does not include disability
payments.) Vacation weeks will be counted toward the one and one-haft months (6
weeks).
Section 18.02. Definitions. The occasions which qualify for
compensatory leave pay as referred to in this article shall include pregnancy,
illness, accidents, or personal emergencies. Personal emergencies shall include
all circumstances of a compelling nature which requires the immediate attention
of the employee.
Section 18.03. Other Compensation - Holidays, Lay-Off and Leave of
Absence. An employee may not receive compensatory leave pay for any day or days
for which other compensation is paid as a direct or indirect result of his
employment such as, but not limited to, vacation pay, holiday pay, worker's or
unemployment compensation. An employee shall be entitled to compensatory leave
pay for the day prior to or the day following a holiday. However, a compensatory
day will not serve as to quality an employee for a holiday. Employees not
scheduled for inventory may claim a day of sick pay. Employees scheduled for
inventory and the inventory takes less than eight hours to complete may claim
and be paid for the remaining hours in two (2) hour increments. In no event
shall an employee be entitled to compensatory leave pay during a lay-off or
during an approved leave of absence.
Section 18.04. Method of Payment. Payment of earned compensatory
leave will be included in the next regular paycheck covering the payroll period
during which the
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<PAGE> 31
request is submitted or verification is completed, provided, however, that in no
event will any payment be made for less than two (2) hours of earned
compensatory leave pay.
Section 18.05. Employees who have not received their maximum
compensatory leave allowance shall be paid an amount equal to their unused
compensatory leave pay entitlement on the second Friday in December of each
calendar year. If the employee elects, he may carry over no more than one (1)
day (8 hours) into the following year. An employee who is permanently laid off,
retires or whose employment or seniority is terminated shall be paid an amount
equal to their unused compensatory leave pay entitlement.
ARTICLE 19
VACATION
Section 19.01. Effective June 30, 1989, all employees employed by the
Employer under this Agreement shall comply to the following schedule for
receiving paid vacation:
<TABLE>
<S> <C>
1 week All Employees
2 weeks 3 years from date of hire
3 weeks 7 years from date of hire
4 weeks 12 years from date of hire
5 weeks 20 years from date of hire
</TABLE>
Section 19.02. In order to be eligible for a vacation benefit, an
employee must have worked a minimum of 1000 hours during the period from July 1
of the previous calendar year to June 30 of the year in which the vacation is
taken. Time spent on approved leaves of absence shall be counted toward the 1000
hours minimum. All compensated time shall be counted toward the 1000 hours
minimum. Vacation pay shall be computed on the basis of 40 hours for each week
of vacation entitlement at the employee's straight time hourly rate in effect
during the week preceding the vacation, including cost of living adjustments
and shift differential, if applicable. Any employee who is prevented from work-
ing 1000 hours during the period above specified because he or she resigns or is
laid off shall be entitled to 1/12 of the employee's applicable vacation benefit
for each month worked after July 1 of the preceding calendar year computed on
the basis of the employee's straight time hourly rate in effect at the time of
resignation or lay off plus cost of living adjustment then in effect and shift
premium, if applicable. An employee on an extended leave of absence (more than
one year in duration) shall be paid no more than one year's vacation entitlement
pursuant to the provisions of this section.
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<PAGE> 32
NOTE: Employees working in an upgraded job at least 50% of their
time the week preceding the vacation will be paid the higher rate of pay for the
vacation.
Section 19.03. The vacation shut down week shall be as designated
below. The employees will be encouraged to make a reasonable effort to take one
week of their vacation by June 30 of each year. This shutdown will be effective
beginning December 1992.
<TABLE>
<CAPTION>
1992
----
<S> <C>
Vacation 12/21/92, 12/22/92, 12/28/92,
12/29/92, 12/30/92
Holidays 12/23/92, 12/24/92, 12/25/92,
12/31/92, 1/l/93
Last Day Worked - 12/18/92 (Not Qualifying Day)
Return - 1/4/93 (Qualifying Day)
</TABLE>
<TABLE>
<CAPTION>
1993
----
<S> <C>
Vacation 12/20/93, 12/21/93, 12/22/93,
12/28/93, 12/29/93
Holidays 12/23/93, 12/24/93, 12/27/93,
12/30/93, 12/31/93
Last Day Worked - 12/17/93 (Not Qualifying Day)
Return - 1/3/94 (Qualifying Day)
</TABLE>
<TABLE>
<CAPTION>
1994
----
<S> <C>
Vacation 12/19/94, 12/20/94, 12/21/94,
12/27/94, 12/28/94
Holidays 12/22/94, 12/23/94, 12/26/94.
12/29/94, 12/30/94
Last Day Worked - 12/16/94 (Not Qualifying Day)
Return - 1/2/95 (Qualifying Day)
</TABLE>
Extra weeks shall be taken at the employee's convenience with mutual
agreement between the employee and the Employer. Employees will give a 30 day
notice of the additional weeks to be used as vacation. In the event there are
more vacation requests than can be granted without affecting production, the
allocation of those who can be granted such vacation will be determined by
seniority.
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<PAGE> 33
An employee who has not taken all vacation to which she/he is
entitled by August 1 of the vacation year shall schedule the remaining vacation
to which she/he is entitled within thirty (30) calendar days following August
1st of the vacation year.
Once an employee's remaining vacation has been scheduled and
approved, said vacation can only be changed thereafter if an opening exists or
is created in the number of vacation openings allocated for a particular
vacation period. In case of a cancellation of an established vacation period,
rescheduling of such cancelled vacation shall be in accordance with the
applicable contract provisions.
Employees shall not be permitted to work during their vacation
period, unless requested by the Employer.
The number of people that shall be granted vacation in any one week
will be according to the following schedule:
<TABLE>
<S> <C>
Amplifier Sub-Assembly & Tube &
Damping Sub Assembly 2
Assemblers (Line) 18
Assembly Material Handler & Truck
Driver 1
Back Electret 1
Cable Line Operator & Artos Operator 2
Cement Center Operator 1
Coil & Diaphragm Area & Specialized
Equipment Operator 6
Charge Machine Operator 2
Electronic Engraver Operator & Tool
Crib Storekeeper 1
Incoming & Fabrication Inspection 2
Lab Tester 2
Line Test Operator 3
Machinist 1
Mend (Relief) Operator 3
Package-Postage Meter Operator 1
Plant Custodian 1
Production Control Expediter &
Scheduler 1
Quality Control Audit Roving Inspector 1
Quality Control Technician 1
</TABLE>
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<PAGE> 34
<TABLE>
<S> <C>
RE 2000 Specialist 1
Stockroom Clerk (will be rotated during
this period to gain exposure to all
jobs) 2
Tool and Die Maker 1
</TABLE>
Section 19.04. Employees whose services are terminated for any cause
shall be paid for any full or fractional vacation to which they became eligible
but did not receive prior to the termination. Vacation checks will be issued the
last work day prior to vacation.
Employees taking two (2) or more vacation weeks together shall
receive separate checks for each week. Employees will receive checks however
they request.
Vacation may be cancelled by notifying the human resource department
by the end of the work day the Friday preceding their vacation or sooner if
possible.
Section 19.05. An employee hired in the final quarter of the year
will be permitted to take his vacation after June 1 of the vacation year, but
will not be paid until the eligibility date is reached. Should the employee who
avails himself of the opportunity hereunder quit or is discharged prior to the
eligibility date, he will not receive the vacation pay to which he would
otherwise have been entitled had he continued in the employ of the Employer to
the eligibility date.
Section 19.06. Should an employee, due to circumstances beyond their
control, have need for an emergency vacation and substantiate their need to
management, the vacation may be granted.
Section 19.07. Employees will be allowed to take one week of his/her
vacation time in one or more day increments. An employee should notify his
supervisor or the company by the day preceding taking of the vacation, if
possible. Vacation pay will be included in normal week's pay check and there
will be no upgraded adjustment from previous week's earnings as normal vacation
is calculated.
An Employee upon request will receive one (1) weeks pay in lieu of
vacation. The employee should give two (2) weeks prior notice to elect this pay
option.
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<PAGE> 35
ARTICLE 20
COST OF LIVING ALLOWANCE
Notation: COLA language will be the same provisions as set forth in
the 1980 contract. This language will not apply during the term of this
Agreement.
Section 20.01. Subject to the limitations set forth in Section 20.02
of this Article, hourly rates of pay shall be adjusted one (1) cent for each
0.4 (4/10) point change in the Urban Wage Earners & Clerical Workers Index
(1967=100). This plan of adjustment shall be shown as a Cost of Living
Allowance.
The Cost of Living Allowance shall be considered as part of the
hourly wage rate for all wages and benefits provided under this Agreement.
A drop in the Cost of Living index will not result in reductions in
wage rates below those rates provided for in the wage schedules attached to and
made a part of this Agreement.
The Cost of Living Allowance shall be computed and applied quarterly
and made effective the first day of the first pay period after the start of the
calendar quarters as out lined below:
<TABLE>
<S> <C>
lst Month of Quarter for which
Month of Index Allowance is Applicable
May October
August January
November April
February July
</TABLE>
The base amount shall be the index figure of May 1992 and the first
allowance (if any) shall be made in October 1992.
Section 20.02. The limitation on cost of living adjustments shall be
computed in three separate annual installments, without pyramiding or carry over
of any fluctuations in the Urban Wage Earners & Clerical Workers Index as
follows:
(A) October 1, 1992 to September 30, 1993
(B) October 1, 1993 to September 30, 1994
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<PAGE> 36
(C) October 1, 1994 to September 30, 1995
The total of such adjustments for the one-year period between October
1, 1992 and September 30, 1993 due to fluctuations in the CPI during the same
period of time, shall not exceed eighteen (18) cents per hour. The total of such
adjustments for the one-year period between October 1, 1993 and September 30,
1994, due to fluctuations in the CPI during the same period of time shall not
exceed eighteen (18) cents per hour. The total of such adjustments for the
one-year period between October 1, 1994, and September 30, 1995, due to
fluctuations in the CPI during the same period of time shall not exceed
eighteen (18) cents per hour.
The total of such adjustments for each one (1) year period as shown
above (A, B, C) will become permanently affixed to and part of the employees
base rates on September 30, 1993, September 30, 1994 and September 30, 1995.
ARTICLE 21
INSURANCE
The following insurance benefit plan for eligible employees will be
effective August 1, 1992, and will be continued for the duration of the
Agreement. (Note: Prior to 8-1-92, coverage will continue as per prior labor
agreement.)
BLUE CROSS/BLUE SHIELD
TENNESSEE PREFERRED PROVIDER NETWORK
Employees are encouraged to stay within the network in order to
receive higher benefits. All insurance coverage will remain same as previous
coverage except as noted.
Sevierville Comprehensive Medical Plan
Deductibles/eco-payments/maximum stop-loss.
<TABLE>
<CAPTION>
IN NETWORK NON-NETWORK
<S> <C> <C>
Individual Deductible $150 $ 300
Family deductible $450 $ 900
Individual Stop-Loss (includes deductible) $400 $1,200
Family Stop-Loss (includes deductible) $800 $2,400
Co-payment required (after meeting de-
ductibles) for outpatient medical treat-
ments and services 20% 40%
</TABLE>
33
<PAGE> 37
<TABLE>
<S> <C> <C>
Co-payment required (after meeting de-
ductibles) for medical treatments and
services while admitted to the hospital 10% 30%
Plan pays 90% semi-private room and board -
Intensive care - charges after plan
deductible is met (Out of Network - 70%)
</TABLE>
Exceptions to the above are:
PLAN PAYS: 90% charges radiology and pathology (x-ray and lab
inpatient and outpatient) after plan deductible is met. (Out of Network - 70%
UCR)
PLAN PAYS: 90% charges for outpatient surgery and anesthesia (no PAC
required) after plan deductible is met. (Out of Network - 70% UCR)
PLAN PAYS: 100% charges for pre-admission testing/diagnostic x-rays.
(Out of Network - 80% UCR)
PLAN PAYS: 100% charges for Second Surgical opinion. (All second
opinions are voluntary) (Out of Network - 80% UCR)
PLAN PAYS: 100% charges for home health care (limit 60 days per
calendar year and extended care facility limited to 100 days per calendar year.
(Out of Network - 80%)
PLAN PAYS: 80% Chiropractic Care. (Out of Network 60% UCR)
PLAN PAYS: 80% Newborn Nursery. (Out of Network 60%)
PLAN PAYS: 100% Mammography and Pap Test up to $110.00 per year for
Lab and Radiology. (After deductible is met, balance of charges will be paid at
90%)
$3 Prescription Drug Deductible
$6 Out of Network Prescription Drug
50/50 CO-PAYMENT MENTAL ILLNESS/DRUG TREATMENT/ALCOHOL ISM THERAPY.
After you meet the plan deductible, the plan pays 50% of the charges for
outpatient mental illness, drug treatment and alcoholism therapy charges (up to
$10,000 maximum lifetime). This 50% co-payment does not apply to your stop-loss
maximum.
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<PAGE> 38
PREADMISSION CERTIFICATION AND CONTINUED STAY REVIEW. Is
required for hospital admissions. Employees are allowed 48 hours to give notice
after be ing admitted in emergency situations. Failure to obtain PAC/CSR will
result in $100 additional deductible and 30% copayment.
The above plan will initially be placed with Blue Cross Blue Shield
of Tennessee: However, the Employer reserves the right to provide similar
coverage through a health insurance carrier of its choice.
If another carrier is selected, the Union will be notified and it is
agreed that if a change is made there will not be less coverage than with the
present carrier.
SICKNESS AND ACCIDENT
Weekly sickness and accident benefits (first day accident or
hospitalization, eighth day illness) will be provided for each eligible employee
in the amount of one hundred forty ($140.00) per week the first (1) year, one
hundred fifty ($150.00) per week the second (2) year, and one hundred sixty
($160.00) per week the third (3) year for a maximum of twenty-six (26) weeks.
LIFE INSURANCE
ACCIDENTAL DEATH & DISMEMBERMENT
<TABLE>
<S> <C> <C>
June 1, 1992 1st year $16,000
June 1, 1993 2nd year $17,000
June 1, 1994 3rd year $18,000
</TABLE>
NOTE: The Life Insurance amount at age 70 will be $2,500, if still
working.
Effective September 1, 1992 a Supplemental Life Insurance Plan will
be offered.
The life, accidental death and dismemberment portions of the
insurance plan will initially be placed with the UNUM Insurance Company; the
weekly sickness and accident portion of the insurance plan will initially be
placed with the NAA. However, the Employer reserves the right to provide
similar coverage through an insurance company of its choice. If another carrier
is selected, the Union will be notified and it is agreed that if a change is
made there will not be less coverage than with the present carrier.
Employees will become eligible for the above insurance when they
have completed the probationary period as provided in Article 11 of this
Agreement.
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<PAGE> 39
The Employer shall bear the full cost of the employee's portion. The
employee shall bear the cost of the dependent's coverage as follows:
<TABLE>
<S> <C>
One (1) Dependent: $28.00 per month
Full Family (2 or more Dependents): $59.00 per month
</TABLE>
The above costs shall be frozen for the duration of the agreement.
ARTICLE 22
HOLIDAYS
Section 22.01. The holidays recognized under this Agreement shall be
as follows:
<TABLE>
<S> <C>
New Year's Day Christmas Day
Good Friday Christmas Eve Day
Memorial Day Day after Thanksgiving
Independence Day Day after Christmas
Labor Day New Year's Eve Day
Thanksgiving Day Employee's Birthday
</TABLE>
Section 22.02. If the holiday falls on a Saturday, Friday will be
observed as a holiday. If the holiday falls on a Sunday, Monday will be observed
as the holiday.
Section 22.03. All employees shall be paid eight (8) hours regular
time for holidays not worked, providing the employee works the last four (4)
hours of the last day the factory works, prior to the holiday and works the
first four (4) hours the first day the factory works after the holiday. A
maximum of one (1) hour of tardiness is allowed on the work day following the
holiday.
Any employee working a holiday shall receive double time plus
regular holiday pay for all such time worked.
Section 22.04. Should an employee be laid off or sustain a lost time
factory in jury, be on leave for union business, or on leave, or absent for
extenuating circumstances and can provide factual substantiation for such
absence, or be hospitalized, or can provide medical substantiation indicating
the necessity for the absence of the employee or the necessity for being with a
member of their immediate family, such that he or she is unable to meet the
above requirements (day before and day after), he shall be eligible to receive
36
<PAGE> 40
holiday pay if he or she is entitled to pay for the time worked in the week
prior to or during the week in which the holiday falls.
In the case of an employee being absent during the qualifying hours
for holiday pay, the Company will pay in the following circumstances:
a) Employee serving as a juror
b) Employee subpoenaed to court. Must furnish a copy of the subpoena
to the Personnel Department.
c) Employee directly involved in a court case submitting proper
evidence as required by the Personnel Department. (Example - a statement
saying that it was necessary for employee to be present at such a time.)
d) Employee attending fellow employee's funeral.
The company will not pay for an employee being absent during
qualifying hours for a doctors appointment, a dentist appointment, etc. The
above reasons for not receiving pay is not an inclusive list.
Section 22.05. Should a holiday fall within an employee's vacation
period or a bereavement leave, such vacation period or leave shall be extended
by the holiday's fail ing within such period. If a holiday falls within an
employee's scheduled vacation week then that vacation week may be extended prior
to or following the vacation week by the holiday's falling within such period.
Section 22.06. Employee working in an upgraded job at least 50% of
their time during the week in which the holiday falls will be paid the higher
rate of pay for the holiday or an employee working in an upgraded job the day
before or the day after a holiday will be paid the higher rate of pay for the
holiday.
ARTICLE 23
PENSION
The Pension Plan shall meet all requirements of ERISA, and shall
become effective with the new Agreement and run concurrently therewith. The
terms of the plan are stated in the Pension Plan for the Sevierville plant,
which shall be called, "The Electro-
37
<PAGE> 41
Voice, Inc., Tennessee Hourly Employees Retirement Plan, dated March 1, 1977."
The principle features of the plan are as follows:
23.01. The monthly pension benefit per year of service:
Effective 6/01/92 - $12.50 per month per year of service
Effective 6/01/93 - $13.50 per month per year of service
Effective 6/01/94 - $14.50 per month per year of service
23.02. Normal retirement at age 65.
23.03. Early retirement at age 55 with actuarially reduced benefit
for each month the employee is under 65 years of age.
23.04. Permanent and total disability at any age with 10 or more
years of accredited service. If otherwise eligible, shall receive a
monthly benefit not reduced for early retirement.
23.05. Survivor option as actuarially established.
23.06. Vesting with 5 years of accredited service.
Accredited service prior to July 1, 1974, shall be based upon
seniority as defined elsewhere herein.
Accredited service following July 1, 1974, shall be based on hours
worked as follows:
(A) Any employee in the bargaining unit who works one thousand
(1000) hours during the course of a calendar year shall be credited with a
full year of accredited service for pension purposes.
(B) Any employee in the bargaining unit who works less than one
thousand (1000) hours during the course of a calendar year shall be
credited with one-tenth (1/10) year of accredited service for each one
hundred (100) hours worked during the calendar year in question.
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<PAGE> 42
NOTE: Employees shall receive credit for all time spent in the
employment with the employer for pension purposes for all active employees as of
6-1-92.
ARTICLE 24
GENERAL
Section 24.01. All references to employees in this Agreement include
both sexes. Wherever the male gender is used it shall be construed to mean both
male and female employees.
Section 24.02. Each employee covered by this Agreement is
responsible at all times for having his correct address and phone number on file
at the Employer's personnel office, by completing a W-4 form. All notices to
employees to be given under the provisions of this Agreement shall be deemed to
have been properly given if mailed to the last address on file or if made by
telephone to the last number on file.
Section 24.03. The union agrees that there shall be no solicitation
of member ship, dues or other fees on the Employer's time and that there shall
be no Union activity during working hours (exclusive of breaks or lunch) on
Employer's property which shall in anyway interfere with the work of the
employees and the operation of the plant. Violators of this section shall be
subject to disciplinary action.
Section 24.04. If any employee or group of employees, feels that any
order of a supervisor is unreasonable or unjust, the employee or group of
employees affected will comply but may, if they choose, institute a grievance
over the matter.
Section 24.05. Should any portion of this Agreement be determined
through appropriate legal processes to be contrary to any State or Federal Law
that portion so found will be regarded as invalid and the balance of that
article and all other articles of this contract will continue in full force and
effect. The Union and the Employer shall have the right to negotiate the invalid
portion.
Section 24.06. Official notice of hires, rehires, bids, transfers,
rate changes, layoffs, and terminations will be made available to the Union
without undue delay. In the event of a layoff, all affected employees and the
Union will be given one (1) week advance notice of such lay-off, when possible.
Section 24.07. The employer agrees to pay the cost of printing a
sufficient sup ply of copies of this contract to make them available to all
employees.
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<PAGE> 43
Section 24.08. INVENTORY. Selection of individuals to work inventory
will be by seniority from those signing the posted notice. Labor grade I
employees will be as signed first by seniority to the line/area normally worked.
If more labor grade I people than are needed on the line sign the posting, the
most senior will be utilized first and so on down the line until the requisite
number of people is reached. Additional junior labor grade I employees will be
assigned to other lines, by seniority, prior to any upgraded employees being
assigned to the lines. Upgraded employees will be assigned by seniority, to fill
any vacancies remaining after labor grade I employees have been assigned.
Section 24.09. The Employer will provide bulletin boards to be
defined in the following manner:
(A) UNION BULLETIN BOARD. The Union agrees that posted notices shall
be non controversial and copies will be furnished to the Personnel
Department prior to posting. The Union shall be furnished a key to such
board and a designated Union official shall be permitted to post such
notices. The Union bulletin board will be kept behind glass.
(B) EMPLOYEE'S BULLETIN BOARD. This board will be used exclusively
for employees in reference to advertising, swapping, trading or general
information. The Employer and the Union will be strictly prohibited from
using this board for their official matters or matters of controversy. The
employee board will remain open where it will be available to any
employees.
(C) PHONE CALL BULLETIN BOARD. Telephone calls regarding medical or
legal appointments will be given to employees without undue delay. Other
telephone calls of non-emergency nature will continue to be posted on the
employee phone call bulletin board and emergency calls will continue to be
given to the employee immediately. Calls concerning an employee's child
at school from a school official, clinic worker, or nurse will be given to
the employee immediately. Non-emergency calls will be posted at 9:50 a.m.,
11:50 a.m., 2:20 p.m. and 3:30 p.m. Any non-emergency messages which come
in after 3:30 p.m. will be given to the proper supervisor for delivery.
Should an employee receive a phone call relating to a death, the employee
will be taken to the Personnel Office to receive the phone call. Location
of the phone call bulletin board will continue to remain at the First Aid
Room entrance.
Section 24.10. EMPLOYEES CONCESSION FUND. The Employee Concession
Fund shall be administered by a committee of three (3) Bargaining Unit employees
appointed by the Union and three (3) members chosen by Management to represent
salaried non-exempt and Management employees. The committee shall select its
Chairman.
40
<PAGE> 44
Bargaining Unit employees shall attend meetings at no loss of pay up to a
maximum of twelve (12) hours per year. The committee shall control the fund and
its uses and provide for receiving and paying bills.
Section 24.11. WEEKLY PAY CHECKS. All employees covered by this
Agreement will be paid prior to their lunchtime on Friday of each week, provided
it does not fall on a Holiday, in which event the employees will be paid prior
to lunch time on the last work day preceding the Holiday. Employees working the
afternoon shift will be paid prior to their lunch time on Thursday.
Section 24.12. INDUSTRIAL THRIFT PLAN. The Plan currently in effect
will remain the same until otherwise agreed upon and/or changed by the Union and
the Employer.
Section 24.13. SUPERVISORS WORKING. No employee of the Employer not
within the Bargaining Unit covered by this Agreement shall perform any work of
the Bargaining Unit at any time; except in extreme emergencies or Acts of God,
provided, however, that supervisors or other management personnel may be
utilized for the purpose of instruction, of conducting a pilot run or for the
purposes of determining the cause of a high failure or reject rate. The Union
will be given advance notice of the occurrence of any of the above (except
instruction).
Section 24.14. TEMPORARY TRANSFERS. Transferring employees in ac-
cordance with lines assigned to and/or work area. Acceptable reasons for
transfer:
a) Lack of work
b) Lack of parts to finish the order
c) To perform another job, although on another line or work area,
which has been deemed by the Employer to be more urgent than the job the
employee is presently performing.
d) Employees may be transferred to fill in for an employee who is
absent or on leave.
Employees transferred for the above reasons will not, under normal
circumstances have other employees assigned to the job from which they
have been transferred.
41
<PAGE> 45
The employees thus transferred will be returned to their normal work
area/or job as soon as practical, normally within fifteen (15) working
days, except the time limit may be extended with the employee's consent.
The company will attempt to equalize the out-of-job transfer among
the group of affected employees.
If a line closes down and later reopens, employees will be brought
back to the line by: 1) Job Started, 2) Seniority.
PERMANENT TRANSFERS:
e) The permanent transfer of employees from one work center to
another will be by seniority beginning with the least senior. If an
opening occurs on a line from which an employee has been permanently
transferred, he shall be given an opportunity to return before other
employees are transferred to that line.
For the purposes of this Article as well as Article 9, work center
shall be defined as any area covered by one supervisor.
f) If an opening occurs on a line and all provisions of Article 24,
Section 24.14 have been complied with, a bid sheet will be posted for one
day stating the line on which the opening(s) exist(s). Employees will be
chosen by seniority from the employees who sign the bid sheet.
The Company will also apply Section 24.14 to premium classifications
permanently assigned to an assembly line.
Complete line transfer: If an entire line is being relocated to
another area in the plant which is vacant, the affected employees will
first be offered the jobs. The employee accepting the transfer will give
up their return rights to the line vacated. The remaining job openings
will be bid as per 24.14 of this Agreement.
Section 24.15. a) Any employee who has successfully bid and holds a
part time job shall be given first opportunity to a full time opening occurring
on that job. He will be offered the full time opening without further bidding.
If two or more employees hold part time bid rights, the most senior employee
will be offered the job. If the employee de clines the full time status, he will
have relinquished all rights to that job and shall not be placed on that job
full time or part time unless he bids again through the bid procedure. A bid
must be posted in the event the part time employee declines the opening.
42
<PAGE> 46
NOTE: Employees who hold part time job rights will be used by
seniority to re place absent employees in the classification.
b) When an employee is cutback from a job classification and bumps
into a lower or lateral premium job, and the cutback job becomes available on a
permanent basis, the employee shall do one of the following two things:
1) Return to the job from which the employee was cutback.
2) If the employee refuses to return to the cutback job
classification, the employee withdraws all rights to that job and is
assigned to the lowest labor grade provided the person has sufficient
seniority. The only way the employee could permanently return to the
premium job would be through the bid procedure.
c) Part time employees shall accumulate job seniority for hours they
are asked to perform on the job. Such accumulated job seniority shall apply to
the rate of pay provided for in Article 25.
d) No employee may hold more than one (1) part time job
concurrently. An employee holding one part time job and successfully bidding on
an additional part time job must relinquish his rights to the part time job to
which he holds rights.
Section 24.16. An employee desiring to leave the plant during his
break period for personal reasons should punch out his clock card when leaving
and punch back in upon his return. If the leaving and returning are within the
scheduled break time, the employee will not be docked.
If the employee punches out prior to the start of the scheduled
break period and/or punches in after the end of the break period, he shall not
be compensated for such time irrespective of any reason for leaving early or
returning late.
NOTE: Employees not leaving company premises do not have to clock
out for the break periods.
Section 24.17. The Employer will give consideration to such factors
as fatigue and strain in specific jobs and will endeavor to make necessary
adjustments in its manufacturing processes to relieve such fatigue and strain.
43
<PAGE> 47
Section 24.18. Income tax will be withheld from S & A checks
providing the employee submits a W4S for each period of disability and the
Company's administrator of such benefits is able to withhold the taxes.
Section 24.19. Company will furnish health, life and pension
booklets to each employee. The Company will also furnish each employee updated
pension credited service time annually.
Section 24.20. Union dues, insurance premiums and other authorized
deductions will be deducted from employees vacation checks.
ARTICLE 25
WAGE PROGRESSIONS
Wage Progressions applicable during the term of this Agreement are
included in the attached schedules, Appendix B, C, D, E, F and G.
Starting rate only applies to newly hired employees. Employees
bidding from a lower labor grade into a higher labor grade would use the three
(3) months rate as their starting rate. An employee previously attaining the top
rate in any labor grade shall retain the top rate in any lateral bid. Should an
employee who has attained the top rate of a labor grade enter a lower labor
grade, he shall receive top rate in that labor grade. Employees who are in the
start or the three (3) months range shall be placed in the appropriate step of
the labor grade into which he is bumped.
Effective June 29, 1983, assembly operators will be in Labor Grade
1.
NEW HIRE RATE. $2.00 per hour reduction in starting rate for new
hires. $1.00 per hour recovery at the end of the first year and $1.00 per hour
recovery at the end of the second year. All contractual wage progressions and
increases will apply.
44
<PAGE> 48
APPENDIX A
The following premium jobs require a period of time to be qualified
as provided for in Article 12 of this Agreement effective June 1, 1992:
<TABLE>
<CAPTION>
Job Title Labor Grade Time Required
- ------------------------------------------------------------ ----------- ---------------
<S> <C> <C>
Assembly Material II 5 working days
Amplifier Sub-Assembly II 20 working days
Cable Line Operator II 20 working days
Charge Machine Operator II 20 working days
Coil & Diaphragm Area II 20 working days
Drill Line Operator II 10 working days
Packager-Postage Meter Operator II 5 working days
Salvage II 5 working days
Tube and Damping Sub Assembly II 30 working days
Back Electret III 30 working days
Mend (Relief) Operator III 10 working days
Artos Operator III 20 working days
Cement Center Operator III 10 working days
Electronic Engraver III 10 working days
Line Test Operator III 20 working days
Mini-Jector Operator III 10 working days
Production Control Clerk III 20 working days
Punch Press-Trim Press Operator III 10 working days
Plant Custodian III 5 working days
Quality Control Audit Roving Inspector III 20 working days
</TABLE>
45
<PAGE> 49
<TABLE>
<CAPTION>
Job Title Labor Grade Time Required
- ------------------------------------------------------------ ----------- ---------------
<S> <C> <C>
Stock Room Clerk (will be rotated during this period to gain III 30 working days
exposure to all jobs)
Tool Crib Storekeeper III 10 working days
Truck Driver III 5 working days
Incoming & Fab. Inspector IV 60 working days
Lab Tester IV 60 working days
Lathe Set-Up Operator IV 10 working days
Polisher V 10 working days
Production Control Expediter V 20 working days
RE 2000 Specialist V 60 working days
Specialized Equipment Operator V 60 working days
Test Set-Up V 60 working days
Production Control Scheduler VI 60 working days
Quality Control Technician VIII *
Machinist X *
Tool & Die Maker XI *
</TABLE>
- ----------
*Non-Biddable jobs
46
<PAGE> 50
APPENDIX B
Effective: June 1, 1992
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 8.65 8.75 8.85 --
II 8.75 8.90 8.97 --
III 8.91 9.03 9.12 --
IV 9.11 9.25 9.37 --
V 9.25 9.42 -- 9.67
VI 9.61 9.91 -- 10.08
VII 9.76 9.98 -- 10.21
VIII 9.98 10.26 -- 10.46
IX 10.26 10.51 -- 10.61
X 10.96 11.11 -- 11.31
XI 11.57 11.82 -- 12.07
</TABLE>
The above table reflects an across-the-board increase of twenty-five cents
($.25).
47
<PAGE> 51
APPENDIX C
Effective: November 30, 1992
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 8.85 8.95 9.05 --
II 8.95 9.10 9.17 --
III 9.11 9.23 9.32 --
IV 9.31 9.45 9.57 --
V 9.45 9.62 -- 9.87
VI 9.81 10.11 -- 10.28
VII 9.96 10.18 -- 10.41
VIII 10.18 10.46 -- 10.66
IX 10.46 10.71 -- 10.81
X 11.16 11.31 -- 11.51
XI 11.77 12.02 -- 12.27
</TABLE>
The above table reflects an across-the-board increase of twenty cents ($.20).
48
<PAGE> 52
APPENDIX D
Effective: May 31, 1993
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 9.10 9.20 9.30 --
II 9.20 9.35 9.42 --
III 9.36 9.48 9.57 --
IV 9.56 9.70 9.82 --
V 9.70 9.87 -- 10.12
VI 10.06 10.36 -- 10.53
VII 10.21 10.43 -- 10.66
VIII 10.43 10.71 -- 10.91
IX 10.71 10.96 -- 11.06
X 11.41 11.56 -- 11.76
XI 12.02 12.27 -- 12.52
</TABLE>
The above table reflects an across-the-board increase of twenty-five cents
($.25).
49
<PAGE> 53
APPENDIX E
Effective: November 29, 1993
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 9.30 9.40 9.50 --
II 9.40 9.55 9.62 --
III 9.56 9.68 9.77 --
IV 9.76 9.90 10.02 --
V 9.90 10.07 -- 10.32
VI 10.26 10.56 -- 10.73
VII 10.41 10.63 -- 10.86
VIII 10.63 10.91 -- 11.11
IX 10.91 11.16 -- 11.26
X 11.61 11.76 -- 11.96
XI 12.22 12.47 -- 12.72
</TABLE>
The above table reflects an across-the-board increase of twenty cents ($.20).
50
<PAGE> 54
APPENDIX F
Effective: May 30, 1994
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 9.55 9.65 9.75 --
II 9.65 9.80 9.87 --
III 9.81 9.93 10.02 --
IV 10.01 10.15 10.27 --
V 10.15 10.32 -- 10.57
VI 10.51 10.81 -- 10.98
VII 10.66 10.88 -- 11.11
VIII 10.88 11.16 -- 11.36
IX 11.16 11.41 -- 11.51
X 11.86 12.01 -- 12.21
XI 12.47 12.72 -- 12.97
</TABLE>
The above table reflects an across-the-board increase of twenty-five cents
($.25).
51
<PAGE> 55
APPENDIX G
Effective: November 28, 1994
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 9.75 9.85 9.95 --
II 9.85 10.00 10.07 --
III 10.01 10.13 10.22 --
IV 10.21 10.35 10.47 --
V 10.35 10.52 -- 10.77
VI 10.71 11.01 -- 11.18
VII 10.86 11.08 -- 11.31
VIII 11.08 11.36 -- 11.56
IX 11.36 11.61 -- 11.71
X 12.06 12.21 -- 12.41
XI 12.67 12.92 -- 13.17
</TABLE>
The above table reflects an across-the-board increase of twenty cents ($.20).
52
<PAGE> 56
APPENDIX B
NEW HIRES RATES 1ST YEAR
Effective: June 1, 1992
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 6.65 6.75 6.85 --
II 6.75 6.90 6.97 --
III 6.91 7.03 7.12 --
IV 7.11 7.25 7.37 --
V 7.25 7.42 -- 7.67
VI 7.61 7.91 -- 8.08
VII 7.76 7.98 -- 8.21
VIII 7.98 8.26 -- 8.46
IX 8.26 8.51 -- 8.61
X 8.96 9.11 -- 9.31
XI 9.57 9.82 -- 10.07
</TABLE>
53
<PAGE> 57
APPENDIX B
NEW HIRES RATES 2ND YEAR
Effective: June 1, 1992
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 7.65 7.75 7.85 --
II 7.75 7.90 7.97 --
III 7.91 8.03 8.12 --
IV 8.11 8.25 8.37 --
V 8.25 8.42 -- 8.67
VI 8.61 8.91 -- 9.08
VII 8.76 8.98 -- 9.21
VIII 8.98 9.26 -- 9.46
IX 9.26 9.51 -- 9.61
X 9.96 10.11 -- 10.31
XI 10.57 10.82 -- 11.07
</TABLE>
54
<PAGE> 58
APPENDIX C
NEW HIRES RATES 1ST YEAR
Effective: November 30, 1992
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 6.85 6.95 7.05 --
II 6.95 7.10 7.17 --
III 7.11 7.23 7.32 --
IV 7.31 7.45 7.57 --
V 7.45 7.62 -- 7.87
VI 7.81 8.11 -- 8.28
VII 7.96 8.18 -- 8.41
VIII 8.18 8.46 -- 8.66
IX 8.46 8.71 -- 8.81
X 9.16 9.31 -- 9.51
XI 9.77 10.02 -- 10.27
</TABLE>
55
<PAGE> 59
APPENDIX C
NEW HIRES RATES 2ND YEAR
Effective: November 30, 1992
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 7.85 7.95 8.05 --
II 7.95 8.10 8.17 --
III 8.11 8.23 8.32 --
IV 8.31 8.45 8.57 --
V 8.45 8.62 -- 8.87
VI 8.81 9.11 -- 9.28
VII 8.96 9.18 -- 9.41
VIII 9.18 9.46 -- 9.66
IX 9.46 9.71 -- 9.81
X 10.16 10.31 -- 10.51
XI 10.77 11.02 -- 11.27
</TABLE>
56
<PAGE> 60
APPENDIX D
NEW HIRES RATES 1ST YEAR
Effective: May 31, 1993
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 7.10 7.20 7.30 --
II 7.20 7.35 7.42 --
III 7.36 7.48 7.57 --
IV 7.56 7.70 7.82 --
V 7.70 7.87 -- 8.12
VI 8.06 8.36 -- 8.53
VII 8.21 8.43 -- 8.66
VIII 8.43 8.71 -- 8.91
IX 8.71 8.96 -- 9.06
X 9.41 9.56 -- 9.76
XI 10.02 10.27 -- 10.52
</TABLE>
57
<PAGE> 61
APPENDIX D
NEW HIRES RATES 2ND YEAR
Effective: May 31, 1993
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 8.10 8.20 8.30 --
II 8.20 8.35 8.42 --
III 8.36 8.48 8.57 --
IV 8.56 8.70 8.82 --
V 8.70 8.87 -- 9.12
VI 9.06 9.36 -- 9.53
VII 9.21 9.43 -- 9.66
VIII 9.43 9.71 -- 9.91
IX 9.71 9.96 -- 10.06
X 10.41 10.56 -- 10.76
XI 11.02 11.27 -- 11.52
</TABLE>
58
<PAGE> 62
APPENDIX E
NEW HIRES RATES 1ST YEAR
Effective: November 29, 1993
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 7.30 7.40 7.50 --
II 7.40 7.55 7.62 --
III 7.56 7.68 7.77 --
IV 7.76 7.90 8.02 --
V 7.90 8.07 -- 8.32
VI 8.26 8.56 -- 8.73
VII 8.41 8.63 -- 8.86
VIII 8.63 8.91 -- 9.11
IX 8.91 9.16 -- 9.26
X 9.61 9.76 -- 9.96
XI 10.22 10.47 -- 10.72
</TABLE>
59
<PAGE> 63
APPENDIX E
NEW HIRES RATES 2ND YEAR
Effective: November 29, 1993
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 8.30 8.40 8.50 --
II 8.40 8.55 8.62 --
III 8.56 8.68 8.77 --
IV 8.76 8.90 9.02 --
V 8.90 9.07 -- 9.32
VI 9.26 9.56 -- 9.73
VII 9.41 9.63 -- 9.86
VIII 9.63 9.91 -- 10.11
IX 9.91 10.16 -- 10.26
X 10.61 10.76 -- 10.96
XI 11.22 11.47 -- 11.72
</TABLE>
60
<PAGE> 64
APPENDIX F
NEW HIRES RATES 1ST YEAR
Effective: May 30, 1994
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 7.55 7.65 7.75 --
II 7.65 7.80 7.87 --
III 7.81 7.93 8.02 --
IV 8.01 8.15 8.27 --
V 8.15 8.32 -- 8.57
VI 8.51 8.81 -- 8.98
VII 8.66 8.88 -- 9.11
VIII 8.88 9.16 -- 9.36
IX 9.16 9.41 -- 9.51
X 9.86 10.01 -- 10.21
XI 10.47 10.72 -- 10.97
</TABLE>
61
<PAGE> 65
APPENDIX F
NEW HIRES RATES 2ND YEAR
Effective: May 30, 1994
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 8.55 8.65 8.75 --
II 8.65 8.80 8.87 --
III 8.81 8.93 9.02 --
IV 9.01 9.15 9.27 --
V 9.15 9.32 -- 9.57
VI 9.51 9.81 -- 9.98
VII 9.66 9.88 -- 10.11
VIII 9.88 10.16 -- 10.36
IX 10.16 10.41 -- 10.51
X 10.86 11.01 -- 11.21
XI 11.47 11.72 -- 11.97
</TABLE>
62
<PAGE> 66
APPENDIX G
NEW HIRES RATES 1ST YEAR
Effective: November 28, 1994
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 7.75 7.85 7.95 --
II 7.85 8.00 8.07 --
III 8.01 8.13 8.22 --
IV 8.21 8.35 8.47 --
V 8.35 8.52 -- 8.77
VI 8.71 9.01 -- 9.18
VII 8.86 9.08 -- 9.31
VIII 9.08 9.36 -- 9.56
IX 9.36 9.61 -- 9.71
X 10.06 10.21 -- 10.41
XI 10.67 10.92 -- 11.17
</TABLE>
63
<PAGE> 67
APPENDIX G
NEW HIRES RATES 2ND YEAR
Effective: November 28, 1994
<TABLE>
<CAPTION>
Labor Grade Start 3 mos. 6 mos. 9 mos.
----------- ----- ------ ------ ------
<S> <C> <C> <C> <C>
I 8.75 8.85 8.95 --
II 8.85 9.00 9.07 --
III 9.01 9.13 9.22 --
IV 9.21 9.35 9.47 --
V 9.35 9.52 -- 9.77
VI 9.71 10.01 -- 10.18
VII 9.86 10.08 -- 10.31
VIII 10.08 10.36 -- 10.56
IX 10.36 10.61 -- 10.71
X 11.06 11.21 -- 11.41
XI 11.67 11.92 -- 12.17
</TABLE>
64
<PAGE> 68
ARTICLE 26
DURATION OF AGREEMENT
Section 26.01. This Agreement shall become effective as of 12:01 a.m.
June 1, 1992, and shall remain in force and be effective until 6:00 p.m., July
10, 1995. It shall be automatically renewed from year to year hereafter, unless
notice of termination is given by either party by certified mail at least 60
days prior to 6:00 p.m. July 10, 1995, or the next annual Expiration date,
whichever is applicable.
Section 26.02. ln the event that either the Union or the Employer
shall exercise its right to terminate, conferences shall be promptly commenced
for the purpose of negotiating and executing an extension, renewal or
modification of this Agreement.
In witness whereof the parties hereto have executed this Agreement
the day and year first written above.
SIGNED FOR LOCAL 663, INTERNATIONAL
UNION OF ELECTRONIC, ELECTRICAL,
SALARIED, MACHINE AND FURNITURE
WORKERS (AFL-CIO):
________________________________________
Judy Grayson, President
________________________________________
Barbara Whetsell, Chief Steward
________________________________________
Mary Lee, Recording Secretary
________________________________________
Beulah Allen, Committee Person
________________________________________
Joan Riggs, Committee Person
65
<PAGE> 69
____________________________________________
Fred T. Prater, International Representative
SIGNED FOR ELECTRO-VOICE, INC., SEVIERVILLE,
TENNESSEE:
____________________________________________
Jay Melton, Plant Manager
____________________________________________
Faye Brooks, Human Resource Manager
____________________________________________
Roger Gaines, V.P. Manufacturing
____________________________________________
Janice Whaley, Assistant Human Resource Manager
66
<PAGE> 1
EXHIBIT 10(j)
AGREEMENT
BETWEEN
ELECTRO-VOICE, INC.
AND
LOCAL 900
INTERNATIONAL UNION OF
ELECTRONIC, ELECTRICAL, SALARIED,
MACHINE AND FURNITURE WORKERS
AFL-CIO
1993-1996
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE 1 Union Recognition...................................................1
ARTICLE 2 Union Shop..........................................................2
ARTICLE 3 Hours and Overtime..................................................2
ARTICLE 4 Holidays............................................................8
ARTICLE 5 Seniority...........................................................9
ARTICLE 6 Discipline and Discharge...........................................14
ARTICLE 7 Leave of Absence...................................................15
ARTICLE 8 Military Service...................................................19
ARTICLE 9 Inter-Plant Transfer...............................................20
ARTICLE 9A Procedure for Using Extra Help
On Premium Jobs....................................................20
ARTICLE 10 Vacations..........................................................22
ARTICLE 11 Bulletin Boards....................................................26
ARTICLE 12 Union Representation...............................................26
ARTICLE 13 Rest Periods.......................................................27
ARTICLE 14 No Discrimination..................................................28
ARTICLE 15 Supervisors........................................................28
ARTICLE 16 Seniority - Out of Bargaining Unit.................................28
ARTICLE 17 Working Conditions.................................................29
ARTICLE 18 Time Study.........................................................29
ARTICLE 19 Payment for Jury Duty and
Voting on Election Day.............................................29
ARTICLE 20 Notice of Proposed Layoffs.........................................30
ARTICLE 21 Information to Union...............................................30
ARTICLE 22 Job Evaluation.....................................................31
ARTICLE 23 Pension and Severance..............................................31
ARTICLE 24 Group Insurance....................................................32
ARTICLE 25 Posting of Agreement...............................................34
ARTICLE 26 Grievances.........................................................34
ARTICLE 27 Arbitration........................................................35
ARTICLE 28 Tool Room Seniority and Qualifications.............................36
ARTICLE 28AMaintenance Department Seniority...................................37
ARTICLE 29 Premium Job-Transfers..............................................38
ARTICLE 30 Premium Job Layoffs and Recall.....................................38
i
<PAGE> 3
Page
ARTICLE 31 Shift Bumping......................................................39
ARTICLE 32 Cost of Living.....................................................39
ARTICLE 33 Job Posting........................................................39
ARTICLE 34 General............................................................42
ARTICLE 35 Compensatory Leave for Sickness or Emergencies.....................44
ARTICLE 36 Hourly Rates.......................................................45
ARTICLE 37 Job Descriptions...................................................50
ARTICLE 38 Plant Closure......................................................72
ARTICLE 39 Duration of Agreement..............................................72
ii
<PAGE> 4
AGREEMENT
Agreement entered into this 18th day of March, 1993 between
Electro-Voice, Inc., Buchanan, Michigan, hereinafter called the "Employer" and
Local 900 International Union of Electronic, Electrical, Salaried, Machine and
Furniture Workers, AFL-CIO, herein called the "Union."
The parties of this agreement recognize that without mutual
understanding, harmony and cooperation among employees, and between employees
and employer, it is impossible to operate a business with the economy and
efficiency indispensable to its very existence. We recognize that it is mutually
advantageous to work together to maintain high standards of living, safe,
healthful working conditions, and promote economic and efficient operations in
order that our service to the buyer will enable the business of the Company to
prosper and provide steady employment. We agree to the fullest extent in
obtaining the aforementioned results and recognize the principle of giving a
fair day's work for a fair day's pay.
To achieve these ends both parties agree the Company shall have the
right to move employees to other jobs within their wage group to promote
efficiency. Such moves shall be made fairly and without discrimination.
No employee or employees shall be requested to perform any premium jobs
as long as there are employees cut back and/or bumped with recall rights from
their premium jobs. Employees upgraded to premium jobs over the normal amount of
operators shall be charged to extra help.
Any employee on a premium job that is temporarily out of work due to
machine breakdown or material shortages may be utilized on any equal or lower
grade job for the remainder of that shift. This displaced employee will not be
utilized on any unstaffed jobs for more than one shift.
ARTICLE 1
UNION RECOGNITION
Section 1. The Employer recognizes the Union as the sole and exclusive
collective bargaining agent for all production and maintenance employees and all
apprentices, excluding office help, engineers, and supervisory employees who
have authority to hire and fire, with respect to rates of pay, wages, hours of
employment, and all other conditions of employment. All individual exclusions
from the bargaining unit must be mutually agreed upon by the Employer and the
Union.
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ARTICLE 2
UNION SHOP
Section 1. As a condition of employment all employees covered by this
agreement shall within 30 days after date of execution of this agreement or in
case of new employees immediately after completion of their probationary period
(60 days of work for tool and die makers, machinists, and maintenance
department, 45 days of work for all other new employees) become members of the
Union. A partial day worked shall be construed as a day of work.
Section 2. The employer for said employees shall deduct each week the
Union dues and assessments and promptly remit the same to the Financial
Secretary-Treasurer of the Union, in accordance with data submitted by the
Union.
In the event a probationary employee incurs an obvious plant injury
after working at least 15 days, any subsequent time lost due to such injury
shall be credited to his qualifying time.
Section 3. New employees excepting tool and die makers, machinists, and
maintenance department shall be considered on probation for the first 45 days of
work. Tool and die makers, machinists, and maintenance department shall be
considered on probation for the first 60 days of work. All probationary
employees will be placed on the seniority list as of date of hire upon
completion of their probationary time.
Section 4. A partial day shall be construed as a day of work for all
probationary employees. A partial week shall be regarded as a work week.
Saturdays, Sundays and holidays worked shall be credited to probation time.
Section 5. In case a dispute arises as to whether or not an employee
has failed to maintain his Union membership in good standing, the Union agrees
to assume any liability that may arise from any acts of the Company which result
from its reliance on representation of facts by the Union.
ARTICLE 3
HOURS AND OVERTIME
Section 1. The work week shall be 40 hours per week, 8 hours per day, 5
days per week from Monday through Friday, inclusive.
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Both parties acknowledge that problems relative to hours of work and
the school hours of the children of employees are problems of mutual concern and
interest to both Company and Union.
Therefore, in the interest of attempting to minimize any conflict in
work hours vs. school hours, it is agreed that the following hours of work will
be observed.
(A) Beginning with the first Monday in June thru Labor Day:
1. FIRST SHIFT.......................................7:00 a.m.-3:30 p.m.
SECOND SHIFT....................................3:30 p.m.-12 MIDNIGHT
THIRD SHIFT......................................10:30 p.m.-7:00 a.m.
(B) Beginning with the first Tuesday after Labor Day to the first Monday in
June:
1. FIRST SHIFT.......................................8:00 a.m.-4:30 p.m.
SECOND SHIFT......................................4:30 p.m.-1:00 a.m.
THIRD SHIFT......................................11:30 p.m.-8:00 a.m.
(C) Paychecks will be issued on Friday mornings or on the morning of the last
scheduled work day. The only exception would be if a pay day is on a
Wednesday and checks cannot be run on computers in time for Wednesday
morning distribution.
Section 2. All work performed in excess of 8 hours in any single day,
in excess of 40 hours in any given week, and all work performed on Saturday
shall be paid at the rate of time and one-half except overtime shall not be
pyramided.
When shift hours have been established, a maximum of 2 hours overlap
will be allowed for an off shift. When the overlap exceeds 2 hours the employee
shall be paid the premium rate for the full 8 hours worked.
Recognizing that it may sometimes be necessary to provide an overlap
shift, it shall be established by mutual agreement between the Company and the
Union.
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Section 3. Double time shall be paid for all work done on Sundays. For
holidays see Article 4.
Section 4. Overtime work shall be performed by the operator normally on
the job on which the overtime occurs. A normal operator shall be defined as one
with the most time spent on the job in a given shift or pay period in which the
overtime occurs. Overtime shall be divided as equally as possible between normal
operators on the job.
Should overtime be offered and the employee refuse it, they shall be
charged with such overtime. Once an employee is offered overtime and refuses,
the Company shall not offer overtime to that employee for any job for that
specified time period.
No more than 10 hour inequity on turn sheet between operators with
exception of Tool Room Classification. Overtime will be divided as equally as
possible on all jobs that all classifications can perform. The Tool Room turn
sheet will be kept by the Tool Room supervisor.
Should an employee wish not to be considered for overtime on a
continuous basis, notification is to be given to the supervisor in writing with
a copy to the Chief Steward. The Company will not consider a person eligible for
overtime until notification is withdrawn.
No employee shall be moved for the purpose of overtime. Notice of
overtime must be given by the Company 2 hours prior to daily overtime.
Such division of overtime shall be controlled by use of a turn sheet
which shall be maintained by the departmental supervisor to be reviewed by area
steward and supervisor.
Seniority shall govern the selection of personnel for overtime on the
job at the start of the turn sheet. The turn sheets will start on June 19, 1990,
and continue for the length of the contract. Any employee on vacation or leave
shall be charged with overtime. When overtime is required as a result of an
absence of any employee, the absent employee will also be charged with the
overtime. Employee entering into a new job shall assume the maximum hours as
credited on the turn sheet. When subsequent operators are needed for overtime on
such jobs, preference shall be given for such overtime to operators in
accordance to time spent on that job in a given shift or pay period when
overtime occurs.
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If possible, notification of opportunity for overtime work shall be
given at least 4 hours before end of last shift prior to overtime.
Failure to report for overtime work, on Saturday, Sunday, or holiday,
after accepting assignment shall be subject to a (1) day suspension.
Notification from the employee with a reasonable excuse will exempt him from the
above.
Failure to report for overtime work, on a regularly scheduled work day,
after accepting assignment, shall be subject to a written reprimand for the
first offense and a (1) day suspension for a second offense. Notification from
the employee with a reasonable excuse will exempt him from the above.
Group Leaders and/or Department Heads whose job normally requires
working on non-premium or premium work on a regular day of work are entitled to
overtime on the same basis as the employee within their group.
Group Leaders and/or Department Heads required to work overtime for
purposes of performing clerical responsibilities, set-up of a line, change-over
and such other duties as are outlined in their job descriptions shall not
perform other classifications of work except as set forth above.
Section 5. Lost Overtime. In the event an employee is available for
overtime and is denied the opportunity for overtime, such employee(s) shall be
given the opportunity of making up such lost overtime or be reimbursed for such
lost overtime equivalent to the amount of time spent on the job.
When hours equivalent to the denied hours are to be worked, the
arrangement with the employee shall be made (24) hours in advance unless shorter
notice is agreeable to the employee involved.
If a supervisor performs the work normally performed by a bargaining
unit employee, in an overtime period, the employee shall receive a minimum of
(4) hours of overtime pay.
Lost overtime on Saturdays, Sundays and holidays shall be reimbursed at
a minimum of (4) hours of overtime pay.
Should it be decided to work overtime on a regular work day, the
Company's responsibility in informing personnel is limited to those in
attendance during the last four hours of the day. If the overtime is to be
worked on Saturday, Sunday or holiday
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and the employee is not in attendance during the last (4) hours of the last
regular work day preceding such overtime, the overtime will not be offered to
the employee unless the employee has notified his or her foreman prior to
leaving and has indicated an interest in any overtime available.
In that event the responsibility of the Company shall be limited to a
telephone call at the location of the telephone as listed in his personnel file.
Union official shall be present while calls are placed. If the Company is unable
to contact the employee and secure confirmation that the employee will work, the
next eligible employee will be called. The Company representative and the Union
official will initial the sheet.
Section 6. Procedure for processing overtime complaints.
(A) Overtime complaints shall be reported no later than the end of the
second shift of the third working day following the alleged violation.
(B) Such complaints shall be investigated by the foreman involved and the
Labor Relations Department.
In the event the foreman and the Labor Relations Department fail to
satisfactorily settle the complaint by the end of the second shift of the third
day after it has been called to their attention, the complaint shall then be
referred to the grievance procedure.
(C) Agreed adjustments relative to make up of lost overtime hours or lost
overtime wages shall be acted upon within (7) calendar days after date
of such agreements.
(D) Agreed adjustments relative to make up of lost overtime outside of your
department shall be acted upon within (21) calendar days or employee
will be paid.
Section 7. Extra Help on Overtime. When extra help is required and
overtime occurs in wage classification (1), this extra help must be obtained by
choosing employees with the most plant seniority in classification (1).
Should the non-premium classification list be exhausted, and more
workers are required, premium workers may be used at non-premium rate. These
workers must be chosen by seniority.
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When extra help is required and overtime occurs on premium jobs, this
extra help must be obtained by choosing employees with the most plant seniority
and previous good experience on the job on which the overtime occurs.
When operators with previous good experience are not available,
personnel shall be selected for such overtime on a basis of plant seniority
unless the job requires specific skills that may have to be taken into
consideration. In this event such skill shall have priority over plant
seniority. Union shall resolve each instance on its particular merit and
circumstances. Failure to arrive at a satisfactory agreement the issue will then
be submitted to the grievance procedure.
NOTE: "Extra Help" is defined as operators who are required only after
the normal and subsequent supply of operators has been exhausted.
Section 8. An employee who reports for work at his or her regular
starting time and has not been notified by the Employer not to so report shall
be given not less than (4) hours of work and pay therefor, or not less than (4)
hours pay.
This section shall also apply to employees who are requested to work
Saturdays, Sundays or holidays with the exception of the maintenance department
on inspection tours. An employee called to return to work shall be given not
less than (2) hours of work or pay.
Should an employee come to work on an overtime basis, not by direction
of the Company, and who is not entitled to overtime because of the "normal
operator" clause or the "seniority clause," he shall be sent home immediately
when the error is detected, and shall not be entitled to the (4) hours pay, but
shall be paid only for the time worked.
Section 9. Maintenance tours shall be conducted on a rotated basis
among maintenance employees. Those eligible for rotation shall be the
Maintenance Department Head, Group Leader and Maintenance Employees with (1) or
more years of experience in the maintenance department. If all eligible
employees refuse, Maintenance 2 will be considered on basis of experience.
Section 10. Any employee classified under the wage supplements shall be
paid $0.50 per hour above their regular hourly rate for all work performed on
the second shift, or $0.65 per hour above their regular hourly rate for all work
performed on the third shift. These premiums shall also be paid to any employee
for hours worked other than their regular shift hours which are not overtime
hours. Day shift
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employees working the second or third shift on Saturday, Sunday or a holiday
will receive the shift differential for that shift for the hours worked on the
weekend or the holiday.
ARTICLE 4
HOLIDAYS
Section 1. The holidays recognized on coming under the scope of this
agreement shall be as follows:
New Year's Day December 24th
Good Friday Christmas Day
Monday after Easter December 31st
Memorial Day Thanksgiving Day
July 4th Friday after Thanksgiving
Labor Day
(A floating holiday September 3, 1993, September 2, 1994 and September
1, 1995)
Any employee working a holiday shall receive double time plus regular
holiday pay for all such time worked.
Section 2. Employees who have completed 30 working days, shall be paid
(8) hours regular time for holidays not worked, providing the employee works the
last (4) hours of the last day the factory works prior to the holiday, and works
the first (4) hours of the first day the factory works after the holiday. A
maximum of one hour of tardiness is allowed on the work day prior to and
following the holidays.
In the event of multiple holidays where qualifying days occur in (2)
pay periods and employee is absent without extenuating circumstances on one of
the qualifying days, employee will forfeit one day of holiday.
Should an employee be laid off or sustain a lost time factory injury,
or on leave of absence for reasons as defined in extenuating circumstances
below, or be
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hospitalized such that he or she is unable to meet the above requirements (day
before and day after) he shall be eligible to receive holiday pay if he or she
is entitled to pay for time worked in the week during which the holiday falls.
In the event that one of the above identified holidays falls on a
Saturday, the Company will endeavor to close on the Friday preceding the holiday
to permit employees the advantage of an extended weekend.
Such closing shall not be construed in any way to be an additional
holiday and should it be necessary to work certain operations on such Friday,
employees who work will be paid at straight time rate.
It being understood that working such day be optional with the Employee
and such Friday shall not be the qualifying day.
Extenuating circumstances which may occur which disqualify a person and
thereby deprive him or her of his or her holiday pay, will be reviewed by the
Plant Manager and proof must be presented if requested.
Any extenuating circumstances which cause the absence of more than (2)
days before, after or surrounding the holiday shall not be considered for the
purpose of removing the disqualification above referenced. Extenuating
circumstances are defined as illness, emergency or compelling personal reasons
and not for convenience nor extending the holiday.
An employee on vacation, bereavement leave or on local Union business
is entitled to holiday pay, should the holiday fall during that period.
An employee on an approved leave of absence, irrespective of the
provisions of Article 4, Section 2, Paragraph 7, shall receive holiday pay
providing they are entitled to pay for the time worked in the weeks in which the
holiday occurs.
ARTICLE 5
SENIORITY
Section 1. Layoffs. In all cases of permanent layoffs and rehiring,
seniority and skill shall govern. When it becomes necessary to lay off
employees, the junior employees in point of service shall be laid off first, and
the senior employee laid off last, except that ability and training to perform
work shall be considered by Management and Union. When rehiring takes place, the
senior employees shall be
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called back to work first, and the junior employees last, except that ability
and training to perform work shall be considered by Management and Union.
Employees called back after having been off the payroll for (6) months or more
shall have a fair trial to prove their capability on current type of work. No
trial period shall exceed (20) days of work. A partial day of work shall be
construed as a full day of credit on trial time period.
In the event of curtailed production, plant seniority will be the
governing factor in moving employees off premium jobs except those not subject
to posting.
Section 2. Permanent Layoffs. A permanent layoff shall be defined as
one of more than (3) consecutive working days' duration.
Section 3. Temporary layoffs. In the event of a TEMPORARY LAYOFF (3
days or less) occasioned by curtailed production or material shortages affecting
(5) or more employees who cannot be absorbed into other production at that time,
those employees may be sent home until the Company has had an opportunity to
clarify the seniority picture.
An employee losing more than (12) hours to an employee of less plant
seniority by this procedure in a (45) day period, shall be exempt from the
temporary layoff provision for the next (90) days by advising his
representatives in the Union who will in turn advise the Company.
Section 3. The work week will be (5) eight-hour days. Before any
general reduction in hours takes place, employees with (26) weeks service or
less will be laid off unless upon mutual agreement of Union and Company they are
the only ones capable of performing the work. Any general reduction in hours
beyond this will be mutually agreed upon.
Section 5. Recall from Layoff. No new employees, except those qualified
in special skills, shall be hired until employees who have been laid off have
been given the opportunity by proper notification to return to work. Employees
shall be given (5) working days after notice when requested by the Employer to
return to work. The employer shall notify employees either by telephone,
telegram, registered mail or personal notice. In the event of personal notice,
such notice shall be made directly to the employee only. After original attempt
(if Employer is unable to make such personal contact within (24) hours) the
Employer shall send such notice via registered mail.
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Section 6. Change of Address and Notification. Employees shall notify
Employer of any change in address within (5) days after such change. Such notice
shall be given in writing. The Employer shall be entitled to rely upon the
address shown upon its records. Employees shall notify Employer within (24)
hours after receipt of notice as to, if and when, he or she can return to work.
If no such notification is given, it will be assumed that the employee is not to
return.
Section 7. In the event of curtailed production, plant seniority will
be the governing factor in moving employees from their jobs. It being expressly
understood that the selection of Group Leaders and Department Heads is the sole
prerogative of Management and such duties as outlined in their job descriptions
are not subject to posting or bumping.
Employees cut back from their jobs for more than (3) work days shall
have the right to bump any less senior employees in an equal or lesser wage
group with the following exceptions (a paid holiday will not be included as one
of the days of the umbrella period):
1. Tool and Die Makers
2. Jig and Fixture Maker
3. Set-up Man, Assembly
4. Maintenance 1
5. Master Painter
6. Process Polisher
7. Spray Painter All-Around
8. Maintenance 2
9. Screw Machine 1
10. Inspector
11. Spray Painter -- Beginner
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12. Plating and Polishing
13. Set-up Man, Assembly (Beginner)
14. Receiving Clerk
15. Screw Machine 2
16. C.N.C. Programmer Operator
17. Maintenance Technician
18. Set-up Die Cast & Trim Press
19. Service Repair*
20. Coil Assembler (Wide Band Driver)
*A list of employees eligible to bump into Service Repair is available
in the Employee Relations Department.
Those jobs excepted in the above list require, in addition to
seniority, that the employees have previously qualified on the job. An employee
may also bump into a vacant job of equal or lesser wage group, provided the
vacant job has been bid in the last two weeks and there were no bidders among
active employees.
On jobs which require a test the employee must pass the test before
exercising a bump.
When an employee bumps into one of the jobs listed above and claim is
made as to previous qualifications, and no record exists as to such
qualifications, an employee may be given a "familiarization" period not to
exceed (4) hours to demonstrate his qualifications.
An employee bumping into any other premium job shall be allowed the
normal qualifying period (in no way to exceed (5) working days), to demonstrate
the skill and ability necessary to satisfactorily perform the production work.
On premium jobs which include set-up, the bumping employee shall have the normal
qualifying period as defined by the contract to demonstrate the skill and
ability necessary to satisfactorily perform all aspects of the job description.
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When an opening shall again exist in his regular classification, the
employee shall be recalled. The employee must accept the recall or sign a
withdrawal sheet. Employees recalled as a replacement for a vacation of (5) days
or longer will be given a recall slip.
(When an employee signs a withdrawal sheet, they shall not be permitted
to remain on the job to which he has bumped but shall be assigned to a job in
Group 1 and shall receive Group 1 rate of pay from the time of such assignment.)
In the event of a cutback of less than (3) days in duration, the
employees involved will be utilized in other work and retain their premium rate.
This time is not to be charged as extra help. No employee or employees shall be
requested to perform any premium jobs as long as there are employees cut back
and/or bumped with recall rights from their premium jobs.
The cutback employee should contact the Personnel Department and
exercise his seniority at the earliest possible time but in no event later than
noon of the third day of cutback. He may be placed on the job he has selected
during the (3) day period providing such placement does not result in moving the
bumped employee from the job during such period. Bumped employees shall receive
(4) hours' notice or (4) hours' pay.
All moves will be made in a fair and orderly manner and not later than
the morning of the (4th) day of the cutback initiating such moves. A premium
worker's pay shall not be reduced to Group I unless he does not have sufficient
seniority to bump or he elects to remain in Group 1. Each subsequent bump
entitles the bumped employees to a (4) hour notice or (4) hours of rate
protection.
In the event a replacement is needed for absenteeism on a premium job
and there are employees cut back from this job, they shall be utilized first and
in line with seniority. If the replacement is for (5) days, the employee shall
be covered by the (3) day clause. If the replacement is for less than (5) days,
the employee must return, but shall not be covered by the (3) day clause. Should
the utilized employee be cut back and be under their (3) day umbrella, the
umbrella will be extended the number of days they are used for replacement for
absenteeism. If the cutback employee is used as a replacement for more than (5)
days in a (3) day period, the employee shall be given their recall rights. The
replacement shall be given the rate of the cutback job for the full day. If the
replacement is for (5) consecutive days or more, the employee must accept the
recall or sign a withdrawal sheet.
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Section 8. As of June 19, 1993 and thereafter, Employees hired on the
same date will be granted seniority in the same order as their birthdates fall
during the calendar year.
ARTICLE 6
DISCIPLINE AND DISCHARGE
Section 1. Full power of discharge or discipline lies with the
Employer, but it is agreed that his power shall be exercised with justice and
with regard for the reasonable rights of the employees. If the Union, after
investigation, feels that an employee has been disciplined or discharged without
just cause and fails to reach an agreement or adjustment with the
representatives of the Employer, the case in question shall be referred to the
grievance procedure. The Union is to be notified at the time of any such
discharge or discipline.
Section 2. Absenteeism. Any employee absent without just cause and/or
without notifying the Company shall be subject to discipline. Three (3)
consecutive days of such absence without reporting to work at the start of the
shift on the fourth consecutive day shall be construed as the employee having
terminated his or her employment.
It is specifically pointed out that the Company and Union are in
complete agreement that absence which is chronic cannot be condoned.
Any absence of more than three (3) days must be covered by a leave of
absence.
Sick days or holidays shall not be considered as part of the three days
unexcused absenteeism prior to being terminated. Compensatory days are not
counted as absent.
Section 3. The Company will publish a list of rules classified into
these categories:
(A) Dismissal Rules
(B) 2-Day Suspension Rules
(C) 3-Day Suspension Rules
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The publishing of the rules by the Company shall not be construed as
limiting the right of the Company to delete, amend or add rules as changing
conditions demand such changes. However, notification of such changes will be
made known to the President and Chief Steward of the Union in advance of the
publishing of the change.
Section 4. Infractions of Company rules require disciplinary action and
the following procedure shall be used except in the event of an infraction of a
rule which carried a mandatory dismissal.
(A) Infractions of rules shall be dealt with in an impartial and fair
manner. A first infraction can deserve a verbal warning. For the
purpose of administration, the "verbal warning" shall be written on an
appropriate form.
(B) A first infraction of a suspension rule as specified by Section 3 or
after the issuance of a verbal warning shall require the writing of a
written reprimand but no penalty will be incurred.
(C) A subsequent infraction of the same rule will require a written
reprimand and suspension penalty. A fourth infraction shall call for
dismissal.
(D) An accumulation of three verbal warnings for various infractions within
a period of (6) months shall carry a penalty of 3-day suspension. An
accumulation of two written reprimands for various rule infractions
during a (1) year period shall carry a (5) day suspension penalty. A
third will carry a (l0) day suspension penalty and a fourth during the
same period of time will require dismissal.
Section 5. The Company recognized that as the repeat violator is
penalized, so should the person who abides by the rules be given consideration,
Therefore, a reprimand which becomes six months old, with no other reprimands
issued in the interim, will not be used as a factor in a subsequent penalty.
However, in the case of a chronic offender, such past history may be used in
administering discipline.
ARTICLE 7
LEAVE OF ABSENCE
Leave of Absence in excess of (3) working days will be granted by
agreement of a committee composed of (2) representatives from the Company and
(2) representatives from the Union. All leaves of absence will be without pay
for:
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(A) Justifiable personal reasons, which shall not exceed (30) days. Leave
of absence shall not be granted for the purpose of extending vacation,
providing however, that an employee may receive not more than once in a
(4) year period, a special leave for an extended travel vacation. Such
leave shall be for not less than (2) weeks nor more than (6) weeks in
addition to vacation. Request for such special leave must be presented
not less than (30) days preceding the start of the vacation and leave
period;
(B) Personal illness, which in serious cases may be for extended periods of
time;
(C) Union Business, which would be for extended periods of time;
(D) To hold public office, which would be for extended periods to time;
(E) Child care;
Electro-Voice Buchanan will provide a maximum of 26 weeks unpaid leave
for an employee to care for and bond with newborn or newly adopted children. The
26 weeks will begin on the day of adoption or on date of employee's release to
return to work. This Child Care Leave may be used once every two years by an
employee.
Any employee on a Child Care Leave will accumulate seniority during
such leave and upon return to work will be re-employed at their former or
similar position in accordance with their seniority.
While on Child Care Leave, an employee's insurance will be terminated
after the first thirteen weeks. An employee's medical and life insurance can be
continued if the employee makes monthly premium payments to the Company.
There must be a two-week prior notification to the Company by the
employee of their desire to use the Child Care Leave. Proper certification,
birth certificate, or adoption papers must accompany any Child Care Leave
request.
(F) Family Care;
Electro-Voice, Buchanan Plant will provide a maximum of thirteen weeks
unpaid leave for an employee to care for a member of their immediate family
(mother, father, spouse, brother, sister, or child) who is totally disabled due
to sickness or accident. Three extensions in monthly increments will be
provided, if necessary. (In
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rare and unusual circumstances, the leave committee may consider more than three
monthly extensions.)
Any employee on a Family Care Leave will accumulate seniority during
such leave and upon return to work will be re-employed at their former or
similar position in accordance with their seniority.
A statement from the family member's physician, stating the need for
family care and the anticipated length of the disability, must accompany the
request for a leave. Disabilities of less than four days will not be considered.
While on Family Care Leave, an employee's insurance will be terminated
after the first thirteen weeks. An employee's medical and life insurance can be
continued if the employee makes monthly premium payments to the company.
(G) Or any other justifiable reason.
A copy of the leave of absence will be given to the Union
representative. Leaves of absence will be granted only when the reason is
justifiable. Where an employee desires to extend his leave of absence, he must
request such extension prior to the expiration of his current leave.
The Company will grant leaves of absence to employees elected or
appointed to offices in the International Union or the AFL-CIO or the Local
Union upon written request addressed to the Personnel Manager from the President
of the International Union or District President of the IUE-AFL-CIO.
While on an approved leave of absence, an employee shall accumulate
seniority.
When an employee fails to return to work at the expiration of the
approved leave of absence, the employee shall be subject to disciplinary action.
The first offense shall deserve a (30) calendar day suspension and the second
offense shall result in discharge.
All requests for leaves of absence shall be supported by such evidence
as the Company and the Union may deem necessary. The limit for submitting a
leave is extended from (3) working days to (5) working days in the case of
sudden illness or hospitalization provided the employee requests such leave
within three working days. It is the intent of this Agreement that leaves of
absence shall not be used to take
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<PAGE> 21
advantage of seasonal or other employment elsewhere, or to be used to try out
jobs in other companies. Employees who violate this provision shall be separated
from the payroll.
Such decisions of this committee normally will be final, but failing to
arrive at a majority decision regarding a request for a leave of absence, the
matter will then be referred to an officer of the Company and an officer of the
Union.
Bereavement leaves and official Union business are legitimate reasons
for leaves of absence. A person on a premium job is to be returned to the same
job upon return from a leave of absence, provided the job still exists and,
provided he is physically and mentally capable of performing that job. Any
employee who has been on an extended sick leave shall not lose his or her
seniority regardless of length of time off, provided he or she is capable of
doing the work required.
Bereavement Leaves: Up to (3) days bereavement leave with pay shall be
granted to employees who lose up to (3) days (Article 3, Section 1) on account
of a death in the immediate family. The Personnel Department must be notified no
later than the first working day missed. One day to be day of funeral. Employee
to inform personnel of the day of the funeral.
Immediate family is identified as:
Husband Father Father-in-Law
Wife Mother Mother-in-Law
Brother Step-Father Step-Mother
Sister Brother-in-Law Sister-in-Law
Children Step-Children Son-in-Law
Grandchildren Grandparents Daughter-in-Law
A bereavement leave with pay of up to (1) day shall be granted to
employees who lose up to one day (Article 3, Section 1) on account of the death
of a grandparent of the employee's spouse.
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ARTICLE 8
MILITARY SERVICE
Section 1.
(a) Coverage. Any employee of the Company who volunteers during a state of
emergency or is drafted or is called into service in the land, naval or
air forces of the United States or their auxiliary services, or the
U.S. Merchant Marine, shall be entitled to the benefits in this
section. Such service shall be referred to hereinafter as "Military
Service."
(b) Temporary Employees. Any employee who has passed the regular
probationary period shall not be considered a temporary employee for
the purpose of this section or for the application of the provisions of
the Selective Service Act.
(c) Military Leave Pay. Upon leaving for military service, such employees
shall receive (1) week's pay based on their average earnings.
(d) Vacation Pay. Upon leaving for military service, such employees shall
receive their accrued vacation pay.
(e) Accumulating Seniority. All such employees shall accumulate seniority
during their period of military service.
(f) Re-employment. Upon termination of their military service, such
employees shall be re-employed at their former or similar work in line
with their seniority as accumulated during military service.
(g) Reporting Time. Such employees shall report for work with the Company
within (120) days of the date of termination of their military service
or at a later date if such employees cannot report sooner through no
fault of their own. Employees who report in accordance with this
section after the (90) days provided for by the Selective Service Act
shall be entitled to all their rights under the Act and under the
provision of this section.
(h) Re-employment of Employee Disabled Veterans. Former employee disabled
veterans who apply for re-employment shall be re-employed by the
Company on work suitable to such employee's capacity, without regard to
seniority or any other consideration.
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(i) This section shall not apply to any employee who re-enlists after
serving his or her original obligation due to the Selective Service Act
or a national emergency.
(j) Benefits Accrued During Military Service. All former employee veterans
shall be re-employed without loss of prejudice to any of the rights and
privileges formerly enjoyed by them as employees of the Company and
shall receive the same benefits and advantages from the Company as
though employment has continued and has been satisfactory during their
periods of military service.
(k) Job Survey for Disabled Veterans. The Company and the Union will
cooperate in making plant, department, and job surveys to determine
what jobs are suitable for returning disabled veterans.
ARTICLE 9
INTER-PLANT TRANSFER
Section 1. In the event an operation is transferred inter-plant-wise
and necessitates the moving of personnel out of the Buchanan plant, the subject
of inter-plant transfers and all related problems such as seniority, job
transfer, etc., will be subject to negotiations by both parties.
ARTICLE 9A
PROCEDURE FOR USING EXTRA HELP
ON PREMIUM JOBS
Section 1. The Company may transfer persons to premium jobs where extra
help as such is needed. Employees upgraded to premium jobs over the normal
amount of operators shall be charged to extra help.
The time limit for use of extra help shall be (20) days in any (1)
year. The year to run concurrent with the date the extra help is placed on the
job. In an emergency, the (20) day limit may be extended by Mutual agreement.
When using lower pay group employees for extra help on higher pay group
work, they shall be selected by seniority provided they have the ability to
perform the work.
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<PAGE> 24
Any employee on a premium job that is temporarily out of work due to
machine breakdown or material shortages may be utilized on any equal or lower
grade job for the remainder of that shift. This displaced employee will not be
utilized on any unstaffed jobs for more than one shift.
No employee or employees shall be requested to perform any premium jobs
as long as there are employees cut back and/or bumped with recall rights from
their premium jobs.
Section 2. Temporary Vacancies on Premium Jobs. Procedure for filling
temporary vacancies in premium jobs due to vacation and authorized leaves of
absence as recognized by this agreement shall be as follows:
The Company shall have the prerogative of requesting employees to fill
vacancies on premium jobs.
Such replacement on a job shall not exceed (60) days.
When it is known in advance by the Company that a vacancy will exist
for a period exceeding (60) days, the vacancy shall be posted on the bulletin
boards for a period of (48) hours as "Temporary Vacancies." Temporary jobs shall
be for a duration of 12 months, only then be reposted as permanent jobs.
Such employees shall be regarded as strictly a temporary operator and
shall not exercise their plant seniority on that job. Regardless of seniority,
they shall be subject to shift bump from another employee who is on a permanent
status, but the temporary employee can only bump another temporary employee on
the same job. They would be cut back by plant seniority before any permanent
people are cut back.
When the employee who has been on an approved leave returns, he shall
return to his regular job, provided his is physically arid mentally capable of
performing that job.
The employee who temporarily filled the vacancy shall be returned to
his former job classification.
In the event the employee used as a replacement has previously
qualified, he shall receive the top rate of the job starting with the first day
or his own, whichever is highest.
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<PAGE> 25
In the event the employee has not previously qualified, he shall
receive the next rate below top rate or his own, whichever is the higher,
starting the first day. This shall apply to all multiple progression jobs such
as maintenance, screw machine, polishing, plating, die cast, set-up assembly and
inspection. All other jobs shall receive top rate starting with the first day or
his own rate, whichever is the higher. Agreement on Maintenance Extra Help the
Company and the Union agree that Maintenance Tech 1 and Maintenance Tech 2 are
not progressive jobs. Should an employee who has not previously qualified in
maintenance be used as extra help in maintenance, that employee shall be paid
the Maintenance 2 rate or their own rate, whichever is higher.
Section 3. Should an employee be temporarily transferred to a job that
in the judgment of the Company is more urgent than the one he is doing and where
the rate of pay is lower than on his regular job, the employee shall be paid the
rate of his regular job and this rate of pay shall not be considered the rate of
pay of the job.
Section 4. In case of emergency or for vacation fill-in, the Company
may temporarily use bargaining unit personnel to perform work not classified in
the contract. The Union will receive prior written notice (except in emergency
cases) of such assignment. The replacement shall not exceed (29) days in any
continuous period. The employee may exercise the right to refuse to perform such
work. The employee shall receive (.25) cents per hour in addition to their
regular rate for the time worked on non-classified work. Employees temporarily
transferred to replace a supervisor for a Department Head.
ARTICLE 10
VACATIONS
Section 1. All employees employed by the Company who have (52) credit
weeks shall receive 3% of their earnings from their seniority date to the end of
the second quarter of the calendar year following their seniority date.
All employees who have the following credit weeks as of the end of the
second quarter of the calendar year (May 31 payable during June), shall receive
the following percentage of their annual earnings:
<TABLE>
<CAPTION>
Credit Weeks Percentage
<S> <C>
53 through 129 3%
130 through 233 5%
234 through 494 7%
</TABLE>
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<PAGE> 26
<TABLE>
<CAPTION>
Credit Weeks Percentage
<S> <C>
495 through 753 8%
754 through 832 9 1/2%
833 and over 10%
</TABLE>
A credit week is a week worked or a portion of a week worked. Credit
will be given for lost time week(s) vacation, union business, military leave or
compensable injuries.
Time off will be granted for vacation based on seniority. One (1) and
(2) years seniority - one week granted for vacation. Three to (7) years
seniority - (2) weeks granted for vacation. Seven to (13) years seniority - (3)
weeks granted for vacation. Thirteen to (18) years seniority - (4) weeks granted
for vacation. Eighteen years or more seniority - (5) weeks granted for vacation.
Employees with (23) or more years of seniority shall, provided they
have scheduled their full (5) weeks vacation, be granted an unpaid week of
vacation. Application for such week shall be made in the manner prescribed and
"on first come, first served basis," but with not less than one week's notice.
No more than (3) employees will be permitted to take such vacation in
any given week, based on employment figures of 100 employees. One additional
employee will be granted such week for each additional (25) employees on the
active payroll for any given week.
Employees whose services are terminated for any cause whatsoever shall
receive with their final pay their accumulated vacation pay, excepting those not
having been in the employ of the Employer for 52 weeks.
A schedule shall be worked out by mutual agreement between the Company
and the Union to permit employees time off for vacation purposes.
In the event a Holiday occurs during an employee's vacation, he shall
be entitled to (1) additional day of vacation for each such Holiday. Such
additional day or days may be taken either preceding or following the regular
vacation period, by notification to his foreman in writing not later than 4:30
p.m. the Wednesday preceding the vacation period.
Section 2. In order to preserve work schedules and honor commitments to
customers and still give employees an opportunity to select a vacation period,
the Company and the Union have agreed to the following vacation plans:
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<PAGE> 27
VACATION PERIOD:
1. Jan. 3, 1993 - May 22, 1993 10 employees
2. May 23, 1993 - Sept. 25, 1993 25 employees
3. Sept. 26, 1993 - Dec. 18, 1993 10 employees
4. Dec. 19, 1993 - Jan. 1, 1994 25 employees
1. Jan. 2, 1994 - May 28, 1994 10 employees
2. May 29, 1994 - Sept. 24, 1994 25 employees
3. Sept. 25, 1 994 - Dec. 17, 1994 10 employees
4. Dec. 18, 1994 - Jan. 7, 1995 25 employees
1. Jan. 8, 1995 - May 27, 1995 10 employees
2. May 28, 1993 - Sept. 23, 1995 25 employees
3. Sept. 24, 1995 - Dec. 16, 1995 10 employees
4. Dec. 17, 1995 - Jan. 6, 1995 25 employees
1. Jan. 7, 1996 - May 25, 1996 10 employees
2. May 26, 1996 - Sept. 28, 1996 25 employees
The above schedule is predicated on an employee level of 150 Bargaining
Unit employees. For each 10 employees over the above 150, two additional
employees shall be added to each of the scheduled number shown above.
(The determination of the additional employees provided for herein
shall be made (3) work days prior to the starting date of the vacation periods
outlined above.
A copy of the number of employees to be added shall be furnished to the
Union.)
The Company will have the option of designating the week beginning June
27, 1993; June 26, 1994; June 25, 1995 for a plant-wide shutdown. The Company
will notify the Union of its determination 2 weeks prior to the scheduled
shutdown. In the event of a plantwide shutdown, the equivalent of 1 week's pay
will be allocated to this period. Employees will not be eligible to collect
unemployment compensation for this period unless they are not eligible for
vacation. Employees will be paid holiday pay for July 4th in the following week.
Vacation checks will be issued on the Friday prior to the shutdown.
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<PAGE> 28
Any time active employment drops below 100, the vacation period Number
2 shall be adjusted to 20 employees.
For the weeks of Michigan Deer Hunting Season (bow and arrow or gun) an
additional (5) employees shall be permitted each week.
Application for vacations for the first period of the year must be made
prior to 4:30 p.m. on the Monday preceding the start of the vacation period. In
accordance with past practice, emergency situations involving a later request
for vacation will be handled on an individual basis. Application for all other
vacation periods shall be filed (with first, second, and third choice and number
of weeks) prior to the end of the day shift of the first Friday of April of each
such year. The allocation of vacation quotas shall be made on the basis of
seniority. Employees shall indicate if they wish to be placed on a waiting list
by seniority. Within two weeks after the above date, the Company will post a
list of the unfilled vacation weeks. Employees who did not make application in
accordance with the above provision may make a vacation selection from the open
positions on a first-come-first-served basis provided they make application in
writing prior to 4:30 p.m. the Monday preceding the start of the vacation
period. In accordance with past practice emergency situations involving a late
request for vacation will be handled on an individual basis.
All vacations must be taken in full weeks on a Sunday-to-Sunday basis.
Vacations may be canceled in whole or in part by notifying the
Personnel Department not less than (4) working days prior to the start of the
vacation period. Vacations partially canceled shall be charged as a full
vacation week. Employees on a waiting list will be notified in line with their
position on the waiting list of any such cancellation and be permitted to take
such canceled week. Arrangements for such must be made by noon on the Friday
preceding the vacation week.
In the event of a substantial change in the level of employment or
other circumstances affecting production which may dictate any deviation of this
schedule, changes shall be made by mutual agreement between the Company and the
Union.
Excluded from the provisions of this agreement are Maintenance, Tool
Room and Painters. In no instance shall more than one-half of the employees in
Maintenance, Tool Room or the Painters be allowed to go on vacation at one time
without Company approval.
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ARTICLE 11
BULLETIN BOARDS
Section 1. The Employer shall permit the Union to use bulletin boards
in the plant for the posting of Union notices.
ARTICLE 12
UNION REPRESENTATION
Section 1. The officers of any authorized representative or official of
the Union shall have admission from the Management, to shop or factory of the
Employer at any time during working hours for the purpose of ascertaining
whether or not this agreement is being observed by the parties thereto, or for
assisting in the adjustment of grievances.
Section 2. Authorized representatives shall be:
INTERNATIONAL REPRESENTATIVE (if other than the
normally assigned International
Representative is to participate the
Company shall be notified.)
NEGOTIATING AND GRIEVANCE COMMITTEE MEMBERS
STEWARDS
Section 3. Stewards will be chosen from and assigned to the following
areas: Die Cast and Machine Shop - I Steward; Maintenance, Tool Room, Plating,
Polishing, Painting, and Janitor -1 Steward; Shipping, Receiving, Stockroom,
Inter-Plant Packing, and Fork Lift Operators - 1 Steward; Assembly, Coil Room,
Driver Packing Area, and Repair - 1 Steward; Night Shift - 1 Steward; Inspectors
- - Steward in assigned area.
The Stewards in each of these areas shall not have jurisdiction in any
area other than his assigned area. The Company agrees to make all reasonable
efforts to retain the Steward in the area which he represents.
In the event of an increase in personnel in any Stewards, area to 75 or
more employees, an additional Steward may be assigned after discussion between
the Company and the Union.
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<PAGE> 30
Section 4. The Employer agrees to pay all lost time to Stewards,
officers and committee men for the purpose of processing and resolving all
differences, disputes and grievances that may arise between the Union and the
Employer. (Will also include time spent in contract, wage and pension
negotiations, etc.)
Section 5. The Employer agrees to pay for all lost time for the
processing and resolving of all problems as outlined in Section 1 of this
Article to the President and Vice President of Local 900 (or such Union
representatives as may be designated to represent the President or Vice
President (or their designated representative) to travel from (1) unit to the
other for the purpose as stated in Sections 4 and 5 of this article.
ARTICLE 13
REST PERIODS
Section 1. Employees shall be granted a five minute rest period after
each two hours continuous work. Employees shall have a personal wash-up period
at the end of the day provided the nature of their work requires it. Employees
not entitled to this wash-up period shall remain at their normal working space
until the signal is sounded. It is specifically pointed out that under no
circumstances are employees to loiter in the aisle or adjacent to the time
clocks. Any questions concerning which jobs require wash-up period must be
mutually agreed upon by the Employer and the Union.
Section 2.
(A) It is understood that relief operators are provided on progressive
assembly lines for the express purpose of providing time for the line
operators to obtain necessary physical relief and not to provide
additional break time as such.
(B) Each line with no less than seven operators or more than 20 operators
will be assigned a relief operator.
(C) Lines which can be considered a convenient grouping for relief purposes
will be serviced by one relief operator provided that the total line
operators do not amount to more than twenty.
(D) Any line with less than seven operators having a group leader of its
own be relieved by the group leader. Certain circumstances may require
a relief operator.
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<PAGE> 31
(E) A relief operator shall be assigned to any line of less than seven
operators which has a group leader in common with another line or is
not covered by the provisions outlined in paragraph C.
(F) In emergency (when the assigned relief operator is engaged), the group
leader may relieve. In extreme emergency, the mend operator (if one is
part of the crew), may relieve.
(G) In all instances, a relief operator shall utilize time not spent in
relieving by performing duties that are outlined in the job
description.
ARTICLE 14
NO DISCRIMINATION
Section 1. There shall be no discrimination against any employee
because of race, color, creed, sex, age, handicap, political belief or for any
other reason. All employees shall be free from interference, restraint or
coercion by the Employer, the Management or Supervision in any activities of
their Union. All employees, male or female, shall receive equal pay for equal
work.
ARTICLE 15
SUPERVISORS
Section 1. Supervisors and other salaried employees shall not perform
work which is the regular scheduled work of the bargaining unit employees except
for the purpose of development, job study, instruction or in extreme emergency.
No salaried employee shall be called in for the express purpose of performing a
bargaining unit job when the factory is not working.
ARTICLE 16
SENIORITY - OUT OF BARGAINING UNIT
Section 1. If an employee accepts a job in the company out of the
Bargaining Unit, his or her seniority shall "freeze" as of the date of such
transfer.
In the event an employee returns to the bargaining unit within (30)
days from the date of transfer out of the bargaining unit, the plant seniority
of such employee shall be from the date of hire to the date of transfer out of
the bargaining unit. In event such employee does not return to the bargaining
unit within (30) days from the date he or she transferred out of the unit, such
employee shall forfeit all seniority rights.
28
<PAGE> 32
ARTICLE 17
WORKING CONDITIONS
Section 1. The Employer agrees to establish the best possible working
conditions and to comply at all times with the health provisions of the State of
Michigan Laws.
Section 2. In addition to the safety procedures set forth in Group
Leader and Department Head descriptions, safety problems shall be handled
through stewards and foremen. Failing to arrive at a satisfactory solution, it
shall be routed through the Labor Relations Department. Failing to arrive (or in
the absence of Labor Relations Department Representatives) at a solution in this
manner, it will be taken up with the Plant Manager.
Section 3. The Union shall be notified of any proposed changes in the
work week. Any differences or dispute concerning any such proposed changes shall
be handled through the grievance and arbitration procedures before any such
changes become effective.
ARTICLE 18
TIME STUDY
Section 1. The Union and Company are in accord that established time
studies are necessary to price and sell a product. Established labor standards
must be set on an attainable basis. In the event a rate is considered
unattainable, a review of this study may be requested. In the event of a dispute
regarding time study procedure, both parties shall attempt to resolve the issue
on this basis, the matter shall be referred to the grievance procedure.
ARTICLE 19
PAYMENT FOR JURY DUTY AND
VOTING ON ELECTION DAY
Section 1. All employees shall be paid at least (1) hour average
earnings for the time lost on election day for voting in State of Michigan and
national elections, providing such employees work the last one and one-half (1
1/2) hours prior to voting time.*
(*Includes Michigan Primary elections)
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<PAGE> 33
Section 2. Any employee on jury duty shall be paid the difference
between his or her regular rate of pay and the amount received for jury duty not
to exceed (8) hours per day.
When employee is released from jury duty, he is to report to work if
time left is equal to or greater than (2) hours on his normal shift.
ARTICLE 20
NOTICE OF PROPOSED LAYOFFS
Section 1. The Employer shall give the senior Union officer, the
steward and the employees in the section or department involved, at least (5)
working days' notice of all proposed or extended or permanent layoffs, with the
reasons thereof. Exclusions of the (5) days' notice are when acts of God or
emergency cancellation of orders or failure of vendors to deliver parts as
promised will apply, then there shall be a minimum of (4) hours' notice given.
Section 2. Notwithstanding the above provisions, Union officers shall
be the last to be laid off and the first to be rehired, is far as practical, in
operation of the plant in accordance to preference as listed below:
Negotiating and Grievance Committee
Section 2. Super seniority shall not grant such employees immunity from
being bumped for shift preference. Such employees shall not be able to exercise
such super seniority for the purpose of bumping another employee on another
shift, bidding for a premium job; nor shall such superiority be exercised in the
event of a reduction in force on a premium job.
ARTICLE 21
INFORMATION TO UNION
Section 1. Copies of all instructions on matters affecting wages, hours
and working conditions, issued by the Employer to its supervisory staff shall,
upon issuance by the Employer, be sent to the Union.
Section 2. At the end of each month, the Employer shall provide the
Union with a complete list of the names, classifications, and dates of all
employees who are Union members and were laid off, quit, hired or reemployed
during the month. The Union shall notify the Company of any members not in good
standing with the Union.
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<PAGE> 34
ARTICLE 22
JOB EVALUATION
Both parties agree as to the desirability of adopting a system whereby
objective measurement and analysis of jobs can be made by the use of a degree
and point method. There is recognition on the part of both parties as to the
difficulties involved. Introducing such a system would place certain existing
jobs in a lower wage group and act to reduce the wages of employees currently in
such jobs.
However, the parties acknowledge that the long-range welfare of the
Company and its employees will be improved by establishing a formalized wage
system by objective measurement. Accordingly, a degree and point wage group
system is adopted and made a part of this agreement for all new jobs introduced
into the plant. Any job in existence in the plant on the effective date of this
agreement which may be discontinued or transferred from the plant and
reintroduced into the plant during the term of this agreement shall not be
subject to this provision.
The Company shall have the right to establish a rate for a new job
being brought into the plant and after 5 days' normal production operation, the
job shall be evaluated. In no event shall this exceed 10 production days unless
an extension shall have been mutually agreed to in writing between the Company
and the Union Bargaining Committee. The rate established shall be retroactive to
first production day.
(This system has been accepted and signed by the parties, but is not
printed herein because of its extended length. Copies of such plan shall be made
available at the personnel office of the Company and at the Union Hall).
ARTICLE 23
PENSION AND SEVERANCE
The Pension Plan, including Severance pay provision dated March 1,
1955, is adopted as a part of this agreement; its expiration date is extended to
the date of this agreement.
Employees who retire after attainment of age 65 and after 5 years of
Credited Service will have the following benefits:
(1) For each month during the period from March 1, 1993 to March 1, 1994,
$17.00 for each year of Credited Service;
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<PAGE> 35
(2) For each month during the period from March 1, 1994 to March 1, 1995,
$17.50 for each year of Credited Service;
(3) For each month during the period from March 1, 1995 to March 1, 1996,
$18.25 for each year of Credited Service;
(4) A $5,000 paid up life insurance policy and a Medicare supplement paid
by the Company.
Employees who retire age 50 through 59, with 5 years of Credited Service, will
be retired at the reduction factor of 3.6. Employees who retire age 60 through
64, with 5 years of Credited Service, will be retired at a reduction factor of
2.4.
Company will pay the full cost of retirees' insurance age 60 to 65 and
a Medicare supplement thereafter, plus $3,000 paid up life insurance.
Employees who retire early (50 - 59) and have 30 years of Credited
Service shall have a $3,000 paid up life insurance policy.
Employees retiring between March 1, 1993 and March 1, 1994, shall
receive subsequent pension increases.
Disability retirement with 10 years of Credited Service, Company will
deduct income taxes (optional).
Employees shall receive credit for all time spent in the employ of
Electro-Voice (Buchanan) for pension purposes only.
Pension benefits for period after March 1, 1996 shall be the subject of
any negotiations to extend this agreement.
ARTICLE 24
GROUP INSURANCE
The Company agrees to maintain a uniform Group Insurance plan providing
benefits for Accident and Sickness, AD & D, Surgical Reimbursement, Life
Insurance and Hospital Insurance for hourly paid employees.
Additional insurance benefits negotiated in 1993.
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<PAGE> 36
A and H (Weekly benefits - 26 weeks) $150.00, first, second and third
year;
<TABLE>
<S> <C>
Major Medical.............................. $2,000,000
Life Insurance............................. $16,500, first year;
$16,500, second year;
$16,500, third year.
</TABLE>
The Company will pay a portion of the premium for three months for laid
off employees and then offer them the opportunity to continue their insurance
under the provisions of COBRA. Note: laid off employees will still have to pay
the normal active medical premium payments for this benefit to continue for the
three months.
The master policy which will be issued by the insurance companies is to
be made part of this contract. Terms and conditions of this contract shall take
precedence over any conditions of this contract for group insurance between the
Employer and the insurance companies.
The insurance plan shall be covered by a master policy issued by the
carrier.
The Employer and the Union are to be equally represented in the future
administration of the group insurance plan. The group insurance plan shall run
concurrently with the contract.
The Employer will agree to PPO Option 1 for active employees at an
employee contribution rate for the first year of:
$2.00 per week for employee
$11.88 per week for plus one
$18.13 per week for two or more dependents
HMO employee contribution rate will be the same as the PPO1 rate unless
HMO exceeds the PPO I rate, then employee picks up the difference.
IBA Classic Choice will also be available with a $250.00 deductive and
an 80% - 20% Co-Pay. Employees will pay differential between PPO Option 1 and
Classic Choice premium.
In addition, administrative costs will be borne by the Company, as they
have in the past.
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<PAGE> 37
Employees who take early retirement and who have reached their (60th)
birthday at the time of such early retirement may continue their group medical
and surgical insurance with life insurance reduced to $3,000 until they reach
their (65th) birthday and a Medicare supplement thereafter. Employees who retire
early (50 - 59) and have 30 years credited service shall have $3,000 life
insurance. The cost of such life insurance premium shall be paid by the
Employer. Employees who take a normal retirement shall have a $5,000 paid up
life insurance policy, plus a Medicare supplement.
The dependents of early retirees within the above-mentioned age
brackets may continue their insurance coverage at group insurance rates in
effect, and the full cost of such dependents' benefits shall be paid by the
retired employees. Dependent benefits will cease when both retiree and their
dependents turn age 65 or the duration of this three-year contract. They will be
eligible for Medicare supplement thereafter. Premiums to be paid by dependents
or spouse.
Arrangements for paying premiums to the Company shall rest entirely on
the employees.
ARTICLE 25
POSTING OF AGREEMENT
Section 1. The Employer shall keep full copies of this agreement posted
in conspicuous places accessible to all employees. Copies of this agreement
shall be placed in the hands of supervisors, foremen, the personnel and
timekeeping departments, with instructions to comply with its terms and
cooperate with the Union for the administration thereof.
ARTICLE 26
GRIEVANCES
Section 1. Grievances which are of emergency nature may be taken up at
any time.
Section 2. Grievances concerning disciplinary action or discharge must
be filed in writing, within five (5) working days of receipt of notification of
such action, or such grievances shall not be valid.
All other grievances must be filed in writing within five (5) working
days after the occurrence of the event on which it is predicated unless either
party shall request in writing an extension of time for further investigation of
the issue.
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<PAGE> 38
Section 3. All differences, disputes and grievances that may arise
between the Union and the Employer shall be taken up as follows:
(A) Between the aggrieved employee and the department steward on the one
hand and the department foreman on the other. However, either party may
request the chief steward be present.
If no satisfactory settlement is reached between them within (24)
hours, the matter shall be referred to Step B. (24 hour period may be
extended to a maximum of (72) hours by mutual consent).
(B) The steward, chief steward, and the representatives of the labor
relations department of Management.
If no satisfactory settlement is reached between them within (24)
hours, the matter shall be referred to Step C. (The (24) hour period
may be extended to a maximum of (72) hours by mutual consent.)
(C) The local Union negotiating committee, representatives of the
International Union on the one hand and Management representatives on
the other. If no satisfactory settlement is arrived at then, the matter
shall be submitted to conciliation (state or federal as agreed to by
both parties) within (10) calendar days. If no satisfactory settlement
is arrived at then, the matter shall be submitted to arbitration within
(10) calendar days.
A written statement of Management's position shall be furnished the
Union within five calendar days after the conclusion of the meeting.
(The Company and the Union may mutually agree to an extension of such
five-day period.)
(D) The steward and/or the foreman involved in a grievance may be requested
to attend all meetings pertaining to said grievance.
(E) Grievances and all answers to grievances shall be in writing and
submitted within the time limits hereinabove set forth.
ARTICLE 27
ARBITRATION
Section 1. All differences, disputes, and grievances between parties
which shall not have been satisfactorily settled after following the procedure
hereinabove set forth
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<PAGE> 39
shall, at the request of either party, be submitted to arbitration within the
time limitation as set forth in Step C of the grievance procedure.
The arbitrator shall be elected by mutual agreement of both parties.
Any difference, dispute, or grievance referred to the arbitrator shall be acted
upon within (10) days after submission to the arbitrator. A decision of the
arbitrator shall be binding on Management and Union. The decision shall be
complied with within (2) days after the decision is rendered.
Section 2. It is the intent of the parties to settle differences,
disputes and grievances by responsible bargaining and not resorting to
arbitration as a substitute for such responsibility. In an attempt to discourage
hasty or irresponsible appeals to arbitration, it is agreed that the losing
party shall bear the full cost of the arbitrator's fee and expense. When, in the
judgment of the arbitrator, there is a split decision or no clear cut win or
lose, the arbitrator shall order such fee and expense to be shared on a 50-50
basis.
Section 3. The Company will furnish the hearing room; legal fees and
expenses of case preparation shall continue to be borne by the respective
parties.
ARTICLE 28
TOOL ROOM SENIORITY AND QUALIFICATIONS
Section 1. Department Head of Tool and Die, First Class Tool and Die
Makers, Jig and Fixture Makers and Machinist shall be selected by management.
Selection shall be made on the basis of ability. Tool and Die Makers, Jig and
Fixture Makers, and Machinists selected to do this work shall be on a
probationary period for the first (60) days of work.
Section 2. After completion of a probationary period ((60) days of work
during which time a partial day shall be construed as a day of work), Tool and
Die Department Head, Tool and Die Makers, Jig and Fixture Makers, and Machinists
shall establish departmental seniority.
Section 3. Tool Room Cutbacks. Tool room persons shall be ruled
specifically by departmental seniority in regard to cutbacks.
The cutback person may bump a lower classification provided he has
sufficient departmental seniority.
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Section 4. Tool and Die Qualifications. Because the Tool and Die
qualifications require certain skill and knowledge not always attained by
seniority or service, a person desiring further progression must of necessity
take further academic training or have taken academic training to receive
consideration for further upgrading. This in no way implies that all people in
the Machinist class or the Jig and Fixture class will become Tool and Die
Makers.
Section 5. Tool Room Layoff. In case of layoff of men in Tool and Die
classification, Jig and Fixture classification, and/or Machinist classification,
they shall be given an option of taking a voluntary layoff or a lesser rated
job, providing they have sufficient plant seniority to take the lesser rated
job; subject to recall to Tool and Die classification, Jig and Fixture
classification or Machinist classification by department seniority.
Tool and Die Makers, Jig and Fixture Makers and Machinists on cutback
to lesser rated jobs shall perform only the work that classification calls for.
The Union shall be notified in the event of any reduction in the work
force of Tool and Die Makers, Jig and Fixture Makers, or Machinists.
Section 6. Departmental Seniority. It is specifically agreed by
Management and Union that departmental seniority shall be in effect in Tool and
Die, Machinists, and Jig and Fixture Makers classifications only and that the
establishment of departmental seniority in any other department or groups is not
subject to discussion or negotiations during the life of this agreement.
Section 7. Employees classified as Tool and Die Makers, Jig and Fixture
Makers and Machinists do not carry super seniority, but are skilled trades
workers and this factor is taken into consideration in case of layoff.
ARTICLE 28A
MAINTENANCE DEPARTMENT SENIORITY
Section 1. In recognition of their skilled trade status, departmental
seniority shall be established for the Maintenance Department, Maintenance 2
shall be selected by posting. Selection shall be made on the basis of seniority
and the probationary period for such group shall be (60) days.
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Section 2. Maintenance Department personnel shall be ruled specifically
by departmental seniority in regard to cutbacks. In case of layoff, employees in
the maintenance classifications shall be given the option of taking a voluntary
layoff or using their plant wide seniority in accordance with the provisions of
Article 5, Section 7. Recall to the Maintenance Department shall be in strict
accordance with their department seniority.
ARTICLE 29
PREMIUM JOB-TRANSFERS
Section 1. In the event that an employee on a premium job accepts a
group leader or department head job on the same premium job or production line,
such employee shall be returned to his or her former premium job upon
termination of such group leader or department head job, providing such employee
has sufficient plant seniority to retain that premium job.
Section 2. In the event that an employee on a premium job accepts a
group leader or department head job on a different type of job, or in another
department or production line, then such employee shall withdraw from the first
premium job. Upon termination of this group leader or department head job, such
employee shall revert back to a base rate job.
Section 3. In the event an employee on a premium job accepts another
premium job other than group leader or department head as outlined above, the
employee shall withdraw his or her name from the first premium job.
(It is recognized that certain premium jobs are of a part time nature
and that it is disadvantageous both to the employee and the Company to go
through repetitive bumps and recalls. Therefore, all jobs of this nature,
mutually agreed upon between the Company and the Union, shall be handled in the
following manner:
The employee shall not be cut back temporarily, but shall remain at his
regular rate and be assigned to other work within his own or a lower wage
classification without "extra help" penalty.)
ARTICLE 30
PREMIUM JOB LAYOFFS AND RECALL
When an employee is on a premium job at the time of layoff, Management
agrees to fill such vacancy by posting, if required.
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<PAGE> 42
ARTICLE 31
SHIFT BUMPING
Section 1. In Group 1, plant seniority will govern the selection of
shifts. On all premium jobs, plant seniority shall govern the selections of
shifts; however, premium operators shall not bump and shall be immune from
bumping for shifts for the first (30) days of initial training on the job.
Shift assignments for training shall be determined by the Company.
Employees who have exercised their option of selection of shifts cannot
again exercise that option for (30) calendar days.
Section 2. Notice of desire to bump for a specified shift shall be
submitted in writing to the foreman. Such change of shifts shall go into effect
on Mondays and notice shall be given to the foreman no later than Thursday prior
to the Monday of shift change unless mutually agreed upon by Management and
Union.
Section 3. If an employee is moved off the night shift to the day shift
by Company direction during the work week, said employee shall carry the premium
shift rate for the remainder of the week.
ARTICLE 32
COST OF LIVING
COLA
March 22, 1993................................................NO COLA
August 22, 1994.............................................$.10 COLA
August 21, 1995.............................................$.10 COLA
ARTICLE 33
JOB POSTING
Section 1. All openings on premium jobs shall be posted on the bulletin
boards for (48) hours prior to selection of operators unless otherwise agreed
between the Company and the Union. The only exception of posting shall be for
openings on the following jobs:
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<PAGE> 43
A. Group Leaders
B. Department Heads
C. Tool and Die Makers
D. Machinists
E. Jig and Fixture Makers
F. Tool and Die Lead Person
G. C.N.C. Programmer Operator
H. Set Up Die Cast & Trim Press
I. Plastic Set Up
Employees who believe themselves qualified for the above classification
may file an advance application in the Personnel Department asking for
consideration should future openings occur. Union will be notified of
applicants.
Premium jobs that are filled by posting must be filled on the basis of
seniority provided the employee is capable of performing the work with
reasonable efficiency. Employees shall be free to refuse such jobs without
losing his or her seniority standing. Posted lists for premium jobs shall be
valid for a period of (2) weeks from the date of posting removal.
Section 2. The (2) week period shall start as the date of the removal
of the posting and shall expire at midnight on the (14th) calendar day from the
date of the posting removal.
Section 3. The Company will select at least one person and use him or
her on the job that was posted before the bid sheet time expires unless the need
is justifiably eliminated during the posting period. After selection of at least
one person from the live bid sheet, the Company may utilize employees on the job
while the bid sheet is alive. A replacement may be used in the event the senior
bidder is not available. The Company will give the Union notice when the job is
so eliminated.
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Section 4. Additional qualifications such as various types of testing,
previous training and/or special skill(s) may be made a factor in the selection
of and retaining or upgrading of premium rated operators during the life of this
agreement. Union stewards shall be present for all tests and the correcting
thereof.
However, such additional requirements shall be negotiated between the
Employer and the Union and shall not be put into effect arbitrarily.
Section 5. Whenever a job is filled in accordance with the provisions
of Article 33, Job Posting, the person awarded the job shall have, for a period
of (30) working days, the right to return to his prior job in the event he is
disqualified, cut back, or bumped from the job upon which he has bid.
The vacated job shall be posted and filled from such posting. Should
he, the vacating employee, be disqualified, cut back or bumped from the premium
job on which he has bid, he shall be returned to the job which he held
immediately prior to bidding (regardless of seniority). The employee who filled
the vacated job shall return to his prior job.
The disqualification of an employee from a premium job is the
responsibility of the Company. Employees do not have the option of trying out a
premium job and disqualifying themselves. When an employee withdraws from a
premium job awarded him by bid, he shall be assigned a job in Group 1 and paid
the Group 1 rate.
Should an employee be disqualified from a premium job, he shall not be
permitted to bid or bump into such job for a period of (1) calendar year from
the effective date of the disqualification.
An individual must personally sign the bid sheet or authorize a Union
steward to sign the bid sheet in his absence. A steward signing the bid sheet
shall initial that he has signed for the employee.
An individual signing a bid sheet or authorizing a Union official to
sign a bid sheet in his absence must accept or reject the job offer within 24
hours of the bid coming down. It is the employee's responsibility to assure that
contact information is recorded with employee relations, and a Union official
will be present at time of contact regarding the job bid.
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ARTICLE 34
GENERAL
Section 1. Rates on Premium Jobs, Groups (2) and above are set out as
jobs which require specific knowhow or have additional responsibility, and those
rates are in effect only for the time actually spent on those jobs.
Section 2. Groups (2) and above shall attain maximum differential rate
after a trial period of (30) days of work unless otherwise specified. New
employees shall receive differential pay on upgraded jobs equal to their base
plus the upgraded difference.
An employee awarded a premium job by bid in Groups 2, 3 and 4 shall
serve a qualifying period of 30 working days at Group 1 rate of pay.
An employee awarded a premium job by bid in Group 5 or above shall
serve a qualifying period of 30 working days at Group 4 rate of pay.
Previous qualification shall be credited against the qualifying period
if supported by Company records and/or agreement between the employee and the
foreman. In the absence of a mutual agreement, Company records will prevail. A
supervisor has the option to qualify a person before the 30 day qualifying
period has expired.
Nothing contained herein shall change the method of payment of
progressive advancement jobs as outlined in the labor agreement.
Section 3. Whenever the pronoun he is used in this Agreement, it shall
mean either he or she as the case may be.
Section 4. Months in minimum wage scale shall be known as calendar
months with minimum scale retroactive to date of hire. Any employee laid off or
absent during this period shall be rehired at his rate at the time of layoff or
leave. Full payroll weeks only will be considered.
Section 5. Classification and the establishment of new classifications
shall be subject to negotiations and agreement by and between the Employer and
the Union. No premium job shall be broken down without negotiation.
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Section 6. Job Inequities. It is understood that no inequities exist
that are not solved by this Agreement and that wage negotiations shall be waived
for the life of this Agreement unless otherwise specified.
It is agreed that only major changes in jobs occasioned by additional
equipment, substantial increases in work load and establishment of new jobs by
new types of products are the only areas in which negotiations may take place
relative to wages and this should be handled through the grievance procedures.
Section 7. Outside Contractors. While there are employees laid off and
cutbacks are in force, no outside contractors shall be called in if our people
are capable and have the tools and machinery to perform such work and are able
to perform the work on an economical and sound basis. The Company will notify
the Union when contemplating calling in outside contractors.
Section 8. Inventory Personnel. Selection of inventory personnel will
be made by mutual agreement. All Union personnel who are working full time and
not scheduled to perform their normal job are eligible to work inventory.
An inventory list will be posted and those volunteering will be
selected in order of seniority. If additional volunteers are needed, requests
will be made by plant wide seniority.
An employee who has signed to take inventory may withdraw their name
from the list by notifying the Employee Relations Director a minimum of four (4)
hours prior to the end of the day shift the day before inventory.
Employees not volunteering to take inventory may take a compensated day
if they desire. Employees assigned to their regular job who are absent must take
a compensated day or be charged for the absence.
Section 9. As used in this Agreement, premium jobs shall mean those
jobs in wage Group 2 and above.
Section 10. Reclassification of Line-Rated Jobs. In the event a
line-rated job is upgraded to a premium rate and the regular operator has been
on the job (30) days of the work, the job will not be posted until a future
opening occurs. Should the operator have less than (30) days of work experience,
the jobs shall be posted as outlined above.
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Section 11. Company and Union agree to work together to establish
non-smoking areas where reasonable.
Section 12. An Educational Assistance Program is available for hourly
employees who desire to improve their skills and/or education. Consult the
Employee Relations Department for more details.
Section 13. Company will upgrade and/or revise tests from time to time.
Only test items related to job functions shall be used in qualification tests.
ARTICLE 35
COMPENSATORY LEAVE FOR SICKNESS OR EMERGENCIES
Section 1. Compensated Days. Subject to the conditions specified in
Section 2, beginning each calendar year regular full-time employees with (1)
year or more of seniority shall be credited with a maximum of 8 compensated
leave days beginning January 1, 1993 for absence due to illness or personal
emergencies which are earned in the previous calendar year at the rate of (1)
day for each (6) weeks on the active payroll. Active service on the payroll is
exclusive of time absent for layoffs and leaves of absence. Regular full-time
employees with less than (1) year of seniority at the beginning of any calendar
year thereafter shall be credited with (1) compensated day (8 hours) for each
(6) weeks on active payroll up to a maximum of 8 compensated leave days
beginning January 1, 1993. Compensatory leave pay for sickness or personal
emergencies shall be computed on the basis of (8) hours' straight time per day
at the employee's hourly rate of pay in effect when actual payment is made.
Section 2. Definitions. The occasions which qualify for compensatory
leave pay as referred to in this article shall include pregnancy, illness or
personal reasons. Personal reasons shall include all circumstances of a
compelling nature which require the immediate attention of the employee, but
require a minimum of four (4) hours' advance notice to the Company.
Section 3. Other Compensation - Holiday, Lay-off and Leave of Absence.
An employee may not receive compensatory leave pay for any day or days for which
other compensation is paid as a direct or indirect result of his employment such
as, but not limited to, vacation pay, holiday pay, workman's or unemployment
compensation. In no event shall an employee be entitled to compensatory leave
pay for qualifying hours prior to or following a holiday or vacation, during a
lay-off, or during an approved leave of absence. An employee will not be
eligible for compensatory pay for Saturday, Sunday or any unscheduled work days.
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Also, at no time will compensatory pay be made for more hours than the
plant was in operation on any work day.
Section 4. Method of Payment. Payment for earned compensatory leave
will be included in the next regular paycheck covering the payroll period during
which the request is submitted or verification is completed, provided, however,
that in no event will any payment be made for less than (2) hours of earned
compensatory leave pay. Compensatory leave papers will be completed by the
employee making the request for pay and shall be turned in to the Personnel
Department immediately upon their return to work. Compensated sick time shall
not be paid for an absence occurring more than two weeks before request for pay
is submitted to the Personnel Department.
Section 5. Unused Compensatory Leave Days. There shall be no
accumulation of unused compensatory leave from year to year. At the end of each
calendar year, employees who have not received their maximum compensatory leave
allowance shall be paid an amount equal to their unused earned compensatory
leave pay entitlement on or before the 31st of January. Unused compensatory
leave pay entitlement shall be by separate check. An employee who is permanently
laid off, retires, or whose employment or seniority is terminated for reasons
other than discharge for just cause shall be paid an amount equal to their
unused compensatory leave pay entitlement. Compensatory pay to people laid off
shall be at their rate at time of lay-off.
Section 6. Abuse of Compensatory Leave Pay. This plan is designed to
assist employees in meeting expenses arising from sickness, accident or personal
reasons. Employees will not be allowed to take more than (3) consecutive
compensated days.
Section 7. Employees, upon retirement, shall be compensated for days
earned in the year of their retirement, effective March 1, 1984.
ARTICLE 36
HOURLY RATES
<TABLE>
<CAPTION>
JUNE 22 JUNE 21 JUNE 20
1993 1994 1995
<S> <C> <C> <C>
New Hires Group 1 $5.00 $5.00 $5.00
13 Weeks $8.25 $8.45 $8.65
26 Weeks $9.79 $9.99 $10.19
GROUP 1 $9.79 $9.99 $10.19
Gate Breaker
All Other Assembly
</TABLE>
45
<PAGE> 49
<TABLE>
<CAPTION>
JUNE 22 JUNE 21 JUNE 20
1993 1994 1995
<S> <C> <C> <C>
GROUP 2 $9.91 $10.11 $10.31
Blister Pack Operator
Magnet Assembly
Magnet Press
GROUP 3 $9.97 $10.17 $10.37
Impact Machines
Relief Operator
Scope Tester
Specialized Solderer
GROUP 4 $10.20 $10.40 $10.60
Group Leader Light Assembly
Janitor
All Other Machine Shop and Heavy Assembly
Mutually agreed on Between Company and Union
GROUP 5 $10.46 $10.66 $10.86
Coil Winder
Dome Machine Operator
General Order Filler (Stockroom & Warehouse)
Heavy Magnet Assembly (Wide Band Driver)
Heavy Magnet Packer
Inspector (Beginner)
Inter-Plant Packaging
Plastics Machine Operator
Precision Diaphragm Trim
Receiving Clerk (Beginner)
Relief Operator-Systems
Repair/Parts Order Filler
Screw Machine 3
Systems Tester
Wide Band Coil Assembly
GROUP 6 $10.58 $10.78 $10.98
Brake and Shear/Welder
Clerical Repair
</TABLE>
46
<PAGE> 50
<TABLE>
<CAPTION>
JUNE 22 JUNE 21 JUNE 20
1993 1994 1995
<S> <C> <C> <C>
Clerical Shipping
CNC Machine Operator
Fork Lift Operator
Group Leader-Speaker Assembly
Group Leader-Systems
Hi Performance Driver Test
Inspector (26 Weeks Experience)
Milling Machine Operator
Paint Stripper Power Saw
Parcel Post & Order Filler/Heavy Packers
Punch & Trim Press Operator
Receiving Clerk
Sander-Rough
Screw Machine 2
Service Repair
Set-Up Man, Assembly (Beginner)
Tool Crib Attendant (Beginner)
Truck Driver (Overnight-GROUP 7)
Vibrator Operator
GROUP 7 $10.73 $10.93 $11.13
Group Leader-Warehouse
Systems Inspector & Repair
Load and Unload Spray Paint (Paint Systems Conveyor)
Department Head-Assembly
Polishing-Inexperienced
Hire Rate
8 Weeks $10.22 $10.42 $10.62
24 Weeks $10.29 $10.49 $10.69
39 Weeks $10.31 $10.51 $10.71
52 Weeks $10.73 $10.93 $11.13
(Above Schedule Applies Only to Polishing)
Specialized Microphone Tester
Die Cast Operator
CNC Programmer Operator (Beginner)
Spray Painter (Beginner)
</TABLE>
47
<PAGE> 51
<TABLE>
<CAPTION>
JUNE 22 JUNE 21 JUNE 20
1993 1994 1995
<S> <C> <C> <C>
GROUP 8 $10.97 $11.17 $11.37
Maintenance 2
Plating-Inexperienced
Hire Rate $10.48 $10.68 $10.88
4 Weeks $10.55 $10.77 $10.97
12 Weeks $10.67 $10.87 $11.07
19 Weeks $10.73 $10.93 $11.13
26 Weeks $10.97 $11.17 $11.37
(Above schedule applies only to Plating)
Repair Head
Shipping Department Head
Stockroom Head
Tool Crib Attendant (180 Days)
GROUP 9 $11.07 $11.27 $11.47
CNC Programmer Operator
Inspector
Polisher-Process
Screw Machine 1
Spray Painter - All Around
GROUP 10 $11.27 $11.47 $11.67
Department Head - Inspection
Group Leader - Plating
Group Leader - Polishing
Group Leader - Punch Press Set-Up
Group Leader - Machine Shop
Group Leader - Screw Machine
Machinist Master Painter
Set-Up Man Assembly
GROUP 11 $11.44 $11.64 $11.84
Department Head - Plastic
& Die Cast
Set-Up Die Cast & Trim Press
Set-Up Plastics
</TABLE>
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<PAGE> 52
<TABLE>
<CAPTION>
JUNE 22 JUNE 21 JUNE 20
1993 1994 1995
<S> <C> <C> <C>
GROUP 11A $12.14 $12.34 $12.54
Jig & Fixture Maker - Beginner
GROUP 12 $11.84 $12.04 $12.24
Maintenance 1
GROUP 12B $12.85 $13.05 $13.25
Jig & Fixture Maker - First Class
Maintenance Technician 2
GROUP 13 $13.72 $13.92 $14.12
Tool & Die Maker 2
Maintenance Technician 1
GROUP 13B $13.26 $14.46 $14.66
Tool & Die Maker - First Class
</TABLE>
APPENDIX "A"
<TABLE>
<CAPTION>
JUNE 22 JUNE 21 JUNE 20
1993 1994 1995
<S> <C> <C> <C>
Group Leader Assembly $10.61 $10.81 $11.01
($.15 Above Group 5)
Group Leader-Coil Winder $10.61 $10.81 $11.01
($.15 Above Coil Winder)
Group Leader-Service Repair $10.88 $11.08 $11.28
($.15 Above GROUP 7)
Group Leader-Die Cast $10.88 $11.08 $11.28
($.15 Above Die Cast Operator)
Group Leader-Maintenance $11.99 $12.19 $12.39
($.15 Above Maintenance 1)
Department Head-Maintenance $12.14 $12.34 $12.54
($.15 Above Group Leader-Maintenance)
Department Head-Tool Room $14.51 $14.71 $14.91
($.25 Above Tool & Die)
Tool & Die Lead Person $14.41 $14.61 $14.81
($.15 Above Tool & Die First Class)
</TABLE>
49
<PAGE> 53
ARTICLE 37
JOB DESCRIPTIONS
ASSISTANT SET-UP; DIE-CAST & TRIM PRESS - Performs set-up on diecast
machines, trim press & any other equipment designated by Department Head
(Die-Cast) Dept. #19 and/or Supervisor.
Will be required to run production when not performing set-up duties.
Personnel to fill this position will be selected by management. Must perform
set-up for 60 working days at Group 7, 30 working days at Group 9, and be able
to demonstrate set-up proficiency before being advanced to Group 11.
BLISTER PACK OPERATOR - Must be able to select appropriate and proper
types and sizes of packaging materials to pack parts to prevent breakage or
scratching.
Must demonstrate ability to set up and operate blister back operation
productively within 30 days.
BRAKE AND SHEAR SPOT WELDER (SET-UP OPERATOR) - Ability to set up press
brake and shear equipment and spot welder from print, to produce the various
parts as required. Also runs machines productively.
CLERICAL REPAIR/TYPIST - All applicants for the job of Clerical Repair/
Typist must pass company standard typing test that requires (30) words per
minute after errors, in order to be eligible for the job.
Receives and processes incoming repairs and credit returns. Assembles
all correspondence relative to each other. Types repair orders, credits, and
quotes as required. Moves material to designated areas.
Must be able to learn dimension limitations.
Does final packing of microphones and other miscellaneous repair items
as directed.
CLERICAL SHIPPING - All applicants of job must pass company standard
typing test that requires (30) words per minute after errors in order to be
eligible for the job, and the test referred to as Receiving Clerk Test.
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<PAGE> 54
Maintains organized files on assigned Shipping Department paperwork and
documents.
Prepares applicable shipping documents for shipments, interplant,
domestic and export, as assigned.
Receives Factory Orders and order changes from EDP and maintains log of
such.
Receives filled factory, MP, Repair Orders from order fillers and
extends dollar value for days shipping value.
May be used to perform other departmental functions as directed by
supervisor.
Responsible for keeping work area neat and orderly.
Maintains credit hold listing and verifies status of all customer
orders before shipment.
Rate of pay - Grade 6.
CNC MACHINE OPERATOR - Shapes and finishes precision machined parts on
one or more automatically controlled machines. Loads parts or raw materials into
machine and clamps them in place ... aligned with cutting tools. Operates
controls to start pre-set operations which automatically perform a series of
functions, such as facing, surfacing, chamfering, boring, tapping, rough
cutting, finish cutting ... etc. Removes finished pieces, inspecting them
visually by gauges or other measuring devices. Performs other secondary
operations during machine cycle.
Observers operation of machine closely to locate or detect tool
defects, failures or machine malfunctions and reports such to supervisor.
Operator is responsible for daily maintenance and upkeep of machines.
The rate of pay will be that of Group (6).
CNC MACHINE PROGRAMMER/OPERATOR - Responsible for developing machining
programs & performing set-up, which will result in the most efficient
utilization of production CNC machines.
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<PAGE> 55
When not performing above function, operator will be required to run
production per the CNC operator job description.
Persons to be placed in this position will be selected by management.
Management reserves the right to develop machine programs & perform CNC
set-up.
This job will be performed on any shift with plant seniority of either
"CNC operator" or "CNC Programmer/Operator" governing shift preference.
Qualifying time will be 90 working days. Until this person demonstrates
full programming ability, pay rate will be Group 7.
Rate of pay will be Group 9.
COIL ASSEMBLER: OF VOICE COILS USED ON WIDE BAND HI - COMPRESSION
DRIVERS - Individual must learn the skills and techniques that are required in
all the steps leading toward the completion of all coil assemblies. Performance
to acceptable production and quality standards is required.
Knowledge in the proper use of adhesives, fixtures, solders, fluxes,
solvents, etc., that are used in the production of these assemblies is required.
Verification of qualifying will be based on the successful assembly and
testing of 12 complete parts per family. Personnel bidding on this job must
qualify or be disqualified.
Qualify 120 working days. Must qualify on DH1A's & DH2A's within 80
working days. Remaining 40 days qualify on 2012's and 1506's. Company and Union
agree all qualified operators shall be rotated. All present employees will be
placed under grandfather clause.
Employees working on Wide Band Assembly should they have over 30 days
are subject to being bumped by a fully qualified operator. Should the operator
have less than 30 days are subject to being bumped or laid off in line of
seniority.
COIL WINDING - Ability to wind coils productively.
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DEPARTMENT HEAD - PLASTIC AND DIECAST - Shall instruct operators on job
assignments, (diecast - plastic - saw - trim presses - sanders - vibrators and
hand burring operations). Shall assist (when necessary) in the set-up of all
machines in the plastic department, give on-the-job instruction, oversee quality
and perform other such duties, as directed by the Management. Shall also operate
machines in the plastic department.
DIECAST OPERATOR - Operate diecast machines as instructed by supervisor
or department head. Operator does not make adjustments to machines but must
notify set-up operator of any malfunction of machine being operated. Must know
basic quality standards. Keeps work area and machine clean. Maintains and
follows safety standards. Operators will be selected by job posting procedure.
DOME MACHINE OPERATOR - Must be able to operate dome form machines
productively to set procedures. Responsible for monitoring and recording Q.C.
samples which include:
Height of the dome.
Temperature that dome was run at.
Inch pounds of pressure machine is running.
Heat numbers of the material being run.
Performance of machine or material.
Record daily production and number of rejects.
Qualifying time will be 30 working days.
Rate of pay will be Group 5.
FORK LIFT OPERATOR - Operates a manually controlled gasoline or
electric powered lift truck to transport materials, stock and products about the
warehouse and factory. May also operate hand truck when necessary (or for sake
of expediency) in transporting materials, stock and products. Shall assist when
necessary (when the fork lift is normally required) in the loading or unloading
of trucks and shall keep the fork lift supplied with fuel, and in the best
operating condition possible and shall operate the lift truck in a safe and
proper manner at all times.
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Fork Lift 2nd and/or 3rd Shift. Company and Union agree to designate 1
employee on the 2nd and/or 3rd Shift who will become a Licensed Fork Lift Drive
for the purpose of set-up of large dies in plastic's and diecast departments or
unloading a truck which may come in late. Remove tote boxes or plastics which
are in stacked positions. The fork lift cannot be used prior to 5:00 (winter
hours) and 4:00 (summer hours) if the Company has prior knowledge to an incoming
semi; the normal fork lift operators shall be kept over.
GENERAL ORDER FILLER (STOCK ROOM AND/OR WAREHOUSE) Performs all duties
of locating stock, filling orders properly, identifying and locating parts. Must
have complete knowledge of all paper work on locating and disbursing all parts.
Accomplishes all necessary paper work to maintain complete records of all
materials received or disbursed from stock room or warehouse.
Performs all other duties as designated and instructed by Supervisor,
Department Head or Group Leader.
Must perform all duties to keep stock room and/or warehouse in neat and
orderly fashion.
GROUP LEADERS (AND DEPARTMENT HEADS) - It is the responsibility of the
group leaders and departmental heads to carry out by direction of the company,
placement of employees within their department, to report to management lack of
work for employees in that department, to see that materials are available for
work, to see that necessary paper work is processed and to provide means for
training on the job.
It is recommended that group leaders and department heads confer with
Management relative to needed jigs, fixtures, tools and safety devices which
would facilitate operation of their department. In departments where there are
both group leaders and department heads, the department heads shall have
jurisdiction over the group leader(s).
HEAVY MAGNET PACKER - Responsible for heavy magnet packaging, including
hardware and literature. Keeps updated on added or deleted parts, paint finish,
and proper skid placement. inspects each unit for paint finish and production
handing marks. Insures each unit conforms with Q.C. specs. Counts and records
units shipped.
Qualifying time will be thirty (30) days.
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Rate of pay will be Group 5.
HIGH PERFORMANCE DRIVER TEST - Tests all High Performance drivers. Runs
rub, buzz and distortion tests on cover assembly, and assembles to magnet
assemblies. Measures and/or runs curve for response, level, impedance, etc., by
using curve tracer, oscilloscope, audio-oscillator, and associated equipment to
determine conformance to specified limits. Makes minor external adjustments and
setups on test equipment as per instructions. Performs visual/mechanical
inspection of unit per Q.C. instructions.
Runs required tests on cover assemblies using standard magnet assembly
to obtain "Cover Kit" units.
Items not meeting required standards are rejected and properly tagged
as to defect. Those meeting required standards are prepared for transfer or
packaging, i.e., stamp, install nameplate, clean, sent to packaging, or place in
bulk pack as directed.
Have ability to read and understand test procedure information on
prints. Responsible for maintaining daily inspection reports.
IMPACT MACHINE - Ability to operate electric and/or air, and/or
hydraulic press, such as eyelet machine, riveter, etc., productively.
INSPECTORS - Prior to obtaining 26 weeks' rate, inspector must pass the
minimum requirement test as given by the Employer. Failure to pass the minimum
requirement test will result in the disqualification of the employee from the
inspection job.
Inspector (26 weeks experience). Inspector inspects vendor, and/or, in
process material, finished goods or raw material and must be able to read all
measuring devices, such as micrometers, optical comparator, indicators,
verniers, thread gauges, "ring and plug" special gauges for designated
dimensions, etc.
Must be able to read complex blueprints as required to check all
material used in plant. Must have a good knowledge of shop mathematics
pertaining to triangulation and the use of trigonometry tables. Inspectors will
be allowed to use books, tables and calculators to accomplish this end.
Accomplishes necessary paper work to maintain complete record of all
material inspected and to route same for designated disposition.
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Performs all other duties as designated, as instructed by the
supervisor, department head or group leader.
Before receiving 52 weeks rate, employee must serve a minimum of 52
weeks in the department (and pass examination with a grade of not less than
90%). (Test to be given by Employer.)
After being accepted as a 52 week inspector, the inspector will be
required, with a minimum amount of direct supervision or aid, to:
Do any type of layout work required.
Inspect all or any work done in Tool Room in detail, or completed to
job tolerance of .0002. Check treads using 3 wire method, optical equipment, or
gauges. Check gauges, adjust gauges, instruct in use of gauges, fixtures and
jigs for inspection.
Inspectors cut back out of the department shall be cut back in
accordance to plant seniority.
INTER-PLANT PACKAGING - Must select proper packaging material to
prevent breakage or scratching of material to be shipped, will look at all parts
at time of packaging to remove parts that are scratched, dented, or any other
items they may be instructed to look for or sort out while packing. Must select
proper carton or bulk pack to minimize breakage or damage in transit and apply
labels or enter identifying data on each container.
JANITOR - Performs all tasks customarily considered as janitorial or
custodial. Duties include maintaining floors - sweeping, cleaning, stripping,
waxing, and buffing; replacing supply items; wall and window washing; waste
disposal, incinerator operation; normally works to a written schedule but may be
assigned other janitorial duties. Must have ability to learn to operate
efficiently equipment and material used in floor polishing. Must demonstrate
ability to adapt to this type of work within (5) working days.
JIG AND FIXTURE MAKER-BEGINNER - Before receiving jig and Fixture Maker
beginner rate, employee must serve a minimum of (78) weeks at Machinist rate
except those employees qualified under the "Experience and Review Schedule".
Employee must be able to meet all the requirements as set out in Machinist, and
in addition must also have the ability to make production jigs and
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fixtures from layout, make minor tool and die repairs, make simple dies, and do
machine work from layout.
JIG AND FIXTURE MAKER, 1ST CLASS - In addition to requirements for Jigs
and Fixture Maker, Beginner must be able to make advanced jig and fixtures from
parts, drawing or layouts. Must serve (1) year in "Jig and Fixture Maker -
Beginner" classification before consideration for advancement, or in the
judgment of management must have demonstrated skill and ability required for the
job.
LOAD AND UNLOAD SPRAY PAINT (PAINT SYSTEM CONVEYOR) - It is the
responsibility of employees in this classification to load the paint system
conveyor racks with parts to be washed and/or painted according to instructions
contained on the shop routing or by direction of the foreman or his designate,
and to unload such parts and stack them in such a method as is provided, and to
unload carts used for baking the batch-oven. Loading may require pre-racking of
the parts as well as hanging them on the conveyor directly.
Personnel shall be rotated on the various types of work in this
classification.
MACHINIST - Before receiving Machinist rate, employees must serve a
minimum of (26) weeks at Group 4 rate except those employees qualified under the
"Experience and Review Schedule" listed below. Must also have the ability to
service or set up various jobs, do various types of machine work and be able to
make simple jigs and fixtures with supervision.
EXPERIENCE AND REVIEW SCHEDULE - Machinists and Jig Fixture Makers. -
Exceptions to the time requirements as set forth for Machinists and Jig and
Fixture Makers are as follows:
MACHINISTS AND JIG AND FIXTURE MAKERS OBTAIN FROM:
(1) Screw Machine Department 26 weeks time credit
(2) Die Cast 12 weeks time credit
(3) Punch Press 12 weeks time credit
The above time credits shall apply only to those employees who have
obtained the top rate in Screw Machine Department, Die Cast 1 or Die Cast 2 and
Punch Press Department.
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The Credits may be computed on a combined basis but the total time
credited shall not exceed (52) weeks or be less than (12) weeks. These time
credits shall apply only to the above named (3) jobs.
Previous experience (or training) as a Machinist or in Tool and Die
work shall be credited weeks equivalent to the number of weeks spent in that
type of work. Previous work experience credits shall not be added to credits
given for Screw Machine, Die Cast or Punch Press work, but such employees shall
receive the higher number of credits. The time credited under the "Experience
and Review Schedule" plus ability shall determine an employee's classification.
REVIEWS - Reviews shall be held between Management and the Union
negotiating committee in regard to progress being made by Machinists and Jig and
Fixture Makers.
MAGNET ASSEMBLY (LIGHT) - Stock own parts at work position, installs
centering plug in back plate, applies bead of cement evenly so as to not to get
cement in air gap. Cements back plate, pole piece and installs in place, place
magnet, cement magnet, place front plate, install centering pins in air gap.
Place magnet assembly in tray, to box or other container for handling. He is to
see that parts are correctly put together before placing in container. Must be
able to operate productively.
MAGNET PRESS - Place magnetized magnet assembly in center of frame,
place frame and magnet sub assembly into hydraulic press, press magnet assembly
into frame, remove frame and magnet assembly, place on conveyor belt, make up
screw assembly, place screws into frame to hold magnet and drive screws with
power drive.
Must be able to operate productively.
MAINTENANCE 2 - Must work for a period of at least (6) months in
Maintenance Department at Group 4 classification rate.
Maintenance 2 employees shall, during this (6) month period, assist one
or more workers in Maintenance 1 group or the Maintenance Department Head or for
the Maintenance Group Leader(s) perform specific or general duties of lesser
skill. At the end of (6) months he shall be upgraded in pay to Maintenance 2
rate.
MAINTENANCE 1 - Must have at least (12) months experience in Department
and also, in order to obtain Maintenance 1 rate, he must qualify as required in
the test listed below.
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Completion of qualifying time will establish test date.
REQUIREMENTS AND TESTS FOR MAINTENANCE:
PLUMBING: (Air - Gas - Water - Oil - Steam)
Steam traps - Where and how used.
Check Valves - Where and how used.
Pipe and pipe sizes.
Copper Tube - Types of joints.
Types of pipe dopes used in various applications.
ELECTRICAL: (Single and 3 phase circuits)
How to determine fuse by knowing loads in volume (watts).
How to determine wire size by knowing loads in volume (watts).
How to determine conduit size by knowing loads in volume (watts).
Hook up of motors and rotation control.
Use of meters for voltage reading - amp reading and resistance.
Must be able to do workmanlike job of conduit and open circuit wiring.
WOOD WORKING:
Must be able to make rectangular frame with right angle corners
(Mitered Corners).
Must know how to use wood working tools as possessed by the Company.
Must know paint, thinning, etc.
Must be able to do workmanlike work in simple carpentry.
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BOILER:
Must know maintenance of boiler and heating equipment. In addition to
the above test Maintenance 1 employees must also have at least a basic knowledge
of:
Installation of equipment, set-up, and general maintenance - Must be
able to install or assist in the installation of machines and equipment, set up
machines and equipment and perform maintenance duties on machines and equipment.
Be able to do general maintenance work relative to the upkeep and maintenance of
all Company property.
MAINTENANCE TECHNICIAN 2 - Must have a minimum of 2 years in
Maintenance 1 classification, similar experience in maintenance somewhere else,
or demonstrated ability to repair CNC equipment and other computer conrolled
machinery in a timely manner and with assistance as needed. Must be able to
analyze and make major machine and equipment repairs and must be able to read
schematics.
Individual must also demonstrate ability by successfully passing a
qualifying test covering electrical, hydraulic systems and pipe fitting.
Rate of pay will be Group 12B.
MAINTENANCE TECHNICIAN 1 - In addition to Maintenance 1 and Maintenance
Technician 2 duties, the individual in this position must be able to analyze
defects and perform repair of electrically, pneumatically, hydraulically
operated and/or computer controlled machinery, in a timely manner.
A minimum of 5 years in Maintenance 1 and/or Maintenance Technician 2
or equivalent is required, plus individual must demonstrate ability by
successfully passing qualifying test.
Rate of pay will be Group 13.
MASTER PAINTER - In addition to Spray Painter-Beginner ability, a
Master Painter must have knowledge to operate the electro-static paint system
which includes technical direction to conveyor loaders as to methods of hanging
parts on hangers and conveyor, placement of employees within the department, to
see that materials are available for work, the operation and control of the
phosphate washer, the operation and control of the baking oven, and the
operation and control of the electrostatic spray equipment.
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Must instruct to see that proper paperwork is processed and provide
instruction and training to Spray Painter-Beginner in all phases of paint
operation.
When more than one Master Painter is available, they shall rotate
monthly between hand paint and systems operation.
Spray Painter-Beginner will be given the opportunity to qualify in
Spray Painter-All Around classification after (3) months training and service.
Spray Painter-All Around will be given the opportunity to qualify as
Master Painter. Selection shall be made on the basis of ability. Spray Painter
selected to do this work shall receive Master Painter rate and be put on a
probationary period for the first 90 days of work.
MILLING MACHINE OPERATOR - Must be able to set up and operate
productively the various productive milling machines as used in our plant.
PAINT STRIPPER - Performs all tasks considered as Paint Stripper.
Duties include stripping, brushing and any other operations required to remove
paint to make parts reusable. This is a wet operation requiring the use of
chemicals or solvents used in softening or loosening paint.
Strips paint rack, hangers, and fixtures as needed.
PARCEL POST & ORDER FILLER/HEAVY PACKER - Must have knowledge of all
part numbers and materials locations, be able to pack, label and compute charges
for all parcel post and united parcel shipments. Must know the united parcel
territory, parcel weight and dimensional limitations.
Fills shipping or transfers orders for finished goods from stored
merchandise in accordance with specification on sales slip, customer order or
other instructions.
Must, in addition to filling orders, indicate items filled or omitted,
report shortages in materials or finished goods to supervisor and perform other
related duties.
Does strapping of all materials for Shipping and storage. Checks all
materials from production and verifies count before storage or shipment. Must
have knowledge of all materials in stock in order to verify count and fill
orders for heavy packer shipments.
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Must be able to select appropriate type and size of container for
material to be shipped or stored. Must assist in loading of such shipments into
truck, car, train or whatever method of transportation is to be used in the
transport of such shipments.
Must have the knowledge of and be able to prepare foreign shipments
that may fall into this category as well as domestic shipments.
Does all labeling on heavy packer shipments, prepares list of material
being shipped and supplies to supervisor for bill of lading preparation.
PLASTIC MACHINE OPERATOR - May be required to regulate the temperature
for different materials used and also be able to regulate the pressure required
for different materials and different molds used. Must be able to purge machine
when needed.
Employee must have the ability to cycle molded part(s) correctly.
Must be able to run all plastic molding machines productively.
PLASTIC SET-UP/OPERATOR - Perform set-up on plastic machines, trim
tooling and any equipment pertaining to the plastic department.
Will be required to run production on any job within plastic department
when not performing set-up duties.
Must be able to read blueprints so that the right part is being molded.
Keep control of all materials and parts and see that they are
identified at all times.
Must perform set-up for 60 working days at Group 7, 30 days at Group 9
and be able to demonstrate set-up proficiency before being advanced to Group 11.
Personnel to fill this position will be selected by management.
PLATING - Must have the ability to do plating and operate degreaser
productively.
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The Company will order (2) sets of clothing (shirts and pants only) for
each employee each year by July 15th and provide $30.00 for boots or shoes, also
by July 15th.
Employees who bid or bump in Plating shall undergo blood test and chest
x-ray which will be provided by the Company upon acceptance of job and then on
an annual basis.
POLISHER - (INCLUDES FINISH SANDING) - Must have ability to polish and
finish sanding productively.
POLISHER-PROCESS - Operator who can do all types of polishing as
performed in our shops with a productivity equal to 90% of rates with a reject
allowance of 5% on this production. (Rates to be established by experienced,
efficient operators on the various jobs using time study figures with standard
time on all operations rated and with a 15% personal and incentive allowance
added to this figure.) This is a minimum requirement for qualification only.
Time study results are to be available to interested parties and may be
reviewed by mutual agreement.
Operators may at any time request an opportunity to qualify for top
rate. Priority on examination shall be on the basis of departmental seniority.
POWER SAW - Breaks and saws diecasting gates according to
specifications or instructions and does other saw work that may be required.
Sets up and makes adjustment on saw and repairs broken saw blades.
PRECISION DIAPHRAGM TRIM - Trims diaphragms with close tolerance
guidelines. Must perform to established production standards. May be required to
verify accuracy.
Qualifying time will be 30 working days.
Rate of pay will be Group 5.
PUNCH PRESS OPERATOR - Runs machine productively.
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RECEIVING CLERK - Must have knowledge of all paper work related to
receiving of materials, processing of all paper work, checking packing slips and
orders to verify correctness of shipment, route material to proper persons or
destination, properly mark all containers as to contents and notify proper
person(s) or departments of any changes.
Keeps department in a neat and orderly fashion and notifies foreman of
any needed equipment or supplies.
After (30) days qualifying time, rate of pay shall be Receiving Clerk
Beginner. After an additional (90) calendar days, rate of pay shall be Receiving
Clerk.
NOTE: RECEIVING CLERK TEST - (Also test receiving clerk - beginner and
general order fillers. AGREED: Both parties are in agreement that the Receiving
Clerk-Beginner and General Order Filler jobs shall be subject to posting and
employees eligible for such jobs as the result of posting shall also pass an
examination as determined by agreement between Management and Union.
Information concerning the examination shall be available to interested
persons.
RELIEF OPERATORS - Replace each operator (on assigned line) in
rotational order for personal relief. Assist group leader (line members) at
start of shift in such matters as cement mixing, filling cement applicators,
etc. When not required for relief duty may assist mend operator or any trouble
spot on line.
(a) It is understood that relief operators are provided on progressive assembly
lines for the express purpose of providing time for the line operators to
obtain necessary physical relief and not to provide additional break time as
such.
(b) Each line with no less than seven operators or more than 20 operators will
be assigned a relief operator.
(c) Lines which can be considered a convenient grouping for relief purposes will
be serviced by one relief operator provided that the total line operators do
not amount to more than twenty.
(d) Any line with less than seven operators having a group leader of its own
will be relieved by the group leader. Certain circumstances may require a
relief operator.
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(e) A relief operator shall be assigned to any line of less than seven operators
that has a group leader in common with another line or is not covered by the
provisions outlined in paragraph c.
(f) In emergency (when the assigned relief operator is engaged), the group
leader may relieve. In extreme emergency the mend operator (if one is part
of the crew) may relieve.
(g) In all instances a relief operator shall utilize time not spent in relieving
by performing duties that are outlined in the job description.
REPAIR/PARTS ORDER FILLER - Performs all duties of filling orders
properly, identifying and locating parts, and must pack/package for shipment,
spare parts orders. Accomplishes all necessary paper work to maintain a complete
record of all material received or disbursed from area.
Performs all other related duties as designated and instructed by
Supervisor, Department Head or Group Leader, and is required to keep area in
neat and orderly fashion.
SANDER-ROUGH - Rough sanding of parts necessary for machining and parts
necessary for finish-polishing.
SCOPE TESTER - Requires good vision or corrective glasses. Ability to
follow verbal or written instructions. Maintains test records on results of
tests.
Performs visual mech. inspection of products for mech. integrity and
proper finish.
Makes minor external adjustments to test equipment as per instructions.
Measures specified parameters such as frequency response, level, impedance,
etc., using oscilloscope and associated equipment to determine conformance to
specified limits.
Equipment and limits to be supplied by Quality Control.
May be required to perform light assembly operations in addition, as
time allows.
Operator must be able to operate productively.
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SCREW MACHINE OPERATOR - One month at regular base rate. If during this
time an operator fails to show, in the estimation of the foreman, the ability to
adapt himself to this type of work, he shall be removed from the job. It is the
intent that qualifiers for all classes shall be selected by departmental
seniority.
CLASS 3
(A) Must qualify on (1) machine.
(B) Operate productively (quantity and quality).
(C) Know lubrication.
(D) Dress tools.
(E) Not required to make set-up.
(F) Make minor adjustments.
CLASS 2
At least (3) months experience.
Ability to set up and grind tools on repeat jobs.
Know machine adjustments
Able to operate any machine in department, but such training to be
deferred when production cannot be interrupted due to production schedules.
CLASS 1
Must demonstrate ability to make original set-up from print on all
machines in the department, and run all machines productively. Knowledgeable use
of all measuring devices, required to check in-process work, must be
demonstrated to the production foreman.
SERVICE REPAIR - Must have full knowledge of microphones, speakers, and
drivers manufactured by the company. Determines source of trouble in faulty
products returned for repair. Repairs and tests to satisfactory performance and
records
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information as required by the Departmental Supervisor. Must be capable of
desoldering and soldering for the purpose of the changing of electronic
sub-assemblies and components under the direction of technician or supervisor.
Will do packing/packaging as required. All work performed in this job
classification must meet good workmanship standards as determined by the Quality
Control Department.
SET-UP, ASSEMBLY - Must be proficient at making set-ups on all
machines, equipment, jigs and fixtures used, or that may be used, in the
sub-assembly of the various products of the company, such as wire strippers,
coil winders, riveters, eyeletters, hydraulic presses, stitches, staplers, etc.
Must maintain stock, in an orderly manner, or spare parts on this
equipment in order to make minor repairs when required, and prepare requisitions
for the procurement of these parts.
Must maintain file on all pertinent information, parts lists,
operator's manuals, etc., on all equipment set up by him.
Must provide set-up equipment to scheduled requirements as directed by
the Superintendent of the Assembly Division.
Applicants for this premium job are selected from job postings as
follows:
1) All applicants will be given two tests -
(a) Adaptability test - form A - SRA Service
(b) Mechanical aptitude test.
Both tests will be conducted and evaluated by Michiana Employment
agency of South Bend or any other source as may be chosen by joint agreement.
2) Test results evaluation will be studied and the applicants chosen by test
grades and seniority.
3) Applicants chosen will start at Set-Up Man Beginner rate.
4) At the end of (65) days of work, applicant will be given a proficiency
test on his work, provided by the Chief Production Engineer.
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a) If applicant does not pass this test, he will be allowed an additional
(30) days of work at Set-Up Man Beginner rate, after which he will be
tested again. Should he fail, he must withdraw from the classification.
b) If the applicant passes either the first or second test, he will be
advanced to Set-Up Man rate.
SPECIALIZED MICROPHONE TESTER-REPAIR - The specialized microphone
tester shall perform all normal service repair operator duties, and additionally
shall do specialized testing of microphones and elements.
Operators eligible to perform this specialized testing shall be
selected from the service repair operators in the following manner:
Notice of an opening shall be given to the service repair operators.
Those who desire this job shall sign for the job. The Company will
select the most senior operator or operators, as required. Training will be
accomplished within a six month period.
The most senior selected operator will be paid at the rate full time;
operator number two will be paid normal service repair operator rate, except
while in training. Operator actually performing the specialized microphone
tester job due to absence of the more senior operator will be paid full rate for
each day of replacement.
SPECIALIZED SOLDERER - Description - Soft soldering of conductors to
fixed terminals or lead out wires to voice coil leads, on dynamic microphones
head sub-assemblies and dynamic speaker transducer sub-assemblies, does not
apply to soldering of lead outs on final assemblies. May be required to clean
flux, dress leads and use various cements and solvents. Will also include
operation of Micro-Welders.
PREREQUISITES -
1. Opening or position must exist.
2. 56 hours of line rate soldering.
3. Completion of advanced soldering course consisting of 2 hours of instruction
and demonstrations in the classroom by a qualified instructor.
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QUALIFICATION - Must qualify within a period of (7) working days. Qualifications
will be determined by the Quality Control Department using Process Specification
402- 2.150. (Soft Soldering of Electrical and Electronic Connections.)
(Line Soldering - A line solderer must complete a basic course in soldering
consisting of (3) hours of instruction and demonstrations in the classroom
conducted by a qualified instructor. Line soldering may consist of one or more
of the following types of soldering wires, induction soldering, printed circuit
soldering, etc.)
SPRAY PAINTER-BEGINNER - Knowledge of spray painting, degreasing,
baking and mixing own paints. Must be capable of coloring the surface of
materials to match or simulate other materials and be able to spray surfaces
without leaving starved areas or runs.
Must have a thorough knowledge of mixing own paints and shall clean own
spray guns, hose the material container with solvent. Also keeps spray booths
and oven clean in the safest manner possible.
SPRAY PAINTER-ALL AROUND - In addition to spray painter-beginner
ability, a spray painter-all around must have knowledge to operate the
electrostatic paint system which includes technical direction to conveyor
loaders as to methods of hanging parts on hangers and conveyor, the operation
and control of the phosphate washer, the operation and control of the baking
oven, and the operation and control of the electrostatic spray equipment.
Spray painter-beginner will be given the opportunity to qualify in this
classification after (3) months training and service.
SYSTEMS INSPECTION AND REPAIR - Inspect all systems returned for repair
or credit and list damage to cabinets due to improper packaging, rough handling
by carrier, misuse by customer or defects in workmanship, on the form provided
for this use. Will do packing/packaging as required.
Determine the defective components in the system that need replacing.
Perform all other duties necessary to the repair of systems - except color
patching of cabinets.
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SYSTEMS TESTER - Tests all systems after assembly. Connects component
or system under test to audio-oscillator, checking for continuity through the
frequency range the unit is designed for. Listens for voice coil rubs, rattles,
hum or other objectionable distortions.
Those items meeting required standards are either sent to assembly or
packaging as the individual case dictates.
Those items not meeting required standards are rejected and are
properly tagged as to defect, and returned to production for processing. Must be
able to follow simple written instructions as to operation of equipment used in
checking systems.
Inspects cabinets prior to packaging.
Must have knowledge of finishes and proper construction of cabinets.
Should be familiar with all models manufactured.
Ability to read and understand information on blueprint is necessary.
Should be able to determine when it is necessary to repair, finish,
such as "tough up," "burn in"; and determine when such repair has been
accomplished satisfactorily.
Be able to accomplish daily inspection reports.
Should be able to recognize good workmanship.
TOOL CRIB ATTENDANT -
1. Sharpen Drills.
2. May be requested to cut stock.
3. Keep record of all stock, tools and operating supplies on hand.
4. Receives, stores and issues tools, dies, fixtures, operating supplies,
janitorial supplies and stock.
5. Clean tools, dies and fixtures and prepare them for inspection.
70
<PAGE> 74
6. Applies preservative to tools, dies and fixtures when necessary to protect
for storage.
7. Will be responsible for crib housekeeping.
8. Maintain records on minimum on-hand requirements of all small tools,
operating supplies and janitorial supplies, as established by Management.
9. Institutes a re-order alert to the foreman when minimum on-hand balance is
reached.
10. May transport tools, dies, jigs and fixtures to the tool room when servicing
is required and return them to crib location when servicing is completed.
TOOL & DIE LEAD PERSON - Must be qualified in First Class Tool & Die
Classification. Must have the ability to relate information on assigned project
to other toolroom personnel assigned to the same project.
Tool & Die Lead Person will have primary responsibility of directing
assigned project to completion.
Tool & Die Lead Person will be selected by management as job
assignments require from the First Class Tool & Die Classification.
TOOL AND DIE MAKER-1ST CLASS - Expert Tool and Die Maker capable of
layout, practical design, and all phases of tool and die construction and
maintenance. Must have (8) years related experience of (6) years experience with
supervisor's recommendation, of which 2 years must be equivalent to Tool and Die
Maker 2, and pass qualifying test or possess a valid Tool and Die Maker,
Journeyman's card.
TOOL AND DIE MAKER 2 - Before receiving Tool and Die Maker 2 rate,
employee must meet all requirements as set out in Jig and Fixture Maker-Beginner
and Jig and Fixture Maker 1st Class descriptions. Must be able to make major die
and mold repairs, construct die and mold components from layout and have the
ability to construct dies and molds from layout to completion, with supervision
as necessary.
TRUCK DRIVER - Drives trucks to transport or pickup mail, materials,
merchandise and equipment to and from various destinations as designated. May
also load or unload truck with or without helpers, makes minor mechanical
repairs and
71
<PAGE> 75
keeps truck in good working order. Reports to Supervisor anything that needs to
be fixed or when it is time for oil changes, etc.
The Company agrees to pay eight hours pay per day for away-from-home
drivers who are delayed 24 hours or more due to an emergency through no fault of
their own.
Any accident, no matter how minor, must be reported to Supervisor.
VIBRATOR OPERATOR - Operates vibratory or tumbling equipment for the
purpose of removing flash or burrs from parts. Employees who bid or bump in
Vibrator shall undergo hearing test which will be provided by the Company upon
acceptance of job and then on an annual basis.
ARTICLE 38
PLANT CLOSURE
In the event that the Company ceases operations at its Buchanan,
Michigan Plant, the Company agrees to give the Union a minimum 60 working days
notice. Within 5 working days after notification, the Company and the Bargaining
Committee will meet to negotiate on all the issues pertaining to the Bargaining
Unit employees as a result of the closing of the Buchanan Plant.
ARTICLE 39
DURATION OF AGREEMENT
Section 1. This agreement shall remain in effect until Midnight, June
18, 1996 and shall then renew itself from year to year thereafter unless notice
of termination in writing via registered mail is given by either party at least
(60) days before the next expiration date of this agreement. Upon receipt of
such notice a conference shall be arranged for within ten (10) days.
72
<PAGE> 76
<TABLE>
<CAPTION>
1993
JANUARY MAY SEPTEMBER
S M T W T F S S M T W T F S S M T W T F S
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2 1 1 2 3 4
3 4 5 6 7 8 9 2 3 4 5 6 7 8 5 6 7 8 9 10 11
10 11 12 13 14 15 16 9 10 11 12 13 14 15 12 13 14 15 16 17 18
17 18 19 20 21 22 23 16 17 18 19 20 21 22 19 20 21 22 23 24 25
24 25 26 27 28 29 30 23 24 25 26 27 28 29 26 27 28 29 30
31 30 31
FEBRUARY JUNE OCTOBER
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 5 6 1 2 3 4 5 1 2
7 8 9 10 11 12 13 6 7 8 9 10 11 12 3 4 5 6 7 8 9
14 15 16 17 18 19 20 13 14 15 16 17 18 19 10 11 12 13 14 15 16
21 22 23 24 25 26 27 20 21 22 23 24 25 26 17 18 19 20 21 22 23
28 27 28 29 30 24 25 26 27 28 29 30
31
MARCH JULY NOVEMBER
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 5 6 1 2 3 1 2 3 4 5 6
7 8 9 10 11 12 13 4 5 6 7 8 9 10 7 8 9 10 11 12 13
14 15 16 17 18 19 20 11 12 13 14 15 16 17 14 15 16 17 18 19 20
21 22 23 24 25 26 27 18 19 20 21 22 23 24 21 22 23 24 25 26 27
28 29 30 31 25 26 27 28 29 30 31 28 29 30
APRIL AUGUST DECEMBER
S M T W T F S S M T W T F S S M T W T F S
1 2 3 1 2 3 4 5 6 7 1 2 3 4
4 5 6 7 8 9 10 8 9 10 11 12 13 14 5 6 7 8 9 10 11
11 12 13 14 15 16 17 15 16 17 18 19 20 21 12 13 14 15 16 17 18
18 19 20 21 22 23 24 22 23 24 25 26 27 28 19 20 21 22 23 24 25
25 26 27 28 29 30 29 30 31 26 27 28 29 30 31
</TABLE>
<TABLE>
<CAPTION>
1994
JANUARY MAY SEPTEMBER
S M T W T F S S M T W T F S S M T W T F S
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1 2 3 4 5 6 7 1 2 3
2 3 4 5 6 7 8 8 9 10 11 12 13 14 4 5 6 7 8 9 10
9 10 11 12 13 14 15 15 16 17 18 19 20 21 11 12 13 14 15 16 17
16 17 18 19 20 21 22 22 23 24 25 26 27 28 18 19 20 21 22 23 24
23 24 25 26 27 28 29 29 30 31 25 26 27 28 29 30
30 31
FEBRUARY JUNE OCTOBER
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 5 1 2 3 4 1
6 7 8 9 10 11 12 5 6 7 8 9 10 11 2 3 4 5 6 7 8
13 14 15 16 17 18 19 12 13 14 15 16 17 18 9 10 11 12 13 14 15
20 21 22 23 24 25 26 19 20 21 22 23 24 25 16 17 18 19 20 21 22
27 28 26 27 28 29 30 23 24 25 26 27 28 29
30 31
MARCH JULY NOVEMBER
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 5 1 2 1 2 3 4 5
6 7 8 9 10 11 12 3 4 5 6 7 8 9 6 7 8 9 10 11 12
13 14 15 16 17 18 19 10 11 12 13 14 15 16 13 14 15 16 17 18 19
20 21 22 23 24 25 26 17 18 19 20 21 22 23 20 21 22 23 24 25 26
27 28 29 30 31 24 25 26 27 28 29 30 27 28 29 30
31
APRIL AUGUST DECEMBER
S M T W T F S S M T W T F S S M T W T F S
1 2 1 2 3 4 5 6 1 2 3
3 4 5 6 7 8 9 7 8 9 10 11 12 13 4 5 6 7 8 9 10
10 11 12 13 14 15 16 14 15 16 17 18 19 20 11 12 13 14 15 16 17
17 18 19 20 21 22 23 21 22 23 24 25 26 27 18 19 20 21 22 23 24
24 25 26 27 28 29 30 28 29 30 31 25 26 27 28 29 30 31
</TABLE>
73
<PAGE> 77
<TABLE>
<CAPTION>
1995
JANUARY MAY SEPTEMBER
S M T W T F S S M T W T F S S M T W T F S
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2 3 4 5 6 7 1 2 3 4 5 6 1 2
8 9 10 11 12 13 14 7 8 9 10 11 12 13 3 4 5 6 7 8 9
15 16 17 18 19 20 21 14 15 16 17 18 19 20 10 11 12 13 14 15 16
22 23 24 25 26 27 28 21 22 23 24 25 26 27 17 18 19 20 21 22 23
29 30 31 28 29 30 31 24 25 26 27 28 29 30
FEBRUARY JUNE OCTOBER
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 1 2 3 1 2 3 4 5 6 7
5 6 7 8 9 10 11 4 5 6 7 8 9 10 8 9 10 11 12 13 14
12 13 14 15 16 17 18 11 12 13 14 15 16 17 15 16 17 18 19 20 21
19 20 21 22 23 24 25 18 19 20 21 22 23 24 22 23 24 25 26 27 28
26 27 28 25 26 27 28 29 30 29 30 31
MARCH JULY NOVEMBER
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 1 1 2 3 4
5 6 7 8 9 10 11 2 3 4 5 6 7 8 5 6 7 8 9 10 11
12 13 14 15 16 17 18 9 10 11 12 13 14 15 12 13 14 15 16 17 18
19 20 21 22 23 24 25 16 17 18 19 20 21 22 19 20 21 22 23 24 25
26 27 28 29 30 31 23 24 25 26 27 28 29 26 27 28 29 30
30 31
APRIL AUGUST DECEMBER
S M T W T F S S M T W T F S S M T W T F S
1 1 2 3 4 5 1 2
2 3 4 5 6 7 8 6 7 8 9 10 11 12 3 4 5 6 7 8 9
9 10 11 12 13 14 15 13 14 15 16 17 18 19 10 11 12 13 14 15 16
16 17 18 19 20 21 22 20 21 22 23 24 25 26 17 18 19 20 21 22 23
23 24 25 26 27 28 29 27 28 29 30 31 24 25 26 27 28 29 30
30 31
</TABLE>
<TABLE>
<CAPTION>
1996
JANUARY MAY SEPTEMBER
S M T W T F S S M T W T F S S M T W T F S
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2 3 4 5 6 1 2 3 4 1 2 3 4 5 6 7
7 8 9 10 11 12 13 5 6 7 8 9 10 11 8 9 10 11 12 13 14
14 15 16 17 18 19 20 12 13 14 15 16 17 18 15 16 17 18 19 20 21
21 22 23 24 25 26 27 19 20 21 22 23 24 25 22 23 24 25 26 27 28
28 29 30 31 26 27 28 29 30 31 29 30
FEBRUARY JUNE OCTOBER
S M T W T F S S M T W T F S S M T W T F S
1 2 3 1 1 2 3 4 5
4 5 6 7 8 9 10 2 3 4 5 6 7 8 6 7 8 9 10 11 12
11 12 13 14 15 16 17 9 10 11 12 13 14 15 13 14 15 16 17 18 19
18 19 20 21 22 23 24 16 17 18 19 20 21 22 20 21 22 23 24 25 26
25 26 27 28 29 23 24 25 26 27 28 29 27 28 29 30 31
30
MARCH JULY NOVEMBER
S M T W T F S S M T W T F S S M T W T F S
1 2 1 2 3 4 5 6 1 2
3 4 5 6 7 8 9 7 8 9 10 11 12 13 3 4 5 6 7 8 9
10 11 12 13 14 15 16 14 15 16 17 18 19 20 10 11 12 13 14 15 16
17 18 19 20 21 22 23 21 22 23 24 25 26 27 17 18 19 20 21 22 23
24 25 26 27 28 29 30 28 29 30 31 24 25 26 27 28 29 30
31
APRIL AUGUST DECEMBER
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 5 6 1 2 3 1 2 3 4 5 6 7
7 8 9 10 11 12 13 4 5 6 7 8 9 10 8 9 10 11 12 13 14
14 15 16 17 18 19 20 11 12 13 14 15 16 17 15 16 17 18 19 20 21
21 22 23 24 25 26 27 18 19 20 21 22 23 24 22 23 24 25 26 27 28
28 29 30 25 26 27 28 29 30 31 29 30 31
</TABLE>
74
<PAGE> 78
FEBRUARY 1, 1993
AGREED LANGUAGE BETWEEN UNION AND COMPANY
FOR UNION CONTRACT
AGREEMENT
Change date to _________, 1993.
ARTICLE 2
UNION SHOP
Take out first five words in first paragraph. (As a condition of
employment).
ARTICLE 3
HOURS AND OVERTIME
Add under Section 4 - Paragraph 2 "Should overtime be offered and the
employee refuses it they shall be charged with such overtime. Once an employee
is offered overtime and refuses, the Company shall not offer overtime to that
employee for any job for that specified time period."
Should an employee wish not to be considered for overtime, on a
continuous basis, notification is to be given to the supervisor in writing with
a copy to the Chief Steward. The Company will not consider a person eligible for
overtime until notification is withdrawn.
Change under Section 4 Paragraph 1 - No more than 10 hour inequity on
turn sheet between operators with exception of Tool Room Classification.
Overtime will be divided as equally as possible on all jobs that all
classifications can perform. The Tool Room turn sheet will be kept by the Tool
Room supervisor.
Change Date in paragraph 4 - _________, 1993.
Add under Section 6 - (d) Agreed adjustments relative to make up of
lost overtime outside of your department shall be acted upon within 21 calendar
days or employee will be paid.
<PAGE> 79
ARTICLE 5
SENIORITY
Add under Section 3 paragraph 1 - "machine breakdown" after TEMPORARY
LAYOFF (3 days or less) occasioned by curtailed production, machine breakdown,
or material shortages affecting (5)......
Section 3 paragraph 2 - change to read "An employee losing more than
(12) hours to an employee . . . ." Section 7 Protected Positions - Take out:
ARTICLE 16
SENIORITY - OUT OF BARGAINING UNIT
Delete Section 2 through Section 4.
ARTICLE 32
COST OF LIVING
Section 2. paragraph 3 - change dates
ARTICLE 33
JOB POSTING
Section 1 job listings:
(H) Delete the word "Assistant"
Add (I) Plastic Set-Up
Change wording in paragraph 3 - Delete the words "machinist
classification" and add "above classifications".
ARTICLE 34
GENERAL
Section 2 add after paragraph 4 - A supervisor has the option to
qualify a person before the 30 day qualifying period has expired.
Section 11. Language to stay the same as is in current contract book.
2
<PAGE> 80
Listing of areas to be designated as NON-SMOKING areas but will not
appear in contract:
Lunch/Break - Canteen area
Plating Department
Paint Department
Chemical areas
Shipping, Receiving, Stockroom Department
Repair Department
Restrooms
Clean Room Department
Tool Room Department
Paint Shed
Smoking will be allowed in the following areas at employees desks until
otherwise agreed upon:
Shipping, Receiving, Stockroom Department
Section 7 Protected Positions - Take out:
#15 Tool Crib Attendant
#19 Strike the word Assistant
Paragraph 6 change to read "familiarization" period not to exceed 8
hours.....
ARTICLE 7
LEAVE OF ABSENCE
Insert:
(E) CHILD CARE LEAVE
Electro-Voice Buchanan will provide a maximum of 26 weeks unpaid leave
for an employee to care for and bond with newborn or newly adopted children. The
26 weeks will begin on the day of adoption or on date of employee's release to
return to work. This Child Care Leave may be used once every two years by an
employee.
3
<PAGE> 81
Any employee on a Child Care Leave will accumulate seniority during
such leave and upon return to work will be re-employed at their former or
similar position in accordance with their seniority.
While on Child Care Leave, an employee's insurance will be terminated
after the first thirteen weeks. An employee's medical and life insurance can be
continued if the employee makes monthly premium payments to the company.
There must be a two week prior notification to the company by the
employee of their desire to use the Child Care Leave. Proper certification,
birth certificate, or adoption papers, must accompany any Child Care Leave
request.
(F) FAMILY CARE LEAVE
Electro-Voice Buchanan Plant will provide a maximum of thirteen weeks
unpaid leave for an employee to care for a member of their immediate family
(mother, father, spouse, brother, sister, or child) who is totally disabled due
to sickness or accident. Three extensions in monthly increments will be provided
if necessary. (In rare and unusual circumstances, the leave committee may
consider more than three monthly extensions.)
Any employee on a Family Care Leave will accumulate seniority during
such leave and upon return to work will be re-employed at their former or
similar position in accordance with their seniority.
A statement from the family member's physician, stating the need for
family care and the anticipated length of the disability, must accompany the
request for a leave. Disabilities of less than four days will not be considered.
While on Family Care Leave, an employee's insurance will be terminated
after the first thirteen weeks. An employee's medical and life insurance can be
continued if the employee makes monthly premium payments to the company.
Add under Paragraph 9 - One day to be day of funeral. Employee to
inform personnel of the day of the funeral.
4
<PAGE> 82
ARTICLE 9A
SECTION 2
Last Paragraph - Agreement on Maintenance Extra Help. The Company and
the Union agree that Maintenance Tech I and Maintenance Tech 2 are not
progressive jobs. Should an employee who has not previously qualified in
maintenance be used as extra help in maintenance, that employee shall be paid
the Maintenance 2 rate or their own rate, whichever is higher.
ARTICLE 10
VACATIONS
Change Vacation period to read as follows:
January 3, 1993 - May 22, 1993
May 23, 1993 - September 25, 1993
September 26, 1993 - December 18, 1993
December 19, 1993 - January 1, 1994
January 2, 1994 - May 28, 1994
May 29, 1994 - September 24, 1994
September 25, 1994 - December 17, 1994
December 18, 1994 - January 7, 1995
January 8, 1995 - May 27, 1995
May 28, 1995 - September 23, 1995
September 24, 1995 - December 16, 1995
December 17, 1995 - January 6, 1996
January 7, 1996 - May 25, 1996
May 26, 1996 - September 28, 1996
Change paragraph 6 and insert new dates in regards to plantwide
shutdown.
ARTICLE 14
NO DISCRIMINATION
Insert the word "Handicap" after the word age.
5
<PAGE> 83
ARTICLE 35
COMPENSATORY LEAVE FOR SICKNESS OR EMERGENCIES
Section 1 - Change dates paragraph one.
ARTICLE 36
HOURLY RATES
Group 5 . . . . .Delete (619/719) under Sanding Microphone Stands.
Add Precision Diaphragm Trim.
Group 11 . . . . Delete the word Assistant before Set-Up Die Cast &
Trim Press.
Add Set-Up Plastics.
Appendix A . . Delete Department Head 41.
ARTICLE 37
JOB DESCRIPTIONS
Add under CNC Machine Programmer/Operator:
Programming of CNC can be done on any shift.
CHANGE COIL ASSEMBLE OF VOICE COILS USED ON WIDE BAND HIGH COMPRESSION
DRIVERS TO FOLLOWING:
Qualify 120 working days.
Must qualify on DH1A's & DH2A's within 80 working days. Remaining 40
days qualify on 2012's and 1506's. Company and Union agree all
qualified operators shall be rotated. All present employees will be
placed under grandfather clause.
Employees working on Wide Band Assembly should they have over 30 days
are subject to being bumped by a fully qualified operator. Should the
operator have less than 30 days are subject to being bumped or laid off
in line of seniority.
6
<PAGE> 84
Add under Fork Lift Operator
Fork Lift 2nd and/or 3rd Shift
Company and Union agree to designate 1 employee on the 2nd and/or 3rd
Shift who will become a Licensed Fork Lift Driver for the purpose of
set-up of large dies in plastic's and die cast departments or unloading a
truck which may come in late. Remove tote boxes or plastics which are in
stacked positions. The fork lift cannot be used prior to 5:00 (winter
hours) and 4:00 (summer hours) if the company has prior knowledge to an
incoming semi; the normal fork lift operators shall be kept over.
ADD: MAINTENANCE TECHNICIAN 2
Must have a minimum of 2 years in Maintenance 1 classification,
similar experience in maintenance somewhere else, or demonstrated
ability to repair CNC equipment and other computer controlled
machinery in a timely manner and with assistance as needed. Must be
able to analyze and make major machine and equipment repairs and must
be able to read schematics.
Individual must also demonstrate ability by successfully passing a
qualifying test covering electrical, hydraulic systems and pipe
fitting.
Rate of pay will be Group 12B.
ADD: PLASTIC SET-UP/OPERATOR
Perform set-up on plastic machines, trim tooling and any equipment
pertaining to the plastic department.
Will be required to run production on any job within plastic
department when not performing set-up duties.
Must be able to read blueprints so that the right part is being
molded.
Keep control of all materials and parts and see that they are
identified at all times.
Must perform set-up for 60 working days at Group 7, 30 days at Group
9 and be able to demonstrate set-up proficiency before being advanced
to Group 11.
7
<PAGE> 85
Personnel to fill this position will be selected by management.
AGREED BY UNION AGREED BY COMPANY
- ----------------------------------- -----------------------------------
- ----------------------------------- -----------------------------------
- ----------------------------------- -----------------------------------
- ----------------------------------- -----------------------------------
- -----------------------------------
- -----------------------------------
DATE
- ----------------------------------- ------------------------------
8
<PAGE> 86
MEDICAL PROPOSAL
EFFECTIVE 5/1/93
ACTIVE
1. Company and union agree to PPO Option 1 for active employees at a
contribution rate of:
$2.00 per week for employee
$11.88 per week for plus one
$18.13 per week for two or more dependents
HMO contribution rate will be the same as the PPO1 rate unless HMO
exceeds the PPO1 rate, then employee picks up the difference.
$ 2.00 per week for employee
$11.88 per week for plus one
$24.09 per week for two or more dependents
IBA Classic Choice available with a $250 deductible and an 80%-20%
Co-Pay. Employees will pay differential between PPO Option 1 and
Classic Choice premium.
Active employees and Pre-65 Retirees can access, if desired, Care Net
(Mark IV Program) Prescription Mail Service Drug Program as noted below
in the Post 65 Retirees with same co-pay.
PRE 65 RETIREES
2. Company and Union agree to PPO Option 1 for future early retirees until
they reach age 65 at a contribution of 25% for retiree and 100% for
spouse.
ELIGIBILITY
3. Eligibility for the Company contribution toward retiree medical shall
be limited to those employees who have achieved vesting in the pension
plan as of March 1, 1993. Other non-vested employees as of March 1,
1993 can purchase coverage at full cost and without Company
contribution.
<PAGE> 87
CAPS
4. Company contribution rates for future retiree medical coverage will be
frozen at:
$900 annually for Post 65 coverage
$1700 annually for Pre 65 coverage
POST 65 RETIREES
5. Company and Union agree to implement the Company proposed Post 65
medical plan with the following exceptions:
NOTE:Retiree contributes 25% for their coverage 100% for spouse
coverage.
Proposes that the following in combination with previous agreements in
language and insurance shall be the agreement:
ARTICLE 7
BEREAVEMENT LEAVE
ADD: Father/Step-Father 3 days
Mother/Step-Mother 3 days
NEW HIRE RATES - $5.00 per hour all three years
13 week is equal to one half of the difference between $5.00
and current rate of Group 1
26 Week rate is current rate of job
NOTE:Job above Group 1 will receive the increment between the job and
Group 1.
All paid time off Articles and Sections - No change except for dates.
PENSION (ARTICLE 23)
<TABLE>
<CAPTION>
lst Year 2nd Year 3rd Year
<S> <C> <C>
$17.00 $17.50 $18.25
</TABLE>
2
<PAGE> 88
No change in amount of life insurance for eligible retirees No change in
reduction factors Employee retiring will receive increases during the term of
the agreement.
WEEKLY DISABILITY (Article 24)
<TABLE>
<CAPTION>
lst Year 2nd Year 3rd Year
<S> <C> <C>
$150 $150 $150
</TABLE>
LIFE INSURANCE (Article 24)
<TABLE>
<CAPTION>
lst Year 2nd Year 3rd Year
<S> <C> <C>
$16,500 $16,500 $16,500
</TABLE>
ARTICLE 24
50% - 75% - 100% Joint & Survivor Pop-Up Option available to retiree
upon retirement so all option can be calculated and presented to retiree for
choice at time of retirement.
ARTICLE 36
The Company proposes the following changes:
Job Combinations
GROUP 6
Brake and Shear/Welder
Parcel Post & Order Filler
Heavy Packers
Prescription drug coverage shall be at retiree option Mail Service or
Retail. EXAMPLE: For short term prescriptions retirees can use the
Retail Program and for long term maintenance prescriptions use Mail
Service Drug Program.
Mail Service Drug Program - Care Net (Mark IV Program) Generic Co-Pay
$5.00 per prescription filled/refilled (up to 90 day supply)
Brand Co-Pay $15.00 per prescription filled/refilled (up to 90 day
supply)
3
<PAGE> 89
Retail Drug Program
All prescription drugs purchased from network pharmacies:
Generic $5.00 Co-Pay then plan pays 100% of network pharmacy cost.
Brand $10.00 Co-Pay then plan pays 100% of network pharmacy generic
equivalent cost. (If generic equivalent is available)
Out of network plan pays 70%.
RETIREMENT SAVINGS (401)k
6. The Company will contribute .333 (33 1/3%) of the first $1200 saved
each year by active participants in the Company Retirement Savings
Plan, e.g. employee saves $1000 the Company will contribute $333.
4
<PAGE> 90
Job Upgrades
Wide Band Coil Assembly Group 5
Group Leader Assembly $.15 above Group 5
Heavy Magnet - Group 5
Clerical Repair - Group 6
Clerical Shipping - Group 6
Reduce Plating qualifying time to 6 months
2 additional 5 minute breaks for Die Cast during the summer hours only.
Safety Glasses:
Plain Lens - EV Furnish at N/C
Single Vision Lens - $45.00
Bifocal Lens - $55.00
Trifocal Lens - $65.00
VACATIONS:
Increase vacation by 3 weeks at 7-13 years of service
WAGES/COLA
Effective 3/22/93 Effective 3/21/94 Effective 3/20/95
$.30 increase $.20 increase $.20 increase
COLA
3/22/93 8/22/94 8/21/95
NO COLA $.10 COLA $.10 COLA
5
<PAGE> 91
FOR THE UNION FOR THE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DATE:
------------------------------
6
<PAGE> 92
INDEX
A
Arbitration.....................................................................
B
Bulletin Boards.................................................................
Bumping
Cutback...................................................................
Shift.....................................................................
C
Change of Address...............................................................
Cost of Living..................................................................
Cut Backs Production............................................................
See Layoffs Tool Room...........................................................
D
Discipline and Discharge........................................................
Duration of Contract............................................................
E
Election Day and Jury Duty......................................................
G
Grievances......................................................................
H
Holidays........................................................................
Hourly Rates....................................................................
I
Information to Union............................................................
Insurance.......................................................................
Inter-Plant Transfer............................................................
Inventory Personnel.............................................................
J
Job Descriptions................................................................
Job Evaluation..................................................................
Job Inequities..................................................................
Job Posting.....................................................................
L
Layoffs.........................................................................
Notice of.................................................................
Recall from...............................................................
Leave of Absence................................................................
Line Rated Jobs, Reclassification of............................................
M
Military Service................................................................
i
<PAGE> 93
N
Non-Discrimination..............................................................
O
Overtime........................................................................
P
Pension and Severance Pay.......................................................
Plant Closure...................................................................
Posting of Agreement............................................................
Premium Job.....................................................................
Extra Help and Temporary Vacancies........................................
Layoff and Recall.........................................................
Transfer..................................................................
R
Rest Periods....................................................................
S
Seniority.......................................................................
Seniority Out of Bargaining Unit................................................
Supervisors.....................................................................
T
Time Study......................................................................
Tool Room Seniority and Qualifications..........................................
Transfer Inter-plant............................................................
Transfer to Unclassified Jobs...................................................
U
Union Recognition...............................................................
Union Representation............................................................
Union Shop......................................................................
V
Vacations.......................................................................
W
Working Conditions..............................................................
ii
<PAGE> 1
EXHIBIT 10(k)
================================================================================
AGREEMENT
between
ALTEC LANSING CORPORATION
and
INTERNATIONAL ASSOCIATION OF
MACHINISTS AND AEROSPACE WORKERS
LOCAL LODGE #850
1994-1997
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TABLE OF CONTENST
AGREEMENT ....................................................................1
ARTICLE 1 PREAMBLE............................................................1
ARTICLE 2 RECOGNITION.........................................................1
ARTICLE 3 MANAGEMENT RESPONSIBILITIES AND FUNCTIONS...........................1
ARTICLE 4 WORKING HOURS AND OVERTIME..........................................2
ARTICLE 5 HOLIDAY PAY.........................................................6
ARTICLE 6 VACATION............................................................7
ARTICLE 7 ALL-PURPOSE PAID ABSENCE...........................................10
ARTICLE 8 WAGES..............................................................11
ARTICLE 9 SHIFT DIFFERENTIALS................................................14
ARTICLE 10 REPORTING AND CALL-BACK PAY........................................14
ARTICLE 11 JURY SERVICE.......................................................14
ARTICLE 12 GROUP INSURANCE....................................................15
ARTICLE 13 RETIREMENT PLAN....................................................16
ARTICLE 14 LEAVE OF ABSENCE...................................................17
ARTICLE 15 SENIORITY..........................................................19
ARTICLE 16 TRANSFERS..........................................................19
ARTICLE 17 REPRESENTATION.....................................................25
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ARTICLE 18 GRIEVANCE PROCEDURE................................................30
ARTICLE 19 ARBITRATION........................................................32
ARTICLE 20 DISCRIMINATION.....................................................34
ARTICLE 21 SAFETY.............................................................35
ARTICLE 22 SPECIFIC PERFORMANCE...............................................36
ARTICLE 23 WAIVER.............................................................36
ARTICLE 24 ASSIGNABILITY......................................................36
ARTICLE 25 QUALIFICATIONS.....................................................36
ARTICLE 26 BULLETIN BOARD.....................................................37
ARTICLE 27 SUPERVISORY FORCE..................................................37
ARTICLE 28 NOTICES............................................................38
ARTICLE 29 STRIKES, STOPPAGES AND LOCKOUTS....................................39
ARTICLE 30 UNION MEMBERSHIP...................................................40
ARTICLE 31 FUNERAL LEAVE......................................................41
ARTICLE 32 DURATION...........................................................42
SCHEDULE "A"..................................................................44
SCHEDULE "B"..................................................................45
SCHEDULE "C"..................................................................46
SCHEDULE "D"..................................................................47
SCHEDULE "E" JOB LISTING......................................................48
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AGREEMENT
The Agreement is made and entered into this 20th day of June, 1994, by
and between Altec Lansing Corporation, hereinafter called the "Company" and the
International Association of Machinists and Aerospace Workers. AFL-CIO and its
Local Lodge No. 850, hereinafter called the "Union".
ARTICLE 1
PREAMBLE
1.1 It is the intent and purpose of the parties hereto that this
Agreement promote and improve the industrial and economic status of the parties,
provide orderly collective bargaining relations between the Company and the
Union, and secure a prompt and fair disposition of grievances so as to eliminate
interruptions of work and interference with the efficient operation of the
Company's business.
ARTICLE 2
RECOGNITION
2.1 The Company recognizes the International Association of Machinists
and Aerospace Workers, AFL-CIO, and its Local Lodge 850 as the sole collective
bargaining agency for the employees included in the Recognition Agreement
between the Union and the Company dated August 9, 1963.
2.2 It is agreed that the term "employee" used herein shall apply to
and include all production, maintenance, inspectors, and truck drivers but
exclude all office clerical, professional. watchmen, guards, supervisors,
quality control technicians and all employees in Industrial Relations,
Industrial Security and Engineering Departments.
ARTICLE 3
MANAGEMENT RESPONSIBILITIES AND FUNCTIONS
3.1 It is recognized and agreed that, in addition to other functions
and responsibilities which are not otherwise specifically mentioned in this
paragraph, the Company has and will retain the sole right and responsibility to
direct the operations of the Company; and, in this connection, to determine the
number and locations
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of its plants, the products to be manufactured, the type of work to be
performed, the out-contracting of work, the schedules of production, shift
schedules and hours of work, the methods, processes and means of manufacturing;
to select, hire and demote employees; and to make and apply reasonable rules and
regulations for production, discipline, efficiency and safety. It shall also
have the right and responsibility to discharge or otherwise discipline any
employee for just cause, to lay off because of lack of work and to transfer and
promote employees. The above shall apply except as hereinafter provided.
3.2 The Company will notify the Union Committee of out-contracting of
work that will result in a reduction on a plant wide basis within the bargaining
unit. The parties will meet on a quarterly basis to review ongoing major
subassembly and final assembly out-contracting issues.
ARTICLE 4
WORKING HOURS AND OVERTIME
4.1 The standard work day for the purpose of computing overtime shall
be eight (8) hours. A day shall be a period of twenty-four (24) consecutive
hours beginning with the starting time of the employee's regular shift.
4.2 The shift starting hours will be determined by the Company. The
starting time of an employee on the first shift will be uniform between the
hours of 6:00 a.m. and 8:00 a.m. inclusive. The second shift starting time will
be uniform between the hours of 3:30 p.m. and 5:30 p.m. inclusive. However, each
department may have its own starting time. Employees within departments may
start work at different times because of the nature of their jobs. Any
exceptions to the foregoing will be by mutual agreement between the Company and
the Chairperson of the Plant Grievance Committee.
4.3 The standard work week for the purpose of computing overtime shall
be forty (40) hours.
4.4 Time and one-half will be paid for time worked in excess of eight
(8) hours in a day.
4.5 Time and one-half will be paid for time worked in excess of forty
(40) hours in an employee's work week.
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4.6 Time and one-half will be paid for time worked during an employee's
Saturday shift.
4.7 Double time will be paid for time worked during an employee's
Sunday shift.
4.8 Second and third shifts for the purpose of computing overtime shall
be considered as falling on the same calendar day as the first shift.
4.9 (a) Overtime Scheduling. Since overtime work is an in convenience
to employees and a premium rate expense to the Company, the parties recognize
two (2) guiding principles:
(1) The Company will, whenever possible, provide twenty-four
hours advance notice of overtime work.
(2) Work in periods of overtime operations shall normally be
performed by the employee who normally performs the operation during
regular working hours.
(b) Equalization of Hours.
(1) The Company will make every reasonable effort to
distribute overtime hours equally among employees on a rotating
seniority basis in their respective classifications by department,
provided such employees are qualified to do the work required.
(2) Distribution of overtime shall be offered to those
employees who have the least number of overtime hours accumulated at
the time the overtime is scheduled to be worked within their job
classification and the employee is qualified to perform the work.
(3) The Company will post weekly an overtime distribution
roster by department classification. The equalization of overtime by
department classification will be made on an annual contract year
basis. The maximum overtime distribution spread will be limited to
forty (40) hours by department classification only.
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(4) Qualified employees, as determined by the Company, outside
of the department classification may voluntarily sign up in Human
Resources to have their names included on the department classification
overtime roster.
(a) The Company will not be obligated for maintaining
equalization of overtime for employees outside the department
classification with those within the department
classification.
(b) Employees can voluntarily sign up on the overtime
roster at any time, but they will be obligated to remain on
the list for three months before they can remove themselves
from the list.
(c) Any employee added to the overtime roster will be
credited with the highest number of overtime hours accumulated
in the department classification roster.
(c) Daily Overtime.
(1) For daily overtime assignments, it shall normally be
offered first to those who are performing the work. When persons
performing the work decline such overtime, it shall normally then be
assigned by classification seniority within the department involved.
When persons assigned by classification seniority decline such
overtime, it shall normally then be assigned among those remaining
qualified employees as determined by the Company from the department
overtime classification roster.
(d) Weekend Overtime.
(1) For weekend overtime assignments, it shall normally first
be offered to those who are performing the work on the preceding
Thursday (or Friday where earlier notice was not practical).
(2) If persons performing the work on the preceding Thursday
p.m. (or Friday) decline such overtime, it shall normally then be
assigned by classification seniority with the department involved (as
defined in 16.6(b)). When persons assigned by classification seniority
decline such overtime, it shall normally then be assigned among those
remaining qualified employees as determined by the Company from the
department overtime classification roster. In such case after
proceeding down the seniority list seeking qualified volunteers, when
the seniority list has been exhausted, qualified personnel within the
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department will be assigned to work in reverse order of seniority.
Outlying considered a separate department for purposes of overtime
distribution.
(e) Additional employees required from other departments.
(1) Nothing in (c) or (d) above shall preclude additional
employees being assigned to an overtime operation. When additional
employees are assigned, it shall be by seniority within the same job
classification among those remaining qualified employees as determined
by the Company. No employee will be required to work over-time when
another qualified employee, as deter mined by the Company, will
voluntarily accept the overtime assignment. (When an employee has per
formed this work regularly, the employee shall be considered
qualified.) After proceeding down the seniority list seeking qualified
volunteers, when the seniority list has been exhausted, qualified
personnel will be assigned to work in reverse order of seniority.
(f) Decline of Overtime.
(1) An employee given proper notice of overtime and who fails
to work such overtime, or refuses to work such overtime, shall be
considered as having worked and will be charged this overtime on the
overtime roster.
4.10 Where several operations, within the same job classification, are
to be performed by a single employee on an overtime basis, the employee assigned
shall be from the work group where the majority of the work would be normally
performed.
4.11 There shall be no pyramiding of overtime under any terms of this
contract.
4.12 Where department-wide changes in shift hours or lunch breaks or
rest breaks are necessary, the Company shall give at least one (1) week of
notice to the affected employees; the exception being temporary or unforeseen
situations.
4.13 Employees will not be required to work through their regularly
assigned lunch periods except in cases where emergency work must be performed.
4.14 The Company will observe one (1) ten minute rest period before and
one (1) ten minute rest period after lunch in each scheduled eight (8) hour work
shift. When an employee has completed his regular eight (8) hour work shift and
is
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required to work two (2) or more hours overtime, he will be afforded a ten
minute break at the close of his regular eight (8) hour work shift and a ten
minute break at the completion of each two (2) hours of overtime work
thereafter.
ARTICLE 5
HOLIDAY PAY
5.1 Hourly rated employees shall be paid their current hourly rate of
pay in effect on the day before the holiday including shift differential, but
exclusive of all premium or overtime allowance for the following observed
holidays when not worked: New Year's Day, President's Day, Good Friday, Memorial
Day, Fourth of July, Labor Day, Thanksgiving Day, Friday following Thanksgiving,
Day before Christmas, and Christmas Day, provided the following conditions are
met.
(a) The employee has worked the entire scheduled eight (8) hour work
day before and the entire scheduled eight (8) hour work day after such holiday
or used preapproved All Purpose Pay or vacation or other absence authorized in
the Company attendance policy. However, sixty (60) minutes tardy on one of the
days will be accepted.
(b) The employee works on the holiday after receiving reasonable notice
to do so. Whenever possible, employees will be given twenty-four (24) hours
notice.
5.2 If one of the holidays occurs while an employee is on an authorized
vacation, he shall receive payment for such holiday.
5.3 An employee who is required to work on any of the observed holidays
will receive double time (2 times) his regular hourly rate for hours worked plus
regular holiday pay for the day.
5.4 Should a holiday fall on Saturday or Sunday. the Company will
observe either Friday or Monday as the holiday.
5.5 Leaves of absence shall affect eligibility for holiday pay for
holidays occurring during the leave as follows:
(a) Personal Leave of Absence - Not eligible for holiday pay.
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(b) Industrial/Personal Medical Leave of Absence - Eligible for holiday
pay provided that employee has received pay for work done within fourteen (14)
calendar days preceding the holiday. Also eligible for pay for any holiday
occurring during the calendar week of the employee's return to work.
ARTICLE 6
VACATION
6.1 (a) A vacation of two (2) weeks consisting of ten (10) working
days, will be allowed an employee who, upon his anniversary date (date of hire),
has completed one (1) full year of continuous and active employment.
(b) A vacation of three (3) weeks. consisting of fifteen (15) working
days, will be allowed an employee who, upon his anniversary date, has completed
ten (10) full years of continuous and active employment.
(c) A vacation of four (4) weeks, consisting of twenty (20) working
days, will be allowed an employee who, upon his anniversary date. has completed
fifteen (15) full years of continuous and active employment.
(d) Holidays - Where a Company recognized holiday(s) occurs during an
employee's scheduled vacation, that employee shall receive holiday pay and at
additional day(s) of concurrent vacation time off if desired by the employee.
6.2 (a) The vacation pay allowances mentioned in this Article shall be
computed at the employee's current hourly rate of pay in effect on the day his
commences, including shift differential, but exclusive of all premiums or
overtime allowances. Where the employee gives at least one (1) week's notice of
his vacation schedule to the Company for a full calendar week his vacation, the
employee shall receive tits vacation check on the last work day prior to his
vacation.
(b) An employee off work for any reason other than an industrial
accident will have his vacation pay reduced based on the number of hours worked
or paid for. neither of which is severable (overtime excluded) during the
vacation year, in accordance with the pro-rata schedule as follows:
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PERIOD OF CONTINUOUS SERVICE COMPLETED
AS OF ANNIVERSARY DATE EACH YEAR
NUMBER OF VACATION DAYS WITH PAY
(YRS. OF CONTINUOUS SERVICE)
<TABLE>
<CAPTION>
HOURS WORKED OR 1 YEAR 10 YEARS 15 YEARS
PAID FOR
<S> <C> <C> <C>
1700 or more 10 15 20
1300 to 1699 8 13 18
1000 to 1299 6 11 16
700 to 999 4 7 12
400 to 699 2 5 10
0 to 399 0 0 0
</TABLE>
(c) An employee who terminates for any reason shall be entitled to
receive pro-rata vacation in accordance with sub-section 6.2(d).
(d) Pro-rata vacation referred to in sub-sections (b) and (c) of this
section shall be computed on the basis of hours worked or paid for as outlined
in subsection 6.2(b). Computation will be made on the hours worked or paid for
since the last anniversary date and on the basis of the vacation allowance due
on the following anniversary date.
(e) An employee who returns from layoff shall be eligible on his
subsequent anniversary date for any pro rata vacation pay allowance as outlined
in the schedule in sub-section 6.2(b).
(f) Should an employee terminate for any reason following an
anniversary date and prior to the time he has taken his vacation, he shall be
entitled to his vacation pay earned and not taken.
(g) The Company will develop a vacation schedule by August 1st of each
calendar year for the following twelve months, blocking out those periods of
time the employees will not be allowed to take vacation. The scheduling of
vacation will be by seniority within classification, however, the Company
reserves the right to establish
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the number of employees who can be on vacation at one time by classification,
and to schedule vacations compatible with production requirements.
(h) Employee vacation will be scheduled during his anniversary year. An
employee may be allowed to carry one week of vacation over into the next
vacation year by mutual agreement with the Company. Any vacation carry over must
be scheduled and taken with (90) days of the anniversary date. No employee will
be permitted to schedule back-to-back vacations during any two (2) concurrent
anniversary years without the approval of the Company. Vacations will normally
be scheduled in increments of one (1) full week. However, employees may take up
to one week of their vacation in any one anniversary year in increments of days
if their vacation is preapproved. No employee will be permitted to take vacation
prior to their anniversary date.
6.3 Plant Shutdown
(a) In the event that production requirements are such that a vacation
shutdown is necessary, the Company agrees to notify the Union not later than
March 1 of each year. In the event the Company declares a plant vacation
shutdown, it will provide the Union with the scheduled vacation shutdown dates
at the time of notification. It is understood and agreed that the vacation
shutdown, if declared, shall begin no earlier than the first full week in June
nor later than the third full week in August.
(b) In the event the Company has work requirements during a declared
plant shutdown, employees who have already taken their vacation and employees
with less than two (2) weeks earned vacation will be the first employees
scheduled to fulfill these work requirements. Selection will be made on the
basis of seniority provided they possess the necessary skills needed to perform
the required work. Employees with less than two (2) weeks earned vacation may be
required to take their earned vacation in increments of full days during the
vacation shutdown and may only be scheduled to work the remaining number of work
days in the vacation shutdown period. If the Company is unable to locate a
sufficient number of qualified employees from these groups, other employees will
be solicited by seniority within the required classifications. If there are
insufficient volunteers, the least senior employees in these classifications
will be required to work.
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ARTICLE 7
ALL-PURPOSE PAID ABSENCE
7.1 All-purpose pay was originally designated as sick pay and its use
was restricted to absence due to illness or injury. It has since been recognized
by the parties that employees may have pressing personal problems of other than
illness nature which cannot be solved or addressed during normal off-duty hours.
In such cases, it may be reasonable and necessary for the employee to be absent.
In recognition of this fact, the name of this article has been changed to
ALL-PURPOSE PAID ABSENCE.
All-purpose paid absence may not be taken during the advance notice of
layoff time period. The Company reserves the right to require documentation
justifying the absence when abuse is evident.
7.2 Each full time employee shall be credited with two and one-half
(2-1/12) days (twenty (20) straight hours) all-purpose paid absence at the end
of each six (6) months of active continuous employment, dating from his last
hiring date.
7.3 Utilization of All-Purpose Pay
(a) Illness cases - Illness provides little or no advance warning.
However, as in all absence cases, if the employee is unable to report for work,
he or she is obligated to call in before or at the start of their shift to
report their absence, thereby permitting supervision to make whatever work
assignment changes are necessary to provide a smooth operation.
(b) Employees must indicate their desire of whether or not to utilize
all-purpose pay prior to the their first shift after returning to work.
(c) Other than illness cases - All-purpose pay can be used for other
than personal illness reasons only by giving the Company one day's prior notice
and securing the Company's approval prior to the absence. In those rare
occasions where the need for absence is unpredictable, the need for calling in
and/or supervisory approval, if on the premises when the emergency arises, still
applies.
(d) All-purpose paid absence will not be paid for less than one half
hour (1/2).
7.4 Active employees on the Company payroll as of November 15 will be
paid unused all-purpose paid absence days accumulated in excess of five (5)
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days (forty (40) hours) accumulated through the preceding November 14, unless
they present a written request to the Personnel Department indicating their
desire to accumulate and maintain a level of eighty (80) hours rather than
forty (40). Payment will be made the pay day immediately following December 1.
7.5 All-purpose paid absence days will be paid on the basis of straight
time hourly rate received by the employee at the time the absence occurs, and
all accumulated all-purpose days in excess of five (5) days (forty (40) hours)
will be paid on the basis of straight time hourly rate received by the employee
as of November 14.
7.6 In the event of the employee's death, all earned unused all-
purpose pay will be paid to the employee's beneficiary as indicated on the
insurance enrollment card.
7.7 An employee who terminates for any reason will be paid for all
earned unused all-purpose pay.
ARTICLE 8
WAGES
8.1 Attached hereto and made part of this Agreement are Schedules "A",
"B", "C" and 'D", which contain the minimum and maximum labor grade wage rates,
and Schedule "E" which contains the various jobs performed in the plant.
8.2 It is the intent and purpose hereof to establish the basic wage
rate that shall be paid to any employee performing the functions of the various
jobs as classified and defined, but it is not intended to prevent employees from
temporarily performing the functions of jobs in classifications other than the
one in which they are rated at their established wage rates, subject to the of
8.4 of this Article.
8.3 Labor Grade rate range progression:
(a) All new employees, regardless of Labor Grade of classification for
which they were hired, may be employed at a rate of $.10 below the minimum
rate Labor Grade. The Company still has the right to hire an employee at
any rate within the rate range of that Labor Grade based on the applicant's
qualifications.
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(b) A new employee will receive an increase of $.10 per hour effective
the first Monday following satisfactory completion of his probationary
period.
(c) An employee below the maximum rate for his classification shall
receive $.10 per hour increase, each 10 weeks following his probationary
increase up to but not to exceed the maximum rate for said classification.
(d) All automatic progression increases shall become effective on the
first Monday following completion of the 10 week progression period.
(e) An employee who is reclassified during the term of this Agreement
and whose rate Is below the maximum of his new classified rate will receive
ten cents ($.10) per hour increase each ten (10) full weeks from date of his
reclassification until he attains the maximum rate of said classification.
However, an employee making a lateral transfer and reclassified at the same
rate of pay will continue his original progression.
8.4 When an employee is placed into a lower Labor Grade, he will
continue to receive his present rate of pay unless the maximum of his new Labor
Grade is lower than his present rate. When the maximum is lower, the employee's
rate will be the maximum of his new Labor Grade.
8.5 The Company and the Union agree that all employees shall be
properly classified and work assignment will be made in accordance with job
descriptions agreed to in the wage plan subject to Article 16.
8.6 (a) The Company shall have the right to establish new jobs, to
revise existing jobs, to evaluate and obsolete jobs providing such action on the
part of the Company shall not be directed toward reducing the Labor Grade of a
job in which no substantial change in the job itself has occurred. When a new or
revised operation involves duties which are not adequately or specifically
described or properly evaluated in an existing job description, specification
and classification, the Company has the right to develop and establish such new
or revised job descriptions, specifications, and classifications, rates of pay
and occupational group placements, and to place them into effect. An existing
job description, specification and classification shall not be considered to
cover a new or revised job description, specification, and classification if (1)
the new or revised job covers major specific functions not called out in the
existing job, or (2) the existing job covers major specific functions not called
out in the new or revised job.
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(b) The Company shall send by certified mail, six (6) copies of such
job descriptions, specifications and classifications, rates of pay and labor
grade placement to the Union Representative of the Local Union within fifteen
(15) days after placing them into effect.
(c) The Union shall have the right within fifteen (15) days of receipt
from the Company of a new or revised job to file a Union grievance alleging: (1)
improper evaluation and Labor Grade: (2) improper occupation group placement;
and/or (3) that such new or revised operations should be placed or retained in
an existing job description, specification, and classification. Such grievance
shall state the Union's position, the facts upon which it is based and the
remedy or correction requested. In the event of a job rating grievance, the
specific factors with which the Union disagrees, together with the reasons why
it believes the factors are not evaluated properly, must be listed by the Union
on the grievance form. In the event that the Company and the Union are unable to
resolve the grievance, it may be appealed to arbitration, in accordance with
Article 19. Said arbitration shall be limited to a determination (based on the
work as described by the Company) of: (1) the proper evaluation; (2) the proper
Labor Grade; (3) that the new or revised job may properly be placed or retained
in an existing classification.
(d) The Company's right to make work assignments and to determine
methods of operations are in no way restricted by this Section and shall not be
subject to arbitration.
(e) When arbitrating the rate of pay for a job, the authority of the
Arbitrator shall be limited to a determination of into which of the existing
labor grades the new or revised job shall be placed.
(f) The effective date of the rate of pay of any new or revised job by
any or all of the above procedures shall be the date upon which such new or
revised job was first placed into effect by the Company. In the event that the
job is placed in a different classification than the classification in which the
Company originally placed it, either by agreement between the parties or by
decision of the Arbitrator, the effective date of displacement pay, if any,
shall be three (3) working days from the date of settlement by the parties, or
three (3) working days from the date of receipt of the Arbitrator's decision by
the Company. When the Union gives notice to the Company of intent to arbitrate
such a matter, it will list the reasons for the disagreement and relief sought
in writing to the Company.
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(g) When a new classification is considered as permanently established,
the Company shall permanently post any new titles and job descriptions created.
Such jobs, after 15 days. will then be declared open and the normal upgrade
procedure shall be utilized.
ARTICLE 9
SHIFT DIFFERENTIALS
9.1 Employees working on the second shift will receive a thirty-five
cent ($.35) shift differential for each hour for which they are paid. In the
event a third shift is established, the shift differential pay for affected
employees will be subject to negotiation.
ARTICLE 10
REPORTING AND CALL-BACK PAY
10.1 Reporting Pay: Any employee reporting for work on his scheduled
shift who has worked the previous day without previously having been notified
not to report shall be given at least four (4) hours work or if no work is
available in his department for which he is qualified, four (4) hours straight
time pay, except that if such work is unavailable as a result of causes beyond
the control the Management, the Company shall not be so obligated.
10.2 Call-Back Pay: Any employee who has already left the premises of
the Company after completion of his scheduled shift and is recalled for work
shall not receive less than three (3) hours at the appropriate overtime rate.
10.3 Failure on the part of an employee to keep Management informed of
his current address and the correct telephone number where he may be reached
relieves Management of the responsibility of any notification required by this
Article.
ARTICLE 11
JURY SERVICE
11.1 The Company agrees to reimburse any employee for wages lost as a
result of serving on a Jury. Liability shall not exceed thirty (30) days. The
Company reserves the right to request that such employee be dismissed from jury
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service if, in Management's opinion, it is necessary to keep the worker on the
job. Before reporting for jury service, the worker will, when possible, inform
the Management of the time and place where he is to serve and will allow
Management sufficient time to obtain a dismissal from jury duty. If an employee
does serve as a jury member, upon presenting evidence of his loss of wages to
Management for such services, he will be reimbursed for the difference in his
current daily wage and that received as a juror. Under no circumstances will
overtime hours be used in computing an employee's current daily wages. The
Company also agrees that an employee will not be required to report for work on
days they report for jury duty should they be excused early.
ARTICLE 12
GROUP INSURANCE
12.1 The Accident & Sickness policy shall provide for payment of
benefits on the first day of hospitalization.
12.2 Accident and sickness benefits shall be $160.00 per week for the
first year of the contract; $170.00 per week for the second year of the
contract, and $190.00 per week for the third year of the contract. Any increase
in insurance company billed rates will be shared equally between the Company and
employee.
12.3 Any increase or decrease in group insurance premiums required by
the insurance company during the term of this agreement, due to insurance
experience rate, will be shared on a 50/50 basis by the and the employee except
as follows:
12.4 The Company's contribution for employee coverage only of Hospital,
Medical and Surgical insurance will shared seventy percent (70%) for the Company
and thirty percent (30%) for the employee. Effective August 1, 1990, the Company
contribution will be increased to 75%. Effective June 24, 1991, the Company
contribution will be increased to 80%.
12.5 In order to continue to protect the insurance cost to the parties,
the group insurance plan will have a merger of benefits provision which will
apply to the hospitalization, medical, and surgery coverage. Such merger of
benefits provision will apply only when there is a duplication of coverage
contributed by another Employer or provided by Government plan or by law, and
shall not be in effect on individual insurance policies paid for wholly by the
insured.
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12.6 The Company will offer a group dental insurance policy to
bargaining unit employees. The group dental insurance premiums will be paid by
the employee.
12.7 The Company will provide $15,000 life insurance coverage to all
employees at no cost to the employee.
12.8 When an employee is absent from work as the result of a lost time
workers compensation Injury, the Company will pay the employee's total medical
premium for the first month of the absence. The employee will be responsible for
their normal medical contribution portion after the first month of a worker
compensation absence.
ARTICLE 13
RETIREMENT PLAN
13.1 Eligibility - Age 21 and one (1) year of continuous service.
13.2 Credited Service - Credited Service of each employee on the
payroll as of July 3, 1972 will be the employee's continuous service since his
hire date within the bargaining unit at the Oklahoma City facility excluding
service prior to the date as of which he has attained both the age of 21 years
old and completed one (1) year service. Employees hired and actively on the
payroll after July 3, 1972 will receive credited service starting with January
1, 1974, or the date upon which the employee has attained one (1) year
continuous service and 21 years of age, whichever is later.
13.3 Normal Retirement - At, or after, age 65 and completion of five
(5) years of credited service.
13.4 Normal Retirement Benefits - $9.50 per month multiplied by the
number of years of credited service not in excess of 30 years. Those employees
retiring or terminating on or after June 17, 1996 will have their benefits
calculated at $11.00 per month multiplied by the number of years of credited
service not in excess of 30 years.
13.5 Vesting - After completing five (5) years of continuous service.
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13.6 Early Retirement - Immediate commencement of payment on an
actuarily reduced basis provided employee has attained the age of 55, 40 for
participants in the plan on or before March 12, 1985, and completed five (5) or
more years of continuous service.
13.7 Disability Benefits - After attaining age 40, and completing ten
(10) years or more of continuous service, permanent disability will be defined
as outlined in the Summary Plan Description.
13.8 Death Benefit - (While an active service employee) $1,000.00.
13.9 Funding Basis - Funding will be on a 40 year actuarial basis.
13.10 Trustee(s) - Will be the same as designated for all other Altec
Lansing Corporation Retirement Plans.
ARTICLE 14
LEAVE OF ABSENCE
14.1 (a) A personal leave of absence not exceeding ninety (90) days may
be granted by the Company to an employee for good and sufficient cause, upon the
written request of such employee. If a leave of absence is granted, the
seniority of such employee shall accumulate during the period of the leave of
absence. All personal leaves of absence shall be considered on the basis of work
requirements and shall be uniformly applied within department, without
discrimination.
(b) A maternity leave of absence will be granted to a female employee
upon written request and a doctor's certificate of pregnancy and need for such
leave. The request shall indicate the estimated date of delivery. Such leave
shall not exceed ninety (90) calendar days after date of delivery without
written request for extension and approval by the Company.
(c) An employee who is prevented from working due to illness or injury
for more than five (5) working days shall be placed on formal leave of absence
on his sixth (6th) normal work day, provided he or she has submitted evidence of
illness satisfactory to the Company. When it is physically impossible to apply
for leave of absence, management shall make appropriate allowances, provided the
employee does communicate immediately after conditions permit. In order to
continue on such leave of absence thereafter, it will be the employee's
responsibility to notify the
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Company of the need for extension and at intervals of thirty (30) calendar days
submit written evidence of illness satisfactory to the Company.
14.2 General
(a) An employee who has been granted a leave of absence shall be
considered as having quit without 28 notice and shall be terminated from
employment by the Company, if, while on such leave of absence, he engages in or
applies for other employment without the consent of the Company. If an employee
on such leave falls to report for work on his first regular shift after the
termination of such leave, he shall be subject to discharge.
(b) An employee who has completed his probationary period but has less
than one (1) year seniority will be allowed sick leave of absence equivalent to
his seniority on the date his leave commences; an employee with one (1) to five
(5) years seniority will be allowed sick leave of absence up to one and one-half
(1-1/2) years; an employee with more than five (5) years seniority will be
allowed sick leave of absence up to two (2) years. The employee must keep the
Company informed of their current address and either return to work on the date
specified or apply for an extension of leave in writing in advance of the return
to work date. Likewise, in case of early return, notice to the Company on the
day prior to the return is required. An employee returning from leave of absence
will be re-employed in as close to the same job assignment, classification and
department as conditions permit, taking into consideration his or her job
knowledge, experience and seniority.
14.3 The Company agrees to comply with applicable Federal and State
laws with respect to an employee leaving for or returning from service with the
Armed Forces of the United States. Employees in the Oklahoma National Guard
shall be given the necessary time off to attend annual summer camp.
14.4 Employees accepting full time positions as I.A.M. Union
Representatives will be given leaves of absence, without pay, for the term of
their office, including any extensions thereof.
14.5 Family and Medical Legal Act of 1993. A policy for Altec Lansing
employees shall be established to incorporate the federal provisions of the
Family and Medical Leave Act of 1993. The policy will be by the Human Resources
Department.
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ARTICLE 15
SENIORITY
15.1 Seniority shall mean the length of employment with the Company
from the last hiring date of the employee.
15.2 All new employees engaged by the Company shall be deemed
probationary employees for the first sixty (60) calendar days of employment
(except all Labor Grade #1 classifications, which will be subject to a ninety
(90) day probationary period). During this period. the employee may be
discharged for any reason. After this initial sixty (60) day probationary period
for all employees, except all Labor Grade #1 classifications, which are subject
to an initial ninety (90) day probationary period, the employee shall be entered
on the appropriate seniority list with seniority from the date of hire.
ARTICLE 16
TRANSFERS
16.1 During the course of normal operations, the Company will have two
types of job openings, namely, temporary and permanent. This article attempts to
define:
(1) Management's role in the selection process.
(2) The employee's responsibility in seeking consideration.
(3) The application of seniority and treatment of employees after
selection has taken place.
GENERAL
16.2 The transferring of employees is the responsibility of management,
subject to the terms of this article.
(a) Promotions and upgrades: In the advancement of employees to higher
rated jobs, when qualifications and experience are equal, employees with longest
seniority will be promoted.
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(b) To qualify for a classification rating, an employee must possess
the necessary qualifications and experience which may be required of this
classification by the Company. The Company shall determine the qualifications
and experience of the employee to perform the particular type of work for which
he may be classified; or applying, provided, however, that in the event an
employee claims he has been improperly classified or bypassed, an investigation
shall be made as to the merit of his claim and any disagreement shall be subject
to the Grievance Procedure of the Agreement.
(c) Nothing in this article shall be interpreted as a restriction of
management's right to increase or decrease the number of persons employed in a
classification or department, and to make the necessary assignments and
transfers to accomplish such changes in the workforce, consistent with the
seniority provisions of this Agreement.
TEMPORARY UPGRADES AND TRANSFERS
16.3 (a) The Company, at its discretion, may make temporary transfers
or assignments to other jobs or classifications for a period not to exceed two
(2) weeks to achieve full time utilization of employees in order to avoid the
undesirable features of production interruptions, short time layoffs, and short
time recalls, and where such factors as absenteeism, temporary overload, and
shortages would impair production efficiency. The Company will consider
employees who have submitted bids for the job when making temporary assignments
if it does not otherwise disrupt operations. Time spent on a temporary
assignment will not be used as a qualifying factor.
(b) The Company and the Union recognize that temporary assignments may
occur that last longer than two (2) weeks and do not justify a permanent
upgrade. These assignments may be extended by mutual agreement of the Company
and the Union.
(c) In the event of a temporary upgrade to a higher rated
classification, the employee shall receive a ten cent ($.10) per hour increase
or the minimum hourly rate for the classification. whichever is higher.
(d) In the event of a transfer of a previously qualified employee to a
higher rated classification, the employee will be entitled to the appropriate
rate of the higher classification.
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PERMANENT UPGRADES OR TRANSFERS
16.4 In the event that production requirements on a job classification
would require time in excess of that set forth in 16.3 above, and/or the time
mutually agreed for extension, then the job would automatically be formally
opened for pro motion selection.
16.5 Employees desiring upgrading shall file a request for such
upgrading, in duplicate, with their department supervisor who will forward to
the Human Resource office setting forth the new classification desired and their
qualifications therefor. Employees who are serving on their upgrade trial
period will not be considered for upgrading. As openings occur, requests then on
file a minimum of five (5) working days shall be reviewed and employees shall be
selected as provided in 16.2(a) of this Article. In the event of a transfer to a
higher rated classification, the employee shall receive a ten cent ($.10) per
hour increase or the minimum hourly rate for the new classification, whichever
is higher, and shall have a period not to exceed 30 actual days worked within
the new classification in which to prove his ability on the new job. Employees
who fall to prove such ability may, at any time within the period specified
above, be returned to their old classification and rate of pay.
(a) In cases of interrupted upgrade trial periods, if the duration of
the interruption exceeds the time period of work performed on the job, the
employee is obliged to start another complete trial period.
(b) Employees failing or refusing this interview or their upgrade trial
period will not be permitted to reapply for that position in which they failed
or refused for at least six (6) months from the date of that action. Refusals
because of shift preference will not disqualify the person from eligibility.
(c) When an employee is transferred from one classification to another,
he shall retain his seniority in the original classification for a period of
thirty (30) actual days worked, and thereafter his entire seniority shall apply
in his new classification.
(d) Employees who are or have been promoted from the bargaining unit to
a position outside the bargaining unit shall retain their accrued seniority in
the bargaining unit for up to one year and may be returned to any job
classification in which they were formerly classified.
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(e) Employees may exercise their seniority to select shifts of their
preference within their classification of work to open jobs subject to the
following conditions:
(1) Employees serving their initial hiring-in probationary period or
upgrade trial period will not be permitted to exercise shift preference and
senior employees will not be permitted to bump such probationary employees.
(2) Employees completing their probationary period or trial period may
be bumped from their shift by a senior employee on the basis that the
position then held is an open job.
(3) Employees desiring to change shifts will be required to place such
request with the Company on forms provided by the Company and only those
requests on file for a period of five (5) days prior to the job opening will
be considered.
LAYOFF AND RECALL PROCEDURE
16.6 Definitions
(a) Classification Seniority as defined in 16.5(a) (and Article 15)
shall govern for purposes of this section.
(b) Departments - Those operational entities as identified by the
Company for operational purposes. For the application of this section and 4.9,
they shall be considered as follows:
DEPARTMENT ENTITIES
Department Number Department Name
10 Fabrication
11 Electronic Assembly
15 Electronic Product Processing
30 Voice Coil/University
31 Voice Coil/Industrial Professional
36 Assembly/Industrial Professional
41 Assembly/University
52 Receiving/Stockroom
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DEPARTMENT ENTITIES
Department Number Department Name
55 Shipping
61 Tool and Die
70 Maintenance
80 Quality Control
81 Customer Service
NOTE: Production inspectors and material handlers shall be considered as
assigned to the departments in which they regularly perform their work for all
purposes except indefinite layoff.
(c) Layoff - An action resulting in no work for that employee who
consequently becomes unemployed.
(d) Downgrade in lieu of layoff - An action placing an employee in a
lower paying classification where work is available to avoid becoming
unemployed.
16.6.1 Temporary Layoffs - One day to one week. When reducing the
workforce due to breakdowns, shortages of material, or causes of a like nature
which in the judgment of management are of a temporary nature not exceeding one
week, those employees directly involved will be laid off from their department.
16.7 Layoffs for Extended Periods - In excess of one week
(a) It is agreed that in case of an extended layoff for lack of work,
employees shall be given an opportunity to exercise their seniority to retain
gainful employment as follows:
(1) Least senior employees from the classification involved shall be
subject to layoff, except:
(b) They shall be given an opportunity to displace or "bump" less
senior employees in a lower graded classification in any department provided -
(1) The senior employee has held the position prior to his upgrade for
a period exceeding thirty (30) work days, AND
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(2) The senior employee makes written request to the Human Resource
office within twenty-four (24) hours after notice of layoff.
16.8 When there are to be extended layoffs, notices will be given to
the employee and to the Chairperson of the Plant Grievance Committee three (3)
working days before such layoff. (A notice given in the forepart of the day
shall be a day of notice.) When there are layoffs caused by a sudden
cancellation of a contract or a cause of like nature, the Company is not
obligated to the three day notice, but will give as much advance notice as
possible.
16.9 Rehiring Laid-Off Employees
(a) In increasing the working force, employees will be called back to
fill jobs in their classification in reverse order of layoff provided they are
physically able to do the job.
16.10 Seniority shall be broken for the following reasons:
(a) If the employee quits;
(b) If the employee is discharged;
(c) If a laid-off employee fails to report to work within three (3)
days after being notified by certified mail, return receipt requested, or
ten (10) work days after postmark of certified mail, that a job is
available. If an employee is unable to report to work within three (3) days
after having been notified, any extenuating circumstances that may have
prevented him from doing so will receive fair consideration by the
Management when he is able to make an appearance at the Company's Human
Resource office;
(d) If the employee on layoff has failed to keep the Human Resource
office notified of his address;
(e) If the employee is laid off for a period that is longer than the
lesser of his length of service at the time of layoff or two (2) years;
(f) If the employee is absent for three (3) working days without
notifying the Human Resource office, such absence shall constitute a
voluntary quit, unless circumstances make it impossible for the employee to
notify the Company;
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(g) If an employee falls to report to work at the expiration of a leave
of absence;
(h) Overstaying scheduled vacation without permission of the Company
(subject to notice from employee to the Human Resource office as to reason
for delay).
16.11 Management will prepare a seniority list each three (3) months.
One copy will be furnished to the Union Representative, two copies will be
furnished to the Chairperson of the Plant Grievance Committee and one copy will
be posted in the plant. The seniority list will contain the name, job code, and
seniority date of employees in the bargaining unit. Bi-monthly, the Company
will mail to the Union office a list of hires, terminations, and transfers and
dates thereof. Two (2) copies will be furnished to the Chairperson of the Plant
Grievance Committee.
ARTICLE 17
REPRESENTATION
17.1 For the purpose of this Article, "The Plant" shall be defined as
10500 West Reno, Oklahoma City, Oklahoma wherein employees work who are included
in the bargaining unit as described in Article 2. entitled "Recognition".
17.2 The plant will be districted by agreement between the Union and
Management. One Committeeperson shall be selected by the Union in each district
to represent only the employees in that district as provided in this Agreement.
The Union will not appoint a Committeeperson to fill a vacancy, pending an
election, from a job classification comprised of three (3) or less employees
within a district.
17.3 The plant will be partitioned, by mutual agreement between the
parties, into three (3) districts: manufacturing, fabrication and warehouse. In
the event 2nd shift employment in the plant totals six (6) or more employees, an
additional district for the 2nd shift shall be in effect.
17.4 Four (4) Committeepersons selected by the Union shall constitute
the Plant Grievance Committee, one of whom shall act as Chairperson. Three (3)
members, including the Chairperson, shall constitute a quorum. This number shall
be increased to comply with Section 3 above, where applicable. The Union will
not elect two (2) Committeepersons from any classification with less than ten
(10) employees.
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17.5 The list of names of the Committeepersons shall be given, in
writing, to the Human Resource Manager, or his designated representative, as
well as any changes in such list, when possible two (2) days, and in any event,
twenty-four (24) hours prior to the effective date of assuming office.
Exceptions to the twenty-four (24) hour period shall be granted by the Human
Resource Manager in cases of emergency when no representation is available and
the matter must be handled immediately. Such notification shall be made by the
Chairperson of the Plant Grievance Committee of the Local Union or his
designated representative, or the Union Representative.
SOLE DUTIES AND RESPONSIBILITIES
OF UNION REPRESENTATIVES
17.6 The following Sections 17.6 to 17.16 inclusive outline the duties
and responsibilities of the Committeeperson and Chairperson of the Plant
Grievance Committee in performing their functions as recognized Union
Representatives.
17.7 The above group constitutes all the recognized Union
Representatives, and they shall be active employees who have completed the
probationary period
17.8 It is understood and agreed that the above group of Union
Representatives will be given permission to leave their place of work during
working hours in the manner provided in this Article in order to perform the
duties set forth in this Article. It is also agreed that. when not so engaged,
they have regular production work to perform. It is further agreed by the
parties hereto that each will cooperate with the other in keeping to a minimum
the time spent away from said work in investigating, presenting, and adjusting
grievances or disputes.
17.9 It Is understood that all employees, including Committeepersons
and the Chairperson of the Plant Grievance Committee, are subject to all plant
rules regarding the conduct of employees on Company premises. However, it is
agreed that no rules are to be applied to the Union Representatives in a
discriminatory manner because of their Union activities.
17.10 While on a formal leave of absence, no employee shall serve as a
Committeeperson.
17.11 Before performing any grievance work, the above Union
Representatives shall be given an authorized grievance pass by their Supervisor.
In the event of the Supervisor's absence, his designated representative shall
act in his place.
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17.12 Committeepersons shall report to their regular supervisor, or in
case of his absence, to his designated representative, at the beginning of their
shifts before performing grievance work as outlined in the Grievance Procedure.
17.13 Any employee who is serving as a Committeeperson shall not be
transferred or promoted out of his District, unless mutually agreed to by the
Chair person of the Plant Grievance Committee and the Human Resource Manager.
Such request by the Company shall be presented in writing to the Chairperson of
the Plant Grievance Committee and shall be considered as granted unless the
Chairperson objects, in writing, within three (3) days following the receipt of
the request.
17.14 Union members will be given permission to be absent or to leave
the plant, without pay, on bona fide Union business upon request of the Union
Representative or his designated representative, providing that:
(a) Twenty-four (24) hours advance notice has been given to the Human
Resource Manager, in writing;
(b) The total for which permission is requested to be absent from the
plant on any day shall not exceed ten (10) and not more than two (2) of
these from any one department. Time spent out of the plant will not be paid
for by the Company.
17.15 The Committeeperson will be given permission to leave his work
during his working hours to perform the following functions:
(a) To investigate and, if necessary, present to a Supervisor in his
district, a grievance on behalf of another employee or group of employees in
his district when his presence has been requested by such employee or
employees;
(b) To investigate and, if necessary, present to a Supervisor in his
district, a written grievance signed by an aggrieved employee that he has
received outside of working hours;
(c) When an aggrieved employee's Supervisor is not located in the
district where the grievance originated, the Supervisor of the
Committeeperson involved shall call in the Supervisor of the aggrieved
employee or shall give permission to the Committeeperson to contact the
aggrieved employee's Super visor at his headquarters, when necessary
arrangements have been made for such a meeting;
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(d) To attend a scheduled meeting with the Department Manager and
Supervisor when a grievance in his district has been appealed by him to the
second step of the grievance procedure;
(e) To attend the weekly scheduled and special meetings of the Plant
Grievance Committee and Management;
(f) When it is necessary to enter a department or section of a
department supervised by a Supervisor other than his own, the
Committeeperson shall immediately report to the Supervisor of that
department or section and advise him of his presence. In the event of the
Supervisor's absence, his designated representative shall act in his place;
(g) A Committeeperson is to handle only grievances arising in his
district. Should it become necessary to obtain pertinent facts in a case
through investigation outside a Committeeperson's district, the Chairperson
of the Plant Grievance Committee will be allowed to make such investigation
for the Committeeperson;
(h) In the absence of a Committeeperson, an employee from the district
may be appointed to act in his place. The Union must notify the Company
twenty-four (24) hours in advance of the appointment. The twenty-four (24)
hour requirement is waived when the absence of the Committeeperson is due to
illness;
(i) In the absence of the Chairperson, a Committeeperson may be
appointed to act in his place. The Union must notify the Company twenty-four
(24) hours in advance of the appointment. The twenty-four (24) hour
requirement is waived when the absence of the Chairperson is due to illness.
17.16 The Chairperson of the Plant Grievance Committee will be
responsible for the following:
(a) To attend 2nd Step Grievance Meetings with the applicable
Department Manager, Supervisor, and Committeeperson.
(b) To refer to Management grievances appealed to the weekly Third Step
of the Grievance Procedure before the scheduled meeting in accordance with
Article 18, Section 8.
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(c) To attend special or regular weekly scheduled grievance meetings
between the Union and the Management and act as Chairperson of the Union
Committee in the presentation of the Union business.
(d) To receive, on behalf of the Union, the Management's answer to
grievances following the 2nd and 3rd step meetings. The Company's written
reply will be drawn up in the following manner: (1) Date; (2) Names of those
present; (3) Statement of Grievance discussed; (4) The Union statement
provided for in Article 18, Section 7; (5) The Company's answer provided for
in Article 18, Section 8.
(e) To receive the seniority lists prepared by the Management and
furnished to the Union as provided in Article 16, Section 11.
(f) The Chairperson of the Plant Grievance Committee will be given
permission to leave his work to contact the Human Resource Manager or his
designated representative by having his Supervisor or his designated
representative secure approval from the Human Resource Manager or his
designated representative. When approval is given. the Supervisor or
designated representative will issue the necessary pass.
(g) With the approval of the Human Resource Manager or his designated
representative, the Chairperson of the Plant Grievance Committee will be
given permission to perform such other special functions as may be desirable
which are not specifically enumerated above. When approval is given, the
Human Resource Manager or his designated representative shall issue the
necessary pass.
(h) To conduct a further investigation of a Grievance, subsequent to
the receipt by the Union of Management's Second Step answer.
(i) In the absence of a Committeeperson, the Chairperson of the Plant
Grievance Committee will be permitted to act in his place.
(j) To investigate and, if necessary, to present to the Human Re source
Manager or his designated representative a grievance on behalf of a laid-off
employee when he has evidence a displacement has occurred in violation of
the specific terms of the Agreement. The Chairperson will present the
grievance orally to the Human Resource Manager or his designated
representative who will investigate the matter. When the grievance is
presented
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orally and not answered, or not answered satisfactorily within
twenty-four (24) hours, the grievance must be reduced to writing on the
forms provided by the Company. When the grievance is reduced to writing, it
shall be entered at the Third Step of the Grievance Procedure.
ARTICLE 18
GRIEVANCE PROCEDURE
18.1 (a) Grievance Defined - A grievance is defined as a difference
between the Company and an employee or group of employees or the Union
concerning the interpretation and/or application of any provisions of this
Agreement.
(b) Union Grievances - The majority of grievance issues will arise
through employees. However, the parties recognize that in rare cases the Union
itself, through its Representatives, may see fit to allege a contractual
violation. In such cases, the grievance shall be designated as a union grievance
rather than an employee grievance.
18.2 This grievance procedure constitutes the exclusive means of
resolving grievances and employees will at all times continue to work while
their grievance is being processed.
18.3 Grievances shall only be processable if action is taken within the
time limits set out for each step and shall only be processable beyond step 2 of
the grievance procedure by or in conjunction with the Union Representative or
grievance committee chairperson.
18.4 There is no responsibility on the Company to make an adjustment in
a case unless it is presented in writing within seventy-two (72) hours after the
employee has or could reasonably be expected to have knowledge of the act which
is the basis of the grievance. In no event shall any disposition or award upon
any grievance provide for retroactive pay for more than 30 calendar days prior
to the date such grievance was filed.
18.5 (a) Grievance Committeepersons
Except when they are engaged in the disposal of a grievance as provided
in this Agreement, Committeepersons shall continue at their regularly assigned
company work or duties in the same manner as other production workers. When such
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union representatives are required to leave their regularly assigned company
duties for the disposal of a grievance within their authority, they shall notify
the appropriate Company Supervisor. If necessary, such Union representatives
shall remain on their regularly assigned company duties until a reasonable time
is afforded to provide a substitute worker in their place. In each such case,
each such Union representative shall furnish written information called for on a
grievance pass to be provided by the Company, and he shall initial each entry
thereon and present it to the Department Manager. In all cases where such a
Union representative is required to enter any department, section or plant
within which he has the authority to act as such but in which he is not
regularly employed, he shall inform the appropriate Supervisor and explain the
business which requires his presence there.
18.5 (b) The Company agrees to pay for all reasonable scheduled work
hours lost by Committeepersons or grievants in the processing of grievances
through the pre-arbitration steps of the grievance procedure.
18.6 STEP 1 - VERBAL
The employee may, within 24 hours of the event upon which the grievance
is based, take up his grievance with his immediate Supervisor, accompanied and
assisted by his or her committeeperson. The Supervisor shall give an answer
within twenty-four (24) hours after the grievance was presented to him or her.
18.7 STEP 2 - WRITTEN
If the grievance is not settled in Step 1, the Union may, through the
Committee Chairperson, appeal it by presenting the grievance in writing to the
Production Manager within twenty-four (24) hours of receipt of the Supervisor's
answer.
The written grievance shall contain:
(1) A brief statement of the grievance and the facts upon which it is
based.
(2) The remedy or correction requested.
(3) The section or sections of the Agreement claimed to have been
violated.
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(4) The signature of the aggrieved employee, and Committee Chairperson
if he or she is presenting the grievance in the employee's behalf.
The Production Manager will meet with the Chairperson of the grievance committee
and answer the grievance within five (5) days after receipt of the Step 2
grievance.
18.8 STEP 3
If the Grievance is not settled in Step 2, the Union may, through the
Union Representative or Committee Chairperson, appeal it by giving a written
notice of such appeal to the Human Resource Manager within five (5) days after
receipt of the Step 2 answer. The parties shall then meet at the earliest
mutually convenient date in an effort to resolve the grievance. The Human
Resource Manager shall give his written answer to the grievance within five (5)
days after such meeting has taken place.
18.9 STEP 4
If the grievance is not settled in Step 3, it may be appealed by
written notice of such appeal, given by the Union Representative to the Human
Resource Manager to arbitrate in accordance with the procedure and conditions
set forth in "Arbitration" of this Agreement.
18.10 The parties agree to follow each of the foregoing steps in the
processing of a grievance and if at any step the Company's representative fails
to respond within the required time limits or mutually agree on a time limit
extension, the grievance will automatically advance to the next step of the
grievance procedure.
18.11 Saturdays, Sundays and holidays are excluded in computing the
time limits specified in this Article. Time limits outlined in this Article may
be extended in writing by mutual agreement of the Parties.
ARTICLE 19
ARBITRATION
19.1 Arbitrable issues are only those which meet each and all of the
following tests:
(1) The issue must first have gone through the grievance procedure as
outlined in this Agreement within the time limits specified.
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(2) Notice of intent to arbitrate must have been received within ten
(10) days after receipt of the last answer of the Company following the last
step of the grievance procedure.
(3) The issue must allege violation of either a specific provision or
an application of a specific provision of this agreement or a claim that the
Company has taken disciplinary action without just cause.
19.2 If the Union desires to submit an issue to arbitration, it shall
deliver a written notice signed by the Union Representative of intent to
arbitrate. This notice shall state the matter at issue and shall precisely state
in what respect the Agreement has been violated and reference the specific
clause or clauses relied upon. The notice shall also stipulate the nature of the
relief or remedy sought.
19.3 The Union representative and the Company representative shall meet
in a last attempt to resolve grievance. Failing to resolve the grievance, they
shall agree in writing as to the exact issue to be submitted to arbitration. If,
after diligent effort, there is no agreement as to the issue of whether or not
the grievance is arbitrable, then each party shall submit its statement of the
issue or position on the question of arbitrability and such disagreement shall
itself become the subject of a separate and prior arbitration.
19.4 The parties shall either mutually agree upon a choice of
arbitrator or ask the Federal Mediation and Conciliation Service to submit to
them a list of arbitrators. The Company and the Union representatives shall
determine by lot the order of elimination and thereafter each shall, in that
order, alternately strike names from the list and the final name shall become
the impartial arbitrator.
19.5 After the arbitrator has been selected by the foregoing procedure,
he or she shall meet at a mutually convenient time and place selected by the
parties and, with all members present, hear the evidence and cross-examination
of both parties, receive written arguments where appropriate and render a
decision within 30 calendar days thereafter. No facts shall be presented by
either party during the arbitration which were known but not disclosed during
the course of the grievance procedure. A separate arbitrator shall be appointed
to hear each grievance that has been appealed to arbitration unless the parties
agree in writing to hear more than one grievance in the same arbitration
proceeding.
19.6 The time limits specified herein may be extended by mutual consent
of the parties.
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19.7 It is understood that the function of the arbitrator shall be to
interpret specific provisions of this Agreement and to determine arbitrable
issues as defined in this Article. This arbitrator shall confine his decision to
the statement(s) of the issue and have no power to arbitrate any issue which is
defined in this Article as being nonarbitrable or to add or to subtract from or
to modify or extend any of the terms of this Agreement.
19.8 The decision of the arbitrator shall be final and binding upon all
parties provided the arbitrator has not exceeded his authority under the terms
of this Agreement.
19.9 Each party shall bear the expenses of its representatives and
witnesses. The fees and expenses of the arbitrator shall be borne equally by the
Parties.
ARTICLE 20
DISCRIMINATION
20.1 The Company will not discriminate against any employee in regard
to tenure of employment or any term or condition thereof because of his
membership in, or activity on behalf of, or sympathy toward the Union.
20.2 All applicants hired are employed according to the Immigration
Reform and Control Act of 1986. Neither the Company nor the Union shall
unlawfully discriminate against any employees or job applicant because of race,
creed, color, sex, national origin, religion, marital status, age, mental or
physical disability, veteran or a veteran of the Vietnam era.
20.3 The Company and the Union mutually agree that where reference is
made to either gender within this Agreement the term shall be synonymous with
both sexes.
20.4 The Company and the Union agree the employer shall be permitted to
take any and all actions necessary to comply with the Americans With
Disabilities Act and to avoid liability under the provisions of said Act. If
such actions necessitate violation of a provision of the Agreement, then the
parties agree to bargain with regard to the effect of such action on other
bargaining unit employees.
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ARTICLE 21
SAFETY
21.1 The Company agrees to abide by and maintain in its plant,
standards of sanitation, safety and health in accordance with the Federal,
State, County, and City laws and regulation. The Union pledges its full
cooperation in the Company's effort to eliminate the causes, practices and
conditions leading to industrial accidents.
21.2 Proper and modern safety devices shall be provided by the Company
for all employees engaged in work where such devices are necessary. Such
devices, where provided, must be used. The Company's emergency and disaster
procedures shall be promulgated in a manner calculated to inform all employees
of their purposes and intent.
21.3 The Union agrees that willful neglect and failure by an employee
to obey the plant safety regulations and to use safety devices provided by the
Company shall be just cause for disciplinary action. However, if the employee
believes the disciplinary action to be unjust, he shall have the right to appeal
as provided in the Grievance Procedure.
21.4 Any employee who, after being sent to the doctor for an industrial
injury, is sent home for the remainder of the day shall be paid for the
remainder of his regular eight (8) hour shift at his regular pay rate.
21.5 Any employee who is sent to the doctor for treatment of an
industrial injury during his regular work day shall be paid for time lost from
work during his regular eight (8) hour shift.
21.6 A joint Union-Management safety committee shall be appointed
consisting of two (2) employee representatives of the Union and two (2)
representatives of Management. The joint committee shall meet at least once
monthly and conduct a plant tour at least once monthly. The purpose of the
committee is to consider, inspect, investigate and review health and safety
conditions and practices. The joint committee shall make constructive
recommendations with respect to the implementation of corrective measures to
eliminate unhealthy and unsafe conditions and practices and to improve existing
health and safety conditions and practices.
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ARTICLE 22
SPECIFIC PERFORMANCE
22.1 Either party hereto shall be entitled to require specific
performance of the provisions of this Agreement.
22.2 There shall be no individual arrangements or agreements made
covering any part or all of this Agreement contrary to the terms herein
provided, and it is distinctly understood and agreed that all previous
agreements, whether oral or written, by and between the Company and the Union.
are superseded by this Agreement, and subject to any amendment as provided in
Article 25.2.
ARTICLE 23
WAIVER
23.1 The waiver of any breach of any of the provisions or terms of this
Agreement by either party does not constitute a precedent for any future waiver
or enforcement of such breach.
ARTICLE 24
ASSIGNABILITY
24.1 This Agreement shall be binding upon the successors and assigns of
the parties hereto, and no provision, terms, or obligations herein contained
shall be affected, modified, altered, or changed in any respect whatsoever, by
the consolidation, merger, sale, transfer of assignment or either party hereto,
or affected, modified, altered, or changed in any respect whatsoever by any
change of any kind in the legal status, ownership or management of either party
hereto.
ARTICLE 25
QUALIFICATIONS
25.1 Each of the parties hereto warrants that it is under no disability
of any kind that will prevent it from completely carrying out and performing
each and all of the provisions of this Agreement, and further that it will not
take any action of any kind that will prevent or impede it in the complete
performance of each and every provision hereof.
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25.2 Any further agreements made by the parties shall be reduced to
writing and signed by authorized representatives of each.
ARTICLE 26
BULLETIN BOARD
26.1 The Company will erect and shall maintain in good order, two (2)
glass-enclosed bulletin boards in the plant, complete with lock and keys. Keys
will be given to the duly authorized Local Union officers. Such bulletin boards
may be used by the Union and the Management and shall be restricted to:
(a) Notices of Union recreational and social affairs.
(b) Notices of Union elections, appointments, and result of Union
elections.
(c) Notices and agenda of Union meetings.
(d) Notices concerning bona fide Union activities such as:
Cooperatives, credit unions and employment compensation information.
(e) Such other notices as are mutually agreed upon.
26.2 Any change in the location of the bulletin board shall be mutually
agreed to by the Management and the Plant Grievance Committee.
26.3 There shall be no other distribution or posting by employees of
notices, pamphlets, advertising or political matter or any kind of literature
upon Company property other than as herein provided.
ARTICLE 27
SUPERVISORY FORCE
27.1 Members of the supervisory force are not employed to do operations
normally performed by the regular operators.
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27.2 Supervisors and other non-unit personnel, except as outlined in
Article 2.2(b), shall not be permitted to perform work on any hourly rated jobs
except in the following types of situation:
(a) In emergencies, when regular employees are not immediately
available.
(b) In the instruction or training of employees.
(c) In the performance of necessary work when production difficulties
are encountered on a job.
27.3 The Union understands and agrees that a part of the work done by
excluded engineering and laboratory employees is similar in some respect to some
of the work done by bargaining unit employees. It is further agreed that
manufacturing supervision may perform work in conjunction with these employees
in the development of hardware consisting of articles for Engineering
Qualifications and Tests up to release to production.
ARTICLE 28
NOTICES
28.1 Notices permitted or required to be served under the terms of this
Agreement shall be sufficiently served for all purposes herein when:
(a) Telegraphed (Personal Delivery) or
(b) Mailed postage prepaid, certified mail, return receipt requested to
the Human Resource Manager for service upon the Company; and for service
upon the Union, when an original and one copy of the notice is mailed
postage prepaid, certified mail, return receipt requested to the Union
Representative of the Local Union or his designated representative. The date
of receiving such notice shall be the controlling date for purposes
hereunder.
28.2 Notices to the Company from the Union may also be personally
delivered by the Chairperson of the Plant Grievance Committee. Such delivery
shall be made to the Human Resources Manager or, in his absence, to his
designated representative. Notices so delivered shall be in duplicate, and both
copies shall be time
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stamped for receipt purposes. One copy will be returned to the Chairperson of
the Plant Grievance Committee in a sealed envelope for delivery to the Union.
ARTICLE 29
STRIKES, STOPPAGES AND LOCKOUTS
29.1 During the life of this Agreement, the Union will not authorize,
cause, engage in, sanction, assist or permit its members to cause, nor will any
member of the Union take part in any slowdown, work stoppage or strike, or any
curtailment of work or restriction of production or interference with production
of the Company. The Union will not cause or permit its members to cause, nor
will any member of the Union take part in any slowdown, work stoppage, or strike
of the Company's operations or picket any of the Company's plants or premises.
29.2 In the event that any member or members of the Local Union or the
International Union shall call, engage in, sanction, or assist in any
unauthorized slowdown, work stoppage or strike against the Company or refuse to
perform services duly assigned when directed to do so by the Company, the
Company agrees that it will not file or prosecute any action for damages arising
out of said unauthorized slowdown, work stoppage, strike or refusal to perform
services, provided that the Local Union, its Union Representative, and members
of the Plant Grievance Committee comply with the following provisions:
(a) That each of them jointly and severally shall immediately, and in
no event later than twenty-four (24) hours, disavow and refuse to recognize
any picket line or lines established as a result of said unauthorized
slowdown, work stoppage or strike against the Company or refusal to perform
services; that each of them will instruct their members by posting written
notices throughout the plant or other communication media not to respect or
recognize any said picket line or lines; and, in addition, each will do
everything within their respective powers to secure the establishment and
disbanding of any said picket line or lines; and
(b) That each of them jointly and severally shall immediately take or
cause to be taken all affirmative action to demand, cause and require each
and every member to perform the terms and conditions of this Agreement.
(c) Any employee who fails to return to work immediately or refuses to
perform services duly assigned when directed to do so by the Company, after
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such action is taken by the Union as set forth in 29.2(a) and (b)
above, the Union agrees that the Company may take whatever disciplinary
action it deems appropriate, including discharge, and that the degree of
such disciplinary action shall not be reviewable through the Grievance and
Arbitration Procedure provided for in this Agreement.
(d) Nothing in this section shall preclude any right to which the
Company previously was entitled to seek legal or other redress of any
individual who has caused damage to or injury to or loss of Company
property, nor does the Company cede any rights in this regard to which it
may be entitled by future legislation.
29.3 During the term of this Agreement, the Company shall not cause,
permit, or engage in any lockout of its employees.
ARTICLE 30
UNION MEMBERSHIP
30.1 Union Shop
(a) All production, maintenance, and inspection employees covered by
this Agreement shall, as a condition of continued employment, become and remain
members of the Union not later than sixty (60) days after the signing of this
Agreement. The Company shall maintain a program to advise new employees of the
Union's status, names and departments of Union committeepersons and employee
obligations for membership.
(b) New employees shall, as a condition of employment, at the end of
sixty (60) days, except Labor Grade #1 who shall, as a condition of continued
employment, at the end of ninety (90) days, become members of the Union and
retain their membership for the duration of this Agreement.
30.2 The Company agrees to a check-off of Union initiation fees,
reinstatement fees, and regular monthly dues for all employees covered by this
Agreement, provided the Union delivers to the Company a wage assignment and
authorization voluntarily signed by the employee.
30.3 The Union shall certify to the Company in writing each month, a
list of its members working for the Company who have voluntarily signed the wage
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assignment and authorization together with an itemized statement of dues and/or
initiation fees or reinstatement fees to be deducted for such month from pay of
such members. The Company shall deduct and remit to the Financial Secretary of
the Union in one lump sum, the amounts so certified in respect to such
individual members and deducted from the first pay check of such members,
following the receipt by the Company of such certified list.
30.4 The parties agree that taxes, social security, insurance and other
deductions required by law shall be priority deductions and the Company shall so
note on the copy of the list returned to the Financial Secretary when earned
wages were insufficient, and no deductions were made.
30.5 In instances where improper deductions were made from the wages of
an employee, if the monies are still in the hands of the Company, the Company
shall refund the monies directly to the employee. If, however, the improper
deductions have been forwarded to the Union, the Union shall make the
appropriate refund. The Union shall indemnify and save the Company harmless
against any and all claims, demands, suits or other forms of liability that
shall arise out of or by reason of action taken or not taken by the Company in
reliance upon information furnished to or demands made upon the Company by the
Union for the purpose of complying with any of the provisions in this Article.
ARTICLE 31
FUNERAL LEAVE
31.1 (a) An employee who is absent from work for the funeral of his
parents, brother, sister, child, spouse, mother-in-law, father-in-law,
grandparents or grandchildren will be compensated on the basis of his basic
straight time hourly wage rate for the time lost by him from his regularly
scheduled work by reason of such absence up to three (3) days for such employees
to attend and take care of necessary funeral arrangements not to exceed eight
(8) hours per day.
(b) In the case of step-parents of employees, where the relationship
has been long standing, such as 5 years or more, such funerals shall be deemed
to qualify for purposes of this benefit.
31.2 To be eligible for the three (3) days pay listed in Section 1 of
this Article, an employee must furnish the Company with reasonable proof of the
death.
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ARTICLE 32
DURATION
32.1 (a) This Agreement shall be in full force and effect through
Friday, June 20, 1997, and for additional periods of one (1) year thereafter
unless either party hereto shall give notice of its intent to terminate the
Agreement or modify any portion of any of the terms thereof by registered mail
to the other party not less than sixty (60) days nor more than ninety (90) days
prior to June 20, 1997, or prior to the end of any yearly period subsequent
thereto.
(b) In the event either party hereto shall give notice to the other of
its intent to terminate or modify this Agreement as provided for in (a) above,
this Agreement shall not forthwith terminate on its anniversary date, but
continue thereafter in force and effect until either party gives to the other
party final written notice of termination which shall be effective not earlier
than one hundred twenty (120) hours from the receipt of said notice by the
addressee.
(c) In the event notice of intent to terminate or modify this Agreement
has been given by either or both parties, as provided for in (a) above,
collective bargaining meetings shall be held between the parties beginning not
later than forty (40) days prior to the expiration date.
(d) It is expressly understood that the notice of dispute shall be made
to the Federal Mediation and Conciliation Service required by the Labor
Management Relations Act of 1947, as amended.
32.2 The Union and the Company, in consideration of the benefits,
privileges and advantages provided in this Agreement, suspend meetings in
collective bargaining negotiations with each other during the life of this
Agreement with respect to any further demands, including out contracting,
pensions, or insurance for
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employees, or with respect to any questions of wages, hours, or working
conditions, except as may be dealt with as a grievance under the Grievance
Procedure Article.
IN WITNESS WHEREOF the parties hereto have executed this Agreement
this 20th day of June, 1994.
LOCAL 850 OF THE INTERNATIONAL
ASSOCIATION OF MACHINISTS &
ALTEC LANSING CORPORATION AEROSPACE WORKERS AFL-CIO
/s/ Ron Graham /s/ Jim Phillips
/s/ Gregg Evans /s/ Terry Johnson
/s/ Ed Rusch /s/ Bob Routt
/s/ Holly Page /s/ William Williams
/s/ Earnest Lowe
/s/ Bob Bradford, GLR
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SCHEDULE "A"
Effective June 20, 1994 the labor grade structure will be:
<TABLE>
<CAPTION>
Labor Grade Rate Labor Grade Rate
<S> <C> <C> <C>
1 $12.28 - $12.97 6 $9.54 - 9.9?
2 10.93 - 11.85 7 9.26 - 9.67
3 10.38 - 10.83 8 9.00 - 9.25
4 10.09 - 10.50 9 8.90 - 9.09
5 9.80 - 10.20 10 7.14 - 7.44
</TABLE>
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SCHEDULE "B"
Effective December 19, 1994
the labor grade structure will be:
<TABLE>
<CAPTION>
Labor Grade Rate Labor Grade Rate
<S> <C> <C> <C>
1 $12.38 - $13.07 6 $9.64 - 10.03
2 11.03 - 11.95 7 9.36 - 9.77
3 10.48 - 10.93 8 9.10 - 9.35
4 10.19 - 10.60 9 9.00 - 9.19
5 9.90 - 10.30 10 7.24 - 7.54
</TABLE>
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SCHEDULE "C"
Effective June 19, 1995 the labor grade structure will be:
<TABLE>
<CAPTION>
Labor Grade Rate Labor Grade Rate
<S> <C> <C> <C>
1 $12.68 - $13.37 6 $9.94 - 10.33
2 11.33 - 12.25 7 9.66 - 10.07
3 10.78 - 11.23 8 9.40 - 9.65
4 10.49 - 10.90 9 9.30 - 9.49
5 10.20 - 10.60 10 7.54 - 7.84
</TABLE>
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SCHEDULE "D"
Effective June 17, 1996 the labor grade structure will be:
<TABLE>
<CAPTION>
Labor Grade Rate Labor Grade Rate
<S> <C> <C> <C>
1 $12.98 - $13.67 6 $10.24 - 10.63
2 11.63 - 12.55 7 9.96 - 10.37
3 11.08 - 11.53 8 9.70 - 9.95
4 10.79 - 11.20 9 9.60 - 9.79
5 10.50 - 10.90 10 7.84 - 8.14
</TABLE>
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SCHEDULE "E"
JOB LISTING
<TABLE>
<CAPTION>
JOB LABOR PAGE
CODE JOB TITLE GRADE NUMBER
<S> <C> <C> <C>
6036 Electronic P.C.B. Assembler 10 70
6031 Assembler, Electro/Mechanical 9 71
6071 Maintenance Helper/Janitor 9 72
6039 Electronic Assembler 8 73
6052 Material Handler 8 74
6013 Drill/Punch Press Operator 7 75
6086 Electronic Tester/Inspector 7 77
6032 Flat Wire Processor 7 78
6082 Production Inspector 7 79
6063 Sheet Metal Machine Operator 6 80
6034 Production Salvage Operator 6 82
6021 Processor 6 83
6053 Customer Service Supply Clerk 6 84
6051 Supply Clerk 6 85
6022 Silk Screen Operator 6 87
6035 P.C.B. Wave Solder Operator 6 88
6012 Precision Machine Operator 5 89
6081 Senior Inspector 5 90
6030 Set-Up (Lead Operator), Assembly Electro-Mechanical 5 92
6033 Set-Up (Lead Operator), Electronic Assembler 5 93
6085 Repairer, Sound Products 5 95
6062 Machinist "B" 4 96
6020 Processor, Lead Operator 3 97
6065 Sheet Metal Fabricator/Layout 3 98
6050 Lead Operator - Supply Clerk 3 100
6061 Machinist "A" 2 101
6010 Set-Up (Lead Operator) Machine Shop 2 102
6066 Sheet Metal Lead Operator 2 104
6070 Maintenance "A" 1 105
6080 Production Test Technician 1 106
6060 Tool & Die Maker 1 108
</TABLE>
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JOB DESCRIPTIONS
ALTEC LANSING CORPORATION
Note: The following job descriptions contain the general details considered
necessary to describe the principle function of the job identified and shall not
be construed in a detailed description of all the work requirements that may be
inherent in this job.
The parties recognize that some job procedures are inherent to more than one job
classification and may be a primary function in one classification and a minor
job procedure and function in another classification. Likewise, there can be
instances where individuals perform single, isolated or selected duties
described in a job description other than their own. It is not the intent of the
parties to exercise the upgrade procedure in such situations. Neither is it
their intent to shift work assignments to lower rated classifications or to
circumvent the upgrade procedure where individuals are performing the full scope
of the job.
ELECTRONIC P.C.B. ASSEMBLER -
LABOR GRADE NO. 10
PRIMARY FUNCTION: Perform a range of repetitive and highly procedurized, but
exacting and intricate component preparation and insertion.
EQUIPMENT AND TOOLS: Operate full complement of P.C.B. assembly equipment which
includes solder mask equipment, hand tools, component prep machines, air
screwdrivers, wire strippers, and other related equipment.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Work from detailed assembly specifications and instructions and prescribed
routings.
2. Perform P.C.B. assembly on a standard bench or paced line in accordance with
production methods.
3. "Prep" components in accordance with assembly instructions.
4. Apply solder masking to P.C.B.
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5. Perform various P.C.B. assembly operations depending on process, procedures,
and methods.
6. Produce high quality acceptable parts and assemblies at reasonable production
standards.
7. Check work for conformance to drawings, maintain production records, care for
tools and equipment, and keep work area clean and orderly.
8. Perform other related duties as assigned.
ASSEMBLER-ELECTRO/MECHANICAL -
LABOR GRADE NO. 9
PRIMARY FUNCTION: Conveyor or bench assembly of mechanical, electromechanical
devices, parts, subassemblies, final assemblies and packing.
TOOLS & EQUIPMENT: Must use various assembly jigs, tools, fixtures, and
equipment, air, mechanically and electronically operated - all types of hand
tools, wire strippers, air drivers and wrenches, soldering devices, etc. Use
adhesive applicators, brush, pump gun, tubes, etc.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Receive work assignments, either verbal or written, from Supervisor together
with drawings, method sheet, sketches or other information as required.
2. Observe operation of equipment for any malfunction and report same to
supervision.
3. Check work for specification conformance.
4. May require the operation of more than one machine, dependent upon process
procedures and methods.
5. Produce high quality acceptable parts.
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6. Repair defective work similar to regular tasks.
7. Maintain work area and equipment in a clean and orderly condition.
8. Parts sorting procedures according to need.
9. Will be responsible for safekeeping and handling of all tools issued.
10. Enter production quantities or other records as required.
11. Meet reasonable standards as required.
MAINTENANCE HELPER/JANITOR -
LABOR GRADE NO. 9
PRIMARY FUNCTION: To assist Maintenance "A" in performance of their duties and
to perform janitorial duties.
TOOLS & EQUIPMENT: As required for performance.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Perform tasks of a general nature such as keeping maintenance personnel
supplied with tools and materials, also performs janitorial duties such as
cleaning, scrubbing and waxing.
2. Recognize various tools and materials and their application.
3. Perform simple operations such as sawing, nailing, cutting material,
painting, etc.
ELECTRONIC ASSEMBLER - LABOR GRADE NO. 8
PRIMARY FUNCTION: Proficiently perform electronic assembly, rework, and repair
of electronic cabinets, consoles, chassis, subassemblies, printed circuit
boards, and similar or related apparatus.
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TOOLS & EQUIPMENT: Various hand tools including soldering devices and equipment,
jigs, fixtures, bench type machines, air drivers, wire strippers, lugger and
other related equipment, diagrams, schematics, drawings, etc.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Perform standard bench or paced electronic assembly duties.
2. Perform various electronics work operations depending on process, procedures
and methods.
3. Proficiently perform electronic wiring and soldering, make proper selection
and installation of mechanical and electronic components and perform point to
point wiring and soldering.
4. Assemble from wire lists, drawings, schematics, wiring diagrams, verbal
instruction and visual aids.
5. Perform fitting, adjusting, aligning, riveting and related electromechanical
assembly duties.
6. Produce high quality acceptable parts at reasonable production standards.
7. Repair or rework defective work similar to regular electronic assembly work
assignments.
8. Check work for conformance to specification. maintain production records,
care for tools and equipment, and keep work area clean and orderly.
9. Perform other related duties as assigned.
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MATERIAL HANDLER - LABOR GRADE, NO. 8
PRIMARY FUNCTION: Move various materials, tools and equipment, keep flow of raw
or in-process goods in required areas and processed goods to stock or required
areas. Keep area clean and orderly.
TOOLS & EQUIPMENT: Material handling and cleaning equipment.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Receive work assignments.
2. Count and identify parts.
3. Keep required areas or workers furnished with materials and supplies.
4. Move finished goods or completed subassembly parts to other departments or
move in-process material back to his department.
5. Use all types of material handling equipment.
6. Maintain general good housekeeping in the area of assignments.
7. Perform other duties as required, such as counting and recording quantities,
cleaning machines, etc.
DRILL/PUNCH PRESS OPERATOR -
LABOR GRADE NO. 7
PRIMARY FUNCTION: Operate metal working machine tools for the purpose of
drilling, tapping, blanking, shaping, fusing, with lathe to shape, turn, drill,
thread, etc. various materials for making parts, forming of various metals and
other materials.
TOOLS & EQUIPMENT: Drill press, polishing and sanding equipment, power presses,
spot welder, lathes, lathe tools and related equipment. Use of go and no-go
gauges, pin gauges, thread gauges, dial gauges, etc.
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SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Receive work assignments, either verbal or written, from supervision,
together with drawings, method sheet, sketches or other information as required.
2. Observe operation of equipment for any malfunction and report same to
supervisor or lead operator.
3. Check work visually for specification conformance.
4. May require the operation of more than one machine, dependent upon process
procedures and methods.
5. Produce high quality acceptable parts.
6. Meet reasonable standards set for each job.
7. May maintain cutters and attachments to ensure maximum performance.
8. Maintain equipment in a clean and orderly condition.
9. Will be responsible for safekeeping of all tools issued.
10. Use gauges, micrometers, calipers etc., to meet specifications on
tolerances.
11. Enter production quantities or other records as required.
12. Make necessary adjustments to hold close tolerances as required.
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ELECTRONIC TESTER/INSPECTOR -
LABOR GRADE NO. 7
PRIMARY FUNCTION: Perform routine in-line or off-line inspection and/or testing
on a variety of devices, parts, products and subassemblies.
TOOLS & EQUIPMENT: Electronic and mechanical hand tools, fixtures and devices,
including applicable measuring devices, gauges and instruments.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Check, inspect and/or perform routine tests on electronic components, printed
circuit boards, chassis or subassemblies for defects, workmanship, correct
component or proper installation.
2. Perform thorough inspection of electronic assembly wiring and soldering.
3. Work from wiring diagrams, wire lists, sample parts, schematics, blueprints,
and other similar documentation, specifications and instructions.
4. Use various measuring devices and instruments to determine performance and
correctness of components and parts to specification.
5. Testing typically includes routine adjustments, reading and measurements to
predetermined values or conditions where complex electronic technical judgment
is not required.
6. May perform rework, repair, assembly, and other assigned and related duties.
7. Complete assigned paperwork, record keeping and housekeeping.
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FLAT WIRE PROCESSOR - LABOR GRADE NO. 7
PRIMARY FUNCTION: To perform the flat wire voice coil process, operates various
equipment to flatten (mill) wire and perform the subsequent operations and
procedures necessary to make flat wire voice coils to specification.
TOOLS & EQUIPMENT: Operator uses wire flatting machine. flat wire insulation
machine, coil stacker and press, curing oven, cutting (sizing) machine and other
related devices. Includes various hand tools, equipment fixtures and measuring
devices.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Performs work from written or verbal instructions together with drawings,
method sheets, sketches and other information.
2. Prepares machines for operations. Operates, adjusts and monitors the various
machines during operation.
3. Observes equipment operations for malfunction and checks work for conformance
to specification.
4. Adjusts and monitors various wire tensions, speeds and various other process
criteria per procedure.
5. Performs flat wire flatting (milling), insulating, stacking, curing and
cutting to size.
6. Prepare and monitor the various cleaning, coating, insulating and gluing
mixtures for the flat wire process.
7. Identifies and properly labels, packages, and marks parts and components per
procedure.
8. Keeps area neat, clean and orderly.
9. Maintains assigned records and documents.
10. Performs other related duties as assigned.
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PRODUCTION INSPECTOR - LABOR GRADE NO. 7
PRIMARY FUNCTION: Line inspection and/or test in the Assembly Departments, and
non-technical visual and go - no-go gauge testing of bulk items in the Machine
Shop and Paint areas.
TOOL & EQUIPMENT: Non-technical gauging tools and measuring devices, both
mechanical and electrical.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Use of inspection tools and other related equipment to detect defects, both
mechanical and electrical.
2. Inspect parts and assemblies visually for mechanical and appearance defects.
3. Perform repetitive inspection sorting operations, both visual and with the
use of go - no-go gauges.
4. Read prints and specifications.
5. Maintain records as required and process all paper work related to job.
6. Does not perform receiving inspection.
7. Does not perform Machine Shop first part and sampling inspection.
8. Does not analyze production rejects or equipment returned by customers.
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SHEET METAL MACHINE OPERATOR -
LABOR GRADE NO. 6
PRIMARY FUNCTION: To Operate a full range of sheet metal fabrication equipment
and tools for the purpose of producing high quality production parts out of
various metals and other materials.
TOOLS & EQUIPMENT: Full range of sheet metal machines and related equipment to
include shears, power brakes, punch presses, turret punch presses, basic welding
equipment, an assortment of sheet metal templates, fixtures, hand tools and
measuring instruments and equipment.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Receive work assignments, either verbal or written, from supervision and/or
lead operator.
2. Observe operation of equipment for any malfunction and report same to
supervisor or lead operator.
3. Check work visually for specification conformance.
4. May require the operation of more than one machine, dependent upon process
procedures and methods.
5. Produce high quality acceptable parts.
6. Meet reasonable standards set for each job.
7. Maintain equipment and the area in clean and orderly condition.
8. Responsible for the safekeeping of all tools issued.
9. Use gauges, production part samples, calipers, micrometers, etc., to meet
specifications on tolerances.
10. Prepare and maintain production related records as required.
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11. May be required to make minor adjustments to hold tolerances and make minor
setups.
12. Perform rework and other assigned and related duties.
PRODUCTION SALVAGE OPERATOR -
LABOR GRADE NO. 6
PRIMARY FUNCTION: To disassemble various units, identify problem, replace or
repair part(s), reassemble and test for performance compliance.
TOOLS & EQUIPMENT: To include manual and power hand tools, applicable production
equipment, special fixtures and apparatus, certain gauging, measuring and
instrumentation equipment, blueprints, drawing, wiring diagrams, specifications
and verbal instructions.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. By experience and product knowledge, uses proper disassembly and assembly
practices and methods on drivers, speakers, networks and other similar or
related Electro-Mechanical products.
2. Proficient knowledge and use of tools and equipment, including various glues,
epoxies, soldering techniques, component parts and cleaning operations.
3. Under superviser or lead person direction, makes necessary set-up, work
station arrangement, and material handling.
4. Retrieves needed parts, stacks, palletizes, and moves parts and assemblies as
required.
5. Proficiently uses proper technique and method to fit, align, adjust,
position, size and assemble the correct part(s) into finished product.
6. Correct cosmetic deficiencies.
7. Performs production work of a similar or lesser nature for full utilization.
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8. Completes necessary paperwork, recordkeeping, housekeeping and other duties
as assigned.
9. May be an in-line or off-line operation.
PROCESSOR - LABOR GRADE NO. 6
PRIMARY FUNCTION: Clean, chemically treat, and spray paint a variety of parts
and assemblies.
TOOLS & EQUIPMENT: All equipment and material pertaining to cleaning, chemically
treating and painting departments.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Paint and clean a variety of parts where procedures are clearly described by
Supervisor or Lead Operator.
2. To apply lacquer, enamel and other types of protective coating with spray
gun.
3. Use all types of cleaning solutions, paint pots and connecting hose hookups.
4. Apply and use degreasing and chemical coating solutions on various parts and
subassemblies.
5. Assemble and adjust spray gun for correct amount of paint for a smooth high
quality finish on a production type basis.
CUSTOMER SERVICE SUPPLY CLERK -
LABOR GRADE NO. 6
PRIMARY FUNCTION: Process returned goods through the Customer Service
department.
TOOLS & EQUIPMENT: Manual and power material handling equipment. Also, other
equipment assigned for efficient and successful operation.
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SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Receive work assignments, written or verbal, from Supervisor.
2. Accept customer returned goods from Receiving Department. Unpackage and
verify contents of receipts. Mark each item with appropriate control number.
3. Unpackage and distribute customer product to appropriate staging areas.
4. Process receiving documents, to include model number, serial number and
inspection comments.
5. Responsible for processing inventory transactions such as material
requisitions and factory returns.
6. Prepare and repackage product to be returned to customer or to inventory.
7. Return customer returned inventory to proper stock location. Process
applicable inventory transaction documents.
SUPPLY CLERK - LABOR GRADE NO. 6
PRIMARY FUNCTION: To process materials and finished products through receiving,
shipping, stores and warehouse.
TOOLS & EQUIPMENT: Manual and power material handling equipment. Also other
equipment assigned for efficient and successful operation.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Receive work assignments, written or verbal, from Supervisor along with
necessary paperwork, blueprints, bills of materials, requisitions, etc.
2. Receive in-bound materials, ship out-bound materials, handle all materials to
and from stores, finished goods stock, and warehouse.
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3. Count and verify counts and description of all material received, shipped and
movement to and from stock. Notifies Supervisor of any discrepancies or
shortages.
4. Process receiving records. bills of lading, requisitions and types or writes
all necessary paperwork and labels for successful operation of receiving,
shipping, and stores area.
5. Makes sure all required identification such as labels, stamps, etc., are
affixed.
6. Must be familiar with freight classifications and parcel post restrictions.
Handle and process air freight, air express, parcel post and commercial carrier
freight.
7. Place material in correct locations with proper identification.
8. Maintain security of stockroom and area assigned.
9. Keep area in neat and orderly condition.
10. Supply accurate physical inventory as directed.
11. Handwriting must be legible and accuracy must be maintained on documents.
SILK SCREEN OPERATOR - LABOR GRADE NO. 6
PRIMARY FUNCTION: To prepare, set up, operate and maintain silk screen equipment
and materials used to print lettering and designs on company products, supplies
and devices.
TOOLS & EQUIPMENT: Silk screen machine, silk screens, baking ovens, various hand
tools, equipment and devices used to perform and maintain silk screen equipment.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Prepare material, mix paints/inks, and select silk screen frame to be used.
2. Set up equipment and align silk screen frame to ensure accurate placement of
printing.
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3. Operate machine and screen pulling to print high quality lettering and
designs on parts and products.
4. Check materials and finished silk screen product for conformance to
specification, documentation and drawings.
5. Set and monitor baking ovens time and temperatures.
6. Perform rework as necessary to ensure conformance to specification.
7. May construct and repair silk screens and frames.
8. Exercise care and properly maintain silk screens and equipment.
9. Keep area clean and orderly and perform work in an efficient manner.
10. Perform other related and associated duties.
P.C.B. WAVE SOLDER OPERATOR -
LABOR GRADE NO. 6
PRIMARY FUNCTION: Sets up, operates, maintains and controls the complete wave
solder operation and cleaning of circuit board assemblies.
EQUIPMENT & TOOLS: Operates and maintains wave solder machine, water wash
machine, hand tools, and other related equipment.
SOURCE OF SUPERVISION: Designated Supervisor.
WORK PROCEDURE:
1. Sets up and operates wave solder machine and water wash system.
2. Perform all duties associated with operating and maintaining wave solder
equipment.
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3. Check work for conformance to drawings, maintain production records, care for
tools and equipment, and keep work area clean and orderly.
4. Perform other related duties as assigned.
PRECISION MACHINE OPERATOR -
LABOR GRADE NO. 5
PRIMARY FUNCTION: Perform operation of machine shop machinery such as Computer
Numerically Controlled (CNC) and Automatic Chucker, (CNC) lathes and (CNC) mills
to fabricate close tolerance parts.
TOOLS & EQUIPMENT: Computer Numerically Controlled (CNC) chuckers, automatic
chuckers and other similarly sophisticated machinery.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Operate CNC machine shop equipment and other automatic chuckers, lathes and
mills to fabricate parts to close tolerance.
2. Proficiently uses a variety of metal working hand tools and precision
measuring instruments and equipment.
3. Work from complex drawings, blueprints, specifications, sketches and verbal
instructions.
4. Make standard machining computations enabling operator to adjust, position
and/or offset cutting tool to hold tolerances.
5. As required, operator replaces cutting tool or insert to hold tolerances and
maintain an acceptable surface finish.
6. Operator may be required to check and add machine lubricants as required.
7. Operator will perform other productive work during machine cycle and/or check
workmanship to specification.
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8. Produce quality parts and meet reasonable work standards.
9. Perform work in an orderly and efficient manner and keep area, machine, and
instruments clean and in proper condition.
10. Perform other related and associated duties, such as Machine Shop Operator
when precision machining is not readily available.
SENIOR INSPECTOR - LABOR GRADE NO. 5
PRIMARY FUNCTION: General, plant-wide quality control and assurance inspection,
testing and analysis of all product lines and related parts and/or
subassemblies, including customer returned material.
TOOLS & EQUIPMENT: Gauging tools, mechanical and electrical equipment, and all
tools incidental to inspection, test analysis, and repair.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Set-up all types of inspection tools and equipment, including environmental
test equipment, to detect both mechanical and electrical defects.
2. Identify defective units, parts, items and assemblies in accordance with
quality assurance and reliability procedures.
3. Detect manufacturing defects as to finishes, imperfections, dimension,
performance, etc., both visually and electronically, including incoming,
receiving, and machine shop inspection.
4. Inspect internal and customer returned items.
5. Perform life tests in accordance with instructions.
6. Read prints and specifications.
7. Maintain records as required and process all paper-work related to job.
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SET-UP (LEAD OPERATOR),
ASSEMBLY-ELECTRO/MECHANICAL
LABOR GRADE NO. 5
PRIMARY FUNCTION: Set up all assembly stations, both individual and line. Sit in
on line relief. Perform temporary production work and/or in-line relief. Assign
assemblers to stations. Ascertain stock levels at work stations.
TOOLS & EQUIPMENT: All tools, prints, equipment and materials pertaining to the
assembly department.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Receive work assignments either verbal or written from supervision.
2. Able to read and interpret drawings and specifications.
3. Secure prints, method sheets, special information, etc., from files or other
sources as required. Check for any discrepancies.
4. Instructs or trains any department employee.
5. Maintain any records or equipment as directed.
6. Make first assembly piece and present for quality approval.
7. Check to assure that all component parts are as specified.
8. Prepare adhesives, paints, etc., according to specifications.
9. Use various measuring and timing devices, such as 6" scale, micrometer, etc.
10. Work in an orderly manner conducive to good housekeeping.
11. Maintain production records and/or other information.
12. Observe assembly operation and make corrections as required.
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SET-UP (LEAD OPERATOR)
ELECTRONIC ASSEMBLER
LABOR GRADE NO. 5
PRIMARY FUNCTION: Set up off-line, paced assembly line and PCB operations and
work stations. Ensures proper fixtures, work aids, soldering devices, hand
tools, and various other equipment and materials are available. Provide
necessary coordination to ensure that production difficulties are minimized.
Proficient in all aspects of electronic assembly techniques used by Altec
Lansing Corporation.
TOOLS & EQUIPMENT: All tools and equipment required in the electronic assembly
and PCB assembly process.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Set up electronic assembly, PCB and related work stations.
2. Provide proper equipment, materials, work aids and communicate work
procedure, instructions and methods.
3. Monitor the assembly process to ensure conformance to specification and
procedure. Report difficulties to supervision.
4. Perform in-line relief to ensure continuation of production.
5. Proficient in a wide variety of electronic assembly techniques, wiring and
soldering skills, parts identification, rework, repair and sequence of assembly.
6. Perform work from wiring diagrams, wire lists, schematics, verbal
instructions and other similar documentation.
7. Complete assigned paperwork and record keeping.
8. Performs or monitors housekeeping and the care and storage of equipment,
supplies and material.
9. Perform other related duties to include regular electronic assembly and PCB
work as required.
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REPAIRER. SOUND PRODUCTS
LABOR GRADE NO. 5
PRIMARY FUNCTION: Test, analyze, identify and repair or replace defective and
customer returned items or products. Excludes electronic devices such as
amplifiers, signal processors, etc.
TOOLS & EQUIPMENT: Oscillators, multi-meters, measuring equipment and
miscellaneous hand tools to include: soldering iron, woodworking tools and other
equipment, devices. and documents as necessary.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Proficient use of tools and equipment.
2. Read and apply drawings, specifications and other instructions in performing
work operation.
3. Test, analyze, identify, and repair or replace the defective or damaged
item(s) and/or product(s) to an acceptable quality/performance level.
4. Repair or replace such items as speakers, network systems, and enclosures
using standard Company techniques.
5. Proper and timely completion of all associated and assigned paperwork,
reports, documents and forms.
6. Other related and associated duties as assigned.
7. Performs work in an orderly and efficient manner.
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MACHINIST "B" - LABOR GRADE NO. 4
PRIMARY FUNCTION: To perform machining and assembly operations in the tool and
die shop and machine operations with close supervision.
TOOLS & EQUIPMENT: All tools and machines normally found in a well-rounded
machine shop.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Use variety of machines and machine tools for routine machining operations.
2. Capable of fabricating simple tools, jigs, and fixtures.
3. Assist Machinist "A" and/or Tool & Die Maker in all phases of work.
4. Work with blueprints, sketches, with close supervision.
5. Ability to perform bench and assembly work on a routine basis.
PROCESSOR, LEAD OPERATOR -
LABOR GRADE NO. 3
PRIMARY FUNCTION: Set up, lay out and monitor all equipment and apparatus of
both individual and production line operations. Maintains equipment and
production flow. Mixes chemicals and paints to specification. Performs temporary
production work and/or in-line relief.
TOOLS & EQUIPMENT: All equipment, apparatus, fixtures and hand tools required
for cleaning, treating and paint operations.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Works from and by written and verbal instructions.
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2. Trains, instructs and monitors department employees and their work.
3. Maintain and upkeep of department equipment and apparatus and observes such
for malfunction.
4. Periodically checks the work of department employees for conformance to
specifications, standards and overall acceptability.
5. Prepares paints, chemicals, etc., according to specifications.
6. Ensures that parts (identity and quantity) material, tanks and equipment are
available for proper and continued production flow.
7. Diagnose and rectify operational difficulties.
8. Familiar with all department processes, techniques and procedures.
9. Maintains and processes department and production records and other necessary
data and information.
10. Works in an orderly manner conducive to good housekeeping, safety and
efficient production.
11. Perform other work as assigned by Supervisor.
SHEET METAL FABRICATOR/LAYOUT -
LABOR GRADE NO. 3
PRIMARY FUNCTION: Perform layout, set-up and fabrication of sheet metal work to
close tolerance for a variety of parts chassis, cabinets, brackets, etc., from
sketches, drawings sequences, set up machines and operate a full range of sheet
metal machinery.
TOOLS & EQUIPMENT: Full range of sheet metal machines and related equipment to
include shears, power brakes, punch presses, turret punch presses, basic welding
equipment, an assortment of sheet metal templates, fixtures, hand tools and
measuring instruments and equipment.
SOURCE OF SUPERVISION: Designated Supervisor
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WORK PROCEDURE:
1. Perform planning, layout and computations to fabricate and form a variety of
holes, cutouts, notches, slots, openings and bends.
2. Set up and operate a full range of sheet metal machinery.
3. Determine layout, tooling, and operation sequences to fabricate sheet metal
parts.
4. Perform sheet metal fabrication of parts to close tolerance in compliance
with verbal instructions, blueprints and other similar documentation.
5. Check work for conformance to dimension, specification, workmanship and
produce to reasonable production standards.
6. Perform rework and other assigned and related duties.
7. Perform other duties such as welding, riveting, stamping, material retrieval,
etc.
8. Complete assigned paperwork, housekeeping and recordkeeping.
9. Perform work in an orderly and efficient manner and keep area, machine, and
instruments clean and in proper condition.
LEAD OPERATOR-SUPPLY CLERK -
LABOR GRADE NO. 3
PRIMARY FUNCTION: To assign Supply Clerks to work assignments. Check for
accuracy in stock retrieval and placement. To perform Supply Clerk duties as
required.
TOOLS & EQUIPMENT: Manual and power material handling equipment. Also other
equipment assigned for efficient and successful operation.
SOURCE OF SUPERVISION: Designated Supervisor
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WORK PROCEDURE:
1. Receive work assignments, written or verbal, from Supervisor along with
necessary paperwork, blueprints, bills of materials, requisitions, etc.
2. Receive in-bound materials, ship out-bound materials, handle all materials to
and from stores, finished goods stock, and warehouse.
3. Count and verify counts and description of all material received, shipped and
movement to and from stock. Notifies Supervisor of any discrepancies or
shortages.
4. Process receiving records, bills of lading, requisitions and types or writes
all necessary paperwork, labels, for successful operation of receiving,
shipping, and stores area.
5. Makes sure all required identification such as labels, stamps, etc., are
affixed.
6. Must be familiar with freight classifications and parcel post restrictions.
7. Handle and process air freight, air express, parcel post and commercial
carrier freight.
8. Place material in correct locations with proper identification.
9. Maintain security of stockroom and area assigned.
10. Keep area in neat and orderly condition.
11. Supply accurate physical inventory as directed.
12. Handwriting must be legible and accuracy must be maintained on documents.
13. Assign Supply Clerks to work duties and check for compliance.
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MACHINIST "A" - LABOR GRADE NO. 2
PRIMARY FUNCTION: To perform diversified operations in the tool and die shop.
Complete bench assembly layout work, model making and machining operations to
close tolerances.
TOOLS & EQUIPMENT: All tools and machines normally found in a well-rounded
machine shop.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Able to make very difficult and special machine parts.
2. To dismantle, repair, assemble tools, dies, fixtures, intricate and complex
mechanical equipment.
3. Work from blue prints, sketches and verbal instructions without supervision.
4. Complete bench operations such as sharpening dies, etc
5. Performs own set-ups on all machines.
6. Assist toolmakers with detail machine parts.
SET-UP (LEAD OPERATOR) MACHINE SHOP -
LABOR GRADE NO. 2
PRIMARY FUNCTION: To properly set up for operation machine shop machinery, such
as power presses, lathes, drills, welders, mills, grinders, chuckers, shears,
brakes and other related equipment. Perform temporary production work and/or
in-line relief Ascertain adequate material levels and locations at work station.
TOOLS & EQUIPMENT: All tools and machines as required for job performance.
SOURCE OF SUPERVISION: Designated Supervisor
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WORK PROCEDURE:
1. Sets up from drawings, layouts and verbal instructions, all machine shop
equipment.
2. Assigns and instructs machine operators, as required, to sufficiently produce
high quality, acceptable parts.
3. Check initial and subsequent pieces to see if standard parts requirements are
met.
4. Diagnose and rectify operational difficulties.
5. Periodically check die fixtures, cutting tools and jigs for wear to ensure
that tolerances are maintained.
6. Set up and check automatic feeds, speeds, jigs and fixtures, etc., as
required for proper function.
7. Maintain production and other records as required.
8. Make certain that proper feeds, speed, tooling, safety and operational
sequence and methods are followed.
9. Perform routine maintenance. Ensure regular maintenance is performed for
satisfactory performance of machines.
10. Keep area neat, safe, clean and orderly.
11. Excludes primary programming of computer controlled equipment.
12. Perform necessary leadership skills to assist machine operators in their
respective job performance.
SHEET METAL LEAD OPERATOR -
LABOR GRADE NO. 2
PRIMARY FUNCTION: Assists and instructs sheet metal fabricators, as required, to
cost effectively manufacture high quality parts.
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TOOLS & EQUIPMENT: Operate full complement of sheet metal equipment which
includes the following:
Shear, Power Brake, Punch Press, CNC or Manual Turret Punch Press, Water press,
Sullivan Press, Welding Equipment, and other related sheet metal equipment.
Utilize the following tools:
An assortment of sheet metal templates, fixtures, hand tools, and measuring
instruments and equipment.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Receive work assignments, written or verbal, from Supervisor along with
necessary paperwork, blueprints, bills of materials, requisitions, etc.
2. Train, instruct and monitor department employees and their work.
3. Analyze and correct operational difficulties.
4. Perform production work as assigned by Supervisor.
5. Process department data and information.
6. Ensure regular maintenance is performed for optimum performance of equipment.
7. Periodically check production tooling for wear to ensure that tolerances are
maintained.
8. Monitor for good housekeeping and safety practices.
MAINTENANCE "A" - LABOR GRADE NO. 1
PRIMARY FUNCTION: To keep in operating order all electrical and mechanical
equipment. Make repairs of all natures.
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TOOLS & EQUIPMENT: All types of tools and equipment for breakdowns and
maintenance of building and machines.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Make complete installation of all electrical and/or plumbing work in factory
in accordance with appropriate codes.
2. Determine a bill of materials to perform a job.
3. Make repairs to all types of equipment or facility.
4. Must be able to perform plumbing, carpentry, welding, painting and other
tasks to acceptable standards as may be required.
5. Instruct and assist other maintenance employees.
PRODUCTION TEST TECHNICIAN -
LABOR GRADE NO. 1
PRIMARY FUNCTION: Quality control analysis, testing, evaluating data, inspection
and repair of internal and customer returned electronic systems.
TOOLS & EQUIPMENT: Gauging tools, mechanical, electronic, and all tools
incidental to inspection or repair of systems.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
1. Set up and test complete electronic systems, using electronic testing
equipment and follow work orders, test manuals, and schematic and wiring
diagrams.
2. Set up all types of electronic testing equipment for repetitive electronic
tests or customer repairs.
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3. Constructs test circuits, using handtools and soldering iron and following
schematic diagrams and test specifications.
4. Connects system to be tested to equipment, such as test circuits,
oscilloscope, signal generator, frequency meters, spectrum analyzers,
voltmeters, ohmmeters, and milliammeters with the ability to interpret results.
5. Reads test equipment that indicate electrical characteristics of system, such
as output, power, frequency, voltage, current distortion, inductance and
capacitance.
6. Compares test data with specifications and records test data or plots test
results on graph.
7. Calibrates system to obtain specified performance characteristics, such as
frequency or inductance.
8. Traces circuits of defective systems, using knowledge of electronic theory
and electronic test equipment to locate defects such as wiring errors, open
wires, and faulty components. Evaluate data and make necessary changes or
corrections to conform to testing specifications.
9. Examines switches, dials, and other hardware for conformance to
specifications.
10. Replaces defective wiring and components, using handtools and soldering
iron, or records defects on tag attached to system and returns to production
department for repair as applicable.
11. Perform functional test of electronic system under specified environmental
conditions.
TOOL & DIE MAKER - LABOR GRADE NO. I
PRIMARY FUNCTION: To make tools, dies, jigs, and fixtures of high quality and
complexity for production machines and other equipment.
TOOLS & EQUIPMENT: All types of precision tools, gauges and necessary equipment
and machines for satisfactory job performance.
SOURCE OF SUPERVISION: Designated Supervisor
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WORK PROCEDURE:
1. Construct and repair machine shop tools, gauges, jigs and fixtures for metal
working. Capable of constructing simple and complex compound dies.
2. Plan and layout work from models, blueprints, drawings, or other
instructions.
3. Application of the working properties of materials as far as malleability,
heat treating, etc., to achieve required qualities.
4. Instructs machinists as to specifications and procedures.
5. Makes initial tryout of dies, jigs, fixtures and instructs in their use.
6. Select and use appropriate materials, tools, processes, and machines for
construction of both simple and complex tools, dies, jigs and fixtures.
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February 14,1996
TO: Ron Graham
FROM: Linda Norton
SUBJECT: Information Needs/Sales Presentation
1. Copy of any "Employee Handbook." See Exhibit "A"
2. Copy of an English summary of any employment agreements. Does not
apply to this location.
3. Copies of any sales incentive or bonus agreements with individual
employees. See Exhibit "B" Employees: Chris Kline & John Sexton
4. Provide examples of New Employee Kits. See Exhibit "C"
5. Union activity - summary of open grievances:
Grievance # 5294: Thinh Van Tran
Nature of Dispute: By-Pass for Upgrade/Qualifications
Stage of Dispute: Arbitration
Grievance # 5416: Terry Johnson
Nature of Dispute: Corrective Discipline/Written Counseling Action
for unauthorized use of a grand-master security key.
Stage of Dispute: Pending Third Step Resolution.
Grievance # 5419: Steve Hicklin
Nature of Dispute: Overtime Procedure
Stage of Dispute: Pending Third Step Resolution.
Grievance # 5422: Union/All Employees
Nature of Dispute: Layoff/Recall
Stage of Dispute: Pending Third Step Resolution.
6. Copy of Union contract: See Exhibit "D"
Copy of union draft handed out to employees for approval:
See Exhibit "D".
<PAGE> 83
COMPANY PROPOSAL
JUNE 17, 1994
FINAL OFFER
1. AGREEMENT: 3 YEARS
2. VACATION CARRY OVER: UP TO ONE WEEK BY MUTUAL AGREEMENT TO BE USED WITHIN 90
DAYS
3. WAGES: 1ST YEAR 2ND YEAR 3RD YEAR
40 CENTS 06/20/94 30 CENTS 30 CENTS
10 CENTS 12/19/94 06/19/95 06/17/96
5.3% 3.0% 2.9%
4. A&S BENEFITS:
1ST YEAR $160 2ND YEAR $170 3RD YEAR $190
ANY INCREASE IN RATES WILL BE SHARED EQUALLY
5. MEDICAL: COMPANY AGREES TO ABSORB MEDICAL PREMIUM INCREASE IN EXCESS OF 10%
PER YEAR WITH ABOVE COMPANY AGREES TO RATIO OF 20%; 34%, 39%
6. DENTAL: WILL PROVIDE FULLY FUNDED BY EMPLOYEE CONTRIBUTION
7. COMPANY PAID MEDICAL PREMIUMS FOR EMPLOYEES ON WORKERS COMP. COMPANY WILL PAY
MEDICAL PREMIUM FOR 1ST MONTH
8. RETIREMENT: INCREASE 3RD YEAR
$9.50 TO $11.00
9. 401(K): OPTION FOR CONSIDERATION - CONSIDER 1/1/95 IF
50% OF ELIGIBLE EMPLOYEES WILLING TO SIGN UP AT A 2% CONTRIBUTION
MINIMUM AVERAGE FOR GROUP
COMPANY AGREES TO 33 1/3% OF FIRST $1000 CONTRIBUTED BY EMPLOYEE
EFFECTIVE 1/1/96
10. ATTENDANCE BONUS: $75 PER QUARTER WITH ONLY THREE OCCURRENCES NOT TO EXCEED
10 HOURS
11. LIFE INSURANCE: COMPANY WILL PROVIDE ALL EMPLOYEES WITH A $15,000 LIFE
INSURANCE
80
<PAGE> 84
COLLECTIVE BARGAINING ECONOMIC LANGUAGE AGREEMENT
BETWEEN
ALTEC LANSING CORPORATION
AND
INTERNATIONAL ASSOCIATION OF MACHINIST AND AEROSPACE WORKERS
LOCAL LODGE #850
ARTICLE 6 VACATION:
SECTION 6.2(H): CHANGE
EMPLOYEE VACATION WILL BE SCHEDULED DURING HIS/HER ANNIVERSARY YEAR. AN EMPLOYEE
MAY BE ALLOWED TO CARRY OVER ONE WEEK OF VACATION OVER INTO THE NEXT VACATION
YEAR BY MUTUAL AGREEMENT WITH THE COMPANY. ANY VACATION CARRY OVER MUST BE
SCHEDULE D AND TAKEN WITHIN NINETY (90) DAYS OF THE ANNIVERSARY DATE.
ARTICLE 12 GROUP INSURANCE:
SECTION 12.2: CHANGE
ACCIDENT AND SICKNESS BENEFITS SHALL BE 160.00 PER WEEK FOR THE FIRST YEAR OF
THE CONTRACT; 170.00 PER WEEK FOR THE SECOND YEAR OF THE CONTRACT, AND 190.00
PER WEEK FOR THE THIRD YEAR OF THE CONTRACT. ANY INCREASE IN INSURANCE COMPANY
BILLED RATES WILL BE SHARED EQUALLY BETWEEN THE COMPANY AND EMPLOYEE.
ARTICLE 12 GROUP INSURANCE:
SECTION 12.6 (NEW)
THE COMPANY WILL OFFER A GROUP DENTAL INSURANCE POLICY TO BAR
GAINING UNIT EMPLOYEES. THE GROUP DENTAL INSURANCE PREMIUMS WILL
BE PAID BY THE EMPLOYEE.
SECTION 12.7 (NEW)
THE COMPANY WILL PROVIDE 15,000 LIFE INSURANCE COVERAGE TO ALL EMPLOYEES AT NO
COST TO THE EMPLOYEE.
SECTION 12.7 (NEW)
WHEN AN EMPLOYEE IS ABSENT FROM WORK AS THE RESULT OF A LOST TIME WORKERS
COMPENSATION INJURY, THE COMPANY WILL PAY THE EMPLOYEE'S
1
<PAGE> 85
TOTAL MEDICAL PREMIUM FOR THE FIRST MONTH OF THE ABSENCE. THE EMPLOYEE WILL BE
RESPONSIBLE FOR THEIR NORMAL MEDICAL CONTRIBUTION PORTION AFTER THE FIRST MONTH
OF WORKER COMPENSATION ABSENCE.
ARTICLE 13 RETIREMENT PLAN:
SECTION 13.4: CHANGE
NORMAL RETIREMENT BENEFITS - THOSE EMPLOYEES RETIRING OR TERMINATING ON OR
AFTER JUNE 17, 1996 WILL HAVE THEIR BENEFITS CALCULATED AT $ll.00 PER MONTH
MULTIPLIED BY THE NUMBER OF YEARS OF CREDITED SERVICE NOT IN EXCESS OF 30 YEARS.
LETTER OF UNDERSTANDING IS LOCATED ON PAGE 3 (NEXT PAGE)
2
<PAGE> 86
LETTER OF UNDERSTANDING
WAGE SCHEDULE ADJUSTMENT
THE PARTIES HAVE AGREED TO ADJUST WAGE SCHEDULES FOR CONTRACTUAL INCREASES.
/s/ EDUARD A. RUSCH
- ----------------------------------- ----------------------------------------
UNION COMPANY
3
<PAGE> 87
LETTER OF UNDERSTANDING
ATTENDANCE BONUS REQUIREMENTS
THE PARTIES HAVE AGREED TO THE FOLLOWING UNDERSTANDING REGARDING THE
REQUIREMENTS FOR EARNING AN ATTENDANCE BONUS. THE COMPANY ABSENTEEISM GUIDELINES
AND ATTENDANCE POLICY IS MODIFIED AS FOLLOWS:
"AS AN ADDED INCENTIVE AND REWARD FOR EXCELLENT ATTENDANCE, EMPLOYEES WILL
RECEIVE A BONUS OF $75.00 FOR EACH CALENDAR QUARTER OF EXCELLENT ATTENDANCE
BEGINNING ON AUGUST 1, 1994. EMPLOYEES WILL NOT BE ELIGIBLE FOR EXCELLENT
ATTENDANCE BONUS IF THEY EXCEED EITHER THREE OCCURRENCES OF ABSENCE OR TARDINESS
OR A TOTAL OF TEN (10) HOURS OF ABSENCE OR TARDINESS."
/s/ EDUARD A. RUSCH
- ----------------------------------- ----------------------------------------
UNION COMPANY
4
<PAGE> 88
LETTER OF UNDERSTANDING
RETIREMENT BENEFIT SUMMARY
THE PARTIES HAVE AGREED TO THE FOLLOWING UNDERSTANDING REGARDING A RETIREMENT
BENEFIT SUMMARY. THE COMPANY AGREES TO MAKE AVAILABLE ANNUALLY FOR EACH
BARGAINING UNIT EMPLOYEE A RETIREMENT BENEFIT SUMMARY AS SOON AS PRACTICAL.
/s/ EDUARD A. RUSCH
- ----------------------------------- ----------------------------------------
UNION COMPANY
5
<PAGE> 89
Letter of Understanding on Company Policy for Authorized Use of Emergency Day at
a Time Vacation or All Purpose Pay (APP)
June 15, 1994
Employees will be required to obtain approval from their supervisor for day at a
time vacation or APP use during the first 2 hours of their shift on the day
prior to use. We realize that emergency situations will arise which may cause an
employee to need to take a day of vacation or use APP on an emergency basis. In
these cases, the employee will be required to call the recorder by 7:30 a.m. on
the day of use and state the following information:
1. Name, employee number, department number, and time call is
made.
2. State your reason for absence. Acceptable reasons will
include:
a. death of a family member not included in the contract
definition
b. vehicle accident/inoperable vehicle
c. emergency illness of self or family member
d. unavoidable family related emergency of such
seriousness that requires their immediate attention
3. Employee must leave a number where they can be reached until
at least 8:30 a.m. in case of the supervisor needing to
contact them to discuss the absence.
4. Exceptions may be made to the above if employee submits
verifiable documentation acceptable to the company.
It is the employee's responsibility to ensure the reason for absence meets the
above emergency criteria. If, in the supervisor's determination, the absence is
not valid the employee will incur an incident.
/s/ EDUARD A. RUSCH
- ----------------------------------- ----------------------------------------
6
<PAGE> 90
LETTER OF UNDERSTANDING
DRUG POLICY
The following provisions will be followed when the Drug Policy applies to
bargaining unit employees.
1. Article 2(D) The application of this provision will be subject to the
normal disciplinary action procedure.
2. Article 3(A) Re tests will be restricted to federally certified or
state licensed laboratory.
3. The parties will review each case and review the options available.
4. Nothing in the referenced Drug Policy denies Union represented
employees will be afforded the full rights to representation and access
to the grievance procedure.
/s/ EDUARD A. RUSCH
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
6/15/94 6/15/94
<PAGE> 91
PRODUCTION TEST TECHNICIAN - LABOR GRADE NO. 1
PRIMARY FUNCTION: Quality control analysis, testing, evaluating data, inspection
and repair of internal and customer returned electronic systems.
TOOLS AND EQUIPMENT: Gauging tools, mechanical, electronic, and all tools
incidental to inspection or repair of systems.
SOURCE OF SUPERVISION: Designated Supervisor
WORK PROCEDURE:
(1) Set up and test complete electronic systems, using electronic testing
equipment and follow work orders, test manuals, and schematic and
wiring diagrams.
(2) Set up all types of electronic testing equipment for repetitive
electronic tests or customer repairs.
(3) Constructs test circuits, using handtools and soldering iron and
following schematic diagrams and test specifications.
(4) Connects system to be tested to equipment, such as test circuits,
oscilloscope, signal generator, frequency meters, spectrum analyzers,
voltmeters, ohmmeters, and millimeters with the ability to interpret
results.
(5) Reads test equipment that indicate electrical characteristics of
system, such as output, power, frequency, voltage, current distortion,
inductance and capacitance.
(6) Compares test data with specifications and records test data or plots
test results on graph.
(7) Calibrates system to obtain specified performance characteristics, such
as frequency or inductance.
(8) Traces circuits of defective systems, using knowledge of electronic
theory and electronic test equipment to locate defects such as wiring
errors, opin wires, and faulty components. Evaluate data and make
necessary changes or corrections to conform to testing specifications.
(9) Examines switches, dials, and other hardware for conformance to
specifications.
<PAGE> 92
(10) Replces defective wiring and components, using handtools and soldering
iron, or records defects on tag attached to system and returns to
production department for repair as applicable.
(11) Perform functional test of electronic system under specified
environmental conditions.
2
<PAGE> 93
REPAIRER, SOUND PRODUCTS - Labor Grade No. 5
PRIMARY FUNCTION: Test, analyze, identify and repair or replace defective and
customer returned items or products. Excludes electronic devices such as
amplifiers, signal processors, etc.
TOOLS & EQUIPMENT: Oscillators, multi-meters, measuring equipment and
miscellaneous hand tools to include: soldering iron, woodworking tools and other
equipment, devices, and documents as necessary.
SOURCE OF SUPERVISION: Designated Supervisor.
WORK PROCEDURE:
(1) Proficient use of tools and equipment.
(2) Read and apply drawings, specifications, and other instructions in
performing work operation.
(3) Test, analyze, identify, and repair or replace the defective or damages
item(s) and/or product(s) to an acceptable quality/performance level.
(4) Repair or replace such items as speakers, crossover networks, hardware,
etc. using standard company techniques.
(5) Properly and timely completion of all associated and assigned
paperwork, reports, documents and forms.
(6) Other related and associated duties as assigned.
(7) Performs work in an orderly and efficient manner.
3
<PAGE> 94
POSITION: Sheet Metal Machine Operator - Labor Grade 6
SUMMARY: Operate a full range of sheet metal fabrication equipment and tools for
the purpose of producing high quality production parts out of various metals and
other materials.
SUPERVISED BY: Designated Supervisor
DUTIES & RESPONSIBILITIES:
1. Receive work assignments, either verbal or written, from supervision
and/or lead operator.
2. Observe operation of equipment for any malfunction and report same to
supervisor or lead operator.
3. Check work visually for specification conformance.
4. May require the operation of more than one machine, dependent upon
process procedures and methods.
5. Produce high quality acceptable parts.
6. Meet reasonable standards set for each job.
7. Maintain equipment and the area in clean and orderly condition.
8. Responsible for the safekeeping of all tools issued.
9. Use gauges, production part samples, calipers, micrometers, etc., to
meet specifications on tolerances.
10. Prepare and maintain production related records as required.
11. May be required to make minor adjustments to hold tolerances and make
minor setups.
12. Perform rework and other assigned and related duties.
4
<PAGE> 95
CUSTOMER SERVICE SUPPLY CLERK - Labor Grade No. 6
PRIMARY FUNCTION: Process returned goods through the Customer Service
department.
TOOLS & EQUIPMENT: Manual and power material handling equipment. Also, other
equipment assigned for efficient and successful operation.
SOURCE OF SUPERVISION: Designated Supervisor.
WORK PROCEDURE:
(1) Receive work assignments, written or verbal, from Supervisor.
(2) Accept customer returned goods from Receiving Department. Unpackage and
verify contents of receipts. Mark each item with appropriate control
number.
(3) Unpackage and distribute customer product to appropriate staging areas.
(4) Process receiving documents, to include model number, serial number and
inspection comments.
(5) Responsible for processing inventory transactions such as material
requisitions and factory returns.
(6) Prepare and repackage product to be returned to customer or to
inventory.
(7) Return customer returned inventory to proper stock location. Process
applicable inventory transaction documents.
5
<PAGE> 96
LETTER OF UNDERSTANDING
DRUG POLICY
The following provisions will be followed when the Drug Policy applies to
bargaining unit employees.
1. Article 2(D) The application of this provision will be subject to the
normal disciplinary action procedure.
2. Article 3(A) Re tests will be restricted to federally certified or
state licensed laboratory.
3. The parties will review each case and review the options available.
4. Nothing in the referenced Drug Policy denies Union represented
employees will be afforded the full rights to representation and access
to the grievance procedure.
<PAGE> 97
Exhibit "D"
COLLECTIVE BARGAINING LANGUAGE AGREEMENT
BETWEEN
ALTEC LANSING CORPORATION
AND
INTERNATIONAL ASSOCIATION OF MACHINIST AND AEROSPACE WORKERS
LOCAL LODGE #850
ARTICLE 3: MANAGEMENT RESPONSIBILITIES AND FUNCTIONS
SECTION 32 NEW WHICH STATES:
THE COMPANY WILL NOTIFY THE UNION COMMITTEE OF OUT-CONTRACTING OF WORK THAT WILL
RESULT IN A REDUCTION ON A PLANT WIDE BASIS WITHIN THE BARGAINING UNIT. THE
PARTIES WILL MEET ON A QUARTERLY BASIS TO REVIEW ONGOING MAJOR SUB-ASSEMBLY AND
FINAL ASSEMBLY OUT-CONTRACTING ISSUES.
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
6/14/94 6/14/94
ARTICLE 4: WORKING HOURS AND OVERTIME
SECTION 4.9 REVISED TO READ AS FOLLOWS:
(A) OVERTIME SCHEDULING. SINCE OVERTIME WORK IS AN IN CONVENIENCE
TO EMPLOYEES AND A PREMIUM RATE EXPENSE TO THE COMPANY, THE
PARTIES RECOGNIZE TWO (2) GUIDING PRINCIPLES:
(1) THE COMPANY WILL, WHENEVER POSSIBLE, PROVIDE TWENTY-
FOUR HOURS ADVANCE NOTICE OF OVERTIME WORK.
(2) WORK IN PERIODS OF OVERTIME OPERATIONS SHALL NORMALLY
BE PERFORMED BY THE EMPLOYEE WHO NORMALLY PERFORMS
THE OPERATION DURING REGULAR WORKING HOURS.
<PAGE> 98
NEW: (B) EQUALIZATION OF HOURS.
(1) THE COMPANY WILL MAKE EVERY REASONABLE EFFORT TO
DISTRIBUTE OVERTIME HOURS EQUALLY AMONG EMPLOYEES ON
A ROTATING SENIORITY BASIS IN THEIR RESPECTIVE
CLASSIFICATIONS BY DEPARTMENT, PROVIDED SUCH
EMPLOYEES ARE QUALIFIED TO DO THE WORK REQUIRED.
(2) DISTRIBUTION OF OVERTIME SHALL BE OFFERED TO THOSE
EMPLOYEES WHO HAVE THE LEAST NUMBER OF OVERTIME HOURS
ACCUMULATED AT THE TIME THE OVERTIME IS SCHEDULED TO
BE WORKED WITHIN THEIR JOB CLASSIFICATION AND THE
EMPLOYEE IS QUALIFIED TO PERFORM THE WORK.
(3) THE COMPANY WILL POST WEEKLY AN OVERTIME DISTRIBUTION
ROSTER BY DEPARTMENT CLASSIFICATION. THE EQUALIZATION
OF OVERTIME BY DEPARTMENT CLASSIFICATION WILL BE
MADE ON AN ANNUAL CONTRACT YEAR BASIS. THE MAXIMUM
OVERTIME DISTRIBUTION SPREAD WILL BE LIMITED TO FORTY
(40) HOURS BY DEPARTMENT CLASSIFICATION ONLY.
(4) QUALIFIED EMPLOYEES, AS DETERMINED BY THE COMPANY,
OUTSIDE OF THE DEPARTMENT CLASSIFICATION MAY
VOLUNTARILY SIGN UP IN PERSONNEL TO HAVE THEIR NAMES
INCLUDED ON THE DEPARTMENT CLASSIFICATION OVERTIME
ROSTER.
(A) THE COMPANY WILL NOT BE OBLIGATED FOR
MAINTAINING EQUALIZATION OF OVERTIME FOR
EMPLOYEES OUTSIDE THE DEPARTMENT
CLASSIFICATION WITH THOSE WITHIN THE
DEPARTMENT CLASSIFICATION.
(B) EMPLOYEES CAN VOLUNTARILY SIGN UP ON THE
OVERTIME ROSTER AT ANYTIME. BUT THEY WILL BE
OBLIGATED TO REMAIN ON THE LIST FOR THREE
MONTHS BEFORE THEY CAN REMOVE THEMSELVES
FORM THE LIST.
(C) ANY EMPLOYEE ADDED TO THE OVERTIME ROSTER
WILL BE CREDITED WITH THE HIGHEST NUMBER OF
OVERTIME HOURS ACCUMULATED IN THE OUTSIDE OF
THE DEPARTMENT CLASSIFICATION ROSTER.
2
<PAGE> 99
(C) DAILY OVERTIME.
(1) FOR DAILY OVERTIME ASSIGNMENTS, IT SHALL NORMALLY BE
OFFERED FIRST TO THOSE WHO ARE PERFORMING THE WORK.
WHEN PERSONS PERFORMING THE WORK DECLINE SUCH OVER
TIME, IT SHALL NORMALLY THEN BE ASSIGNED BY
CLASSIFICATION SENIORITY WITHIN THE DEPARTMENT
INVOLVED. WHEN PERSONS ASSIGNED BY CLASSIFICATION
SENIORITY DECLINE SUCH OVERTIME, IT SHALL NORMALLY
THEN BE ASSIGNED AMONG THOSE REMAINING QUALIFIED
EMPLOYEES AS DETERMINED BY THE COMPANY FROM THE
DEPARTMENT OVERTIME CLASSIFICATION ROSTER.
(D) WEEKEND OVERTIME:
(1) FOR WEEKEND OVERTIME ASSIGNMENTS, IT SHALL NORMALLY
FIRST BE OFFERED TO THOSE WHO ARE PERFORMING THE WORK
ON THE PRECEDING THURSDAY (OR FRIDAY WHERE EARLIER
NOTICE WAS NOT PRACTICAL).
(2) IF PERSONS PERFORMING THE WORK ON THE PRECEDING
THURSDAY P.M. (OR FRIDAY) DECLINE SUCH OVERTIME, IT
SHALL NORMALLY THEN BE ASSIGNED BY CLASSIFICATION
SENIORITY WITH THE DEPARTMENT INVOLVED (AS DEFINED IN
16.6 (B)). WHEN PERSONS ASSIGNED BY CLASSIFICATION
SENIORITY DECLINE SUCH OVERTIME, IT SHALL NORMALLY
THEN BE ASSIGNED AMONG THOSE REMAINING QUALIFIED
EMPLOYEES AS DETERMINED BY THE COMPANY FROM THE
DEPARTMENT OVERTIME CLASSIFICATION ROSTER. IN SUCH
CASES AFTER PROCEEDING DOWN THE SENIORITY LIST
SEEKING QUALIFIED VOLUNTEERS, WHEN THE SENIORITY LIST
HAS BEEN EXHAUSTED, QUALIFIED PERSONNEL WITHIN THE
DEPARTMENT WILL BE ASSIGNED TO WORK IN REVERSE ORDER
OF SENIORITY. OUTLYING FACILITIES WILL BE CONSIDERED
A SEPARATE DEPARTMENT FOR PURPOSES OF OVERTIME
DISTRIBUTION.
(E) ADDITIONAL EMPLOYEES REQUIRED FROM OTHER DEPARTMENTS. NOTHING
IN (C) OR (D) ABOVE SHALL PRECLUDE ADDITIONAL EMPLOYEES BEING
ASSIGNED TO AN OVERTIME OPERATION. WHEN ADDITIONAL EMPLOYEES
ARE ASSIGNED, IT SHALL BE BY SENIORITY WITHIN THE SAME JOB
CLASSIFICATION AMONG THOSE REMAINING QUALIFIED EMPLOYEES AS
DETERMINED BY THE COMPANY. NO EMPLOYEE WILL BE REQUIRED TO
WORK OVERTIME WHEN ANOTHER
3
<PAGE> 100
QUALIFIED EMPLOYEE, AS DETERMINED BY THE COMPANY, WILL VOLUNTARILY
ACCEPT THE OVERTIME ASSIGNMENT.
(WHEN AN EMPLOYEE HAS PERFORMED THIS WORK REGULARLY, THE EMPLOYEE SHALL
BE CONSIDERED QUALIFIED.) AFTER PROCEEDING DOWN THE SENIORITY LIST
SEEKING QUALIFIED VOLUNTEERS, WHEN THE SENIORITY LIST HAS BEEN
EXHAUSTED, QUALIFIED PERSONNEL WILL BE ASSIGNED TO WORK IN REVERSE
ORDER OF SENIORITY.
NEW: (F) AN EMPLOYEE GIVEN PROPER NOTICE OF OVERTIME AND WHO FAILS TO WORK
SUCH OVERTIME, OR REFUSES TO WORK SUCH OVERTIME, SHALL BE
CONSIDERED AS HAVING WORKED AND WILL BE CHARGED THIS OVERTIME ON
THE OVERTIME ROSTER.
SECTIONS 4.10, 4.11, 4.12, 4.13, AND 4.14 REMAIN THE SAME WITH NO CHANGES
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
6/14/94 6/14/94
ARTICLE 5: HOLIDAY PAY
SECTION 5.1 HOURLY RATE CLARIFICATION
"HOURLY RATED EMPLOYEES SHALL BE PAID THEIR CURRENT HOURLY RATE OF PAY IN EFFECT
ON THE DAY BEFORE THE HOLIDAY, INCLUDING SHIFT DIFFERENTIAL, BUT EXCLUSIVE OF
ALL PREMIUMS OR OVERTIME ALLOWANCE FOR THE FOLLOWING OBSERVED HOLIDAYS WHEN NOT
WORKED...."
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
6/14/94 6/14/94
ARTICLE 6: VACATION
SECTION 6.2(A) CHANGE VACATION NOTICE PERIOD
"WHERE THE EMPLOYEE GIVES AT LEAST ONE (1) WEEK NOTICE OF HIS
VACATION SCHEDULE TO THE COMPANY FOR A FULL CALENDAR WEEK OF
4
<PAGE> 101
VACATION, THE EMPLOYEE SHALL RECEIVE HIS VACATION CHECK ON THE LAST WORK DAY
PRIOR TO HIS VACATION."
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
6/14/94 6/14/94
ARTICLE 6: VACATION
SECTION 6.2 (G) MODIFY TO READ:
"THE COMPANY WILL DEVELOP A VACATION SCHEDULE BY AUGUST 1ST OF EACH CALENDAR
YEAR FOR THE FOLLOWING TWELVE MONTHS, BLOCKING OUT THOSE PERIODS OF TIME THE
EMPLOYEES WILL NOT BE ALLOWED TO TAKE VACATION."
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
6/14/94 6/14/94
ARTICLE 11: JURY SERVICE
SECTION 11.1 MODIFY TYPE OF JURY AND LIABILITY AMOUNT TO READ:
"THE COMPANY AGREES TO REIMBURSE ANY EMPLOYEE FOR WAGES LOST AS A RESULT OF
SERVING ON A JURY. LIABILITY SHALL NOT EXCEED THIRTY (30) DAYS.
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
6/14/94 6/14/94
ARTICLE 13: RETIREMENT PLAN
SECTION 13.1 MODIFY BY REDUCTION THE AGE OF ELIGIBILITY "ELIGIBILITY - AGE 21
AND ONE (1) YEAR OF CONTINUOUS SERVICE"
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
14 4 14 4
5
<PAGE> 102
ARTICLE 13: RETIREMENT PLAN
SECTION 13.4 MODIFY THE SECTION BY ADDING OR TERMINATING FOLLOWING THE WORD
RETIRING IN THIS SECTION. LISTED IN THREE PLACES "THOSE EMPLOYEES RETIRING OR
TERMINATING ON OR AFTER JUNE..."
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
6/14/94 6/14/94
ARTICLE 14: LEAVE OF ABSENCE
SECTION 14.5 NEW PROVISION
"Family and Medical Leave Act of 1993. A policy for Altec Lansing employees
shall be established to incorporate the federal provisions of the Family and
Medical Leave Act of 1993. The policy will be administered by the Human
Resources Department."
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
6/14/94 6/14/94
ARTICLE 16: TRANSFERS: PERMANENT UPGRADES OF TRANSFERS
SECTION 16.5 (D) MODIFY COVERING POSITIONS OUTSIDE BARGAINING UNIT "EMPLOYEES
WHO ARE OR HAVE BEEN PROMOTED FROM THE BARGAINING UNIT TO A POSITION OUTSIDE THE
BARGAINING UNIT SHALL RETAIN THEIR ACCRUED SENIORITY IN THE BARGAINING UNIT FOR
UP TO ONE YEAR AND MAY BE RETURNED TO ANY JOB CLASSIFICATION IN WHICH THEY WERE
FORMERLY CLASSIFIED."
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
6/14/94 6/14/94
6
<PAGE> 103
ARTICLE 16: TEMPORARY UPGRADES AND TRANSFERS
SECTION 16.3 (C) NEW PAYING TEMPORARY SAME AS PERMANENT UPGRADES "IN THE EVENT
OF A TEMPORARY UPGRADE TO A HIGHER RATED CLASSIFICATION, THE EMPLOYEE SHALL
RECEIVE A TEN CENT (.10) PER HOUR INCREASE OR THE MINIMUM HOURLY RATE FOR THE
CLASSIFICATION, WHICH EVER IS HIGHER."
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
6/14/94 6/14/94
ARTICLE 16: TEMPORARY UPGRADES AND TRANSFERS
SECTION 16.3 (D) NEW PAYING TEMPORARY AT EQUIVALENT RATE PREVIOUSLY QUALIFIED
"IN THE EVENT OF A TRANSFER OF A PREVIOUSLY QUALIFIED EMPLOYEE TO A HIGHER RATED
CLASSIFICATION, THE EMPLOYEE WILL BE ENTITLED TO THE APPROPRIATE RATE OF THE
HIGHER CLASSIFICATION."
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
6/14/94 6/14/94
ARTICLE 20: DISCRIMINATION
SECTION 20.2 MODIFY TO INCLUDE IMMIGRATION REFORM AND EXPAND CLASSES
"All applicants hired are employed according to the Immigration Reform and
Control Act of 1996. Neither the Company nor the Union shall unlawfully
discriminate against any employees or job applicant because of race, creed,
color, sex, national origin, religion, marital status, age, mental or physical
disability, veteran or a veteran of the Vietnam era."
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
6/14/94 6/14/94
7
<PAGE> 104
ARTICLE 20 DISCRIMINATION
SECTION 20.4 NEW TO COVER AMERICANS WITH DISABILITIES ACT
"The Company and the Union agree the employer shall be permitted to take any and
all actions necessary to comply with the Americans With Disabilities Act and to
avoid liability under the provisions of said Act. If such actions necessitate
violation of a provision of the Agreement, then the parties agree to bargain
with regard to the effect of such action on other bargaining unit employees."
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
6/14/94 6/14/94
ARTICLE 21: SAFETY
SECTION 21.6 NEW SECTION PROVIDING FOR A SAFETY COMMITTEE "A JOINT
UNION-MANAGEMENT SAFETY COMMITTEE SHALL BE APPOINTED CONSISTING OF TWO (2)
EMPLOYEE REPRESENTATIVES OF THE UNION AND TWO (2) REPRESENTATIVES OF MANAGEMENT.
THE JOINT COMMITTEE SHALL MEET AT LEAST ONCE MONTHLY AND CONDUCT A PLANT TOUR AT
LEAST ONCE MONTHLY. THE PURPOSE OF THE COMMITTEE IS TO CONSIDER, INSPECT,
INVESTIGATE AND REVIEW HEALTH AND SAFETY CONDITIONS AND PRACTICES. THE JOINT
COMMITTEE SHALL MAKE CONSTRUCTIVE RECOMMENDATIONS WITH RESPECT TO THE
IMPLEMENTATION OF CORRECTIVE MEASURES TO ELIMINATE UNHEALTHY AND UNSAFE
CONDITIONS AND PRACTICES AND TO IMPROVE EXISTING HEALTH AND SAFETY CONDITIONS
AND PRACTICES."
- ----------------------------------- ----------------------------------------
FOR THE UNION FOR THE COMPANY
6/14/94 6/14/94
8
<PAGE> 1
EXHIBIT 10(l)
[California]
Recording requested by, and when recorded,
please return to:
Simpson Thacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
ATTN: Emily R. Steinman, Esq.
THIS INSTRUMENT IS TO BE INDEXED IN THE OFFICE OF THE LOS ANGELES
COUNTY RECORDS AS BOTH A DEED OF TRUST AND A FIXTURE FILING
DEED OF TRUST, ASSIGNMENT OF
RENTS AND LEASES, SECURITY
AGREEMENT AND FIXTURE FILING
from
EV INTERNATIONAL, INC., Grantor
to
CHICAGO TITLE INSURANCE COMPANY, Trustee
for the use and
benefit of
THE CHASE MANHATTAN BANK, as Administrative Agent, Beneficiary
DATED AS OF FEBRUARY 10, 1997
<PAGE> 2
[California]
DEED OF TRUST, ASSIGNMENT OF RENTS
AND LEASES, SECURITY AGREEMENT AND FIXTURE FILING
THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES, SECURITY
AGREEMENT AND FIXTURE FILING, dated as of February 10, 1997 is made by EV
INTERNATIONAL, INC., a Delaware corporation, as successor by merger and name
change to LFE Corporation ("GRANTOR"), whose address is 600 Cecil Street,
Buchanan, Michigan 49107, to CHICAGO TITLE INSURANCE COMPANY, a California
corporation, ("TRUSTEE") whose address is 700 South Flower, Suite 900, Los
Angeles, CA 90017 for the use and benefit of THE CHASE MANHATTAN BANK, a New
York banking corporation whose address is 270 Park Avenue, New York, New York
10017, as Administrative Agent (in such capacity, "BENEFICIARY") for the several
banks and other financial institutions (the "LENDERS") from time to time parties
to the Credit Agreement dated as of February 10, 1997, (as the same may be
amended, supplemented, waived or otherwise modified from time to time the
"SENIOR SECURED CREDIT AGREEMENT") among Gulton Acquisition Corp., a Delaware
corporation ("BORROWER"), the Lenders and Beneficiary. References to this "Deed
of Trust" shall mean this instrument and any and all renewals, modifications,
amendments, supplements, extensions, consolidations, substitutions, spreaders
and replacements of this instrument. Capitalized terms used and not otherwise
defined herein shall have the meanings assigned thereto in the Senior Secured
Credit Agreement.
Background
A. Gulton Holdings Corp., a Delaware corporation which, on or
after the Effective Date, will be renamed EVI Audio Holding, Inc. ("HOLDINGS")
and Borrower, its direct Wholly Owned Subsidiary, are newly formed companies
organized by an investor group led by Greenwich Street Capital Partners, Inc., a
Delaware corporation ("GSCP").
B. Borrower acquired Gulton Industries Inc., a Delaware
corporation ("GII") which was a subsidiary of Mark IV Industries, Inc. ("MARK
IV") through the purchase from Mark IV and Mark IV PLC of the capital stock of
GII (the
<PAGE> 3
"ACQUISITION") pursuant to the Stock Purchase Agreement, dated as of December
12, 1996, by and among Mark IV, Mark IV PLC and Borrower (as amended,
supplemented, waived or otherwise modified from time to time in accordance with
the Senior Secured Credit Agreement, the "STOCK PURCHASE AGREEMENT").
C. Borrower merged with and into GII (the "FIRST MERGER"), and
GII as surviving corporation of the First Merger merged (the "SECOND MERGER";
the First Merger together with the Second Merger, the "MERGERS") with and into
Electro-Voice, Incorporated, a Delaware corporation and a Wholly Owned
Subsidiary of GII, which was thereupon renamed EV International, Inc.
D. In order to (i) finance a portion of the Acquisition
Consideration, (ii) refinance a portion of the existing indebtedness of GII and
its subsidiaries, (iii) pay certain fees, taxes and expenses related to (x) the
Acquisition and the financing thereof and (y) the refinancing of such existing
indebtedness of GII and its subsidiaries and (iv) finance the working capital
and other business requirements of Grantor and its subsidiaries following the
consummation of the Acquisition and the Merger, Acquisition Co. has requested
that the Lenders make the Loans and issue and participate in the Letters of
Credit in accordance with the terms of the Senior Secured Credit Agreement.
E. Grantor is the owner of the parcel(s) of real property
described on Schedule A attached hereto (such real property, together with all
of the buildings, improvements, structures and fixtures now or subsequently
located thereon (the "IMPROVEMENTS"), being collectively referred to as the
"REAL ESTATE").
F. Pursuant to the terms of the Senior Secured Credit
Agreement, the Lenders have agreed, among other things, to make the Loans and
the Issuing Lender has agreed to issue, and the L/C Participants have agreed to
acquire undivided participating interests in, the Letter(s) of Credit for the
account of the Borrower upon the terms and subject to the conditions set forth
in the Senior Secured Credit Agreement which conditions include the grant by
Grantor to Beneficiary of a first lien upon and perfected security interest in,
among other things, all estate, right, title and interest of Grantor in and to
the Real Estate pursuant to the terms hereof.
G. Grantor is the successor by merger to Borrower, and it is
to the advantage and benefit of Grantor that the Lenders make the Loans to
Borrower.
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Granting Clauses
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor agrees that to secure:
(a) the repayment of principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans
and Reimbursement Obligations and interest accruing after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Loan Party, whether
or not a claim for post-filing or post-petition interest is allowed in
such proceeding) the Loans (as they may be evidenced by the Notes from
time to time) and all other obligations (including the Reimbursement
Obligations) and liabilities of Grantor to Beneficiary, the Issuing
Lender and the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Senior
Secured Credit Agreement, the Loans, the Letters of Credit, the
Security Documents, any Guarantee Obligation of Grantor as to which any
Lender is a beneficiary, any Permitted Hedging Arrangement with any
Lender or any banking affiliate of any Lender (whether entered into
directly, or guaranteed, by Grantor), the Guarantee and Collateral
Agreement dated as of February 10, 1997 between Grantor, Holdings and
Beneficiary (the "GUARANTEE") or any other document made, delivered or
given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees,
charges and disbursements of counsel to the Administrative Agent, the
Issuing Lender or any Lender that are required to be paid by any Loan
Party pursuant to the Senior Secured Credit Agreement) (the items set
forth above being referred to collectively as the "INDEBTEDNESS"); and
(b) the performance of all covenants, agreements, obligations
and liabilities of Grantor (the "OBLIGATIONS") under or pursuant to the
provisions of the Senior Secured Credit Agreement, the Loans, this Deed
of Trust, the Guarantee, any other document securing payment of the
Indebtedness (the "SECURITY DOCUMENTS") and any amendments,
supplements, extensions, renewals, restatements, replacements or
modifications of any of the foregoing (the Senior Secured Credit
Agreement, the Loans, the Letters of Credit, this Deed of Trust, the
Guarantee and all other documents and instruments from time to time
evidencing, securing or guaranteeing the payment of the Indebtedness or
the performance of the Obligations, as any of the same may be
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amended, supplemented, extended, renewed, restated, replaced or
modified from time to time, are collectively referred to as the "LOAN
DOCUMENTS");
GRANTOR HEREBY IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS TO TRUSTEE, IN TRUST,
WITH POWER OF SALE, THE FOLLOWING:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever
of Grantor, in possession or expectancy, in and to the Real Estate or
any part thereof;
(C) all right, title and interest of Grantor in, to and under
all easements, rights of way, gores of land, streets, ways, alleys,
passages, sewer rights, waters, water courses, water and riparian
rights, development rights, air rights, mineral rights and all estates,
rights, titles, interests, privileges, licenses, tenements,
hereditaments and appurtenances belonging, relating or appertaining to
the Real Estate, and any reversions, remainders, rents, issues, profits
and revenue thereof and all land lying in the bed of any street, road
or avenue, in front of or adjoining the Real Estate to the center line
thereof;
(D) all right, title and interest of Grantor in and to all of
the fixtures, chattels, business machines, machinery, apparatus,
equipment, furnishings, fittings and articles of personal property of
every kind and nature whatsoever, and all appurtenances and additions
thereto and substitutions or replacements thereof (together with, in
each case, attachments, components, parts and accessories) currently
owned or subsequently acquired by Grantor and now or subsequently
attached to, or contained in or used or usable in any way in connection
with any operation or letting of the Real Estate, including but without
limiting the generality of the foregoing, all screens, awnings, shades,
blinds, curtains, draperies, artwork, carpets, rugs, storm doors and
windows, furniture and furnishings, heating, electrical, and mechanical
equipment, lighting, switchboards, plumbing, ventilating, air
conditioning and air-cooling apparatus, refrigerating, and incinerating
equipment, escalators, elevators, loading and unloading equipment and
systems, stoves, ranges, laundry equipment, cleaning systems (including
window cleaning apparatus), telephones, communication systems
(including satellite dishes and antennae), televisions, computers,
sprinkler systems and other fire prevention and extinguishing apparatus
and materials, security systems, motors, engines, machinery, pipes,
pumps, tanks, conduits, appliances, fittings and fixtures of
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every kind and description (all of the foregoing in this paragraph (D)
being referred to as the "EQUIPMENT");
(E) all right, title and interest of Grantor in and to all
substitutes and replacements of, and all additions and improvements to,
the Real Estate and the Equipment, subsequently acquired by or released
to Grantor or constructed, assembled or placed by Grantor on the Real
Estate, immediately upon such acquisition, release, construction,
assembling or placement, including, without limitation, any and all
building materials to be used by Grantor whether stored at the Real
Estate or offsite, and, in each such case, without any further
mortgage, conveyance, assignment or other act by Grantor;
(F) all right, title and interest of Grantor in, to and under
all leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or
occupancy of the Real Estate or the Equipment or any part thereof, now
existing or subsequently entered into by Grantor and whether written or
oral and all guarantees of any of the foregoing (collectively, as any
of the foregoing may be amended, restated, extended, renewed or
modified from time to time, the "LEASES"), and all rights of Grantor in
respect of cash and securities deposited thereunder and the right to
receive and collect the revenues, income, rents, issues and profits
thereof, together with all other rents, royalties, issues, profits,
revenue, income and other benefits arising from the use and enjoyment
of the Trust Property (as defined below) (collectively, the "RENTS");
(G) all books and records relating to or used in connection
with the operation of the Real Estate or the Equipment or any part
thereof;
(H) all right, title and interest of Grantor, to the extent
assignable, in and to (i) all unearned premiums under insurance
policies now or subsequently obtained by Grantor relating to the Real
Estate or Equipment, (ii) any such insurance policies, (iii) all
proceeds of any such insurance policies (including title insurance
policies) including the right to collect and receive such proceeds,
subject to the provisions relating to insurance generally set forth
below, and (iv) all awards and other compensation, including the
interest payable thereon and the right to collect and receive the same,
made to the present or any subsequent owner of the Real Estate or
Equipment for the taking by eminent domain, condemnation or otherwise,
of all or any part of the Real Estate or any easement or other right
therein, subject to the provisions relating to condemnation awards
generally set forth below;
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(I) all right, title and interest of Grantor, to the extent
assignable, in and to (i) all contracts from time to time executed by
Grantor or any manager or agent on its behalf relating to the
ownership, construction, maintenance, repair, operation, occupancy,
sale or financing of the Real Estate or Equipment or any part thereof
and all agreements relating to the purchase or lease of any portion of
the Real Estate or any property which is adjacent or peripheral to the
Real Estate, together with the right to exercise such options
(collectively, the "CONTRACTS"), (ii) all consents, licenses, building
permits, certificates of occupancy and other governmental approvals
relating to construction, completion, occupancy, use or operation of
the Real Estate or any part thereof (collectively, the "PERMITS") and
(iii) all drawings, plans, specifications and similar or related items
relating to the Real Estate (collectively, the "PLANS");
(J) any and all monies now or subsequently on deposit for the
payment of real estate taxes or special assessments against the Real
Estate or for the payment of premiums on insurance policies covering
the foregoing property or otherwise on deposit with or held by
Beneficiary as provided in this Deed of Trust;
(K) all accounts and revenues arising from the operation of
the Improvements; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now
owned or held or subsequently acquired by Grantor and described in the foregoing
clauses (A) through (E) are collectively referred to as the "PREMISES", and
those described in the foregoing clauses (A) through (L) are collectively
referred to as the "TRUST PROPERTY").
TO HAVE AND TO HOLD the Trust Property and the rights and
privileges hereby granted unto Trustee, its successors and assigns for the uses
and purposes set forth, until the Indebtedness is fully paid and the Obligations
fully performed or as otherwise expressly provided in the Section of this Deed
of Trust entitled "Release of Deed of Trust".
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Terms and Conditions
Grantor further represents, warrants, covenants and agrees
with Trustee and Beneficiary as follows:
1. Warranty of Title. Grantor warrants that Grantor has good
title to the Real Estate in fee simple and good title to the rest of the Trust
Property, subject only to the matters that are set forth in Schedule B of the
title insurance policy or policies being issued to Beneficiary to insure the
lien of this Deed of Trust and Liens expressly permitted under the Senior
Secured Credit Agreement (collectively, the "PERMITTED EXCEPTIONS") and Grantor
shall warrant, defend and preserve such title and the rights granted by this
Deed of Trust with respect thereto against all claims of all persons and
entities. Grantor further warrants that it has the right to grant this Deed of
Trust.
2. Payment of Indebtedness. Grantor shall pay the Indebtedness
at the times and places and in the manner specified in the Senior Secured Credit
Agreement and shall perform all the Obligations.
3. Requirements. (a) Grantor shall promptly comply with, or
cause to be complied with, and conform to all present and future laws, statutes,
codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements, and irrespective of the nature of the work to be done, of each of
the United States of America, any State and any municipality, local government
or other political subdivision thereof and any agency, department, bureau,
board, commission or other instrumentality of any of them, now existing or
subsequently created (collectively, "GOVERNMENTAL AUTHORITY") which has
jurisdiction over the Trust Property and all covenants, restrictions and
conditions now or later of record which may be applicable to any of the Trust
Property, or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration, repair or reconstruction of any of the Trust Property,
except to the extent that failure to comply therewith, in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. All present and
future laws, statutes, codes, ordinances, orders, judgments, decrees, rules,
regulations and requirements of every Governmental Authority applicable to
Grantor or to any of the Trust Property and all covenants, restrictions, and
conditions which now or later may be applicable to any of the Trust Property are
collectively referred to as the "LEGAL REQUIREMENTS".
(b) From and after the date of this Deed of Trust, except as
expressly permitted under the Senior Secured Credit Agreement or herein, Grantor
shall not by
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act or omission permit, other than Permitted Exceptions, any building or other
improvement on any premises not subject to this Deed of Trust to rely on the
Premises or any part thereof or any interest therein to fulfill any Legal
Requirement, and Grantor hereby assigns to Beneficiary any and all rights to
give consent for all or any portion of the Premises or any interest therein to
be so used. Grantor shall not by act or omission impair the integrity of any of
the Real Estate as a single zoning lot separate and apart from all other
premises. Grantor represents that each parcel of the Real Estate constitutes a
legally subdivided lot, in compliance with all subdivision laws and similar
Legal Requirements, except to the extent that failure to comply therewith, in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. Any act or omission by Grantor which would result in a violation of any
of the provisions of this subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Except as
expressly permitted under the Senior Secured Credit Agreement, Grantor, prior to
delinquency, shall pay and discharge all taxes of every kind and nature
(including, without limitation, all real and personal property, income,
franchise, withholding, transfer, gains, profits and gross receipts taxes), all
charges for any easement or agreement maintained for the benefit of any of the
Trust Property, all general and special assessments, levies, permits, inspection
and license fees, all water and sewer rents and charges and all other public
charges even if unforeseen or extraordinary, imposed upon or assessed against or
which may become a lien on any of the Trust Property, or arising in respect of
the occupancy, use or possession thereof, together with any penalties or
interest on any of the foregoing (all of the foregoing are collectively referred
to as the "IMPOSITIONS"). Grantor shall within 30 days after the request of
Beneficiary deliver to Beneficiary (i) original or copies of receipted bills and
cancelled checks or other evidence of payment of such Imposition if it is a real
estate tax or other public charge and (ii) evidence acceptable to Beneficiary in
its reasonable discretion showing the payment of any other such Imposition. If
by law any Imposition, at Grantor's option, may be paid in installments (whether
or not interest shall accrue on the unpaid balance of such Imposition), Grantor
may elect to pay such Imposition in such installments and shall be responsible
for the payment of such installments with interest, if any.
(b) Nothing herein shall affect any right or remedy of Trustee
or Beneficiary under this Deed of Trust or otherwise, without notice or demand
to Grantor, to pay any Imposition after the date such Imposition shall have
become delinquent, and to add to the Indebtedness the amount so paid, together
with interest from the time of payment at the rate of interest described in
paragraph 4.1(c) of the Senior Secured Credit Agreement (the "DEFAULT RATE").
Any sums paid by Trustee or Beneficiary in discharge of any Impositions shall be
(i) a charge on the Premises
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secured hereby prior to any right or title to, interest in, or claim upon the
Premises subordinate to the lien of this Deed of Trust, and (ii) payable on
demand by Grantor to Trustee or Beneficiary, as the case may be, together with
interest at the Default Rate as set forth above.
(c) Grantor shall not claim, demand or be entitled to receive
any credit or credits toward the satisfaction of this Deed of Trust or on any
interest payable thereon for any taxes assessed against the Trust Property or
any part thereof, and shall not claim any deduction from the taxable value of
the Trust Property by reason of this Deed of Trust.
(d) Grantor shall have the right pursuant to subsection 7.3 of
the Senior Secured Credit Agreement to contest in good faith to the amount or
validity of any Imposition by appropriate proceedings diligently conducted with
reserves in conformity with GAAP, provided that Grantor shall demonstrate to
Beneficiary's reasonable satisfaction that such proceedings shall operate
conclusively to prevent the sale of the Trust Property, or any part thereof, to
satisfy such Imposition prior to final determination of such proceedings.
(e) Upon written notice to Grantor, Beneficiary during the
continuance of an Event of Default (as defined below) shall be entitled to
require Grantor to pay monthly in advance to Beneficiary the equivalent of
1/12th of the estimated annual Impositions. Beneficiary may commingle such funds
with its own funds but Grantor shall be entitled to interest thereon at a rate
mutually agreed upon by Grantor and Beneficiary.
5. Insurance. (a) Grantor shall maintain or cause to be
maintained on all of the Premises:
(i) property insurance against loss or damage by fire,
lightning, windstorm, tornado, water damage, flood, earthquake and by
such other further risks and hazards as now are or subsequently may be
covered by an "all risk" policy or a fire policy covering "special"
causes of loss (provided, however, that the maintenance of insurance
against earthquake, windstorm, flood and freeze risks shall be subject
to availability of such insurance coverage on commercially reasonable
terms). The policy shall include building ordinance law endorsements
and the policy limits shall be automatically reinstated after each loss
(other than with respect to flood and earthquake coverage which shall
be reinstated on a commercially reasonable basis);
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(ii) commercial general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language or similar language of such endorsement), covering all claims
for personal injury, bodily injury or death, or property damage,
subject to standard policy terms, conditions and exclusions, occurring
on, in or about the Premises in an amount not less than $10,000,000
combined single limit with respect to personal injury, bodily injury or
death, or property damage, relating to any one occurrence plus such
excess limits as Beneficiary shall reasonably request from time to
time;
(iii) when and to the extent reasonably required by
Beneficiary, insurance against loss or damage by any other risk
commonly insured against by persons occupying or using like properties
in the locality or localities in which the Real Estate is situated;
(iv) during the course of any construction or repair of
Improvements, commercial general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language or similar language of such endorsement), (including coverage
for elevators and escalators, if any). The policy shall include
coverage for independent contractors and completed operations. The
completed operations coverage shall stay in effect for two years after
construction of any Improvements has been completed. The policy shall
provide coverage on an occurrence basis against claims for personal
injury, including, without limitation, bodily injury and death, and
property damage resulting from Grantor's negligence or other behavior
for which Grantor may be adjudged tortiously liable, subject to
standard policy terms, conditions and exclusions, occurring on, in or
about the Premises and the adjoining streets, sidewalks and
passageways, such insurance to afford immediate minimum protection to a
limit of not less than that reasonably required by Beneficiary with
respect to personal injury, bodily injury or death to any one or more
persons or damage to property;
(v) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Grantor engaged on or with
respect to the Premises in such amounts no less than the limits
established by law or in the case of employer's liability insurance, no
less than $500,000, provided that Grantor may self-insure any or all
workers' compensation liabilities;
(vi) during the course of any construction, addition,
alteration or repair of the Improvements, builder's risk completed
value property insurance form
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against "all risks of physical loss" (subject to standard policy
exclusions), including collapse, water damage, flood and earthquake and
transit coverage, during construction or repairs of the Improvements,
with deductible approved by Beneficiary in its reasonable discretion,
in reporting form, covering the total replacement value of work
performed and equipment, supplies and materials furnished (with an
appropriate limit for soft costs in the case of construction);
provided, however, that the maintenance of insurance against earthquake
and flood risks shall be subject to availability of such insurance
coverage on commercially reasonable terms;
(vii) boiler and machinery property insurance covering
pressure vessels, air tanks, boilers, machinery, pressure piping,
heating, air conditioning and elevator equipment and escalator
equipment, provided the Improvements contain equipment of such nature,
in such amounts as are reasonably satisfactory to Beneficiary but not
less than the lesser of $1,000,000 or 10% of the value of the
Improvements;
(viii) if any portion of the Premises are located in an area
identified in the Federal Register as having special flood hazards by
the Secretary of Housing and Urban Development or other applicable
agency, flood insurance covering any parcel of the Trust Property which
contains improvements in an amount satisfactory to Beneficiary in its
reasonable discretion, but in no event less than the maximum limit of
coverage available with respect to the particular type of property
under the National Flood Insurance Act of 1968, as amended and with a
term ending not later than the maturity of the Indebtedness and
Beneficiary shall receive confirmation that Grantor has received the
notice required pursuant to Section 208.8(e)(3) of Regulation H of the
Board of Governors of The Federal Reserve System; and
(ix) such other insurance in such amounts as Beneficiary may
reasonably request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or, in the case of
property and boiler and machinery insurance, materially amended without 30-days'
prior written notice to Beneficiary, (ii) with respect to all property
insurance, subject to availability on commercially reasonable terms, provide for
deductibles not to exceed $250,000, other than with respect to (a) flood,
freeze, windstorm and earthquake perils for which deductibles shall not exceed
the greater of $500,000 or 5% of values at risk per
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location involved in loss and (b) boiler and machinery coverage for which
deductibles shall not exceed the greater of $500,000 or five times 100% of the
daily time element value, contain a "Replacement Cost Endorsement" without any
deduction made for depreciation and with no co-insurance penalty (or attaching
an agreed amount endorsement satisfactory to Beneficiary in its reasonable
discretion), with loss payable solely to Beneficiary (modified, if necessary and
to the extent available under such policy, to provide that proceeds in the
amount of replacement cost may be retained by Beneficiary without the obligation
to rebuild) as its interest may appear, without contribution, under a "standard"
or "New York" mortgagee clause acceptable to Beneficiary in its reasonable
discretion and be written by insurance companies having an A.M. Best Company,
Inc. rating of A- or higher and a financial size category of not less than VII,
or otherwise as approved by Beneficiary in its reasonable discretion and (iii)
contain a "manuscript" endorsement providing that Grantor may not unilaterally
cancel such policy without Beneficiary's prior written consent. Liability
insurance policies shall name Beneficiary as an additional insured and contain a
waiver of subrogation against Beneficiary; all such policies shall indemnify and
hold Beneficiary harmless from all liability claims occurring on, in or about
the Premises and the adjoining streets, sidewalks and passageways, subject to
standard policy terms, conditions and exclusions. The amounts of each insurance
policy and the form of each such policy shall at all times be satisfactory to
Beneficiary in its reasonable discretion. Each policy shall expressly provide
that any proceeds which are payable to Beneficiary shall be paid by check
payable to the order of Beneficiary only and requiring the endorsement of
Beneficiary only. If any required insurance shall expire, be withdrawn, become
void by breach of any condition thereof by Grantor or by any lessee of any part
of the Trust Property or become void or unsafe by reason of the failure or
impairment of the capital of any insurer, Grantor shall immediately obtain new
or additional insurance satisfactory to Beneficiary in its reasonable
discretion. Grantor shall not take out any separate or additional insurance
which is contributing in the event of loss unless it is properly endorsed and
otherwise satisfactory to Beneficiary in all respects in its reasonable
discretion.
(b) Grantor shall deliver to Beneficiary an original of each
insurance policy required to be maintained, or a certificate of such insurance
acceptable to Beneficiary in its reasonable discretion, together with a copy of
the declaration page for each such policy. Grantor shall (i) pay as they become
due all premiums for such insurance, (ii) not later than seven days prior to the
expiration of each policy to be furnished pursuant to the provisions of this
Section, deliver a renewed policy or policies, or certificates of insurance
acceptable to Beneficiary, in its reasonable discretion, or duplicate original
or originals thereof. Upon the reasonable request of Beneficiary, Grantor shall
cause its insurance underwriter or broker to certify to
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Beneficiary in writing that all the requirements of this Deed of Trust governing
insurance have been satisfied.
(c) If Grantor is in default of its obligations to insure or
deliver any such policy or policies, or certificates of insurance acceptable to
Beneficiary, in its reasonable discretion, then Beneficiary, at its option and
without notice, may effect such insurance from year to year, and pay the premium
or premiums therefor, and Grantor shall pay to Beneficiary on demand such
premium or premiums so paid by Beneficiary with interest from the time of
payment at the Default Rate and the same shall be deemed to be secured by this
Deed of Trust and shall be collectible in the same manner as the Indebtedness
secured by this Deed of Trust.
(d) Grantor shall increase the amount of property insurance
required to equal 100% replacement cost pursuant to the provisions of this
Section at the time of each renewal of each policy (but not later than 12 months
from the date of this Deed of Trust and each successive 12 month period to occur
thereafter) by using the Morgan & Swift Building Cost Index to determine whether
there shall have been an increase in the replacement value since the most recent
adjustment and, if there shall have been such an increase, the amount of
insurance required shall be adjusted accordingly.
(e) Grantor promptly shall in all material respects comply
with and conform to (i) all provisions of each such insurance policy, and (ii)
all requirements of the insurers applicable to Grantor or to any of the Trust
Property or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of any of the Trust Property. Grantor shall
not use or permit the use of the Trust Property in any manner which would permit
any insurer to cancel any insurance policy or void coverage required to be
maintained by this Deed of Trust.
(f) (i) If the Trust Property, or any part thereof, shall be
destroyed or damaged by fire or any other casualty, whether insured or
uninsured, or in the event any claim is made against Grantor for any
personal injury, bodily injury or property damage incurred on or about
the Premises, Grantor shall promptly give notice thereof to
Beneficiary.
(ii) If the Trust Property is damaged by fire or other
casualty and the cost to repair such damage is less than $1,000,000,
then provided that no Event of Default shall have occurred and be
continuing, Grantor shall have the right to adjust such loss, and the
insurance proceeds relating to such loss may be paid over to Grantor;
provided that Grantor shall, promptly after any such damage, repair
such damage to the extent required by subsection 7.5 of the Senior
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Secured Credit Agreement regardless of whether any insurance proceeds
have been received or whether such proceeds, if received, are
sufficient to pay for the costs of repair.
(iii) If the Trust Property is damaged by fire or other
casualty, and the cost to repair such damage exceeds the limit in
Section 5(f)(ii) above, or if an Event of Default shall have occurred
and be continuing, then Grantor authorizes and empowers Beneficiary, at
Beneficiary's option and in Beneficiary's reasonable discretion, as
attorney-in-fact for Grantor, to make proof of loss, to adjust and
compromise any claim under any insurance policy, to appear in and
prosecute any action arising from any policy, to collect and receive
insurance proceeds and to deduct therefrom Beneficiary's reasonable
expenses incurred in the collection process. Each insurance company
concerned is hereby authorized and directed to make payment for such
loss directly to Beneficiary. Beneficiary shall have the right to
require Grantor to repair or restore the Trust Property to the extent
required by subsection 7.5 of the Senior Secured Credit Agreement, and
Grantor hereby designates Beneficiary as its attorney-in-fact for the
purpose of making any election required or permitted under any
insurance policy relating to such repair or restoration. The insurance
proceeds or any part thereof received by Beneficiary may be applied by
Beneficiary toward reimbursement of all reasonable costs and expenses
of Beneficiary in collecting such proceeds, and the balance, at
Beneficiary's option in its sole and absolute discretion, to the
principal (to the installments in inverse order of maturity, if payable
in installments) and interest due or to become due under the Notes, the
Senior Secured Credit Agreement or the other Loan Documents, to fulfill
any other Obligation of Grantor, to the restoration or repair of the
property damaged, or released to Grantor. Application by Beneficiary of
any insurance proceeds toward the last maturing installments of
principal and interest due or to become due on the Loans shall not
excuse Grantor from making any regularly scheduled payments due
thereunder, nor shall such application extend or reduce the amount of
such payments. In the event Beneficiary elects to release such proceeds
to Grantor, Grantor shall be obligated to use such proceeds to restore
or repair the Trust Property to the extent required by subsection 7.5
of the Senior Secured Credit Agreement.
(g) In the event of foreclosure of this Deed of Trust or other
transfer of title to the Trust Property in extinguishment of the Indebtedness,
all right, title and interest of Grantor in and to any insurance policies then
in force, to the extent assignable or transferable, shall pass to the purchaser
or grantee and Grantor hereby
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appoints Beneficiary its attorney-in-fact, in Grantor's name, to assign and
transfer all such policies and proceeds to such purchaser or grantee.
(h) Upon written notice to Grantor, Beneficiary, during the
continuance of an Event of Default, shall be entitled to require Grantor to pay
monthly in advance to Beneficiary the equivalent of 1/12th of the estimated
annual premiums due on such insurance. Beneficiary may commingle such funds with
its own funds but Grantor shall be entitled to interest thereon at a rate
mutually agreed upon by Grantor and Beneficiary.
(i) Grantor may maintain insurance required under this Deed of
Trust by means of one or more blanket insurance policies maintained by Grantor;
provided, however, that (A) any such policy shall specify, or Grantor shall
furnish to Beneficiary a written statement from the insurer so specifying, the
maximum amount of the total insurance afforded by such blanket policy that is
allocated to the Premises and the other Trust Property and any sublimits and
aggregates in such blanket policy applicable to the Premises and the other Trust
Property, (B) each such blanket policy shall include an endorsement providing
that, in the event of a loss resulting from an insured peril, insurance proceeds
shall be allocated to the Trust Property in an amount equal to the coverages
required to be maintained by Grantor as provided above (subject to applicable
sublimits and aggregates) and (C) the protection afforded under any such blanket
policy shall be no less than that which would have been afforded under a
separate policy or policies relating only to the Trust Property (subject to
applicable sublimits and aggregates).
6. Restrictions on Liens and Encumbrances. Except for the lien
of this Deed of Trust and the Permitted Exceptions and except as otherwise
permitted pursuant to the terms of the Senior Secured Credit Agreement, Grantor
shall not further mortgage, nor otherwise encumber the Trust Property nor create
or suffer to exist any lien, charge or encumbrance on the Trust Property, or any
part thereof, whether superior or subordinate to the lien of this Deed of Trust
and whether recourse or non-recourse.
7. Due on Sale and Other Transfer Restrictions. Except as may
be otherwise expressly permitted under the Senior Secured Credit Agreement,
Grantor shall not sell, transfer, convey or assign all or any portion of, or any
interest in, the Trust Property.
8. Maintenance; No Alteration; Inspection; Utilities. (a)
Grantor shall maintain or cause to be maintained all the Improvements in good
condition and repair
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and shall not commit or suffer any waste of the Improvements. To the extent
required under subsection 7.5 of the Senior Secured Credit Agreement, Grantor
shall repair, restore, replace or rebuild promptly any part of the Premises
which may be damaged or destroyed by any casualty whatsoever to a condition
substantially equivalent to its condition prior to the damage or destruction.
Except as permitted by the Senior Secured Credit Agreement, the Improvements
shall not be demolished or materially altered, nor any material additions built,
without the prior written consent of Beneficiary, provided that Grantor may make
alterations or additions without the consent of Beneficiary that do not
materially reduce the value of the Trust Property.
(b) Beneficiary and any persons authorized by Beneficiary
shall, upon reasonable notice and at any reasonable time, have the right to
enter and inspect the Premises and the right to inspect all work done, labor
performed and materials furnished in and about the Improvements and the right to
inspect and make copies, to the extent reasonable, of all books, contracts and
records of Grantor relating to the Trust Property.
(c) Except as permitted under subsection 7.3 of the Senior
Secured Credit Agreement, Grantor shall pay or cause to be paid prior to
delinquency, all utility charges which are incurred for gas, electricity, water
or sewer services furnished to the Premises and all other assessments or charges
of a similar nature, whether public or private, affecting the Premises or any
portion thereof, whether or not such assessments or charges are liens thereon.
9. Condemnation/Eminent Domain. Promptly upon obtaining
knowledge of the institution of any proceedings for the condemnation of the
Trust Property, or any portion thereof, Grantor will notify Beneficiary of the
pendency of such proceedings. Grantor authorizes Beneficiary, at Beneficiary's
option and in Beneficiary's reasonable discretion, as attorney-in-fact for
Grantor, to commence, appear in and prosecute, in Beneficiary's or Grantor's
name, any action or proceeding relating to any condemnation of the Trust
Property, or any portion thereof, and to settle or compromise any claim in
connection with such condemnation upon the occurrence and during the continuance
of an Event of Default. If Beneficiary elects not to participate in such
condemnation proceeding, then Grantor shall, at its expense, diligently
prosecute any such proceeding and shall consult with Beneficiary, its attorneys
and experts and cooperate with them in any defense of any such proceedings. All
awards and proceeds of condemnation shall be applied in the same manner as
insurance proceeds, and to the extent such awards and proceeds exceed $1,000,000
and no Event of Default shall have occurred and be continuing, such awards and
proceeds shall be assigned to Beneficiary to be applied in the same manner as
insurance
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proceeds, as provided above in subsection 5(f)(iii) above, and Grantor agrees to
execute any such assignments of all such awards as Beneficiary may request.
10. Restoration. If Beneficiary elects or is required
hereunder to release funds to Grantor for restoration of any of the Trust
Property, then such restoration shall be performed in accordance with such
conditions as Beneficiary shall impose in its reasonable discretion, and as are
customarily imposed by construction lenders.
11. Leases. (a) Grantor shall not (i) execute an assignment or
pledge of any Lease relating to all or any portion of the Trust Property other
than in favor of Beneficiary, or (ii) without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed,
execute or permit to exist any Lease of any of the Trust Property, except for
Permitted Exceptions and except as may be otherwise expressly permitted under
the Senior Secured Credit Agreement.
(b) As to any Lease consented to by Beneficiary under
subsection 11(a) above, Grantor shall:
(i) promptly perform in all material respects all of the
provisions of the Lease on the part of the lessor thereunder to be
performed;
(ii) promptly enforce all of the material provisions of the
Lease on the part of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising
under or in any manner connected with the Lease or the obligations of
Grantor as lessor or of the lessee thereunder;
(iv) exercise, within 5 business days after a reasonable
request by Beneficiary, any right to request from the lessee a
certificate with respect to the status thereof;
(v) promptly deliver to Beneficiary copies of any notices of
default which Grantor may at any time forward to or receive from the
lessee;
(vi) promptly deliver to Beneficiary a fully executed
counterpart of the Lease; and
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(vii) promptly deliver to Beneficiary, upon Beneficiary's
reasonable request, if permitted under such Lease, an assignment of the
Grantor's interest under such Lease.
(c) Grantor shall deliver to Beneficiary, within 10 business
days after a reasonable request by Beneficiary, a written statement, certified
by Grantor as being true, correct and complete, containing the names of all
lessees and other occupants of the Trust Property, the terms of all Leases and
the spaces occupied and rentals payable thereunder, and a list of all Leases
which are then in default, including the nature and magnitude of the default;
such statement shall be accompanied by such other information as Beneficiary may
reasonably request.
(d) All Leases entered into by Grantor after the date hereof,
if any, and all rights of any lessees thereunder shall be subject and
subordinate in all respects to the lien and provisions of this Deed of Trust
unless Beneficiary shall otherwise elect in writing.
(e) In the event of the enforcement by Beneficiary of any
remedy under this Deed of Trust, the lessee under each Lease shall, if requested
by Beneficiary or any other person succeeding to the interest of Beneficiary as
a result of such enforcement, and if provided, at such lessee's request, with a
nondisturbance agreement from Beneficiary or such person, attorn to Beneficiary
or to such person and shall recognize Beneficiary or such successor in interest
as lessor under the Lease without change in the provisions thereof; provided
however, that Beneficiary or such successor in interest shall not be: (i) bound
by any payment of an installment of rent or additional rent which may have been
made more than 30 days before the due date of such installment; (ii) bound by
any amendment or modification to the Lease made without the consent of
Beneficiary or such successor in interest; (iii) liable for any previous act or
omission of Grantor (or its predecessors in interest); (iv) responsible for any
monies owing by Grantor to the credit of such lessee or subject to any credits,
offsets, claims, counterclaims, demands or defenses which the lessee may have
against Grantor (or its predecessors in interest); (v) bound by any covenant to
undertake or complete any construction of the Premises or any portion thereof;
or (vi) obligated to make any payment to such lessee other than any security
deposit actually delivered to Beneficiary or such successor in interest. Each
lessee or other occupant, upon request by Beneficiary or such successor in
interest, shall execute and deliver an instrument or instruments confirming such
attornment. In addition, Grantor agrees that each Lease entered into after the
date of this Deed of Trust shall include language to the effect of subsections
(d)-(e) of this Section and language to the effect that if any act or omission
of Grantor would give any lessee under such Lease the right, immediately or
after lapse
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of a period of time, to cancel or terminate such Lease, or to abate or offset
against the payment of rent or to claim a partial or total eviction, such lessee
shall not exercise such right until it has given written notice of such act or
omission to Beneficiary and until a reasonable period for remedying such act or
omission shall have elapsed following the giving of such notice without a remedy
being effected; provided that the provisions of such subsections shall be
self-operative and any failure of any Lease to include such language shall not
impair the binding effect of such provisions on any lessee under such Lease.
12. Further Assurances/Estoppel Certificates. To further
assure Beneficiary's and Trustee's rights under this Deed of Trust, Grantor
agrees upon demand of Beneficiary or Trustee to do any act or execute any
additional documents (including, but not limited to, security agreements on any
personalty included or to be included in the Trust Property and a separate
assignment of each Lease in recordable form) as may be reasonably required by
Beneficiary or Trustee to confirm the rights or benefits conferred on
Beneficiary or Trustee by this Deed of Trust.
13. Beneficiary's Right to Perform. If Grantor fails to
perform any of the covenants or agreements of Grantor, Beneficiary or Trustee,
without waiving or releasing Grantor from any obligation or default under this
Deed of Trust, may, at any time (but shall be under no obligation to) pay or
perform the same, and the amount or cost thereof, with interest at the Default
Rate, shall immediately be due from Grantor to Beneficiary or Trustee (as the
case may be) and the same shall be secured by this Deed of Trust and shall be an
encumbrance on the Trust Property prior to any right, title to, interest in or
claim upon the Trust Property attaching subsequent to the date of this Deed of
Trust. No payment or advance of money by Beneficiary or Trustee under this
Section shall be deemed or construed to cure Grantor's default or waive any
right or remedy of Beneficiary or Trustee.
14. Events of Default. The occurrence of an Event of Default
under the Senior Secured Credit Agreement shall constitute an Event of Default
hereunder.
15. Remedies. (a) Upon the occurrence of any Event of Default,
in addition to any other rights and remedies Beneficiary may have pursuant to
the Loan Documents, or as provided by law, and without limitation, the
Indebtedness and all other amounts payable with respect to the Loans, the
Letters of Credit, the Senior Secured Credit Agreement, this Deed of Trust and
the other Security Documents shall become due and payable as provided in the
Senior Secured Credit Agreement. Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived. In addition, upon the occurrence of
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any Event of Default, Beneficiary may immediately take such action, without
notice or demand, as it deems advisable to protect and enforce its rights
against Grantor and in and to the Trust Property, including, but not limited to,
the following actions, each of which may be pursued concurrently or otherwise,
at such time and in such manner as Beneficiary may determine, in its sole
discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary:
(i) Enter upon and take possession of the Trust Property or
any part thereof, with or without legal action, and do any acts which it deems
necessary or desirable to preserve the value, marketability or rentability of
the Trust Property, or any part thereof or the value of this Deed of Trust
(including, without limitation, entering into new leases of all or any part of
the Trust Property) and, with or without taking possession of the Trust
Property, sue for or otherwise collect the rents, issues and profits thereof,
including those past due and unpaid, and apply the same, less costs and expenses
of operation and collection including reasonable attorneys' fees, upon the
Indebtedness, all in such order as Beneficiary may determine. The entering upon
and taking possession of the Trust Property, the collection of such rents,
issues and profits and the application thereof as aforesaid, shall not cure or
waive any default or notice of default hereunder or invalidate any act done in
response to such default or pursuant to such notice of default and,
notwithstanding the continuance in possession of the Trust Property or the
collection, receipt and application of rents, issues or profits, Beneficiary
shall be entitled to exercise every right provided for in any of the Loan
Documents or by law.
(ii) Bring an action in any court of competent jurisdiction to
foreclose this Deed of Trust or to enforce any of the covenants, terms or
conditions hereof and Beneficiary shall have the right to specific performance,
injunction and any other equitable right or remedy as though other remedies were
not provided in this Deed of Trust.
(iii) Elect to cause the Trust Property or any part thereof to
be sold as follows, Grantor hereby expressly waiving any right which it may have
to direct the order in which any of the Trust Property may be sold:
(a) Beneficiary may proceed as if all of the Trust Property
were real property, in accordance with subparagraph (c) below, or
Beneficiary may elect to treat any of the Trust Property which consists
of personal property, in accordance with the Section of this Deed of
Trust entitled "Security Agreement Under Uniform Commercial Code",
separate and apart from the sale of real property, the remainder of the
Trust Property being treated as real property;
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(b) Beneficiary may cause any such sale or other disposition
to be conducted immediately following the expiration of any grace
period, if any, herein provided or Beneficiary may delay any such sale
or other disposition for such period of time as Beneficiary deems to be
in its best interest. Should Beneficiary desire that more than one such
sale or other disposition be conducted, Beneficiary may, at its option,
cause the same to be conducted simultaneously, or successively on the
same day, or at such different days or times and in such order as
Beneficiary may deem to be in its best interest;
(c) Should Beneficiary elect to sell the Trust Property upon
which Beneficiary elects to proceed under the laws governing
foreclosure of or sales pursuant to Deeds of Trust, Beneficiary or
Trustee shall give such notice of default and election to sell as may
then be required by law. Thereafter, upon the expiration of such time
and the giving of such notice of sale as may then be required by law,
Trustee, at the time and place specified by the notice of sale, shall
sell such Trust Property, or any portion thereof specified by
Beneficiary, at public auction to the highest bidder for cash in lawful
money of the United States, subject, however, to the provisions of the
Section of this Deed of Trust entitled "Right of Beneficiary to Credit
Sale". Trustee may, and upon request of Beneficiary shall, from time to
time, postpone the sale by public announcement thereof at the time and
place noticed therefor. If the Trust Property consists of several lots
or parcels, Beneficiary may elect to sell the Trust Property either as
a whole or in separate lots or parcels. If Beneficiary elects to sell
in separate lots or parcels, Beneficiary may designate the order in
which such lots or parcels shall be offered for sale or sold. Any
person, including Grantor, Trustee or Beneficiary, may purchase at the
sale. Upon any sale, Trustee shall execute and deliver to the purchaser
or purchasers a deed or deeds conveying the property so sold, but
without any covenant or warranty whatsoever, express or implied,
whereupon such purchaser or purchasers shall be let into immediate
possession;
(d) In the event of a sale or other disposition of any such
property, or any part thereof, and the execution of a deed or other
conveyance pursuant thereto, the recitals therein of facts, such as an
Event of Default, the giving of notice of default and notice of sale,
demand that such sale should be made, postponement of sale, terms of
sale, sale, purchase, payments of purchase money, and any other fact
affecting the regularity or validity of such sale or disposition shall
be conclusive proof of the truth of such facts; and any such deed or
conveyance shall be conclusive against all persons as to such facts
recited therein;
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(e) Beneficiary and/or Trustee shall apply the proceeds of any
sale or disposition hereunder in the order as provided in the Section
of this Deed of Trust entitled "Sale of the Properties; Application of
Proceeds"; and
(iv) Exercise all other rights and remedies provided herein,
in the other Loan Documents or otherwise available at law or equity.
16. Sale of the Properties; Application of Proceeds. (a)
Subject to the requirements of applicable law, the proceeds or avails of any
foreclosure sale and all moneys received by Beneficiary pursuant to any right
given or action taken under the provisions of this Deed of Trust shall be
applied as follows:
First: To the payment of the costs and expenses of any such
sale or other enforcement proceedings in accordance with the terms
hereof and of any judicial proceeding wherein the same may be made, and
in addition thereto, reasonable compensation to Beneficiary, its agents
and counsel, and all actual out of pocket expenses, advances,
liabilities and sums made or furnished or incurred by Beneficiary or
the holder of this Deed of Trust under this Deed of Trust and the other
Loan Documents, together with interest at the Default Rate (or such
lesser amount as may be the maximum amount permitted by law), and all
taxes, assessments or other charges, except any taxes, assessments or
other charges subject to which the Trust Property shall have been sold;
Second: To the payment of the aggregate amount when due, owing
and unpaid (whether by acceleration or otherwise) upon the Indebtedness
for principal and interest; and in case such proceeds shall be
insufficient to pay in full the whole aggregate amount so due and
unpaid, then first, to the payment of all amounts of interest at the
time due and payable on the Indebtedness, without preference or
priority of any installment of interest over any other installment of
interest, and with payment of interest on the Notes and other
instruments evidencing the Indebtedness being applied pro rata based on
the amount of interest then due pursuant to the Notes, the Senior
Secured Credit Agreement and other instrument evidencing the
Indebtedness, and second, to the payment of all amounts of principal,
with payment of principal due under the Notes, the Senior Secured
Credit Agreement and other instruments evidencing the Indebtedness
being applied pro rata based on the amount of principal due under the
Notes, the Senior Secured Credit Agreement and other instrument
evidencing the Indebtedness; all such payments of principal and
interest to be made ratably to the holders entitled thereto.
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Third: To the payment of any other sums required to be paid by
Grantor pursuant to any provision of this Deed of Trust, or any other
Loan Document.
Fourth: To the payment of the surplus, if any, to whomsoever
may be lawfully entitled to receive the same.
17. Trustee's Powers and Liabilities.
(a) Powers of Trustee. At any time or from time to time,
without liability therefor and without notice, upon the written request of
Beneficiary and presentation of the Notes and the other instruments evidencing
the indebtedness and this Deed of Trust for endorsement, without affecting the
personal liability of any person for the payment of the indebtedness secured
hereby, and without affecting the lien of this Deed of Trust upon the Trust
Property for the full amount of all amounts secured hereby, Trustee may (i)
reconvey all or any part of the Trust Property, (ii) consent to the making of
any map or plat thereof, (iii) join in granting any easement thereon or in
creating any covenants or conditions restricting use or occupancy thereof, or
(iv) join in any extension agreement or in any agreement subordinating the lien
or charge hereof.
(b) Reconveyance. Upon written request of Beneficiary stating
that all sums secured hereby have been paid, and upon surrender of this Deed of
Trust and the Notes and the other instruments evidencing the Indebtedness to
Trustee for cancellation and retention, and upon payment of its fees, Trustee
shall reconvey, without warranty, the property then held hereunder. The recitals
in any such reconveyance of any matters or facts shall be conclusive proof of
the truth thereof. The grantee in such reconveyance may be described as "the
person or persons legally entitled thereto."
(c) Trustee Notice. Trustee is not obligated to notify any
party hereto of any pending sale under any other deed of trust or of any action
or proceeding in which Grantor, Beneficiary or Trustee shall be a party, unless
brought by Trustee.
(d) Compensation and Indemnification of Trustee. Trustee shall
be entitled to reasonable compensation for all services rendered or expenses
incurred in the administration or execution of the trusts hereby created and
Grantor hereby agrees to pay the same. Trustee shall be indemnified, held
harmless and reimbursed by Grantor for any liability, damage or expense,
including reasonable attorneys' fees and amounts paid in settlement, which
Trustee may incur or sustain in connection with this Deed of Trust or in the
doing of any act which Trustee is required or permitted to do by the terms
hereof or by law.
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(e) Substitute Trustees. Beneficiary may substitute the
Trustee hereunder in any manner now or hereafter provided by law, or in lieu
thereof, Beneficiary may from time to time, by an instrument in writing,
substitute a successor or successors to any Trustee named herein or acting
hereunder, which instrument, executed and acknowledged by Beneficiary and
recorded in the office of the recorder of the county or counties where the Trust
Property is situated, shall be conclusive proof of proper substitution of such
successor Trustee or Trustees, who shall thereupon, and without conveyance from
the predecessor Trustee, succeed to all its title, estate, rights, powers and
duties. Such instrument must contain the name of the original Grantor, Trustee
and Beneficiary hereunder, the book and page where this Deed of Trust is
recorded, the legal description of the Land and the name and address of the new
Trustee.
(f) Acceptance by Trustee. The acceptance by Trustee of this
trust shall be evidenced when this Deed of Trust, duly executed and
acknowledged, is made a public record as provided by law.
(g) Trust Irrevocable; No Offset. The trust created hereby is
irrevocable by Grantor. No offset or claim that Grantor now or may in the future
have against Beneficiary shall relieve Grantor from paying installments or
performing any other obligation herein or secured hereby.
(h) Corrections. Grantor will, upon request of Beneficiary or
Trustee, promptly correct any defect, error or omission which may be discovered
in the contents of this Deed of Trust or in the execution or acknowledgement
hereof, and will execute, acknowledge and deliver such further instruments and
do such further acts as may be necessary or as may be reasonably requested by
Beneficiary or Trustee to carry out more effectively the purposes of this Deed
of Trust, to subject to the lien and security interests hereby created any of
Grantor's properties, rights or interest covered or intended to be covered
hereby, and to perfect and maintain such lien and security interest.
18. Request for Notice. In accordance with California Civil
Code Section 2924b, a request is hereby made by Grantor that a copy of any
notice of default and a copy of any notice of sale under this Deed of Trust be
mailed to Grantor at Grantor's address set forth in the first paragraph of this
Deed of Trust.
19. Successor Grantor. In the event ownership of the Trust
Property or any portion thereof becomes vested in a person other than the
Grantor herein named, Beneficiary may, without notice to the Grantor herein
named, whether or not
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Beneficiary has given written consent to such change in ownership, deal with
such successor or successors in interest with reference to this Deed of Trust
and the Indebtedness and the Obligations, and in the same manner as with the
Grantor herein named, without in any way vitiating or discharging Grantor's
liability hereunder or under the Indebtedness and the Obligations.
20. Right of Beneficiary to Credit Sale. Upon the occurrence
of any sale made under this Deed of Trust, whether made under the power of sale
or by virtue of judicial proceedings or of a judgment or decree of foreclosure
and sale, Beneficiary may bid for and acquire the Trust Property or any part
thereof. In lieu of paying cash therefor, Beneficiary may make settlement for
the purchase price by crediting upon the Indebtedness or other sums secured by
this Deed of Trust the net sales price after deducting therefrom the expenses of
sale and the cost of the action and any other sums which Beneficiary is
authorized to deduct under this Deed of Trust. In such event, this Deed of
Trust, the Notes and other instruments evidencing the Indebtedness and any and
all documents evidencing expenditures secured hereby may be presented to the
person or persons conducting the sale in order that the amount so used or
applied may be credited upon the Indebtedness as having been paid.
21. Appointment of Receiver. If an Event of Default shall have
occurred and be continuing, Beneficiary as a matter of right and without notice
to Grantor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Trust Property or any other collateral as
security for the Indebtedness and Obligations or the interest of Grantor
therein, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers or other manager of the Trust Property, without
requiring the posting of a surety bond and without reference to the adequacy or
inadequacy of the value of the Trust Property or the solvency or insolvency of
Grantor or any other party obligated for payment of all or any part of the
Indebtedness, and whether or not waste has occurred with respect to the Trust
Property. Grantor hereby irrevocably consents to such appointment and waives
notice of any application therefor (except as may be required by law). Any such
receiver or receivers shall have all the usual powers and duties of receivers in
like or similar cases and all the powers and duties of Beneficiary in case of
entry as provided in this Deed of Trust, including, without limitation and to
the extent permitted by law, the right to enter into leases of all or any part
of the Trust Property, and shall continue as such and exercise all such powers
until the date of confirmation of sale of the Trust Property unless such
receivership is sooner terminated.
22. Extension, Release, etc. (a) Without affecting the
encumbrance or charge of this Deed of Trust upon any portion of the Trust
Property not then or
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theretofore released as security for the full amount of the Indebtedness,
Beneficiary may, from time to time and without notice, agree to (i) release any
person liable for the Indebtedness, (ii) extend the maturity or alter any of the
terms of the Indebtedness or any guaranty thereof, (iii) grant other
indulgences, (iv) release or reconvey, or cause to be released or reconveyed at
any time at Beneficiary's option any parcel, portion or all of the Trust
Property, (v) take or release any other or additional security for any
obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Deed of Trust shall secure
less than all of the principal amount of the Indebtedness, it is expressly
agreed that any repayments of the principal amount of the Indebtedness shall not
reduce the amount of the encumbrance of this Deed of Trust until the encumbrance
amount shall equal the principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Beneficiary and no levy of
an execution under any judgment upon the Trust Property or upon any other
property of Grantor shall affect the encumbrance of this Deed of Trust or any
liens, rights, powers or remedies of Beneficiary or Trustee hereunder, and such
liens, rights, powers and remedies shall continue unimpaired.
(c) If Beneficiary shall have the right to foreclose this Deed
of Trust or to direct the Trustee to exercise its power of sale, Grantor
authorizes Beneficiary at its option to foreclose the lien of this Deed of Trust
(or direct the Trustee to sell the Trust Property, as the case may be) subject
to the rights of any tenants of the Trust Property. The failure to make any such
tenants parties defendant to any such foreclosure proceeding and to foreclose
their rights, or to provide notice to such tenants as required in any statutory
procedure governing a sale of the Trust Property by Trustee, or to terminate
such tenant's rights in such sale will not be asserted by Grantor as a defense
to any proceeding instituted by Beneficiary to collect the Indebtedness or to
foreclose this Deed of Trust.
(d) Unless expressly provided otherwise, in the event that
Beneficiary's interest in this Deed of Trust and title to the Trust Property or
any estate therein shall become vested in the same person or entity, this Deed
of Trust shall not merge in such title but shall continue as a valid charge on
the Trust Property for the amount secured hereby.
23. Security Agreement under Uniform Commercial Code. (a) It
is the intention of the parties hereto that this Deed of Trust shall constitute
a Security Agreement within the meaning of the Uniform Commercial Code (the
"CODE") of the State in which the Trust Property is located, and Grantor hereby
grants a security
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interest in all of the personal property of Grantor described in the Granting
Clauses of this Deed of Trust. If an Event of Default shall occur under this
Deed of Trust, then in addition to having any other right or remedy available at
law or in equity, Beneficiary shall have the option of either (i) proceeding
under the Code and exercising such rights and remedies as may be provided to a
secured party by the Code with respect to all or any portion of the Trust
Property which is personal property (including, without limitation, taking
possession of and selling such property) or (ii) treating such property as real
property and proceeding with respect to both the real and personal property
constituting the Trust Property in accordance with Beneficiary's rights, powers
and remedies with respect to the real property (in which event the default
provisions of the Code shall not apply). If Beneficiary shall elect to proceed
under the Code, then five days' notice of sale of the personal property shall be
deemed reasonable notice and the reasonable expenses of retaking, holding,
preparing for sale, selling and the like incurred by Beneficiary shall include,
but not be limited to, reasonable attorneys' fees and legal expenses. At
Beneficiary's request, during the continuance of an Event of Default, Grantor
shall assemble the personal property and make it available to Beneficiary at a
place designated by Beneficiary which is reasonably convenient to both parties.
(b) Grantor and Beneficiary agree, to the extent permitted by
law, that: (i) all of the goods described within the definition of the word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Deed of
Trust upon recording or registration in the real estate records of the proper
office shall constitute a financing statement filed as a "fixture filing" within
the meaning of Sections 9-313 and 9-402 of the Code; (iii) Grantor is the record
owner of the Real Estate; and (iv) the addresses of Grantor and Beneficiary are
as set forth on the first page of this Deed of Trust.
(c) Grantor, upon request by Beneficiary from time to time,
shall execute, acknowledge and deliver to Beneficiary one or more separate
security agreements, in form satisfactory to Beneficiary in its reasonable
discretion, covering all or any part of the Trust Property and will further
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, any financing statement, affidavit, continuation statement or
certificate or other document as Beneficiary may request in order to perfect,
preserve, maintain, continue or extend the security interest under and the
priority of this Deed of Trust and such security instrument. Grantor further
agrees to pay to Beneficiary on demand all reasonable costs and expenses
incurred by Beneficiary in connection with the preparation, execution,
recording, filing and refiling of any such document and all reasonable costs and
expenses of any record searches for financing statements Beneficiary shall
reasonably require. If Grantor shall fail to furnish any financing or
continuation statement within 10 days after request by
27
<PAGE> 29
Beneficiary, then pursuant to the provisions of the Code, Grantor hereby
authorizes Beneficiary, without the signature of Grantor, to execute and file
any such financing and continuation statements. The filing of any financing or
continuation statements in the records relating to personal property or chattels
shall not be construed as in any way impairing the right of Beneficiary to
proceed against any personal property encumbered by this Deed of Trust as real
property, as set forth above.
24. Assignment of Rents. Grantor hereby absolutely and
unconditionally assigns, transfers, conveys and sets over to Beneficiary, the
Rents as further security for the payment of the Indebtedness and performance of
the Obligations, and Grantor grants to Beneficiary the right to enter the Trust
Property for the purpose of collecting the same and to let the Trust Property or
any part thereof and to apply the Rents on account of the Indebtedness. The
foregoing assignment and grant is present and absolute and shall continue in
effect until the Indebtedness is paid in full, but Beneficiary and Trustee
hereby waive the right to enter the Trust Property for the purpose of collecting
the Rents, letting the Trust Property or any part thereof or applying the Rents
and Grantor shall be entitled to collect, receive, use and retain the Rents
until the occurrence of an Event of Default under this Deed of Trust; such right
of Grantor to collect, receive, use and retain the Rents may be revoked by
Beneficiary upon the occurrence of any Event of Default under this Deed of Trust
by giving not less than five days' written notice of such revocation to Grantor;
in the event such notice is given, Grantor shall pay over to Beneficiary, or to
any receiver appointed to collect the Rents, any lease security deposits, and
shall pay monthly in advance to Beneficiary, or to any such receiver, the fair
and reasonable rental value as determined by Beneficiary for the use and
occupancy of the Trust Property or of such part thereof as may be in the
possession of Grantor or any affiliate of Grantor, and upon default in any such
payment Grantor and any such affiliate will vacate and surrender the possession
of the Trust Property to Beneficiary or to such receiver, and in default thereof
may be evicted by summary proceedings or otherwise. Grantor shall not accept
prepayments of installments of Rent to become due for a period of more than one
month in advance (except for security deposits and estimated payments of
percentage rent, if any).
25. Trust Funds. All lease security deposits of the Real
Estate shall be treated as trust funds not to be commingled with any other funds
of Grantor. Within 10 days after request by Beneficiary, Grantor shall furnish
Beneficiary satisfactory evidence of compliance with this subsection, together
with a statement of all lease security deposits by lessees and copies of all
Leases not previously delivered to Beneficiary under which such security
deposits are held, which statement shall be certified by Grantor.
28
<PAGE> 30
26. Additional Rights. The holder of any subordinate lien or
subordinate deed of trust on the Trust Property shall have no right to terminate
any Lease whether or not such Lease is subordinate to this Deed of Trust nor
shall any holder of any subordinate lien or subordinate deed of trust join any
tenant under any Lease in any trustee's sale or action to foreclose the lien or
modify, interfere with, disturb or terminate the rights of any tenant under any
Lease. By recordation of this Deed of Trust all subordinate lienholders and the
trustees and beneficiaries under subordinate deeds of trust are subject to and
notified of this provision, and any action taken by any such lienholder or
trustee or beneficiary contrary to this provision shall be null and void. Upon
the occurrence of any Event of Default, Beneficiary may, in its sole discretion
and without regard to the adequacy of its security under this Deed of Trust,
apply all or any part of any amounts on deposit with Beneficiary under this Deed
of Trust against all or any part of the Indebtedness. Any such application shall
not be construed to cure or waive any Default or Event of Default or invalidate
any act taken by Beneficiary on account of such Default or Event of Default.
27. Changes in Method of Taxation. In the event of the passage
after the date hereof of any law of any Governmental Authority deducting from
the value of the Premises for the purposes of taxation any lien or deed of trust
thereon, or changing in any way the laws for the taxation of mortgages or deeds
of trust or debts secured thereby for federal, state or local purposes, or the
manner of collection of any such taxes, and imposing a tax, either directly or
indirectly, on mortgages or deeds of trust or debts secured thereby, the holder
of this Deed of Trust shall have the right to declare the Indebtedness due on a
date to be specified by not less than 30 days' written notice to be given to
Grantor unless within such 30-day period Grantor shall assume as an Obligation
hereunder the payment of any tax so imposed until full payment of the
Indebtedness and such assumption shall be permitted by law.
28. Notices. All notices, requests, demands and other
communications hereunder shall be deemed to have been sufficiently given or
served when served in the same manner as set forth for notices in the Senior
Secured Credit Agreement. The Trustee's address for notices shall be the
Trustee's address given on the first page of this Deed of Trust.
29. No Oral Modification. This Deed of Trust may not be
changed or terminated orally. Any agreement made by Grantor and Beneficiary
after the date of this Deed of Trust relating to this Deed of Trust shall be
superior to the rights of the holder of any intervening or subordinate deed of
trust, lien or encumbrance. Trustee's execution of any written agreement between
Grantor and Beneficiary shall not be required for the effectiveness thereof as
between Grantor and Beneficiary.
29
<PAGE> 31
30. Partial Invalidity. In the event any one or more of the
provisions contained in this Deed of Trust shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included. Notwithstanding to the contrary anything contained in this Deed of
Trust or in any provisions of the Indebtedness or Loan Documents, the
obligations of Grantor and of any other obligor under the Indebtedness or Loan
Documents shall be subject to the limitation that Beneficiary shall not charge,
take or receive, nor shall Grantor or any other obligor be obligated to pay to
Beneficiary, any amounts constituting interest in excess of the maximum rate
permitted by law to be charged by Beneficiary.
31. Grantor's Waiver of Rights. To the fullest extent
permitted by law, Grantor waives the benefit of all laws now existing or that
may subsequently be enacted providing for (i) any appraisement before sale of
any portion of the Trust Property, (ii) any extension of the time for the
enforcement of the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Trust Property from attachment, levy or sale under execution or
exemption from civil process. To the full extent Grantor may do so, Grantor
agrees that Grantor will not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, exemption, extension or redemption, or requiring
foreclosure of this Deed of Trust before exercising any other remedy granted
hereunder and Grantor, for Grantor and its successors and assigns, and for any
and all persons ever claiming any interest in the Trust Property, to the extent
permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the secured indebtedness and marshalling in the event
of exercise by Trustee or Beneficiary of the power of sale or other rights
hereby created.
32. Remedies Not Exclusive. Beneficiary and Trustee shall be
entitled to enforce payment of the Indebtedness and performance of the
Obligations and to exercise all rights and powers under this Deed of Trust or
under any of the other Loan Documents or other agreement or any laws now or
hereafter in force, notwithstanding some or all of the Indebtedness and
Obligations may now or hereafter be otherwise secured, whether by deed of trust,
mortgage, security agreement, pledge, lien, assignment or otherwise. Neither the
acceptance of this Deed of Trust nor its enforcement, shall prejudice or in any
manner affect Beneficiary's or Trustee's right to realize upon or enforce any
other security now or hereafter held by Beneficiary or Trustee, it being agreed
that Beneficiary and Trustee shall be entitled to enforce this
30
<PAGE> 32
Deed of Trust and any other security now or hereafter held by Beneficiary or
Trustee in such order and manner as Beneficiary may determine in its absolute
discretion. No remedy herein conferred upon or reserved to Trustee or
Beneficiary is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each 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. Every power or remedy given by any of the Loan Documents
to Beneficiary or Trustee or to which either may otherwise be entitled, may be
exercised, concurrently or independently, from time to time and as often as may
be deemed expedient by Beneficiary or Trustee, as the case may be. In no event
shall Beneficiary or Trustee, in the exercise of the remedies provided in this
Deed of Trust (including, without limitation, in connection with the assignment
of Rents, or the appointment of a receiver and the entry of such receiver on to
all or any part of the Trust Property), be deemed a "mortgagee in possession,"
and neither Beneficiary nor Trustee shall in any way be made liable for any act,
either of commission or omission, in connection with the exercise of such
remedies.
33. Multiple Security. If (a) the Premises shall consist of
one or more parcels, whether or not contiguous and whether or not located in the
same county, or (b) in addition to this Deed of Trust, Beneficiary shall now or
hereafter hold or be the beneficiary of one or more additional mortgages, liens,
deeds of trust or other security (directly or indirectly) for the Indebtedness
upon other property in the State in which the Premises are located (whether or
not such property is owned by Grantor or by others) or (c) both the
circumstances described in clauses (a) and (b) shall be true, then to the
fullest extent permitted by law, Beneficiary may, at its election, commence or
consolidate in a single trustee's sale or foreclosure action all trustee's sale
or foreclosure proceedings against all such collateral securing the Indebtedness
(including the Trust Property), which action may be brought or consolidated in
the courts of, or sale conducted in, any county in which any of such collateral
is located. Grantor acknowledges that the right to maintain a consolidated
trustee's sale or foreclosure action is a specific inducement to Beneficiary to
extend the Indebtedness, and Grantor expressly and irrevocably waives any
objections to the commencement or consolidation of the foreclosure proceedings
in a single action and any objections to the laying of venue or based on the
grounds of forum non conveniens which it may now or hereafter have. Grantor
further agrees that if Trustee or Beneficiary shall be prosecuting one or more
foreclosure or other proceedings against a portion of the Trust Property or
against any collateral other than the Trust Property, which collateral directly
or indirectly secures the Indebtedness, or if Beneficiary shall have obtained a
judgment of foreclosure and sale or similar judgment against such collateral
(or, in the case of a trustee's sale, shall have met the statutory requirements
therefor with respect to such collateral), then, whether or not such proceedings
are being maintained or judgments
31
<PAGE> 33
were obtained in or outside the State in which the Premises are located,
Beneficiary may commence or continue any trustee's sale or foreclosure
proceedings and exercise its other remedies granted in this Deed of Trust
against all or any part of the Trust Property and Grantor waives any objections
to the commencement or continuation of a foreclosure of this Deed of Trust or
exercise of any other remedies hereunder based on such other proceedings or
judgments, and waives any right to seek to dismiss, stay, remove, transfer or
consolidate either any action under this Deed of Trust or such other proceedings
on such basis. The commencement or continuation of proceedings to sell the Trust
Property in a trustee's sale, to foreclose this Deed of Trust or the exercise of
any other rights hereunder or the recovery of any judgment by Beneficiary or the
occurrence of any sale by the Trustee in any such proceedings shall not
prejudice, limit or preclude Beneficiary's right to commence or continue one or
more trustee's sales, foreclosure or other proceedings or obtain a judgment
against (or, in the case of a trustee's sale, to meet the statutory requirements
for, any such sale of) any other collateral (either in or outside the State in
which the Real Estate is located) which directly or indirectly secures the
Indebtedness, and Grantor expressly waives any objections to the commencement
of, continuation of, or entry of a judgment in such other sales or proceedings
or exercise of any remedies in such sales or proceedings based upon any action
or judgment connected to this Deed of Trust, and Grantor also waives any right
to seek to dismiss, stay, remove, transfer or consolidate either such other
sales or proceedings or any sale or action under this Deed of Trust on such
basis. It is expressly understood and agreed that to the fullest extent
permitted by law, Beneficiary may, at its election, cause the sale of all
collateral which is the subject of a single trustee's sale or foreclosure action
at either a single sale or at multiple sales conducted simultaneously and take
such other measures as are appropriate in order to effect the agreement of the
parties to dispose of and administer all collateral securing the Indebtedness
(directly or indirectly) in the most economical and least time-consuming manner.
34. Successors and Assigns. All covenants of Grantor contained
in this Deed of Trust are imposed solely and exclusively for the benefit of
Beneficiary and Trustee and their respective successors and assigns, and no
other person or entity shall have standing to require compliance with such
covenants or be deemed, under any circumstances, to be a beneficiary of such
covenants, any or all of which may be freely waived in whole or in part by
Beneficiary or Trustee at any time if in the sole discretion of either of them
such waiver is deemed advisable. All such covenants of Grantor shall run with
the land and bind Grantor, the successors and assigns of Grantor (and each of
them) and all subsequent owners, encumbrancers and tenants of the Trust
Property, and shall inure to the benefit of Beneficiary, Trustee and their
respective successors and assigns. Without limiting the generality of the
foregoing, any successor
32
<PAGE> 34
to Trustee appointed by Beneficiary shall succeed to all rights of Trustee as if
such successor had been originally named as Trustee hereunder. The word
"Grantor" shall be construed as if it read "Grantors" whenever the sense of this
Deed of Trust so requires and if there shall be more than one Grantor, the
obligations of the Grantors shall be joint and several.
35. No Waivers, etc. Any failure by Beneficiary to insist upon
the strict performance by Grantor of any of the terms and provisions of this
Deed of Trust shall not be deemed to be a waiver of any of the terms and
provisions hereof, and Beneficiary or Trustee, notwithstanding any such failure,
shall have the right thereafter to insist upon the strict performance by Grantor
of any and all of the terms and provisions of this Deed of Trust to be performed
by Grantor. Beneficiary may release, regardless of consideration and without the
necessity for any notice to or consent by the beneficiary of any subordinate
deed of trust or the holder of any subordinate lien on the Trust Property, any
part of the security held for the obligations secured by this Deed of Trust
without, as to the remainder of the security, in anywise impairing or affecting
this Deed of Trust or the priority of this Deed of Trust over any subordinate
lien or deed of trust.
36. Governing Law, etc. This Deed of Trust shall be governed
by and construed in accordance with the laws of the State in which the Premises
are located, except that Grantor expressly acknowledges that by its terms the
Senior Secured Credit Agreement shall be governed and construed in accordance
with the laws of the State of New York, without regard to principles of conflict
of law, and for purposes of consistency, Grantor agrees that in any in personam
proceeding related to this Deed of Trust the rights of the parties to this Deed
of Trust shall also be governed by and construed in accordance with the laws of
the State of New York governing contracts made and to be performed in that
State, without regard to principles of conflict of law.
37. Waiver of Trial by Jury. Grantor, Trustee and Beneficiary
each hereby irrevocably and unconditionally waive trial by jury in any action,
claim, suit or proceeding relating to this Deed of Trust and for any
counterclaim brought therein.
38. Certain Definitions. Unless the context clearly indicates
a contrary intent or unless otherwise specifically provided herein, words used
in this Deed of Trust shall be used interchangeably in singular or plural form
and the word "Grantor" shall mean "each Grantor or any subsequent owner or
owners of the Trust Property or any part thereof or interest therein," the word
"Beneficiary" shall mean "Beneficiary or any successor Administrative Agent,"
the word "Trustee" shall mean "Trustee and any successor trustee hereunder," the
word "Notes" shall mean "the notes that may from
33
<PAGE> 35
time to time be given pursuant to the terms of the Senior Secured Credit
Agreement or any other evidence of indebtedness secured by this Deed of Trust,"
the word "person" shall include any individual, corporation, partnership, trust,
unincorporated association, government, governmental authority, or other entity,
and the words "Trust Property" shall include any portion of the Trust Property
or interest therein. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa. The
captions in this Deed of Trust are for convenience or reference only and in no
way limit or amplify the provisions hereof.
39. Reconveyance of Deed Of Trust. Upon payment in full of the
Indebtedness, the termination of all Commitments under the Senior Secured Credit
Agreement secured hereby and the compliance with the Obligations then required
to be complied with, Beneficiary shall release the encumbrance of this Deed of
Trust. If any of the Trust Property shall be sold, transferred or otherwise
disposed of by Grantor in a transaction expressly permitted by the Senior
Secured Credit Agreement, then Beneficiary shall execute and deliver, and shall
cause Trustee to execute and deliver to Grantor (at the sole cost and expense of
Grantor) all releases, reconveyances or other documents reasonably necessary or
desirable for the release of such Trust Property from the encumbrance of this
Deed of Trust.
40. Conflict With Senior Secured Credit Agreement. In the
event of any conflict or inconsistency between the terms and provisions of this
Deed of Trust and the terms and provisions of the Senior Secured Credit
Agreement, the terms and provisions of the Senior Secured Credit Agreement shall
govern, other than with respect to the Section of this Deed of Trust captioned
"Governing Law, etc.". By their execution of the Senior Secured Credit
Agreement, each Lender hereby agrees that it shall not have the right to
institute any suit for enforcement of Notes or any other Indebtedness secured by
this Deed of Trust or any other Security Document, if and to the extent that the
institution or prosecution thereof or the entry of judgment therein would, under
applicable law, result in the surrender, impairment, waiver or loss of the Lien
of this Deed of Trust or any other Security Document or impede or delay the
enforcement of the Lien of this Deed of Trust or any other Security Document.
41. Receipt of Copy. Grantor acknowledges that it has received
a true copy of this Deed of Trust.
34
<PAGE> 36
This Deed of Trust has been duly executed by Grantor as of the
date first above written.
Signed, sealed and EV INTERNATIONAL, INC.
delivered in our
presence: By: /s/ CHRISTINE K. VANDEN BEUKEL
---------------------------------
Name: Christine K. Vanden Beukel
Title: Vice President, Secretary and
Treasurer
/s/ GINGER BALLARD
- ---------------------------
Name: Ginger Ballard
/s/ ARON GOSER
- ---------------------------
Name: Aron Goser
35
<PAGE> 37
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 10th day of February in the year 1997 before me, Nancy
Lomazzo, a Notary Public of said State, duly commissioned and sworn, personally
appeared Christine K. Vanden Beukel, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person who executed the within
instrument as vice president, secretary and treasurer, or on behalf of the
corporation therein and acknowledged to me that such corporation executed the
same.
In Witness Whereof, I have hereunto set my hand and affixed by
official seal the day and year in this certificate first above written.
/s/ NANCY L. LOMAZZO
--------------------------
Notary Public
[Notarial Stamp]
NANCY L. LOMAZZO
Notary Public, State of New York
No. 31-5061123
Qualified in New York County
Commission Expires June 3, 1998
<PAGE> 38
CERTIFICATION PURSUANT TO CALIFORNIA GOVERNMENT CODE 27361.7:
I certify under penalty of perjury that the notary seal and stamp on the
document to which this statement is attached reads as follows:
Name of Notary: Nancy L. Lomazzo
Date Commission Expires: June 3, 1998
County where qualification
or bond is filed: New York County, New York
Place of execution: New York County, New York
Signature: /s/ NANCY L. LOMAZZO
------------------------------------
Print Name: Nancy L. Lomazzo
<PAGE> 39
13278 Ralston Ave.
Sylmar, CA 91342
Los Angeles County
Schedule A
Legal Description
LOT 4 OF TRACT NO. 32284, IN THE CITY OF LOS ANGELES, IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 1055 PAGES 37 TO 39
INCLUS8IVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT AN UNDIVIDED ONE HALF OF ALL OIL, GAS, MINERALS AND HYDROCARBON
SUBSTANCES IN AND UNDER SAID LAND, AS RESERVED IN DEED RECORDED IN BOOK 18773
PAGE 102, OFFICIAL RECORDS.
ALSO EXCEPT AN UNDIVIDED ONE HALF OF ALL OIL, GAS, MINERALS AND HYDROCARBON
SUBSTANCES UNDER SAID LAND, AS RESERVED BY GERTRUDE C. CANNON, A MARRIED WOMAN,
IN DEED RECORDED JULY 7, 1995 IN BOOK 48272 PAGE 384, OFFICIAL RECORDS.
<PAGE> 1
Exhibit 10(m)
[California]
Recording requested by, and when recorded, please return to:
Simpson Thacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
ATTN: Emily R. Steinman, Esq.
THIS INSTRUMENT IS TO BE INDEXED IN THE OFFICE OF THE LOS ANGELES COUNTY RECORDS
AS BOTH A DEED OF TRUST AND A FIXTURE FILING
DEED OF TRUST, ASSIGNMENT OF
RENTS AND LEASES, SECURITY
AGREEMENT AND FIXTURE FILING
from
EV INTERNATIONAL, INC., Grantor
to
CHICAGO TITLE INSURANCE COMPANY, Trustee
for the use and
benefit of
THE CHASE MANHATTAN BANK, as Administrative Agent, Beneficiary
DATED AS OF FEBRUARY 10, 1997
<PAGE> 2
[California]
DEED OF TRUST, ASSIGNMENT OF RENTS
AND LEASES, SECURITY AGREEMENT AND FIXTURE FILING
THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES, SECURITY
AGREEMENT AND FIXTURE FILING, dated as of February 10, 1997 is made by EV
INTERNATIONAL, INC., a Delaware corporation, as successor by merger and name
change to LFE Corporation ("GRANTOR"), whose address is 600 Cecil Street,
Buchanan, Michigan 49107, to CHICAGO TITLE INSURANCE COMPANY, a California
corporation, ("TRUSTEE") whose address is 700 South Flower, Suite 900, Los
Angeles, CA 90017 for the use and benefit of THE CHASE MANHATTAN BANK, a New
York banking corporation whose address is 270 Park Avenue, New York, New York
10017, as Administrative Agent (in such capacity, "BENEFICIARY") for the several
banks and other financial institutions (the "LENDERS") from time to time parties
to the Credit Agreement dated as of February 10, 1997, (as the same may be
amended, supplemented, waived or otherwise modified from time to time the
"SENIOR SECURED CREDIT AGREEMENT") among Gulton Acquisition Corp., a Delaware
corporation ("BORROWER"), the Lenders and Beneficiary. References to this "Deed
of Trust" shall mean this instrument and any and all renewals, modifications,
amendments, supplements, extensions, consolidations, substitutions, spreaders
and replacements of this instrument. Capitalized terms used and not otherwise
defined herein shall have the meanings assigned thereto in the Senior Secured
Credit Agreement.
Background
A. Gulton Holdings Corp., a Delaware corporation which, on or
after the Effective Date, will be renamed EVI Audio Holding, Inc. ("HOLDINGS")
and Borrower, its direct Wholly Owned Subsidiary, are newly formed companies
organized by an investor group led by Greenwich Street Capital Partners, Inc., a
Delaware corporation ("GSCP").
B. Borrower acquired Gulton Industries Inc., a Delaware
corporation ("GII") which was a subsidiary of Mark IV Industries, Inc. ("MARK
IV") through the purchase from Mark IV and Mark IV PLC of the capital stock of
GII (the
<PAGE> 3
"ACQUISITION") pursuant to the Stock Purchase Agreement, dated as of December
12, 1996, by and among Mark IV, Mark IV PLC and Borrower (as amended,
supplemented, waived or otherwise modified from time to time in accordance with
the Senior Secured Credit Agreement, the "STOCK PURCHASE AGREEMENT").
C. Borrower merged with and into GII (the "FIRST MERGER"), and
GII as surviving corporation of the First Merger merged (the "SECOND MERGER";
the First Merger together with the Second Merger, the "MERGERS") with and into
Electro- Voice, Incorporated, a Delaware corporation and a Wholly Owned
Subsidiary of GII, which was thereupon renamed EV International, Inc.
D. In order to (i) finance a portion of the Acquisition
Consideration, (ii) refinance a portion of the existing indebtedness of GII and
its subsidiaries, (iii) pay certain fees, taxes and expenses related to (x) the
Acquisition and the financing thereof and (y) the refinancing of such existing
indebtedness of GII and its subsidiaries and (iv) finance the working capital
and other business requirements of Grantor and its subsidiaries following the
consummation of the Acquisition and the Merger, Acquisition Co. has requested
that the Lenders make the Loans and issue and participate in the Letters of
Credit in accordance with the terms of the Senior Secured Credit Agreement.
E. Grantor is the owner of the parcel(s) of real property
described on Schedule A attached hereto (such real property, together with all
of the buildings, improvements, structures and fixtures now or subsequently
located thereon (the "IMPROVEMENTS"), being collectively referred to as the
"REAL ESTATE").
F. Pursuant to the terms of the Senior Secured Credit
Agreement, the Lenders have agreed, among other things, to make the Loans and
the Issuing Lender has agreed to issue, and the L/C Participants have agreed to
acquire undivided participating interests in, the Letter(s) of Credit for the
account of the Borrower upon the terms and subject to the conditions set forth
in the Senior Secured Credit Agreement which conditions include the grant by
Grantor to Beneficiary of a first lien upon and perfected security interest in,
among other things, all estate, right, title and interest of Grantor in and to
the Real Estate pursuant to the terms hereof.
G. Grantor is the successor by merger to Borrower, and it is
to the advantage and benefit of Grantor that the Lenders make the Loans to
Borrower.
2
<PAGE> 4
Granting Clauses
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor agrees that to secure:
(a) the repayment of principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans
and Reimbursement Obligations and interest accruing after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Loan Party, whether
or not a claim for post-filing or post-petition interest is allowed in
such proceeding) the Loans (as they may be evidenced by the Notes from
time to time) and all other obligations (including the Reimbursement
Obligations) and liabilities of Grantor to Beneficiary, the Issuing
Lender and the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Senior
Secured Credit Agreement, the Loans, the Letters of Credit, the
Security Documents, any Guarantee Obligation of Grantor as to which any
Lender is a beneficiary, any Permitted Hedging Arrangement with any
Lender or any banking affiliate of any Lender (whether entered into
directly, or guaranteed, by Grantor), the Guarantee and Collateral
Agreement dated as of February 10, 1997 between Grantor, Holdings and
Beneficiary (the "GUARANTEE") or any other document made, delivered or
given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees,
charges and disbursements of counsel to the Administrative Agent, the
Issuing Lender or any Lender that are required to be paid by any Loan
Party pursuant to the Senior Secured Credit Agreement) (the items set
forth above being referred to collectively as the "INDEBTEDNESS"); and
(b) the performance of all covenants, agreements, obligations
and liabilities of Grantor (the "OBLIGATIONS") under or pursuant to the
provisions of the Senior Secured Credit Agreement, the Loans, this Deed
of Trust, the Guarantee, any other document securing payment of the
Indebtedness (the "SECURITY DOCUMENTS") and any amendments,
supplements, extensions, renewals, restatements, replacements or
modifications of any of the foregoing (the Senior Secured Credit
Agreement, the Loans, the Letters of Credit, this Deed of Trust, the
Guarantee and all other documents and instruments from time to time
evidencing, securing or guaranteeing the payment of the Indebtedness or
the performance of the Obligations, as any of the same may be
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amended, supplemented, extended, renewed, restated, replaced or
modified from time to time, are collectively referred to as the "LOAN
DOCUMENTS");
GRANTOR HEREBY IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS TO TRUSTEE, IN TRUST,
WITH POWER OF SALE, THE FOLLOWING:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever
of Grantor, in possession or expectancy, in and to the Real Estate or
any part thereof;
(C) all right, title and interest of Grantor in, to and under
all easements, rights of way, gores of land, streets, ways, alleys,
passages, sewer rights, waters, water courses, water and riparian
rights, development rights, air rights, mineral rights and all estates,
rights, titles, interests, privileges, licenses, tenements,
hereditaments and appurtenances belonging, relating or appertaining to
the Real Estate, and any reversions, remainders, rents, issues, profits
and revenue thereof and all land lying in the bed of any street, road
or avenue, in front of or adjoining the Real Estate to the center line
thereof;
(D) all right, title and interest of Grantor in and to all of
the fixtures, chattels, business machines, machinery, apparatus,
equipment, furnishings, fittings and articles of personal property of
every kind and nature whatsoever, and all appurtenances and additions
thereto and substitutions or replacements thereof (together with, in
each case, attachments, components, parts and accessories) currently
owned or subsequently acquired by Grantor and now or subsequently
attached to, or contained in or used or usable in any way in connection
with any operation or letting of the Real Estate, including but without
limiting the generality of the foregoing, all screens, awnings, shades,
blinds, curtains, draperies, artwork, carpets, rugs, storm doors and
windows, furniture and furnishings, heating, electrical, and mechanical
equipment, lighting, switchboards, plumbing, ventilating, air
conditioning and air-cooling apparatus, refrigerating, and incinerating
equipment, escalators, elevators, loading and unloading equipment and
systems, stoves, ranges, laundry equipment, cleaning systems (including
window cleaning apparatus), telephones, communication systems
(including satellite dishes and antennae), televisions, computers,
sprinkler systems and other fire prevention and extinguishing apparatus
and materials, security systems, motors, engines, machinery, pipes,
pumps, tanks, conduits, appliances, fittings and fixtures of
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<PAGE> 6
every kind and description (all of the foregoing in this paragraph (D)
being referred to as the "EQUIPMENT");
(E) all right, title and interest of Grantor in and to all
substitutes and replacements of, and all additions and improvements to,
the Real Estate and the Equipment, subsequently acquired by or released
to Grantor or constructed, assembled or placed by Grantor on the Real
Estate, immediately upon such acquisition, release, construction,
assembling or placement, including, without limitation, any and all
building materials to be used by Grantor whether stored at the Real
Estate or offsite, and, in each such case, without any further
mortgage, conveyance, assignment or other act by Grantor;
(F) all right, title and interest of Grantor in, to and under
all leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or
occupancy of the Real Estate or the Equipment or any part thereof, now
existing or subsequently entered into by Grantor and whether written or
oral and all guarantees of any of the foregoing (collectively, as any
of the foregoing may be amended, restated, extended, renewed or
modified from time to time, the "LEASES"), and all rights of Grantor in
respect of cash and securities deposited thereunder and the right to
receive and collect the revenues, income, rents, issues and profits
thereof, together with all other rents, royalties, issues, profits,
revenue, income and other benefits arising from the use and enjoyment
of the Trust Property (as defined below) (collectively, the "RENTS");
(G) all books and records relating to or used in connection
with the operation of the Real Estate or the Equipment or any part
thereof;
(H) all right, title and interest of Grantor, to the extent
assignable, in and to (i) all unearned premiums under insurance
policies now or subsequently obtained by Grantor relating to the Real
Estate or Equipment, (ii) any such insurance policies, (iii) all
proceeds of any such insurance policies (including title insurance
policies) including the right to collect and receive such proceeds,
subject to the provisions relating to insurance generally set forth
below, and (iv) all awards and other compensation, including the
interest payable thereon and the right to collect and receive the same,
made to the present or any subsequent owner of the Real Estate or
Equipment for the taking by eminent domain, condemnation or otherwise,
of all or any part of the Real Estate or any easement or other right
therein, subject to the provisions relating to condemnation awards
generally set forth below;
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(I) all right, title and interest of Grantor, to the extent
assignable, in and to (i) all contracts from time to time executed by
Grantor or any manager or agent on its behalf relating to the
ownership, construction, maintenance, repair, operation, occupancy,
sale or financing of the Real Estate or Equipment or any part thereof
and all agreements relating to the purchase or lease of any portion of
the Real Estate or any property which is adjacent or peripheral to the
Real Estate, together with the right to exercise such options
(collectively, the "CONTRACTS"), (ii) all consents, licenses, building
permits, certificates of occupancy and other governmental approvals
relating to construction, completion, occupancy, use or operation of
the Real Estate or any part thereof (collectively, the "PERMITS") and
(iii) all drawings, plans, specifications and similar or related items
relating to the Real Estate (collectively, the "PLANS");
(J) any and all monies now or subsequently on deposit for the
payment of real estate taxes or special assessments against the Real
Estate or for the payment of premiums on insurance policies covering
the foregoing property or otherwise on deposit with or held by
Beneficiary as provided in this Deed of Trust;
(K) all accounts and revenues arising from the operation of
the Improvements; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now
owned or held or subsequently acquired by Grantor and described in the foregoing
clauses (A) through (E) are collectively referred to as the "PREMISES", and
those described in the foregoing clauses (A) through (L) are collectively
referred to as the "TRUST PROPERTY").
TO HAVE AND TO HOLD the Trust Property and the rights and
privileges hereby granted unto Trustee, its successors and assigns for the uses
and purposes set forth, until the Indebtedness is fully paid and the Obligations
fully performed or as otherwise expressly provided in the Section of this Deed
of Trust entitled "Release of Deed of Trust".
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Terms and Conditions
Grantor further represents, warrants, covenants and agrees
with Trustee and Beneficiary as follows:
1. Warranty of Title. Grantor warrants that Grantor has good
title to the Real Estate in fee simple and good title to the rest of the Trust
Property, subject only to the matters that are set forth in Schedule B of the
title insurance policy or policies being issued to Beneficiary to insure the
lien of this Deed of Trust and Liens expressly permitted under the Senior
Secured Credit Agreement (collectively, the "PERMITTED EXCEPTIONS") and Grantor
shall warrant, defend and preserve such title and the rights granted by this
Deed of Trust with respect thereto against all claims of all persons and
entities. Grantor further warrants that it has the right to grant this Deed of
Trust.
2. Payment of Indebtedness. Grantor shall pay the Indebtedness
at the times and places and in the manner specified in the Senior Secured Credit
Agreement and shall perform all the Obligations.
3. Requirements. (a) Grantor shall promptly comply with, or
cause to be complied with, and conform to all present and future laws, statutes,
codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements, and irrespective of the nature of the work to be done, of each of
the United States of America, any State and any municipality, local government
or other political subdivision thereof and any agency, department, bureau,
board, commission or other instrumentality of any of them, now existing or
subsequently created (collectively, "GOVERNMENTAL AUTHORITY") which has
jurisdiction over the Trust Property and all covenants, restrictions and
conditions now or later of record which may be applicable to any of the Trust
Property, or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration, repair or reconstruction of any of the Trust Property,
except to the extent that failure to comply therewith, in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. All present and
future laws, statutes, codes, ordinances, orders, judgments, decrees, rules,
regulations and requirements of every Governmental Authority applicable to
Grantor or to any of the Trust Property and all covenants, restrictions, and
conditions which now or later may be applicable to any of the Trust Property are
collectively referred to as the "LEGAL REQUIREMENTS".
(b) From and after the date of this Deed of Trust, except as
expressly permitted under the Senior Secured Credit Agreement or herein, Grantor
shall not by
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<PAGE> 9
act or omission permit, other than Permitted Exceptions, any building or other
improvement on any premises not subject to this Deed of Trust to rely on the
Premises or any part thereof or any interest therein to fulfill any Legal
Requirement, and Grantor hereby assigns to Beneficiary any and all rights to
give consent for all or any portion of the Premises or any interest therein to
be so used. Grantor shall not by act or omission impair the integrity of any of
the Real Estate as a single zoning lot separate and apart from all other
premises. Grantor represents that each parcel of the Real Estate constitutes a
legally subdivided lot, in compliance with all subdivision laws and similar
Legal Requirements, except to the extent that failure to comply therewith, in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. Any act or omission by Grantor which would result in a violation of any
of the provisions of this subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Except as
expressly permitted under the Senior Secured Credit Agreement, Grantor, prior to
delinquency, shall pay and discharge all taxes of every kind and nature
(including, without limitation, all real and personal property, income,
franchise, withholding, transfer, gains, profits and gross receipts taxes), all
charges for any easement or agreement maintained for the benefit of any of the
Trust Property, all general and special assessments, levies, permits, inspection
and license fees, all water and sewer rents and charges and all other public
charges even if unforeseen or extraordinary, imposed upon or assessed against or
which may become a lien on any of the Trust Property, or arising in respect of
the occupancy, use or possession thereof, together with any penalties or
interest on any of the foregoing (all of the foregoing are collectively referred
to as the "IMPOSITIONS"). Grantor shall within 30 days after the request of
Beneficiary deliver to Beneficiary (i) original or copies of receipted bills and
cancelled checks or other evidence of payment of such Imposition if it is a real
estate tax or other public charge and (ii) evidence acceptable to Beneficiary in
its reasonable discretion showing the payment of any other such Imposition. If
by law any Imposition, at Grantor's option, may be paid in installments (whether
or not interest shall accrue on the unpaid balance of such Imposition), Grantor
may elect to pay such Imposition in such installments and shall be responsible
for the payment of such installments with interest, if any.
(b) Nothing herein shall affect any right or remedy of Trustee
or Beneficiary under this Deed of Trust or otherwise, without notice or demand
to Grantor, to pay any Imposition after the date such Imposition shall have
become delinquent, and to add to the Indebtedness the amount so paid, together
with interest from the time of payment at the rate of interest described in
paragraph 4.1(c) of the Senior Secured Credit Agreement (the "DEFAULT RATE").
Any sums paid by Trustee or Beneficiary in discharge of any Impositions shall be
(i) a charge on the Premises
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secured hereby prior to any right or title to, interest in, or claim upon the
Premises subordinate to the lien of this Deed of Trust, and (ii) payable on
demand by Grantor to Trustee or Beneficiary, as the case may be, together with
interest at the Default Rate as set forth above.
(c) Grantor shall not claim, demand or be entitled to receive
any credit or credits toward the satisfaction of this Deed of Trust or on any
interest payable thereon for any taxes assessed against the Trust Property or
any part thereof, and shall not claim any deduction from the taxable value of
the Trust Property by reason of this Deed of Trust.
(d) Grantor shall have the right pursuant to subsection 7.3 of
the Senior Secured Credit Agreement to contest in good faith to the amount or
validity of any Imposition by appropriate proceedings diligently conducted with
reserves in conformity with GAAP, provided that Grantor shall demonstrate to
Beneficiary's reasonable satisfaction that such proceedings shall operate
conclusively to prevent the sale of the Trust Property, or any part thereof, to
satisfy such Imposition prior to final determination of such proceedings.
(e) Upon written notice to Grantor, Beneficiary during the
continuance of an Event of Default (as defined below) shall be entitled to
require Grantor to pay monthly in advance to Beneficiary the equivalent of
1/12th of the estimated annual Impositions. Beneficiary may commingle such funds
with its own funds but Grantor shall be entitled to interest thereon at a rate
mutually agreed upon by Grantor and Beneficiary.
5. Insurance. (a) Grantor shall maintain or cause to be
maintained on all of the Premises:
(i) property insurance against loss or damage by fire,
lightning, windstorm, tornado, water damage, flood, earthquake and by
such other further risks and hazards as now are or subsequently may be
covered by an "all risk" policy or a fire policy covering "special"
causes of loss (provided, however, that the maintenance of insurance
against earthquake, windstorm, flood and freeze risks shall be subject
to availability of such insurance coverage on commercially reasonable
terms). The policy shall include building ordinance law endorsements
and the policy limits shall be automatically reinstated after each loss
(other than with respect to flood and earthquake coverage which shall
be reinstated on a commercially reasonable basis);
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(ii) commercial general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language or similar language of such endorsement), covering all claims
for personal injury, bodily injury or death, or property damage,
subject to standard policy terms, conditions and exclusions, occurring
on, in or about the Premises in an amount not less than $10,000,000
combined single limit with respect to personal injury, bodily injury or
death, or property damage, relating to any one occurrence plus such
excess limits as Beneficiary shall reasonably request from time to
time;
(iii) when and to the extent reasonably required by
Beneficiary, insurance against loss or damage by any other risk
commonly insured against by persons occupying or using like properties
in the locality or localities in which the Real Estate is situated;
(iv) during the course of any construction or repair of
Improvements, commercial general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language or similar language of such endorsement), (including coverage
for elevators and escalators, if any). The policy shall include
coverage for independent contractors and completed operations. The
completed operations coverage shall stay in effect for two years after
construction of any Improvements has been completed. The policy shall
provide coverage on an occurrence basis against claims for personal
injury, including, without limitation, bodily injury and death, and
property damage resulting from Grantor's negligence or other behavior
for which Grantor may be adjudged tortiously liable, subject to
standard policy terms, conditions and exclusions, occurring on, in or
about the Premises and the adjoining streets, sidewalks and
passageways, such insurance to afford immediate minimum protection to a
limit of not less than that reasonably required by Beneficiary with
respect to personal injury, bodily injury or death to any one or more
persons or damage to property;
(v) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Grantor engaged on or with
respect to the Premises in such amounts no less than the limits
established by law or in the case of employer's liability insurance, no
less than $500,000, provided that Grantor may self-insure any or all
workers' compensation liabilities;
(vi) during the course of any construction, addition,
alteration or repair of the Improvements, builder's risk completed
value property insurance form
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against "all risks of physical loss" (subject to standard policy
exclusions), including collapse, water damage, flood and earthquake and
transit coverage, during construction or repairs of the Improvements,
with deductible approved by Beneficiary in its reasonable discretion,
in reporting form, covering the total replacement value of work
performed and equipment, supplies and materials furnished (with an
appropriate limit for soft costs in the case of construction);
provided, however, that the maintenance of insurance against earthquake
and flood risks shall be subject to availability of such insurance
coverage on commercially reasonable terms;
(vii) boiler and machinery property insurance covering
pressure vessels, air tanks, boilers, machinery, pressure piping,
heating, air conditioning and elevator equipment and escalator
equipment, provided the Improvements contain equipment of such nature,
in such amounts as are reasonably satisfactory to Beneficiary but not
less than the lesser of $1,000,000 or 10% of the value of the
Improvements;
(viii) if any portion of the Premises are located in an area
identified in the Federal Register as having special flood hazards by
the Secretary of Housing and Urban Development or other applicable
agency, flood insurance covering any parcel of the Trust Property which
contains improvements in an amount satisfactory to Beneficiary in its
reasonable discretion, but in no event less than the maximum limit of
coverage available with respect to the particular type of property
under the National Flood Insurance Act of 1968, as amended and with a
term ending not later than the maturity of the Indebtedness and
Beneficiary shall receive confirmation that Grantor has received the
notice required pursuant to Section 208.8(e)(3) of Regulation H of the
Board of Governors of The Federal Reserve System; and
(ix) such other insurance in such amounts as Beneficiary may
reasonably request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or, in the case of
property and boiler and machinery insurance, materially amended without 30-days'
prior written notice to Beneficiary, (ii) with respect to all property
insurance, subject to availability on commercially reasonable terms, provide for
deductibles not to exceed $250,000, other than with respect to (a) flood,
freeze, windstorm and earthquake perils for which deductibles shall not exceed
the greater of $500,000 or 5% of values at risk per
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<PAGE> 13
location involved in loss and (b) boiler and machinery coverage for which
deductibles shall not exceed the greater of $500,000 or five times 100% of the
daily time element value, contain a "Replacement Cost Endorsement" without any
deduction made for depreciation and with no co-insurance penalty (or attaching
an agreed amount endorsement satisfactory to Beneficiary in its reasonable
discretion), with loss payable solely to Beneficiary (modified, if necessary and
to the extent available under such policy, to provide that proceeds in the
amount of replacement cost may be retained by Beneficiary without the obligation
to rebuild) as its interest may appear, without contribution, under a "standard"
or "New York" mortgagee clause acceptable to Beneficiary in its reasonable
discretion and be written by insurance companies having an A.M. Best Company,
Inc. rating of A- or higher and a financial size category of not less than VII,
or otherwise as approved by Beneficiary in its reasonable discretion and (iii)
contain a "manuscript" endorsement providing that Grantor may not unilaterally
cancel such policy without Beneficiary's prior written consent. Liability
insurance policies shall name Beneficiary as an additional insured and contain a
waiver of subrogation against Beneficiary; all such policies shall indemnify and
hold Beneficiary harmless from all liability claims occurring on, in or about
the Premises and the adjoining streets, sidewalks and passageways, subject to
standard policy terms, conditions and exclusions. The amounts of each insurance
policy and the form of each such policy shall at all times be satisfactory to
Beneficiary in its reasonable discretion. Each policy shall expressly provide
that any proceeds which are payable to Beneficiary shall be paid by check
payable to the order of Beneficiary only and requiring the endorsement of
Beneficiary only. If any required insurance shall expire, be withdrawn, become
void by breach of any condition thereof by Grantor or by any lessee of any part
of the Trust Property or become void or unsafe by reason of the failure or
impairment of the capital of any insurer, Grantor shall immediately obtain new
or additional insurance satisfactory to Beneficiary in its reasonable
discretion. Grantor shall not take out any separate or additional insurance
which is contributing in the event of loss unless it is properly endorsed and
otherwise satisfactory to Beneficiary in all respects in its reasonable
discretion.
(b) Grantor shall deliver to Beneficiary an original of each
insurance policy required to be maintained, or a certificate of such insurance
acceptable to Beneficiary in its reasonable discretion, together with a copy of
the declaration page for each such policy. Grantor shall (i) pay as they become
due all premiums for such insurance, (ii) not later than seven days prior to the
expiration of each policy to be furnished pursuant to the provisions of this
Section, deliver a renewed policy or policies, or certificates of insurance
acceptable to Beneficiary, in its reasonable discretion, or duplicate original
or originals thereof. Upon the reasonable request of Beneficiary, Grantor shall
cause its insurance underwriter or broker to certify to
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Beneficiary in writing that all the requirements of this Deed of Trust governing
insurance have been satisfied.
(c) If Grantor is in default of its obligations to insure or
deliver any such policy or policies, or certificates of insurance acceptable to
Beneficiary, in its reasonable discretion, then Beneficiary, at its option and
without notice, may effect such insurance from year to year, and pay the premium
or premiums therefor, and Grantor shall pay to Beneficiary on demand such
premium or premiums so paid by Beneficiary with interest from the time of
payment at the Default Rate and the same shall be deemed to be secured by this
Deed of Trust and shall be collectible in the same manner as the Indebtedness
secured by this Deed of Trust.
(d) Grantor shall increase the amount of property insurance
required to equal 100% replacement cost pursuant to the provisions of this
Section at the time of each renewal of each policy (but not later than 12 months
from the date of this Deed of Trust and each successive 12 month period to occur
thereafter) by using the Morgan & Swift Building Cost Index to determine whether
there shall have been an increase in the replacement value since the most recent
adjustment and, if there shall have been such an increase, the amount of
insurance required shall be adjusted accordingly.
(e) Grantor promptly shall in all material respects comply
with and conform to (i) all provisions of each such insurance policy, and (ii)
all requirements of the insurers applicable to Grantor or to any of the Trust
Property or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of any of the Trust Property. Grantor shall
not use or permit the use of the Trust Property in any manner which would permit
any insurer to cancel any insurance policy or void coverage required to be
maintained by this Deed of Trust.
(f) (i) If the Trust Property, or any part thereof, shall be
destroyed or damaged by fire or any other casualty, whether insured or
uninsured, or in the event any claim is made against Grantor for any
personal injury, bodily injury or property damage incurred on or about
the Premises, Grantor shall promptly give notice thereof to
Beneficiary.
(ii) If the Trust Property is damaged by fire or other
casualty and the cost to repair such damage is less than $1,000,000,
then provided that no Event of Default shall have occurred and be
continuing, Grantor shall have the right to adjust such loss, and the
insurance proceeds relating to such loss may be paid over to Grantor;
provided that Grantor shall, promptly after any such damage, repair
such damage to the extent required by subsection 7.5 of the Senior
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Secured Credit Agreement regardless of whether any insurance proceeds
have been received or whether such proceeds, if received, are
sufficient to pay for the costs of repair.
(iii) If the Trust Property is damaged by fire or other
casualty, and the cost to repair such damage exceeds the limit in
Section 5(f)(ii) above, or if an Event of Default shall have occurred
and be continuing, then Grantor authorizes and empowers Beneficiary, at
Beneficiary's option and in Beneficiary's reasonable discretion, as
attorney-in-fact for Grantor, to make proof of loss, to adjust and
compromise any claim under any insurance policy, to appear in and
prosecute any action arising from any policy, to collect and receive
insurance proceeds and to deduct therefrom Beneficiary's reasonable
expenses incurred in the collection process. Each insurance company
concerned is hereby authorized and directed to make payment for such
loss directly to Beneficiary. Beneficiary shall have the right to
require Grantor to repair or restore the Trust Property to the extent
required by subsection 7.5 of the Senior Secured Credit Agreement, and
Grantor hereby designates Beneficiary as its attorney-in-fact for the
purpose of making any election required or permitted under any
insurance policy relating to such repair or restoration. The insurance
proceeds or any part thereof received by Beneficiary may be applied by
Beneficiary toward reimbursement of all reasonable costs and expenses
of Beneficiary in collecting such proceeds, and the balance, at
Beneficiary's option in its sole and absolute discretion, to the
principal (to the installments in inverse order of maturity, if payable
in installments) and interest due or to become due under the Notes, the
Senior Secured Credit Agreement or the other Loan Documents, to fulfill
any other Obligation of Grantor, to the restoration or repair of the
property damaged, or released to Grantor. Application by Beneficiary of
any insurance proceeds toward the last maturing installments of
principal and interest due or to become due on the Loans shall not
excuse Grantor from making any regularly scheduled payments due
thereunder, nor shall such application extend or reduce the amount of
such payments. In the event Beneficiary elects to release such proceeds
to Grantor, Grantor shall be obligated to use such proceeds to restore
or repair the Trust Property to the extent required by subsection 7.5
of the Senior Secured Credit Agreement.
(g) In the event of foreclosure of this Deed of Trust or other
transfer of title to the Trust Property in extinguishment of the Indebtedness,
all right, title and interest of Grantor in and to any insurance policies then
in force, to the extent assignable or transferable, shall pass to the purchaser
or grantee and Grantor hereby
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appoints Beneficiary its attorney-in-fact, in Grantor's name, to assign and
transfer all such policies and proceeds to such purchaser or grantee.
(h) Upon written notice to Grantor, Beneficiary, during the
continuance of an Event of Default, shall be entitled to require Grantor to pay
monthly in advance to Beneficiary the equivalent of 1/12th of the estimated
annual premiums due on such insurance. Beneficiary may commingle such funds with
its own funds but Grantor shall be entitled to interest thereon at a rate
mutually agreed upon by Grantor and Beneficiary.
(i) Grantor may maintain insurance required under this Deed of
Trust by means of one or more blanket insurance policies maintained by Grantor;
provided, however, that (A) any such policy shall specify, or Grantor shall
furnish to Beneficiary a written statement from the insurer so specifying, the
maximum amount of the total insurance afforded by such blanket policy that is
allocated to the Premises and the other Trust Property and any sublimits and
aggregates in such blanket policy applicable to the Premises and the other Trust
Property, (B) each such blanket policy shall include an endorsement providing
that, in the event of a loss resulting from an insured peril, insurance proceeds
shall be allocated to the Trust Property in an amount equal to the coverages
required to be maintained by Grantor as provided above (subject to applicable
sublimits and aggregates) and (C) the protection afforded under any such blanket
policy shall be no less than that which would have been afforded under a
separate policy or policies relating only to the Trust Property (subject to
applicable sublimits and aggregates).
6. Restrictions on Liens and Encumbrances. Except for the lien
of this Deed of Trust and the Permitted Exceptions and except as otherwise
permitted pursuant to the terms of the Senior Secured Credit Agreement, Grantor
shall not further mortgage, nor otherwise encumber the Trust Property nor create
or suffer to exist any lien, charge or encumbrance on the Trust Property, or any
part thereof, whether superior or subordinate to the lien of this Deed of Trust
and whether recourse or non-recourse.
7. Due on Sale and Other Transfer Restrictions. Except as may
be otherwise expressly permitted under the Senior Secured Credit Agreement,
Grantor shall not sell, transfer, convey or assign all or any portion of, or any
interest in, the Trust Property.
8. Maintenance; No Alteration; Inspection; Utilities. (a)
Grantor shall maintain or cause to be maintained all the Improvements in good
condition and repair
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and shall not commit or suffer any waste of the Improvements. To the extent
required under subsection 7.5 of the Senior Secured Credit Agreement, Grantor
shall repair, restore, replace or rebuild promptly any part of the Premises
which may be damaged or destroyed by any casualty whatsoever to a condition
substantially equivalent to its condition prior to the damage or destruction.
Except as permitted by the Senior Secured Credit Agreement, the Improvements
shall not be demolished or materially altered, nor any material additions built,
without the prior written consent of Beneficiary, provided that Grantor may make
alterations or additions without the consent of Beneficiary that do not
materially reduce the value of the Trust Property.
(b) Beneficiary and any persons authorized by Beneficiary
shall, upon reasonable notice and at any reasonable time, have the right to
enter and inspect the Premises and the right to inspect all work done, labor
performed and materials furnished in and about the Improvements and the right to
inspect and make copies, to the extent reasonable, of all books, contracts and
records of Grantor relating to the Trust Property.
(c) Except as permitted under subsection 7.3 of the Senior
Secured Credit Agreement, Grantor shall pay or cause to be paid prior to
delinquency, all utility charges which are incurred for gas, electricity, water
or sewer services furnished to the Premises and all other assessments or charges
of a similar nature, whether public or private, affecting the Premises or any
portion thereof, whether or not such assessments or charges are liens thereon.
9. Condemnation/Eminent Domain. Promptly upon obtaining
knowledge of the institution of any proceedings for the condemnation of the
Trust Property, or any portion thereof, Grantor will notify Beneficiary of the
pendency of such proceedings. Grantor authorizes Beneficiary, at Beneficiary's
option and in Beneficiary's reasonable discretion, as attorney-in-fact for
Grantor, to commence, appear in and prosecute, in Beneficiary's or Grantor's
name, any action or proceeding relating to any condemnation of the Trust
Property, or any portion thereof, and to settle or compromise any claim in
connection with such condemnation upon the occurrence and during the continuance
of an Event of Default. If Beneficiary elects not to participate in such
condemnation proceeding, then Grantor shall, at its expense, diligently
prosecute any such proceeding and shall consult with Beneficiary, its attorneys
and experts and cooperate with them in any defense of any such proceedings. All
awards and proceeds of condemnation shall be applied in the same manner as
insurance proceeds, and to the extent such awards and proceeds exceed $1,000,000
and no Event of Default shall have occurred and be continuing, such awards and
proceeds shall be assigned to Beneficiary to be applied in the same manner as
insurance
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proceeds, as provided above in subsection 5(f)(iii) above, and Grantor agrees to
execute any such assignments of all such awards as Beneficiary may request.
10. Restoration. If Beneficiary elects or is required
hereunder to release funds to Grantor for restoration of any of the Trust
Property, then such restoration shall be performed in accordance with such
conditions as Beneficiary shall impose in its reasonable discretion, and as are
customarily imposed by construction lenders.
11. Leases. (a) Grantor shall not (i) execute an assignment or
pledge of any Lease relating to all or any portion of the Trust Property other
than in favor of Beneficiary, or (ii) without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed,
execute or permit to exist any Lease of any of the Trust Property, except for
Permitted Exceptions and except as may be otherwise expressly permitted under
the Senior Secured Credit Agreement.
(b) As to any Lease consented to by Beneficiary under
subsection 11(a) above, Grantor shall:
(i) promptly perform in all material respects all of the
provisions of the Lease on the part of the lessor thereunder to be
performed;
(ii) promptly enforce all of the material provisions of the
Lease on the part of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising
under or in any manner connected with the Lease or the obligations of
Grantor as lessor or of the lessee thereunder;
(iv) exercise, within 5 business days after a reasonable
request by Beneficiary, any right to request from the lessee a
certificate with respect to the status thereof;
(v) promptly deliver to Beneficiary copies of any notices of
default which Grantor may at any time forward to or receive from the
lessee;
(vi) promptly deliver to Beneficiary a fully executed
counterpart of the Lease; and
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(vii) promptly deliver to Beneficiary, upon Beneficiary's
reasonable request, if permitted under such Lease, an assignment of the
Grantor's interest under such Lease.
(c) Grantor shall deliver to Beneficiary, within 10 business
days after a reasonable request by Beneficiary, a written statement, certified
by Grantor as being true, correct and complete, containing the names of all
lessees and other occupants of the Trust Property, the terms of all Leases and
the spaces occupied and rentals payable thereunder, and a list of all Leases
which are then in default, including the nature and magnitude of the default;
such statement shall be accompanied by such other information as Beneficiary may
reasonably request.
(d) All Leases entered into by Grantor after the date hereof,
if any, and all rights of any lessees thereunder shall be subject and
subordinate in all respects to the lien and provisions of this Deed of Trust
unless Beneficiary shall otherwise elect in writing.
(e) In the event of the enforcement by Beneficiary of any
remedy under this Deed of Trust, the lessee under each Lease shall, if requested
by Beneficiary or any other person succeeding to the interest of Beneficiary as
a result of such enforcement, and if provided, at such lessee's request, with a
nondisturbance agreement from Beneficiary or such person, attorn to Beneficiary
or to such person and shall recognize Beneficiary or such successor in interest
as lessor under the Lease without change in the provisions thereof; provided
however, that Beneficiary or such successor in interest shall not be: (i) bound
by any payment of an installment of rent or additional rent which may have been
made more than 30 days before the due date of such installment; (ii) bound by
any amendment or modification to the Lease made without the consent of
Beneficiary or such successor in interest; (iii) liable for any previous act or
omission of Grantor (or its predecessors in interest); (iv) responsible for any
monies owing by Grantor to the credit of such lessee or subject to any credits,
offsets, claims, counterclaims, demands or defenses which the lessee may have
against Grantor (or its predecessors in interest); (v) bound by any covenant to
undertake or complete any construction of the Premises or any portion thereof;
or (vi) obligated to make any payment to such lessee other than any security
deposit actually delivered to Beneficiary or such successor in interest. Each
lessee or other occupant, upon request by Beneficiary or such successor in
interest, shall execute and deliver an instrument or instruments confirming such
attornment. In addition, Grantor agrees that each Lease entered into after the
date of this Deed of Trust shall include language to the effect of subsections
(d)-(e) of this Section and language to the effect that if any act or omission
of Grantor would give any lessee under such Lease the right, immediately or
after lapse
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of a period of time, to cancel or terminate such Lease, or to abate or offset
against the payment of rent or to claim a partial or total eviction, such lessee
shall not exercise such right until it has given written notice of such act or
omission to Beneficiary and until a reasonable period for remedying such act or
omission shall have elapsed following the giving of such notice without a remedy
being effected; provided that the provisions of such subsections shall be
self-operative and any failure of any Lease to include such language shall not
impair the binding effect of such provisions on any lessee under such Lease.
12. Further Assurances/Estoppel Certificates. To further
assure Beneficiary's and Trustee's rights under this Deed of Trust, Grantor
agrees upon demand of Beneficiary or Trustee to do any act or execute any
additional documents (including, but not limited to, security agreements on any
personalty included or to be included in the Trust Property and a separate
assignment of each Lease in recordable form) as may be reasonably required by
Beneficiary or Trustee to confirm the rights or benefits conferred on
Beneficiary or Trustee by this Deed of Trust.
13. Beneficiary's Right to Perform. If Grantor fails to
perform any of the covenants or agreements of Grantor, Beneficiary or Trustee,
without waiving or releasing Grantor from any obligation or default under this
Deed of Trust, may, at any time (but shall be under no obligation to) pay or
perform the same, and the amount or cost thereof, with interest at the Default
Rate, shall immediately be due from Grantor to Beneficiary or Trustee (as the
case may be) and the same shall be secured by this Deed of Trust and shall be an
encumbrance on the Trust Property prior to any right, title to, interest in or
claim upon the Trust Property attaching subsequent to the date of this Deed of
Trust. No payment or advance of money by Beneficiary or Trustee under this
Section shall be deemed or construed to cure Grantor's default or waive any
right or remedy of Beneficiary or Trustee.
14. Events of Default. The occurrence of an Event of Default
under the Senior Secured Credit Agreement shall constitute an Event of Default
hereunder.
15. Remedies. (a) Upon the occurrence of any Event of Default,
in addition to any other rights and remedies Beneficiary may have pursuant to
the Loan Documents, or as provided by law, and without limitation, the
Indebtedness and all other amounts payable with respect to the Loans, the
Letters of Credit, the Senior Secured Credit Agreement, this Deed of Trust and
the other Security Documents shall become due and payable as provided in the
Senior Secured Credit Agreement. Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived. In addition, upon the occurrence of
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any Event of Default, Beneficiary may immediately take such action, without
notice or demand, as it deems advisable to protect and enforce its rights
against Grantor and in and to the Trust Property, including, but not limited to,
the following actions, each of which may be pursued concurrently or otherwise,
at such time and in such manner as Beneficiary may determine, in its sole
discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary:
(i) Enter upon and take possession of the Trust Property or
any part thereof, with or without legal action, and do any acts which it deems
necessary or desirable to preserve the value, marketability or rentability of
the Trust Property, or any part thereof or the value of this Deed of Trust
(including, without limitation, entering into new leases of all or any part of
the Trust Property) and, with or without taking possession of the Trust
Property, sue for or otherwise collect the rents, issues and profits thereof,
including those past due and unpaid, and apply the same, less costs and expenses
of operation and collection including reasonable attorneys' fees, upon the
Indebtedness, all in such order as Beneficiary may determine. The entering upon
and taking possession of the Trust Property, the collection of such rents,
issues and profits and the application thereof as aforesaid, shall not cure or
waive any default or notice of default hereunder or invalidate any act done in
response to such default or pursuant to such notice of default and,
notwithstanding the continuance in possession of the Trust Property or the
collection, receipt and application of rents, issues or profits, Beneficiary
shall be entitled to exercise every right provided for in any of the Loan
Documents or by law.
(ii) Bring an action in any court of competent jurisdiction to
foreclose this Deed of Trust or to enforce any of the covenants, terms or
conditions hereof and Beneficiary shall have the right to specific performance,
injunction and any other equitable right or remedy as though other remedies were
not provided in this Deed of Trust.
(iii) Elect to cause the Trust Property or any part thereof to
be sold as follows, Grantor hereby expressly waiving any right which it may have
to direct the order in which any of the Trust Property may be sold:
(a) Beneficiary may proceed as if all of the Trust Property
were real property, in accordance with subparagraph (c) below, or
Beneficiary may elect to treat any of the Trust Property which consists
of personal property, in accordance with the Section of this Deed of
Trust entitled "Security Agreement Under Uniform Commercial Code",
separate and apart from the sale of real property, the remainder of the
Trust Property being treated as real property;
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(b) Beneficiary may cause any such sale or other disposition
to be conducted immediately following the expiration of any grace
period, if any, herein provided or Beneficiary may delay any such sale
or other disposition for such period of time as Beneficiary deems to be
in its best interest. Should Beneficiary desire that more than one such
sale or other disposition be conducted, Beneficiary may, at its option,
cause the same to be conducted simultaneously, or successively on the
same day, or at such different days or times and in such order as
Beneficiary may deem to be in its best interest;
(c) Should Beneficiary elect to sell the Trust Property upon
which Beneficiary elects to proceed under the laws governing
foreclosure of or sales pursuant to Deeds of Trust, Beneficiary or
Trustee shall give such notice of default and election to sell as may
then be required by law. Thereafter, upon the expiration of such time
and the giving of such notice of sale as may then be required by law,
Trustee, at the time and place specified by the notice of sale, shall
sell such Trust Property, or any portion thereof specified by
Beneficiary, at public auction to the highest bidder for cash in lawful
money of the United States, subject, however, to the provisions of the
Section of this Deed of Trust entitled "Right of Beneficiary to Credit
Sale". Trustee may, and upon request of Beneficiary shall, from time to
time, postpone the sale by public announcement thereof at the time and
place noticed therefor. If the Trust Property consists of several lots
or parcels, Beneficiary may elect to sell the Trust Property either as
a whole or in separate lots or parcels. If Beneficiary elects to sell
in separate lots or parcels, Beneficiary may designate the order in
which such lots or parcels shall be offered for sale or sold. Any
person, including Grantor, Trustee or Beneficiary, may purchase at the
sale. Upon any sale, Trustee shall execute and deliver to the purchaser
or purchasers a deed or deeds conveying the property so sold, but
without any covenant or warranty whatsoever, express or implied,
whereupon such purchaser or purchasers shall be let into immediate
possession;
(d) In the event of a sale or other disposition of any such
property, or any part thereof, and the execution of a deed or other
conveyance pursuant thereto, the recitals therein of facts, such as an
Event of Default, the giving of notice of default and notice of sale,
demand that such sale should be made, postponement of sale, terms of
sale, sale, purchase, payments of purchase money, and any other fact
affecting the regularity or validity of such sale or disposition shall
be conclusive proof of the truth of such facts; and any such deed or
conveyance shall be conclusive against all persons as to such facts
recited therein;
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(e) Beneficiary and/or Trustee shall apply the proceeds of any
sale or disposition hereunder in the order as provided in the Section
of this Deed of Trust entitled "Sale of the Properties; Application of
Proceeds"; and
(iv) Exercise all other rights and remedies provided herein,
in the other Loan Documents or otherwise available at law or equity.
16. Sale of the Properties; Application of Proceeds. (a)
Subject to the requirements of applicable law, the proceeds or avails of any
foreclosure sale and all moneys received by Beneficiary pursuant to any right
given or action taken under the provisions of this Deed of Trust shall be
applied as follows:
First: To the payment of the costs and expenses of any such
sale or other enforcement proceedings in accordance with the terms
hereof and of any judicial proceeding wherein the same may be made, and
in addition thereto, reasonable compensation to Beneficiary, its agents
and counsel, and all actual out of pocket expenses, advances,
liabilities and sums made or furnished or incurred by Beneficiary or
the holder of this Deed of Trust under this Deed of Trust and the other
Loan Documents, together with interest at the Default Rate (or such
lesser amount as may be the maximum amount permitted by law), and all
taxes, assessments or other charges, except any taxes, assessments or
other charges subject to which the Trust Property shall have been sold;
Second: To the payment of the aggregate amount when due, owing
and unpaid (whether by acceleration or otherwise) upon the Indebtedness
for principal and interest; and in case such proceeds shall be
insufficient to pay in full the whole aggregate amount so due and
unpaid, then first, to the payment of all amounts of interest at the
time due and payable on the Indebtedness, without preference or
priority of any installment of interest over any other installment of
interest, and with payment of interest on the Notes and other
instruments evidencing the Indebtedness being applied pro rata based on
the amount of interest then due pursuant to the Notes, the Senior
Secured Credit Agreement and other instrument evidencing the
Indebtedness, and second, to the payment of all amounts of principal,
with payment of principal due under the Notes, the Senior Secured
Credit Agreement and other instruments evidencing the Indebtedness
being applied pro rata based on the amount of principal due under the
Notes, the Senior Secured Credit Agreement and other instrument
evidencing the Indebtedness; all such payments of principal and
interest to be made ratably to the holders entitled thereto.
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Third: To the payment of any other sums required to be paid by
Grantor pursuant to any provision of this Deed of Trust, or any other
Loan Document.
Fourth: To the payment of the surplus, if any, to whomsoever
may be lawfully entitled to receive the same.
17. Trustee's Powers and Liabilities.
(a) Powers of Trustee. At any time or from time to time,
without liability therefor and without notice, upon the written request of
Beneficiary and presentation of the Notes and the other instruments evidencing
the indebtedness and this Deed of Trust for endorsement, without affecting the
personal liability of any person for the payment of the indebtedness secured
hereby, and without affecting the lien of this Deed of Trust upon the Trust
Property for the full amount of all amounts secured hereby, Trustee may (i)
reconvey all or any part of the Trust Property, (ii) consent to the making of
any map or plat thereof, (iii) join in granting any easement thereon or in
creating any covenants or conditions restricting use or occupancy thereof, or
(iv) join in any extension agreement or in any agreement subordinating the lien
or charge hereof.
(b) Reconveyance. Upon written request of Beneficiary stating
that all sums secured hereby have been paid, and upon surrender of this Deed of
Trust and the Notes and the other instruments evidencing the Indebtedness to
Trustee for cancellation and retention, and upon payment of its fees, Trustee
shall reconvey, without warranty, the property then held hereunder. The recitals
in any such reconveyance of any matters or facts shall be conclusive proof of
the truth thereof. The grantee in such reconveyance may be described as "the
person or persons legally entitled thereto."
(c) Trustee Notice. Trustee is not obligated to notify any
party hereto of any pending sale under any other deed of trust or of any action
or proceeding in which Grantor, Beneficiary or Trustee shall be a party, unless
brought by Trustee.
(d) Compensation and Indemnification of Trustee. Trustee shall
be entitled to reasonable compensation for all services rendered or expenses
incurred in the administration or execution of the trusts hereby created and
Grantor hereby agrees to pay the same. Trustee shall be indemnified, held
harmless and reimbursed by Grantor for any liability, damage or expense,
including reasonable attorneys' fees and amounts paid in settlement, which
Trustee may incur or sustain in connection with this Deed of Trust or in the
doing of any act which Trustee is required or permitted to do by the terms
hereof or by law.
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(e) Substitute Trustees. Beneficiary may substitute the
Trustee hereunder in any manner now or hereafter provided by law, or in lieu
thereof, Beneficiary may from time to time, by an instrument in writing,
substitute a successor or successors to any Trustee named herein or acting
hereunder, which instrument, executed and acknowledged by Beneficiary and
recorded in the office of the recorder of the county or counties where the Trust
Property is situated, shall be conclusive proof of proper substitution of such
successor Trustee or Trustees, who shall thereupon, and without conveyance from
the predecessor Trustee, succeed to all its title, estate, rights, powers and
duties. Such instrument must contain the name of the original Grantor, Trustee
and Beneficiary hereunder, the book and page where this Deed of Trust is
recorded, the legal description of the Land and the name and address of the new
Trustee.
(f) Acceptance by Trustee. The acceptance by Trustee of this
trust shall be evidenced when this Deed of Trust, duly executed and
acknowledged, is made a public record as provided by law.
(g) Trust Irrevocable; No Offset. The trust created hereby is
irrevocable by Grantor. No offset or claim that Grantor now or may in the future
have against Beneficiary shall relieve Grantor from paying installments or
performing any other obligation herein or secured hereby.
(h) Corrections. Grantor will, upon request of Beneficiary or
Trustee, promptly correct any defect, error or omission which may be discovered
in the contents of this Deed of Trust or in the execution or acknowledgement
hereof, and will execute, acknowledge and deliver such further instruments and
do such further acts as may be necessary or as may be reasonably requested by
Beneficiary or Trustee to carry out more effectively the purposes of this Deed
of Trust, to subject to the lien and security interests hereby created any of
Grantor's properties, rights or interest covered or intended to be covered
hereby, and to perfect and maintain such lien and security interest.
18. Request for Notice. In accordance with California Civil
Code Section 2924b, a request is hereby made by Grantor that a copy of any
notice of default and a copy of any notice of sale under this Deed of Trust be
mailed to Grantor at Grantor's address set forth in the first paragraph of this
Deed of Trust.
19. Successor Grantor. In the event ownership of the Trust
Property or any portion thereof becomes vested in a person other than the
Grantor herein named, Beneficiary may, without notice to the Grantor herein
named, whether or not
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Beneficiary has given written consent to such change in ownership, deal with
such successor or successors in interest with reference to this Deed of Trust
and the Indebtedness and the Obligations, and in the same manner as with the
Grantor herein named, without in any way vitiating or discharging Grantor's
liability hereunder or under the Indebtedness and the Obligations.
20. Right of Beneficiary to Credit Sale. Upon the occurrence
of any sale made under this Deed of Trust, whether made under the power of sale
or by virtue of judicial proceedings or of a judgment or decree of foreclosure
and sale, Beneficiary may bid for and acquire the Trust Property or any part
thereof. In lieu of paying cash therefor, Beneficiary may make settlement for
the purchase price by crediting upon the Indebtedness or other sums secured by
this Deed of Trust the net sales price after deducting therefrom the expenses of
sale and the cost of the action and any other sums which Beneficiary is
authorized to deduct under this Deed of Trust. In such event, this Deed of
Trust, the Notes and other instruments evidencing the Indebtedness and any and
all documents evidencing expenditures secured hereby may be presented to the
person or persons conducting the sale in order that the amount so used or
applied may be credited upon the Indebtedness as having been paid.
21. Appointment of Receiver. If an Event of Default shall have
occurred and be continuing, Beneficiary as a matter of right and without notice
to Grantor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Trust Property or any other collateral as
security for the Indebtedness and Obligations or the interest of Grantor
therein, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers or other manager of the Trust Property, without
requiring the posting of a surety bond and without reference to the adequacy or
inadequacy of the value of the Trust Property or the solvency or insolvency of
Grantor or any other party obligated for payment of all or any part of the
Indebtedness, and whether or not waste has occurred with respect to the Trust
Property. Grantor hereby irrevocably consents to such appointment and waives
notice of any application therefor (except as may be required by law). Any such
receiver or receivers shall have all the usual powers and duties of receivers in
like or similar cases and all the powers and duties of Beneficiary in case of
entry as provided in this Deed of Trust, including, without limitation and to
the extent permitted by law, the right to enter into leases of all or any part
of the Trust Property, and shall continue as such and exercise all such powers
until the date of confirmation of sale of the Trust Property unless such
receivership is sooner terminated.
22. Extension, Release, etc. (a) Without affecting the
encumbrance or charge of this Deed of Trust upon any portion of the Trust
Property not then or
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theretofore released as security for the full amount of the Indebtedness,
Beneficiary may, from time to time and without notice, agree to (i) release any
person liable for the Indebtedness, (ii) extend the maturity or alter any of the
terms of the Indebtedness or any guaranty thereof, (iii) grant other
indulgences, (iv) release or reconvey, or cause to be released or reconveyed at
any time at Beneficiary's option any parcel, portion or all of the Trust
Property, (v) take or release any other or additional security for any
obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Deed of Trust shall secure
less than all of the principal amount of the Indebtedness, it is expressly
agreed that any repayments of the principal amount of the Indebtedness shall not
reduce the amount of the encumbrance of this Deed of Trust until the encumbrance
amount shall equal the principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Beneficiary and no levy of
an execution under any judgment upon the Trust Property or upon any other
property of Grantor shall affect the encumbrance of this Deed of Trust or any
liens, rights, powers or remedies of Beneficiary or Trustee hereunder, and such
liens, rights, powers and remedies shall continue unimpaired.
(c) If Beneficiary shall have the right to foreclose this Deed
of Trust or to direct the Trustee to exercise its power of sale, Grantor
authorizes Beneficiary at its option to foreclose the lien of this Deed of Trust
(or direct the Trustee to sell the Trust Property, as the case may be) subject
to the rights of any tenants of the Trust Property. The failure to make any such
tenants parties defendant to any such foreclosure proceeding and to foreclose
their rights, or to provide notice to such tenants as required in any statutory
procedure governing a sale of the Trust Property by Trustee, or to terminate
such tenant's rights in such sale will not be asserted by Grantor as a defense
to any proceeding instituted by Beneficiary to collect the Indebtedness or to
foreclose this Deed of Trust.
(d) Unless expressly provided otherwise, in the event that
Beneficiary's interest in this Deed of Trust and title to the Trust Property or
any estate therein shall become vested in the same person or entity, this Deed
of Trust shall not merge in such title but shall continue as a valid charge on
the Trust Property for the amount secured hereby.
23. Security Agreement under Uniform Commercial Code. (a) It
is the intention of the parties hereto that this Deed of Trust shall constitute
a Security Agreement within the meaning of the Uniform Commercial Code (the
"CODE") of the State in which the Trust Property is located, and Grantor hereby
grants a security
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interest in all of the personal property of Grantor described in the Granting
Clauses of this Deed of Trust. If an Event of Default shall occur under this
Deed of Trust, then in addition to having any other right or remedy available at
law or in equity, Beneficiary shall have the option of either (i) proceeding
under the Code and exercising such rights and remedies as may be provided to a
secured party by the Code with respect to all or any portion of the Trust
Property which is personal property (including, without limitation, taking
possession of and selling such property) or (ii) treating such property as real
property and proceeding with respect to both the real and personal property
constituting the Trust Property in accordance with Beneficiary's rights, powers
and remedies with respect to the real property (in which event the default
provisions of the Code shall not apply). If Beneficiary shall elect to proceed
under the Code, then five days' notice of sale of the personal property shall be
deemed reasonable notice and the reasonable expenses of retaking, holding,
preparing for sale, selling and the like incurred by Beneficiary shall include,
but not be limited to, reasonable attorneys' fees and legal expenses. At
Beneficiary's request, during the continuance of an Event of Default, Grantor
shall assemble the personal property and make it available to Beneficiary at a
place designated by Beneficiary which is reasonably convenient to both parties.
(b) Grantor and Beneficiary agree, to the extent permitted by
law, that: (i) all of the goods described within the definition of the word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Deed of
Trust upon recording or registration in the real estate records of the proper
office shall constitute a financing statement filed as a "fixture filing" within
the meaning of Sections 9-313 and 9-402 of the Code; (iii) Grantor is the record
owner of the Real Estate; and (iv) the addresses of Grantor and Beneficiary are
as set forth on the first page of this Deed of Trust.
(c) Grantor, upon request by Beneficiary from time to time,
shall execute, acknowledge and deliver to Beneficiary one or more separate
security agreements, in form satisfactory to Beneficiary in its reasonable
discretion, covering all or any part of the Trust Property and will further
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, any financing statement, affidavit, continuation statement or
certificate or other document as Beneficiary may request in order to perfect,
preserve, maintain, continue or extend the security interest under and the
priority of this Deed of Trust and such security instrument. Grantor further
agrees to pay to Beneficiary on demand all reasonable costs and expenses
incurred by Beneficiary in connection with the preparation, execution,
recording, filing and refiling of any such document and all reasonable costs and
expenses of any record searches for financing statements Beneficiary shall
reasonably require. If Grantor shall fail to furnish any financing or
continuation statement within 10 days after request by
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Beneficiary, then pursuant to the provisions of the Code, Grantor hereby
authorizes Beneficiary, without the signature of Grantor, to execute and file
any such financing and continuation statements. The filing of any financing or
continuation statements in the records relating to personal property or chattels
shall not be construed as in any way impairing the right of Beneficiary to
proceed against any personal property encumbered by this Deed of Trust as real
property, as set forth above.
24. Assignment of Rents. Grantor hereby absolutely and
unconditionally assigns, transfers, conveys and sets over to Beneficiary, the
Rents as further security for the payment of the Indebtedness and performance of
the Obligations, and Grantor grants to Beneficiary the right to enter the Trust
Property for the purpose of collecting the same and to let the Trust Property or
any part thereof and to apply the Rents on account of the Indebtedness. The
foregoing assignment and grant is present and absolute and shall continue in
effect until the Indebtedness is paid in full, but Beneficiary and Trustee
hereby waive the right to enter the Trust Property for the purpose of collecting
the Rents, letting the Trust Property or any part thereof or applying the Rents
and Grantor shall be entitled to collect, receive, use and retain the Rents
until the occurrence of an Event of Default under this Deed of Trust; such right
of Grantor to collect, receive, use and retain the Rents may be revoked by
Beneficiary upon the occurrence of any Event of Default under this Deed of Trust
by giving not less than five days' written notice of such revocation to Grantor;
in the event such notice is given, Grantor shall pay over to Beneficiary, or to
any receiver appointed to collect the Rents, any lease security deposits, and
shall pay monthly in advance to Beneficiary, or to any such receiver, the fair
and reasonable rental value as determined by Beneficiary for the use and
occupancy of the Trust Property or of such part thereof as may be in the
possession of Grantor or any affiliate of Grantor, and upon default in any such
payment Grantor and any such affiliate will vacate and surrender the possession
of the Trust Property to Beneficiary or to such receiver, and in default thereof
may be evicted by summary proceedings or otherwise. Grantor shall not accept
prepayments of installments of Rent to become due for a period of more than one
month in advance (except for security deposits and estimated payments of
percentage rent, if any).
25. Trust Funds. All lease security deposits of the Real
Estate shall be treated as trust funds not to be commingled with any other funds
of Grantor. Within 10 days after request by Beneficiary, Grantor shall furnish
Beneficiary satisfactory evidence of compliance with this subsection, together
with a statement of all lease security deposits by lessees and copies of all
Leases not previously delivered to Beneficiary under which such security
deposits are held, which statement shall be certified by Grantor.
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<PAGE> 30
26. Additional Rights. The holder of any subordinate lien or
subordinate deed of trust on the Trust Property shall have no right to terminate
any Lease whether or not such Lease is subordinate to this Deed of Trust nor
shall any holder of any subordinate lien or subordinate deed of trust join any
tenant under any Lease in any trustee's sale or action to foreclose the lien or
modify, interfere with, disturb or terminate the rights of any tenant under any
Lease. By recordation of this Deed of Trust all subordinate lienholders and the
trustees and beneficiaries under subordinate deeds of trust are subject to and
notified of this provision, and any action taken by any such lienholder or
trustee or beneficiary contrary to this provision shall be null and void. Upon
the occurrence of any Event of Default, Beneficiary may, in its sole discretion
and without regard to the adequacy of its security under this Deed of Trust,
apply all or any part of any amounts on deposit with Beneficiary under this Deed
of Trust against all or any part of the Indebtedness. Any such application shall
not be construed to cure or waive any Default or Event of Default or invalidate
any act taken by Beneficiary on account of such Default or Event of Default.
27. Changes in Method of Taxation. In the event of the passage
after the date hereof of any law of any Governmental Authority deducting from
the value of the Premises for the purposes of taxation any lien or deed of trust
thereon, or changing in any way the laws for the taxation of mortgages or deeds
of trust or debts secured thereby for federal, state or local purposes, or the
manner of collection of any such taxes, and imposing a tax, either directly or
indirectly, on mortgages or deeds of trust or debts secured thereby, the holder
of this Deed of Trust shall have the right to declare the Indebtedness due on a
date to be specified by not less than 30 days' written notice to be given to
Grantor unless within such 30-day period Grantor shall assume as an Obligation
hereunder the payment of any tax so imposed until full payment of the
Indebtedness and such assumption shall be permitted by law.
28. Notices. All notices, requests, demands and other
communications hereunder shall be deemed to have been sufficiently given or
served when served in the same manner as set forth for notices in the Senior
Secured Credit Agreement. The Trustee's address for notices shall be the
Trustee's address given on the first page of this Deed of Trust.
29. No Oral Modification. This Deed of Trust may not be
changed or terminated orally. Any agreement made by Grantor and Beneficiary
after the date of this Deed of Trust relating to this Deed of Trust shall be
superior to the rights of the holder of any intervening or subordinate deed of
trust, lien or encumbrance. Trustee's execution of any written agreement between
Grantor and Beneficiary shall not be required for the effectiveness thereof as
between Grantor and Beneficiary.
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<PAGE> 31
30. Partial Invalidity. In the event any one or more of the
provisions contained in this Deed of Trust shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included. Notwithstanding to the contrary anything contained in this Deed of
Trust or in any provisions of the Indebtedness or Loan Documents, the
obligations of Grantor and of any other obligor under the Indebtedness or Loan
Documents shall be subject to the limitation that Beneficiary shall not charge,
take or receive, nor shall Grantor or any other obligor be obligated to pay to
Beneficiary, any amounts constituting interest in excess of the maximum rate
permitted by law to be charged by Beneficiary.
31. Grantor's Waiver of Rights. To the fullest extent
permitted by law, Grantor waives the benefit of all laws now existing or that
may subsequently be enacted providing for (i) any appraisement before sale of
any portion of the Trust Property, (ii) any extension of the time for the
enforcement of the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Trust Property from attachment, levy or sale under execution or
exemption from civil process. To the full extent Grantor may do so, Grantor
agrees that Grantor will not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, exemption, extension or redemption, or requiring
foreclosure of this Deed of Trust before exercising any other remedy granted
hereunder and Grantor, for Grantor and its successors and assigns, and for any
and all persons ever claiming any interest in the Trust Property, to the extent
permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the secured indebtedness and marshalling in the event
of exercise by Trustee or Beneficiary of the power of sale or other rights
hereby created.
32. Remedies Not Exclusive. Beneficiary and Trustee shall be
entitled to enforce payment of the Indebtedness and performance of the
Obligations and to exercise all rights and powers under this Deed of Trust or
under any of the other Loan Documents or other agreement or any laws now or
hereafter in force, notwithstanding some or all of the Indebtedness and
Obligations may now or hereafter be otherwise secured, whether by deed of trust,
mortgage, security agreement, pledge, lien, assignment or otherwise. Neither the
acceptance of this Deed of Trust nor its enforcement, shall prejudice or in any
manner affect Beneficiary's or Trustee's right to realize upon or enforce any
other security now or hereafter held by Beneficiary or Trustee, it being agreed
that Beneficiary and Trustee shall be entitled to enforce this
30
<PAGE> 32
Deed of Trust and any other security now or hereafter held by Beneficiary or
Trustee in such order and manner as Beneficiary may determine in its absolute
discretion. No remedy herein conferred upon or reserved to Trustee or
Beneficiary is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each 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. Every power or remedy given by any of the Loan Documents
to Beneficiary or Trustee or to which either may otherwise be entitled, may be
exercised, concurrently or independently, from time to time and as often as may
be deemed expedient by Beneficiary or Trustee, as the case may be. In no event
shall Beneficiary or Trustee, in the exercise of the remedies provided in this
Deed of Trust (including, without limitation, in connection with the assignment
of Rents, or the appointment of a receiver and the entry of such receiver on to
all or any part of the Trust Property), be deemed a "mortgagee in possession,"
and neither Beneficiary nor Trustee shall in any way be made liable for any act,
either of commission or omission, in connection with the exercise of such
remedies.
33. Multiple Security. If (a) the Premises shall consist of
one or more parcels, whether or not contiguous and whether or not located in the
same county, or (b) in addition to this Deed of Trust, Beneficiary shall now or
hereafter hold or be the beneficiary of one or more additional mortgages, liens,
deeds of trust or other security (directly or indirectly) for the Indebtedness
upon other property in the State in which the Premises are located (whether or
not such property is owned by Grantor or by others) or (c) both the
circumstances described in clauses (a) and (b) shall be true, then to the
fullest extent permitted by law, Beneficiary may, at its election, commence or
consolidate in a single trustee's sale or foreclosure action all trustee's sale
or foreclosure proceedings against all such collateral securing the Indebtedness
(including the Trust Property), which action may be brought or consolidated in
the courts of, or sale conducted in, any county in which any of such collateral
is located. Grantor acknowledges that the right to maintain a consolidated
trustee's sale or foreclosure action is a specific inducement to Beneficiary to
extend the Indebtedness, and Grantor expressly and irrevocably waives any
objections to the commencement or consolidation of the foreclosure proceedings
in a single action and any objections to the laying of venue or based on the
grounds of forum non conveniens which it may now or hereafter have. Grantor
further agrees that if Trustee or Beneficiary shall be prosecuting one or more
foreclosure or other proceedings against a portion of the Trust Property or
against any collateral other than the Trust Property, which collateral directly
or indirectly secures the Indebtedness, or if Beneficiary shall have obtained a
judgment of foreclosure and sale or similar judgment against such collateral
(or, in the case of a trustee's sale, shall have met the statutory requirements
therefor with respect to such collateral), then, whether or not such proceedings
are being maintained or judgments
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<PAGE> 33
were obtained in or outside the State in which the Premises are located,
Beneficiary may commence or continue any trustee's sale or foreclosure
proceedings and exercise its other remedies granted in this Deed of Trust
against all or any part of the Trust Property and Grantor waives any objections
to the commencement or continuation of a foreclosure of this Deed of Trust or
exercise of any other remedies hereunder based on such other proceedings or
judgments, and waives any right to seek to dismiss, stay, remove, transfer or
consolidate either any action under this Deed of Trust or such other proceedings
on such basis. The commencement or continuation of proceedings to sell the Trust
Property in a trustee's sale, to foreclose this Deed of Trust or the exercise of
any other rights hereunder or the recovery of any judgment by Beneficiary or the
occurrence of any sale by the Trustee in any such proceedings shall not
prejudice, limit or preclude Beneficiary's right to commence or continue one or
more trustee's sales, foreclosure or other proceedings or obtain a judgment
against (or, in the case of a trustee's sale, to meet the statutory requirements
for, any such sale of) any other collateral (either in or outside the State in
which the Real Estate is located) which directly or indirectly secures the
Indebtedness, and Grantor expressly waives any objections to the commencement
of, continuation of, or entry of a judgment in such other sales or proceedings
or exercise of any remedies in such sales or proceedings based upon any action
or judgment connected to this Deed of Trust, and Grantor also waives any right
to seek to dismiss, stay, remove, transfer or consolidate either such other
sales or proceedings or any sale or action under this Deed of Trust on such
basis. It is expressly understood and agreed that to the fullest extent
permitted by law, Beneficiary may, at its election, cause the sale of all
collateral which is the subject of a single trustee's sale or foreclosure action
at either a single sale or at multiple sales conducted simultaneously and take
such other measures as are appropriate in order to effect the agreement of the
parties to dispose of and administer all collateral securing the Indebtedness
(directly or indirectly) in the most economical and least time-consuming manner.
34. Successors and Assigns. All covenants of Grantor contained
in this Deed of Trust are imposed solely and exclusively for the benefit of
Beneficiary and Trustee and their respective successors and assigns, and no
other person or entity shall have standing to require compliance with such
covenants or be deemed, under any circumstances, to be a beneficiary of such
covenants, any or all of which may be freely waived in whole or in part by
Beneficiary or Trustee at any time if in the sole discretion of either of them
such waiver is deemed advisable. All such covenants of Grantor shall run with
the land and bind Grantor, the successors and assigns of Grantor (and each of
them) and all subsequent owners, encumbrancers and tenants of the Trust
Property, and shall inure to the benefit of Beneficiary, Trustee and their
respective successors and assigns. Without limiting the generality of the
foregoing, any successor
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<PAGE> 34
to Trustee appointed by Beneficiary shall succeed to all rights of Trustee as if
such successor had been originally named as Trustee hereunder. The word
"Grantor" shall be construed as if it read "Grantors" whenever the sense of this
Deed of Trust so requires and if there shall be more than one Grantor, the
obligations of the Grantors shall be joint and several.
35. No Waivers, etc. Any failure by Beneficiary to insist upon
the strict performance by Grantor of any of the terms and provisions of this
Deed of Trust shall not be deemed to be a waiver of any of the terms and
provisions hereof, and Beneficiary or Trustee, notwithstanding any such failure,
shall have the right thereafter to insist upon the strict performance by Grantor
of any and all of the terms and provisions of this Deed of Trust to be performed
by Grantor. Beneficiary may release, regardless of consideration and without the
necessity for any notice to or consent by the beneficiary of any subordinate
deed of trust or the holder of any subordinate lien on the Trust Property, any
part of the security held for the obligations secured by this Deed of Trust
without, as to the remainder of the security, in anywise impairing or affecting
this Deed of Trust or the priority of this Deed of Trust over any subordinate
lien or deed of trust.
36. Governing Law, etc. This Deed of Trust shall be governed
by and construed in accordance with the laws of the State in which the Premises
are located, except that Grantor expressly acknowledges that by its terms the
Senior Secured Credit Agreement shall be governed and construed in accordance
with the laws of the State of New York, without regard to principles of conflict
of law, and for purposes of consistency, Grantor agrees that in any in personam
proceeding related to this Deed of Trust the rights of the parties to this Deed
of Trust shall also be governed by and construed in accordance with the laws of
the State of New York governing contracts made and to be performed in that
State, without regard to principles of conflict of law.
37. Waiver of Trial by Jury. Grantor, Trustee and Beneficiary
each hereby irrevocably and unconditionally waive trial by jury in any action,
claim, suit or proceeding relating to this Deed of Trust and for any
counterclaim brought therein.
38. Certain Definitions. Unless the context clearly indicates
a contrary intent or unless otherwise specifically provided herein, words used
in this Deed of Trust shall be used interchangeably in singular or plural form
and the word "Grantor" shall mean "each Grantor or any subsequent owner or
owners of the Trust Property or any part thereof or interest therein," the word
"Beneficiary" shall mean "Beneficiary or any successor Administrative Agent,"
the word "Trustee" shall mean "Trustee and any successor trustee hereunder," the
word "Notes" shall mean "the notes that may from
33
<PAGE> 35
time to time be given pursuant to the terms of the Senior Secured Credit
Agreement or any other evidence of indebtedness secured by this Deed of Trust,"
the word "person" shall include any individual, corporation, partnership, trust,
unincorporated association, government, governmental authority, or other entity,
and the words "Trust Property" shall include any portion of the Trust Property
or interest therein. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa. The
captions in this Deed of Trust are for convenience or reference only and in no
way limit or amplify the provisions hereof.
39. Reconveyance of Deed Of Trust. Upon payment in full of the
Indebtedness, the termination of all Commitments under the Senior Secured Credit
Agreement secured hereby and the compliance with the Obligations then required
to be complied with, Beneficiary shall release the encumbrance of this Deed of
Trust. If any of the Trust Property shall be sold, transferred or otherwise
disposed of by Grantor in a transaction expressly permitted by the Senior
Secured Credit Agreement, then Beneficiary shall execute and deliver, and shall
cause Trustee to execute and deliver to Grantor (at the sole cost and expense of
Grantor) all releases, reconveyances or other documents reasonably necessary or
desirable for the release of such Trust Property from the encumbrance of this
Deed of Trust.
40. Conflict With Senior Secured Credit Agreement. In the
event of any conflict or inconsistency between the terms and provisions of this
Deed of Trust and the terms and provisions of the Senior Secured Credit
Agreement, the terms and provisions of the Senior Secured Credit Agreement shall
govern, other than with respect to the Section of this Deed of Trust captioned
"Governing Law, etc.". By their execution of the Senior Secured Credit
Agreement, each Lender hereby agrees that it shall not have the right to
institute any suit for enforcement of Notes or any other Indebtedness secured by
this Deed of Trust or any other Security Document, if and to the extent that the
institution or prosecution thereof or the entry of judgment therein would, under
applicable law, result in the surrender, impairment, waiver or loss of the Lien
of this Deed of Trust or any other Security Document or impede or delay the
enforcement of the Lien of this Deed of Trust or any other Security Document.
41. Receipt of Copy. Grantor acknowledges that it has received
a true copy of this Deed of Trust.
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<PAGE> 36
This Deed of Trust has been duly executed by Grantor as of the
date first above written.
Signed, sealed and EV INTERNATIONAL, INC.
delivered in our
presence: By: /s/ CHRISTINE K. VANDEN BEUKEL
-------------------------------------
Name: Christine K. Vanden Beukel
Title: Vice President, Secretary and
Treasurer
/s/ GINGER BALLARD
- ---------------------------
Name: Ginger Ballard
/s/ ARON GOSER
- ---------------------------
Name: Aron Goser
35
<PAGE> 37
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 10th day of February in the year 1997 before me, Nancy
Lomazzo, a Notary Public of said State, duly commissioned and sworn, personally
appeared Christine K. Vanden Beukel, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person who executed the within
instrument as vice president, secretary and treasurer, or on behalf of the
corporation therein and acknowledged to me that such corporation executed the
same.
In Witness Whereof, I have hereunto set my hand and affixed by
official seal the day and year in this certificate first above written.
/s/ NANCY L. LOMAZZO
-----------------------------------------
Notary Public
[Notarial Stamp]
NANCY L. LOMAZZO
Notary Public, State of New York
No. 31-5061123
Qualified in New York County
Commission Expires June 3, 1998
<PAGE> 38
CERTIFICATION PURSUANT TO CALIFORNIA GOVERNMENT CODE 27361.7:
I certify under penalty of perjury that the notary seal and stamp on the
document to which this statement is attached reads as follows:
Name of Notary: Nancy L. Lomazzo
---------------------------------
Date Commission Expires: June 3, 1998
-----------------------
County where qualification
or bond is filed: New York County, New York
------------------------------
Place of execution: New York County, New York
----------------------------
Signature: /s/ NANCY L. LOMAZZO
-------------------------------------
Print Name: Nancy L. Lomazzo
<PAGE> 39
9130 Glenoaks Blvd.
Sun Valley, CA 91352
Los Angeles County
Schedule A
Legal Description
LOT 1 OF TRACT 31653, IN THE CITY OF LOS ANGELES, IN THE COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 868 PAGES 18 AND 19 OF MAPS, IN
THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
<PAGE> 1
MICHIGAN
Exhibit 10(n)
Prepared by and after recording, please return to:
Simpson Thacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
ATTN: Emily R. Steinman, Esq.
THIS MORTGAGE CONSTITUTES A FIXTURE FILING UNDER THE
MICHIGAN COMMERCIAL CODE
MORTGAGE ASSIGNMENT OF RENTS
AND LEASES, SECURITY AGREEMENT AND FIXTURE FILING
from
EV INTERNATIONAL, INC., Mortgagor
to
THE CHASE MANHATTAN BANK, as Administrative Agent, Mortgagee
DATED AS OF FEBRUARY 10, 1997
This Mortgage secures future advances and is a future advance mortgage under Act
348 of the Public Acts of 1990 (MCLA 565.901 et. seq.).
<PAGE> 2
MICHIGAN
MORTGAGE, ASSIGNMENT OF RENTS
AND LEASES, SECURITY AGREEMENT AND FIXTURE FILING
THIS MORTGAGE, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT
AND FIXTURE FILING, dated as of February 10, 1997 is made by EV INTERNATIONAL,
INC., a Delaware corporation (formerly known as Electro-Voice, Incorporated)
("MORTGAGOR"), whose address is 600 Cecil Street, Buchanan, Michigan 49107, to
THE CHASE MANHATTAN BANK, a New York banking corporation whose address is 270
Park Avenue, New York, New York 10017, as Administrative Agent (in such
capacity, "MORTGAGEE") for the several banks and other financial institutions
(the "LENDERS") from time to time parties to the Credit Agreement dated as of
February 10, 1997, (as the same may be amended, supplemented, waived or
otherwise modified from time to time the "SENIOR SECURED CREDIT AGREEMENT")
among Gulton Acquisition Corp., a Delaware corporation ("BORROWER"), the Lenders
and Mortgagee. References to this "Mortgage" shall mean this instrument and any
and all renewals, modifications, amendments, supplements,
extensions, consolidations, substitutions, spreaders and replacements of this
instrument. Capitalized terms used and not otherwise defined herein shall have
the meanings assigned thereto in the Senior Secured Credit Agreement.
Background
A. Gulton Holdings Corp., a Delaware corporation which, on or after
the Effective Date, will be renamed EVI Audio Holding, Inc. ("HOLDINGS") and
Borrower, its direct Wholly Owned Subsidiary, were newly formed companies
organized by an investor group led by Greenwich Street Capital Partners, Inc., a
Delaware corporation ("GSCP").
B. Borrower acquired Gulton Industries Inc., a Delaware corporation
("GII") which was a subsidiary of Mark IV Industries, Inc. ("MARK IV") through
the purchase from Mark IV and Mark IV PLC of the capital stock of GII (the
"ACQUISITION") pursuant to the Stock Purchase Agreement, dated as of December
12, 1996, by and among Mark IV, Mark IV PLC and Borrower (as amended,
<PAGE> 3
supplemented, waived or otherwise modified from time to time in accordance with
the Senior Secured Credit Agreement, the "STOCK PURCHASE AGREEMENT").
C. Borrower merged with and into GII (the "FIRST MERGER"), and GII
as surviving corporation of the First Merger merged (the "SECOND MERGER"; the
First Merger together with the Second Merger, the "MERGERS") with and into
Electro-Voice, Incorporated, a Delaware corporation and a Wholly Owned
Subsidiary of GII, which was thereupon renamed EV International, Inc.
D. In order to (i) finance a portion of the Acquisition
Consideration, (ii) refinance a portion of the existing indebtedness of GII and
its subsidiaries, (iii) pay certain fees, taxes and expenses related to (x) the
Acquisition and the financing thereof and (y) the refinancing of such existing
indebtedness of GII and its subsidiaries and (iv) finance the working capital
and other business requirements of Mortgagor and its subsidiaries following the
consummation of the Acquisition and the Merger, Acquisition Co. has requested
that the Lenders make the Loans and issue and participate in the Letters of
Credit in accordance with the terms of the Senior Secured Credit Agreement.
E. Mortgagor is the owner of the parcel(s) of real property
described on Schedule A attached hereto (such real property, together with all
of the buildings, improvements, structures and fixtures now or subsequently
located thereon (the "IMPROVEMENTS"), being collectively referred to as the
"REAL ESTATE").
F. Pursuant to the terms of the Senior Secured Credit Agreement, the
Lenders have agreed, among other things, to make the Loans and the Issuing
Lender has agreed to issue, and the L/C Participants have agreed to acquire
undivided participating interests in, the Letter(s) of Credit for the account of
the Borrower upon the terms and subject to the conditions set forth in the
Senior Secured Credit Agreement which conditions include the grant by Mortgagor
to Mortgagee of a first lien upon and perfected security interest in, among
other things, all estate, right, title and interest of Mortgagor in and to the
Real Estate pursuant to the terms hereof.
G. Mortgagor is the surviving corporation of any merger of the
Borrower, and it is to the advantage and benefit of Mortgagor that the Lenders
make the Loans to the Borrower.
2
<PAGE> 4
Granting Clauses
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Mortgagor agrees that to secure:
(a) the repayment of principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
Reimbursement Obligations and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Loan Party, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding) the Loans (as they may be evidenced by the Notes from time to
time) and all other obligations (including the Reimbursement Obligations)
and liabilities of Mortgagor to Mortgagee, the Issuing Lender and the
Lenders, whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Senior Secured Credit Agreement, the Loans,
the Letters of Credit, the Security Documents, any Guarantee Obligation of
Mortgagor as to which any Lender is a beneficiary, any Permitted Hedging
Arrangement with any Lender or any banking affiliate of any Lender
(whether entered into directly, or guaranteed, by Mortgagor), the
Guarantee and Collateral Agreement dated as of February 10, 1997 between
Mortgagor, Holdings and Mortgagee (the "GUARANTEE") or any other document
made, delivered or given in connection therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all fees, charges and disbursements of counsel to the Administrative
Agent, the Issuing Lender or any Lender that are required to be paid by
any Loan Party pursuant to the Senior Secured Credit Agreement) (the items
set forth above being referred to collectively as the "INDEBTEDNESS"); and
(b) the performance of all covenants, agreements, obligations and
liabilities of Mortgagor (the "OBLIGATIONS") under or pursuant to the
provisions of the Senior Secured Credit Agreement, the Loans, this
Mortgage, the Guarantee, any other document securing payment of the
Indebtedness (the "SECURITY DOCUMENTS") and any amendments, supplements,
extensions, renewals, restatements, replacements or modifications of any
of the foregoing (the Senior Secured Credit Agreement, the Loans, the
Letters of Credit, this Mortgage, the Guarantee and all other documents
and instruments from time to time evidencing, securing or guaranteeing the
payment of the Indebtedness or the performance of the Obligations, as any
of the same may be amended,
3
<PAGE> 5
supplemented, extended, renewed, restated, replaced or modified from time
to time, are collectively referred to as the "LOAN DOCUMENTS");
MORTGAGOR HEREBY GRANTS TO MORTGAGEE A LIEN UPON AND A SECURITY INTEREST IN, AND
HEREBY MORTGAGES AND WARRANTS, GRANTS, ASSIGNS, TRANSFERS AND SETS OVER TO
MORTGAGEE:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever of
Mortgagor, in possession or expectancy, in and to the Real Estate or any
part thereof;
(C) all right, title and interest of Mortgagor in, to and under all
easements, rights of way, gores of land, streets, ways, alleys, passages,
sewer rights, waters, water courses, water and riparian rights,
development rights, air rights, mineral rights and all estates, rights,
titles, interests, privileges, licenses, tenements, hereditaments and
appurtenances belonging, relating or appertaining to the Real Estate, and
any reversions, remainders, rents, issues, profits and revenue thereof and
all land lying in the bed of any street, road or avenue, in front of or
adjoining the Real Estate to the center line thereof;
(D) all right, title and interest of Mortgagor in and to all of the
fixtures, chattels, business machines, machinery, apparatus, equipment,
furnishings, fittings and articles of personal property of every kind and
nature whatsoever, and all appurtenances and additions thereto and
substitutions or replacements thereof (together with, in each case,
attachments, components, parts and accessories) currently owned or
subsequently acquired by Mortgagor and now or subsequently attached to, or
contained in or used or usable in any way in connection with any operation
or letting of the Real Estate, including but without limiting the
generality of the foregoing, all screens, awnings, shades, blinds,
curtains, draperies, artwork, carpets, rugs, storm doors and windows,
furniture and furnishings, heating, electrical, and mechanical equipment,
lighting, switchboards, plumbing, ventilating, air conditioning and
air-cooling apparatus, refrigerating, and incinerating equipment,
escalators, elevators, loading and unloading equipment and systems,
stoves, ranges, laundry equipment, cleaning systems (including window
cleaning apparatus), telephones, communication systems (including
satellite dishes and antennae), televisions, computers, sprinkler systems
and other fire prevention and extinguishing apparatus and materials,
security systems, motors, engines,
4
<PAGE> 6
machinery, pipes, pumps, tanks, conduits, appliances, fittings and
fixtures of every kind and description (all of the foregoing in this
paragraph (D) being referred to as the "EQUIPMENT");
(E) all right, title and interest of Mortgagor in and to all
substitutes and replacements of, and all additions and improvements to,
the Real Estate and the Equipment, subsequently acquired by or released to
Mortgagor or constructed, assembled or placed by Mortgagor on the Real
Estate, immediately upon such acquisition, release, construction,
assembling or placement, including, without limitation, any and all
building materials to be used by Mortgagor whether stored at the Real
Estate or offsite, and, in each such case, without any further mortgage,
conveyance, assignment or other act by Mortgagor;
(F) all right, title and interest of Mortgagor in, to and under all
leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or occupancy
of the Real Estate or the Equipment or any part thereof, now existing or
subsequently entered into by Mortgagor and whether written or oral and all
guarantees of any of the foregoing (collectively, as any of the foregoing
may be amended, restated, extended, renewed or modified from time to time,
the "LEASES"), and all rights of Mortgagor in respect of cash and
securities deposited thereunder and the right to receive and collect the
revenues, income, rents, issues and profits thereof, together with all
other rents, royalties, issues, profits, revenue, income and other
benefits arising from the use and enjoyment of the Mortgaged Property (as
defined below) (collectively, the "RENTS") including, but not limited to,
all rights conferred by Act No. 210 of the Michigan Public Acts of 1953 as
amended by Act No. 151 of the Michigan Public Acts of 1966 (MCLA 554.231
et seq.), and Act No. 228 of the Michigan Public Acts of 1925 as amended
by Act No. 55 of the Michigan Public Acts of 1933 (MCLA 554.211 et seq.);
(G) all books and records relating to or used in connection with the
operation of the Real Estate or the Equipment or any part thereof;
(H) all right, title and interest of Mortgagor, to the extent
assignable, in and to (i) all unearned premiums under insurance policies
now or subsequently obtained by Mortgagor relating to the Real Estate or
Equipment, (ii) any such insurance policies, (iii) all proceeds of any
such insurance policies (including title insurance policies) including the
right to collect and receive such proceeds, subject to the provisions
relating to insurance generally set forth below, and (iv) all awards and
other compensation, including the interest payable thereon and
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the right to collect and receive the same, made to the present or any
subsequent owner of the Real Estate or Equipment for the taking by eminent
domain, condemnation or otherwise, of all or any part of the Real Estate
or any easement or other right therein, subject to the provisions relating
to condemnation awards generally set forth below;
(I) all right, title and interest of Mortgagor, to the extent
assignable, in and to (i) all contracts from time to time executed by
Mortgagor or any manager or agent on its behalf relating to the ownership,
construction, maintenance, repair, operation, occupancy, sale or financing
of the Real Estate or Equipment or any part thereof and all agreements
relating to the purchase or lease of any portion of the Real Estate or any
property which is adjacent or peripheral to the Real Estate, together with
the right to exercise such options (collectively, the "CONTRACTS"), (ii)
all consents, licenses, building permits, certificates of occupancy and
other governmental approvals relating to construction, completion,
occupancy, use or operation of the Real Estate or any part thereof
(collectively, the "PERMITS") and (iii) all drawings, plans,
specifications and similar or related items relating to the Real Estate
(collectively, the "PLANS");
(J) any and all monies now or subsequently on deposit for the
payment of real estate taxes or special assessments against the Real
Estate or for the payment of premiums on insurance policies covering the
foregoing property or otherwise on deposit with or held by Mortgagee as
provided in this Mortgage;
(K) all accounts and revenues arising from the operation of the
Improvements; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by Mortgagor and described in the foregoing
clauses (A) through (E) are collectively referred to as the "PREMISES", and
those described in the foregoing clauses (A) through (L) are collectively
referred to as the "MORTGAGED PROPERTY").
TO HAVE AND TO HOLD the Mortgaged Property and the rights and
privileges hereby mortgaged unto Mortgagee, its successors and assigns for the
uses and purposes set forth, until the Indebtedness is fully paid and the
Obligations fully performed or as otherwise expressly provided in the Section of
this Mortgage entitled "Release of Mortgage".
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Terms and Conditions
Mortgagor further represents, warrants, covenants and agrees with
Mortgagee as follows:
1. Warranty of Title. Mortgagor warrants that Mortgagor has good
title to the Real Estate in fee simple and good title to the rest of the
Mortgaged Property, subject only to the matters that are set forth in Schedule B
of the title insurance policy or policies being issued to Mortgagee to insure
the lien of this Mortgage and Liens expressly permitted under the Senior Secured
Credit Agreement (collectively, the "PERMITTED EXCEPTIONS") and Mortgagor shall
warrant, defend and preserve such title and the lien of the Mortgage thereon
against all claims of all persons and entities. Mortgagor further warrants that
it has the right to mortgage the Mortgage Property.
2. Payment of Indebtedness. Mortgagor shall pay the Indebtedness at
the times and places and in the manner specified in the Senior Secured Credit
Agreement and shall perform all the Obligations.
3. Requirements. (a) Mortgagor shall promptly comply with, or cause
to be complied with, and conform to all present and future laws, statutes,
codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements, and irrespective of the nature of the work to be done, of each of
the United States of America, any State and any municipality, local government
or other political subdivision thereof and any agency, department, bureau,
board, commission or other instrumentality of any of them, now existing or
subsequently created (collectively, "GOVERNMENTAL AUTHORITY") which has
jurisdiction over the Mortgaged Property and all covenants, restrictions and
conditions now or later of record which may be applicable to any of the
Mortgaged Property, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any of the
Mortgaged Property, except to the extent that failure to comply therewith, in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. All present and future laws, statutes, codes, ordinances, orders,
judgments, decrees, rules, regulations and requirements of every Governmental
Authority applicable to Mortgagor or to any of the Mortgaged Property and all
covenants, restrictions, and conditions which now or later may be applicable to
any of the Mortgaged Property are collectively referred to as the "LEGAL
REQUIREMENTS".
(b) From and after the date of this Mortgage, except as expressly
permitted under the Senior Secured Credit Agreement or herein, Mortgagor shall
not by act or omission permit, other than Permitted Exceptions, any building or
other
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improvement on any premises not subject to the lien of this Mortgage to rely on
the Premises or any part thereof or any interest therein to fulfill any Legal
Requirement, and Mortgagor hereby assigns to Mortgagee any and all rights to
give consent for all or any portion of the Premises or any interest therein to
be so used. Mortgagor shall not by act or omission impair the integrity of any
of the Real Estate as a single zoning lot separate and apart from all other
premises. Mortgagor represents that each parcel of the Real Estate constitutes a
legally subdivided lot, in compliance with all subdivision laws and similar
Legal Requirements, except to the extent that failure to comply therewith, in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. Any act or omission by Mortgagor which would result in a violation of
any of the provisions of this subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Except as expressly
permitted under the Senior Secured Credit Agreement, Mortgagor, prior to
delinquency, shall pay and discharge all taxes of every kind and nature
(including, without limitation, all real and personal property, income,
franchise, withholding, transfer, gains, profits and gross receipts taxes), all
charges for any easement or agreement maintained for the benefit of any of the
Mortgaged Property, all general and special assessments, levies, permits,
inspection and license fees, all water and sewer rents and charges and all other
public charges even if unforeseen or extraordinary, imposed upon or assessed
against or which may become a lien on any of the Mortgaged Property, or arising
in respect of the occupancy, use or possession thereof, together with any
penalties or interest on any of the foregoing (all of the foregoing are
collectively referred to as the "IMPOSITIONS"). Mortgagor shall within 30 days
after the request of Mortgagee deliver to Mortgagee (i) original or copies of
receipted bills and cancelled checks or other evidence of payment of such
Imposition if it is a real estate tax or other public charge and (ii) evidence
acceptable to Mortgagee in its reasonable discretion showing the payment of any
other such Imposition. If by law any Imposition, at Mortgagor's option, may be
paid in installments (whether or not interest shall accrue on the unpaid balance
of such Imposition), Mortgagor may elect to pay such Imposition in such
installments and shall be responsible for the payment of such installments with
interest, if any.
(b) Nothing herein shall affect any right or remedy of Mortgagee
under this Mortgage or otherwise, without notice or demand to Mortgagor, to pay
any Imposition after the date such Imposition shall have become delinquent, and
to add to the Indebtedness the amount so paid, together with interest from the
time of payment at the rate of interest described in paragraph 4.1(c) of the
Senior Secured Credit Agreement (the "DEFAULT RATE"). Any sums paid by Mortgagee
in discharge of any Impositions shall be (i) a charge on the Premises secured
hereby prior to any right or
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title to, interest in, or claim upon the Premises subordinate to the lien of
this Mortgage, and (ii) payable on demand by Mortgagor to Mortgagee together
with interest at the Default Rate as set forth above.
(c) Mortgagor shall not claim, demand or be entitled to receive any
credit or credits toward the satisfaction of this Mortgage or on any interest
payable thereon for any taxes assessed against the Mortgaged Property or any
part thereof, and shall not claim any deduction from the taxable value of the
Mortgaged Property by reason of this Mortgage.
(d) Mortgagor shall have the right pursuant to subsection 7.3 of the
Senior Secured Credit Agreement to contest in good faith to the amount or
validity of any Imposition by appropriate proceedings diligently conducted with
reserves in conformity with GAAP, provided that Mortgagor shall demonstrate to
Mortgagee's reasonable satisfaction that such proceedings shall operate
conclusively to prevent the sale of the Mortgaged Property, or any part thereof,
to satisfy such Imposition prior to final determination of such proceedings.
(e) Upon written notice to Mortgagor, Mortgagee during the
continuance of an Event of Default (as defined below) shall be entitled to
require Mortgagor to pay monthly in advance to Mortgagee the equivalent of
1/12th of the estimated annual Impositions. Mortgagee may commingle such funds
with its own funds but Mortgagor shall be entitled to interest thereon at a rate
mutually agreed upon by Mortgagor and Mortgagee.
5. Insurance. (a) Mortgagor shall maintain or cause to be maintained
on all of the Premises:
(i) property insurance against loss or damage by fire, lightning,
windstorm, tornado, water damage, flood, earthquake and by such other
further risks and hazards as now are or subsequently may be covered by an
"all risk" policy or a fire policy covering "special" causes of loss
(provided, however, that the maintenance of insurance against earthquake,
windstorm, flood and freeze risks shall be subject to availability of such
insurance coverage on commercially reasonable terms). The policy shall
include building ordinance law endorsements and the policy limits shall be
automatically reinstated after each loss (other than with respect to flood
and earthquake coverage which shall be reinstated on a commercially
reasonable basis);
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(ii) commercial general liability insurance under a policy including
the "broad form CGL endorsement" (or which incorporates the language or
similar language of such endorsement), covering all claims for personal
injury, bodily injury or death, or property damage, subject to standard
policy terms, conditions and exclusions, occurring on, in or about the
Premises in an amount not less than $10,000,000 combined single limit with
respect to personal injury, bodily injury or death, or property damage,
relating to any one occurrence plus such excess limits as Mortgagee shall
reasonably request from time to time;
(iii) when and to the extent reasonably required by Mortgagee,
insurance against loss or damage by any other risk commonly insured
against by persons occupying or using like properties in the locality or
localities in which the Real Estate is situated;
(iv) during the course of any construction or repair of
Improvements, commercial general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language or similar language of such endorsement), (including coverage for
elevators and escalators, if any). The policy shall include coverage for
independent contractors and completed operations. The completed operations
coverage shall stay in effect for two years after construction of any
Improvements has been completed. The policy shall provide coverage on an
occurrence basis against claims for personal injury, including, without
limitation, bodily injury and death, and property damage resulting from
Mortgagor's negligence or other behavior for which Mortgagor may be
adjudged tortiously liable, subject to standard policy terms, conditions
and exclusions, occurring on, in or about the Premises and the adjoining
streets, sidewalks and passageways, such insurance to afford immediate
minimum protection to a limit of not less than that reasonably required by
Mortgagee with respect to personal injury, bodily injury or death to any
one or more persons or damage to property;
(v) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Mortgagor engaged on or with
respect to the Premises in such amounts no less than the limits
established by law or in the case of employer's liability insurance, no
less than $500,000, provided that Mortgagor may self-insure any or all
workers' compensation liabilities;
(vi) during the course of any construction, addition, alteration or
repair of the Improvements, builder's risk completed value property
insurance form
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against "all risks of physical loss" (subject to standard policy
exclusions), including collapse, water damage, flood and earthquake and
transit coverage, during construction or repairs of the Improvements, with
deductible approved by Mortgagee in its reasonable discretion, in
reporting form, covering the total replacement value of work performed and
equipment, supplies and materials furnished (with an appropriate limit for
soft costs in the case of construction); provided, however, that the
maintenance of insurance against earthquake and flood risks shall be
subject to availability of such insurance coverage on commercially
reasonable terms;
(vii) boiler and machinery property insurance covering pressure
vessels, air tanks, boilers, machinery, pressure piping, heating, air
conditioning and elevator equipment and escalator equipment, provided the
Improvements contain equipment of such nature, in such amounts as are
reasonably satisfactory to Mortgagee but not less than the lesser of
$1,000,000 or 10% of the value of the Improvements;
(viii) if any portion of the Premises are located in an area
identified in the Federal Register as having special flood hazards by the
Secretary of Housing and Urban Development or other applicable agency,
flood insurance covering any parcel of the Mortgaged Property which
contains improvements in an amount satisfactory to Mortgagee in its
reasonable discretion, but in no event less than the maximum limit of
coverage available with respect to the particular type of property under
the National Flood Insurance Act of 1968, as amended and with a term
ending not later than the maturity of the Indebtedness and Mortgagee shall
receive confirmation that Mortgagor has received the notice required
pursuant to Section 208.8(e)(3) of Regulation H of the Board of Governors
of The Federal Reserve System; and
(ix) such other insurance in such amounts as Mortgagee may
reasonably request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or, in the case of
property and boiler and machinery insurance, materially amended without 30-days'
prior written notice to Mortgagee, (ii) with respect to all property insurance,
subject to availability on commercially reasonable terms, provide for
deductibles not to exceed $250,000, other than with respect to (a) flood,
freeze, windstorm and earthquake perils for which deductibles shall not exceed
the greater of $500,000 or 5% of values at risk per
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location involved in loss and (b) boiler and machinery coverage for which
deductibles shall not exceed the greater of $500,000 or five times 100% of the
daily time element value, contain a "Replacement Cost Endorsement" without any
deduction made for depreciation and with no co-insurance penalty (or attaching
an agreed amount endorsement satisfactory to Mortgagee in its reasonable
discretion), with loss payable solely to Mortgagee (modified, if necessary and
to the extent available under such policy, to provide that proceeds in the
amount of replacement cost may be retained by Mortgagee without the obligation
to rebuild) as its interest may appear, without contribution, under a "standard"
or "New York" mortgagee clause acceptable to Mortgagee in its reasonable
discretion and be written by insurance companies having an A.M. Best Company,
Inc. rating of A- or higher and a financial size category of not less than VII,
or otherwise as approved by Mortgagee in its reasonable discretion and (iii)
contain a "manuscript" endorsement providing that Mortgagor may not unilaterally
cancel such policy without Mortgagee's prior written consent. Liability
insurance policies shall name Mortgagee as an additional insured and contain a
waiver of subrogation against Mortgagee; all such policies shall indemnify and
hold Mortgagee harmless from all liability claims occurring on, in or about the
Premises and the adjoining streets, sidewalks and passageways, subject to
standard policy terms, conditions and exclusions. The amounts of each insurance
policy and the form of each such policy shall at all times be satisfactory to
Mortgagee in its reasonable discretion. Each policy shall expressly provide that
any proceeds which are payable to Mortgagee shall be paid by check payable to
the order of Mortgagee only and requiring the endorsement of Mortgagee only. If
any required insurance shall expire, be withdrawn, become void by breach of any
condition thereof by Mortgagor or by any lessee of any part of the Mortgaged
Property or become void or unsafe by reason of the failure or impairment of the
capital of any insurer, Mortgagor shall immediately obtain new or additional
insurance satisfactory to Mortgagee in its reasonable discretion. Mortgagor
shall not take out any separate or additional insurance which is contributing in
the event of loss unless it is properly endorsed and otherwise satisfactory to
Mortgagee in all respects in its reasonable discretion.
(b) Mortgagor shall deliver to Mortgagee an original of each
insurance policy required to be maintained, or a certificate of such insurance
acceptable to Mortgagee in its reasonable discretion, together with a copy of
the declaration page for each such policy. Mortgagor shall (i) pay as they
become due all premiums for such insurance, (ii) not later than seven days prior
to the expiration of each policy to be furnished pursuant to the provisions of
this Section, deliver a renewed policy or policies, or certificates of insurance
acceptable to Mortgagee, in its reasonable discretion, or duplicate original or
originals thereof. Upon the reasonable request of Mortgagee, Mortgagor shall
cause its insurance underwriter or broker to certify to
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Mortgagee in writing that all the requirements of this Mortgage governing
insurance have been satisfied.
(c) If Mortgagor is in default of its obligations to insure or
deliver any such policy or policies, or certificates of insurance acceptable to
Mortgagee, in its reasonable discretion, then Mortgagee, at its option and
without notice, may effect such insurance from year to year, and pay the premium
or premiums therefor, and Mortgagor shall pay to Mortgagee on demand such
premium or premiums so paid by Mortgagee with interest from the time of payment
at the Default Rate and the same shall be deemed to be secured by this Mortgage
and shall be collectible in the same manner as the Indebtedness secured by this
Mortgage.
(d) Mortgagor shall increase the amount of property insurance
required to equal 100% replacement cost pursuant to the provisions of this
Section at the time of each renewal of each policy (but not later than 12 months
from the date of this Mortgage and each successive 12 month period to occur
thereafter) by using the Morgan & Swift Building Cost Index to determine whether
there shall have been an increase in the replacement value since the most recent
adjustment and, if there shall have been such an increase, the amount of
insurance required shall be adjusted accordingly.
(e) Mortgagor promptly shall in all material respects comply with
and conform to (i) all provisions of each such insurance policy, and (ii) all
requirements of the insurers applicable to Mortgagor or to any of the Mortgaged
Property or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of any of the Mortgaged Property. Mortgagor
shall not use or permit the use of the Mortgaged Property in any manner which
would permit any insurer to cancel any insurance policy or void coverage
required to be maintained by this Mortgage.
(f) (i) If the Mortgaged Property, or any part thereof, shall be
destroyed or damaged by fire or any other casualty, whether insured or
uninsured, or in the event any claim is made against Mortgagor for any
personal injury, bodily injury or property damage incurred on or about the
Premises, Mortgagor shall promptly give notice thereof to Mortgagee.
(ii) If the Mortgaged Property is damaged by fire or other casualty
and the cost to repair such damage is less than $1,000,000, then provided
that no Event of Default shall have occurred and be continuing, Mortgagor
shall have the right to adjust such loss, and the insurance proceeds
relating to such loss
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may be paid over to Mortgagor; provided that Mortgagor shall, promptly
after any such damage, repair such damage to the extent required by
subsection 7.5 of the Senior Secured Credit Agreement regardless of
whether any insurance proceeds have been received or whether such
proceeds, if received, are sufficient to pay for the costs of repair.
(iii) If the Mortgaged Property is damaged by fire or other
casualty, and the cost to repair such damage exceeds the limit in Section
5(f)(ii) above, or if an Event of Default shall have occurred and be
continuing, then Mortgagor authorizes and empowers Mortgagee, at
Mortgagee's option and in Mortgagee's reasonable discretion, as
attorney-in-fact for Mortgagor, to make proof of loss, to adjust and
compromise any claim under any insurance policy, to appear in and
prosecute any action arising from any policy, to collect and receive
insurance proceeds and to deduct therefrom Mortgagee's reasonable expenses
incurred in the collection process. Each insurance company concerned is
hereby authorized and directed to make payment for such loss directly to
Mortgagee. Mortgagee shall have the right to require Mortgagor to repair
or restore the Mortgaged Property to the extent required by subsection 7.5
of the Senior Secured Credit Agreement, and Mortgagor hereby designates
Mortgagee as its attorney-in-fact for the purpose of making any election
required or permitted under any insurance policy relating to such repair
or restoration. The insurance proceeds or any part thereof received by
Mortgagee may be applied by Mortgagee toward reimbursement of all
reasonable costs and expenses of Mortgagee in collecting such proceeds,
and the balance, at Mortgagee's option in its sole and absolute
discretion, to the principal (to the installments in inverse order of
maturity, if payable in installments) and interest due or to become due
under the Notes, the Senior Secured Credit Agreement or the other Loan
Documents, to fulfill any other Obligation of Mortgagor, to the
restoration or repair of the property damaged, or released to Mortgagor.
Application by Mortgagee of any insurance proceeds toward the last
maturing installments of principal and interest due or to become due on
the Loans shall not excuse Mortgagor from making any regularly scheduled
payments due thereunder, nor shall such application extend or reduce the
amount of such payments. In the event Mortgagee elects to release such
proceeds to Mortgagor, Mortgagor shall be obligated to use such proceeds
to restore or repair the Mortgaged Property to the extent required by
subsection 7.5 of the Senior Secured Credit Agreement.
(g) In the event of foreclosure of this Mortgage or other transfer
of title to the Mortgaged Property in extinguishment of the Indebtedness, all
right, title and interest of Mortgagor in and to any insurance policies then in
force, to the extent
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assignable or transferable, shall pass to the purchaser or grantee and Mortgagor
hereby appoints Mortgagee its attorney-in-fact, in Mortgagor's name, to assign
and transfer all such policies and proceeds to such purchaser or grantee.
(h) Upon written notice to Mortgagor, Mortgagee, during the
continuance of an Event of Default, shall be entitled to require Mortgagor to
pay monthly in advance to Mortgagee the equivalent of 1/12th of the estimated
annual premiums due on such insurance. Mortgagee may commingle such funds with
its own funds but Mortgagor shall be entitled to interest thereon at a rate
mutually agreed upon by Mortgagor and Mortgagee.
(i) Mortgagor may maintain insurance required under this Mortgage by
means of one or more blanket insurance policies maintained by Mortgagor;
provided, however, that (A) any such policy shall specify, or Mortgagor shall
furnish to Mortgagee a written statement from the insurer so specifying, the
maximum amount of the total insurance afforded by such blanket policy that is
allocated to the Premises and the other Mortgaged Property and any sublimits and
aggregates in such blanket policy applicable to the Premises and the other
Mortgaged Property, (B) each such blanket policy shall include an endorsement
providing that, in the event of a loss resulting from an insured peril,
insurance proceeds shall be allocated to the Mortgaged Property in an amount
equal to the coverages required to be maintained by Mortgagor as provided above
(subject to applicable sublimits and aggregates) and (C) the protection afforded
under any such blanket policy shall be no less than that which would have been
afforded under a separate policy or policies relating only to the Mortgaged
Property (subject to applicable sublimits and aggregates).
6. Restrictions on Liens and Encumbrances. Except for the lien of
this Mortgage and the Permitted Exceptions and except as otherwise permitted
pursuant to the terms of the Senior Secured Credit Agreement, Mortgagor shall
not further mortgage, nor otherwise encumber the Mortgaged Property nor create
or suffer to exist any lien, charge or encumbrance on the Mortgaged Property, or
any part thereof, whether superior or subordinate to the lien of this Mortgage
and whether recourse or non-recourse.
7. Due on Sale and Other Transfer Restrictions. Except as may be
otherwise expressly permitted under the Senior Secured Credit Agreement,
Mortgagor shall not sell, transfer, convey or assign all or any portion of, or
any interest in, the Mortgaged Property.
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8. Maintenance; No Alteration; Inspection; Utilities. (a) Mortgagor
shall maintain or cause to be maintained all the Improvements in good condition
and repair and shall not commit or suffer any waste of the Improvements. To the
extent required under subsection 7.5 of the Senior Secured Credit Agreement,
Mortgagor shall repair, restore, replace or rebuild promptly any part of the
Premises which may be damaged or destroyed by any casualty whatsoever to a
condition substantially equivalent to its condition prior to the damage or
destruction. Except as permitted by the Senior Secured Credit Agreement, the
Improvements shall not be demolished or materially altered, nor any material
additions built, without the prior written consent of Mortgagee, provided that
Mortgagor may make alterations or additions without the consent of Mortgagee
that do not materially reduce the value of the Mortgaged Property. Mortgagor's
failure to pay (i) any Imposition assessed against the Premises, or any
installment thereof, or (ii) any insurance premium upon policies required to be
carried by the terms of this Mortgage, shall constitute waste (although the
meaning of the term "waste" shall not be limited to such nonpayment) as provided
by Act No. 236 of the Michigan Public Acts of 1961 (Revised Judicature Act),
Section 600.2927, as and if amended and shall entitle Mortgagee to all remedies
provided for therein; and Mortgagor agrees to and hereby does consent to the
appointment of a receiver under said statute, should Mortgagee elect to seek
such relief thereunder.
(b) Mortgagee and any persons authorized by Mortgagee shall, upon
reasonable notice and at any reasonable time, have the right to enter and
inspect the Premises and the right to inspect all work done, labor performed and
materials furnished in and about the Improvements and the right to inspect and
make copies, to the extent reasonable, of all books, contracts and records of
Mortgagor relating to the Mortgaged Property.
(c) Except as permitted under subsection 7.3 of the Senior Secured
Credit Agreement, Mortgagor shall pay or cause to be paid prior to delinquency,
all utility charges which are incurred for gas, electricity, water or sewer
services furnished to the Premises and all other assessments or charges of a
similar nature, whether public or private, affecting the Premises or any portion
thereof, whether or not such assessments or charges are liens thereon.
9. Condemnation/Eminent Domain. Promptly upon obtaining knowledge of
the institution of any proceedings for the condemnation of the Mortgaged
Property, or any portion thereof, Mortgagor will notify Mortgagee of the
pendency of such proceedings. Mortgagor authorizes Mortgagee, at Mortgagee's
option and in Mortgagee's reasonable discretion, as attorney-in-fact for
Mortgagor, to commence, appear in and prosecute, in Mortgagee's or Mortgagor's
name, any action or
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proceeding relating to any condemnation of the Mortgaged Property, or any
portion thereof, and to settle or compromise any claim in connection with such
condemnation upon the occurrence and during the continuance of an Event of
Default. If Mortgagee elects not to participate in such condemnation proceeding,
then Mortgagor shall, at its expense, diligently prosecute any such proceeding
and shall consult with Mortgagee, its attorneys and experts and cooperate with
them in any defense of any such proceedings. All awards and proceeds of
condemnation shall be applied in the same manner as insurance proceeds, and to
the extent such awards and proceeds exceed $1,000,000 and no Event of Default
shall have occurred and be continuing, such awards and proceeds shall be
assigned to Mortgagee to be applied in the same manner as insurance proceeds, as
provided above in subsection 5(f)(iii) above, and Mortgagor agrees to execute
any such assignments of all such awards as Mortgagee may request.
10. Restoration. If Mortgagee elects or is required hereunder to
release funds to Mortgagor for restoration of any of the Mortgaged Property,
then such restoration shall be performed in accordance with such conditions as
Mortgagee shall impose in its reasonable discretion, and as are customarily
imposed by construction lenders.
11. Leases. (a) Mortgagor shall not (i) execute an assignment or
pledge of any Lease relating to all or any portion of the Mortgaged Property
other than in favor of Mortgagee, or (ii) without the prior written consent of
Mortgagee, which consent shall not be unreasonably withheld or delayed, execute
or permit to exist any Lease of any of the Mortgaged Property, except for
Permitted Exceptions and except as may be otherwise expressly permitted under
the Senior Secured Credit Agreement.
(b) As to any Lease consented to by Mortgagee under subsection 11(a)
above, Mortgagor shall:
(i) promptly perform in all material respects all of the provisions
of the Lease on the part of the lessor thereunder to be performed;
(ii) promptly enforce all of the material provisions of the Lease on
the part of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising under or
in any manner connected with the Lease or the obligations of Mortgagor as
lessor or of the lessee thereunder;
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(iv) exercise, within 5 business days after a reasonable request by
Mortgagee, any right to request from the lessee a certificate with respect
to the status thereof;
(v) promptly deliver to Mortgagee copies of any notices of default
which Mortgagor may at any time forward to or receive from the lessee;
(vi) promptly deliver to Mortgagee a fully executed counterpart of
the Lease; and
(vii) promptly deliver to Mortgagee, upon Mortgagee's reasonable
request, if permitted under such Lease, an assignment of the Mortgagor's
interest under such Lease.
(c) Mortgagor shall deliver to Mortgagee, within 10 business days
after a reasonable request by Mortgagee, a written statement, certified by
Mortgagor as being true, correct and complete, containing the names of all
lessees and other occupants of the Mortgaged Property, the terms of all Leases
and the spaces occupied and rentals payable thereunder, and a list of all Leases
which are then in default, including the nature and magnitude of the default;
such statement shall be accompanied by such other information as Mortgagee may
reasonably request.
(d) All Leases entered into by Mortgagor after the date hereof, if
any, and all rights of any lessees thereunder shall be subject and subordinate
in all respects to the lien and provisions of this Mortgage unless Mortgagee
shall otherwise elect in writing.
(e) In the event of the enforcement by Mortgagee of any remedy under
this Mortgage, the lessee under each Lease shall, if requested by Mortgagee or
any other person succeeding to the interest of Mortgagee as a result of such
enforcement, and if provided, at such lessee's request, with a nondisturbance
agreement from Mortgagee or such person, attorn to Mortgagee or to such person
and shall recognize Mortgagee or such successor in interest as lessor under the
Lease without change in the provisions thereof; provided however, that Mortgagee
or such successor in interest shall not be: (i) bound by any payment of an
installment of rent or additional rent which may have been made more than 30
days before the due date of such installment; (ii) bound by any amendment or
modification to the Lease made without the consent of Mortgagee or such
successor in interest; (iii) liable for any previous act or omission of
Mortgagor (or its predecessors in interest); (iv) responsible for any monies
owing by Mortgagor to the credit of such lessee or subject to any credits,
offsets, claims,
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counterclaims, demands or defenses which the lessee may have against Mortgagor
(or its predecessors in interest); (v) bound by any covenant to undertake or
complete any construction of the Premises or any portion thereof; or (vi)
obligated to make any payment to such lessee other than any security deposit
actually delivered to Mortgagee or such successor in interest. Each lessee or
other occupant, upon request by Mortgagee or such successor in interest, shall
execute and deliver an instrument or instruments confirming such attornment. In
addition, Mortgagor agrees that each Lease entered into after the date of this
Mortgage shall include language to the effect of subsections (d)-(e) of this
Section and language to the effect that if any act or omission of Mortgagor
would give any lessee under such Lease the right, immediately or after lapse of
a period of time, to cancel or terminate such Lease, or to abate or offset
against the payment of rent or to claim a partial or total eviction, such lessee
shall not exercise such right until it has given written notice of such act or
omission to Mortgagee and until a reasonable period for remedying such act or
omission shall have elapsed following the giving of such notice without a remedy
being effected; provided that the provisions of such subsections shall be
self-operative and any failure of any Lease to include such language shall not
impair the binding effect of such provisions on any lessee under such Lease.
12. Further Assurances/Estoppel Certificates. To further assure
Mortgagee's rights under this Mortgage, Mortgagor agrees upon demand of
Mortgagee to do any act or execute any additional documents (including, but not
limited to, security agreements on any personalty included or to be included in
the Mortgaged Property and a separate assignment of each Lease in recordable
form) as may be reasonably required by Mortgagee to confirm the rights or
benefits conferred on Mortgagee by this Mortgage.
13. Mortgagee's Right to Perform. If Mortgagor fails to perform any
of the covenants or agreements of Mortgagor, Mortgagee, without waiving or
releasing Mortgagor from any obligation or default under this Mortgage, may, at
any time (but shall be under no obligation to) pay or perform the same, and the
amount or cost thereof, with interest at the Default Rate, shall immediately be
due from Mortgagor to Mortgagee and the same shall be secured by this Mortgage
and shall be an encumbrance on the Mortgaged Property prior to any right, title
to, interest in or claim upon the Mortgaged Property attaching subsequent to the
date of this Mortgage. No payment or advance of money by Mortgagee under this
Section shall be deemed or construed to cure Mortgagor's default or waive any
right or remedy of Mortgagee.
14. Events of Default. The occurrence of an Event of Default under
the Senior Secured Credit Agreement shall constitute an Event of Default
hereunder.
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15. Remedies. (a) Upon the occurrence of any Event of Default, in
addition to any other rights and remedies Mortgagee may have pursuant to the
Loan Documents, or as provided by law, and without limitation, the Indebtedness
and all other amounts payable with respect to the Loans, the Letters of Credit,
the Senior Secured Credit Agreement, this Mortgage and the other Security
Documents shall become due and payable as provided in the Senior Secured Credit
Agreement. Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
In addition, upon the occurrence of any Event of Default, Mortgagee may
immediately take such action, without notice or demand, as it deems advisable to
protect and enforce its rights against Mortgagor and in and to the Mortgaged
Property, including, but not limited to, the following actions, each of which
may be pursued concurrently or otherwise, at such time and in such manner as
Mortgagee may determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Mortgagee:
(i) Mortgagee may, to the extent permitted by applicable law, (A)
institute and maintain an action of mortgage foreclosure against all or
any part of the Mortgaged Property (as described below), (B) institute and
maintain an action on the Notes, the Senior Secured Credit Agreement or
the other Security Documents, (C) sell all or part of the Mortgaged
Property (Mortgagor expressly granting to Mortgagee the power of sale, as
more fully described below), or (D) take such other action at law or in
equity for the enforcement of this Mortgage or any of the Loan Documents
as the law may allow. Mortgagee may proceed in any such action to final
judgment and execution thereon for all sums due hereunder, together with
interest thereon at the Default Rate and all costs of suit, including,
without limitation, reasonable attorneys' fees and disbursements. Interest
at the Default Rate shall be due on any judgment obtained by Mortgagee
from the date of judgment until actual payment is made of the full amount
of the judgment.
(ii) Mortgagee may immediately commence foreclosure proceedings
against the Mortgaged Property pursuant to applicable law. The
commencement by Mortgagee of foreclosure proceedings by advertisement or
in equity shall be deemed an exercise by Mortgagee of its option set forth
above to accelerate the due date of all sums secured hereby. Mortgagor
hereby grants power to Mortgagee, in the event of the occurrence of an
Event of Default hereunder, to grant, bargain, sell, release and convey
the Mortgaged Property at public auction or vendue, and upon such sale to
execute and deliver to the purchaser(s) instruments of conveyance pursuant
to the terms hereof and to the applicable laws. Mortgagor acknowledges
that the foregoing sentence confers a power of
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sale upon Mortgagee, and that upon the occurrence of an Event of Default
this Mortgage may be foreclosed by advertisement as described below and in
the applicable Michigan statutes. MORTGAGOR UNDERSTANDS THAT UPON DEFAULT,
MORTGAGEE IS HEREBY AUTHORIZED AND EMPOWERED TO SELL THE MORTGAGED
PROPERTY, OR CAUSE THE SAME TO BE SOLD AND TO CONVEY THE SAME TO THE
PURCHASER IN ANY LAWFUL MANNER, INCLUDING BUT NOT LIMITED TO THAT PROVIDED
BY CHAPTER 32 OF THE REVISED JUDICATURE ACT OF MICHIGAN, ENTITLED
"FORECLOSURE OF MORTGAGE BY ADVERTISEMENT", WHICH PERMITS MORTGAGEE TO
SELL THE MORTGAGED PROPERTY WITHOUT AFFORDING MORTGAGOR A HEARING, OR
GIVING IT ACTUAL PERSONAL NOTICE. THE ONLY NOTICE REQUIRED UNDER SUCH
CHAPTER 32 IS TO PUBLISH NOTICE IN A LOCAL NEWSPAPER AND TO POST A COPY OF
THE NOTICE ON THE MORTGAGED PROPERTY.
WAIVER: BY CONFERRING THIS POWER OF SALE UPON MORTGAGEE, MORTGAGOR, FOR
ITSELF, ITS SUCCESSORS AND ASSIGNS, AFTER AN OPPORTUNITY FOR CONSULTATION
WITH ITS LEGAL COUNSEL, HEREBY VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY
WAIVES ALL RIGHTS UNDER THE CONSTITUTION AND LAWS OF THE UNITED STATES AND
UNDER THE CONSTITUTION AND LAWS OF THE STATE OF MICHIGAN, BOTH TO A
HEARING ON THE RIGHT TO EXERCISE AND THE EXERCISE OF THE POWER OF SALE,
AND TO NOTICE EXCEPT AS REQUIRED BY THE MICHIGAN STATUTE WHICH PROVIDES
FOR FORECLOSURE OF MORTGAGES BY ADVERTISEMENT.
(iii) Mortgagee may personally, or by its agents, attorneys and
employees and without regard to the adequacy or inadequacy of the
Mortgaged Property or any other collateral as security for the
Indebtedness and Obligations enter into and upon the Mortgaged Property
and each and every part thereof and exclude Mortgagor and its agents and
employees therefrom without liability for trespass, damage or otherwise
(Mortgagor hereby agreeing to surrender possession of the Mortgaged
Property to Mortgagee upon demand at any such time) and use, operate,
manage, maintain and control the Mortgaged Property and every part
thereof. Following such entry and taking of possession, Mortgagee shall be
entitled, without limitation, (x) to lease all or any part or parts of the
Mortgaged Property for such periods of time and upon such conditions as
Mortgagee may, in its discretion, deem proper, (y) to enforce, cancel or
modify any Lease and (z) generally to execute, do and perform any other
act, deed, matter or thing concerning the Mortgaged Property as Mortgagee
shall deem appropriate as fully as Mortgagor might do. In connection with
Mortgagee's right to possession of the Mortgaged Property as specified in
this paragraph, Mortgagor acknowledges that it has been advised that there
is a significant body of case law in Michigan which purportedly
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provides that in the absence of a showing of waste of a character
sufficient to endanger the value of the Mortgaged Property, or other
special factors, a mortgagor is entitled to remain in possession of
Mortgaged Property, and to enjoy the income, rents and profits therefrom,
during the pendency of foreclosure proceedings and until the expiration of
the redemption period, even if the mortgage documents expressly provide to
the contrary. Mortgagor further acknowledges that it has been advised that
Mortgagee recognizes the value of the security covered hereby is
inextricably intertwined with the effectiveness of the management,
maintenance and general operation of the Mortgaged Property, and that
Mortgagee would not extend the Indebtedness secured hereby unless it could
be assured that it would have the right to take possession of the
Mortgaged Property in order to manage or to control management thereof,
and to enjoy the income, rents and profits therefrom, immediately upon
default by Mortgagor hereunder, notwithstanding that foreclosure
proceedings may not have been instituted, or are pending, or the
redemption period may not have expired. Accordingly, Mortgagor hereby
knowingly, intelligently and voluntarily waives all right to possession of
the Mortgaged Property from and after the occurrence of an Event of
Default hereunder, upon demand for possession by Mortgagee, and Mortgagor
agrees not to assert any objection or defense to Mortgagee's request or
petition to a court for possession. The rights hereby conferred upon
Mortgagee have been agreed upon prior to any default by Mortgagor
hereunder and the exercise by Mortgagee of any such rights shall not be
deemed to put Mortgagee in the status of a "mortgagee in possession".
Mortgagor acknowledges that this provision is material to this transaction
and that Mortgagee would not extend the Indebtedness secured hereby but
for this paragraph.
(b) The holder of this Mortgage, in any action to foreclose it,
shall be entitled to the appointment of a receiver. In case of a foreclosure
sale, the Real Estate may be sold, at Mortgagee's election, in one parcel or in
more than one parcel and if in more than one parcel the same may be divided as
Mortgagee may elect and Mortgagee is specifically empowered, (without being
required to do so, and in its sole and absolute discretion) to cause successive
sales of portions of the Mortgaged Property to be held. At the election of
Mortgagee, the Mortgaged Property may be offered first in parcels and then as a
whole, the offer producing the highest price for the entire property offered to
prevail. Mortgagor hereby waives any right to require any such sale to be made
in parcels or any right to select such parcels.
(c) In the event of any breach of any of the covenants, agreements,
terms or conditions contained in this Mortgage, and notwithstanding to the
contrary any
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exculpatory or non-recourse language which may be contained herein, Mortgagee
shall be entitled to enjoin such breach and obtain specific performance of any
covenant, agreement, term or condition and Mortgagee shall have the right to
invoke any equitable right or remedy as though other remedies were not provided
for in this Mortgage.
(d) In the event of a default because of the existence of any lien
upon the Mortgaged Property, Mortgagee shall have the right (without being
obligated to do so or to continue to do so), without notice to Mortgagor, to
advance on and for the account of Mortgagor such sums as Mortgagee in its sole
discretion deems necessary to cure such default or to induce the holder of any
such lien to forbear from exercising its rights thereunder. Notwithstanding
anything herein to the contrary, the repayment of all such advances, with
interest thereon at the Default Rate from the date of each such advance, shall
be immediately due and payable without demand.
16. Right of Mortgagee to Credit Sale. Upon the occurrence of any
sale made under this Mortgage, whether made under the power of sale or by virtue
of judicial proceedings or of a judgment or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof. In
lieu of paying cash therefor, Mortgagee may make settlement for the purchase
price by crediting upon the Indebtedness or other sums secured by this Mortgage
the net sales price after deducting therefrom the expenses of sale and the cost
of the action and any other sums which Mortgagee is authorized to deduct under
this Mortgage. In such event, this Mortgage, the Notes and other instruments
evidencing the Indebtedness and any and all documents evidencing expenditures
secured hereby may be presented to the person or persons conducting the sale in
order that the amount so used or applied may be credited upon the Indebtedness
as having been paid.
17. Appointment of Receiver. If an Event of Default shall have
occurred and be continuing, Mortgagee as a matter of right and without notice to
Mortgagor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Mortgaged Property or any other collateral as
security for the Indebtedness and Obligations or the interest of Mortgagor
therein, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers or other manager of the Mortgaged Property,
without requiring the posting of a surety bond and without reference to the
adequacy or inadequacy of the value of the Mortgaged Property or the solvency or
insolvency of Mortgagor or any other party obligated for payment of all or any
part of the Indebtedness, and whether or not waste has occurred with respect to
the Mortgaged Property. Mortgagor hereby irrevocably consents to such
appointment and waives notice of any application therefor (except as may be
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required by law). Any such receiver or receivers shall have all the usual powers
and duties of receivers in like or similar cases and all the powers and duties
of Mortgagee in case of entry as provided in this Mortgage, including, without
limitation and to the extent permitted by law, the right to enter into leases of
all or any part of the Mortgaged Property, and shall continue as such and
exercise all such powers until the date of confirmation of sale of the Mortgaged
Property unless such receivership is sooner terminated.
18. Extension, Release, etc. (a) Without affecting the lien or
charge of this Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of the Indebtedness,
Mortgagee may, from time to time and without notice, agree to (i) release any
person liable for the Indebtedness, (ii) extend the maturity or alter any of the
terms of the Indebtedness or any guaranty thereof, (iii) grant other
indulgences, (iv) release or reconvey, or cause to be released or reconveyed at
any time at Mortgagee's option any parcel, portion or all of the Mortgaged
Property, (v) take or release any other or additional security for any
obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Mortgage shall secure less
than all of the principal amount of the Indebtedness, it is expressly agreed
that any repayments of the principal amount of the Indebtedness shall not reduce
the amount of the encumbrance of this Mortgage until the encumbrance amount
shall equal the principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect the encumbrance of this Mortgage or any
liens, rights, powers or remedies of Mortgagee hereunder, and such liens,
rights, powers and remedies shall continue unimpaired.
(c) If Mortgagee shall have the right to foreclose this Mortgage,
Mortgagor authorizes Mortgagee at its option to foreclose the lien of this
Mortgage subject to the rights of any tenants of the Mortgaged Property. The
failure to make any such tenants parties defendant to any such foreclosure
proceeding and to foreclose their rights will not be asserted by Mortgagor as a
defense to any proceeding instituted by Mortgagee to collect the Indebtedness or
to foreclose the lien of this Mortgage.
(d) Unless expressly provided otherwise, in the event that ownership
of this Mortgage and title to the Mortgaged Property or any estate therein shall
become vested in the same person or entity, this Mortgage shall not merge in
such title but shall continue as a valid lien on the Mortgaged Property for the
amount secured hereby.
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19. Security Agreement under Uniform Commercial Code. (a) It is the
intention of the parties hereto that this Mortgage shall constitute a Security
Agreement within the meaning of the Uniform Commercial Code (the "CODE") of the
State in which the Mortgaged Property is located. If an Event of Default shall
occur under this Mortgage, then in addition to having any other right or remedy
available at law or in equity, Mortgagee shall have the option of either (i)
proceeding under the Code and exercising such rights and remedies as may be
provided to a secured party by the Code with respect to all or any portion of
the Mortgaged Property which is personal property (including, without
limitation, taking possession of and selling such property) or (ii) treating
such property as real property and proceeding with respect to both the real and
personal property constituting the Mortgaged Property in accordance with
Mortgagee's rights, powers and remedies with respect to the real property (in
which event the default provisions of the Code shall not apply). If Mortgagee
shall elect to proceed under the Code, then five days' notice of sale of the
personal property shall be deemed reasonable notice and the reasonable expenses
of retaking, holding, preparing for sale, selling and the like incurred by
Mortgagee shall include, but not be limited to, reasonable attorneys' fees and
legal expenses. At Mortgagee's request, during the continuance of an Event of
Default, Mortgagor shall assemble the personal property and make it available to
Mortgagee at a place designated by Mortgagee which is reasonably convenient to
both parties.
(b) Mortgagor and Mortgagee agree, to the extent permitted by law,
that: (i) all of the goods described within the definition of the word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Mortgage
upon recording or registration in the real estate records of the proper office
shall constitute a financing statement filed as a "fixture filing" within the
meaning of Sections 9-313 and 9-402 of the Code; (iii) Mortgagor is the record
owner of the Real Estate; (iv) the mailing addresses of Mortgagor and Mortgagee
are as set forth on the first page of this Mortgage; and (v) Mortgagor's federal
tax identification number is 22-185-0850. In addition, for purposes of Article 9
of the Michigan Uniform Commercial Code, (i) Mortgagor is the "debtor", (ii)
Mortgagee is the "secured party" and (iii) information concerning the security
interest created hereby may be obtained from Mortgagee at its address on the
first page of this Mortgage.
(c) Mortgagor, upon request by Mortgagee from time to time, shall
execute, acknowledge and deliver to Mortgagee one or more separate security
agreements, in form satisfactory to Mortgagee in its reasonable discretion,
covering all or any part of the Mortgaged Property and will further execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
any financing statement, affidavit, continuation statement or certificate or
other document as Mortgagee may
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request in order to perfect, preserve, maintain, continue or extend the security
interest under and the priority of this Mortgage and such security instrument.
Mortgagor further agrees to pay to Mortgagee on demand all reasonable costs and
expenses incurred by Mortgagee in connection with the preparation, execution,
recording, filing and re-filing of any such document and all reasonable costs
and expenses of any record searches for financing statements Mortgagee shall
reasonably require. If Mortgagor shall fail to furnish any financing or
continuation statement within 10 days after request by Mortgagee, then pursuant
to the provisions of the Code, Mortgagor hereby authorizes Mortgagee, without
the signature of Mortgagor, to execute and file any such financing and
continuation statements. The filing of any financing or continuation statements
in the records relating to personal property or chattels shall not be construed
as in any way impairing the right of Mortgagee to proceed against any personal
property encumbered by this Mortgage as real property, as set forth above.
20. Assignment of Rents. Mortgagor hereby absolutely and
unconditionally assigns, transfers, conveys and sets over to Mortgagee, the
Rents as further security for the payment of the Indebtedness and performance of
the Obligations, and Mortgagor grants to Mortgagee the right to enter the
Mortgaged Property for the purpose of collecting the same and to let the
Mortgaged Property or any part thereof and to apply the Rents on account of the
Indebtedness. The foregoing assignment and grant is present and absolute and
shall continue in effect until the Indebtedness is paid in full, but Mortgagee
hereby waives the right to enter the Mortgaged Property for the purpose of
collecting the Rents, letting the Mortgaged Property or any part thereof or
applying the Rents and Mortgagor shall be entitled to collect, receive, use and
retain the Rents until the occurrence of an Event of Default under this
Mortgage; such right of Mortgagor to collect, receive, use and retain the Rents
may be revoked by Mortgagee upon the occurrence of any Event of Default under
this Mortgage by giving not less than five days' written notice of such
revocation to Mortgagor; in the event such notice is given, Mortgagor shall pay
over to Mortgagee, or to any receiver appointed to collect the Rents, any lease
security deposits, and shall pay monthly in advance to Mortgagee, or to any such
receiver, the fair and reasonable rental value as determined by Mortgagee for
the use and occupancy of the Mortgaged Property or of such part thereof as may
be in the possession of Mortgagor or any affiliate of Mortgagor, and upon
default in any such payment Mortgagor and any such affiliate will vacate and
surrender the possession of the Mortgaged Property to Mortgagee or to such
receiver, and in default thereof may be evicted by summary proceedings or
otherwise. Mortgagor shall not accept prepayments of installments of Rent to
become due for a period of more than one month in advance (except for security
deposits and estimated payments of percentage rent, if any). Mortgagee shall be
entitled to all of the rights and benefits conferred by
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Act No. 210 of the Michigan Public Acts of 1953 as it may be amended, including
by Act No. 151 of the Michigan Public Acts of 1966 (MCLA 554.231 et seq.), and
Act No. 228 of the Michigan Public Acts of 1925 as it may be amended, including
by Act No. 55 of the Michigan Public Acts of 1933 (MCLA 554.211 et seq.). The
collection of rents by Mortgagee shall in no way waive the right of Mortgagee to
foreclose this Mortgage in the event of any default.
21. Trust Funds. All lease security deposits of the Real Estate
shall be treated as trust funds not to be commingled with any other funds of
Mortgagor. Within 10 days after request by Mortgagee, Mortgagor shall furnish
Mortgagee satisfactory evidence of compliance with this subsection, together
with a statement of all lease security deposits by lessees and copies of all
Leases not previously delivered to Mortgagee under which such security deposits
are held, which statement shall be certified by Mortgagor.
22. Additional Rights. The holder of any subordinate lien or
subordinate mortgage on the Mortgaged Property shall have no right to terminate
any Lease whether or not such Lease is subordinate to this Mortgage nor shall
any holder of any subordinate lien or subordinate mortgage join any tenant under
any Lease in any action to foreclose the lien or modify, interfere with, disturb
or terminate the rights of any tenant under any Lease. By recordation of this
Mortgage all subordinate lienholders under subordinate mortgages are subject to
and notified of this provision, and any action taken by any such lienholder or
mortgagee contrary to this provision shall be null and void. Upon the occurrence
of any Event of Default, Mortgagee may, in its sole discretion and without
regard to the adequacy of its security under this Mortgage, apply all or any
part of any amounts on deposit with Mortgagee under this Mortgage against all or
any part of the Indebtedness. Any such application shall not be construed to
cure or waive any Default or Event of Default or invalidate any act taken by
Mortgagee on account of such Default or Event of Default.
23. Changes in Method of Taxation. In the event of the passage after
the date hereof of any law of any Governmental Authority deducting from the
value of the Premises for the purposes of taxation any lien or mortgage thereon,
or changing in any way the laws for the taxation of mortgages or deeds of trust
or debts secured thereby for federal, state or local purposes, or the manner of
collection of any such taxes, and imposing a tax, either directly or indirectly,
on mortgages or deeds of trust or debts secured thereby, the holder of this
Mortgage shall have the right to declare the Indebtedness due on a date to be
specified by not less than 30 days' written notice to be given to Mortgagor
unless within such 30-day period Mortgagor shall assume as an
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Obligation hereunder the payment of any tax so imposed until full payment of the
Indebtedness and such assumption shall be permitted by law.
24. Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been sufficiently given or served when served
in the same manner as set forth for notices in the Senior Secured Credit
Agreement.
25. No Oral Modification. This Mortgage may not be changed or
terminated orally. Any agreement made by Mortgagor and Mortgagee after the date
of this Mortgage relating to this Mortgage shall be superior to the rights of
the holder of any intervening or subordinate mortgage, lien or encumbrance.
26. Partial Invalidity. In the event any one or more of the
provisions contained in this Mortgage shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included. Notwithstanding to the contrary anything contained in this Mortgage or
in any provisions of the Indebtedness or Loan Documents, the obligations of
Mortgagor and of any other obligor under the Indebtedness or Loan Documents
shall be subject to the limitation that Mortgagee shall not charge, take or
receive, nor shall Mortgagor or any other obligor be obligated to pay to
Mortgagee, any amounts constituting interest in excess of the maximum rate
permitted by law to be charged by Mortgagee.
27. Mortgagor's Waiver of Rights. To the fullest extent permitted by
law, Mortgagor waives the benefit of all laws now existing or that may
subsequently be enacted providing for (i) any appraisement before sale of any
portion of the Mortgaged Property, (ii) any extension of the time for the
enforcement of the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Mortgaged Property from attachment, levy or sale under
execution or exemption from civil process. To the full extent Mortgagor may do
so, Mortgagor agrees that Mortgagor will not at any time insist upon, plead,
claim or take the benefit or advantage of any law now or hereafter in force
providing for any appraisement, valuation, stay, exemption, extension or
redemption, or requiring foreclosure of this Mortgage before exercising any
other remedy granted hereunder and Mortgagor, for Mortgagor and its successors
and assigns, and for any and all persons ever claiming any interest in the
Mortgaged Property, to the extent permitted by law, hereby waives and releases
all rights of redemption, valuation, appraisement, stay of execution, notice of
election to mature or
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<PAGE> 30
declare due the whole of the secured indebtedness and marshalling in the event
of foreclosure of the liens hereby created.
28. Remedies Not Exclusive. Mortgagee shall be entitled to enforce
payment of the Indebtedness and performance of the Obligations and to exercise
all rights and powers under this Mortgage or under any of the other Loan
Documents or other agreement or any laws now or hereafter in force,
notwithstanding some or all of the Indebtedness and Obligations may now or
hereafter be otherwise secured, whether by deed of trust, mortgage, security
agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this
Mortgage nor its enforcement, shall prejudice or in any manner affect
Mortgagee's right to realize upon or enforce any other security now or hereafter
held by Mortgagee, it being agreed that Mortgagee shall be entitled to enforce
this Mortgage and any other security now or hereafter held by Mortgagee in such
order and manner as Mortgagee may determine in its absolute discretion. No
remedy herein conferred upon or reserved to Mortgagee is intended to be
exclusive of any other remedy herein or by law provided or permitted, but each
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. Every
power or remedy given by any of the Loan Documents to Mortgagee or to which
either may otherwise be entitled, may be exercised, concurrently or
independently, from time to time and as often as may be deemed expedient by
Mortgagee. In no event shall Mortgagee, in the exercise of the remedies provided
in this Mortgage (including, without limitation, in connection with the
assignment of Rents, or the appointment of a receiver and the entry of such
receiver on to all or any part of the Mortgaged Property), be deemed a
"mortgagee in possession," and Mortgagee shall not in any way be made liable for
any act, either of commission or omission, in connection with the exercise of
such remedies.
29. Multiple Security. If (a) the Premises shall consist of one or
more parcels, whether or not contiguous and whether or not located in the same
county, or (b) in addition to this Mortgage, Mortgagee shall now or hereafter
hold or be the mortgagee of one or more additional mortgages, liens, deeds of
trust or other security (directly or indirectly) for the Indebtedness upon other
property in the State in which the Premises are located (whether or not such
property is owned by Mortgagor or by others) or (c) both the circumstances
described in clauses (a) and (b) shall be true, then to the fullest extent
permitted by law, Mortgagee may, at its election, commence or consolidate in a
single foreclosure action all foreclosure proceedings against all such
collateral securing the Indebtedness (including the Mortgaged Property), which
action may be brought or consolidated in the courts of, or sale conducted in,
any county in which any of such collateral is located. Mortgagor acknowledges
that the right to maintain a consolidated foreclosure action is a specific
inducement to Mortgagee to
29
<PAGE> 31
extend the Indebtedness, and Mortgagor expressly and irrevocably waives any
objections to the commencement or consolidation of the foreclosure proceedings
in a single action and any objections to the laying of venue or based on the
grounds of forum non conveniens which it may now or hereafter have. Mortgagor
further agrees that if Mortgagee shall be prosecuting one or more foreclosure or
other proceedings against a portion of the Mortgaged Property or against any
collateral other than the Mortgaged Property, which collateral directly or
indirectly secures the Indebtedness, or if Mortgagee shall have obtained a
judgment of foreclosure or similar judgment against such collateral, then,
whether or not such proceedings are being maintained or judgments were obtained
in or outside the State in which the Premises are located, Mortgagee may
commence or continue any foreclosure proceedings and exercise its other remedies
granted in this Mortgage against all or any part of the Mortgaged Property and
Mortgagor waives any objections to the commencement or continuation of a
foreclosure of this Mortgage or exercise of any other remedies hereunder based
on such other proceedings or judgments, and waives any right to seek to dismiss,
stay, remove, transfer or consolidate either any action under this Mortgage or
such other proceedings on such basis. Neither the commencement nor continuation
of proceedings to foreclose this Mortgage nor the exercise of any other rights
hereunder nor the recovery of any judgment by Mortgagee in any such proceedings
shall prejudice, limit or preclude Mortgagee's right to commence or continue one
or more foreclosure or other proceedings or obtain a judgment against any other
collateral (either in or outside the State in which the Real Estate is located)
which directly or indirectly secures the Indebtedness, and Mortgagor expressly
waives any objections to the commencement of, continuation of, or entry of a
judgment in such other proceedings or exercise of any remedies in such
proceedings based upon any action or judgment connected to this Mortgage, and
Mortgagor also waives any right to seek to dismiss, stay, remove, transfer or
consolidate either such other proceedings or any sale or action under this
Mortgage on such basis. It is expressly understood and agreed that to the
fullest extent permitted by law, Mortgagee may, at its election, cause the sale
of all collateral which is the subject of a single foreclosure action at either
a single sale or at multiple sales conducted simultaneously and take such other
measures as are appropriate in order to effect the agreement of the parties to
dispose of and administer all collateral securing the Indebtedness (directly or
indirectly) in the most economical and least time-consuming manner.
30. Successors and Assigns. All covenants of Mortgagor contained in
this Mortgage are imposed solely and exclusively for the benefit of Mortgagee
and its respective successors and assigns, and no other person or entity shall
have standing to require compliance with such covenants or be deemed, under any
circumstances, to be a beneficiary of such covenants, any or all of which may be
freely waived in whole or
30
<PAGE> 32
in part by Mortgagee at any time if in its sole discretion such waiver is deemed
advisable. All such covenants of Mortgagor shall run with the land and bind
Mortgagor, the successors and assigns of Mortgagor (and each of them) and all
subsequent owners, encumbrancers and tenants of the Mortgaged Property, and
shall inure to the benefit of Mortgagee and its respective successors and
assigns. The word "Mortgagor" shall be construed as if it read "Mortgagors"
whenever the sense of this Mortgage so requires and if there shall be more than
one Mortgagor, the obligations of the Mortgagors shall be joint and several.
31. No Waivers, etc. Any failure by Mortgagee to insist upon the
strict performance by Mortgagor of any of the terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgagor of any and all of
the terms and provisions of this Mortgage to be performed by Mortgagor.
Mortgagee may release, regardless of consideration and without the necessity for
any notice to or consent by the mortgagee of any subordinate mortgage or the
holder of any subordinate lien on the Mortgaged Property, any part of the
security held for the obligations secured by this Mortgage without, as to the
remainder of the security, in anywise impairing or affecting the lien of this
Mortgage or the priority of such lien over any subordinate lien or mortgage.
32. Governing Law, etc. This Mortgage shall be governed by and
construed in accordance with the laws of the State in which the Premises are
located, except that Mortgagor expressly acknowledges that by its terms the
Senior Secured Credit Agreement shall be governed and construed in accordance
with the laws of the State of New York, without regard to principles of conflict
of law, and for purposes of consistency, Mortgagor agrees that in any in
personam proceeding related to this Mortgage the rights of the parties to this
Mortgage shall also be governed by and construed in accordance with the laws of
the State of New York governing contracts made and to be performed in that
State, without regard to principles of conflict of law.
33. Waiver of Trial by Jury. Mortgagor and Mortgagee each hereby
irrevocably and unconditionally waive trial by jury in any action, claim, suit
or proceeding relating to this Mortgage and for any counterclaim brought
therein.
34. Certain Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Mortgage shall be used interchangeably in singular or plural form and the
word "Mortgagor" shall mean "each Mortgagor or any subsequent owner or owners of
the Mortgaged Property or any part thereof or interest therein," the word
"Mortgagee" shall mean
31
<PAGE> 33
"Mortgagee or any successor Administrative Agent," the word "Notes" shall mean
"the notes that may from time to time be given pursuant to the terms of the
Senior Secured Credit Agreement or any other evidence of indebtedness secured by
this Mortgage," the word "person" shall include any individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, or other entity, and the words "Mortgaged Property" shall include any
portion of the Mortgaged Property or interest therein. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa. The captions in this Mortgage are for
convenience or reference only and in no way limit or amplify the provisions
hereof.
35. Reconveyance of Mortgage. Upon payment in full of the
Indebtedness, the termination of all Commitments under the Senior Secured Credit
Agreement secured hereby and the compliance with the Obligations then required
to be complied with, Mortgagee shall release the encumbrance of this Mortgage.
If any of the Mortgaged Property shall be sold, transferred or otherwise
disposed of by Mortgagor in a transaction expressly permitted by the Senior
Secured Credit Agreement, then Mortgagee shall execute and deliver (at the sole
cost and expense of Mortgagor) all releases, reconveyances or other documents
reasonably necessary or desirable for the release of such Mortgaged Property
from the encumbrance of this Mortgage.
36. Conflict With Senior Secured Credit Agreement. In the event of
any conflict or inconsistency between the terms and provisions of this Mortgage
and the terms and provisions of the Senior Secured Credit Agreement, the terms
and provisions of the Senior Secured Credit Agreement shall govern, other than
with respect to the Section of this Mortgage captioned "Governing Law, etc.". By
their execution of the Senior Secured Credit Agreement, each Lender hereby
agrees that it shall not have the right to institute any suit for enforcement of
Notes or any other Indebtedness secured by this Mortgage or any other Security
Document, if and to the extent that the institution or prosecution thereof or
the entry of judgment therein would, under applicable law, result in the
surrender, impairment, waiver or loss of the Lien of this Mortgage or any other
Security Document or impede or delay the enforcement of the Lien of this
Mortgage or any other Security Document.
37. Receipt of Copy. Mortgagor acknowledges that it has received a
true copy of this Mortgage.
32
<PAGE> 34
This Mortgage has been duly executed by Mortgagor as of the date
first above written.
Signed, sealed and EV INTERNATIONAL, INC.
delivered in our
presence: By: /s/ CHRISTINE K. VANDEN BEUKEL
-----------------------------------
Name: Christine K. Vanden Beukel
Title: Vice President, Secretary and
Treasurer
/s/ GINGER BALLARD
- ---------------------------
Name: Ginger Ballard
/s/ ARON GOSER
- ---------------------------
Name: Aron Goser
33
<PAGE> 35
State of New York )
: ss.:
County of New York )
The foregoing instrument was acknowledged before me this 10th day of
February, 1997, by Christine K. Vanden Beukel as Vice President, Secretary and
Treasurer of EV INTERNATIONAL, INC., a Delaware corporation, on behalf of the
corporation.
/s/ NANCY L. LOMAZZO
-------------------------
Notary Public
My commission expires:
June 3, 1998
- -------------------------
[SEAL] NANCY L. LOMAZZO
Notary Public, State of New York
No. 31-5061123
Qualified in New York County
Commission Expires June 3, 1998
<PAGE> 36
600 Cecil Street
Buchanan, MI 49107
Berrien County
Schedule A
the following described premises situated n the City of Buchanan, County of
Berrien and State of Michigan:
Lots 28, 29, 30, 31 and 32 (including the South 1/2 of vacated Jordan
Street adjacent thereto), Rynearson's Addition to the Village of Buchanan,
according to the plat thereof, recorded June 3, 1867, in Volume 27 of
Deeds, page 493, Berrien County Records, together with all appurtenant
interests which Grantor may own in connection with the property,
including, but not limited to, any interest in the land platted as
"Berrien Street" adjacent to the lots;
ALSO
Lots 29, 30, 166, 167 and 168 in Liberty Heights Add. to the
Village (now City) of Buchanan, according to the plat thereof recorded
in the off. of the Reg. of Deeds for Berr. Co., Mich. at Book 6 of Plats,
page 6.
Sub. to the reservations and restrictions contained in the Deed
recorded at Liber 564 of Deeds, page 317.
ALSO
Lot 88 of Liberty Heights Add. to the Village (now city) of
Buchanan, except a strip of land 7 feet in width across the west end of
said lot to be used for alley purposes, said alley to run from the south
line of Smith St. south to the south line of said Liberty Heights
Addition.
ALSO
City of Buchanan - That part of Sec. 36. Twp. 7 S., R. 18W.,
City of Buchanan, Berrien Co., Michigan, described as follows, to-wit: -
<PAGE> 37
600 Cecil Street
Buchanan, MI 49107
Berrien County
Commencing at a point 514.6 feet east of west qr. post of said Sec. 36
(called 515 feet); thence N. 0(degree) 37' east 64 feet to the pl. of
beginning of the parcel of land herein described; thence N. 0(degree) 37'
East 564.05 feet to the NW cor. of Lot 29, Liberty Heights Addition to the
Village, now City of Buchanan, according to the Plat. thereof, recorded
July 24, 1918 in Book 6 of Plats, page 6; thence east, along the North lot
lines of Lots 29, 30 and 88, said Liberty Heights Addition, 463.85 feet to
the West line of Cecil Avenue, thence S. 0(degree) 37' west, along the
west line of Cecil Ave., and said line extended 100 feet; thence S.
89(degree) 29' east, along the south line of Jordan Street, so-called,
326.05 feet, to an iron at the intersection of Jordan and Liberty Streets,
so-called; thence S. 0(degree) 38' west, along the west line of Liberty
Street, so-called 469.15 feet to an iron; th. W. 748.52 feet, along the N.
line of Carroll St., to an iron; th. N. 71(degree) 05' west 43.18 feet,
along the N. line of Carroll St., to an iron at the place of beginning.
Including lots 29, 30, 88, 166, 167 and 168, said Liberty Heights
Addition.
ALSO
Township of Buchanan - That part of Sec. 36, Twp. 7 S., R. 18 W., Buchanan
Twp., B.C.M., described as follows, to-wit: Commencing at a point 1302.15
feet west of the center of said Section (called 19.75 chains) on the south
line of Carroll Street, so-called; thence S. 0(degree) 56' west 259 feet
to an iron on the northerly line of a private road; th. N. 67(degree) 19'
west 671 feet to a spike at the intersection of the northerly line of said
private road and the south line of Carroll Street, so-called; th. E. 623.2
feet, a long the south line of Carroll Street, so-called to the place of
beginning.
ALSO
Lots Thirty-one and Thirty-two, LIBERTY HEIGHTS ADDITION to the Village,
now City, of Buchanan, Berrien County, Michigan, according to the Plat
thereof recorded July 24, 1918 in Book 6 of Plats, page 6.
2
<PAGE> 38
600 Cecil Street
Buchanan, MI 49107
Berrien County
EXCEPTING THEREFROM that part dedicated as Cul-De-Sac in Sylvan Avenue
pursuant to document recorded at Liber 1009, page 1124.
ALSO
all those certain pieces or parcels of land situated in the Township of
Buchanan in Berrien county, and State of Michigan, known and described as
follows:
A part of the Northwest 1/4 of Section 36, Town 7 South, Range 18 West and
described as commencing 515 feet East and 64 feet North of the West
quarter post of said Section 36; thence North 511 feet; thence East 468
feet; thence South 525 feet; thence West 427 feet; thence North 75(degree)
West, 41 feet to the place of the beginning.
Also, commencing 983 feet East and 50 feet North of the West quarter post
of Section 36, Town 7 South, Range 18 West; thence North 525 feet; thence
East 393 feet; thence South 525 feet; thence West to the place of
beginning, together with all the hereditaments and appurtenances thereto
belonging or in any wise appertaining,
Also, a part of the Southwest 1/4 of said Section 36 and described as
commencing 19.75 chains West of the center of said Section 36; thence
South 254 feet to the North line of the private road; thence North
68(degree) West along the North line of the private road, 672 feet to the
South line of the right-of-way of the Buchanan-St. Joseph R.R.Co.; thence
East along said right-of-way, 624 feet to the place of beginning,
Also, a strip of land 50 feet wide, 25 feet one each side of following
described line: Commencing at a point on West line of Section 36, Township
7 South, Range 18 West, which is 13 feet North of center of the North Main
track of the Michigan Central Railroad in a line the magnetic course of
which is South 82(degree) 39' East, 255.6 feet to a point by a curve to
the left whose radius is 1432.7 feet a distance of 239.5 feet
3
<PAGE> 39
600 Cecil Street
Buchanan, MI 49107
Berrien County
to a point which is 25 feet North of East and West quarter line of Section
36, Township 7 South, Range 18 West; thence Easterly parallel to and 25
feet North of South line of said Section a distance of 1233.9 feet; thence
Northeasterly by a curve to the left whose radius is 955.4 feet, a
distance of 1121 feet; thence Northeasterly tangent to the last described
curve a distance of 657.3 feet; thence to the left by a curve whose radius
is 1432.7 feet a distance of 107.7 feet except so much of the above
described property is owned and occupied by the M.C.R.R. and Minnie
Weisgerber, 3.43 acres, more or less.
ALSO
Lots 33 and 34, Rynearsons Addition to the Village of Buchanan, according
to the plat thereof, recorded June 3, 1867, in Volume 27 of Deeds, page
493, Berrien County Records;
Also, the North Half of vacated Jordan Street lying South of said Lot 33.
4
<PAGE> 1
EXHIBIT 10(o)
MICHIGAN
Prepared by and after recording, please return to:
Simpson Thacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
ATTN: Emily R. Steinman, Esq.
THIS MORTGAGE CONSTITUTES A FIXTURE FILING UNDER THE
MICHIGAN COMMERCIAL CODE
MORTGAGE ASSIGNMENT OF RENTS
AND LEASES, SECURITY AGREEMENT AND FIXTURE FILING
from
EV INTERNATIONAL, INC., Mortgagor
to
THE CHASE MANHATTAN BANK, as Administrative Agent, Mortgagee
DATED AS OF FEBRUARY 10, 1997
This Mortgage secures future advances and is a future advance mortgage under Act
348 of the Public Acts of 1990 (MCLA 565.901 et. seq.).
<PAGE> 2
MICHIGAN
MORTGAGE, ASSIGNMENT OF RENTS
AND LEASES, SECURITY AGREEMENT AND FIXTURE FILING
THIS MORTGAGE, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT
AND FIXTURE FILING, dated as of February 10, 1997 is made by EV INTERNATIONAL,
INC., a Delaware corporation (formerly known as Electro-Voice, Incorporated)
("MORTGAGOR"), whose address is 600 Cecil Street, Buchanan, Michigan 49107, to
THE CHASE MANHATTAN BANK, a New York banking corporation whose address is 270
Park Avenue, New York, New York 10017, as Administrative Agent (in such
capacity, "MORTGAGEE") for the several banks and other financial institutions
(the "LENDERS") from time to time parties to the Credit Agreement dated as of
February 10, 1997, (as the same may be amended, supplemented, waived or
otherwise modified from time to time the "SENIOR SECURED CREDIT AGREEMENT")
among Gulton Acquisition Corp., a Delaware corporation ("BORROWER"), the Lenders
and Mortgagee. References to this "Mortgage" shall mean this instrument and any
and all renewals, modifications, amendments, supplements,
extensions, consolidations, substitutions, spreaders and replacements of this
instrument. Capitalized terms used and not otherwise defined herein shall have
the meanings assigned thereto in the Senior Secured Credit Agreement.
Background
A. Gulton Holdings Corp., a Delaware corporation which, on or after
the Effective Date, will be renamed EVI Audio Holding, Inc. ("HOLDINGS") and
Borrower, its direct Wholly Owned Subsidiary, were newly formed companies
organized by an investor group led by Greenwich Street Capital Partners, Inc., a
Delaware corporation ("GSCP").
B. Borrower acquired Gulton Industries Inc., a Delaware corporation
("GII") which was a subsidiary of Mark IV Industries, Inc. ("MARK IV") through
the purchase from Mark IV and Mark IV PLC of the capital stock of GII (the
"ACQUISITION") pursuant to the Stock Purchase Agreement, dated as of December
12, 1996, by and among Mark IV, Mark IV PLC and Borrower (as amended,
<PAGE> 3
supplemented, waived or otherwise modified from time to time in accordance with
the Senior Secured Credit Agreement, the "STOCK PURCHASE AGREEMENT").
C. Borrower merged with and into GII (the "FIRST MERGER"), and GII
as surviving corporation of the First Merger merged (the "SECOND MERGER"; the
First Merger together with the Second Merger, the "MERGERS") with and into
Electro-Voice, Incorporated, a Delaware corporation and a Wholly Owned
Subsidiary of GII, which was thereupon renamed EV International, Inc.
D. In order to (i) finance a portion of the Acquisition
Consideration, (ii) refinance a portion of the existing indebtedness of GII and
its subsidiaries, (iii) pay certain fees, taxes and expenses related to (x) the
Acquisition and the financing thereof and (y) the refinancing of such existing
indebtedness of GII and its subsidiaries and (iv) finance the working capital
and other business requirements of Mortgagor and its subsidiaries following the
consummation of the Acquisition and the Merger, Acquisition Co. has requested
that the Lenders make the Loans and issue and participate in the Letters of
Credit in accordance with the terms of the Senior Secured Credit Agreement.
E. Mortgagor is the owner of the parcel(s) of real property
described on Schedule A attached hereto (such real property, together with all
of the buildings, improvements, structures and fixtures now or subsequently
located thereon (the "IMPROVEMENTS"), being collectively referred to as the
"REAL ESTATE").
F. Pursuant to the terms of the Senior Secured Credit Agreement, the
Lenders have agreed, among other things, to make the Loans and the Issuing
Lender has agreed to issue, and the L/C Participants have agreed to acquire
undivided participating interests in, the Letter(s) of Credit for the account of
the Borrower upon the terms and subject to the conditions set forth in the
Senior Secured Credit Agreement which conditions include the grant by Mortgagor
to Mortgagee of a first lien upon and perfected security interest in, among
other things, all estate, right, title and interest of Mortgagor in and to the
Real Estate pursuant to the terms hereof.
G. Mortgagor is the surviving corporation of any merger of the
Borrower, and it is to the advantage and benefit of Mortgagor that the Lenders
make the Loans to the Borrower.
2
<PAGE> 4
Granting Clauses
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Mortgagor agrees that to secure:
(a) the repayment of principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
Reimbursement Obligations and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Loan Party, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding) the Loans (as they may be evidenced by the Notes from time to
time) and all other obligations (including the Reimbursement Obligations)
and liabilities of Mortgagor to Mortgagee, the Issuing Lender and the
Lenders, whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Senior Secured Credit Agreement, the Loans,
the Letters of Credit, the Security Documents, any Guarantee Obligation of
Mortgagor as to which any Lender is a beneficiary, any Permitted Hedging
Arrangement with any Lender or any banking affiliate of any Lender
(whether entered into directly, or guaranteed, by Mortgagor), the
Guarantee and Collateral Agreement dated as of February 10, 1997 between
Mortgagor, Holdings and Mortgagee (the "GUARANTEE") or any other document
made, delivered or given in connection therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all fees, charges and disbursements of counsel to the Administrative
Agent, the Issuing Lender or any Lender that are required to be paid by
any Loan Party pursuant to the Senior Secured Credit Agreement) (the items
set forth above being referred to collectively as the "INDEBTEDNESS"); and
(b) the performance of all covenants, agreements, obligations and
liabilities of Mortgagor (the "OBLIGATIONS") under or pursuant to the
provisions of the Senior Secured Credit Agreement, the Loans, this
Mortgage, the Guarantee, any other document securing payment of the
Indebtedness (the "SECURITY DOCUMENTS") and any amendments, supplements,
extensions, renewals, restatements, replacements or modifications of any
of the foregoing (the Senior Secured Credit Agreement, the Loans, the
Letters of Credit, this Mortgage, the Guarantee and all other documents
and instruments from time to time evidencing, securing or guaranteeing the
payment of the Indebtedness or the performance of the Obligations, as any
of the same may be amended,
3
<PAGE> 5
supplemented, extended, renewed, restated, replaced or modified from time
to time, are collectively referred to as the "LOAN DOCUMENTS");
MORTGAGOR HEREBY GRANTS TO MORTGAGEE A LIEN UPON AND A SECURITY INTEREST IN, AND
HEREBY MORTGAGES AND WARRANTS, GRANTS, ASSIGNS, TRANSFERS AND SETS OVER TO
MORTGAGEE:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever of
Mortgagor, in possession or expectancy, in and to the Real Estate or any
part thereof;
(C) all right, title and interest of Mortgagor in, to and under all
easements, rights of way, gores of land, streets, ways, alleys, passages,
sewer rights, waters, water courses, water and riparian rights,
development rights, air rights, mineral rights and all estates, rights,
titles, interests, privileges, licenses, tenements, hereditaments and
appurtenances belonging, relating or appertaining to the Real Estate, and
any reversions, remainders, rents, issues, profits and revenue thereof and
all land lying in the bed of any street, road or avenue, in front of or
adjoining the Real Estate to the center line thereof;
(D) all right, title and interest of Mortgagor in and to all of the
fixtures, chattels, business machines, machinery, apparatus, equipment,
furnishings, fittings and articles of personal property of every kind and
nature whatsoever, and all appurtenances and additions thereto and
substitutions or replacements thereof (together with, in each case,
attachments, components, parts and accessories) currently owned or
subsequently acquired by Mortgagor and now or subsequently attached to, or
contained in or used or usable in any way in connection with any operation
or letting of the Real Estate, including but without limiting the
generality of the foregoing, all screens, awnings, shades, blinds,
curtains, draperies, artwork, carpets, rugs, storm doors and windows,
furniture and furnishings, heating, electrical, and mechanical equipment,
lighting, switchboards, plumbing, ventilating, air conditioning and
air-cooling apparatus, refrigerating, and incinerating equipment,
escalators, elevators, loading and unloading equipment and systems,
stoves, ranges, laundry equipment, cleaning systems (including window
cleaning apparatus), telephones, communication systems (including
satellite dishes and antennae), televisions, computers, sprinkler systems
and other fire prevention and extinguishing apparatus and materials,
security systems, motors, engines,
4
<PAGE> 6
machinery, pipes, pumps, tanks, conduits, appliances, fittings and
fixtures of every kind and description (all of the foregoing in this
paragraph (D) being referred to as the "EQUIPMENT");
(E) all right, title and interest of Mortgagor in and to all
substitutes and replacements of, and all additions and improvements to,
the Real Estate and the Equipment, subsequently acquired by or released to
Mortgagor or constructed, assembled or placed by Mortgagor on the Real
Estate, immediately upon such acquisition, release, construction,
assembling or placement, including, without limitation, any and all
building materials to be used by Mortgagor whether stored at the Real
Estate or offsite, and, in each such case, without any further mortgage,
conveyance, assignment or other act by Mortgagor;
(F) all right, title and interest of Mortgagor in, to and under all
leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or occupancy
of the Real Estate or the Equipment or any part thereof, now existing or
subsequently entered into by Mortgagor and whether written or oral and all
guarantees of any of the foregoing (collectively, as any of the foregoing
may be amended, restated, extended, renewed or modified from time to time,
the "LEASES"), and all rights of Mortgagor in respect of cash and
securities deposited thereunder and the right to receive and collect the
revenues, income, rents, issues and profits thereof, together with all
other rents, royalties, issues, profits, revenue, income and other
benefits arising from the use and enjoyment of the Mortgaged Property (as
defined below) (collectively, the "RENTS") including, but not limited to,
all rights conferred by Act No. 210 of the Michigan Public Acts of 1953 as
amended by Act No. 151 of the Michigan Public Acts of 1966 (MCLA 554.231
et seq.), and Act No. 228 of the Michigan Public Acts of 1925 as amended
by Act No. 55 of the Michigan Public Acts of 1933 (MCLA 554.211 et seq.);
(G) all books and records relating to or used in connection with the
operation of the Real Estate or the Equipment or any part thereof;
(H) all right, title and interest of Mortgagor, to the extent
assignable, in and to (i) all unearned premiums under insurance policies
now or subsequently obtained by Mortgagor relating to the Real Estate or
Equipment, (ii) any such insurance policies, (iii) all proceeds of any
such insurance policies (including title insurance policies) including the
right to collect and receive such proceeds, subject to the provisions
relating to insurance generally set forth below, and (iv) all awards and
other compensation, including the interest payable thereon and
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the right to collect and receive the same, made to the present or any
subsequent owner of the Real Estate or Equipment for the taking by eminent
domain, condemnation or otherwise, of all or any part of the Real Estate
or any easement or other right therein, subject to the provisions relating
to condemnation awards generally set forth below;
(I) all right, title and interest of Mortgagor, to the extent
assignable, in and to (i) all contracts from time to time executed by
Mortgagor or any manager or agent on its behalf relating to the ownership,
construction, maintenance, repair, operation, occupancy, sale or financing
of the Real Estate or Equipment or any part thereof and all agreements
relating to the purchase or lease of any portion of the Real Estate or any
property which is adjacent or peripheral to the Real Estate, together with
the right to exercise such options (collectively, the "CONTRACTS"), (ii)
all consents, licenses, building permits, certificates of occupancy and
other governmental approvals relating to construction, completion,
occupancy, use or operation of the Real Estate or any part thereof
(collectively, the "PERMITS") and (iii) all drawings, plans,
specifications and similar or related items relating to the Real Estate
(collectively, the "PLANS");
(J) any and all monies now or subsequently on deposit for the
payment of real estate taxes or special assessments against the Real
Estate or for the payment of premiums on insurance policies covering the
foregoing property or otherwise on deposit with or held by Mortgagee as
provided in this Mortgage;
(K) all accounts and revenues arising from the operation of the
Improvements; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by Mortgagor and described in the foregoing
clauses (A) through (E) are collectively referred to as the "PREMISES", and
those described in the foregoing clauses (A) through (L) are collectively
referred to as the "MORTGAGED PROPERTY").
TO HAVE AND TO HOLD the Mortgaged Property and the rights and
privileges hereby mortgaged unto Mortgagee, its successors and assigns for the
uses and purposes set forth, until the Indebtedness is fully paid and the
Obligations fully performed or as otherwise expressly provided in the Section of
this Mortgage entitled "Release of Mortgage".
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Terms and Conditions
Mortgagor further represents, warrants, covenants and agrees with
Mortgagee as follows:
1. Warranty of Title. Mortgagor warrants that Mortgagor has good
title to the Real Estate in fee simple and good title to the rest of the
Mortgaged Property, subject only to the matters that are set forth in Schedule B
of the title insurance policy or policies being issued to Mortgagee to insure
the lien of this Mortgage and Liens expressly permitted under the Senior Secured
Credit Agreement (collectively, the "PERMITTED EXCEPTIONS") and Mortgagor shall
warrant, defend and preserve such title and the lien of the Mortgage thereon
against all claims of all persons and entities. Mortgagor further warrants that
it has the right to mortgage the Mortgage Property.
2. Payment of Indebtedness. Mortgagor shall pay the Indebtedness at
the times and places and in the manner specified in the Senior Secured Credit
Agreement and shall perform all the Obligations.
3. Requirements. (a) Mortgagor shall promptly comply with, or cause
to be complied with, and conform to all present and future laws, statutes,
codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements, and irrespective of the nature of the work to be done, of each of
the United States of America, any State and any municipality, local government
or other political subdivision thereof and any agency, department, bureau,
board, commission or other instrumentality of any of them, now existing or
subsequently created (collectively, "GOVERNMENTAL AUTHORITY") which has
jurisdiction over the Mortgaged Property and all covenants, restrictions and
conditions now or later of record which may be applicable to any of the
Mortgaged Property, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any of the
Mortgaged Property, except to the extent that failure to comply therewith, in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. All present and future laws, statutes, codes, ordinances, orders,
judgments, decrees, rules, regulations and requirements of every Governmental
Authority applicable to Mortgagor or to any of the Mortgaged Property and all
covenants, restrictions, and conditions which now or later may be applicable to
any of the Mortgaged Property are collectively referred to as the "LEGAL
REQUIREMENTS".
(b) From and after the date of this Mortgage, except as expressly
permitted under the Senior Secured Credit Agreement or herein, Mortgagor shall
not by act or omission permit, other than Permitted Exceptions, any building or
other
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improvement on any premises not subject to the lien of this Mortgage to rely on
the Premises or any part thereof or any interest therein to fulfill any Legal
Requirement, and Mortgagor hereby assigns to Mortgagee any and all rights to
give consent for all or any portion of the Premises or any interest therein to
be so used. Mortgagor shall not by act or omission impair the integrity of any
of the Real Estate as a single zoning lot separate and apart from all other
premises. Mortgagor represents that each parcel of the Real Estate constitutes a
legally subdivided lot, in compliance with all subdivision laws and similar
Legal Requirements, except to the extent that failure to comply therewith, in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. Any act or omission by Mortgagor which would result in a violation of
any of the provisions of this subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Except as expressly
permitted under the Senior Secured Credit Agreement, Mortgagor, prior to
delinquency, shall pay and discharge all taxes of every kind and nature
(including, without limitation, all real and personal property, income,
franchise, withholding, transfer, gains, profits and gross receipts taxes), all
charges for any easement or agreement maintained for the benefit of any of the
Mortgaged Property, all general and special assessments, levies, permits,
inspection and license fees, all water and sewer rents and charges and all other
public charges even if unforeseen or extraordinary, imposed upon or assessed
against or which may become a lien on any of the Mortgaged Property, or arising
in respect of the occupancy, use or possession thereof, together with any
penalties or interest on any of the foregoing (all of the foregoing are
collectively referred to as the "IMPOSITIONS"). Mortgagor shall within 30 days
after the request of Mortgagee deliver to Mortgagee (i) original or copies of
receipted bills and cancelled checks or other evidence of payment of such
Imposition if it is a real estate tax or other public charge and (ii) evidence
acceptable to Mortgagee in its reasonable discretion showing the payment of any
other such Imposition. If by law any Imposition, at Mortgagor's option, may be
paid in installments (whether or not interest shall accrue on the unpaid balance
of such Imposition), Mortgagor may elect to pay such Imposition in such
installments and shall be responsible for the payment of such installments with
interest, if any.
(b) Nothing herein shall affect any right or remedy of Mortgagee
under this Mortgage or otherwise, without notice or demand to Mortgagor, to pay
any Imposition after the date such Imposition shall have become delinquent, and
to add to the Indebtedness the amount so paid, together with interest from the
time of payment at the rate of interest described in paragraph 4.1(c) of the
Senior Secured Credit Agreement (the "DEFAULT RATE"). Any sums paid by Mortgagee
in discharge of any Impositions shall be (i) a charge on the Premises secured
hereby prior to any right or
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title to, interest in, or claim upon the Premises subordinate to the lien of
this Mortgage, and (ii) payable on demand by Mortgagor to Mortgagee together
with interest at the Default Rate as set forth above.
(c) Mortgagor shall not claim, demand or be entitled to receive any
credit or credits toward the satisfaction of this Mortgage or on any interest
payable thereon for any taxes assessed against the Mortgaged Property or any
part thereof, and shall not claim any deduction from the taxable value of the
Mortgaged Property by reason of this Mortgage.
(d) Mortgagor shall have the right pursuant to subsection 7.3 of the
Senior Secured Credit Agreement to contest in good faith to the amount or
validity of any Imposition by appropriate proceedings diligently conducted with
reserves in conformity with GAAP, provided that Mortgagor shall demonstrate to
Mortgagee's reasonable satisfaction that such proceedings shall operate
conclusively to prevent the sale of the Mortgaged Property, or any part thereof,
to satisfy such Imposition prior to final determination of such proceedings.
(e) Upon written notice to Mortgagor, Mortgagee during the
continuance of an Event of Default (as defined below) shall be entitled to
require Mortgagor to pay monthly in advance to Mortgagee the equivalent of
1/12th of the estimated annual Impositions. Mortgagee may commingle such funds
with its own funds but Mortgagor shall be entitled to interest thereon at a rate
mutually agreed upon by Mortgagor and Mortgagee.
5. Insurance. (a) Mortgagor shall maintain or cause to be maintained
on all of the Premises:
(i) property insurance against loss or damage by fire, lightning,
windstorm, tornado, water damage, flood, earthquake and by such other
further risks and hazards as now are or subsequently may be covered by an
"all risk" policy or a fire policy covering "special" causes of loss
(provided, however, that the maintenance of insurance against earthquake,
windstorm, flood and freeze risks shall be subject to availability of such
insurance coverage on commercially reasonable terms). The policy shall
include building ordinance law endorsements and the policy limits shall be
automatically reinstated after each loss (other than with respect to flood
and earthquake coverage which shall be reinstated on a commercially
reasonable basis);
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(ii) commercial general liability insurance under a policy including
the "broad form CGL endorsement" (or which incorporates the language or
similar language of such endorsement), covering all claims for personal
injury, bodily injury or death, or property damage, subject to standard
policy terms, conditions and exclusions, occurring on, in or about the
Premises in an amount not less than $10,000,000 combined single limit with
respect to personal injury, bodily injury or death, or property damage,
relating to any one occurrence plus such excess limits as Mortgagee shall
reasonably request from time to time;
(iii) when and to the extent reasonably required by Mortgagee,
insurance against loss or damage by any other risk commonly insured
against by persons occupying or using like properties in the locality or
localities in which the Real Estate is situated;
(iv) during the course of any construction or repair of
Improvements, commercial general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language or similar language of such endorsement), (including coverage for
elevators and escalators, if any). The policy shall include coverage for
independent contractors and completed operations. The completed operations
coverage shall stay in effect for two years after construction of any
Improvements has been completed. The policy shall provide coverage on an
occurrence basis against claims for personal injury, including, without
limitation, bodily injury and death, and property damage resulting from
Mortgagor's negligence or other behavior for which Mortgagor may be
adjudged tortiously liable, subject to standard policy terms, conditions
and exclusions, occurring on, in or about the Premises and the adjoining
streets, sidewalks and passageways, such insurance to afford immediate
minimum protection to a limit of not less than that reasonably required by
Mortgagee with respect to personal injury, bodily injury or death to any
one or more persons or damage to property;
(v) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Mortgagor engaged on or with
respect to the Premises in such amounts no less than the limits
established by law or in the case of employer's liability insurance, no
less than $500,000, provided that Mortgagor may self-insure any or all
workers' compensation liabilities;
(vi) during the course of any construction, addition, alteration or
repair of the Improvements, builder's risk completed value property
insurance form
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against "all risks of physical loss" (subject to standard policy
exclusions), including collapse, water damage, flood and earthquake and
transit coverage, during construction or repairs of the Improvements, with
deductible approved by Mortgagee in its reasonable discretion, in
reporting form, covering the total replacement value of work performed and
equipment, supplies and materials furnished (with an appropriate limit for
soft costs in the case of construction); provided, however, that the
maintenance of insurance against earthquake and flood risks shall be
subject to availability of such insurance coverage on commercially
reasonable terms;
(vii) boiler and machinery property insurance covering pressure
vessels, air tanks, boilers, machinery, pressure piping, heating, air
conditioning and elevator equipment and escalator equipment, provided the
Improvements contain equipment of such nature, in such amounts as are
reasonably satisfactory to Mortgagee but not less than the lesser of
$1,000,000 or 10% of the value of the Improvements;
(viii) if any portion of the Premises are located in an area
identified in the Federal Register as having special flood hazards by the
Secretary of Housing and Urban Development or other applicable agency,
flood insurance covering any parcel of the Mortgaged Property which
contains improvements in an amount satisfactory to Mortgagee in its
reasonable discretion, but in no event less than the maximum limit of
coverage available with respect to the particular type of property under
the National Flood Insurance Act of 1968, as amended and with a term
ending not later than the maturity of the Indebtedness and Mortgagee shall
receive confirmation that Mortgagor has received the notice required
pursuant to Section 208.8(e)(3) of Regulation H of the Board of Governors
of The Federal Reserve System; and
(ix) such other insurance in such amounts as Mortgagee may
reasonably request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or, in the case of
property and boiler and machinery insurance, materially amended without 30-days'
prior written notice to Mortgagee, (ii) with respect to all property insurance,
subject to availability on commercially reasonable terms, provide for
deductibles not to exceed $250,000, other than with respect to (a) flood,
freeze, windstorm and earthquake perils for which deductibles shall not exceed
the greater of $500,000 or 5% of values at risk per
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location involved in loss and (b) boiler and machinery coverage for which
deductibles shall not exceed the greater of $500,000 or five times 100% of the
daily time element value, contain a "Replacement Cost Endorsement" without any
deduction made for depreciation and with no co-insurance penalty (or attaching
an agreed amount endorsement satisfactory to Mortgagee in its reasonable
discretion), with loss payable solely to Mortgagee (modified, if necessary and
to the extent available under such policy, to provide that proceeds in the
amount of replacement cost may be retained by Mortgagee without the obligation
to rebuild) as its interest may appear, without contribution, under a "standard"
or "New York" mortgagee clause acceptable to Mortgagee in its reasonable
discretion and be written by insurance companies having an A.M. Best Company,
Inc. rating of A- or higher and a financial size category of not less than VII,
or otherwise as approved by Mortgagee in its reasonable discretion and (iii)
contain a "manuscript" endorsement providing that Mortgagor may not unilaterally
cancel such policy without Mortgagee's prior written consent. Liability
insurance policies shall name Mortgagee as an additional insured and contain a
waiver of subrogation against Mortgagee; all such policies shall indemnify and
hold Mortgagee harmless from all liability claims occurring on, in or about the
Premises and the adjoining streets, sidewalks and passageways, subject to
standard policy terms, conditions and exclusions. The amounts of each insurance
policy and the form of each such policy shall at all times be satisfactory to
Mortgagee in its reasonable discretion. Each policy shall expressly provide that
any proceeds which are payable to Mortgagee shall be paid by check payable to
the order of Mortgagee only and requiring the endorsement of Mortgagee only. If
any required insurance shall expire, be withdrawn, become void by breach of any
condition thereof by Mortgagor or by any lessee of any part of the Mortgaged
Property or become void or unsafe by reason of the failure or impairment of the
capital of any insurer, Mortgagor shall immediately obtain new or additional
insurance satisfactory to Mortgagee in its reasonable discretion. Mortgagor
shall not take out any separate or additional insurance which is contributing in
the event of loss unless it is properly endorsed and otherwise satisfactory to
Mortgagee in all respects in its reasonable discretion.
(b) Mortgagor shall deliver to Mortgagee an original of each
insurance policy required to be maintained, or a certificate of such insurance
acceptable to Mortgagee in its reasonable discretion, together with a copy of
the declaration page for each such policy. Mortgagor shall (i) pay as they
become due all premiums for such insurance, (ii) not later than seven days prior
to the expiration of each policy to be furnished pursuant to the provisions of
this Section, deliver a renewed policy or policies, or certificates of insurance
acceptable to Mortgagee, in its reasonable discretion, or duplicate original or
originals thereof. Upon the reasonable request of Mortgagee, Mortgagor shall
cause its insurance underwriter or broker to certify to
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Mortgagee in writing that all the requirements of this Mortgage governing
insurance have been satisfied.
(c) If Mortgagor is in default of its obligations to insure or
deliver any such policy or policies, or certificates of insurance acceptable to
Mortgagee, in its reasonable discretion, then Mortgagee, at its option and
without notice, may effect such insurance from year to year, and pay the premium
or premiums therefor, and Mortgagor shall pay to Mortgagee on demand such
premium or premiums so paid by Mortgagee with interest from the time of payment
at the Default Rate and the same shall be deemed to be secured by this Mortgage
and shall be collectible in the same manner as the Indebtedness secured by this
Mortgage.
(d) Mortgagor shall increase the amount of property insurance
required to equal 100% replacement cost pursuant to the provisions of this
Section at the time of each renewal of each policy (but not later than 12 months
from the date of this Mortgage and each successive 12 month period to occur
thereafter) by using the Morgan & Swift Building Cost Index to determine whether
there shall have been an increase in the replacement value since the most recent
adjustment and, if there shall have been such an increase, the amount of
insurance required shall be adjusted accordingly.
(e) Mortgagor promptly shall in all material respects comply with
and conform to (i) all provisions of each such insurance policy, and (ii) all
requirements of the insurers applicable to Mortgagor or to any of the Mortgaged
Property or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of any of the Mortgaged Property. Mortgagor
shall not use or permit the use of the Mortgaged Property in any manner which
would permit any insurer to cancel any insurance policy or void coverage
required to be maintained by this Mortgage.
(f) (i) If the Mortgaged Property, or any part thereof, shall be
destroyed or damaged by fire or any other casualty, whether insured or
uninsured, or in the event any claim is made against Mortgagor for any personal
injury, bodily injury or property damage incurred on or about the Premises,
Mortgagor shall promptly give notice thereof to Mortgagee.
(ii) If the Mortgaged Property is damaged by fire or other casualty
and the cost to repair such damage is less than $1,000,000, then provided
that no Event of Default shall have occurred and be continuing, Mortgagor
shall have the right to adjust such loss, and the insurance proceeds
relating to such loss
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may be paid over to Mortgagor; provided that Mortgagor shall, promptly
after any such damage, repair such damage to the extent required by
subsection 7.5 of the Senior Secured Credit Agreement regardless of
whether any insurance proceeds have been received or whether such
proceeds, if received, are sufficient to pay for the costs of repair.
(iii) If the Mortgaged Property is damaged by fire or other
casualty, and the cost to repair such damage exceeds the limit in Section
5(f)(ii) above, or if an Event of Default shall have occurred and be
continuing, then Mortgagor authorizes and empowers Mortgagee, at
Mortgagee's option and in Mortgagee's reasonable discretion, as
attorney-in-fact for Mortgagor, to make proof of loss, to adjust and
compromise any claim under any insurance policy, to appear in and
prosecute any action arising from any policy, to collect and receive
insurance proceeds and to deduct therefrom Mortgagee's reasonable expenses
incurred in the collection process. Each insurance company concerned is
hereby authorized and directed to make payment for such loss directly to
Mortgagee. Mortgagee shall have the right to require Mortgagor to repair
or restore the Mortgaged Property to the extent required by subsection 7.5
of the Senior Secured Credit Agreement, and Mortgagor hereby designates
Mortgagee as its attorney-in-fact for the purpose of making any election
required or permitted under any insurance policy relating to such repair
or restoration. The insurance proceeds or any part thereof received by
Mortgagee may be applied by Mortgagee toward reimbursement of all
reasonable costs and expenses of Mortgagee in collecting such proceeds,
and the balance, at Mortgagee's option in its sole and absolute
discretion, to the principal (to the installments in inverse order of
maturity, if payable in installments) and interest due or to become due
under the Notes, the Senior Secured Credit Agreement or the other Loan
Documents, to fulfill any other Obligation of Mortgagor, to the
restoration or repair of the property damaged, or released to Mortgagor.
Application by Mortgagee of any insurance proceeds toward the last
maturing installments of principal and interest due or to become due on
the Loans shall not excuse Mortgagor from making any regularly scheduled
payments due thereunder, nor shall such application extend or reduce the
amount of such payments. In the event Mortgagee elects to release such
proceeds to Mortgagor, Mortgagor shall be obligated to use such proceeds
to restore or repair the Mortgaged Property to the extent required by
subsection 7.5 of the Senior Secured Credit Agreement.
(g) In the event of foreclosure of this Mortgage or other transfer
of title to the Mortgaged Property in extinguishment of the Indebtedness, all
right, title and interest of Mortgagor in and to any insurance policies then in
force, to the extent
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assignable or transferable, shall pass to the purchaser or grantee and Mortgagor
hereby appoints Mortgagee its attorney-in-fact, in Mortgagor's name, to assign
and transfer all such policies and proceeds to such purchaser or grantee.
(h) Upon written notice to Mortgagor, Mortgagee, during the
continuance of an Event of Default, shall be entitled to require Mortgagor to
pay monthly in advance to Mortgagee the equivalent of 1/12th of the estimated
annual premiums due on such insurance. Mortgagee may commingle such funds with
its own funds but Mortgagor shall be entitled to interest thereon at a rate
mutually agreed upon by Mortgagor and Mortgagee.
(i) Mortgagor may maintain insurance required under this Mortgage by
means of one or more blanket insurance policies maintained by Mortgagor;
provided, however, that (A) any such policy shall specify, or Mortgagor shall
furnish to Mortgagee a written statement from the insurer so specifying, the
maximum amount of the total insurance afforded by such blanket policy that is
allocated to the Premises and the other Mortgaged Property and any sublimits and
aggregates in such blanket policy applicable to the Premises and the other
Mortgaged Property, (B) each such blanket policy shall include an endorsement
providing that, in the event of a loss resulting from an insured peril,
insurance proceeds shall be allocated to the Mortgaged Property in an amount
equal to the coverages required to be maintained by Mortgagor as provided above
(subject to applicable sublimits and aggregates) and (C) the protection afforded
under any such blanket policy shall be no less than that which would have been
afforded under a separate policy or policies relating only to the Mortgaged
Property (subject to applicable sublimits and aggregates).
6. Restrictions on Liens and Encumbrances. Except for the lien of
this Mortgage and the Permitted Exceptions and except as otherwise permitted
pursuant to the terms of the Senior Secured Credit Agreement, Mortgagor shall
not further mortgage, nor otherwise encumber the Mortgaged Property nor create
or suffer to exist any lien, charge or encumbrance on the Mortgaged Property, or
any part thereof, whether superior or subordinate to the lien of this Mortgage
and whether recourse or non-recourse.
7. Due on Sale and Other Transfer Restrictions. Except as may be
otherwise expressly permitted under the Senior Secured Credit Agreement,
Mortgagor shall not sell, transfer, convey or assign all or any portion of, or
any interest in, the Mortgaged Property.
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8. Maintenance; No Alteration; Inspection; Utilities. (a) Mortgagor
shall maintain or cause to be maintained all the Improvements in good condition
and repair and shall not commit or suffer any waste of the Improvements. To the
extent required under subsection 7.5 of the Senior Secured Credit Agreement,
Mortgagor shall repair, restore, replace or rebuild promptly any part of the
Premises which may be damaged or destroyed by any casualty whatsoever to a
condition substantially equivalent to its condition prior to the damage or
destruction. Except as permitted by the Senior Secured Credit Agreement, the
Improvements shall not be demolished or materially altered, nor any material
additions built, without the prior written consent of Mortgagee, provided that
Mortgagor may make alterations or additions without the consent of Mortgagee
that do not materially reduce the value of the Mortgaged Property. Mortgagor's
failure to pay (i) any Imposition assessed against the Premises, or any
installment thereof, or (ii) any insurance premium upon policies required to be
carried by the terms of this Mortgage, shall constitute waste (although the
meaning of the term "waste" shall not be limited to such nonpayment) as provided
by Act No. 236 of the Michigan Public Acts of 1961 (Revised Judicature Act),
Section 600.2927, as and if amended and shall entitle Mortgagee to all remedies
provided for therein; and Mortgagor agrees to and hereby does consent to the
appointment of a receiver under said statute, should Mortgagee elect to seek
such relief thereunder.
(b) Mortgagee and any persons authorized by Mortgagee shall, upon
reasonable notice and at any reasonable time, have the right to enter and
inspect the Premises and the right to inspect all work done, labor performed and
materials furnished in and about the Improvements and the right to inspect and
make copies, to the extent reasonable, of all books, contracts and records of
Mortgagor relating to the Mortgaged Property.
(c) Except as permitted under subsection 7.3 of the Senior Secured
Credit Agreement, Mortgagor shall pay or cause to be paid prior to delinquency,
all utility charges which are incurred for gas, electricity, water or sewer
services furnished to the Premises and all other assessments or charges of a
similar nature, whether public or private, affecting the Premises or any portion
thereof, whether or not such assessments or charges are liens thereon.
9. Condemnation/Eminent Domain. Promptly upon obtaining knowledge of
the institution of any proceedings for the condemnation of the Mortgaged
Property, or any portion thereof, Mortgagor will notify Mortgagee of the
pendency of such proceedings. Mortgagor authorizes Mortgagee, at Mortgagee's
option and in Mortgagee's reasonable discretion, as attorney-in-fact for
Mortgagor, to commence, appear in and prosecute, in Mortgagee's or Mortgagor's
name, any action or
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proceeding relating to any condemnation of the Mortgaged Property, or any
portion thereof, and to settle or compromise any claim in connection with such
condemnation upon the occurrence and during the continuance of an Event of
Default. If Mortgagee elects not to participate in such condemnation proceeding,
then Mortgagor shall, at its expense, diligently prosecute any such proceeding
and shall consult with Mortgagee, its attorneys and experts and cooperate with
them in any defense of any such proceedings. All awards and proceeds of
condemnation shall be applied in the same manner as insurance proceeds, and to
the extent such awards and proceeds exceed $1,000,000 and no Event of Default
shall have occurred and be continuing, such awards and proceeds shall be
assigned to Mortgagee to be applied in the same manner as insurance proceeds, as
provided above in subsection 5(f)(iii) above, and Mortgagor agrees to execute
any such assignments of all such awards as Mortgagee may request.
10. Restoration. If Mortgagee elects or is required hereunder to
release funds to Mortgagor for restoration of any of the Mortgaged Property,
then such restoration shall be performed in accordance with such conditions as
Mortgagee shall impose in its reasonable discretion, and as are customarily
imposed by construction lenders.
11. Leases. (a) Mortgagor shall not (i) execute an assignment or
pledge of any Lease relating to all or any portion of the Mortgaged Property
other than in favor of Mortgagee, or (ii) without the prior written consent of
Mortgagee, which consent shall not be unreasonably withheld or delayed, execute
or permit to exist any Lease of any of the Mortgaged Property, except for
Permitted Exceptions and except as may be otherwise expressly permitted under
the Senior Secured Credit Agreement.
(b) As to any Lease consented to by Mortgagee under subsection 11(a)
above, Mortgagor shall:
(i) promptly perform in all material respects all of the provisions
of the Lease on the part of the lessor thereunder to be performed;
(ii) promptly enforce all of the material provisions of the Lease on
the part of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising under or
in any manner connected with the Lease or the obligations of Mortgagor as
lessor or of the lessee thereunder;
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(iv) exercise, within 5 business days after a reasonable request by
Mortgagee, any right to request from the lessee a certificate with respect
to the status thereof;
(v) promptly deliver to Mortgagee copies of any notices of default
which Mortgagor may at any time forward to or receive from the lessee;
(vi) promptly deliver to Mortgagee a fully executed counterpart of
the Lease; and
(vii) promptly deliver to Mortgagee, upon Mortgagee's reasonable
request, if permitted under such Lease, an assignment of the Mortgagor's
interest under such Lease.
(c) Mortgagor shall deliver to Mortgagee, within 10 business days
after a reasonable request by Mortgagee, a written statement, certified by
Mortgagor as being true, correct and complete, containing the names of all
lessees and other occupants of the Mortgaged Property, the terms of all Leases
and the spaces occupied and rentals payable thereunder, and a list of all Leases
which are then in default, including the nature and magnitude of the default;
such statement shall be accompanied by such other information as Mortgagee may
reasonably request.
(d) All Leases entered into by Mortgagor after the date hereof, if
any, and all rights of any lessees thereunder shall be subject and subordinate
in all respects to the lien and provisions of this Mortgage unless Mortgagee
shall otherwise elect in writing.
(e) In the event of the enforcement by Mortgagee of any remedy under
this Mortgage, the lessee under each Lease shall, if requested by Mortgagee or
any other person succeeding to the interest of Mortgagee as a result of such
enforcement, and if provided, at such lessee's request, with a nondisturbance
agreement from Mortgagee or such person, attorn to Mortgagee or to such person
and shall recognize Mortgagee or such successor in interest as lessor under the
Lease without change in the provisions thereof; provided however, that Mortgagee
or such successor in interest shall not be: (i) bound by any payment of an
installment of rent or additional rent which may have been made more than 30
days before the due date of such installment; (ii) bound by any amendment or
modification to the Lease made without the consent of Mortgagee or such
successor in interest; (iii) liable for any previous act or omission of
Mortgagor (or its predecessors in interest); (iv) responsible for any monies
owing by Mortgagor to the credit of such lessee or subject to any credits,
offsets, claims,
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counterclaims, demands or defenses which the lessee may have against Mortgagor
(or its predecessors in interest); (v) bound by any covenant to undertake or
complete any construction of the Premises or any portion thereof; or (vi)
obligated to make any payment to such lessee other than any security deposit
actually delivered to Mortgagee or such successor in interest. Each lessee or
other occupant, upon request by Mortgagee or such successor in interest, shall
execute and deliver an instrument or instruments confirming such attornment. In
addition, Mortgagor agrees that each Lease entered into after the date of this
Mortgage shall include language to the effect of subsections (d)-(e) of this
Section and language to the effect that if any act or omission of Mortgagor
would give any lessee under such Lease the right, immediately or after lapse of
a period of time, to cancel or terminate such Lease, or to abate or offset
against the payment of rent or to claim a partial or total eviction, such lessee
shall not exercise such right until it has given written notice of such act or
omission to Mortgagee and until a reasonable period for remedying such act or
omission shall have elapsed following the giving of such notice without a remedy
being effected; provided that the provisions of such subsections shall be
self-operative and any failure of any Lease to include such language shall not
impair the binding effect of such provisions on any lessee under such Lease.
12. Further Assurances/Estoppel Certificates. To further assure
Mortgagee's rights under this Mortgage, Mortgagor agrees upon demand of
Mortgagee to do any act or execute any additional documents (including, but not
limited to, security agreements on any personalty included or to be included in
the Mortgaged Property and a separate assignment of each Lease in recordable
form) as may be reasonably required by Mortgagee to confirm the rights or
benefits conferred on Mortgagee by this Mortgage.
13. Mortgagee's Right to Perform. If Mortgagor fails to perform any
of the covenants or agreements of Mortgagor, Mortgagee, without waiving or
releasing Mortgagor from any obligation or default under this Mortgage, may, at
any time (but shall be under no obligation to) pay or perform the same, and the
amount or cost thereof, with interest at the Default Rate, shall immediately be
due from Mortgagor to Mortgagee and the same shall be secured by this Mortgage
and shall be an encumbrance on the Mortgaged Property prior to any right, title
to, interest in or claim upon the Mortgaged Property attaching subsequent to the
date of this Mortgage. No payment or advance of money by Mortgagee under this
Section shall be deemed or construed to cure Mortgagor's default or waive any
right or remedy of Mortgagee.
14. Events of Default. The occurrence of an Event of Default under
the Senior Secured Credit Agreement shall constitute an Event of Default
hereunder.
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15. Remedies. (a) Upon the occurrence of any Event of Default, in
addition to any other rights and remedies Mortgagee may have pursuant to the
Loan Documents, or as provided by law, and without limitation, the Indebtedness
and all other amounts payable with respect to the Loans, the Letters of Credit,
the Senior Secured Credit Agreement, this Mortgage and the other Security
Documents shall become due and payable as provided in the Senior Secured Credit
Agreement. Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
In addition, upon the occurrence of any Event of Default, Mortgagee may
immediately take such action, without notice or demand, as it deems advisable to
protect and enforce its rights against Mortgagor and in and to the Mortgaged
Property, including, but not limited to, the following actions, each of which
may be pursued concurrently or otherwise, at such time and in such manner as
Mortgagee may determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Mortgagee:
(i) Mortgagee may, to the extent permitted by applicable law, (A)
institute and maintain an action of mortgage foreclosure against all or
any part of the Mortgaged Property (as described below), (B) institute and
maintain an action on the Notes, the Senior Secured Credit Agreement or
the other Security Documents, (C) sell all or part of the Mortgaged
Property (Mortgagor expressly granting to Mortgagee the power of sale, as
more fully described below), or (D) take such other action at law or in
equity for the enforcement of this Mortgage or any of the Loan Documents
as the law may allow. Mortgagee may proceed in any such action to final
judgment and execution thereon for all sums due hereunder, together with
interest thereon at the Default Rate and all costs of suit, including,
without limitation, reasonable attorneys' fees and disbursements. Interest
at the Default Rate shall be due on any judgment obtained by Mortgagee
from the date of judgment until actual payment is made of the full amount
of the judgment.
(ii) Mortgagee may immediately commence foreclosure proceedings
against the Mortgaged Property pursuant to applicable law. The
commencement by Mortgagee of foreclosure proceedings by advertisement or
in equity shall be deemed an exercise by Mortgagee of its option set forth
above to accelerate the due date of all sums secured hereby. Mortgagor
hereby grants power to Mortgagee, in the event of the occurrence of an
Event of Default hereunder, to grant, bargain, sell, release and convey
the Mortgaged Property at public auction or vendue, and upon such sale to
execute and deliver to the purchaser(s) instruments of conveyance pursuant
to the terms hereof and to the applicable laws. Mortgagor acknowledges
that the foregoing sentence confers a power of
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sale upon Mortgagee, and that upon the occurrence of an Event of Default
this Mortgage may be foreclosed by advertisement as described below and in
the applicable Michigan statutes. MORTGAGOR UNDERSTANDS THAT UPON DEFAULT,
MORTGAGEE IS HEREBY AUTHORIZED AND EMPOWERED TO SELL THE MORTGAGED
PROPERTY, OR CAUSE THE SAME TO BE SOLD AND TO CONVEY THE SAME TO THE
PURCHASER IN ANY LAWFUL MANNER, INCLUDING BUT NOT LIMITED TO THAT PROVIDED
BY CHAPTER 32 OF THE REVISED JUDICATURE ACT OF MICHIGAN, ENTITLED
"FORECLOSURE OF MORTGAGE BY ADVERTISEMENT", WHICH PERMITS MORTGAGEE TO
SELL THE MORTGAGED PROPERTY WITHOUT AFFORDING MORTGAGOR A HEARING, OR
GIVING IT ACTUAL PERSONAL NOTICE. THE ONLY NOTICE REQUIRED UNDER SUCH
CHAPTER 32 IS TO PUBLISH NOTICE IN A LOCAL NEWSPAPER AND TO POST A COPY OF
THE NOTICE ON THE MORTGAGED PROPERTY.
WAIVER: BY CONFERRING THIS POWER OF SALE UPON MORTGAGEE, MORTGAGOR, FOR
ITSELF, ITS SUCCESSORS AND ASSIGNS, AFTER AN OPPORTUNITY FOR CONSULTATION
WITH ITS LEGAL COUNSEL, HEREBY VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY
WAIVES ALL RIGHTS UNDER THE CONSTITUTION AND LAWS OF THE UNITED STATES AND
UNDER THE CONSTITUTION AND LAWS OF THE STATE OF MICHIGAN, BOTH TO A
HEARING ON THE RIGHT TO EXERCISE AND THE EXERCISE OF THE POWER OF SALE,
AND TO NOTICE EXCEPT AS REQUIRED BY THE MICHIGAN STATUTE WHICH PROVIDES
FOR FORECLOSURE OF MORTGAGES BY ADVERTISEMENT.
(iii) Mortgagee may personally, or by its agents, attorneys and
employees and without regard to the adequacy or inadequacy of the
Mortgaged Property or any other collateral as security for the
Indebtedness and Obligations enter into and upon the Mortgaged Property
and each and every part thereof and exclude Mortgagor and its agents and
employees therefrom without liability for trespass, damage or otherwise
(Mortgagor hereby agreeing to surrender possession of the Mortgaged
Property to Mortgagee upon demand at any such time) and use, operate,
manage, maintain and control the Mortgaged Property and every part
thereof. Following such entry and taking of possession, Mortgagee shall be
entitled, without limitation, (x) to lease all or any part or parts of the
Mortgaged Property for such periods of time and upon such conditions as
Mortgagee may, in its discretion, deem proper, (y) to enforce, cancel or
modify any Lease and (z) generally to execute, do and perform any other
act, deed, matter or thing concerning the Mortgaged Property as Mortgagee
shall deem appropriate as fully as Mortgagor might do. In connection with
Mortgagee's right to possession of the Mortgaged Property as specified in
this paragraph, Mortgagor acknowledges that it has been advised that there
is a significant body of case law in Michigan which purportedly
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provides that in the absence of a showing of waste of a character
sufficient to endanger the value of the Mortgaged Property, or other
special factors, a mortgagor is entitled to remain in possession of
Mortgaged Property, and to enjoy the income, rents and profits therefrom,
during the pendency of foreclosure proceedings and until the expiration of
the redemption period, even if the mortgage documents expressly provide to
the contrary. Mortgagor further acknowledges that it has been advised that
Mortgagee recognizes the value of the security covered hereby is
inextricably intertwined with the effectiveness of the management,
maintenance and general operation of the Mortgaged Property, and that
Mortgagee would not extend the Indebtedness secured hereby unless it could
be assured that it would have the right to take possession of the
Mortgaged Property in order to manage or to control management thereof,
and to enjoy the income, rents and profits therefrom, immediately upon
default by Mortgagor hereunder, notwithstanding that foreclosure
proceedings may not have been instituted, or are pending, or the
redemption period may not have expired. Accordingly, Mortgagor hereby
knowingly, intelligently and voluntarily waives all right to possession of
the Mortgaged Property from and after the occurrence of an Event of
Default hereunder, upon demand for possession by Mortgagee, and Mortgagor
agrees not to assert any objection or defense to Mortgagee's request or
petition to a court for possession. The rights hereby conferred upon
Mortgagee have been agreed upon prior to any default by Mortgagor
hereunder and the exercise by Mortgagee of any such rights shall not be
deemed to put Mortgagee in the status of a "mortgagee in possession".
Mortgagor acknowledges that this provision is material to this transaction
and that Mortgagee would not extend the Indebtedness secured hereby but
for this paragraph.
(b) The holder of this Mortgage, in any action to foreclose it,
shall be entitled to the appointment of a receiver. In case of a foreclosure
sale, the Real Estate may be sold, at Mortgagee's election, in one parcel or in
more than one parcel and if in more than one parcel the same may be divided as
Mortgagee may elect and Mortgagee is specifically empowered, (without being
required to do so, and in its sole and absolute discretion) to cause successive
sales of portions of the Mortgaged Property to be held. At the election of
Mortgagee, the Mortgaged Property may be offered first in parcels and then as a
whole, the offer producing the highest price for the entire property offered to
prevail. Mortgagor hereby waives any right to require any such sale to be made
in parcels or any right to select such parcels.
(c) In the event of any breach of any of the covenants, agreements,
terms or conditions contained in this Mortgage, and notwithstanding to the
contrary any
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exculpatory or non-recourse language which may be contained herein, Mortgagee
shall be entitled to enjoin such breach and obtain specific performance of any
covenant, agreement, term or condition and Mortgagee shall have the right to
invoke any equitable right or remedy as though other remedies were not provided
for in this Mortgage.
(d) In the event of a default because of the existence of any lien
upon the Mortgaged Property, Mortgagee shall have the right (without being
obligated to do so or to continue to do so), without notice to Mortgagor, to
advance on and for the account of Mortgagor such sums as Mortgagee in its sole
discretion deems necessary to cure such default or to induce the holder of any
such lien to forbear from exercising its rights thereunder. Notwithstanding
anything herein to the contrary, the repayment of all such advances, with
interest thereon at the Default Rate from the date of each such advance, shall
be immediately due and payable without demand.
16. Right of Mortgagee to Credit Sale. Upon the occurrence of any
sale made under this Mortgage, whether made under the power of sale or by virtue
of judicial proceedings or of a judgment or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof. In
lieu of paying cash therefor, Mortgagee may make settlement for the purchase
price by crediting upon the Indebtedness or other sums secured by this Mortgage
the net sales price after deducting therefrom the expenses of sale and the cost
of the action and any other sums which Mortgagee is authorized to deduct under
this Mortgage. In such event, this Mortgage, the Notes and other instruments
evidencing the Indebtedness and any and all documents evidencing expenditures
secured hereby may be presented to the person or persons conducting the sale in
order that the amount so used or applied may be credited upon the Indebtedness
as having been paid.
17. Appointment of Receiver. If an Event of Default shall have
occurred and be continuing, Mortgagee as a matter of right and without notice to
Mortgagor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Mortgaged Property or any other collateral as
security for the Indebtedness and Obligations or the interest of Mortgagor
therein, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers or other manager of the Mortgaged Property,
without requiring the posting of a surety bond and without reference to the
adequacy or inadequacy of the value of the Mortgaged Property or the solvency or
insolvency of Mortgagor or any other party obligated for payment of all or any
part of the Indebtedness, and whether or not waste has occurred with respect to
the Mortgaged Property. Mortgagor hereby irrevocably consents to such
appointment and waives notice of any application therefor (except as may be
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required by law). Any such receiver or receivers shall have all the usual powers
and duties of receivers in like or similar cases and all the powers and duties
of Mortgagee in case of entry as provided in this Mortgage, including, without
limitation and to the extent permitted by law, the right to enter into leases of
all or any part of the Mortgaged Property, and shall continue as such and
exercise all such powers until the date of confirmation of sale of the Mortgaged
Property unless such receivership is sooner terminated.
18. Extension, Release, etc. (a) Without affecting the lien or
charge of this Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of the Indebtedness,
Mortgagee may, from time to time and without notice, agree to (i) release any
person liable for the Indebtedness, (ii) extend the maturity or alter any of the
terms of the Indebtedness or any guaranty thereof, (iii) grant other
indulgences, (iv) release or reconvey, or cause to be released or reconveyed at
any time at Mortgagee's option any parcel, portion or all of the Mortgaged
Property, (v) take or release any other or additional security for any
obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Mortgage shall secure less
than all of the principal amount of the Indebtedness, it is expressly agreed
that any repayments of the principal amount of the Indebtedness shall not reduce
the amount of the encumbrance of this Mortgage until the encumbrance amount
shall equal the principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect the encumbrance of this Mortgage or any
liens, rights, powers or remedies of Mortgagee hereunder, and such liens,
rights, powers and remedies shall continue unimpaired.
(c) If Mortgagee shall have the right to foreclose this Mortgage,
Mortgagor authorizes Mortgagee at its option to foreclose the lien of this
Mortgage subject to the rights of any tenants of the Mortgaged Property. The
failure to make any such tenants parties defendant to any such foreclosure
proceeding and to foreclose their rights will not be asserted by Mortgagor as a
defense to any proceeding instituted by Mortgagee to collect the Indebtedness or
to foreclose the lien of this Mortgage.
(d) Unless expressly provided otherwise, in the event that ownership
of this Mortgage and title to the Mortgaged Property or any estate therein shall
become vested in the same person or entity, this Mortgage shall not merge in
such title but shall continue as a valid lien on the Mortgaged Property for the
amount secured hereby.
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19. Security Agreement under Uniform Commercial Code. (a) It is the
intention of the parties hereto that this Mortgage shall constitute a Security
Agreement within the meaning of the Uniform Commercial Code (the "CODE") of the
State in which the Mortgaged Property is located. If an Event of Default shall
occur under this Mortgage, then in addition to having any other right or remedy
available at law or in equity, Mortgagee shall have the option of either (i)
proceeding under the Code and exercising such rights and remedies as may be
provided to a secured party by the Code with respect to all or any portion of
the Mortgaged Property which is personal property (including, without
limitation, taking possession of and selling such property) or (ii) treating
such property as real property and proceeding with respect to both the real and
personal property constituting the Mortgaged Property in accordance with
Mortgagee's rights, powers and remedies with respect to the real property (in
which event the default provisions of the Code shall not apply). If Mortgagee
shall elect to proceed under the Code, then five days' notice of sale of the
personal property shall be deemed reasonable notice and the reasonable expenses
of retaking, holding, preparing for sale, selling and the like incurred by
Mortgagee shall include, but not be limited to, reasonable attorneys' fees and
legal expenses. At Mortgagee's request, during the continuance of an Event of
Default, Mortgagor shall assemble the personal property and make it available to
Mortgagee at a place designated by Mortgagee which is reasonably convenient to
both parties.
(b) Mortgagor and Mortgagee agree, to the extent permitted by law,
that: (i) all of the goods described within the definition of the word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Mortgage
upon recording or registration in the real estate records of the proper office
shall constitute a financing statement filed as a "fixture filing" within the
meaning of Sections 9-313 and 9-402 of the Code; (iii) Mortgagor is the record
owner of the Real Estate; (iv) the mailing addresses of Mortgagor and Mortgagee
are as set forth on the first page of this Mortgage; and (v) Mortgagor's federal
tax identification number is 22-185-0850. In addition, for purposes of Article 9
of the Michigan Uniform Commercial Code, (i) Mortgagor is the "debtor", (ii)
Mortgagee is the "secured party" and (iii) information concerning the security
interest created hereby may be obtained from Mortgagee at its address on the
first page of this Mortgage.
(c) Mortgagor, upon request by Mortgagee from time to time, shall
execute, acknowledge and deliver to Mortgagee one or more separate security
agreements, in form satisfactory to Mortgagee in its reasonable discretion,
covering all or any part of the Mortgaged Property and will further execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
any financing statement, affidavit, continuation statement or certificate or
other document as Mortgagee may
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request in order to perfect, preserve, maintain, continue or extend the security
interest under and the priority of this Mortgage and such security instrument.
Mortgagor further agrees to pay to Mortgagee on demand all reasonable costs and
expenses incurred by Mortgagee in connection with the preparation, execution,
recording, filing and re-filing of any such document and all reasonable costs
and expenses of any record searches for financing statements Mortgagee shall
reasonably require. If Mortgagor shall fail to furnish any financing or
continuation statement within 10 days after request by Mortgagee, then pursuant
to the provisions of the Code, Mortgagor hereby authorizes Mortgagee, without
the signature of Mortgagor, to execute and file any such financing and
continuation statements. The filing of any financing or continuation statements
in the records relating to personal property or chattels shall not be construed
as in any way impairing the right of Mortgagee to proceed against any personal
property encumbered by this Mortgage as real property, as set forth above.
20. Assignment of Rents. Mortgagor hereby absolutely and
unconditionally assigns, transfers, conveys and sets over to Mortgagee, the
Rents as further security for the payment of the Indebtedness and performance of
the Obligations, and Mortgagor grants to Mortgagee the right to enter the
Mortgaged Property for the purpose of collecting the same and to let the
Mortgaged Property or any part thereof and to apply the Rents on account of the
Indebtedness. The foregoing assignment and grant is present and absolute and
shall continue in effect until the Indebtedness is paid in full, but Mortgagee
hereby waives the right to enter the Mortgaged Property for the purpose of
collecting the Rents, letting the Mortgaged Property or any part thereof or
applying the Rents and Mortgagor shall be entitled to collect, receive, use and
retain the Rents until the occurrence of an Event of Default under this
Mortgage; such right of Mortgagor to collect, receive, use and retain the Rents
may be revoked by Mortgagee upon the occurrence of any Event of Default under
this Mortgage by giving not less than five days' written notice of such
revocation to Mortgagor; in the event such notice is given, Mortgagor shall pay
over to Mortgagee, or to any receiver appointed to collect the Rents, any lease
security deposits, and shall pay monthly in advance to Mortgagee, or to any such
receiver, the fair and reasonable rental value as determined by Mortgagee for
the use and occupancy of the Mortgaged Property or of such part thereof as may
be in the possession of Mortgagor or any affiliate of Mortgagor, and upon
default in any such payment Mortgagor and any such affiliate will vacate and
surrender the possession of the Mortgaged Property to Mortgagee or to such
receiver, and in default thereof may be evicted by summary proceedings or
otherwise. Mortgagor shall not accept prepayments of installments of Rent to
become due for a period of more than one month in advance (except for security
deposits and estimated payments of percentage rent, if any). Mortgagee shall be
entitled to all of the rights and benefits conferred by
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Act No. 210 of the Michigan Public Acts of 1953 as it may be amended, including
by Act No. 151 of the Michigan Public Acts of 1966 (MCLA 554.231 et seq.), and
Act No. 228 of the Michigan Public Acts of 1925 as it may be amended, including
by Act No. 55 of the Michigan Public Acts of 1933 (MCLA 554.211 et seq.). The
collection of rents by Mortgagee shall in no way waive the right of Mortgagee to
foreclose this Mortgage in the event of any default.
21. Trust Funds. All lease security deposits of the Real Estate
shall be treated as trust funds not to be commingled with any other funds of
Mortgagor. Within 10 days after request by Mortgagee, Mortgagor shall furnish
Mortgagee satisfactory evidence of compliance with this subsection, together
with a statement of all lease security deposits by lessees and copies of all
Leases not previously delivered to Mortgagee under which such security deposits
are held, which statement shall be certified by Mortgagor.
22. Additional Rights. The holder of any subordinate lien or
subordinate mortgage on the Mortgaged Property shall have no right to terminate
any Lease whether or not such Lease is subordinate to this Mortgage nor shall
any holder of any subordinate lien or subordinate mortgage join any tenant under
any Lease in any action to foreclose the lien or modify, interfere with, disturb
or terminate the rights of any tenant under any Lease. By recordation of this
Mortgage all subordinate lienholders under subordinate mortgages are subject to
and notified of this provision, and any action taken by any such lienholder or
mortgagee contrary to this provision shall be null and void. Upon the occurrence
of any Event of Default, Mortgagee may, in its sole discretion and without
regard to the adequacy of its security under this Mortgage, apply all or any
part of any amounts on deposit with Mortgagee under this Mortgage against all or
any part of the Indebtedness. Any such application shall not be construed to
cure or waive any Default or Event of Default or invalidate any act taken by
Mortgagee on account of such Default or Event of Default.
23. Changes in Method of Taxation. In the event of the passage after
the date hereof of any law of any Governmental Authority deducting from the
value of the Premises for the purposes of taxation any lien or mortgage thereon,
or changing in any way the laws for the taxation of mortgages or deeds of trust
or debts secured thereby for federal, state or local purposes, or the manner of
collection of any such taxes, and imposing a tax, either directly or indirectly,
on mortgages or deeds of trust or debts secured thereby, the holder of this
Mortgage shall have the right to declare the Indebtedness due on a date to be
specified by not less than 30 days' written notice to be given to Mortgagor
unless within such 30-day period Mortgagor shall assume as an
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Obligation hereunder the payment of any tax so imposed until full payment of the
Indebtedness and such assumption shall be permitted by law.
24. Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been sufficiently given or served when served
in the same manner as set forth for notices in the Senior Secured Credit
Agreement.
25. No Oral Modification. This Mortgage may not be changed or
terminated orally. Any agreement made by Mortgagor and Mortgagee after the date
of this Mortgage relating to this Mortgage shall be superior to the rights of
the holder of any intervening or subordinate mortgage, lien or encumbrance.
26. Partial Invalidity. In the event any one or more of the
provisions contained in this Mortgage shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included. Notwithstanding to the contrary anything contained in this Mortgage or
in any provisions of the Indebtedness or Loan Documents, the obligations of
Mortgagor and of any other obligor under the Indebtedness or Loan Documents
shall be subject to the limitation that Mortgagee shall not charge, take or
receive, nor shall Mortgagor or any other obligor be obligated to pay to
Mortgagee, any amounts constituting interest in excess of the maximum rate
permitted by law to be charged by Mortgagee.
27. Mortgagor's Waiver of Rights. To the fullest extent permitted by
law, Mortgagor waives the benefit of all laws now existing or that may
subsequently be enacted providing for (i) any appraisement before sale of any
portion of the Mortgaged Property, (ii) any extension of the time for the
enforcement of the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Mortgaged Property from attachment, levy or sale under
execution or exemption from civil process. To the full extent Mortgagor may do
so, Mortgagor agrees that Mortgagor will not at any time insist upon, plead,
claim or take the benefit or advantage of any law now or hereafter in force
providing for any appraisement, valuation, stay, exemption, extension or
redemption, or requiring foreclosure of this Mortgage before exercising any
other remedy granted hereunder and Mortgagor, for Mortgagor and its successors
and assigns, and for any and all persons ever claiming any interest in the
Mortgaged Property, to the extent permitted by law, hereby waives and releases
all rights of redemption, valuation, appraisement, stay of execution, notice of
election to mature or
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declare due the whole of the secured indebtedness and marshalling in the event
of foreclosure of the liens hereby created.
28. Remedies Not Exclusive. Mortgagee shall be entitled to enforce
payment of the Indebtedness and performance of the Obligations and to exercise
all rights and powers under this Mortgage or under any of the other Loan
Documents or other agreement or any laws now or hereafter in force,
notwithstanding some or all of the Indebtedness and Obligations may now or
hereafter be otherwise secured, whether by deed of trust, mortgage, security
agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this
Mortgage nor its enforcement, shall prejudice or in any manner affect
Mortgagee's right to realize upon or enforce any other security now or hereafter
held by Mortgagee, it being agreed that Mortgagee shall be entitled to enforce
this Mortgage and any other security now or hereafter held by Mortgagee in such
order and manner as Mortgagee may determine in its absolute discretion. No
remedy herein conferred upon or reserved to Mortgagee is intended to be
exclusive of any other remedy herein or by law provided or permitted, but each
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. Every
power or remedy given by any of the Loan Documents to Mortgagee or to which
either may otherwise be entitled, may be exercised, concurrently or
independently, from time to time and as often as may be deemed expedient by
Mortgagee. In no event shall Mortgagee, in the exercise of the remedies provided
in this Mortgage (including, without limitation, in connection with the
assignment of Rents, or the appointment of a receiver and the entry of such
receiver on to all or any part of the Mortgaged Property), be deemed a
"mortgagee in possession," and Mortgagee shall not in any way be made liable for
any act, either of commission or omission, in connection with the exercise of
such remedies.
29. Multiple Security. If (a) the Premises shall consist of one or
more parcels, whether or not contiguous and whether or not located in the same
county, or (b) in addition to this Mortgage, Mortgagee shall now or hereafter
hold or be the mortgagee of one or more additional mortgages, liens, deeds of
trust or other security (directly or indirectly) for the Indebtedness upon other
property in the State in which the Premises are located (whether or not such
property is owned by Mortgagor or by others) or (c) both the circumstances
described in clauses (a) and (b) shall be true, then to the fullest extent
permitted by law, Mortgagee may, at its election, commence or consolidate in a
single foreclosure action all foreclosure proceedings against all such
collateral securing the Indebtedness (including the Mortgaged Property), which
action may be brought or consolidated in the courts of, or sale conducted in,
any county in which any of such collateral is located. Mortgagor acknowledges
that the right to maintain a consolidated foreclosure action is a specific
inducement to Mortgagee to
29
<PAGE> 31
extend the Indebtedness, and Mortgagor expressly and irrevocably waives any
objections to the commencement or consolidation of the foreclosure proceedings
in a single action and any objections to the laying of venue or based on the
grounds of forum non conveniens which it may now or hereafter have. Mortgagor
further agrees that if Mortgagee shall be prosecuting one or more foreclosure or
other proceedings against a portion of the Mortgaged Property or against any
collateral other than the Mortgaged Property, which collateral directly or
indirectly secures the Indebtedness, or if Mortgagee shall have obtained a
judgment of foreclosure or similar judgment against such collateral, then,
whether or not such proceedings are being maintained or judgments were obtained
in or outside the State in which the Premises are located, Mortgagee may
commence or continue any foreclosure proceedings and exercise its other remedies
granted in this Mortgage against all or any part of the Mortgaged Property and
Mortgagor waives any objections to the commencement or continuation of a
foreclosure of this Mortgage or exercise of any other remedies hereunder based
on such other proceedings or judgments, and waives any right to seek to dismiss,
stay, remove, transfer or consolidate either any action under this Mortgage or
such other proceedings on such basis. Neither the commencement nor continuation
of proceedings to foreclose this Mortgage nor the exercise of any other rights
hereunder nor the recovery of any judgment by Mortgagee in any such proceedings
shall prejudice, limit or preclude Mortgagee's right to commence or continue one
or more foreclosure or other proceedings or obtain a judgment against any other
collateral (either in or outside the State in which the Real Estate is located)
which directly or indirectly secures the Indebtedness, and Mortgagor expressly
waives any objections to the commencement of, continuation of, or entry of a
judgment in such other proceedings or exercise of any remedies in such
proceedings based upon any action or judgment connected to this Mortgage, and
Mortgagor also waives any right to seek to dismiss, stay, remove, transfer or
consolidate either such other proceedings or any sale or action under this
Mortgage on such basis. It is expressly understood and agreed that to the
fullest extent permitted by law, Mortgagee may, at its election, cause the sale
of all collateral which is the subject of a single foreclosure action at either
a single sale or at multiple sales conducted simultaneously and take such other
measures as are appropriate in order to effect the agreement of the parties to
dispose of and administer all collateral securing the Indebtedness (directly or
indirectly) in the most economical and least time-consuming manner.
30. Successors and Assigns. All covenants of Mortgagor contained in
this Mortgage are imposed solely and exclusively for the benefit of Mortgagee
and its respective successors and assigns, and no other person or entity shall
have standing to require compliance with such covenants or be deemed, under any
circumstances, to be a beneficiary of such covenants, any or all of which may be
freely waived in whole or
30
<PAGE> 32
in part by Mortgagee at any time if in its sole discretion such waiver is deemed
advisable. All such covenants of Mortgagor shall run with the land and bind
Mortgagor, the successors and assigns of Mortgagor (and each of them) and all
subsequent owners, encumbrancers and tenants of the Mortgaged Property, and
shall inure to the benefit of Mortgagee and its respective successors and
assigns. The word "Mortgagor" shall be construed as if it read "Mortgagors"
whenever the sense of this Mortgage so requires and if there shall be more than
one Mortgagor, the obligations of the Mortgagors shall be joint and several.
31. No Waivers, etc. Any failure by Mortgagee to insist upon the
strict performance by Mortgagor of any of the terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgagor of any and all of
the terms and provisions of this Mortgage to be performed by Mortgagor.
Mortgagee may release, regardless of consideration and without the necessity for
any notice to or consent by the mortgagee of any subordinate mortgage or the
holder of any subordinate lien on the Mortgaged Property, any part of the
security held for the obligations secured by this Mortgage without, as to the
remainder of the security, in anywise impairing or affecting the lien of this
Mortgage or the priority of such lien over any subordinate lien or mortgage.
32. Governing Law, etc. This Mortgage shall be governed by and
construed in accordance with the laws of the State in which the Premises are
located, except that Mortgagor expressly acknowledges that by its terms the
Senior Secured Credit Agreement shall be governed and construed in accordance
with the laws of the State of New York, without regard to principles of conflict
of law, and for purposes of consistency, Mortgagor agrees that in any in
personam proceeding related to this Mortgage the rights of the parties to this
Mortgage shall also be governed by and construed in accordance with the laws of
the State of New York governing contracts made and to be performed in that
State, without regard to principles of conflict of law.
33. Waiver of Trial by Jury. Mortgagor and Mortgagee each hereby
irrevocably and unconditionally waive trial by jury in any action, claim, suit
or proceeding relating to this Mortgage and for any counterclaim brought
therein.
34. Certain Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Mortgage shall be used interchangeably in singular or plural form and the
word "Mortgagor" shall mean "each Mortgagor or any subsequent owner or owners of
the Mortgaged Property or any part thereof or interest therein," the word
"Mortgagee" shall mean
31
<PAGE> 33
"Mortgagee or any successor Administrative Agent," the word "Notes" shall mean
"the notes that may from time to time be given pursuant to the terms of the
Senior Secured Credit Agreement or any other evidence of indebtedness secured by
this Mortgage," the word "person" shall include any individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, or other entity, and the words "Mortgaged Property" shall include any
portion of the Mortgaged Property or interest therein. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa. The captions in this Mortgage are for
convenience or reference only and in no way limit or amplify the provisions
hereof.
35. Reconveyance of Mortgage. Upon payment in full of the
Indebtedness, the termination of all Commitments under the Senior Secured Credit
Agreement secured hereby and the compliance with the Obligations then required
to be complied with, Mortgagee shall release the encumbrance of this Mortgage.
If any of the Mortgaged Property shall be sold, transferred or otherwise
disposed of by Mortgagor in a transaction expressly permitted by the Senior
Secured Credit Agreement, then Mortgagee shall execute and deliver (at the sole
cost and expense of Mortgagor) all releases, reconveyances or other documents
reasonably necessary or desirable for the release of such Mortgaged Property
from the encumbrance of this Mortgage.
36. Conflict With Senior Secured Credit Agreement. In the event of
any conflict or inconsistency between the terms and provisions of this Mortgage
and the terms and provisions of the Senior Secured Credit Agreement, the terms
and provisions of the Senior Secured Credit Agreement shall govern, other than
with respect to the Section of this Mortgage captioned "Governing Law, etc.". By
their execution of the Senior Secured Credit Agreement, each Lender hereby
agrees that it shall not have the right to institute any suit for enforcement of
Notes or any other Indebtedness secured by this Mortgage or any other Security
Document, if and to the extent that the institution or prosecution thereof or
the entry of judgment therein would, under applicable law, result in the
surrender, impairment, waiver or loss of the Lien of this Mortgage or any other
Security Document or impede or delay the enforcement of the Lien of this
Mortgage or any other Security Document.
37. Receipt of Copy. Mortgagor acknowledges that it has received a
true copy of this Mortgage.
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<PAGE> 34
This Mortgage has been duly executed by Mortgagor as of the date
first above written.
Signed, sealed and EV INTERNATIONAL, INC.
delivered in our
presence: By: /s/ CHRISTINE K. VANDEN BEUKEL
--------------------------------
Name: Christine K. Vanden Beukel
Title: Vice President, Secretary and
Treasurer
/s/ GINGER BALLARD
- --------------------------------
Name: Ginger Ballard
/s/ ARON GOSER
- --------------------------------
Name: Aron Goser
33
<PAGE> 35
State of New York )
: ss.:
County of New York )
The foregoing instrument was acknowledged before me this 10th day of
February, 1997, by Christine K. Vanden Beukel as Vice President, Secretary and
Treasurer of EV INTERNATIONAL, INC., a Delaware corporation, on behalf of the
corporation.
/s/ NANCY L. LOMAZZO
----------------------------------
Notary Public
My commission expires:
June 3, 1998
- -------------------------------
[SEAL] NANCY L. LOMAZZO
Notary Public, State of New York
No. 31-5061123
Qualified in New York County
Commission Expires June 3, 1998
<PAGE> 36
128 East Front Street
Buchanan, MI 49107
Berrien County
Schedule A
Legal Description
Part of Blocks "A" and "D", Central Addition, City of Buchanan, and part of the
Northeast Quarter of Section 35, Township 7 South, Range 18 West, City of
Buchanan, County of Berrien, State of Michigan, described as follows:
From the Northeast corner of said Section 35 Measure West along the North
line of said Section 35, 399.9 feet; thence measure S 0(degree) 18' W,
33.0 feet, to the intersection of the South line of Front Street and the
West line of Days Avenue, and the place of beginning of the land herein
described; then S 0(degree) 18' W along the West line of Days Avenue,
230.25 feet, to a brass monument; thence N. 89(degree) 45' W, 127.9 feet,
to a brass monument; then N 0(degree)12' 30" E, 113.04 feet, to a brass
monument, thence N 69(degree) 57' E, 4.08 feet, to a brass monument; then
N 0(degree) 21' E, 15.23 feet to the Southwest corner of Lot 4, Block "A",
Central Addition, City of Buchanan; thence East, 29.5 feet, along the
South line of said Lot 4 to the Southeast corner of said Lot 4; thence N
0(degree) 21' E, 18.94 feet, to the South wall of brick building; thence
East, 1.0 foot, to the Southeast corner of said brick building; thence N
0(degree) 05' W, 81.06 feet, along the East wall of said building to a
point on the South line of Front Street that is 94.27 feet West of the
place of beginning; thence East, 94.27 feet, to the place of the
beginning.
<PAGE> 1
EXHIBIT 10(p)
OKLAHOMA
Prepared by and after recording, please return to:
Simpson Thacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
ATTN: Emily R. Steinman, Esq.
MORTGAGE, ASSIGNMENT OF RENTS AND LEASES AND SECURITY AGREEMENT
from
EV INTERNATIONAL, INC., Mortgagor
to
THE CHASE MANHATTAN BANK, as Administrative Agent, Mortgagee
DATED AS OF FEBRUARY 10, 1997
<PAGE> 2
OKLAHOMA
MORTGAGE, ASSIGNMENT OF RENTS
AND LEASES AND SECURITY AGREEMENT
THIS MORTGAGE ASSIGNMENT OF RENTS AND LEASES AND SECURITY
AGREEMENT, dated as of February 10, 1997 is made by EV INTERNATIONAL, INC., a
Delaware corporation, formerly named ELECTRO-VOICE, INCORPORATED, a Delaware
corporation ("MORTGAGOR"), whose address is 600 Cecil Street, Buchanan, Michigan
49107, to THE CHASE MANHATTAN BANK, a New York banking corporation whose address
is 270 Park Avenue, New York, New York 10017, as Administrative Agent (in such
capacity, "MORTGAGEE") for the several banks and other financial institutions
(the "LENDERS") from time to time parties to the Credit Agreement dated as of
February 10, 1997, (as the same may be amended, supplemented, waived or
otherwise modified from time to time the "SENIOR SECURED CREDIT AGREEMENT")
among Gulton Acquisition Corp., a Delaware corporation ("BORROWER"), the Lenders
and Mortgagee. References to this "Mortgage" shall mean this instrument and any
and all renewals, modifications, amendments, supplements, extensions,
consolidations, substitutions, spreaders and replacements of this instrument.
Capitalized terms used and not otherwise defined herein shall have the meanings
assigned thereto in the Senior Secured Credit Agreement.
Background
A. Gulton Holdings Corp., a Delaware corporation which, on or
after the Effective Date, will be renamed EVI Audio Holdings, Inc. ("HOLDINGS")
and Borrower, its direct Wholly Owned Subsidiary, were newly formed companies
organized by an investor group led by Greenwich Street Capital Partners, Inc., a
Delaware corporation ("GSCP").
B. Borrower acquired Gulton Industries Inc., a Delaware
corporation ("GII") which was a subsidiary of Mark IV Industries, Inc. ("MARK
IV") through the purchase from Mark IV and Mark IV PLC of the capital stock of
GII (the "ACQUISITION") pursuant to the Stock Purchase Agreement, dated as of
December 12, 1996, by and among Mark IV, Mark IV PLC and Borrower (as amended,
<PAGE> 3
supplemented, waived or otherwise modified from time to time in accordance with
the Senior Secured Credit Agreement, the "STOCK PURCHASE AGREEMENT").
C. Borrower merged with and into GII (the "FIRST MERGER"), and
GII as surviving corporation of the First Merger merged (the "SECOND MERGER";
the First Merger together with the Second Merger, the "MERGERS") with and into
Electro-Voice, Incorporated, a Delaware corporation and a Wholly Owned
Subsidiary of GII, which was thereupon renamed EV International, Inc.
D. In order to (i) finance a portion of the Acquisition
Consideration, (ii) refinance a portion of the existing indebtedness of GII and
its subsidiaries, (iii) pay certain fees, taxes and expenses related to (x) the
Acquisition and the financing thereof and (y) the refinancing of such existing
indebtedness of GII and its subsidiaries and (iv) finance the working capital
and other business requirements of Mortgagor and its subsidiaries following the
consummation of the Acquisition and the Merger, Acquisition Co. has requested
that the Lenders make the Loans and issue and participate in the Letters of
Credit in accordance with the terms of the Senior Secured Credit Agreement.
E. Mortgagor is the owner of the parcel(s) of real property
described on Schedule A attached hereto (such real property, together with all
of the buildings, improvements, structures and fixtures now or subsequently
located thereon (the "IMPROVEMENTS"), being collectively referred to as the
"REAL ESTATE").
F. Pursuant to the terms of the Senior Secured Credit
Agreement, the Lenders have agreed, among other things, to make the Loans and
the Issuing Lender has agreed to issue, and the L/C Participants have agreed to
acquire undivided participating interests in, the Letter(s) of Credit for the
account of the Borrower upon the terms and subject to the conditions set forth
in the Senior Secured Credit Agreement which conditions include the grant by
Mortgagor to Mortgagee of a first lien upon and perfected security interest in,
among other things, all estate, right, title and interest of Mortgagor in and to
the Real Estate pursuant to the terms hereof.
G. Mortgagor is the surviving corporation of any merger of the
Borrower, and it is to the advantage and benefit of Mortgagor that the Lenders
make the Loans to the Borrower.
2
<PAGE> 4
Granting Clauses
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Mortgagor agrees that to secure:
(a) the repayment of principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans
and Reimbursement Obligations and interest accruing after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Loan Party, whether
or not a claim for post-filing or post-petition interest is allowed in
such proceeding) the Loans (as they may be evidenced by the Notes from
time to time) and all other obligations (including the Reimbursement
Obligations) and liabilities of Mortgagor to Mortgagee, the Issuing
Lender and the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Senior
Secured Credit Agreement, the Notes, the Loans, the Letters of Credit,
the Security Documents, any Guarantee Obligation of Mortgagor as to
which any Lender is a beneficiary, any Permitted Hedging Arrangement
with any Lender or any banking affiliate of any Lender (whether entered
into directly, or guaranteed, by Mortgagor), the Guarantee and
Collateral Agreement dated as of February 10, 1997 between Mortgagor,
Holdings and Mortgagee (the "GUARANTEE") or any other document made,
delivered or given in connection therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without
limitation, all fees, charges and disbursements of counsel to the
Administrative Agent, the Issuing Lender or any Lender that are
required to be paid by any Loan Party pursuant to the Senior Secured
Credit Agreement) (the items set forth above being referred to
collectively as the "INDEBTEDNESS"); and
(b) the performance of all covenants, agreements, obligations
and liabilities of Mortgagor (the "OBLIGATIONS") under or pursuant to
the provisions of the Senior Secured Credit Agreement, the Notes, the
Loans, this Mortgage, the Guarantee, any other document securing
payment of the Indebtedness (the "SECURITY DOCUMENTS") and any
amendments, supplements, extensions, renewals, restatements,
replacements or modifications of any of the foregoing (the Senior
Secured Credit Agreement, the Notes, the Loans, the Letters of Credit,
this Mortgage, the Guarantee and all other documents and instruments
from time to time evidencing, securing or guaranteeing the payment of
the Indebtedness or the performance of the Obligations, as any of the
same may be
3
<PAGE> 5
amended, supplemented, extended, renewed, restated, replaced or
modified from time to time, are collectively referred to as the "LOAN
DOCUMENTS");
The Indebtedness includes Revolving Loans and Swing Line Loans
under which monies may be advanced by the Lenders, repaid by Mortgagor
and subsequently readvanced by the Lenders. All advances from time to
time made under such Loans and remaining outstanding will be secured by
this Mortgage, notwithstanding that there may be times when there are
no principal balances outstanding under such Loans.
MORTGAGOR HEREBY GRANTS TO MORTGAGEE A LIEN UPON AND A SECURITY INTEREST IN, AND
HEREBY MORTGAGES, CONVEYS, GRANTS, ASSIGNS, TRANSFERS AND SETS OVER TO
MORTGAGEE:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever
of Mortgagor, in possession or expectancy, in and to the Real Estate or
any part thereof;
(C) all right, title and interest of Mortgagor in, to and
under all easements, rights of way, gores of land, streets, ways,
alleys, passages, sewer rights, waters, water courses, water and
riparian rights, development rights, air rights, mineral rights and all
estates, rights, titles, interests, privileges, licenses, tenements,
hereditaments and appurtenances belonging, relating or appertaining to
the Real Estate, and any reversions, remainders, rents, issues, profits
and revenue thereof and all land lying in the bed of any street, road
or avenue, in front of or adjoining the Real Estate to the center line
thereof;
(D) all right, title and interest of Mortgagor in and to all
of the fixtures, chattels, business machines, machinery, apparatus,
equipment, furnishings, fittings and articles of personal property of
every kind and nature whatsoever, and all appurtenances and additions
thereto and substitutions or replacements thereof (together with, in
each case, attachments, components, parts and accessories) currently
owned or subsequently acquired by Mortgagor and now or subsequently
attached to, or contained in or used or usable in any way in connection
with any operation or letting of the Real Estate, including but without
limiting the generality of the foregoing, all screens, awnings, shades,
blinds, curtains, draperies, artwork, carpets, rugs, storm doors and
windows, furniture and furnishings, heating, electrical, and mechanical
equipment,
4
<PAGE> 6
lighting, switchboards, plumbing, ventilating, air conditioning and
air-cooling apparatus, refrigerating, and incinerating equipment,
escalators, elevators, loading and unloading equipment and systems,
stoves, ranges, laundry equipment, cleaning systems (including window
cleaning apparatus), telephones, communication systems (including
satellite dishes and antennae), televisions, computers, sprinkler
systems and other fire prevention and extinguishing apparatus and
materials, security systems, motors, engines, machinery, pipes, pumps,
tanks, conduits, appliances, fittings and fixtures of every kind and
description (all of the foregoing in this paragraph (D) being referred
to as the "EQUIPMENT");
(E) all right, title and interest of Mortgagor in and to all
substitutes and replacements of, and all additions and improvements to,
the Real Estate and the Equipment, subsequently acquired by or released
to Mortgagor or constructed, assembled or placed by Mortgagor on the
Real Estate, immediately upon such acquisition, release, construction,
assembling or placement, including, without limitation, any and all
building materials to be used by Mortgagor whether stored at the Real
Estate or offsite, and, in each such case, without any further
mortgage, conveyance, assignment or other act by Mortgagor;
(F) all right, title and interest of Mortgagor in, to and
under all leases, subleases, underlettings, concession agreements,
management agreements, licenses and other agreements relating to the
use or occupancy of the Real Estate or the Equipment or any part
thereof, now existing or subsequently entered into by Mortgagor and
whether written or oral and all guarantees of any of the foregoing
(collectively, as any of the foregoing may be amended, restated,
extended, renewed or modified from time to time, the "LEASES"), and all
rights of Mortgagor in respect of cash and securities deposited
thereunder and the right to receive and collect the revenues, income,
rents, issues and profits thereof, together with all other rents,
royalties, issues, profits, revenue, income and other benefits arising
from the use and enjoyment of the Mortgaged Property (as defined below)
(collectively, the "RENTS");
(G) all books and records relating to or used in connection
with the operation of the Real Estate or the Equipment or any part
thereof;
(H) all right, title and interest of Mortgagor, to the extent
assignable, in and to (i) all unearned premiums under insurance
policies now or subsequently obtained by Mortgagor relating to the Real
Estate or Equipment, (ii) any such insurance policies, (iii) all
proceeds of any such insurance policies (including
5
<PAGE> 7
title insurance policies) including the right to collect and receive
such proceeds, subject to the provisions relating to insurance
generally set forth below, and (iv) all awards and other compensation,
including the interest payable thereon and the right to collect and
receive the same, made to the present or any subsequent owner of the
Real Estate or Equipment for the taking by eminent domain, condemnation
or otherwise, of all or any part of the Real Estate or any easement or
other right therein, subject to the provisions relating to condemnation
awards generally set forth below;
(I) all right, title and interest of Mortgagor, to the extent
assignable, in and to (i) all contracts from time to time executed by
Mortgagor or any manager or agent on its behalf relating to the
ownership, construction, maintenance, repair, operation, occupancy,
sale or financing of the Real Estate or Equipment or any part thereof
and all agreements relating to the purchase or lease of any portion of
the Real Estate or any property which is adjacent or peripheral to the
Real Estate, together with the right to exercise such options
(collectively, the "CONTRACTS"), (ii) all consents, licenses, building
permits, certificates of occupancy and other governmental approvals
relating to construction, completion, occupancy, use or operation of
the Real Estate or any part thereof (collectively, the "PERMITS") and
(iii) all drawings, plans, specifications and similar or related items
relating to the Real Estate (collectively, the "PLANS");
(J) any and all monies now or subsequently on deposit for the
payment of real estate taxes or special assessments against the Real
Estate or for the payment of premiums on insurance policies covering
the foregoing property or otherwise on deposit with or held by
Mortgagee as provided in this Mortgage;
(K) all accounts and revenues arising from the operation of
the Improvements; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now
owned or held or subsequently acquired by Mortgagor and described in the
foregoing clauses (A) through (E) are collectively referred to as the
"PREMISES", and those described in the foregoing clauses (A) through (L) are
collectively referred to as the "MORTGAGED PROPERTY").
TO HAVE AND TO HOLD the Mortgaged Property and the rights and
privileges hereby mortgaged unto Mortgagee, its successors and assigns for the
uses
6
<PAGE> 8
and purposes set forth, until the Indebtedness is fully paid and the Obligations
fully performed or as otherwise expressly provided in the Section of this
Mortgage entitled "Release of Mortgage".
Terms and Conditions
Mortgagor further represents, warrants, covenants and agrees
with Mortgagee as follows:
1. Warranty of Title. Mortgagor warrants that Mortgagor has
good title to the Real Estate in fee simple and good title to the rest of the
Mortgaged Property, subject only to the matters that are set forth in Schedule B
of the title insurance policy or policies being issued to Mortgagee to insure
the lien of this Mortgage and Liens expressly permitted under the Senior Secured
Credit Agreement (collectively, the "PERMITTED EXCEPTIONS") and Mortgagor shall
warrant, defend and preserve such title and the lien of the Mortgage thereon
against all claims of all persons and entities. Mortgagor further warrants that
it has the right to mortgage the Mortgage Property.
2. Payment of Indebtedness. Mortgagor shall pay the
Indebtedness at the times and places and in the manner specified in the Senior
Secured Credit Agreement and shall perform all the Obligations.
3. Requirements. (a) Mortgagor shall promptly comply with, or
cause to be complied with, and conform to all present and future laws, statutes,
codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements, and irrespective of the nature of the work to be done, of each of
the United States of America, any State and any municipality, local government
or other political subdivision thereof and any agency, department, bureau,
board, commission or other instrumentality of any of them, now existing or
subsequently created (collectively, "GOVERNMENTAL AUTHORITY") which has
jurisdiction over the Mortgaged Property and all covenants, restrictions and
conditions now or later of record which may be applicable to any of the
Mortgaged Property, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any of the
Mortgaged Property, except to the extent that failure to comply therewith, in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. All present and future laws, statutes, codes, ordinances, orders,
judgments, decrees, rules, regulations and requirements of every Governmental
Authority applicable to Mortgagor or to any of the Mortgaged Property and all
covenants, restrictions, and conditions which now or later may be applicable to
any of the Mortgaged Property are collectively referred to as the "LEGAL
REQUIREMENTS".
7
<PAGE> 9
(b) From and after the date of this Mortgage, except as
expressly permitted under the Senior Secured Credit Agreement or herein,
Mortgagor shall not by act or omission permit, other than Permitted Exceptions,
any building or other improvement on any premises not subject to the lien of
this Mortgage to rely on the Premises or any part thereof or any interest
therein to fulfill any Legal Requirement, and Mortgagor hereby assigns to
Mortgagee any and all rights to give consent for all or any portion of the
Premises or any interest therein to be so used. Mortgagor shall not by act or
omission impair the integrity of any of the Real Estate as a single zoning lot
separate and apart from all other premises. Mortgagor represents that each
parcel of the Real Estate constitutes a legally subdivided lot, in compliance
with all subdivision laws and similar Legal Requirements, except to the extent
that failure to comply therewith, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. Any act or omission by Mortgagor
which would result in a violation of any of the provisions of this subsection
shall be void.
4. Payment of Taxes and Other Impositions. (a) Except as
expressly permitted under the Senior Secured Credit Agreement, Mortgagor, prior
to delinquency, shall pay and discharge all taxes of every kind and nature
(including, without limitation, all real and personal property, income,
franchise, withholding, transfer, gains, profits and gross receipts taxes), all
charges for any easement or agreement maintained for the benefit of any of the
Mortgaged Property, all general and special assessments, levies, permits,
inspection and license fees, all water and sewer rents and charges and all other
public charges even if unforeseen or extraordinary, imposed upon or assessed
against or which may become a lien on any of the Mortgaged Property, or arising
in respect of the occupancy, use or possession thereof, together with any
penalties or interest on any of the foregoing (all of the foregoing are
collectively referred to as the "IMPOSITIONS"). Mortgagor shall within 30 days
after the request of Mortgagee deliver to Mortgagee (i) original or copies of
receipted bills and cancelled checks or other evidence of payment of such
Imposition if it is a real estate tax or other public charge and (ii) evidence
acceptable to Mortgagee in its reasonable discretion showing the payment of any
other such Imposition. If by law any Imposition, at Mortgagor's option, may be
paid in installments (whether or not interest shall accrue on the unpaid balance
of such Imposition), Mortgagor may elect to pay such Imposition in such
installments and shall be responsible for the payment of such installments with
interest, if any.
(b) Nothing herein shall affect any right or remedy of
Mortgagee under this Mortgage or otherwise, without notice or demand to
Mortgagor, to pay any Imposition after the date such Imposition shall have
become delinquent, and to add to the Indebtedness the amount so paid, together
with interest from the time of payment at
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the rate of interest described in paragraph 4.1(c) of the Senior Secured Credit
Agreement (the "DEFAULT RATE"). Any sums paid by Mortgagee in discharge of any
Impositions shall be (i) a charge on the Premises secured hereby prior to any
right or title to, interest in, or claim upon the Premises subordinate to the
lien of this Mortgage, and (ii) payable on demand by Mortgagor to Mortgagee
together with interest at the Default Rate as set forth above.
(c) Mortgagor shall not claim, demand or be entitled to
receive any credit or credits toward the satisfaction of this Mortgage or on any
interest payable thereon for any taxes assessed against the Mortgaged Property
or any part thereof, and shall not claim any deduction from the taxable value of
the Mortgaged Property by reason of this Mortgage.
(d) Mortgagor shall have the right pursuant to subsection 7.3
of the Senior Secured Credit Agreement to contest in good faith to the amount or
validity of any Imposition by appropriate proceedings diligently conducted with
reserves in conformity with GAAP, provided that Mortgagor shall demonstrate to
Mortgagee's reasonable satisfaction that such proceedings shall operate
conclusively to prevent the sale of the Mortgaged Property, or any part thereof,
to satisfy such Imposition prior to final determination of such proceedings.
(e) Upon written notice to Mortgagor, Mortgagee during the
continuance of an Event of Default (as defined below) shall be entitled to
require Mortgagor to pay monthly in advance to Mortgagee the equivalent of
1/12th of the estimated annual Impositions. Mortgagee may commingle such funds
with its own funds but Mortgagor shall be entitled to interest thereon at a rate
mutually agreed upon by Mortgagor and Mortgagee.
5. Insurance. (a) Mortgagor shall maintain or cause to be
maintained on all of the Premises:
(i) property insurance against loss or damage by fire,
lightning, windstorm, tornado, water damage, flood, earthquake and by
such other further risks and hazards as now are or subsequently may be
covered by an "all risk" policy or a fire policy covering "special"
causes of loss (provided, however, that the maintenance of insurance
against earthquake, windstorm, flood and freeze risks shall be subject
to availability of such insurance coverage on commercially reasonable
terms). The policy shall include building ordinance law endorsements
and the policy limits shall be automatically reinstated after
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<PAGE> 11
each loss (other than with respect to flood and earthquake coverage
which shall be reinstated on a commercially reasonable basis);
(ii) commercial general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language or similar language of such endorsement), covering all claims
for personal injury, bodily injury or death, or property damage,
subject to standard policy terms, conditions and exclusions, occurring
on, in or about the Premises in an amount not less than $10,000,000
combined single limit with respect to personal injury, bodily injury or
death, or property damage, relating to any one occurrence plus such
excess limits as Mortgagee shall reasonably request from time to time;
(iii) when and to the extent reasonably required by Mortgagee,
insurance against loss or damage by any other risk commonly insured
against by persons occupying or using like properties in the locality
or localities in which the Real Estate is situated;
(iv) during the course of any construction or repair of
Improvements, commercial general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language or similar language of such endorsement), (including coverage
for elevators and escalators, if any). The policy shall include
coverage for independent contractors and completed operations. The
completed operations coverage shall stay in effect for two years after
construction of any Improvements has been completed. The policy shall
provide coverage on an occurrence basis against claims for personal
injury, including, without limitation, bodily injury and death, and
property damage resulting from Mortgagor's negligence or other behavior
for which Mortgagor may be adjudged tortiously liable, subject to
standard policy terms, conditions and exclusions, occurring on, in or
about the Premises and the adjoining streets, sidewalks and
passageways, such insurance to afford immediate minimum protection to a
limit of not less than that reasonably required by Mortgagee with
respect to personal injury, bodily injury or death to any one or more
persons or damage to property;
(v) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Mortgagor engaged on or with
respect to the Premises in such amounts no less than the limits
established by law or in the case of employer's liability insurance, no
less than $500,000, provided that Mortgagor may self-insure any or all
workers' compensation liabilities;
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(vi) during the course of any construction, addition,
alteration or repair of the Improvements, builder's risk completed
value property insurance form against "all risks of physical loss"
(subject to standard policy exclusions), including collapse, water
damage, flood and earthquake and transit coverage, during construction
or repairs of the Improvements, with deductible approved by Mortgagee
in its reasonable discretion, in reporting form, covering the total
replacement value of work performed and equipment, supplies and
materials furnished (with an appropriate limit for soft costs in the
case of construction); provided, however, that the maintenance of
insurance against earthquake and flood risks shall be subject to
availability of such insurance coverage on commercially reasonable
terms;
(vii) boiler and machinery property insurance covering
pressure vessels, air tanks, boilers, machinery, pressure piping,
heating, air conditioning and elevator equipment and escalator
equipment, provided the Improvements contain equipment of such nature,
in such amounts as are reasonably satisfactory to Mortgagee but not
less than the lesser of $1,000,000 or 10% of the value of the
Improvements;
(viii) if any portion of the Premises are located in an area
identified in the Federal Register as having special flood hazards by
the Secretary of Housing and Urban Development or other applicable
agency, flood insurance covering any parcel of the Mortgaged Property
which contains improvements in an amount satisfactory to Mortgagee in
its reasonable discretion, but in no event less than the maximum limit
of coverage available with respect to the particular type of property
under the National Flood Insurance Act of 1968, as amended and with a
term ending not later than the maturity of the Indebtedness and
Mortgagee shall receive confirmation that Mortgagor has received the
notice required pursuant to Section 208.8(e)(3) of Regulation H of the
Board of Governors of The Federal Reserve System; and
(ix) such other insurance in such amounts as Mortgagee may
reasonably request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or, in the case of
property and boiler and machinery insurance, materially amended without 30-days'
prior written notice to Mortgagee, (ii) with respect to all property insurance,
subject to availability on commercially reasonable terms, provide for
deductibles not to exceed $250,000,
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other than with respect to (a) flood, freeze, windstorm and earthquake perils
for which deductibles shall not exceed the greater of $500,000 or 5% of values
at risk per location involved in loss and (b) boiler and machinery coverage for
which deductibles shall not exceed the greater of $500,000 or five times 100% of
the daily time element value, contain a "Replacement Cost Endorsement" without
any deduction made for depreciation and with no co-insurance penalty (or
attaching an agreed amount endorsement satisfactory to Mortgagee in its
reasonable discretion), with loss payable solely to Mortgagee (modified, if
necessary and to the extent available under such policy, to provide that
proceeds in the amount of replacement cost may be retained by Mortgagee without
the obligation to rebuild) as its interest may appear, without contribution,
under a "standard" or "New York" mortgagee clause acceptable to Mortgagee in its
reasonable discretion and be written by insurance companies having an A.M. Best
Company, Inc. rating of A- or higher and a financial size category of not less
than VII, or otherwise as approved by Mortgagee in its reasonable discretion and
(iii) contain a "manuscript" endorsement providing that Mortgagor may not
unilaterally cancel such policy without Mortgagee's prior written consent.
Liability insurance policies shall name Mortgagee as an additional insured and
contain a waiver of subrogation against Mortgagee; all such policies shall
indemnify and hold Mortgagee harmless from all liability claims occurring on, in
or about the Premises and the adjoining streets, sidewalks and passageways,
subject to standard policy terms, conditions and exclusions. The amounts of each
insurance policy and the form of each such policy shall at all times be
satisfactory to Mortgagee in its reasonable discretion. Each policy shall
expressly provide that any proceeds which are payable to Mortgagee shall be paid
by check payable to the order of Mortgagee only and requiring the endorsement of
Mortgagee only. If any required insurance shall expire, be withdrawn, become
void by breach of any condition thereof by Mortgagor or by any lessee of any
part of the Mortgaged Property or become void or unsafe by reason of the failure
or impairment of the capital of any insurer, Mortgagor shall immediately obtain
new or additional insurance satisfactory to Mortgagee in its reasonable
discretion. Mortgagor shall not take out any separate or additional insurance
which is contributing in the event of loss unless it is properly endorsed and
otherwise satisfactory to Mortgagee in all respects in its reasonable
discretion.
(b) Mortgagor shall deliver to Mortgagee an original of each
insurance policy required to be maintained, or a certificate of such insurance
acceptable to Mortgagee in its reasonable discretion, together with a copy of
the declaration page for each such policy. Mortgagor shall (i) pay as they
become due all premiums for such insurance, (ii) not later than seven days prior
to the expiration of each policy to be furnished pursuant to the provisions of
this Section, deliver a renewed policy or policies, or certificates of insurance
acceptable to Mortgagee, in its reasonable
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discretion, or duplicate original or originals thereof. Upon the reasonable
request of Mortgagee, Mortgagor shall cause its insurance underwriter or broker
to certify to Mortgagee in writing that all the requirements of this Mortgage
governing insurance have been satisfied.
(c) If Mortgagor is in default of its obligations to insure or
deliver any such policy or policies, or certificates of insurance acceptable to
Mortgagee, in its reasonable discretion, then Mortgagee, at its option and
without notice, may effect such insurance from year to year, and pay the premium
or premiums therefor, and Mortgagor shall pay to Mortgagee on demand such
premium or premiums so paid by Mortgagee with interest from the time of payment
at the Default Rate and the same shall be deemed to be secured by this Mortgage
and shall be collectible in the same manner as the Indebtedness secured by this
Mortgage.
(d) Mortgagor shall increase the amount of property insurance
required to equal 100% replacement cost pursuant to the provisions of this
Section at the time of each renewal of each policy (but not later than 12 months
from the date of this Mortgage and each successive 12 month period to occur
thereafter) by using the Morgan & Swift Building Cost Index to determine whether
there shall have been an increase in the replacement value since the most recent
adjustment and, if there shall have been such an increase, the amount of
insurance required shall be adjusted accordingly.
(e) Mortgagor promptly shall in all material respects comply
with and conform to (i) all provisions of each such insurance policy, and (ii)
all requirements of the insurers applicable to Mortgagor or to any of the
Mortgaged Property or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration or repair of any of the Mortgaged Property.
Mortgagor shall not use or permit the use of the Mortgaged Property in any
manner which would permit any insurer to cancel any insurance policy or void
coverage required to be maintained by this Mortgage.
(f) (i) If the Mortgaged Property, or any part thereof, shall
be destroyed or damaged by fire or any other casualty, whether insured
or uninsured, or in the event any claim is made against Mortgagor for
any personal injury, bodily injury or property damage incurred on or
about the Premises, Mortgagor shall promptly give notice thereof to
Mortgagee.
(ii) If the Mortgaged Property is damaged by fire or other
casualty and the cost to repair such damage is less than $1,000,000,
then provided that no
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Event of Default shall have occurred and be continuing, Mortgagor shall
have the right to adjust such loss, and the insurance proceeds relating
to such loss may be paid over to Mortgagor; provided that Mortgagor
shall, promptly after any such damage, repair such damage to the extent
required by subsection 7.5 of the Senior Secured Credit Agreement
regardless of whether any insurance proceeds have been received or
whether such proceeds, if received, are sufficient to pay for the costs
of repair.
(iii) If the Mortgaged Property is damaged by fire or other
casualty, and the cost to repair such damage exceeds the limit in
Section 5(f)(ii) above, or if an Event of Default shall have occurred
and be continuing, then Mortgagor authorizes and empowers Mortgagee, at
Mortgagee's option and in Mortgagee's reasonable discretion, as
attorney-in-fact for Mortgagor, to make proof of loss, to adjust and
compromise any claim under any insurance policy, to appear in and
prosecute any action arising from any policy, to collect and receive
insurance proceeds and to deduct therefrom Mortgagee's reasonable
expenses incurred in the collection process. Each insurance company
concerned is hereby authorized and directed to make payment for such
loss directly to Mortgagee. Mortgagee shall have the right to require
Mortgagor to repair or restore the Mortgaged Property to the extent
required by subsection 7.5 of the Senior Secured Credit Agreement, and
Mortgagor hereby designates Mortgagee as its attorney-in-fact for the
purpose of making any election required or permitted under any
insurance policy relating to such repair or restoration. The insurance
proceeds or any part thereof received by Mortgagee may be applied by
Mortgagee toward reimbursement of all reasonable costs and expenses of
Mortgagee in collecting such proceeds, and the balance, at Mortgagee's
option in its sole and absolute discretion, to the principal (to the
installments in inverse order of maturity, if payable in installments)
and interest due or to become due under the Notes, the Senior Secured
Credit Agreement or the other Loan Documents, to fulfill any other
Obligation of Mortgagor, to the restoration or repair of the property
damaged, or released to Mortgagor. Application by Mortgagee of any
insurance proceeds toward the last maturing installments of principal
and interest due or to become due on the Loans shall not excuse
Mortgagor from making any regularly scheduled payments due thereunder,
nor shall such application extend or reduce the amount of such
payments. In the event Mortgagee elects to release such proceeds to
Mortgagor, Mortgagor shall be obligated to use such proceeds to restore
or repair the Mortgaged Property to the extent required by subsection
7.5 of the Senior Secured Credit Agreement.
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(g) In the event of foreclosure of this Mortgage or other
transfer of title to the Mortgaged Property in lieu of such foreclosure, all
right, title and interest of Mortgagor in and to any insurance policies then in
force, to the extent assignable or transferable, shall pass to the purchaser or
grantee and Mortgagor hereby appoints Mortgagee its attorney-in-fact, in
Mortgagor's name, to assign and transfer all such policies and proceeds to such
purchaser or grantee.
(h) Upon written notice to Mortgagor, Mortgagee, during the
continuance of an Event of Default, shall be entitled to require Mortgagor to
pay monthly in advance to Mortgagee the equivalent of 1/12th of the estimated
annual premiums due on such insurance. Mortgagee may commingle such funds with
its own funds but Mortgagor shall be entitled to interest thereon at a rate
mutually agreed upon by Mortgagor and Mortgagee.
(i) Mortgagor may maintain insurance required under this
Mortgage by means of one or more blanket insurance policies maintained by
Mortgagor; provided, however, that (A) any such policy shall specify, or
Mortgagor shall furnish to Mortgagee a written statement from the insurer so
specifying, the maximum amount of the total insurance afforded by such blanket
policy that is allocated to the Premises and the other Mortgaged Property and
any sublimits and aggregates in such blanket policy applicable to the Premises
and the other Mortgaged Property, (B) each such blanket policy shall include an
endorsement providing that, in the event of a loss resulting from an insured
peril, insurance proceeds shall be allocated to the Mortgaged Property in an
amount equal to the coverages required to be maintained by Mortgagor as provided
above (subject to applicable sublimits and aggregates) and (C) the protection
afforded under any such blanket policy shall be no less than that which would
have been afforded under a separate policy or policies relating only to the
Mortgaged Property (subject to applicable sublimits and aggregates).
6. Restrictions on Liens and Encumbrances. Except for the lien
of this Mortgage and the Permitted Exceptions and except as otherwise permitted
pursuant to the terms of the Senior Secured Credit Agreement, Mortgagor shall
not further mortgage, nor otherwise encumber the Mortgaged Property nor create
or suffer to exist any lien, charge or encumbrance on the Mortgaged Property, or
any part thereof, whether superior or subordinate to the lien of this Mortgage
and whether recourse or non-recourse.
7. Due on Sale and Other Transfer Restrictions. Except as may
be otherwise expressly permitted under the Senior Secured Credit Agreement,
Mortgagor
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shall not sell, transfer, convey or assign all or any portion of, or any
interest in, the Mortgaged Property.
8. Maintenance; No Alteration; Inspection; Utilities. (a)
Mortgagor shall maintain or cause to be maintained all the Improvements in good
condition and repair and shall not commit or suffer any waste of the
Improvements. To the extent required under subsection 7.5 of the Senior Secured
Credit Agreement, Mortgagor shall repair, restore, replace or rebuild promptly
any part of the Premises which may be damaged or destroyed by any casualty
whatsoever to a condition substantially equivalent to its condition prior to the
damage or destruction. Except as permitted by the Senior Secured Credit
Agreement, the Improvements shall not be demolished or materially altered, nor
any material additions built, without the prior written consent of Mortgagee,
provided that Mortgagor may make alterations or additions without the consent of
Mortgagee that do not materially reduce the value of the Mortgaged Property.
(b) Mortgagee and any persons authorized by Mortgagee shall,
upon reasonable notice and at any reasonable time, have the right to enter and
inspect the Premises and the right to inspect all work done, labor performed and
materials furnished in and about the Improvements and the right to inspect and
make copies, to the extent reasonable, of all books, contracts and records of
Mortgagor relating to the Mortgaged Property.
(c) Except as permitted under subsection 7.3 of the Senior
Secured Credit Agreement, Mortgagor shall pay or cause to be paid prior to
delinquency, all utility charges which are incurred for gas, electricity, water
or sewer services furnished to the Premises and all other assessments or charges
of a similar nature, whether public or private, affecting the Premises or any
portion thereof, whether or not such assessments or charges are liens thereon.
9. Condemnation/Eminent Domain. Promptly upon obtaining
knowledge of the institution of any proceedings for the condemnation of the
Mortgaged Property, or any portion thereof, Mortgagor will notify Mortgagee of
the pendency of such proceedings. Mortgagor authorizes Mortgagee, at Mortgagee's
option and in Mortgagee's reasonable discretion, as attorney-in-fact for
Mortgagor, to commence, appear in and prosecute, in Mortgagee's or Mortgagor's
name, any action or proceeding relating to any condemnation of the Mortgaged
Property, or any portion thereof, and to settle or compromise any claim in
connection with such condemnation upon the occurrence and during the continuance
of an Event of Default. If Mortgagee elects not to participate in such
condemnation proceeding, then Mortgagor shall, at its
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expense, diligently prosecute any such proceeding and shall consult with
Mortgagee, its attorneys and experts and cooperate with them in any defense of
any such proceedings. All awards and proceeds of condemnation shall be applied
in the same manner as insurance proceeds, and to the extent such awards and
proceeds exceed $1,000,000 and no Event of Default shall have occurred and be
continuing, such awards and proceeds shall be assigned to Mortgagee to be
applied in the same manner as insurance proceeds, as provided above in
subsection 5(f)(iii) above, and Mortgagor agrees to execute any such assignments
of all such awards as Mortgagee may request.
10. Restoration. If Mortgagee elects or is required hereunder
to release funds to Mortgagor for restoration of any of the Mortgaged Property,
then such restoration shall be performed in accordance with such conditions as
Mortgagee shall impose in its reasonable discretion, and as are customarily
imposed by construction lenders.
11. Leases. (a) Mortgagor shall not (i) execute an assignment
or pledge of any Lease relating to all or any portion of the Mortgaged Property
other than in favor of Mortgagee, or (ii) without the prior written consent of
Mortgagee, which consent shall not be unreasonably withheld or delayed, execute
or permit to exist any Lease of any of the Mortgaged Property, except for
Permitted Exceptions and except as may be otherwise expressly permitted under
the Senior Secured Credit Agreement.
(b) As to any Lease consented to by Mortgagee under subsection
11(a) above, Mortgagor shall:
(i) promptly perform in all material respects all of the
provisions of the Lease on the part of the lessor thereunder to be
performed;
(ii) promptly enforce all of the material provisions of the
Lease on the part of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising
under or in any manner connected with the Lease or the obligations of
Mortgagor as lessor or of the lessee thereunder;
(iv) exercise, within 5 business days after a reasonable
request by Mortgagee, any right to request from the lessee a
certificate with respect to the status thereof;
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(v) promptly deliver to Mortgagee copies of any notices of
default which Mortgagor may at any time forward to or receive from the
lessee;
(vi) promptly deliver to Mortgagee a fully executed
counterpart of the Lease; and
(vii) promptly deliver to Mortgagee, upon Mortgagee's
reasonable request, if permitted under such Lease, an assignment of the
Mortgagor's interest under such Lease.
(c) Mortgagor shall deliver to Mortgagee, within 10 business
days after a reasonable request by Mortgagee, a written statement, certified by
Mortgagor as being true, correct and complete, containing the names of all
lessees and other occupants of the Mortgaged Property, the terms of all Leases
and the spaces occupied and rentals payable thereunder, and a list of all Leases
which are then in default, including the nature and magnitude of the default;
such statement shall be accompanied by such other information as Mortgagee may
reasonably request.
(d) All Leases entered into by Mortgagor after the date
hereof, if any, and all rights of any lessees thereunder shall be subject and
subordinate in all respects to the lien and provisions of this Mortgage unless
Mortgagee shall otherwise elect in writing.
(e) In the event of the enforcement by Mortgagee of any remedy
under this Mortgage, the lessee under each Lease shall, if requested by
Mortgagee or any other person succeeding to the interest of Mortgagee as a
result of such enforcement, and if provided, at such lessee's request, with a
nondisturbance agreement from Mortgagee or such person, attorn to Mortgagee or
to such person and shall recognize Mortgagee or such successor in interest as
lessor under the Lease without change in the provisions thereof; provided
however, that Mortgagee or such successor in interest shall not be: (i) bound by
any payment of an installment of rent or additional rent which may have been
made more than 30 days before the due date of such installment; (ii) bound by
any amendment or modification to the Lease made without the consent of Mortgagee
or such successor in interest; (iii) liable for any previous act or omission of
Mortgagor (or its predecessors in interest); (iv) responsible for any monies
owing by Mortgagor to the credit of such lessee or subject to any credits,
offsets, claims, counterclaims, demands or defenses which the lessee may have
against Mortgagor (or its predecessors in interest); (v) bound by any covenant
to undertake or complete any construction of the Premises or any portion
thereof; or (vi) obligated to make any payment to such lessee other than any
security deposit actually delivered to Mortgagee
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or such successor in interest. Each lessee or other occupant, upon request by
Mortgagee or such successor in interest, shall execute and deliver an instrument
or instruments confirming such attornment. In addition, Mortgagor agrees that
each Lease entered into after the date of this Mortgage shall include language
to the effect of subsections (d)-(e) of this Section and language to the effect
that if any act or omission of Mortgagor would give any lessee under such Lease
the right, immediately or after lapse of a period of time, to cancel or
terminate such Lease, or to abate or offset against the payment of rent or to
claim a partial or total eviction, such lessee shall not exercise such right
until it has given written notice of such act or omission to Mortgagee and until
a reasonable period for remedying such act or omission shall have elapsed
following the giving of such notice without a remedy being effected; provided
that the provisions of such subsections shall be self-operative and any failure
of any Lease to include such language shall not impair the binding effect of
such provisions on any lessee under such Lease.
12. Further Assurances/Estoppel Certificates. To further
assure Mortgagee's rights under this Mortgage, Mortgagor agrees upon demand of
Mortgagee to do any act or execute any additional documents (including, but not
limited to, security agreements on any personalty included or to be included in
the Mortgaged Property and a separate assignment of each Lease in recordable
form) as may be reasonably required by Mortgagee to confirm the rights or
benefits conferred on Mortgagee by this Mortgage.
13. Mortgagee's Right to Perform. If Mortgagor fails to
perform any of the covenants or agreements of Mortgagor, Mortgagee, without
waiving or releasing Mortgagor from any obligation or default under this
Mortgage, may, at any time (but shall be under no obligation to) pay or perform
the same, and the amount or cost thereof, with interest at the Default Rate,
shall immediately be due from Mortgagor to Mortgagee and the same shall be
secured by this Mortgage and shall be an encumbrance on the Mortgaged Property
prior to any right, title to, interest in or claim upon the Mortgaged Property
attaching subsequent to the date of this Mortgage. No payment or advance of
money by Mortgagee under this Section shall be deemed or construed to cure
Mortgagor's default or waive any right or remedy of Mortgagee.
14. Events of Default. The occurrence of an Event of Default
under the Senior Secured Credit Agreement shall constitute an Event of Default
hereunder.
15. Remedies. (a) Upon the occurrence of any Event of Default,
in addition to any other rights and remedies Mortgagee may have pursuant to the
Loan Documents, or as provided by law, and without limitation, the Indebtedness
and all
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other amounts payable with respect to the Loans, the Letters of Credit, the
Senior Secured Credit Agreement, this Mortgage and the other Security Documents
shall become due and payable as provided in the Senior Secured Credit Agreement.
Except as expressly provided above in this Section, presentment, demand, protest
and all other notices of any kind are hereby expressly waived. In addition, upon
the occurrence of any Event of Default, Mortgagee may immediately take such
action, without notice or demand, as it deems advisable to protect and enforce
its rights against Mortgagor and in and to the Mortgaged Property, including,
but not limited to, the following actions, each of which may be pursued
concurrently or otherwise, at such time and in such manner as Mortgagee may
determine, in its sole discretion, without impairing or otherwise affecting the
other rights and remedies of Mortgagee:
(i) Mortgagee may, to the extent permitted by applicable law,
(A) institute and maintain an action of mortgage foreclosure against
all or any part of the Mortgaged Property, (B) institute and maintain
an action on the Notes, the Senior Secured Credit Agreement or the
other Security Documents, (C) sell all or part of the Mortgaged
Property (Mortgagor expressly granting to Mortgagee the power of sale,
as more fully described below), or (D) take such other action at law or
in equity for the enforcement of this Mortgage or any of the Loan
Documents as the law may allow. Mortgagee may proceed in any such
action to final judgment and execution thereon for all sums due
hereunder, together with interest thereon at the Default Rate and all
costs of suit, including, without limitation, reasonable attorneys'
fees and disbursements. Interest at the Default Rate shall be due on
any judgment obtained by Mortgagee from the date of judgment until
actual payment is made of the full amount of the judgment.
(ii) Without affecting any right, power or remedy herein given
to Mortgagee and in addition to every other right, power and remedy
herein specifically given or now or hereafter existing in equity, law
or statute, Mortgagor hereby grants to Mortgagee the non-judicial Power
of Sale. Such Power of Sale shall be exercised by giving Mortgagor
Notice of Intent to Foreclose by Power of Sale and setting forth, among
other things, the nature of the breach(es) or default(s) and the action
required to effect a cure thereof and the time period within which such
cure may be effected all in compliance with Title 46 Oklahoma Statutes
Sections 40 et. seq. (Oklahoma Power of Sale Mortgage Foreclosure
Act) as the same may be amended from time to time or other applicable
statutory or judicial authority (the "Act"). If no cure is effected
within the statutory time limits, Mortgagee may accelerate the
Indebtedness secured hereby without further notice (the aforementioned
statutory cure period shall run concurrently with any contractual
provision for notice before
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acceleration of debt) and may then proceed in the manner and subject to
the conditions of the Act to send to Mortgagor and other necessary
parties a Notice of Sale and to sell and convey the Mortgaged Property
in accordance with such Act. The sale shall be made at one or more
sales, as an entirety or in parcels upon such notice, at such times and
places, subject to all conditions and with the proceeds thereof to be
applied all as provided in the Act. No action of Mortgagee based upon
the provisions contained herein or in the Act, including, without
limitation, the giving of the Notice of Intent to Foreclose by Power of
Sale or the Notice of Sale, shall constitute an election of remedies
which would preclude Mortgagee from pursuing judicial foreclosure
before or at any time after commencement of the Power of Sale
foreclosure procedure. Whether or not proceedings have commenced by the
exercise of the Power of Sale above given, Mortgagee or the holder or
holders of any of the Indebtedness, in lieu of proceeding with the
Power of Sale (or in the event of homestead property where Mortgagor
has elected judicial foreclosure, as provided in the Act) may at its or
their option, as applicable, following acceleration of the Indebtedness
as set forth above, proceed by suit or suits in equity or at law to
foreclose this Mortgage. If Mortgagee institutes judicial proceedings
to foreclose this Mortgage, Mortgagor hereby waives or does not waive,
at the sole option of Mortgagee, appraisement of the Mortgaged
Property, said option to be exercised by Mortgagee at or prior to the
time judgment is rendered in such judicial foreclosure. Mortgagor fully
understands the consequences of conferring on Mortgagee the
above-described Power of Sale, and if Mortgagee elects to enforce this
Mortgage by exercising said Power of Sale, Mortgagor hereby expressly
waives to the fullest extent permitted by law any right to a judicial
hearing prior to the sale of the Mortgaged Property. As often as any
proceedings may be taken to foreclose this Mortgage, whether pursuant
to the Power of Sale herein conferred or by judicial proceedings, or to
foreclose the security interest herein granted to Mortgagee, Mortgagor
agrees to pay to Mortgagee, in addition to all other sums due, all
costs and expenses, including reasonable attorney fees, incurred by
Mortgagee.
(iii) Mortgagee may personally, or by its agents, attorneys
and employees and without regard to the adequacy or inadequacy of the
Mortgaged Property or any other collateral as security for the
Indebtedness and Obligations enter into and upon the Mortgaged Property
and each and every part thereof and exclude Mortgagor and its agents
and employees therefrom without liability for trespass, damage or
otherwise (Mortgagor hereby agreeing to surrender possession of the
Mortgaged Property to Mortgagee upon demand at any such time) and use,
operate, manage, maintain and control the Mortgaged Property
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and every part thereof. Following such entry and taking of possession,
Mortgagee shall be entitled, without limitation, (x) to lease all or
any part or parts of the Mortgaged Property for such periods of time
and upon such conditions as Mortgagee may, in its discretion, deem
proper, (y) to enforce, cancel or modify any Lease and (z) generally to
execute, do and perform any other act, deed, matter or thing concerning
the Mortgaged Property as Mortgagee shall deem appropriate as fully as
Mortgagor might do. In connection with Mortgagee's right to possession
of the Mortgaged Property as specified in this paragraph, Mortgagor
acknowledges that it has been advised that there is a significant body
of case law in Oklahoma which purportedly provides that in the absence
of a showing of waste of a character sufficient to endanger the value
of the Mortgaged Property, or other special factors, a mortgagor is
entitled to remain in possession of Mortgaged Property, and to enjoy
the income, rents and profits therefrom, during the pendency of
foreclosure proceedings and until the expiration of the redemption
period, even if the mortgage documents expressly provide to the
contrary. Mortgagor further acknowledges that it has been advised that
Mortgagee recognizes the value of the security covered hereby is
inextricably intertwined with the effectiveness of the management,
maintenance and general operation of the Mortgaged Property, and that
Mortgagee would not extend the Indebtedness secured hereby unless it
could be assured that it would have the right to take possession of the
Mortgaged Property in order to manage or to control management thereof,
and to enjoy the income, rents and profits therefrom, immediately upon
default by Mortgagor hereunder, notwithstanding that foreclosure
proceedings may not have been instituted, or are pending, or the
redemption period may not have expired. Accordingly, Mortgagor hereby
knowingly, intelligently and voluntarily waives all right to possession
of the Mortgaged Property from and after the occurrence of an Event of
Default hereunder, upon demand for possession by Mortgagee, and
Mortgagor agrees not to assert any objection or defense to Mortgagee's
request or petition to a court for possession. The rights hereby
conferred upon Mortgagee have been agreed upon prior to any default by
Mortgagor hereunder and the exercise by Mortgagee of any such rights
shall not be deemed to put Mortgagee in the status of a "mortgagee in
possession". Mortgagor acknowledges that this provision is material to
this transaction and that Mortgagee would not extend the Indebtedness
secured hereby but for this paragraph.
(b) The holder of this Mortgage, without regard to Mortgagee's
election of nonjudicial Power of Sale foreclosure or judicial foreclosure, shall
be entitled to the appointment of a receiver by any court of competent
jurisdiction. In case of a
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foreclosure sale, the Real Estate may be sold, at Mortgagee's election, in one
parcel or in more than one parcel and Mortgagee is specifically empowered,
(without being required to do so, and in its sole and absolute discretion) to
cause successive sales of portions of the Mortgaged Property to be held. In the
event of a judicial foreclosure, the court shall direct a sale of the Real
Estate either with or without appraisement, as Mortgagee may elect, said
election to be exercised at or prior to the time judgment is rendered.
(c) In the event of any breach of any of the covenants,
agreements, terms or conditions contained in this Mortgage, and notwithstanding
to the contrary any exculpatory or non-recourse language which may be contained
herein, Mortgagee shall be entitled to enjoin such breach and obtain specific
performance of any covenant, agreement, term or condition and Mortgagee shall
have the right to invoke any equitable right or remedy as though other remedies
were not provided for in this Mortgage.
(d) In case of foreclosure of this Mortgage or the exercise of
Power of Sale, and as often as any proceedings shall be instituted relating
thereto, Mortgagor will pay to Mortgagee a reasonable attorney's fee, together
with the cost of continuing the abstract of title to the Real Estate to the date
of filing such foreclosure, court costs and all other expenses incurred in
connection with such proceedings, all of which will be due and payable when suit
is filed and will be and become a part of the Indebtedness to be paid or
collected in such foreclosure.
16. Right of Mortgagee to Credit Sale. Upon the occurrence of
any sale made under this Mortgage, whether made under the power of sale or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale, Mortgagee may bid for and acquire the Mortgaged Property or any part
thereof. In lieu of paying cash therefor, Mortgagee may make settlement for the
purchase price by crediting upon the Indebtedness or other sums secured by this
Mortgage the net sales price after deducting therefrom the expenses of sale and
the cost of the action and any other sums which Mortgagee is authorized to
deduct under this Mortgage. In such event, this Mortgage, the Notes and other
instruments evidencing the Indebtedness and any and all documents evidencing
expenditures secured hereby may be presented to the person or persons conducting
the sale in order that the amount so used or applied may be credited upon the
Indebtedness as having been paid.
17. Appointment of Receiver. If any condition of this Mortgage
shall not have been satisfied or if any other Event of Default shall have
occurred and be continuing, Mortgagee, in any action to foreclose this Mortgage
(whether by judicial
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proceedings or in connection with any exercise of the Power of Sale), shall be
entitled as a matter of right and without notice to Mortgagor, unless otherwise
required by applicable law, and without regard to the adequacy or inadequacy of
the Mortgaged Property or any other collateral as security for the Indebtedness
and Obligations or the interest of Mortgagor therein, and without the proof
required by statute, and without regard to Mortgagee's election of nonjudicial
Power of Sale foreclosure or judicial foreclosure, shall have the right to the
appointment of a receiver or receivers or other manager of the Mortgaged
Property by any court of competent jurisdiction, without requiring the posting
of a surety bond and without reference to the adequacy or inadequacy of the
value of the Mortgaged Property or the solvency or insolvency of Mortgagor or
any other party obligated for payment of all or any part of the Indebtedness,
and whether or not waste has occurred with respect to the Mortgaged Property.
Mortgagor hereby irrevocably consents to such appointment and waives notice of
any application therefor (except as may be required by law). Any such receiver
or receivers shall have all the usual powers and duties of receivers in like or
similar cases and all the powers and duties of Mortgagee in case of entry as
provided in this Mortgage, including, without limitation and to the extent
permitted by law, the right to enter into leases of all or any part of the
Mortgaged Property, and shall continue as such and exercise all such powers
until the date of confirmation of sale of the Mortgaged Property unless such
receivership is sooner terminated.
18. Extension, Release, etc. (a) Without affecting the lien or
charge of this Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of the Indebtedness,
Mortgagee may, from time to time and without notice, agree to (i) release any
person liable for the Indebtedness, (ii) extend the maturity or alter any of the
terms of the Indebtedness or any guaranty thereof, (iii) grant other
indulgences, (iv) release or reconvey, or cause to be released or reconveyed at
any time at Mortgagee's option any parcel, portion or all of the Mortgaged
Property, (v) take or release any other or additional security for any
obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Mortgage shall secure less
than all of the principal amount of the Indebtedness, it is expressly agreed
that any repayments of the principal amount of the Indebtedness shall not reduce
the amount of the encumbrance of this Mortgage until the encumbrance amount
shall equal the principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect the encumbrance of this Mortgage or any
liens, rights,
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powers or remedies of Mortgagee hereunder, and such liens, rights, powers and
remedies shall continue unimpaired.
(c) If Mortgagee shall have the right to foreclose this
Mortgage or exercise the Power of Sale, Mortgagor authorizes Mortgagee at its
option to foreclose the lien of this Mortgage or exercise the Power of Sale
subject to the rights of any tenants of the Mortgaged Property. The failure to
make any such tenants parties defendant to any such foreclosure proceeding and
to foreclose their rights or exercise the Power of Sale will not be asserted by
Mortgagor as a defense to any proceeding instituted by Mortgagee to collect the
Indebtedness, to foreclose the lien of this Mortgage or to exercise the Power of
Sale.
(d) Unless expressly provided otherwise, in the event that
ownership of this Mortgage and title to the Mortgaged Property or any estate
therein shall become vested in the same person or entity, this Mortgage shall
not merge in such title but shall continue as a valid lien on the Mortgaged
Property for the amount secured hereby.
19. Security Agreement under Uniform Commercial Code. (a) It
is the intention of the parties hereto that this Mortgage shall constitute a
Security Agreement within the meaning of the Uniform Commercial Code (the
"CODE") of the State of Oklahoma (being Title 12A Section 1-101 et seq.). If an
Event of Default shall occur under this Mortgage, then in addition to having any
other right or remedy available at law or in equity, Mortgagee shall have the
option of either (i) proceeding under the Code and exercising such rights and
remedies as may be provided to a secured party by the Code with respect to all
or any portion of the Mortgaged Property which is personal property (including,
without limitation, taking possession of and selling such property) or (ii)
treating such property as real property and proceeding with respect to both the
real and personal property constituting the Mortgaged Property in accordance
with Mortgagee's rights, powers and remedies with respect to the real property
(in which event the default provisions of the Code shall not apply). If
Mortgagee shall elect to proceed under the Code, then ten days' notice of sale
of the personal property shall be deemed reasonable notice and the reasonable
expenses of retaking, holding, preparing for sale, selling and the like incurred
by Mortgagee shall include, but not be limited to, reasonable attorneys' fees
and legal expenses. At its option, Mortgagee may proceed solely or separately
against the Mortgaged Property or any part thereof upon any default and will be
entitled to exercise any or all of the rights and remedies accorded a secured
party by the Code including, but not limited to, the right to require Mortgagor,
upon demand by Mortgagee, to assemble the Mortgaged Property and make the same
available to Mortgagee at a place convenient to both parties. Any reasonable
attorney's fees and legal expenses incurred by Mortgagee in taking any such
action will be
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considered part of the reasonable expenses of retaking, holding, preparing for
sale and reselling the Mortgaged Property within the meaning of the Code.
(b) Mortgagor and Mortgagee agree, to the extent permitted by
law, that: (i) some or all of the goods described within the definition of the
word "Equipment" are or are to become fixtures on the Real Estate; (ii) this
Mortgage upon recording or registration in the real estate records of the proper
office shall constitute a financing statement filed as a "fixture filing" within
the meaning of Sections 9-313 and 9-402 of the Code; (iii) Mortgagor is the
record owner of the Real Estate; and (iv) the mailing addresses of Mortgagor and
Mortgagee are as set forth on the first page of this Mortgage. In addition, for
purposes of Article 9 of the Oklahoma Uniform Commercial Code, (i) Mortgagor is
the "debtor", (ii) Mortgagee is the "secured party" and (iii) information
concerning the security interest created hereby may be obtained from Mortgagee
at its address on the first page of this Mortgage.
(c) Mortgagor, upon request by Mortgagee from time to time,
shall execute, acknowledge and deliver to Mortgagee one or more separate
security agreements, in form satisfactory to Mortgagee in its reasonable
discretion, covering all or any part of the Mortgaged Property and will further
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, any financing statement, affidavit, continuation statement or
certificate or other document as Mortgagee may request in order to perfect,
preserve, maintain, continue or extend the security interest under and the
priority of this Mortgage and such security instrument. Mortgagor further agrees
to pay to Mortgagee on demand all reasonable costs and expenses incurred by
Mortgagee in connection with the preparation, execution, recording, filing and
re-filing of any such document and all reasonable costs and expenses of any
record searches for financing statements Mortgagee shall reasonably require. If
Mortgagor shall fail to furnish any financing or continuation statement within
10 days after request by Mortgagee, then pursuant to the provisions of the Code,
Mortgagor hereby authorizes Mortgagee, without the signature of Mortgagor, to
execute and file any such financing and continuation statements. The filing of
any financing or continuation statements in the records relating to personal
property or chattels shall not be construed as in any way impairing the right of
Mortgagee to proceed against any personal property encumbered by this Mortgage
as real property, as set forth above.
20. Assignment of Rents. Mortgagor hereby absolutely and
unconditionally assigns, transfers, conveys and sets over to Mortgagee, the
Rents as further security for the payment of the Indebtedness and performance of
the Obligations, and Mortgagor grants to Mortgagee the right to enter the
Mortgaged Property for the purpose of collecting the same and to let the
Mortgaged Property or
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any part thereof and to apply the Rents on account of the Indebtedness. The
foregoing assignment and grant is present and absolute and shall continue in
effect until the Indebtedness is paid in full, but Mortgagee hereby waives the
right to enter the Mortgaged Property for the purpose of collecting the Rents,
letting the Mortgaged Property or any part thereof or applying the Rents and
Mortgagor shall be entitled to collect, receive, use and retain the Rents until
the occurrence of an Event of Default under this Mortgage; such right of
Mortgagor to collect, receive, use and retain the Rents may be revoked by
Mortgagee upon the occurrence of any Event of Default under this Mortgage by
giving not less than five days' written notice of such revocation to Mortgagor;
in the event such notice is given, Mortgagor shall pay over to Mortgagee, or to
any receiver appointed to collect the Rents, any lease security deposits, and
shall pay monthly in advance to Mortgagee, or to any such receiver, the fair and
reasonable rental value as determined by Mortgagee for the use and occupancy of
the Mortgaged Property or of such part thereof as may be in the possession of
Mortgagor or any affiliate of Mortgagor, and upon default in any such payment
Mortgagor and any such affiliate will vacate and surrender the possession of the
Mortgaged Property to Mortgagee or to such receiver, and in default thereof may
be evicted by summary proceedings or otherwise. Mortgagor shall not accept
prepayments of installments of Rent to become due for a period of more than one
month in advance (except for security deposits and estimated payments of
percentage rent, if any).
21. Trust Funds. All lease security deposits of the Real
Estate shall be treated as trust funds not to be commingled with any other funds
of Mortgagor. Within 10 days after request by Mortgagee, Mortgagor shall furnish
Mortgagee satisfactory evidence of compliance with this subsection, together
with a statement of all lease security deposits by lessees and copies of all
Leases not previously delivered to Mortgagee under which such security deposits
are held, which statement shall be certified by Mortgagor.
22. Additional Rights. The holder of any subordinate lien or
subordinate mortgage on the Mortgaged Property shall have no right to terminate
any Lease whether or not such Lease is subordinate to this Mortgage nor shall
any holder of any subordinate lien or subordinate mortgage join any tenant under
any Lease in any action to foreclose the lien or modify, interfere with, disturb
or terminate the rights of any tenant under any Lease. By recordation of this
Mortgage all subordinate lienholders under subordinate mortgages are subject to
and notified of this provision, and any action taken by any such lienholder or
mortgagee contrary to this provision shall be null and void. Upon the occurrence
of any Event of Default, Mortgagee may, in its sole discretion and without
regard to the adequacy of its security under this
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Mortgage, apply all or any part of any amounts on deposit with Mortgagee under
this Mortgage against all or any part of the Indebtedness. Any such application
shall not be construed to cure or waive any Default or Event of Default or
invalidate any act taken by Mortgagee on account of such Default or Event of
Default.
23. Changes in Method of Taxation. In the event of the passage
after the date hereof of any law of any Governmental Authority deducting from
the value of the Premises for the purposes of taxation any lien or mortgage
thereon, or changing in any way the laws for the taxation of mortgages or deeds
of trust or debts secured thereby for federal, state or local purposes, or the
manner of collection of any such taxes, and imposing a tax, either directly or
indirectly, on mortgages or deeds of trust or debts secured thereby, the holder
of this Mortgage shall have the right to declare the Indebtedness due on a date
to be specified by not less than 30 days' written notice to be given to
Mortgagor unless within such 30-day period Mortgagor shall assume as an
Obligation hereunder the payment of any tax so imposed until full payment of the
Indebtedness and such assumption shall be permitted by law.
24. Notices. All notices, requests, demands and other
communications hereunder shall be deemed to have been sufficiently given or
served when served in the same manner as set forth for notices in the Senior
Secured Credit Agreement.
25. No Oral Modification. This Mortgage may not be changed or
terminated orally. Any agreement made by Mortgagor and Mortgagee after the date
of this Mortgage relating to this Mortgage shall be superior to the rights of
the holder of any intervening or subordinate mortgage, lien or encumbrance.
26. Partial Invalidity. In the event any one or more of the
provisions contained in this Mortgage shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included. Notwithstanding to the contrary anything contained in this Mortgage or
in any provisions of the Indebtedness or Loan Documents, the obligations of
Mortgagor and of any other obligor under the Indebtedness or Loan Documents
shall be subject to the limitation that Mortgagee shall not charge, take or
receive, nor shall Mortgagor or any other obligor be obligated to pay to
Mortgagee, any amounts constituting interest in excess of the maximum rate
permitted by law to be charged by Mortgagee.
27. Mortgagor's Waiver of Rights. To the fullest extent
permitted by law, Mortgagor waives the benefit of all laws now existing or that
may subsequently be
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enacted providing for (i) any appraisement before sale of any portion of the
Mortgaged Property, (ii) any extension of the time for the enforcement of the
collection of the Indebtedness or the creation or extension of a period of
redemption from any sale made in collecting such debt and (iii) exemption of the
Mortgaged Property from attachment, levy or sale under execution or exemption
from civil process. To the full extent Mortgagor may do so, Mortgagor agrees
that Mortgagor will not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, exemption, extension or redemption, or requiring
foreclosure of this Mortgage before exercising any other remedy granted
hereunder and Mortgagor, for Mortgagor and its successors and assigns, and for
any and all persons ever claiming any interest in the Mortgaged Property, to the
extent permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the secured indebtedness and marshalling in the event
of foreclosure of the liens hereby created.
28. Remedies Not Exclusive. Mortgagee shall be entitled to
enforce payment of the Indebtedness and performance of the Obligations and to
exercise all rights and powers under this Mortgage or under any of the other
Loan Documents or other agreement or any laws now or hereafter in force,
notwithstanding some or all of the Indebtedness and Obligations may now or
hereafter be otherwise secured, whether by deed of trust, mortgage, security
agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this
Mortgage nor its enforcement, shall prejudice or in any manner affect
Mortgagee's right to realize upon or enforce any other security now or hereafter
held by Mortgagee, it being agreed that Mortgagee shall be entitled to enforce
this Mortgage and any other security now or hereafter held by Mortgagee in such
order and manner as Mortgagee may determine in its absolute discretion. No
remedy herein conferred upon or reserved to Mortgagee is intended to be
exclusive of any other remedy herein or by law provided or permitted, but each
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. Every
power or remedy given by any of the Loan Documents to Mortgagee or to which
either may otherwise be entitled, may be exercised, concurrently or
independently, from time to time and as often as may be deemed expedient by
Mortgagee. In no event shall Mortgagee, in the exercise of the remedies provided
in this Mortgage (including, without limitation, in connection with the
assignment of Rents, or the appointment of a receiver and the entry of such
receiver on to all or any part of the Mortgaged Property), be deemed a
"mortgagee in possession," and Mortgagee shall not in any way be made liable for
any act, either of commission or omission, in connection with the exercise of
such remedies.
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29. Multiple Security. If (a) the Premises shall consist of
one or more parcels, whether or not contiguous and whether or not located in the
same county, or (b) in addition to this Mortgage, Mortgagee shall now or
hereafter hold or be the mortgagee of one or more additional mortgages, liens,
deeds of trust or other security (directly or indirectly) for the Indebtedness
upon other property in the State in which the Premises are located (whether or
not such property is owned by Mortgagor or by others) or (c) both the
circumstances described in clauses (a) and (b) shall be true, then to the
fullest extent permitted by law, Mortgagee may, at its election, commence or
consolidate in a single foreclosure action all foreclosure proceedings against
all such collateral securing the Indebtedness (including the Mortgaged
Property), which action ("foreclosure", "foreclosure action", "foreclosure
proceeding" all include, for purposes of this Section, the exercise of Power of
Sale granted in this Mortgage) may be brought or consolidated in the courts of,
or sale conducted in, any county in which any of such collateral is located.
Mortgagor acknowledges that the right to maintain a consolidated foreclosure
action is a specific inducement to Mortgagee to extend the Indebtedness, and
Mortgagor expressly and irrevocably waives any objections to the commencement or
consolidation of the foreclosure proceedings in a single action and any
objections to the laying of venue or based on the grounds of forum non
conveniens which it may now or hereafter have. Mortgagor further agrees that if
Mortgagee shall be prosecuting one or more foreclosure or other proceedings
against a portion of the Mortgaged Property or against any collateral other than
the Mortgaged Property, which collateral directly or indirectly secures the
Indebtedness, or if Mortgagee shall have obtained a judgment of foreclosure or
similar judgment against such collateral, then, whether or not such proceedings
are being maintained or judgments were obtained in or outside the State in which
the Premises are located, Mortgagee may commence or continue any foreclosure
proceedings and exercise its other remedies granted in this Mortgage against all
or any part of the Mortgaged Property and Mortgagor waives any objections to the
commencement or continuation of a foreclosure of this Mortgage or exercise of
any other remedies hereunder based on such other proceedings or judgments, and
waives any right to seek to dismiss, stay, remove, transfer or consolidate
either any action under this Mortgage or such other proceedings on such basis.
Neither the commencement nor continuation of proceedings to foreclose this
Mortgage nor the exercise of any other rights hereunder nor the recovery of any
judgment by Mortgagee in any such proceedings shall prejudice, limit or preclude
Mortgagee's right to commence or continue one or more foreclosure or other
proceedings or obtain a judgment against any other collateral (either in or
outside the State in which the Real Estate is located) which directly or
indirectly secures the Indebtedness, and Mortgagor expressly waives any
objections to the commencement of, continuation of, or entry of a judgment in
such other proceedings or exercise of any remedies in such proceedings based
upon any action or judgment connected to this Mortgage, and Mortgagor also
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waives any right to seek to dismiss, stay, remove, transfer or consolidate
either such other proceedings or any sale or action under this Mortgage on such
basis. It is expressly understood and agreed that to the fullest extent
permitted by law, Mortgagee may, at its election, cause the sale of all
collateral which is the subject of a single foreclosure action at either a
single sale or at multiple sales conducted simultaneously and take such other
measures as are appropriate in order to effect the agreement of the parties to
dispose of and administer all collateral securing the Indebtedness (directly or
indirectly) in the most economical and least time-consuming manner.
30. Successors and Assigns. All covenants of Mortgagor
contained in this Mortgage are imposed solely and exclusively for the benefit of
Mortgagee and its respective successors and assigns, and no other person or
entity shall have standing to require compliance with such covenants or be
deemed, under any circumstances, to be a beneficiary of such covenants, any or
all of which may be freely waived in whole or in part by Mortgagee at any time
if in its sole discretion such waiver is deemed advisable. All such covenants of
Mortgagor shall run with the land and bind Mortgagor, the successors and assigns
of Mortgagor (and each of them) and all subsequent owners, encumbrancers and
tenants of the Mortgaged Property, and shall inure to the benefit of Mortgagee
and its respective successors and assigns. The word "Mortgagor" shall be
construed as if it read "Mortgagors" whenever the sense of this Mortgage so
requires and if there shall be more than one Mortgagor, the obligations of the
Mortgagors shall be joint and several.
31. No Waivers, etc. Any failure by Mortgagee to insist upon
the strict performance by Mortgagor of any of the terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgagor of any and all of
the terms and provisions of this Mortgage to be performed by Mortgagor.
Mortgagee may release, regardless of consideration and without the necessity for
any notice to or consent by the mortgagee of any subordinate mortgage or the
holder of any subordinate lien on the Mortgaged Property, any part of the
security held for the obligations secured by this Mortgage without, as to the
remainder of the security, in anywise impairing or affecting the lien of this
Mortgage or the priority of such lien over any subordinate lien or mortgage.
32. Governing Law, etc. This Mortgage shall be governed by and
construed in accordance with the laws of the State in which the Premises are
located, except that Mortgagor expressly acknowledges that by its terms the
Senior Secured Credit Agreement shall be governed and construed in accordance
with the laws of the State of New York, without regard to principles of conflict
of law, and for purposes of
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consistency, Mortgagor agrees that in any in personam proceeding related to this
Mortgage the rights of the parties to this Mortgage shall also be governed by
and construed in accordance with the laws of the State of New York governing
contracts made and to be performed in that State, without regard to principles
of conflict of law.
33. Waiver of Trial by Jury. Mortgagor and Mortgagee each
hereby irrevocably and unconditionally waive trial by jury in any action, claim,
suit or proceeding relating to this Mortgage and for any counterclaim brought
therein.
34. Certain Definitions. Unless the context clearly indicates
a contrary intent or unless otherwise specifically provided herein, words used
in this Mortgage shall be used interchangeably in singular or plural form and
the word "Mortgagor" shall mean "each Mortgagor or any subsequent owner or
owners of the Mortgaged Property or any part thereof or interest therein," the
word "Mortgagee" shall mean "Mortgagee or any successor Administrative Agent,"
the word "Notes" shall mean "the notes that may from time to time be given
pursuant to the terms of the Senior Secured Credit Agreement or any other
evidence of indebtedness secured by this Mortgage," the word "person" shall
include any individual, corporation, partnership, trust, unincorporated
association, government, governmental authority, or other entity, and the words
"Mortgaged Property" shall include any portion of the Mortgaged Property or
interest therein. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa. The
captions in this Mortgage are for convenience or reference only and in no way
limit or amplify the provisions hereof.
35. Release of Mortgage. Upon payment in full of the
Indebtedness, the termination of all Commitments under the Senior Secured Credit
Agreement secured hereby and the compliance with the Obligations then required
to be complied with, Mortgagee shall release the encumbrance of this Mortgage.
If any of the Mortgaged Property shall be sold, transferred or otherwise
disposed of by Mortgagor in a transaction expressly permitted by the Senior
Secured Credit Agreement, then Mortgagee shall execute and deliver (at the sole
cost and expense of Mortgagor) all partial releases or other documents
reasonably necessary or desirable for the release of such Mortgaged Property
from the encumbrance of this Mortgage.
36. Conflict With Senior Secured Credit Agreement. In the
event of any conflict or inconsistency between the terms and provisions of this
Mortgage and the terms and provisions of the Senior Secured Credit Agreement,
the terms and provisions of the Senior Secured Credit Agreement shall govern,
other than with respect to the
32
<PAGE> 34
Section of this Mortgage captioned "Governing Law, etc.". By their execution of
the Senior Secured Credit Agreement, each Lender hereby agrees that it shall not
have the right to institute any suit for enforcement of Notes or any other
Indebtedness secured by this Mortgage or any other Security Document, if and to
the extent that the institution or prosecution thereof or the entry of judgment
therein would, under applicable law, result in the surrender, impairment, waiver
or loss of the Lien of this Mortgage or any other Security Document or impede or
delay the enforcement of the Lien of this Mortgage or any other Security
Document.
37. Receipt of Copy. Mortgagor acknowledges that it has
received a true copy of this Mortgage.
38. Counterparts. This Mortgage maybe executed in any number
of counterparts, each of which shall for all purposes be deemed to be an
original, and all of which are identical except that, to facilitate recordation,
in any particular counterpart there may be omitted those portions of Schedule A
which describe properties situated in counties other than the country in which
such counterpart is to be recorded.
NOTICE: A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY
ALLOW THE MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO
COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR UNDER THIS MORTGAGE.
33
<PAGE> 35
This Mortgage has been duly executed by Mortgagor as of the
date first above written.
EV INTERNATIONAL, INC.
By: /s/ CHRISTINE K. VANDEN BEUKEL
---------------------------------
Name: Christine K. Vanden Beukel
Title: Vice President, Secretary and
Treasurer
34
<PAGE> 36
State of New York )
: ss.:
County of New York )
This instrument was acknowledged before me this 10th day of
February, 1997, by K. Vanden Beukel, Vice President, Secretary and Treasurer of
EV INTERNATIONAL, INC., a Delaware corporation, on behalf of the corporation.
/s/ NANCY L. LOMAZZO
--------------------------
Notary Public
Name: Nancy L. Lomazzo
My commission expires:
June 3, 1998
- -----------------------
[SEAL] NANCY L. LOMAZZO
Notary Public, State of New York
No. 31-5061123
Qualified in New York County
Commission Expires June 3, 1998
<PAGE> 37
10500 West Reno Avenue
Oklahoma City, OK 73127
Canadian County
Schedule A
Legal Description
TRACT I:
A parcel of land being a part of Government Lot 4 in the Northwest
Quarter, Section 2, T 11 N, R 5 W, I.M., Canadian County, Oklahoma, said parcel
being more particularly described as follows:
Starting in the Northwest Corner of Lot 4, also being the Northwest
Corner of Section 2, T 11 N, R 5 W, I.M., Canadian County, Oklahoma (same being
at the intersection of Reno Avenue and Sara Road);
thence S 0(degree)16'56" W along the West line of said Section 2 (Sara Road)
for a distance of 561.75 feet;
thence S 89(degree)56'42" E on a line parallel with the North line of said
Section 2 a distance of 241.33 feet to the point of beginning;
thence S 89(degree)56'42" E a distance of 272.87 feet;
thence S 0(degree)16'56" W a distance of 120 feet;
thence N 89(degree)56'42" W a distance of 272.87 feet;
thence N 0(degree)16'56" E a distance of 120 feet to the point of beginning.
<PAGE> 38
10500 West Reno Avenue
Oklahoma City, OK 73127
Canadian County
TRACT II:
A parcel or tract of land being part of Government Lot 4 in
the Northwest quarter of Sec 2 T11N R5W of the I.M. in Canadian County,
Oklahoma. Said tract being more particularly described as follows:
Starting at the Northwest corner of government Lot 4 also
being the Northwest corner of Sec 2, T11N R5W of the I.M. Canadian
County. Okla. (Same point being the intersection of Sara Road and Reno
Ave.) Thence S 0(degree) - 16'-56" W along the west line of said Sec 2
a distance of 561.75 ft.; thence S 89(degree) - 56'-42" E along a line
parallel to the North line of said Sec 2 a distance of 241.33 feet to
the point or place of beginning. Thence S 0(degree)-16'-56" W a
distance of 120.00 ft.; Thence S 89(degree)-56' 42" E a distance of
272.87 feet; Thence S 0(degree)-16'-56" W a distance of 210.0 ft.;
Thence N 89(degree) -56'-42" W a distance of 514.20 ft.; Thence N
0(degree)-16'-56" E a distance of 330.0 ft.; Thence S
89(degree)-56'-46" E a distance of 241.33 ft. more or less to the point
or place of beginning, containing 3.14 acres more or less.
LESS AND EXCEPT that property conveyed to the State of Oklahoma under the
Warranty Deed recorded at Book 402, page 272.
2
<PAGE> 39
10500 West Reno Avenue
Oklahoma City, OK 73127
Canadian County
TRACT III:
BEGINNING at the Northwest corner (NW/C) of Section Two (2),
Township Eleven (11) North, Range Five (5) West of the Indian Meridian,
Canadian County, Oklahoma; THENCE South 89(degree) 56' 42" East,
1,325.41 feet to a point; THENCE South 00(degree) 25' 19" West,
1,293.19 feet to a point; THENCE Northwesterly on a curve to the right
having a radius of 10,552.96 feet for a distance of 1,194.72 feet to a
point; THENCE North 08(degree) 32' 51" West, 236.50 feet to a point;
THENCE South 89(degree) 56' 42" East, 411.18 feet to a point; THENCE
North 00(degree) 16' 56" East, 330.00 feet to a point; THENCE North
89(degree) 56' 42" West, 462.41 feet to a point; THENCE North
08(degree) 32' 51" West, 11.68 feet to a point; THENCE North 89(degree)
43' 04" West, 50.00 feet to a point on the West line of said Section
Two (2); THENCE North 00(degree) 16' 57" East, 550.00 to the POINT OF
THE BEGINNING,
3
<PAGE> 1
EXHIBIT 10(q)
TENNESSEE
Prepared by, and when
recorded, please return to:
Simpson Thacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
ATTN: Emily R. Steinman, Esq.
DEED OF TRUST, ASSIGNMENT OF RENTS
AND LEASES AND SECURITY AGREEMENT
from
EV INTERNATIONAL, INC., Grantor
to
JOE B. PITT, JR., Trustee
for the use and
benefit of
THE CHASE MANHATTAN BANK, as Administrative Agent, Beneficiary
DATED AS OF FEBRUARY 10, 1997
MAXIMUM PRINCIPAL INDEBTEDNESS FOR TENNESSEE
RECORDING TAX PURPOSES IS $15,000.00.
SEE ATTACHED AFFIDAVIT
This instrument covers property which has become so affixed to real property as
to become fixtures and constitutes a fixture filing under Section 47-9-402 of
the Tennessee Code Annotated.
<PAGE> 2
NEWPORT, TENNESSEE
DEED OF TRUST, ASSIGNMENT OF RENTS
AND LEASES AND SECURITY AGREEMENT
THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES AND SECURITY
AGREEMENT, dated as of February 10, 1997 is made by EV INTERNATIONAL, INC., a
Delaware corporation, as successor by merger and name change to Gulton
Industries, Inc. ("GRANTOR"), whose address is 600 Cecil Street, Buchanan,
Michigan 49107, to JOE B. PITT, JR., a resident of Davidson County, Tennessee,
("TRUSTEE") whose address is 414 Union St., Suite 1800, Nashville, TN 37219 for
the use and benefit of THE CHASE MANHATTAN BANK, a New York banking corporation
whose address is 270 Park Avenue, New York, New York 10017, as Administrative
Agent (in such capacity, "BENEFICIARY") for the several banks and other
financial institutions (the "LENDERS") from time to time parties to the Credit
Agreement dated as of February 10, 1997, (as the same may be amended,
supplemented, waived or otherwise modified from time to time the "SENIOR SECURED
CREDIT AGREEMENT") among Gulton Acquisition Corp., a Delaware corporation
("BORROWER"), the Lenders and Beneficiary. References to this "Deed of Trust"
shall mean this instrument and any and all renewals, modifications, amendments,
supplements, extensions, consolidations, substitutions, spreaders and
replacements of this instrument. Capitalized terms used and not otherwise
defined herein shall have the meanings assigned thereto in the Senior Secured
Credit Agreement.
Background
A. Gulton Holdings Corp., a Delaware corporation which, on or after
the Effective Date, will be renamed EVI Audio Holding, Inc. ("HOLDINGS") and
Borrower, its direct Wholly Owned Subsidiary, were newly formed companies
organized by an investor group led by Greenwich Street Capital Partners, Inc., a
Delaware corporation ("GSCP").
B. Borrower acquired Gulton Industries Inc., a Delaware corporation
("GII") which was a subsidiary of Mark IV Industries, Inc. ("MARK IV") through
the purchase from Mark IV and Mark IV PLC of the capital stock of GII (the
"ACQUISITION") pursuant to the Stock Purchase Agreement, dated as of December
12,
<PAGE> 3
1996, by and among Mark IV, Mark IV PLC and Borrower (as amended, supplemented,
waived or otherwise modified from time to time in accordance with the Senior
Secured Credit Agreement, the "STOCK PURCHASE AGREEMENT").
C. Borrower merged with and into GII (the "FIRST MERGER"), and GII
as surviving corporation of the First Merger merged (the "SECOND MERGER"; the
First Merger together with the Second Merger, the "MERGERS") with and into
Electro-Voice, Incorporated, a Delaware corporation and a Wholly Owned
Subsidiary of GII, which was thereupon renamed EV International, Inc.
D. In order to (i) finance a portion of the Acquisition
Consideration, (ii) refinance a portion of the existing indebtedness of GII and
its subsidiaries, (iii) pay certain fees, taxes and expenses related to (x) the
Acquisition and the financing thereof and (y) the refinancing of such existing
indebtedness of GII and its subsidiaries and (iv) finance the working capital
and other business requirements of Grantor and its subsidiaries following the
consummation of the Acquisition and the Merger, Acquisition Co. has requested
that the Lenders make the Loans and issue and participate in the Letters of
Credit in accordance with the terms of the Senior Secured Credit Agreement.
E. Grantor is the owner of the parcel(s) of real property described
on Schedule A attached hereto (such real property, together with all of the
buildings, improvements, structures and fixtures now or subsequently located
thereon (the "IMPROVEMENTS"), being collectively referred to as the "REAL
ESTATE").
F. Pursuant to the terms of the Senior Secured Credit Agreement, the
Lenders have agreed, among other things, to make the Loans in the maximum
principal amount of $60,000,000, having a maturity date of August 10, 2002, and
the Issuing Lender has agreed to issue, and the L/C Participants have agreed to
acquire undivided participating interests in, the Letter(s) of Credit for the
account of the Borrower upon the terms and subject to the conditions set forth
in the Senior Secured Credit Agreement which conditions include the grant by
Grantor to Beneficiary of a first lien upon and perfected security interest in,
among other things, all estate, right, title and interest of Grantor in and to
the Real Estate pursuant to the terms hereof.
G. Grantor is the successor by merger to Borrower, and it is to the
advantage and benefit of Grantor that the Lenders make the Loans to Borrower.
2
<PAGE> 4
Granting Clauses
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Grantor agrees that to secure:
(a) the repayment of principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
Reimbursement Obligations and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Loan Party, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding) the Loans (as they may be evidenced by the Notes from time to
time) and all other obligations (including the Reimbursement Obligations)
and liabilities of Grantor to Beneficiary, the Issuing Lender and the
Lenders, whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Senior Secured Credit Agreement, the Loans,
the Letters of Credit, the Security Documents, any Guarantee Obligation of
Grantor as to which any Lender is a beneficiary, any Permitted Hedging
Arrangement with any Lender or any banking affiliate of any Lender
(whether entered into directly, or guaranteed, by Grantor), the Guarantee
and Collateral Agreement dated as of February 10, 1997 between Grantor,
Holdings and Beneficiary (the "GUARANTEE") or any other document made,
delivered or given in connection therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all fees, charges and disbursements of counsel to the Administrative
Agent, the Issuing Lender or any Lender that are required to be paid by
any Loan Party pursuant to the Senior Secured Credit Agreement) (the items
set forth above being referred to collectively as the "INDEBTEDNESS"); and
(b) the performance of all covenants, agreements, obligations and
liabilities of Grantor (the "OBLIGATIONS") under or pursuant to the
provisions of the Senior Secured Credit Agreement, the Loans, this Deed of
Trust, the Guarantee, any other document securing payment of the
Indebtedness (the "SECURITY DOCUMENTS") and any amendments, supplements,
extensions, renewals, restatements, replacements or modifications of any
of the foregoing (the Senior Secured Credit Agreement, the Loans, the
Letters of Credit, this Deed of Trust, the Guarantee and all other
documents and instruments from time to time evidencing, securing or
guaranteeing the payment of the Indebtedness or the performance of the
Obligations, as any of the same may be
3
<PAGE> 5
amended, supplemented, extended, renewed, restated, replaced or modified
from time to time, are collectively referred to as the "LOAN DOCUMENTS");
GRANTOR HEREBY CONVEYS TO TRUSTEE AND HEREBY GRANTS, SELLS, BARGAINS, CONFIRMS,
ASSIGNS, TRANSFERS AND SETS OVER TO TRUSTEE, WITH POWER OF SALE FOR THE USE AND
BENEFIT OF BENEFICIARY, AND GRANTS BENEFICIARY, INSOFAR AS ANY PROPERTY
CONSTITUTES PERSONAL PROPERTY, A SECURITY INTEREST IN:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever of
Grantor, in possession or expectancy, in and to the Real Estate or any
part thereof;
(C) all right, title and interest of Grantor in, to and under all
easements, rights of way, gores of land, streets, ways, alleys, passages,
sewer rights, waters, water courses, water and riparian rights,
development rights, air rights, mineral rights and all estates, rights,
titles, interests, privileges, licenses, tenements, hereditaments and
appurtenances belonging, relating or appertaining to the Real Estate, and
any reversions, remainders, rents, issues, profits and revenue thereof and
all land lying in the bed of any street, road or avenue, in front of or
adjoining the Real Estate to the center line thereof;
(D) all right, title and interest of Grantor in and to all of the
fixtures, chattels, business machines, machinery, apparatus, equipment,
furnishings, fittings and articles of personal property of every kind and
nature whatsoever, and all appurtenances and additions thereto and
substitutions or replacements thereof (together with, in each case,
attachments, components, parts and accessories) currently owned or
subsequently acquired by Grantor and now or subsequently attached to, or
contained in or used or usable in any way in connection with any operation
or letting of the Real Estate, including but without limiting the
generality of the foregoing, all screens, awnings, shades, blinds,
curtains, draperies, artwork, carpets, rugs, storm doors and windows,
furniture and furnishings, heating, electrical, and mechanical equipment,
lighting, switchboards, plumbing, ventilating, air conditioning and
air-cooling apparatus, refrigerating, and incinerating equipment,
escalators, elevators, loading and unloading equipment and systems,
stoves, ranges, laundry equipment, cleaning systems (including window
cleaning apparatus), telephones, communication systems (including
satellite dishes and antennae), televisions, computers, sprinkler systems
and other fire prevention and
4
<PAGE> 6
extinguishing apparatus and materials, security systems, motors, engines,
machinery, pipes, pumps, tanks, conduits, appliances, fittings and
fixtures of every kind and description (all of the foregoing in this
paragraph (D) being referred to as the "EQUIPMENT");
(E) all right, title and interest of Grantor in and to all
substitutes and replacements of, and all additions and improvements to,
the Real Estate and the Equipment, subsequently acquired by or released to
Grantor or constructed, assembled or placed by Grantor on the Real Estate,
immediately upon such acquisition, release, construction, assembling or
placement, including, without limitation, any and all building materials
to be used by Grantor whether stored at the Real Estate or offsite, and,
in each such case, without any further mortgage, conveyance, assignment or
other act by Grantor;
(F) all right, title and interest of Grantor in, to and under all
leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or occupancy
of the Real Estate or the Equipment or any part thereof, now existing or
subsequently entered into by Grantor and whether written or oral and all
guarantees of any of the foregoing (collectively, as any of the foregoing
may be amended, restated, extended, renewed or modified from time to time,
the "LEASES"), and all rights of Grantor in respect of cash and securities
deposited thereunder and the right to receive and collect the revenues,
income, rents, issues and profits thereof, together with all other rents,
royalties, issues, profits, revenue, income and other benefits arising
from the use and enjoyment of the Trust Property (as defined below)
(collectively, the "RENTS");
(G) all books and records relating to or used in connection with the
operation of the Real Estate or the Equipment or any part thereof;
(H) all right, title and interest of Grantor, to the extent
assignable, in and to (i) all unearned premiums under insurance policies
now or subsequently obtained by Grantor relating to the Real Estate or
Equipment, (ii) any such insurance policies, (iii) all proceeds of any
such insurance policies (including title insurance policies) including the
right to collect and receive such proceeds, subject to the provisions
relating to insurance generally set forth below, and (iv) all awards and
other compensation, including the interest payable thereon and the right
to collect and receive the same, made to the present or any subsequent
owner of the Real Estate or Equipment for the taking by eminent domain,
condemnation or otherwise, of all or any part of the Real Estate or any
easement
5
<PAGE> 7
or other right therein, subject to the provisions relating to condemnation
awards generally set forth below;
(I) all right, title and interest of Grantor, to the extent
assignable, in and to (i) all contracts from time to time executed by
Grantor or any manager or agent on its behalf relating to the ownership,
construction, maintenance, repair, operation, occupancy, sale or financing
of the Real Estate or Equipment or any part thereof and all agreements
relating to the purchase or lease of any portion of the Real Estate or any
property which is adjacent or peripheral to the Real Estate, together with
the right to exercise such options (collectively, the "CONTRACTS"), (ii)
all consents, licenses, building permits, certificates of occupancy and
other governmental approvals relating to construction, completion,
occupancy, use or operation of the Real Estate or any part thereof
(collectively, the "PERMITS") and (iii) all drawings, plans,
specifications and similar or related items relating to the Real Estate
(collectively, the "PLANS");
(J) any and all monies now or subsequently on deposit for the
payment of real estate taxes or special assessments against the Real
Estate or for the payment of premiums on insurance policies covering the
foregoing property or otherwise on deposit with or held by Beneficiary as
provided in this Deed of Trust;
(K) all accounts and revenues arising from the operation of the
Improvements; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by Grantor and described in the foregoing clauses
(A) through (E) are collectively referred to as the "PREMISES", and those
described in the foregoing clauses (A) through (L) are collectively referred to
as the "TRUST PROPERTY").
TO HAVE AND TO HOLD the Trust Property and the rights and privileges
hereby granted unto Trustee, its successors and assigns for the uses and
purposes set forth, until the Indebtedness is fully paid and the Obligations
fully performed or as otherwise expressly provided in the Section of this Deed
of Trust entitled "Release of Deed of Trust".
6
<PAGE> 8
Terms and Conditions
Grantor further represents, warrants, covenants and agrees with
Trustee and Beneficiary as follows:
1. Warranty of Title. Grantor warrants that Grantor has good title
to the Real Estate in fee simple and good title to the rest of the Trust
Property, subject only to the matters that are set forth in Schedule B of the
title insurance policy or policies being issued to Beneficiary to insure the
lien of this Deed of Trust and Liens expressly permitted under the Senior
Secured Credit Agreement (collectively, the "PERMITTED EXCEPTIONS") and Grantor
shall warrant, defend and preserve such title and the rights granted by this
Deed of Trust with respect thereto against all claims of all persons and
entities. Grantor further warrants that it has the right to grant this Deed of
Trust.
2. Payment of Indebtedness. Grantor shall pay the Indebtedness at
the times and places and in the manner specified in the Senior Secured Credit
Agreement and shall perform all the Obligations.
3. Requirements. (a) Grantor shall promptly comply with, or cause to
be complied with, and conform to all present and future laws, statutes, codes,
ordinances, orders, judgments, decrees, rules, regulations and requirements, and
irrespective of the nature of the work to be done, of each of the United States
of America, any State and any municipality, local government or other political
subdivision thereof and any agency, department, bureau, board, commission or
other instrumentality of any of them, now existing or subsequently created
(collectively, "GOVERNMENTAL AUTHORITY") which has jurisdiction over the Trust
Property and all covenants, restrictions and conditions now or later of record
which may be applicable to any of the Trust Property, or to the use, manner of
use, occupancy, possession, operation, maintenance, alteration, repair or
reconstruction of any of the Trust Property, except to the extent that failure
to comply therewith, in the aggregate, would not reasonably be expected to have
a Material Adverse Effect. All present and future laws, statutes, codes,
ordinances, orders, judgments, decrees, rules, regulations and requirements of
every Governmental Authority applicable to Grantor or to any of the Trust
Property and all covenants, restrictions, and conditions which now or later may
be applicable to any of the Trust Property are collectively referred to as the
"LEGAL REQUIREMENTS".
(b) From and after the date of this Deed of Trust, except as
expressly permitted under the Senior Secured Credit Agreement or herein, Grantor
shall not by
7
<PAGE> 9
act or omission permit, other than Permitted Exceptions, any building or other
improvement on any premises not subject to this Deed of Trust to rely on the
Premises or any part thereof or any interest therein to fulfill any Legal
Requirement, and Grantor hereby assigns to Beneficiary any and all rights to
give consent for all or any portion of the Premises or any interest therein to
be so used. Grantor shall not by act or omission impair the integrity of any of
the Real Estate as a single zoning lot separate and apart from all other
premises. Grantor represents that each parcel of the Real Estate constitutes a
legally subdivided lot, in compliance with all subdivision laws and similar
Legal Requirements, except to the extent that failure to comply therewith, in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. Any act or omission by Grantor which would result in a violation of any
of the provisions of this subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Except as expressly
permitted under the Senior Secured Credit Agreement, Grantor, prior to
delinquency, shall pay and discharge all taxes of every kind and nature
(including, without limitation, all real and personal property, income,
franchise, withholding, transfer, gains, profits and gross receipts taxes), all
charges for any easement or agreement maintained for the benefit of any of the
Trust Property, all general and special assessments, levies, permits, inspection
and license fees, all water and sewer rents and charges and all other public
charges even if unforeseen or extraordinary, imposed upon or assessed against or
which may become a lien on any of the Trust Property, or arising in respect of
the occupancy, use or possession thereof, together with any penalties or
interest on any of the foregoing (all of the foregoing are collectively referred
to as the "IMPOSITIONS"). Grantor shall within 30 days after the request of
Beneficiary deliver to Beneficiary (i) original or copies of receipted bills and
cancelled checks or other evidence of payment of such Imposition if it is a real
estate tax or other public charge and (ii) evidence acceptable to Beneficiary in
its reasonable discretion showing the payment of any other such Imposition. If
by law any Imposition, at Grantor's option, may be paid in installments (whether
or not interest shall accrue on the unpaid balance of such Imposition), Grantor
may elect to pay such Imposition in such installments and shall be responsible
for the payment of such installments with interest, if any.
(b) Nothing herein shall affect any right or remedy of Trustee or
Beneficiary under this Deed of Trust or otherwise, without notice or demand to
Grantor, to pay any Imposition after the date such Imposition shall have become
delinquent, and to add to the Indebtedness the amount so paid, together with
interest from the time of payment at the rate of interest described in paragraph
4.1(c) of the Senior Secured Credit Agreement (the "DEFAULT RATE"). Any sums
paid by Trustee or Beneficiary in discharge of any Impositions shall be (i) a
charge on the Premises
8
<PAGE> 10
secured hereby prior to any right or title to, interest in, or claim upon the
Premises subordinate to the lien of this Deed of Trust, and (ii) payable on
demand by Grantor to Trustee or Beneficiary, as the case may be, together with
interest at the Default Rate as set forth above.
(c) Grantor shall not claim, demand or be entitled to receive any
credit or credits toward the satisfaction of this Deed of Trust or on any
interest payable thereon for any taxes assessed against the Trust Property or
any part thereof, and shall not claim any deduction from the taxable value of
the Trust Property by reason of this Deed of Trust.
(d) Grantor shall have the right pursuant to subsection 7.3 of the
Senior Secured Credit Agreement to contest in good faith to the amount or
validity of any Imposition by appropriate proceedings diligently conducted with
reserves in conformity with GAAP, provided that Grantor shall demonstrate to
Beneficiary's reasonable satisfaction that such proceedings shall operate
conclusively to prevent the sale of the Trust Property, or any part thereof, to
satisfy such Imposition prior to final determination of such proceedings.
(e) Upon written notice to Grantor, Beneficiary during the
continuance of an Event of Default (as defined below) shall be entitled to
require Grantor to pay monthly in advance to Beneficiary the equivalent of
1/12th of the estimated annual Impositions. Beneficiary may commingle such funds
with its own funds but Grantor shall be entitled to interest thereon at a rate
mutually agreed upon by Grantor and Beneficiary.
5. Insurance. (a) Grantor shall maintain or cause to be maintained
on all of the Premises:
(i) property insurance against loss or damage by fire, lightning,
windstorm, tornado, water damage, flood, earthquake and by such other
further risks and hazards as now are or subsequently may be covered by an
"all risk" policy or a fire policy covering "special" causes of loss
(provided, however, that the maintenance of insurance against earthquake,
windstorm, flood and freeze risks shall be subject to availability of such
insurance coverage on commercially reasonable terms). The policy shall
include building ordinance law endorsements and the policy limits shall be
automatically reinstated after each loss (other than with respect to flood
and earthquake coverage which shall be reinstated on a commercially
reasonable basis);
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(ii) commercial general liability insurance under a policy including
the "broad form CGL endorsement" (or which incorporates the language or
similar language of such endorsement), covering all claims for personal
injury, bodily injury or death, or property damage, subject to standard
policy terms, conditions and exclusions, occurring on, in or about the
Premises in an amount not less than $10,000,000 combined single limit with
respect to personal injury, bodily injury or death, or property damage,
relating to any one occurrence plus such excess limits as Beneficiary
shall reasonably request from time to time;
(iii) when and to the extent reasonably required by Beneficiary,
insurance against loss or damage by any other risk commonly insured
against by persons occupying or using like properties in the locality or
localities in which the Real Estate is situated;
(iv) during the course of any construction or repair of
Improvements, commercial general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language or similar language of such endorsement), (including coverage for
elevators and escalators, if any). The policy shall include coverage for
independent contractors and completed operations. The completed operations
coverage shall stay in effect for two years after construction of any
Improvements has been completed. The policy shall provide coverage on an
occurrence basis against claims for personal injury, including, without
limitation, bodily injury and death, and property damage resulting from
Grantor's negligence or other behavior for which Grantor may be adjudged
tortiously liable, subject to standard policy terms, conditions and
exclusions, occurring on, in or about the Premises and the adjoining
streets, sidewalks and passageways, such insurance to afford immediate
minimum protection to a limit of not less than that reasonably required by
Beneficiary with respect to personal injury, bodily injury or death to any
one or more persons or damage to property;
(v) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Grantor engaged on or with
respect to the Premises in such amounts no less than the limits
established by law or in the case of employer's liability insurance, no
less than $500,000, provided that Grantor may self-insure any or all
workers' compensation liabilities;
(vi) during the course of any construction, addition, alteration or
repair of the Improvements, builder's risk completed value property
insurance form
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against "all risks of physical loss" (subject to standard policy
exclusions), including collapse, water damage, flood and earthquake and
transit coverage, during construction or repairs of the Improvements, with
deductible approved by Beneficiary in its reasonable discretion, in
reporting form, covering the total replacement value of work performed and
equipment, supplies and materials furnished (with an appropriate limit for
soft costs in the case of construction); provided, however, that the
maintenance of insurance against earthquake and flood risks shall be
subject to availability of such insurance coverage on commercially
reasonable terms;
(vii) boiler and machinery property insurance covering pressure
vessels, air tanks, boilers, machinery, pressure piping, heating, air
conditioning and elevator equipment and escalator equipment, provided the
Improvements contain equipment of such nature, in such amounts as are
reasonably satisfactory to Beneficiary but not less than the lesser of
$1,000,000 or 10% of the value of the Improvements;
(viii) if any portion of the Premises are located in an area
identified in the Federal Register as having special flood hazards by the
Secretary of Housing and Urban Development or other applicable agency,
flood insurance covering any parcel of the Trust Property which contains
improvements in an amount satisfactory to Beneficiary in its reasonable
discretion, but in no event less than the maximum limit of coverage
available with respect to the particular type of property under the
National Flood Insurance Act of 1968, as amended and with a term ending
not later than the maturity of the Indebtedness and Beneficiary shall
receive confirmation that Grantor has received the notice required
pursuant to Section 208.8(e)(3) of Regulation H of the Board of Governors
of The Federal Reserve System; and
(ix) such other insurance in such amounts as Beneficiary may
reasonably request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or, in the case of
property and boiler and machinery insurance, materially amended without 30-days'
prior written notice to Beneficiary, (ii) with respect to all property
insurance, subject to availability on commercially reasonable terms, provide for
deductibles not to exceed $250,000, other than with respect to (a) flood,
freeze, windstorm and earthquake perils for which deductibles shall not exceed
the greater of $500,000 or 5% of values at risk per
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location involved in loss and (b) boiler and machinery coverage for which
deductibles shall not exceed the greater of $500,000 or five times 100% of the
daily time element value, contain a "Replacement Cost Endorsement" without any
deduction made for depreciation and with no co-insurance penalty (or attaching
an agreed amount endorsement satisfactory to Beneficiary in its reasonable
discretion), with loss payable solely to Beneficiary (modified, if necessary and
to the extent available under such policy, to provide that proceeds in the
amount of replacement cost may be retained by Beneficiary without the obligation
to rebuild) as its interest may appear, without contribution, under a "standard"
or "New York" mortgagee clause acceptable to Beneficiary in its reasonable
discretion and be written by insurance companies having an A.M. Best Company,
Inc. rating of A- or higher and a financial size category of not less than VII,
or otherwise as approved by Beneficiary in its reasonable discretion and (iii)
contain a "manuscript" endorsement providing that Grantor may not unilaterally
cancel such policy without Beneficiary's prior written consent. Liability
insurance policies shall name Beneficiary as an additional insured and contain a
waiver of subrogation against Beneficiary; all such policies shall indemnify and
hold Beneficiary harmless from all liability claims occurring on, in or about
the Premises and the adjoining streets, sidewalks and passageways, subject to
standard policy terms, conditions and exclusions. The amounts of each insurance
policy and the form of each such policy shall at all times be satisfactory to
Beneficiary in its reasonable discretion. Each policy shall expressly provide
that any proceeds which are payable to Beneficiary shall be paid by check
payable to the order of Beneficiary only and requiring the endorsement of
Beneficiary only. If any required insurance shall expire, be withdrawn, become
void by breach of any condition thereof by Grantor or by any lessee of any part
of the Trust Property or become void or unsafe by reason of the failure or
impairment of the capital of any insurer, Grantor shall immediately obtain new
or additional insurance satisfactory to Beneficiary in its reasonable
discretion. Grantor shall not take out any separate or additional insurance
which is contributing in the event of loss unless it is properly endorsed and
otherwise satisfactory to Beneficiary in all respects in its reasonable
discretion.
(b) Grantor shall deliver to Beneficiary an original of each
insurance policy required to be maintained, or a certificate of such insurance
acceptable to Beneficiary in its reasonable discretion, together with a copy of
the declaration page for each such policy. Grantor shall (i) pay as they become
due all premiums for such insurance, (ii) not later than seven days prior to the
expiration of each policy to be furnished pursuant to the provisions of this
Section, deliver a renewed policy or policies, or certificates of insurance
acceptable to Beneficiary, in its reasonable discretion, or duplicate original
or originals thereof. Upon the reasonable request of Beneficiary, Grantor shall
cause its insurance underwriter or broker to certify to
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Beneficiary in writing that all the requirements of this Deed of Trust governing
insurance have been satisfied.
(c) If Grantor is in default of its obligations to insure or deliver
any such policy or policies, or certificates of insurance acceptable to
Beneficiary, in its reasonable discretion, then Beneficiary, at its option and
without notice, may effect such insurance from year to year, and pay the premium
or premiums therefor, and Grantor shall pay to Beneficiary on demand such
premium or premiums so paid by Beneficiary with interest from the time of
payment at the Default Rate and the same shall be deemed to be secured by this
Deed of Trust and shall be collectible in the same manner as the Indebtedness
secured by this Deed of Trust.
(d) Grantor shall increase the amount of property insurance required
to equal 100% replacement cost pursuant to the provisions of this Section at the
time of each renewal of each policy (but not later than 12 months from the date
of this Deed of Trust and each successive 12 month period to occur thereafter)
by using the Morgan & Swift Building Cost Index to determine whether there shall
have been an increase in the replacement value since the most recent adjustment
and, if there shall have been such an increase, the amount of insurance required
shall be adjusted accordingly.
(e) Grantor promptly shall in all material respects comply with and
conform to (i) all provisions of each such insurance policy, and (ii) all
requirements of the insurers applicable to Grantor or to any of the Trust
Property or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of any of the Trust Property. Grantor shall
not use or permit the use of the Trust Property in any manner which would permit
any insurer to cancel any insurance policy or void coverage required to be
maintained by this Deed of Trust.
(f) (i) If the Trust Property, or any part thereof, shall be
destroyed or damaged by fire or any other casualty, whether insured or
uninsured, or in the event any claim is made against Grantor for any personal
injury, bodily injury or property damage incurred on or about the Premises,
Grantor shall promptly give notice thereof to Beneficiary.
(ii) If the Trust Property is damaged by fire or other casualty and
the cost to repair such damage is less than $1,000,000, then provided that
no Event of Default shall have occurred and be continuing, Grantor shall
have the right to adjust such loss, and the insurance proceeds relating to
such loss may be paid over to Grantor; provided that Grantor shall,
promptly after any such damage, repair such damage to the extent required
by subsection 7.5 of the Senior
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Secured Credit Agreement regardless of whether any insurance proceeds have
been received or whether such proceeds, if received, are sufficient to pay
for the costs of repair.
(iii) If the Trust Property is damaged by fire or other casualty,
and the cost to repair such damage exceeds the limit in Section 5(f)(ii)
above, or if an Event of Default shall have occurred and be continuing,
then Grantor authorizes and empowers Beneficiary, at Beneficiary's option
and in Beneficiary's reasonable discretion, as attorney-in-fact for
Grantor, to make proof of loss, to adjust and compromise any claim under
any insurance policy, to appear in and prosecute any action arising from
any policy, to collect and receive insurance proceeds and to deduct
therefrom Beneficiary's reasonable expenses incurred in the collection
process. Each insurance company concerned is hereby authorized and
directed to make payment for such loss directly to Beneficiary.
Beneficiary shall have the right to require Grantor to repair or restore
the Trust Property to the extent required by subsection 7.5 of the Senior
Secured Credit Agreement, and Grantor hereby designates Beneficiary as its
attorney-in-fact for the purpose of making any election required or
permitted under any insurance policy relating to such repair or
restoration. The insurance proceeds or any part thereof received by
Beneficiary may be applied by Beneficiary toward reimbursement of all
reasonable costs and expenses of Beneficiary in collecting such proceeds,
and the balance, at Beneficiary's option in its sole and absolute
discretion, to the principal (to the installments in inverse order of
maturity, if payable in installments) and interest due or to become due
under the Notes, the Senior Secured Credit Agreement or the other Loan
Documents, to fulfill any other Obligation of Grantor, to the restoration
or repair of the property damaged, or released to Grantor. Application by
Beneficiary of any insurance proceeds toward the last maturing
installments of principal and interest due or to become due on the Loans
shall not excuse Grantor from making any regularly scheduled payments due
thereunder, nor shall such application extend or reduce the amount of such
payments. In the event Beneficiary elects to release such proceeds to
Grantor, Grantor shall be obligated to use such proceeds to restore or
repair the Trust Property to the extent required by subsection 7.5 of the
Senior Secured Credit Agreement.
(g) In the event of foreclosure of this Deed of Trust or other
transfer of title to the Trust Property in extinguishment of the Indebtedness,
all right, title and interest of Grantor in and to any insurance policies then
in force, to the extent assignable or transferable, shall pass to the purchaser
or grantee and Grantor hereby
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appoints Beneficiary its attorney-in-fact, in Grantor's name, to assign and
transfer all such policies and proceeds to such purchaser or grantee.
(h) Upon written notice to Grantor, Beneficiary, during the
continuance of an Event of Default, shall be entitled to require Grantor to pay
monthly in advance to Beneficiary the equivalent of 1/12th of the estimated
annual premiums due on such insurance. Beneficiary may commingle such funds with
its own funds but Grantor shall be entitled to interest thereon at a rate
mutually agreed upon by Grantor and Beneficiary.
(i) Grantor may maintain insurance required under this Deed of Trust
by means of one or more blanket insurance policies maintained by Grantor;
provided, however, that (A) any such policy shall specify, or Grantor shall
furnish to Beneficiary a written statement from the insurer so specifying, the
maximum amount of the total insurance afforded by such blanket policy that is
allocated to the Premises and the other Trust Property and any sublimits and
aggregates in such blanket policy applicable to the Premises and the other Trust
Property, (B) each such blanket policy shall include an endorsement providing
that, in the event of a loss resulting from an insured peril, insurance proceeds
shall be allocated to the Trust Property in an amount equal to the coverages
required to be maintained by Grantor as provided above (subject to applicable
sublimits and aggregates) and (C) the protection afforded under any such blanket
policy shall be no less than that which would have been afforded under a
separate policy or policies relating only to the Trust Property (subject to
applicable sublimits and aggregates).
6. Restrictions on Liens and Encumbrances. Except for the lien of
this Deed of Trust and the Permitted Exceptions and except as otherwise
permitted pursuant to the terms of the Senior Secured Credit Agreement, Grantor
shall not further mortgage, nor otherwise encumber the Trust Property nor create
or suffer to exist any lien, charge or encumbrance on the Trust Property, or any
part thereof, whether superior or subordinate to the lien of this Deed of Trust
and whether recourse or non-recourse. Beneficiary has not consented and will not
consent to any contract or to any work or to the furnishing of any materials
which might be deemed to create a lien or liens superior to the lien of this
instrument, either under Section 66-11-108 of the Tennessee Code Annotated, or
otherwise.
7. Due on Sale and Other Transfer Restrictions. Except as may be
otherwise expressly permitted under the Senior Secured Credit Agreement, Grantor
shall not sell, transfer, convey or assign all or any portion of, or any
interest in, the Trust Property.
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8. Maintenance; No Alteration; Inspection; Utilities. (a) Grantor
shall maintain or cause to be maintained all the Improvements in good condition
and repair and shall not commit or suffer any waste of the Improvements. To the
extent required under subsection 7.5 of the Senior Secured Credit Agreement,
Grantor shall repair, restore, replace or rebuild promptly any part of the
Premises which may be damaged or destroyed by any casualty whatsoever to a
condition substantially equivalent to its condition prior to the damage or
destruction. Except as permitted by the Senior Secured Credit Agreement, the
Improvements shall not be demolished or materially altered, nor any material
additions built, without the prior written consent of Beneficiary, provided that
Grantor may make alterations or additions without the consent of Beneficiary
that do not materially reduce the value of the Trust Property.
(b) Beneficiary and any persons authorized by Beneficiary shall,
upon reasonable notice and at any reasonable time, have the right to enter and
inspect the Premises and the right to inspect all work done, labor performed and
materials furnished in and about the Improvements and the right to inspect and
make copies, to the extent reasonable, of all books, contracts and records of
Grantor relating to the Trust Property.
(c) Except as permitted under subsection 7.3 of the Senior Secured
Credit Agreement, Grantor shall pay or cause to be paid prior to delinquency,
all utility charges which are incurred for gas, electricity, water or sewer
services furnished to the Premises and all other assessments or charges of a
similar nature, whether public or private, affecting the Premises or any portion
thereof, whether or not such assessments or charges are liens thereon.
9. Condemnation/Eminent Domain. Promptly upon obtaining knowledge of
the institution of any proceedings for the condemnation of the Trust Property,
or any portion thereof, Grantor will notify Beneficiary of the pendency of such
proceedings. Grantor authorizes Beneficiary, at Beneficiary's option and in
Beneficiary's reasonable discretion, as attorney-in-fact for Grantor, to
commence, appear in and prosecute, in Beneficiary's or Grantor's name, any
action or proceeding relating to any condemnation of the Trust Property, or any
portion thereof, and to settle or compromise any claim in connection with such
condemnation upon the occurrence and during the continuance of an Event of
Default. If Beneficiary elects not to participate in such condemnation
proceeding, then Grantor shall, at its expense, diligently prosecute any such
proceeding and shall consult with Beneficiary, its attorneys and experts and
cooperate with them in any defense of any such proceedings. All awards and
proceeds of condemnation shall be applied in the same manner as insurance
proceeds, and to the extent such awards and proceeds exceed $1,000,000 and
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no Event of Default shall have occurred and be continuing, such awards and
proceeds shall be assigned to Beneficiary to be applied in the same manner as
insurance proceeds, as provided above in subsection 5(f)(iii) above, and Grantor
agrees to execute any such assignments of all such awards as Beneficiary may
request.
10. Restoration. If Beneficiary elects or is required hereunder to
release funds to Grantor for restoration of any of the Trust Property, then such
restoration shall be performed in accordance with such conditions as Beneficiary
shall impose in its reasonable discretion, and as are customarily imposed by
construction lenders.
11. Leases. (a) Grantor shall not (i) execute an assignment or
pledge of any Lease relating to all or any portion of the Trust Property other
than in favor of Beneficiary, or (ii) without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed,
execute or permit to exist any Lease of any of the Trust Property, except for
Permitted Exceptions and except as may be otherwise expressly permitted under
the Senior Secured Credit Agreement.
(b) As to any Lease consented to by Beneficiary under subsection
11(a) above, Grantor shall:
(i) promptly perform in all material respects all of the provisions
of the Lease on the part of the lessor thereunder to be performed;
(ii) promptly enforce all of the material provisions of the Lease on
the part of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising under or
in any manner connected with the Lease or the obligations of Grantor as
lessor or of the lessee thereunder;
(iv) exercise, within 5 business days after a reasonable request by
Beneficiary, any right to request from the lessee a certificate with
respect to the status thereof;
(v) promptly deliver to Beneficiary copies of any notices of default
which Grantor may at any time forward to or receive from the lessee;
(vi) promptly deliver to Beneficiary a fully executed counterpart of
the Lease; and
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(vii) promptly deliver to Beneficiary, upon Beneficiary's reasonable
request, if permitted under such Lease, an assignment of the Grantor's
interest under such Lease.
(c) Grantor shall deliver to Beneficiary, within 10 business days
after a reasonable request by Beneficiary, a written statement, certified by
Grantor as being true, correct and complete, containing the names of all lessees
and other occupants of the Trust Property, the terms of all Leases and the
spaces occupied and rentals payable thereunder, and a list of all Leases which
are then in default, including the nature and magnitude of the default; such
statement shall be accompanied by such other information as Beneficiary may
reasonably request.
(d) All Leases entered into by Grantor after the date hereof, if
any, and all rights of any lessees thereunder shall be subject and subordinate
in all respects to the lien and provisions of this Deed of Trust unless
Beneficiary shall otherwise elect in writing.
(e) In the event of the enforcement by Beneficiary of any remedy
under this Deed of Trust, the lessee under each Lease shall, if requested by
Beneficiary or any other person succeeding to the interest of Beneficiary as a
result of such enforcement, and if provided, at such lessee's request, with a
nondisturbance agreement from Beneficiary or such person, attorn to Beneficiary
or to such person and shall recognize Beneficiary or such successor in interest
as lessor under the Lease without change in the provisions thereof; provided
however, that Beneficiary or such successor in interest shall not be: (i) bound
by any payment of an installment of rent or additional rent which may have been
made more than 30 days before the due date of such installment; (ii) bound by
any amendment or modification to the Lease made without the consent of
Beneficiary or such successor in interest; (iii) liable for any previous act or
omission of Grantor (or its predecessors in interest); (iv) responsible for any
monies owing by Grantor to the credit of such lessee or subject to any credits,
offsets, claims, counterclaims, demands or defenses which the lessee may have
against Grantor (or its predecessors in interest); (v) bound by any covenant to
undertake or complete any construction of the Premises or any portion thereof;
or (vi) obligated to make any payment to such lessee other than any security
deposit actually delivered to Beneficiary or such successor in interest. Each
lessee or other occupant, upon request by Beneficiary or such successor in
interest, shall execute and deliver an instrument or instruments confirming such
attornment. In addition, Grantor agrees that each Lease entered into after the
date of this Deed of Trust shall include language to the effect of subsections
(d)-(e) of this Section and language to the effect that if any act or omission
of Grantor would give any lessee under such Lease the right, immediately or
after lapse
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of a period of time, to cancel or terminate such Lease, or to abate or offset
against the payment of rent or to claim a partial or total eviction, such lessee
shall not exercise such right until it has given written notice of such act or
omission to Beneficiary and until a reasonable period for remedying such act or
omission shall have elapsed following the giving of such notice without a remedy
being effected; provided that the provisions of such subsections shall be
self-operative and any failure of any Lease to include such language shall not
impair the binding effect of such provisions on any lessee under such Lease.
12. Further Assurances/Estoppel Certificates. To further assure
Beneficiary's and Trustee's rights under this Deed of Trust, Grantor agrees upon
demand of Beneficiary or Trustee to do any act or execute any additional
documents (including, but not limited to, security agreements on any personalty
included or to be included in the Trust Property and a separate assignment of
each Lease in recordable form) as may be reasonably required by Beneficiary or
Trustee to confirm the rights or benefits conferred on Beneficiary or Trustee by
this Deed of Trust.
13. Beneficiary's Right to Perform. If Grantor fails to perform any
of the covenants or agreements of Grantor, Beneficiary or Trustee, without
waiving or releasing Grantor from any obligation or default under this Deed of
Trust, may, at any time (but shall be under no obligation to) pay or perform the
same, and the amount or cost thereof, with interest at the Default Rate, shall
immediately be due from Grantor to Beneficiary or Trustee (as the case may be)
and the same shall be secured by this Deed of Trust and shall be an encumbrance
on the Trust Property prior to any right, title to, interest in or claim upon
the Trust Property attaching subsequent to the date of this Deed of Trust. No
payment or advance of money by Beneficiary or Trustee under this Section shall
be deemed or construed to cure Grantor's default or waive any right or remedy of
Beneficiary or Trustee.
14. Events of Default. The occurrence of an Event of Default under
the Senior Secured Credit Agreement shall constitute an Event of Default
hereunder.
15. Remedies. (a) Upon the occurrence of any Event of Default, in
addition to any other rights and remedies Beneficiary may have pursuant to the
Loan Documents, or as provided by law, and without limitation, the Indebtedness
and all other amounts payable with respect to the Loans, the Letters of Credit,
the Senior Secured Credit Agreement, this Deed of Trust and the other Security
Documents shall become due and payable as provided in the Senior Secured Credit
Agreement. Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
In addition, upon the occurrence of
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<PAGE> 21
any Event of Default, Beneficiary may immediately take such action, without
notice or demand, as it deems advisable to protect and enforce its rights
against Grantor and in and to the Trust Property, including, but not limited to,
the following actions, each of which may be pursued concurrently or otherwise,
at such time and in such manner as Beneficiary may determine, in its sole
discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary:
(i) Beneficiary may elect to cause the Trust Property or any part
thereof to be sold as follows: The Trustee, his successor or substitute,
is authorized and empowered and it shall be his special duty at the
request of Beneficiary to enter and take possession of the Trust Property,
and before or after such entry to advertise the sale of the Trust Property
for 20 days by 3 weekly notices in some newspaper published in the county
where such sale is to be made and to sell the Trust Property or any part
thereof situated in the State of Tennessee at the courthouse door of any
county in the State of Tennessee in which any part of the Trust Property
is situated, at public vendue to the highest bidder for cash between the
hours of 10 o'clock A.M. and 4 o'clock P.M. of the day fixed in the
notice. Said sale shall be free from equity of redemption, statutory right
of redemption, homestead, dower, and all other rights and exemptions of
every kind, all of which are hereby waived, and the Trustee shall execute
a conveyance to the Purchaser and deliver possession to the Purchaser,
which Grantor binds itself shall be given without obstruction, hindrance
or delay. Any sale made by the Trustee hereunder may be as an entirety or
in such parcels or parts as Beneficiary may request, and any sale may be
adjourned by announcement at the time and place appointed for such sale
without further notice except as may be required by law. The sale by the
Trustee of less than the whole of the Trust Property shall not exhaust the
power of sale herein granted, and the Trustee is specifically empowered to
make successive sale or sales under such power until the whole of the
Trust Property shall be sold; and, if the proceeds of such sale of less
then the whole of the Trust Property shall be less than the aggregate of
the Indebtedness secured hereby and the expense of executing this trust as
provided herein, this Deed of Trust and the lien hereof shall remain in
full force and effect as to the unsold portion of the Trust Property just
as though no sale had been made; provided, however, that Grantor shall
never have any right to require the sale of less than the whole of the
Mortgaged Property but Beneficiary shall have the right, at its sole
election, to request the Trustee to sell less than the whole of the Trust
Property. After each sale, the Trustee shall make to the purchaser or
purchasers at such sale good and sufficient conveyances, conveying the
property so sold to the purchaser or purchasers with general warranty of
title as then possessed by the Trustee, and
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<PAGE> 22
after each sale the Trustee shall receive the proceeds of said sale or
sales and apply the same as herein provided. The power of sale granted
herein shall not be exhausted by any sale held hereunder by the Trustee or
his substitute or successor, and such power of sale may be exercised from
time to time and as many times as the Beneficiary may deem necessary until
all the Trust Property has been duly sold and all secured indebtedness has
been fully paid. In the event any sale hereunder is not completed or is
defective in the opinion of the Beneficiary, such sale shall not exhaust
the power of sale hereunder and the Beneficiary shall have the right to
cause a subsequent sale or sales to be made hereunder. Any and all
statements of fact or other recitals made in any deed or deeds given by
the Trustee or any successor or substitute appointed hereunder as to
nonpayment of the Indebtedness or as to the occurrence of any default, or
as to Beneficiary having declared all such indebtedness to be due and
payable, or as to the request to sell, or as to notice of time, place and
terms of sale and the properties to be sold having been duly given, or as
to the refusal, failure or inability to act of the Trustee or any
substitute or successor, or as to the appointment of any substitute or
successor, shall be taken as prima facie evidence of the truth of the
facts so stated and recited. The Trustee, his successor or substitute, may
appoint or delegate any one or more persons as agent to perform any act or
acts necessary or incident to any sale held by the Trustee, including the
posting of notices and the conduct of sale, but in the name and on behalf
of the Trustee, his successor or substitute. In the event a foreclosure
hereunder shall be commenced by the Trustee, or his substitute or
successor, Beneficiary may at any time before the sale of the Trust
Property direct the said Trustee to abandon the sale, and may then
institute suit for the collection of the Notes or any other evidence of
the Indebtedness and the other Indebtedness and Obligations secured
hereby, and for the foreclosure of the lien of this Deed of Trust. It is
agreed that if Beneficiary should institute a suit for the collection of
the Notes or any other evidence of the Indebtedness and/or any other
secured Indebtedness and for the foreclosure of the lien of this Deed of
Trust, Beneficiary may at any time before the entry of a final judgment in
said suit dismiss the same, and require the Trustee, his substitute or
successor to sell the property in accordance with the provisions of this
Deed of Trust.
(ii) Beneficiary may, to the extent permitted by applicable law, (A)
institute and maintain an action of judicial foreclosure against all or
any part of the Trust Property, (B) institute and maintain an action on
the Notes, the Senior Secured Credit Agreement or the other Security
Documents, or (C) take such other action at law or in equity for the
enforcement of this Deed of Trust or any of the Loan Documents as the law
may allow. Beneficiary may proceed in any
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<PAGE> 23
such action to final judgment and execution thereon for all sums due
hereunder, together with interest thereon at the Default Rate and all
costs of suit, including, without limitation, reasonable attorneys' fees
and disbursements. Interest at the Default Rate shall be due on any
judgment obtained by Beneficiary from the date of judgment until actual
payment is made of the full amount of the judgment.
(iii) Beneficiary may personally, or by its agents, attorneys and
employees and without regard to the adequacy or inadequacy of the Trust
Property or any other collateral as security for the Indebtedness and
Obligations enter into and upon the Trust Property and each and every part
thereof and exclude Grantor and its agents and employees therefrom without
liability for trespass, damage or otherwise (Grantor hereby agreeing to
surrender possession of the Trust Property to Beneficiary upon demand at
any such time) and use, operate, manage, maintain and control the Trust
Property and every part thereof. Following such entry and taking of
possession, Beneficiary shall be entitled, without limitation, (x) to
lease all or any part or parts of the Trust Property for such periods of
time and upon such conditions as Beneficiary may, in its discretion, deem
proper, (y) to enforce, cancel or modify any Lease and (z) generally to
execute, do and perform any other act, deed, matter or thing concerning
the Trust Property as Beneficiary shall deem appropriate as fully as
Grantor might do.
(b) Beneficiary, in any action to foreclose this Deed of Trust in a
judicial procedure or in connection with the exercise of any non-judicial power
of sale by Trustee, shall be entitled to the appointment of a receiver. In case
of a trustee's sale or foreclosure sale, the Real Estate may be sold, at
Beneficiary's election, in one parcel or in more than one parcel and Beneficiary
is specifically empowered (without being required to do so, and in its sole and
absolute discretion) to cause successive sales of portions of the Trust Property
to be held.
(c) In the event of any breach of any of the covenants, agreements,
terms or conditions contained in this Deed of Trust, and notwithstanding to the
contrary any exculpatory or non-recourse language which may be contained herein,
Beneficiary or Trustee shall be entitled to enjoin such breach and obtain
specific performance of any covenant, agreement, term or condition and
Beneficiary and Trustee shall have the right to invoke any equitable right or
remedy as though other remedies were not provided for in this Deed of Trust.
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16. Right of Beneficiary to Credit Sale. Upon the occurrence of any
sale made under this Deed of Trust, whether made under the power of sale or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale, Beneficiary may bid for and acquire the Trust Property or any part
thereof. In lieu of paying cash therefor, Beneficiary may make settlement for
the purchase price by crediting upon the Indebtedness or other sums secured by
this Deed of Trust the net sales price after deducting therefrom the expenses of
sale and the cost of the action and any other sums which Beneficiary is
authorized to deduct under this Deed of Trust. In such event, this Deed of
Trust, the Notes and other instruments evidencing the Indebtedness and any and
all documents evidencing expenditures secured hereby may be presented to the
person or persons conducting the sale in order that the amount so used or
applied may be credited upon the Indebtedness as having been paid.
17. Appointment of Receiver. If an Event of Default shall have
occurred and be continuing, Beneficiary as a matter of right and without notice
to Grantor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Trust Property or any other collateral as
security for the Indebtedness and Obligations or the interest of Grantor
therein, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers or other manager of the Trust Property, without
requiring the posting of a surety bond and without reference to the adequacy or
inadequacy of the value of the Trust Property or the solvency or insolvency of
Grantor or any other party obligated for payment of all or any part of the
Indebtedness, and whether or not waste has occurred with respect to the Trust
Property. Grantor hereby irrevocably consents to such appointment and waives
notice of any application therefor (except as may be required by law). Any such
receiver or receivers shall have all the usual powers and duties of receivers in
like or similar cases and all the powers and duties of Beneficiary in case of
entry as provided in this Deed of Trust, including, without limitation and to
the extent permitted by law, the right to enter into leases of all or any part
of the Trust Property, and shall continue as such and exercise all such powers
until the date of confirmation of sale of the Trust Property unless such
receivership is sooner terminated.
18. Extension, Release, etc. (a) Without affecting the encumbrance
or charge of this Deed of Trust upon any portion of the Trust Property not then
or theretofore released as security for the full amount of the Indebtedness,
Beneficiary may, from time to time and without notice, agree to (i) release any
person liable for the Indebtedness, (ii) extend the maturity or alter any of the
terms of the Indebtedness or any guaranty thereof, (iii) grant other
indulgences, (iv) release or reconvey, or cause to be released or reconveyed at
any time at Beneficiary's option any parcel, portion or all of the Trust
Property, (v) take or release any other or additional security for any
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obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Deed of Trust shall secure
less than all of the principal amount of the Indebtedness, it is expressly
agreed that any repayments of the principal amount of the Indebtedness shall not
reduce the amount of the encumbrance of this Deed of Trust until the encumbrance
amount shall equal the principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Trust Property or upon any other property
of Grantor shall affect the encumbrance of this Deed of Trust or any liens,
rights, powers or remedies of Beneficiary or Trustee hereunder, and such liens,
rights, powers and remedies shall continue unimpaired.
(c) If Beneficiary shall have the right to foreclose this Deed of
Trust or to direct the Trustee to exercise its power of sale, Grantor authorizes
Beneficiary at its option to foreclose the lien of this Deed of Trust (or direct
the Trustee to sell the Trust Property, as the case may be) subject to the
rights of any tenants of the Trust Property. The failure to make any such
tenants parties defendant to any such foreclosure proceeding and to foreclose
their rights, or to provide notice to such tenants as required in any statutory
procedure governing a sale of the Trust Property by Trustee, or to terminate
such tenant's rights in such sale will not be asserted by Grantor as a defense
to any proceeding instituted by Beneficiary to collect the Indebtedness or to
foreclose this Deed of Trust.
(d) Unless expressly provided otherwise, in the event that
Beneficiary's interest in this Deed of Trust and title to the Trust Property or
any estate therein shall become vested in the same person or entity, this Deed
of Trust shall not merge in such title but shall continue as a valid charge on
the Trust Property for the amount secured hereby.
19. Trustee's Powers (and Liabilities). (a) Beneficiary may
substitute, for any reason whatsoever, a successor Trustee or successor Trustees
for the Trustee hereunder from time to time by an instrument in writing in any
manner now or hereafter provided by law. Such right of substitution may be
exercised at any time and more than once for so long as any part of the
Indebtedness and Obligations remains unpaid. Such writing, upon recordation,
shall be conclusive proof of proper substitution of each such successor Trustee
or Trustees, who shall thereupon and without conveyance from the predecessor
Trustee, succeed to all its title, estate, rights, powers and duties hereunder.
The making of oath and giving bond by Trustee or any successor Trustee is hereby
expressly waived by Grantor. The Trustee may sell and
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convey said property under the power set out herein, to any person, firm or
corporation, although said Trustee has been, may now be or may hereafter be
attorney for or agent of Beneficiary.
(b) At any time or from time to time, without liability therefor,
and without notice, upon the written request of Beneficiary and presentation of
the Notes, or other evidence of the Indebtedness, and this Deed of Trust for
endorsement, without affecting the liability of any person for the payment of
the indebtedness secured hereby, and without affecting the lien of the Deed of
Trust upon the Trust Property for the full amount of all amounts secured hereby,
upon Beneficiary's request Trustee may (i) release all or any part of the Trust
Property, (ii) consent to the making of any map or plat thereof, (iii) join in
granting any easement thereon or in creating any covenants or conditions
restricting use or occupancy thereof, or (iv) join in any extension agreement or
in any agreement subordinating the lien or charge hereof.
20. Security Agreement under Uniform Commercial Code. (a) It is the
intention of the parties hereto that this Deed of Trust shall constitute a
Security Agreement within the meaning of the Uniform Commercial Code (the
"CODE") of the State in which the Trust Property is located. If an Event of
Default shall occur under this Deed of Trust, then in addition to having any
other right or remedy available at law or in equity, Beneficiary shall have the
option of either (i) proceeding under the Code and exercising such rights and
remedies as may be provided to a secured party by the Code with respect to all
or any portion of the Trust Property which is personal property (including,
without limitation, taking possession of and selling such property) or (ii)
treating such property as real property and proceeding with respect to both the
real and personal property constituting the Trust Property in accordance with
Beneficiary's rights, powers and remedies with respect to the real property (in
which event the default provisions of the Code shall not apply). If Beneficiary
shall elect to proceed under the Code, then ten days' notice of sale of the
personal property shall be deemed reasonable notice and the reasonable expenses
of retaking, holding, preparing for sale, selling and the like incurred by
Beneficiary shall include, but not be limited to, reasonable attorneys' fees and
legal expenses. At Beneficiary's request, during the continuance of an Event of
Default, Grantor shall assemble the personal property and make it available to
Beneficiary at a place designated by Beneficiary which is reasonably convenient
to both parties.
(b) Grantor and Beneficiary agree, to the extent permitted by law,
that: (i) all of the goods described within the definition of the word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Deed of
Trust upon recording or registration in the real estate records of the proper
office shall constitute a financing
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statement filed as a "fixture filing" within the meaning of Sections 9-313 and
9-402 of the Code; (iii) Grantor is the record owner of the Real Estate; and
(iv) the addresses of Grantor and Beneficiary are as set forth on the first page
of this Deed of Trust.
(c) Grantor, upon request by Beneficiary from time to time, shall
execute, acknowledge and deliver to Beneficiary one or more separate security
agreements, in form satisfactory to Beneficiary in its reasonable discretion,
covering all or any part of the Trust Property and will further execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
any financing statement, affidavit, continuation statement or certificate or
other document as Beneficiary may request in order to perfect, preserve,
maintain, continue or extend the security interest under and the priority of
this Deed of Trust and such security instrument. Grantor further agrees to pay
to Beneficiary on demand all reasonable costs and expenses incurred by
Beneficiary in connection with the preparation, execution, recording, filing and
refiling of any such document and all reasonable costs and expenses of any
record searches for financing statements Beneficiary shall reasonably require.
If Grantor shall fail to furnish any financing or continuation statement within
10 days after request by Beneficiary, then pursuant to the provisions of the
Code, Grantor hereby authorizes Beneficiary, without the signature of Grantor,
to execute and file any such financing and continuation statements. The filing
of any financing or continuation statements in the records relating to personal
property or chattels shall not be construed as in any way impairing the right of
Beneficiary to proceed against any personal property encumbered by this Deed of
Trust as real property, as set forth above.
21. Assignment of Rents. Grantor hereby assigns to Trustee, for the
benefit of Beneficiary, the Rents as further security for the payment of the
Indebtedness and performance of the Obligations, and Grantor grants to Trustee
and Beneficiary the right to enter the Trust Property for the purpose of
collecting the same and to let the Trust Property or any part thereof and to
apply the Rents on account of the Indebtedness. The foregoing assignment and
grant is present and absolute and shall continue in effect until the
Indebtedness is paid in full, but Beneficiary and Trustee hereby waive the right
to enter the Trust Property for the purpose of collecting the Rents, letting the
Trust Property or any part thereof or applying the Rents and Grantor shall be
entitled to collect, receive, use and retain the Rents until the occurrence of
an Event of Default under this Deed of Trust; such right of Grantor to collect,
receive, use and retain the Rents may be revoked by Beneficiary upon the
occurrence of any Event of Default under this Deed of Trust by giving not less
than five days' written notice of such revocation to Grantor; in the event such
notice is given, Grantor shall pay over to Beneficiary, or to any receiver
appointed to collect the Rents, any lease security deposits, and shall pay
monthly in advance to Beneficiary, or to any such receiver, the
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fair and reasonable rental value as determined by Beneficiary for the use and
occupancy of the Trust Property or of such part thereof as may be in the
possession of Grantor or any affiliate of Grantor, and upon default in any such
payment Grantor and any such affiliate will vacate and surrender the possession
of the Trust Property to Beneficiary or to such receiver, and in default thereof
may be evicted by summary proceedings or otherwise. Grantor shall not accept
prepayments of installments of Rent to become due for a period of more than one
month in advance (except for security deposits and estimated payments of
percentage rent, if any).
22. Trust Funds. All lease security deposits of the Real Estate
shall be treated as trust funds not to be commingled with any other funds of
Grantor. Within 10 days after request by Beneficiary, Grantor shall furnish
Beneficiary satisfactory evidence of compliance with this subsection, together
with a statement of all lease security deposits by lessees and copies of all
Leases not previously delivered to Beneficiary under which such security
deposits are held, which statement shall be certified by Grantor.
23. Additional Rights. The holder of any subordinate lien or
subordinate deed of trust on the Trust Property shall have no right to terminate
any Lease whether or not such Lease is subordinate to this Deed of Trust nor
shall any holder of any subordinate lien or subordinate deed of trust join any
tenant under any Lease in any trustee's sale or action to foreclose the lien or
modify, interfere with, disturb or terminate the rights of any tenant under any
Lease. By recordation of this Deed of Trust all subordinate lienholders and the
trustees and beneficiaries under subordinate deeds of trust are subject to and
notified of this provision, and any action taken by any such lienholder or
trustee or beneficiary contrary to this provision shall be null and void. Upon
the occurrence of any Event of Default, Beneficiary may, in its sole discretion
and without regard to the adequacy of its security under this Deed of Trust,
apply all or any part of any amounts on deposit with Beneficiary under this Deed
of Trust against all or any part of the Indebtedness. Any such application shall
not be construed to cure or waive any Default or Event of Default or invalidate
any act taken by Beneficiary on account of such Default or Event of Default.
24. Changes in Method of Taxation. In the event of the passage after
the date hereof of any law of any Governmental Authority deducting from the
value of the Premises for the purposes of taxation any lien or deed of trust
thereon, or changing in any way the laws for the taxation of mortgages or deeds
of trust or debts secured thereby for federal, state or local purposes, or the
manner of collection of any such taxes, and imposing a tax, either directly or
indirectly, on mortgages or deeds of trust or debts secured thereby, the holder
of this Deed of Trust shall have the right to declare
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the Indebtedness due on a date to be specified by not less than 30 days' written
notice to be given to Grantor unless within such 30-day period Grantor shall
assume as an Obligation hereunder the payment of any tax so imposed until full
payment of the Indebtedness and such assumption shall be permitted by law.
25. Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been sufficiently given or served when served
in the same manner as set forth for notices in the Senior Secured Credit
Agreement. The Trustee's address for notices shall be the Trustee's address
given on the first page of this Deed of Trust.
26. No Oral Modification. This Deed of Trust may not be changed or
terminated orally. Any agreement made by Grantor and Beneficiary after the date
of this Deed of Trust relating to this Deed of Trust shall be superior to the
rights of the holder of any intervening or subordinate deed of trust, lien or
encumbrance. Trustee's execution of any written agreement between Grantor and
Beneficiary shall not be required for the effectiveness thereof as between
Grantor and Beneficiary.
27. Partial Invalidity. In the event any one or more of the
provisions contained in this Deed of Trust shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included. Notwithstanding to the contrary anything contained in this Deed of
Trust or in any provisions of the Indebtedness or Loan Documents, the
obligations of Grantor and of any other obligor under the Indebtedness or Loan
Documents shall be subject to the limitation that Beneficiary shall not charge,
take or receive, nor shall Grantor or any other obligor be obligated to pay to
Beneficiary, any amounts constituting interest or loan charges in excess of the
maximum rate or amount permitted by law to be charged by Beneficiary.
28. Grantor's Waiver of Rights. To the fullest extent permitted by
law, Grantor waives the benefit of all laws now existing or that may
subsequently be enacted providing for (i) any appraisement before sale of any
portion of the Trust Property, (ii) any extension of the time for the
enforcement of the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Trust Property from attachment, levy or sale under execution or
exemption from civil process. To the full extent Grantor may do so, Grantor
agrees that Grantor will not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, exemption, extension or redemption, or requiring
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foreclosure of this Deed of Trust before exercising any other remedy granted
hereunder and Grantor, for Grantor and its successors and assigns, and for any
and all persons ever claiming any interest in the Trust Property, to the extent
permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the secured indebtedness and marshalling in the event
of exercise by Trustee or Beneficiary of the power of sale or other rights
hereby created.
29. Remedies Not Exclusive. Beneficiary and Trustee shall be
entitled to enforce payment of the Indebtedness and performance of the
Obligations and to exercise all rights and powers under this Deed of Trust or
under any of the other Loan Documents or other agreement or any laws now or
hereafter in force, notwithstanding some or all of the Indebtedness and
Obligations may now or hereafter be otherwise secured, whether by deed of trust,
mortgage, security agreement, pledge, lien, assignment or otherwise. Neither the
acceptance of this Deed of Trust nor its enforcement, shall prejudice or in any
manner affect Beneficiary's or Trustee's right to realize upon or enforce any
other security now or hereafter held by Beneficiary or Trustee, it being agreed
that Beneficiary and Trustee shall be entitled to enforce this Deed of Trust and
any other security now or hereafter held by Beneficiary or Trustee in such order
and manner as Beneficiary may determine in its absolute discretion. No remedy
herein conferred upon or reserved to Trustee or Beneficiary is intended to be
exclusive of any other remedy herein or by law provided or permitted, but each
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. Every
power or remedy given by any of the Loan Documents to Beneficiary or Trustee or
to which either may otherwise be entitled, may be exercised, concurrently or
independently, from time to time and as often as may be deemed expedient by
Beneficiary or Trustee, as the case may be. In no event shall Beneficiary or
Trustee, in the exercise of the remedies provided in this Deed of Trust
(including, without limitation, in connection with the assignment of Rents, or
the appointment of a receiver and the entry of such receiver on to all or any
part of the Trust Property), be deemed a "mortgagee in possession," and neither
Beneficiary nor Trustee shall in any way be made liable for any act, either of
commission or omission, in connection with the exercise of such remedies.
30. Multiple Security. If (a) the Premises shall consist of one or
more parcels, whether or not contiguous and whether or not located in the same
county, or (b) in addition to this Deed of Trust, Beneficiary shall now or
hereafter hold or be the beneficiary of one or more additional mortgages, liens,
deeds of trust or other security (directly or indirectly) for the Indebtedness
upon other property in the State in which the Premises are located (whether or
not such property is owned by Grantor or by
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others) or (c) both the circumstances described in clauses (a) and (b) shall be
true, then to the fullest extent permitted by law, Beneficiary may, at its
election, commence or consolidate in a single trustee's sale or foreclosure
action all trustee's sale or foreclosure proceedings against all such collateral
securing the Indebtedness (including the Trust Property), which action may be
brought or consolidated in the courts of, or sale conducted in, any county in
which any of such collateral is located. Grantor acknowledges that the right to
maintain a consolidated trustee's sale or foreclosure action is a specific
inducement to Beneficiary to extend the Indebtedness, and Grantor expressly and
irrevocably waives any objections to the commencement or consolidation of the
foreclosure proceedings in a single action and any objections to the laying of
venue or based on the grounds of forum non conveniens which it may now or
hereafter have. Grantor further agrees that if Trustee or Beneficiary shall be
prosecuting one or more foreclosure or other proceedings against a portion of
the Trust Property or against any collateral other than the Trust Property,
which collateral directly or indirectly secures the Indebtedness, or if
Beneficiary shall have obtained a judgment of foreclosure and sale or similar
judgment against such collateral (or, in the case of a trustee's sale, shall
have met the statutory requirements therefor with respect to such collateral),
then, whether or not such proceedings are being maintained or judgments were
obtained in or outside the State in which the Premises are located, Beneficiary
may commence or continue any trustee's sale or foreclosure proceedings and
exercise its other remedies granted in this Deed of Trust against all or any
part of the Trust Property and Grantor waives any objections to the commencement
or continuation of a foreclosure of this Deed of Trust or exercise of any other
remedies hereunder based on such other proceedings or judgments, and waives any
right to seek to dismiss, stay, remove, transfer or consolidate either any
action under this Deed of Trust or such other proceedings on such basis. The
commencement or continuation of proceedings to sell the Trust Property in a
trustee's sale, to foreclose this Deed of Trust or the exercise of any other
rights hereunder or the recovery of any judgment by Beneficiary or the
occurrence of any sale by the Trustee in any such proceedings shall not
prejudice, limit or preclude Beneficiary's right to commence or continue one or
more trustee's sales, foreclosure or other proceedings or obtain a judgment
against (or, in the case of a trustee's sale, to meet the statutory requirements
for, any such sale of) any other collateral (either in or outside the State in
which the Real Estate is located) which directly or indirectly secures the
Indebtedness, and Grantor expressly waives any objections to the commencement
of, continuation of, or entry of a judgment in such other sales or proceedings
or exercise of any remedies in such sales or proceedings based upon any action
or judgment connected to this Deed of Trust, and Grantor also waives any right
to seek to dismiss, stay, remove, transfer or consolidate either such other
sales or proceedings or any sale or action under this Deed of Trust on such
basis. It is expressly understood and agreed that to the fullest extent
permitted by law,
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Beneficiary may, at its election, cause the sale of all collateral which is the
subject of a single trustee's sale or foreclosure action at either a single sale
or at multiple sales conducted simultaneously and take such other measures as
are appropriate in order to effect the agreement of the parties to dispose of
and administer all collateral securing the Indebtedness (directly or indirectly)
in the most economical and least time-consuming manner.
31. Successors and Assigns. All covenants of Grantor contained in
this Deed of Trust are imposed solely and exclusively for the benefit of
Beneficiary and Trustee and their respective successors and assigns, and no
other person or entity shall have standing to require compliance with such
covenants or be deemed, under any circumstances, to be a beneficiary of such
covenants, any or all of which may be freely waived in whole or in part by
Beneficiary or Trustee at any time if in the sole discretion of either of them
such waiver is deemed advisable. All such covenants of Grantor shall run with
the land and bind Grantor, the successors and assigns of Grantor (and each of
them) and all subsequent owners, encumbrancers and tenants of the Trust
Property, and shall inure to the benefit of Beneficiary, Trustee and their
respective successors and assigns. Without limiting the generality of the
foregoing, any successor to Trustee appointed by Beneficiary shall succeed to
all rights of Trustee as if such successor had been originally named as Trustee
hereunder. The word "Grantor" shall be construed as if it read "Grantors"
whenever the sense of this Deed of Trust so requires and if there shall be more
than one Grantor, the obligations of the Grantors shall be joint and several.
32. No Waivers, etc. Any failure by Beneficiary to insist upon the
strict performance by Grantor of any of the terms and provisions of this Deed of
Trust shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Beneficiary or Trustee, notwithstanding any such failure, shall have
the right thereafter to insist upon the strict performance by Grantor of any and
all of the terms and provisions of this Deed of Trust to be performed by
Grantor. Beneficiary may release, regardless of consideration and without the
necessity for any notice to or consent by the beneficiary of any subordinate
deed of trust or the holder of any subordinate lien on the Trust Property, any
part of the security held for the obligations secured by this Deed of Trust
without, as to the remainder of the security, in anywise impairing or affecting
this Deed of Trust or the priority of this Deed of Trust over any subordinate
lien or deed of trust.
33. Governing Law, etc. This Deed of Trust shall be governed by and
construed in accordance with the laws of the State in which the Premises are
located, except that Grantor expressly acknowledges that by its terms the Senior
Secured Credit
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Agreement shall be governed and construed in accordance with the laws of the
State of New York, without regard to principles of conflict of law, and for
purposes of consistency, Grantor agrees that in any in personam proceeding
related to this Deed of Trust the rights of the parties to this Deed of Trust
shall also be governed by and construed in accordance with the laws of the State
of New York governing contracts made and to be performed in that State, without
regard to principles of conflict of law.
34. WAIVER OF TRIAL BY JURY. GRANTOR, TRUSTEE AND BENEFICIARY EACH
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY ACTION, CLAIM,
SUIT OR PROCEEDING RELATING TO THIS DEED OF TRUST AND FOR ANY COUNTERCLAIM
BROUGHT THEREIN.
35. Certain Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Deed of Trust shall be used interchangeably in singular or plural form and
the word "Grantor" shall mean "each Grantor or any subsequent owner or owners of
the Trust Property or any part thereof or interest therein," the word
"Beneficiary" shall mean "Beneficiary or any successor Administrative Agent,"
the word "Trustee" shall mean "Trustee and any successor trustee hereunder," the
word "Notes" shall mean "the notes that may from time to time be given pursuant
to the terms of the Senior Secured Credit Agreement or any other evidence of
indebtedness secured by this Deed of Trust," the word "person" shall include any
individual, corporation, partnership, trust, unincorporated association,
government, governmental authority, or other entity, and the words "Trust
Property" shall include any portion of the Trust Property or interest therein.
Whenever the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa. The captions in this
Deed of Trust are for convenience or reference only and in no way limit or
amplify the provisions hereof.
36. Reconveyance of Deed Of Trust. Upon payment in full of the
Indebtedness, the termination of all Commitments under the Senior Secured Credit
Agreement secured hereby and the compliance with the Obligations then required
to be complied with, Beneficiary shall release the encumbrance of this Deed of
Trust. If any of the Trust Property shall be sold, transferred or otherwise
disposed of by Grantor in a transaction expressly permitted by the Senior
Secured Credit Agreement, then Beneficiary shall execute and deliver, and shall
cause Trustee to execute and deliver to Grantor (at the sole cost and expense of
Grantor) all releases, reconveyances or other documents reasonably necessary or
desirable for the release of such Trust Property from the encumbrance of this
Deed of Trust.
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37. Conflict With Senior Secured Credit Agreement. In the event of
any conflict or inconsistency between the terms and provisions of this Deed of
Trust and the terms and provisions of the Senior Secured Credit Agreement, the
terms and provisions of the Senior Secured Credit Agreement shall govern, other
than with respect to the Section of this Deed of Trust captioned "Governing Law,
etc.". By their execution of the Senior Secured Credit Agreement, each Lender
hereby agrees that it shall not have the right to institute any suit for
enforcement of Notes or any other Indebtedness secured by this Deed of Trust or
any other Security Document, if and to the extent that the institution or
prosecution thereof or the entry of judgment therein would, under applicable
law, result in the surrender, impairment, waiver or loss of the Lien of this
Deed of Trust or any other Security Document or impede or delay the enforcement
of the Lien of this Deed of Trust or any other Security Document.
38. Receipt of Copy. Grantor acknowledges that it has received a
true copy of this Deed of Trust.
39. Notice Pursuant to Section 47-28-104 of Tennessee Code
Annotated. This Deed of Trust secures future advances which are "obligatory
advances" as defined in the aforesaid statute. This Deed of Trust is for
commercial purposes as defined in said statute.
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This Deed of Trust has been duly executed by Grantor as of the date
first above written.
Signed, sealed and EV INTERNATIONAL, INC.
delivered in our
presence: By: /s/ CHRISTINE K. VANDEN BEUKEL
--------------------------------
Name: Christine K. Vanden Beukel
Title: Vice President, Secretary
and Treasurer
/s/ GINGER BALLARD
- ----------------------------
Name: Ginger Ballard
/s/ ARON GOSER
- ----------------------------
Name: Aron Goser
34
<PAGE> 36
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
Personally appeared before me, Christine K. Vanden Beukel, with whom
I am personally acquainted (or proved to me on the basis of satisfactory
evidence) and who, upon oath, acknowledged herself to be the V.P., Secretary and
Treasurer of EV INTERNATIONAL, INC., the within named bargainor, a Delaware
corporation, and that he as such V.P., Secretary and Treasurer, being authorized
so to do, executed the foregoing instrument for the purposes therein contained
by signing the name of the corporation by himself as such V.P., Secretary and
Treasurer.
WITNESS my hand and seal at office this 10th day of February, 1997.
/s/ NANCY L. LOMAZZO
-------------------------
Notary Public
My commission expires:
June 3, 1998
___________________________
(embossed seal) NANCY L. LOMAZZO
Notary Public, State of New York
No. 31-5061123
Qualified in New York County
Commission Expires June 3, 1998
<PAGE> 37
366 Industrial Road
Newport, TN 37821
Cocke County
(Page 1 of 2)
Schedule A
Situated in District No. Six (6) of Cocke County, Tennessee, bounded on the West
by Cocke County Farm, on the North by State Rural Road Project No. 8-2540-(4) as
shown by State Road Plans dated 1957 & 1958 in State File "Y" Div. 12,
Nashville, Tennessee, on the East by Welch, McGaha and the Chemetron
Corporation, on the South by the Chemetron Corporation and the Cocke County
Farm, and more particularly described as follows:
BEGINNING at an iron pin in the southern right-of-way line of the aforementioned
highway at the intersection of the eastern right-of-way line of a proposed 50
foot street leading in a south easterly direction and running thence with said
highway and a curve to the right with a center line radius of 1041.74 feet and a
southern right-of-way radius of 1011.74 feet for an arc distance of 450.00 feet
the chord of which bears North 54 deg. 01 min. 29 seconds East a distance of
446.30 feet to a concrete right-of-way post located 30 feet south of highway
center line station P. T. 54+37.8; thence South 23 deg. 14 min. 00 seconds East
10.0 feet to a concrete right-of-way post 40.0 feet south of center line station
P. T. 54+37.8; thence North 66 deg. 46 min. East with the southern right-of-way
of said highway 254.1 feet to a concrete right-of-way post 40 feet south of the
center line station P. C. 56+91.9; thence with a curve to the left with a radius
of 1185.92 for an arc distance of 318.86 feet the chord of which bears North 59
deg. 03 min. 51 seconds East a distance of 317.90 feet to a concrete
right-of-way post opposite center line station 60 + 00; thence South 38 deg. 38
min. 18 seconds East 15.0 feet to a concrete right-of-way post opposite center
line station 60 + 00 and 55 feet south easterly thereof; thence continuing with
a curve to the left whose radius is 1200.92 feet through an arc of 262.00 feet
the chord of which bears North 45 deg. 06 min. 42 seconds East for a distance of
261.48 feet to a right-of-way post opposite center line station 62 + 50; thence
South 51 deg. 08 min. 18 seconds East 45.0 feet to a concrete right-of-way post
100.00 feet south easterly of aforesaid center line station; thence continuing
with a curve to the left whose radius is 1245.92 feet for an arc distance of
262.97 feet the chord of which bears North 32 deg. 48 min. 51 seconds East a
distance of 262.54 feet to a concrete right-of-way post 100.00 feet
southeasterly of center line station P. T. 64 + 91.9 feet; thence North 63 deg.
14 min. 00 seconds West 60.0 feet to a concrete right-of-way post 40 feet from
center line station P. T. 64 + 91.9 feet; thence parallel with the center line
of said highway and 40.0 feet therefrom North 26 deg. 46 min. 00 seconds East
135.5 feet to an iron pipe in said line and corner to Welch McGaha; thence South
70 deg. 57 min. East with the old line 546.8 feet to a concrete post corner No.
4 to the Chemetron Corporation; thence with
<PAGE> 38
366 Industrial Road
Newport, TN 37821
Cocke County
(Page 2 of 2)
the eastern margin of an old road and the Chemetron Corporation line five calls
as follows: South 10 deg. 03 min. East 366.7 feet to a concrete post corner No.
5; thence South 57 deg. 36 min. West 49.3 feet to a concrete post corner No. 6;
thence South 77 deg. 45 min. West 49.35 feet to a concrete post corner No. 7;
thence North 89 deg. 58 min. West 198.1 feet to a concrete post corner No. 8;
thence North 84 deg. 00 min. West 197.0 feet to a concrete post corner No. 9;
thence leaving the margin of the old road and continuing with the Chemetron
Corporation line two courses and distances as follows: South 52 deg. 15 min.
West 621.8 feet to a concrete post corner No. 10; thence South 25 deg. 45 min.
West passing a meander corner on the north bank of Sinking Creek at 109.0 feet
and continuing to the center line of said creek; thence up the center line of
the creek as it meanders as follows by meander line as run from aforesaid
meander corner on the North bank of the creek, South 44 deg. 35 min. West 244.3
feet to a stake on north bank of creek; thence South 51 deg. 44 min. West 155.6
feet to a stake; thence South 35 deg. 48 min. West 180.6 feet passing the center
of a 48 inch sycamore tree about 12 feet to an iron pipe set on the north bank
of Sinking Creek about 15 feet Northwest of the center line of the creek and on
the eastern margin of a proposed 50 foot street; thence with the remaining
County Farm lands and the eastern margin of said proposed street North 44 deg.
04 min. West 580.0 feet to an iron pin the Beginning corner, containing eighteen
and one-half (18 1/2) acres, more or less.
BEING the same premises conveyed to Gulton Industries, Inc. by deed from
The Industrial Development Board of the County of Cocke, Tennessee, dated
October 31, 1984, of record in the Register's Office of Cocke County,
Tennessee, in W.D. Book 217 at Pages 262-265.
<PAGE> 1
EXHIBIT 10(r)
TENNESSEE
Prepared by, and when
recorded, please return to:
Simpson Thacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
ATTN: Emily R. Steinman, Esq.
DEED OF TRUST, ASSIGNMENT OF RENTS
AND LEASES AND SECURITY AGREEMENT
from
EV INTERNATIONAL, INC., Grantor
to
JOE B. PITT, JR., Trustee
for the use and
benefit of
THE CHASE MANHATTAN BANK, as Administrative Agent, Beneficiary
DATED AS OF FEBRUARY 10, 1997
MAXIMUM PRINCIPAL INDEBTEDNESS FOR TENNESSEE
RECORDING TAX PURPOSES IS $15,000.00.
SEE ATTACHED AFFIDAVIT
This instrument covers property which has become so affixed to real property as
to become fixtures and constitutes a fixture filing under Section 47-9-402 of
the Tennessee Code Annotated.
<PAGE> 2
TENNESSEE
DEED OF TRUST, ASSIGNMENT OF RENTS
AND LEASES AND SECURITY AGREEMENT
THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES AND
SECURITY AGREEMENT, dated as of February 10, 1997 is made by EV INTERNATIONAL,
INC., a Delaware corporation, as successor by merger and name change to Gulton
Industries, Inc. ("GRANTOR"), whose address is 600 Cecil Street, Buchanan,
Michigan 49107, to JOE B. PITT, JR., a resident of Davidson County, Tennessee,
("TRUSTEE") whose address is 414 Union St., Suite 1800, Nashville, TN 37219 for
the use and benefit of THE CHASE MANHATTAN BANK, a New York banking corporation
whose address is 270 Park Avenue, New York, New York 10017, as Administrative
Agent (in such capacity, "BENEFICIARY") for the several banks and other
financial institutions (the "LENDERS") from time to time parties to the Credit
Agreement dated as of February __, 1997, (as the same may be amended,
supplemented, waived or otherwise modified from time to time the "SENIOR SECURED
CREDIT AGREEMENT") among Gulton Acquisition Corp., a Delaware corporation
("BORROWER"), the Lenders and Beneficiary. References to this "Deed of Trust"
shall mean this instrument and any and all renewals, modifications, amendments,
supplements, extensions, consolidations, substitutions, spreaders and
replacements of this instrument. Capitalized terms used and not otherwise
defined herein shall have the meanings assigned thereto in the Senior Secured
Credit Agreement.
Background
A. Gulton Holdings Corp., a Delaware corporation which, on or
after the Effective Date, will be renamed EVI Audio Holding, Inc. ("HOLDINGS")
and Borrower, its direct Wholly Owned Subsidiary, were newly formed companies
organized by an investor group led by Greenwich Street Capital Partners, Inc., a
Delaware corporation ("GSCP").
B. Borrower acquired Gulton Industries Inc., a Delaware
corporation ("GII") which was a subsidiary of Mark IV Industries, Inc. ("MARK
IV") through the purchase from Mark IV and Mark IV PLC of the capital stock of
GII (the "ACQUISITION") pursuant to the Stock Purchase Agreement, dated as of
December 12,
<PAGE> 3
1996, by and among Mark IV, Mark IV PLC and Borrower (as amended, supplemented,
waived or otherwise modified from time to time in accordance with the Senior
Secured Credit Agreement, the "STOCK PURCHASE AGREEMENT").
C. Borrower merged with and into GII (the "FIRST MERGER"), and
GII as surviving corporation of the First Merger merged (the "SECOND MERGER";
the First Merger together with the Second Merger, the "MERGERS") with and into
Electro-Voice, Incorporated, a Delaware corporation and a Wholly Owned
Subsidiary of GII, which was thereupon renamed EV International, Inc.
D. In order to (i) finance a portion of the Acquisition
Consideration, (ii) refinance a portion of the existing indebtedness of GII and
its subsidiaries, (iii) pay certain fees, taxes and expenses related to (x) the
Acquisition and the financing thereof and (y) the refinancing of such existing
indebtedness of GII and its subsidiaries and (iv) finance the working capital
and other business requirements of Grantor and its subsidiaries following the
consummation of the Acquisition and the Merger, Acquisition Co. has requested
that the Lenders make the Loans and issue and participate in the Letters of
Credit in accordance with the terms of the Senior Secured Credit Agreement.
E. Grantor is the owner of the parcel(s) of real property
described on Schedule A attached hereto (such real property, together with all
of the buildings, improvements, structures and fixtures now or subsequently
located thereon (the "IMPROVEMENTS"), being collectively referred to as the
"REAL ESTATE").
F. Pursuant to the terms of the Senior Secured Credit
Agreement, the Lenders have agreed, among other things, to make the Loans in the
maximum principal amount of $______________________, having a maturity date of
__________________, and the Issuing Lender has agreed to issue, and the L/C
Participants have agreed to acquire undivided participating interests in, the
Letter(s) of Credit for the account of the Borrower upon the terms and subject
to the conditions set forth in the Senior Secured Credit Agreement which
conditions include the grant by Grantor to Beneficiary of a first lien upon and
perfected security interest in, among other things, all estate, right, title and
interest of Grantor in and to the Real Estate pursuant to the terms hereof.
G. Grantor is the successor by merger to Borrower, and it is
to the advantage and benefit of Grantor that the Lenders make the Loans to
Borrower.
2
<PAGE> 4
Granting Clauses
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor agrees that to secure:
(a) the repayment of principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans
and Reimbursement Obligations and interest accruing after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Loan Party, whether
or not a claim for post-filing or post-petition interest is allowed in
such proceeding) the Loans (as they may be evidenced by the Notes from
time to time) and all other obligations (including the Reimbursement
Obligations) and liabilities of Grantor to Beneficiary, the Issuing
Lender and the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Senior
Secured Credit Agreement, the Loans, the Letters of Credit, the
Security Documents, any Guarantee Obligation of Grantor as to which any
Lender is a beneficiary, any Permitted Hedging Arrangement with any
Lender or any banking affiliate of any Lender (whether entered into
directly, or guaranteed, by Grantor), the Guarantee and Collateral
Agreement dated as of February 10, 1997 between Grantor, Holdings and
Beneficiary (the "GUARANTEE") or any other document made, delivered or
given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees,
charges and disbursements of counsel to the Administrative Agent, the
Issuing Lender or any Lender that are required to be paid by any Loan
Party pursuant to the Senior Secured Credit Agreement) (the items set
forth above being referred to collectively as the "INDEBTEDNESS"); and
(b) the performance of all covenants, agreements, obligations
and liabilities of Grantor (the "OBLIGATIONS") under or pursuant to the
provisions of the Senior Secured Credit Agreement, the Loans, this Deed
of Trust, the Guarantee, any other document securing payment of the
Indebtedness (the "SECURITY DOCUMENTS") and any amendments,
supplements, extensions, renewals, restatements, replacements or
modifications of any of the foregoing (the Senior Secured Credit
Agreement, the Loans, the Letters of Credit, this Deed of Trust, the
Guarantee and all other documents and instruments from time to time
evidencing, securing or guaranteeing the payment of the Indebtedness or
the performance of the Obligations, as any of the same may be
3
<PAGE> 5
amended, supplemented, extended, renewed, restated, replaced or
modified from time to time, are collectively referred to as the "LOAN
DOCUMENTS");
GRANTOR HEREBY CONVEYS TO TRUSTEE AND HEREBY GRANTS, SELLS, BARGAINS, CONFIRMS,
ASSIGNS, TRANSFERS AND SETS OVER TO TRUSTEE, WITH POWER OF SALE FOR THE USE AND
BENEFIT OF BENEFICIARY, AND GRANTS BENEFICIARY, INSOFAR AS ANY PROPERTY
CONSTITUTES PERSONAL PROPERTY, A SECURITY INTEREST IN:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever
of Grantor, in possession or expectancy, in and to the Real Estate or
any part thereof;
(C) all right, title and interest of Grantor in, to and under
all easements, rights of way, gores of land, streets, ways, alleys,
passages, sewer rights, waters, water courses, water and riparian
rights, development rights, air rights, mineral rights and all estates,
rights, titles, interests, privileges, licenses, tenements,
hereditaments and appurtenances belonging, relating or appertaining to
the Real Estate, and any reversions, remainders, rents, issues, profits
and revenue thereof and all land lying in the bed of any street, road
or avenue, in front of or adjoining the Real Estate to the center line
thereof;
(D) all right, title and interest of Grantor in and to all of
the fixtures, chattels, business machines, machinery, apparatus,
equipment, furnishings, fittings and articles of personal property of
every kind and nature whatsoever, and all appurtenances and additions
thereto and substitutions or replacements thereof (together with, in
each case, attachments, components, parts and accessories) currently
owned or subsequently acquired by Grantor and now or subsequently
attached to, or contained in or used or usable in any way in connection
with any operation or letting of the Real Estate, including but without
limiting the generality of the foregoing, all screens, awnings, shades,
blinds, curtains, draperies, artwork, carpets, rugs, storm doors and
windows, furniture and furnishings, heating, electrical, and mechanical
equipment, lighting, switchboards, plumbing, ventilating, air
conditioning and air-cooling apparatus, refrigerating, and incinerating
equipment, escalators, elevators, loading and unloading equipment and
systems, stoves, ranges, laundry equipment, cleaning systems (including
window cleaning apparatus), telephones, communication systems
(including satellite dishes and antennae), televisions, computers,
sprinkler systems and other fire prevention and
4
<PAGE> 6
extinguishing apparatus and materials, security systems, motors,
engines, machinery, pipes, pumps, tanks, conduits, appliances, fittings
and fixtures of every kind and description (all of the foregoing in
this paragraph (D) being referred to as the "EQUIPMENT");
(E) all right, title and interest of Grantor in and to all
substitutes and replacements of, and all additions and improvements to,
the Real Estate and the Equipment, subsequently acquired by or released
to Grantor or constructed, assembled or placed by Grantor on the Real
Estate, immediately upon such acquisition, release, construction,
assembling or placement, including, without limitation, any and all
building materials to be used by Grantor whether stored at the Real
Estate or offsite, and, in each such case, without any further
mortgage, conveyance, assignment or other act by Grantor;
(F) all right, title and interest of Grantor in, to and under
all leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or
occupancy of the Real Estate or the Equipment or any part thereof, now
existing or subsequently entered into by Grantor and whether written or
oral and all guarantees of any of the foregoing (collectively, as any
of the foregoing may be amended, restated, extended, renewed or
modified from time to time, the "LEASES"), and all rights of Grantor in
respect of cash and securities deposited thereunder and the right to
receive and collect the revenues, income, rents, issues and profits
thereof, together with all other rents, royalties, issues, profits,
revenue, income and other benefits arising from the use and enjoyment
of the Trust Property (as defined below) (collectively, the "RENTS");
(G) all books and records relating to or used in connection
with the operation of the Real Estate or the Equipment or any part
thereof;
(H) all right, title and interest of Grantor, to the extent
assignable, in and to (i) all unearned premiums under insurance
policies now or subsequently obtained by Grantor relating to the Real
Estate or Equipment, (ii) any such insurance policies, (iii) all
proceeds of any such insurance policies (including title insurance
policies) including the right to collect and receive such proceeds,
subject to the provisions relating to insurance generally set forth
below, and (iv) all awards and other compensation, including the
interest payable thereon and the right to collect and receive the same,
made to the present or any subsequent owner of the Real Estate or
Equipment for the taking by eminent domain, condemnation or otherwise,
of all or any part of the Real Estate or any easement
5
<PAGE> 7
or other right therein, subject to the provisions relating to
condemnation awards generally set forth below;
(I) all right, title and interest of Grantor, to the extent
assignable, in and to (i) all contracts from time to time executed by
Grantor or any manager or agent on its behalf relating to the
ownership, construction, maintenance, repair, operation, occupancy,
sale or financing of the Real Estate or Equipment or any part thereof
and all agreements relating to the purchase or lease of any portion of
the Real Estate or any property which is adjacent or peripheral to the
Real Estate, together with the right to exercise such options
(collectively, the "CONTRACTS"), (ii) all consents, licenses, building
permits, certificates of occupancy and other governmental approvals
relating to construction, completion, occupancy, use or operation of
the Real Estate or any part thereof (collectively, the "PERMITS") and
(iii) all drawings, plans, specifications and similar or related items
relating to the Real Estate (collectively, the "PLANS");
(J) any and all monies now or subsequently on deposit for the
payment of real estate taxes or special assessments against the Real
Estate or for the payment of premiums on insurance policies covering
the foregoing property or otherwise on deposit with or held by
Beneficiary as provided in this Deed of Trust;
(K) all accounts and revenues arising from the operation of
the Improvements; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now
owned or held or subsequently acquired by Grantor and described in the foregoing
clauses (A) through (E) are collectively referred to as the "PREMISES", and
those described in the foregoing clauses (A) through (L) are collectively
referred to as the "TRUST PROPERTY").
TO HAVE AND TO HOLD the Trust Property and the rights and
privileges hereby granted unto Trustee, its successors and assigns for the uses
and purposes set forth, until the Indebtedness is fully paid and the Obligations
fully performed or as otherwise expressly provided in the Section of this Deed
of Trust entitled "Release of Deed of Trust".
6
<PAGE> 8
Terms and Conditions
Grantor further represents, warrants, covenants and agrees
with Trustee and Beneficiary as follows:
1. Warranty of Title. Grantor warrants that Grantor has good
title to the Real Estate in fee simple and good title to the rest of the Trust
Property, subject only to the matters that are set forth in Schedule B of the
title insurance policy or policies being issued to Beneficiary to insure the
lien of this Deed of Trust and Liens expressly permitted under the Senior
Secured Credit Agreement (collectively, the "PERMITTED EXCEPTIONS") and Grantor
shall warrant, defend and preserve such title and the rights granted by this
Deed of Trust with respect thereto against all claims of all persons and
entities. Grantor further warrants that it has the right to grant this Deed of
Trust.
2. Payment of Indebtedness. Grantor shall pay the Indebtedness
at the times and places and in the manner specified in the Senior Secured Credit
Agreement and shall perform all the Obligations.
3. Requirements. (a) Grantor shall promptly comply with, or
cause to be complied with, and conform to all present and future laws, statutes,
codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements, and irrespective of the nature of the work to be done, of each of
the United States of America, any State and any municipality, local government
or other political subdivision thereof and any agency, department, bureau,
board, commission or other instrumentality of any of them, now existing or
subsequently created (collectively, "GOVERNMENTAL AUTHORITY") which has
jurisdiction over the Trust Property and all covenants, restrictions and
conditions now or later of record which may be applicable to any of the Trust
Property, or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration, repair or reconstruction of any of the Trust Property,
except to the extent that failure to comply therewith, in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. All present and
future laws, statutes, codes, ordinances, orders, judgments, decrees, rules,
regulations and requirements of every Governmental Authority applicable to
Grantor or to any of the Trust Property and all covenants, restrictions, and
conditions which now or later may be applicable to any of the Trust Property are
collectively referred to as the "LEGAL REQUIREMENTS".
(b) From and after the date of this Deed of Trust, except as
expressly permitted under the Senior Secured Credit Agreement or herein, Grantor
shall not by
7
<PAGE> 9
act or omission permit, other than Permitted Exceptions, any building or other
improvement on any premises not subject to this Deed of Trust to rely on the
Premises or any part thereof or any interest therein to fulfill any Legal
Requirement, and Grantor hereby assigns to Beneficiary any and all rights to
give consent for all or any portion of the Premises or any interest therein to
be so used. Grantor shall not by act or omission impair the integrity of any of
the Real Estate as a single zoning lot separate and apart from all other
premises. Grantor represents that each parcel of the Real Estate constitutes a
legally subdivided lot, in compliance with all subdivision laws and similar
Legal Requirements, except to the extent that failure to comply therewith, in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. Any act or omission by Grantor which would result in a violation of any
of the provisions of this subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Except as
expressly permitted under the Senior Secured Credit Agreement, Grantor, prior to
delinquency, shall pay and discharge all taxes of every kind and nature
(including, without limitation, all real and personal property, income,
franchise, withholding, transfer, gains, profits and gross receipts taxes), all
charges for any easement or agreement maintained for the benefit of any of the
Trust Property, all general and special assessments, levies, permits, inspection
and license fees, all water and sewer rents and charges and all other public
charges even if unforeseen or extraordinary, imposed upon or assessed against or
which may become a lien on any of the Trust Property, or arising in respect of
the occupancy, use or possession thereof, together with any penalties or
interest on any of the foregoing (all of the foregoing are collectively referred
to as the "IMPOSITIONS"). Grantor shall within 30 days after the request of
Beneficiary deliver to Beneficiary (i) original or copies of receipted bills and
cancelled checks or other evidence of payment of such Imposition if it is a real
estate tax or other public charge and (ii) evidence acceptable to Beneficiary in
its reasonable discretion showing the payment of any other such Imposition. If
by law any Imposition, at Grantor's option, may be paid in installments (whether
or not interest shall accrue on the unpaid balance of such Imposition), Grantor
may elect to pay such Imposition in such installments and shall be responsible
for the payment of such installments with interest, if any.
(b) Nothing herein shall affect any right or remedy of Trustee
or Beneficiary under this Deed of Trust or otherwise, without notice or demand
to Grantor, to pay any Imposition after the date such Imposition shall have
become delinquent, and to add to the Indebtedness the amount so paid, together
with interest from the time of payment at the rate of interest described in
paragraph 4.1(c) of the Senior Secured Credit Agreement (the "DEFAULT RATE").
Any sums paid by Trustee or Beneficiary in discharge of any Impositions shall be
(i) a charge on the Premises
8
<PAGE> 10
secured hereby prior to any right or title to, interest in, or claim upon the
Premises subordinate to the lien of this Deed of Trust, and (ii) payable on
demand by Grantor to Trustee or Beneficiary, as the case may be, together with
interest at the Default Rate as set forth above.
(c) Grantor shall not claim, demand or be entitled to receive
any credit or credits toward the satisfaction of this Deed of Trust or on any
interest payable thereon for any taxes assessed against the Trust Property or
any part thereof, and shall not claim any deduction from the taxable value of
the Trust Property by reason of this Deed of Trust.
(d) Grantor shall have the right pursuant to subsection 7.3 of
the Senior Secured Credit Agreement to contest in good faith to the amount or
validity of any Imposition by appropriate proceedings diligently conducted with
reserves in conformity with GAAP, provided that Grantor shall demonstrate to
Beneficiary's reasonable satisfaction that such proceedings shall operate
conclusively to prevent the sale of the Trust Property, or any part thereof, to
satisfy such Imposition prior to final determination of such proceedings.
(e) Upon written notice to Grantor, Beneficiary during the
continuance of an Event of Default (as defined below) shall be entitled to
require Grantor to pay monthly in advance to Beneficiary the equivalent of
1/12th of the estimated annual Impositions. Beneficiary may commingle such funds
with its own funds but Grantor shall be entitled to interest thereon at a rate
mutually agreed upon by Grantor and Beneficiary.
5. Insurance. (a) Grantor shall maintain or cause to be
maintained on all of the Premises:
(i) property insurance against loss or damage by fire,
lightning, windstorm, tornado, water damage, flood, earthquake and by
such other further risks and hazards as now are or subsequently may be
covered by an "all risk" policy or a fire policy covering "special"
causes of loss (provided, however, that the maintenance of insurance
against earthquake, windstorm, flood and freeze risks shall be subject
to availability of such insurance coverage on commercially reasonable
terms). The policy shall include building ordinance law endorsements
and the policy limits shall be automatically reinstated after each loss
(other than with respect to flood and earthquake coverage which shall
be reinstated on a commercially reasonable basis);
9
<PAGE> 11
(ii) commercial general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language or similar language of such endorsement), covering all claims
for personal injury, bodily injury or death, or property damage,
subject to standard policy terms, conditions and exclusions, occurring
on, in or about the Premises in an amount not less than $10,000,000
combined single limit with respect to personal injury, bodily injury or
death, or property damage, relating to any one occurrence plus such
excess limits as Beneficiary shall reasonably request from time to
time;
(iii) when and to the extent reasonably required by
Beneficiary, insurance against loss or damage by any other risk
commonly insured against by persons occupying or using like properties
in the locality or localities in which the Real Estate is situated;
(iv) during the course of any construction or repair of
Improvements, commercial general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language or similar language of such endorsement), (including coverage
for elevators and escalators, if any). The policy shall include
coverage for independent contractors and completed operations. The
completed operations coverage shall stay in effect for two years after
construction of any Improvements has been completed. The policy shall
provide coverage on an occurrence basis against claims for personal
injury, including, without limitation, bodily injury and death, and
property damage resulting from Grantor's negligence or other behavior
for which Grantor may be adjudged tortiously liable, subject to
standard policy terms, conditions and exclusions, occurring on, in or
about the Premises and the adjoining streets, sidewalks and
passageways, such insurance to afford immediate minimum protection to a
limit of not less than that reasonably required by Beneficiary with
respect to personal injury, bodily injury or death to any one or more
persons or damage to property;
(v) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Grantor engaged on or with
respect to the Premises in such amounts no less than the limits
established by law or in the case of employer's liability insurance, no
less than $500,000, provided that Grantor may self-insure any or all
workers' compensation liabilities;
(vi) during the course of any construction, addition,
alteration or repair of the Improvements, builder's risk completed
value property insurance form
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against "all risks of physical loss" (subject to standard policy
exclusions), including collapse, water damage, flood and earthquake and
transit coverage, during construction or repairs of the Improvements,
with deductible approved by Beneficiary in its reasonable discretion,
in reporting form, covering the total replacement value of work
performed and equipment, supplies and materials furnished (with an
appropriate limit for soft costs in the case of construction);
provided, however, that the maintenance of insurance against earthquake
and flood risks shall be subject to availability of such insurance
coverage on commercially reasonable terms;
(vii) boiler and machinery property insurance covering
pressure vessels, air tanks, boilers, machinery, pressure piping,
heating, air conditioning and elevator equipment and escalator
equipment, provided the Improvements contain equipment of such nature,
in such amounts as are reasonably satisfactory to Beneficiary but not
less than the lesser of $1,000,000 or 10% of the value of the
Improvements;
(viii) if any portion of the Premises are located in an area
identified in the Federal Register as having special flood hazards by
the Secretary of Housing and Urban Development or other applicable
agency, flood insurance covering any parcel of the Trust Property which
contains improvements in an amount satisfactory to Beneficiary in its
reasonable discretion, but in no event less than the maximum limit of
coverage available with respect to the particular type of property
under the National Flood Insurance Act of 1968, as amended and with a
term ending not later than the maturity of the Indebtedness and
Beneficiary shall receive confirmation that Grantor has received the
notice required pursuant to Section 208.8(e)(3) of Regulation H of the
Board of Governors of The Federal Reserve System; and
(ix) such other insurance in such amounts as Beneficiary may
reasonably request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or, in the case of
property and boiler and machinery insurance, materially amended without 30-days'
prior written notice to Beneficiary, (ii) with respect to all property
insurance, subject to availability on commercially reasonable terms, provide for
deductibles not to exceed $250,000, other than with respect to (a) flood,
freeze, windstorm and earthquake perils for which deductibles shall not exceed
the greater of $500,000 or 5% of values at risk per
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<PAGE> 13
location involved in loss and (b) boiler and machinery coverage for which
deductibles shall not exceed the greater of $500,000 or five times 100% of the
daily time element value, contain a "Replacement Cost Endorsement" without any
deduction made for depreciation and with no co-insurance penalty (or attaching
an agreed amount endorsement satisfactory to Beneficiary in its reasonable
discretion), with loss payable solely to Beneficiary (modified, if necessary and
to the extent available under such policy, to provide that proceeds in the
amount of replacement cost may be retained by Beneficiary without the obligation
to rebuild) as its interest may appear, without contribution, under a "standard"
or "New York" mortgagee clause acceptable to Beneficiary in its reasonable
discretion and be written by insurance companies having an A.M. Best Company,
Inc. rating of A- or higher and a financial size category of not less than VII,
or otherwise as approved by Beneficiary in its reasonable discretion and (iii)
contain a "manuscript" endorsement providing that Grantor may not unilaterally
cancel such policy without Beneficiary's prior written consent. Liability
insurance policies shall name Beneficiary as an additional insured and contain a
waiver of subrogation against Beneficiary; all such policies shall indemnify and
hold Beneficiary harmless from all liability claims occurring on, in or about
the Premises and the adjoining streets, sidewalks and passageways, subject to
standard policy terms, conditions and exclusions. The amounts of each insurance
policy and the form of each such policy shall at all times be satisfactory to
Beneficiary in its reasonable discretion. Each policy shall expressly provide
that any proceeds which are payable to Beneficiary shall be paid by check
payable to the order of Beneficiary only and requiring the endorsement of
Beneficiary only. If any required insurance shall expire, be withdrawn, become
void by breach of any condition thereof by Grantor or by any lessee of any part
of the Trust Property or become void or unsafe by reason of the failure or
impairment of the capital of any insurer, Grantor shall immediately obtain new
or additional insurance satisfactory to Beneficiary in its reasonable
discretion. Grantor shall not take out any separate or additional insurance
which is contributing in the event of loss unless it is properly endorsed and
otherwise satisfactory to Beneficiary in all respects in its reasonable
discretion.
(b) Grantor shall deliver to Beneficiary an original of each
insurance policy required to be maintained, or a certificate of such insurance
acceptable to Beneficiary in its reasonable discretion, together with a copy of
the declaration page for each such policy. Grantor shall (i) pay as they become
due all premiums for such insurance, (ii) not later than seven days prior to the
expiration of each policy to be furnished pursuant to the provisions of this
Section, deliver a renewed policy or policies, or certificates of insurance
acceptable to Beneficiary, in its reasonable discretion, or duplicate original
or originals thereof. Upon the reasonable request of Beneficiary, Grantor shall
cause its insurance underwriter or broker to certify to
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<PAGE> 14
Beneficiary in writing that all the requirements of this Deed of Trust governing
insurance have been satisfied.
(c) If Grantor is in default of its obligations to insure or
deliver any such policy or policies, or certificates of insurance acceptable to
Beneficiary, in its reasonable discretion, then Beneficiary, at its option and
without notice, may effect such insurance from year to year, and pay the premium
or premiums therefor, and Grantor shall pay to Beneficiary on demand such
premium or premiums so paid by Beneficiary with interest from the time of
payment at the Default Rate and the same shall be deemed to be secured by this
Deed of Trust and shall be collectible in the same manner as the Indebtedness
secured by this Deed of Trust.
(d) Grantor shall increase the amount of property insurance
required to equal 100% replacement cost pursuant to the provisions of this
Section at the time of each renewal of each policy (but not later than 12 months
from the date of this Deed of Trust and each successive 12 month period to occur
thereafter) by using the Morgan & Swift Building Cost Index to determine whether
there shall have been an increase in the replacement value since the most recent
adjustment and, if there shall have been such an increase, the amount of
insurance required shall be adjusted accordingly.
(e) Grantor promptly shall in all material respects comply
with and conform to (i) all provisions of each such insurance policy, and (ii)
all requirements of the insurers applicable to Grantor or to any of the Trust
Property or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of any of the Trust Property. Grantor shall
not use or permit the use of the Trust Property in any manner which would permit
any insurer to cancel any insurance policy or void coverage required to be
maintained by this Deed of Trust.
(f) (i) If the Trust Property, or any part thereof, shall be
destroyed or damaged by fire or any other casualty, whether insured or
uninsured, or in the event any claim is made against Grantor for any personal
injury, bodily injury or property damage incurred on or about the Premises,
Grantor shall promptly give notice thereof to Beneficiary.
(ii) If the Trust Property is damaged by fire or other
casualty and the cost to repair such damage is less than $1,000,000,
then provided that no Event of Default shall have occurred and be
continuing, Grantor shall have the right to adjust such loss, and the
insurance proceeds relating to such loss may be paid over to Grantor;
provided that Grantor shall, promptly after any such damage, repair
such damage to the extent required by subsection 7.5 of the Senior
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<PAGE> 15
Secured Credit Agreement regardless of whether any insurance proceeds
have been received or whether such proceeds, if received, are
sufficient to pay for the costs of repair.
(iii) If the Trust Property is damaged by fire or other
casualty, and the cost to repair such damage exceeds the limit in
Section 5(f)(ii) above, or if an Event of Default shall have occurred
and be continuing, then Grantor authorizes and empowers Beneficiary, at
Beneficiary's option and in Beneficiary's reasonable discretion, as
attorney-in-fact for Grantor, to make proof of loss, to adjust and
compromise any claim under any insurance policy, to appear in and
prosecute any action arising from any policy, to collect and receive
insurance proceeds and to deduct therefrom Beneficiary's reasonable
expenses incurred in the collection process. Each insurance company
concerned is hereby authorized and directed to make payment for such
loss directly to Beneficiary. Beneficiary shall have the right to
require Grantor to repair or restore the Trust Property to the extent
required by subsection 7.5 of the Senior Secured Credit Agreement, and
Grantor hereby designates Beneficiary as its attorney-in-fact for the
purpose of making any election required or permitted under any
insurance policy relating to such repair or restoration. The insurance
proceeds or any part thereof received by Beneficiary may be applied by
Beneficiary toward reimbursement of all reasonable costs and expenses
of Beneficiary in collecting such proceeds, and the balance, at
Beneficiary's option in its sole and absolute discretion, to the
principal (to the installments in inverse order of maturity, if payable
in installments) and interest due or to become due under the Notes, the
Senior Secured Credit Agreement or the other Loan Documents, to fulfill
any other Obligation of Grantor, to the restoration or repair of the
property damaged, or released to Grantor. Application by Beneficiary of
any insurance proceeds toward the last maturing installments of
principal and interest due or to become due on the Loans shall not
excuse Grantor from making any regularly scheduled payments due
thereunder, nor shall such application extend or reduce the amount of
such payments. In the event Beneficiary elects to release such proceeds
to Grantor, Grantor shall be obligated to use such proceeds to restore
or repair the Trust Property to the extent required by subsection 7.5
of the Senior Secured Credit Agreement.
(g) In the event of foreclosure of this Deed of Trust or other
transfer of title to the Trust Property in extinguishment of the Indebtedness,
all right, title and interest of Grantor in and to any insurance policies then
in force, to the extent assignable or transferable, shall pass to the purchaser
or grantee and Grantor hereby
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<PAGE> 16
appoints Beneficiary its attorney-in-fact, in Grantor's name, to assign and
transfer all such policies and proceeds to such purchaser or grantee.
(h) Upon written notice to Grantor, Beneficiary, during the
continuance of an Event of Default, shall be entitled to require Grantor to pay
monthly in advance to Beneficiary the equivalent of 1/12th of the estimated
annual premiums due on such insurance. Beneficiary may commingle such funds with
its own funds but Grantor shall be entitled to interest thereon at a rate
mutually agreed upon by Grantor and Beneficiary.
(i) Grantor may maintain insurance required under this Deed of
Trust by means of one or more blanket insurance policies maintained by Grantor;
provided, however, that (A) any such policy shall specify, or Grantor shall
furnish to Beneficiary a written statement from the insurer so specifying, the
maximum amount of the total insurance afforded by such blanket policy that is
allocated to the Premises and the other Trust Property and any sublimits and
aggregates in such blanket policy applicable to the Premises and the other Trust
Property, (B) each such blanket policy shall include an endorsement providing
that, in the event of a loss resulting from an insured peril, insurance proceeds
shall be allocated to the Trust Property in an amount equal to the coverages
required to be maintained by Grantor as provided above (subject to applicable
sublimits and aggregates) and (C) the protection afforded under any such blanket
policy shall be no less than that which would have been afforded under a
separate policy or policies relating only to the Trust Property (subject to
applicable sublimits and aggregates).
6. Restrictions on Liens and Encumbrances. Except for the lien
of this Deed of Trust and the Permitted Exceptions and except as otherwise
permitted pursuant to the terms of the Senior Secured Credit Agreement, Grantor
shall not further mortgage, nor otherwise encumber the Trust Property nor create
or suffer to exist any lien, charge or encumbrance on the Trust Property, or any
part thereof, whether superior or subordinate to the lien of this Deed of Trust
and whether recourse or non-recourse. Beneficiary has not consented and will not
consent to any contract or to any work or to the furnishing of any materials
which might be deemed to create a lien or liens superior to the lien of this
instrument, either under Section 66-11-108 of the Tennessee Code Annotated, or
otherwise.
7. Due on Sale and Other Transfer Restrictions. Except as may
be otherwise expressly permitted under the Senior Secured Credit Agreement,
Grantor shall not sell, transfer, convey or assign all or any portion of, or any
interest in, the Trust Property.
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8. Maintenance; No Alteration; Inspection; Utilities. (a)
Grantor shall maintain or cause to be maintained all the Improvements in good
condition and repair and shall not commit or suffer any waste of the
Improvements. To the extent required under subsection 7.5 of the Senior Secured
Credit Agreement, Grantor shall repair, restore, replace or rebuild promptly any
part of the Premises which may be damaged or destroyed by any casualty
whatsoever to a condition substantially equivalent to its condition prior to the
damage or destruction. Except as permitted by the Senior Secured Credit
Agreement, the Improvements shall not be demolished or materially altered, nor
any material additions built, without the prior written consent of Beneficiary,
provided that Grantor may make alterations or additions without the consent of
Beneficiary that do not materially reduce the value of the Trust Property.
(b) Beneficiary and any persons authorized by Beneficiary
shall, upon reasonable notice and at any reasonable time, have the right to
enter and inspect the Premises and the right to inspect all work done, labor
performed and materials furnished in and about the Improvements and the right to
inspect and make copies, to the extent reasonable, of all books, contracts and
records of Grantor relating to the Trust Property.
(c) Except as permitted under subsection 7.3 of the Senior
Secured Credit Agreement, Grantor shall pay or cause to be paid prior to
delinquency, all utility charges which are incurred for gas, electricity, water
or sewer services furnished to the Premises and all other assessments or charges
of a similar nature, whether public or private, affecting the Premises or any
portion thereof, whether or not such assessments or charges are liens thereon.
9. Condemnation/Eminent Domain. Promptly upon obtaining
knowledge of the institution of any proceedings for the condemnation of the
Trust Property, or any portion thereof, Grantor will notify Beneficiary of the
pendency of such proceedings. Grantor authorizes Beneficiary, at Beneficiary's
option and in Beneficiary's reasonable discretion, as attorney-in-fact for
Grantor, to commence, appear in and prosecute, in Beneficiary's or Grantor's
name, any action or proceeding relating to any condemnation of the Trust
Property, or any portion thereof, and to settle or compromise any claim in
connection with such condemnation upon the occurrence and during the continuance
of an Event of Default. If Beneficiary elects not to participate in such
condemnation proceeding, then Grantor shall, at its expense, diligently
prosecute any such proceeding and shall consult with Beneficiary, its attorneys
and experts and cooperate with them in any defense of any such proceedings. All
awards and proceeds of condemnation shall be applied in the same manner as
insurance proceeds, and to the extent such awards and proceeds exceed $1,000,000
and
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no Event of Default shall have occurred and be continuing, such awards and
proceeds shall be assigned to Beneficiary to be applied in the same manner as
insurance proceeds, as provided above in subsection 5(f)(iii) above, and Grantor
agrees to execute any such assignments of all such awards as Beneficiary may
request.
10. Restoration. If Beneficiary elects or is required
hereunder to release funds to Grantor for restoration of any of the Trust
Property, then such restoration shall be performed in accordance with such
conditions as Beneficiary shall impose in its reasonable discretion, and as are
customarily imposed by construction lenders.
11. Leases. (a) Grantor shall not (i) execute an assignment or
pledge of any Lease relating to all or any portion of the Trust Property other
than in favor of Beneficiary, or (ii) without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed,
execute or permit to exist any Lease of any of the Trust Property, except for
Permitted Exceptions and except as may be otherwise expressly permitted under
the Senior Secured Credit Agreement.
(b) As to any Lease consented to by Beneficiary under
subsection 11(a) above, Grantor shall:
(i) promptly perform in all material respects all of the
provisions of the Lease on the part of the lessor thereunder to be
performed;
(ii) promptly enforce all of the material provisions of the
Lease on the part of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising
under or in any manner connected with the Lease or the obligations of
Grantor as lessor or of the lessee thereunder;
(iv) exercise, within 5 business days after a reasonable
request by Beneficiary, any right to request from the lessee a
certificate with respect to the status thereof;
(v) promptly deliver to Beneficiary copies of any notices of
default which Grantor may at any time forward to or receive from the
lessee;
(vi) promptly deliver to Beneficiary a fully executed
counterpart of the Lease; and
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(vii) promptly deliver to Beneficiary, upon Beneficiary's
reasonable request, if permitted under such Lease, an assignment of the
Grantor's interest under such Lease.
(c) Grantor shall deliver to Beneficiary, within 10 business
days after a reasonable request by Beneficiary, a written statement, certified
by Grantor as being true, correct and complete, containing the names of all
lessees and other occupants of the Trust Property, the terms of all Leases and
the spaces occupied and rentals payable thereunder, and a list of all Leases
which are then in default, including the nature and magnitude of the default;
such statement shall be accompanied by such other information as Beneficiary may
reasonably request.
(d) All Leases entered into by Grantor after the date hereof,
if any, and all rights of any lessees thereunder shall be subject and
subordinate in all respects to the lien and provisions of this Deed of Trust
unless Beneficiary shall otherwise elect in writing.
(e) In the event of the enforcement by Beneficiary of any
remedy under this Deed of Trust, the lessee under each Lease shall, if requested
by Beneficiary or any other person succeeding to the interest of Beneficiary as
a result of such enforcement, and if provided, at such lessee's request, with a
nondisturbance agreement from Beneficiary or such person, attorn to Beneficiary
or to such person and shall recognize Beneficiary or such successor in interest
as lessor under the Lease without change in the provisions thereof; provided
however, that Beneficiary or such successor in interest shall not be: (i) bound
by any payment of an installment of rent or additional rent which may have been
made more than 30 days before the due date of such installment; (ii) bound by
any amendment or modification to the Lease made without the consent of
Beneficiary or such successor in interest; (iii) liable for any previous act or
omission of Grantor (or its predecessors in interest); (iv) responsible for any
monies owing by Grantor to the credit of such lessee or subject to any credits,
offsets, claims, counterclaims, demands or defenses which the lessee may have
against Grantor (or its predecessors in interest); (v) bound by any covenant to
undertake or complete any construction of the Premises or any portion thereof;
or (vi) obligated to make any payment to such lessee other than any security
deposit actually delivered to Beneficiary or such successor in interest. Each
lessee or other occupant, upon request by Beneficiary or such successor in
interest, shall execute and deliver an instrument or instruments confirming such
attornment. In addition, Grantor agrees that each Lease entered into after the
date of this Deed of Trust shall include language to the effect of subsections
(d)-(e) of this Section and language to the effect that if any act or omission
of Grantor would give any lessee under such Lease the right, immediately or
after lapse
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of a period of time, to cancel or terminate such Lease, or to abate or offset
against the payment of rent or to claim a partial or total eviction, such lessee
shall not exercise such right until it has given written notice of such act or
omission to Beneficiary and until a reasonable period for remedying such act or
omission shall have elapsed following the giving of such notice without a remedy
being effected; provided that the provisions of such subsections shall be
self-operative and any failure of any Lease to include such language shall not
impair the binding effect of such provisions on any lessee under such Lease.
12. Further Assurances/Estoppel Certificates. To further
assure Beneficiary's and Trustee's rights under this Deed of Trust, Grantor
agrees upon demand of Beneficiary or Trustee to do any act or execute any
additional documents (including, but not limited to, security agreements on any
personalty included or to be included in the Trust Property and a separate
assignment of each Lease in recordable form) as may be reasonably required by
Beneficiary or Trustee to confirm the rights or benefits conferred on
Beneficiary or Trustee by this Deed of Trust.
13. Beneficiary's Right to Perform. If Grantor fails to
perform any of the covenants or agreements of Grantor, Beneficiary or Trustee,
without waiving or releasing Grantor from any obligation or default under this
Deed of Trust, may, at any time (but shall be under no obligation to) pay or
perform the same, and the amount or cost thereof, with interest at the Default
Rate, shall immediately be due from Grantor to Beneficiary or Trustee (as the
case may be) and the same shall be secured by this Deed of Trust and shall be an
encumbrance on the Trust Property prior to any right, title to, interest in or
claim upon the Trust Property attaching subsequent to the date of this Deed of
Trust. No payment or advance of money by Beneficiary or Trustee under this
Section shall be deemed or construed to cure Grantor's default or waive any
right or remedy of Beneficiary or Trustee.
14. Events of Default. The occurrence of an Event of Default
under the Senior Secured Credit Agreement shall constitute an Event of Default
hereunder.
15. Remedies. (a) Upon the occurrence of any Event of Default,
in addition to any other rights and remedies Beneficiary may have pursuant to
the Loan Documents, or as provided by law, and without limitation, the
Indebtedness and all other amounts payable with respect to the Loans, the
Letters of Credit, the Senior Secured Credit Agreement, this Deed of Trust and
the other Security Documents shall become due and payable as provided in the
Senior Secured Credit Agreement. Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived. In addition, upon the occurrence of
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<PAGE> 21
any Event of Default, Beneficiary may immediately take such action, without
notice or demand, as it deems advisable to protect and enforce its rights
against Grantor and in and to the Trust Property, including, but not limited to,
the following actions, each of which may be pursued concurrently or otherwise,
at such time and in such manner as Beneficiary may determine, in its sole
discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary:
(i) Beneficiary may elect to cause the Trust Property or any
part thereof to be sold as follows: The Trustee, his successor or
substitute, is authorized and empowered and it shall be his special
duty at the request of Beneficiary to enter and take possession of the
Trust Property, and before or after such entry to advertise the sale of
the Trust Property for 20 days by 3 weekly notices in some newspaper
published in the county where such sale is to be made and to sell the
Trust Property or any part thereof situated in the State of Tennessee
at the courthouse door of any county in the State of Tennessee in which
any part of the Trust Property is situated, at public vendue to the
highest bidder for cash between the hours of 10 o'clock A.M. and 4
o'clock P.M. of the day fixed in the notice. Said sale shall be free
from equity of redemption, statutory right of redemption, homestead,
dower, and all other rights and exemptions of every kind, all of which
are hereby waived, and the Trustee shall execute a conveyance to the
Purchaser and deliver possession to the Purchaser, which Grantor binds
itself shall be given without obstruction, hindrance or delay. Any sale
made by the Trustee hereunder may be as an entirety or in such parcels
or parts as Beneficiary may request, and any sale may be adjourned by
announcement at the time and place appointed for such sale without
further notice except as may be required by law. The sale by the
Trustee of less than the whole of the Trust Property shall not exhaust
the power of sale herein granted, and the Trustee is specifically
empowered to make successive sale or sales under such power until the
whole of the Trust Property shall be sold; and, if the proceeds of such
sale of less then the whole of the Trust Property shall be less than
the aggregate of the Indebtedness secured hereby and the expense of
executing this trust as provided herein, this Deed of Trust and the
lien hereof shall remain in full force and effect as to the unsold
portion of the Trust Property just as though no sale had been made;
provided, however, that Grantor shall never have any right to require
the sale of less than the whole of the Mortgaged Property but
Beneficiary shall have the right, at its sole election, to request the
Trustee to sell less than the whole of the Trust Property. After each
sale, the Trustee shall make to the purchaser or purchasers at such
sale good and sufficient conveyances, conveying the property so sold to
the purchaser or purchasers with general warranty of title as then
possessed by the Trustee, and
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<PAGE> 22
after each sale the Trustee shall receive the proceeds of said sale or
sales and apply the same as herein provided. The power of sale granted
herein shall not be exhausted by any sale held hereunder by the Trustee
or his substitute or successor, and such power of sale may be exercised
from time to time and as many times as the Beneficiary may deem
necessary until all the Trust Property has been duly sold and all
secured indebtedness has been fully paid. In the event any sale
hereunder is not completed or is defective in the opinion of the
Beneficiary, such sale shall not exhaust the power of sale hereunder
and the Beneficiary shall have the right to cause a subsequent sale or
sales to be made hereunder. Any and all statements of fact or other
recitals made in any deed or deeds given by the Trustee or any
successor or substitute appointed hereunder as to nonpayment of the
Indebtedness or as to the occurrence of any default, or as to
Beneficiary having declared all such indebtedness to be due and
payable, or as to the request to sell, or as to notice of time, place
and terms of sale and the properties to be sold having been duly given,
or as to the refusal, failure or inability to act of the Trustee or any
substitute or successor, or as to the appointment of any substitute or
successor, shall be taken as prima facie evidence of the truth of the
facts so stated and recited. The Trustee, his successor or substitute,
may appoint or delegate any one or more persons as agent to perform any
act or acts necessary or incident to any sale held by the Trustee,
including the posting of notices and the conduct of sale, but in the
name and on behalf of the Trustee, his successor or substitute. In the
event a foreclosure hereunder shall be commenced by the Trustee, or his
substitute or successor, Beneficiary may at any time before the sale of
the Trust Property direct the said Trustee to abandon the sale, and may
then institute suit for the collection of the Notes or any other
evidence of the Indebtedness and the other Indebtedness and Obligations
secured hereby, and for the foreclosure of the lien of this Deed of
Trust. It is agreed that if Beneficiary should institute a suit for the
collection of the Notes or any other evidence of the Indebtedness
and/or any other secured Indebtedness and for the foreclosure of the
lien of this Deed of Trust, Beneficiary may at any time before the
entry of a final judgment in said suit dismiss the same, and require
the Trustee, his substitute or successor to sell the property in
accordance with the provisions of this Deed of Trust.
(ii) Beneficiary may, to the extent permitted by applicable
law, (A) institute and maintain an action of judicial foreclosure
against all or any part of the Trust Property, (B) institute and
maintain an action on the Notes, the Senior Secured Credit Agreement or
the other Security Documents, or (C) take such other action at law or
in equity for the enforcement of this Deed of Trust or any of the Loan
Documents as the law may allow. Beneficiary may proceed in any
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<PAGE> 23
such action to final judgment and execution thereon for all sums due
hereunder, together with interest thereon at the Default Rate and all
costs of suit, including, without limitation, reasonable attorneys'
fees and disbursements. Interest at the Default Rate shall be due on
any judgment obtained by Beneficiary from the date of judgment until
actual payment is made of the full amount of the judgment.
(iii) Beneficiary may personally, or by its agents, attorneys
and employees and without regard to the adequacy or inadequacy of the
Trust Property or any other collateral as security for the Indebtedness
and Obligations enter into and upon the Trust Property and each and
every part thereof and exclude Grantor and its agents and employees
therefrom without liability for trespass, damage or otherwise (Grantor
hereby agreeing to surrender possession of the Trust Property to
Beneficiary upon demand at any such time) and use, operate, manage,
maintain and control the Trust Property and every part thereof.
Following such entry and taking of possession, Beneficiary shall be
entitled, without limitation, (x) to lease all or any part or parts of
the Trust Property for such periods of time and upon such conditions as
Beneficiary may, in its discretion, deem proper, (y) to enforce, cancel
or modify any Lease and (z) generally to execute, do and perform any
other act, deed, matter or thing concerning the Trust Property as
Beneficiary shall deem appropriate as fully as Grantor might do.
(b) Beneficiary, in any action to foreclose this Deed of Trust
in a judicial procedure or in connection with the exercise of any non-judicial
power of sale by Trustee, shall be entitled to the appointment of a receiver. In
case of a trustee's sale or foreclosure sale, the Real Estate may be sold, at
Beneficiary's election, in one parcel or in more than one parcel and Beneficiary
is specifically empowered (without being required to do so, and in its sole and
absolute discretion) to cause successive sales of portions of the Trust Property
to be held.
(c) In the event of any breach of any of the covenants,
agreements, terms or conditions contained in this Deed of Trust, and
notwithstanding to the contrary any exculpatory or non-recourse language which
may be contained herein, Beneficiary or Trustee shall be entitled to enjoin such
breach and obtain specific performance of any covenant, agreement, term or
condition and Beneficiary and Trustee shall have the right to invoke any
equitable right or remedy as though other remedies were not provided for in this
Deed of Trust.
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<PAGE> 24
16. Right of Beneficiary to Credit Sale. Upon the occurrence
of any sale made under this Deed of Trust, whether made under the power of sale
or by virtue of judicial proceedings or of a judgment or decree of foreclosure
and sale, Beneficiary may bid for and acquire the Trust Property or any part
thereof. In lieu of paying cash therefor, Beneficiary may make settlement for
the purchase price by crediting upon the Indebtedness or other sums secured by
this Deed of Trust the net sales price after deducting therefrom the expenses of
sale and the cost of the action and any other sums which Beneficiary is
authorized to deduct under this Deed of Trust. In such event, this Deed of
Trust, the Notes and other instruments evidencing the Indebtedness and any and
all documents evidencing expenditures secured hereby may be presented to the
person or persons conducting the sale in order that the amount so used or
applied may be credited upon the Indebtedness as having been paid.
17. Appointment of Receiver. If an Event of Default shall have
occurred and be continuing, Beneficiary as a matter of right and without notice
to Grantor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Trust Property or any other collateral as
security for the Indebtedness and Obligations or the interest of Grantor
therein, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers or other manager of the Trust Property, without
requiring the posting of a surety bond and without reference to the adequacy or
inadequacy of the value of the Trust Property or the solvency or insolvency of
Grantor or any other party obligated for payment of all or any part of the
Indebtedness, and whether or not waste has occurred with respect to the Trust
Property. Grantor hereby irrevocably consents to such appointment and waives
notice of any application therefor (except as may be required by law). Any such
receiver or receivers shall have all the usual powers and duties of receivers in
like or similar cases and all the powers and duties of Beneficiary in case of
entry as provided in this Deed of Trust, including, without limitation and to
the extent permitted by law, the right to enter into leases of all or any part
of the Trust Property, and shall continue as such and exercise all such powers
until the date of confirmation of sale of the Trust Property unless such
receivership is sooner terminated.
18. Extension, Release, etc. (a) Without affecting the
encumbrance or charge of this Deed of Trust upon any portion of the Trust
Property not then or theretofore released as security for the full amount of the
Indebtedness, Beneficiary may, from time to time and without notice, agree to
(i) release any person liable for the Indebtedness, (ii) extend the maturity or
alter any of the terms of the Indebtedness or any guaranty thereof, (iii) grant
other indulgences, (iv) release or reconvey, or cause to be released or
reconveyed at any time at Beneficiary's option any parcel, portion or all of the
Trust Property, (v) take or release any other or additional security for any
23
<PAGE> 25
obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Deed of Trust shall secure
less than all of the principal amount of the Indebtedness, it is expressly
agreed that any repayments of the principal amount of the Indebtedness shall not
reduce the amount of the encumbrance of this Deed of Trust until the encumbrance
amount shall equal the principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Beneficiary and no levy of
an execution under any judgment upon the Trust Property or upon any other
property of Grantor shall affect the encumbrance of this Deed of Trust or any
liens, rights, powers or remedies of Beneficiary or Trustee hereunder, and such
liens, rights, powers and remedies shall continue unimpaired.
(c) If Beneficiary shall have the right to foreclose this Deed
of Trust or to direct the Trustee to exercise its power of sale, Grantor
authorizes Beneficiary at its option to foreclose the lien of this Deed of Trust
(or direct the Trustee to sell the Trust Property, as the case may be) subject
to the rights of any tenants of the Trust Property. The failure to make any such
tenants parties defendant to any such foreclosure proceeding and to foreclose
their rights, or to provide notice to such tenants as required in any statutory
procedure governing a sale of the Trust Property by Trustee, or to terminate
such tenant's rights in such sale will not be asserted by Grantor as a defense
to any proceeding instituted by Beneficiary to collect the Indebtedness or to
foreclose this Deed of Trust.
(d) Unless expressly provided otherwise, in the event that
Beneficiary's interest in this Deed of Trust and title to the Trust Property or
any estate therein shall become vested in the same person or entity, this Deed
of Trust shall not merge in such title but shall continue as a valid charge on
the Trust Property for the amount secured hereby.
19. Trustee's Powers (and Liabilities). (a) Beneficiary may
substitute, for any reason whatsoever, a successor Trustee or successor Trustees
for the Trustee hereunder from time to time by an instrument in writing in any
manner now or hereafter provided by law. Such right of substitution may be
exercised at any time and more than once for so long as any part of the
Indebtedness and Obligations remains unpaid. Such writing, upon recordation,
shall be conclusive proof of proper substitution of each such successor Trustee
or Trustees, who shall thereupon and without conveyance from the predecessor
Trustee, succeed to all its title, estate, rights, powers and duties hereunder.
The making of oath and giving bond by Trustee or any successor Trustee is hereby
expressly waived by Grantor. The Trustee may sell and
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convey said property under the power set out herein, to any person, firm or
corporation, although said Trustee has been, may now be or may hereafter be
attorney for or agent of Beneficiary.
(b) At any time or from time to time, without liability
therefor, and without notice, upon the written request of Beneficiary and
presentation of the Notes, or other evidence of the Indebtedness, and this Deed
of Trust for endorsement, without affecting the liability of any person for the
payment of the indebtedness secured hereby, and without affecting the lien of
the Deed of Trust upon the Trust Property for the full amount of all amounts
secured hereby, upon Beneficiary's request Trustee may (i) release all or any
part of the Trust Property, (ii) consent to the making of any map or plat
thereof, (iii) join in granting any easement thereon or in creating any
covenants or conditions restricting use or occupancy thereof, or (iv) join in
any extension agreement or in any agreement subordinating the lien or charge
hereof.
20. Security Agreement under Uniform Commercial Code. (a) It
is the intention of the parties hereto that this Deed of Trust shall constitute
a Security Agreement within the meaning of the Uniform Commercial Code (the
"CODE") of the State in which the Trust Property is located. If an Event of
Default shall occur under this Deed of Trust, then in addition to having any
other right or remedy available at law or in equity, Beneficiary shall have the
option of either (i) proceeding under the Code and exercising such rights and
remedies as may be provided to a secured party by the Code with respect to all
or any portion of the Trust Property which is personal property (including,
without limitation, taking possession of and selling such property) or (ii)
treating such property as real property and proceeding with respect to both the
real and personal property constituting the Trust Property in accordance with
Beneficiary's rights, powers and remedies with respect to the real property (in
which event the default provisions of the Code shall not apply). If Beneficiary
shall elect to proceed under the Code, then ten days' notice of sale of the
personal property shall be deemed reasonable notice and the reasonable expenses
of retaking, holding, preparing for sale, selling and the like incurred by
Beneficiary shall include, but not be limited to, reasonable attorneys' fees and
legal expenses. At Beneficiary's request, during the continuance of an Event of
Default, Grantor shall assemble the personal property and make it available to
Beneficiary at a place designated by Beneficiary which is reasonably convenient
to both parties.
(b) Grantor and Beneficiary agree, to the extent permitted by
law, that: (i) all of the goods described within the definition of the word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Deed of
Trust upon recording or registration in the real estate records of the proper
office shall constitute a financing
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statement filed as a "fixture filing" within the meaning of Sections 9-313 and
9-402 of the Code; (iii) Grantor is the record owner of the Real Estate; and
(iv) the addresses of Grantor and Beneficiary are as set forth on the first page
of this Deed of Trust.
(c) Grantor, upon request by Beneficiary from time to time,
shall execute, acknowledge and deliver to Beneficiary one or more separate
security agreements, in form satisfactory to Beneficiary in its reasonable
discretion, covering all or any part of the Trust Property and will further
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, any financing statement, affidavit, continuation statement or
certificate or other document as Beneficiary may request in order to perfect,
preserve, maintain, continue or extend the security interest under and the
priority of this Deed of Trust and such security instrument. Grantor further
agrees to pay to Beneficiary on demand all reasonable costs and expenses
incurred by Beneficiary in connection with the preparation, execution,
recording, filing and refiling of any such document and all reasonable costs and
expenses of any record searches for financing statements Beneficiary shall
reasonably require. If Grantor shall fail to furnish any financing or
continuation statement within 10 days after request by Beneficiary, then
pursuant to the provisions of the Code, Grantor hereby authorizes Beneficiary,
without the signature of Grantor, to execute and file any such financing and
continuation statements. The filing of any financing or continuation statements
in the records relating to personal property or chattels shall not be construed
as in any way impairing the right of Beneficiary to proceed against any personal
property encumbered by this Deed of Trust as real property, as set forth above.
21. Assignment of Rents. Grantor hereby assigns to Trustee,
for the benefit of Beneficiary, the Rents as further security for the payment of
the Indebtedness and performance of the Obligations, and Grantor grants to
Trustee and Beneficiary the right to enter the Trust Property for the purpose of
collecting the same and to let the Trust Property or any part thereof and to
apply the Rents on account of the Indebtedness. The foregoing assignment and
grant is present and absolute and shall continue in effect until the
Indebtedness is paid in full, but Beneficiary and Trustee hereby waive the right
to enter the Trust Property for the purpose of collecting the Rents, letting the
Trust Property or any part thereof or applying the Rents and Grantor shall be
entitled to collect, receive, use and retain the Rents until the occurrence of
an Event of Default under this Deed of Trust; such right of Grantor to collect,
receive, use and retain the Rents may be revoked by Beneficiary upon the
occurrence of any Event of Default under this Deed of Trust by giving not less
than five days' written notice of such revocation to Grantor; in the event such
notice is given, Grantor shall pay over to Beneficiary, or to any receiver
appointed to collect the Rents, any lease security deposits, and shall pay
monthly in advance to Beneficiary, or to any such receiver, the
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fair and reasonable rental value as determined by Beneficiary for the use and
occupancy of the Trust Property or of such part thereof as may be in the
possession of Grantor or any affiliate of Grantor, and upon default in any such
payment Grantor and any such affiliate will vacate and surrender the possession
of the Trust Property to Beneficiary or to such receiver, and in default thereof
may be evicted by summary proceedings or otherwise. Grantor shall not accept
prepayments of installments of Rent to become due for a period of more than one
month in advance (except for security deposits and estimated payments of
percentage rent, if any).
22. Trust Funds. All lease security deposits of the Real
Estate shall be treated as trust funds not to be commingled with any other funds
of Grantor. Within 10 days after request by Beneficiary, Grantor shall furnish
Beneficiary satisfactory evidence of compliance with this subsection, together
with a statement of all lease security deposits by lessees and copies of all
Leases not previously delivered to Beneficiary under which such security
deposits are held, which statement shall be certified by Grantor.
23. Additional Rights. The holder of any subordinate lien or
subordinate deed of trust on the Trust Property shall have no right to terminate
any Lease whether or not such Lease is subordinate to this Deed of Trust nor
shall any holder of any subordinate lien or subordinate deed of trust join any
tenant under any Lease in any trustee's sale or action to foreclose the lien or
modify, interfere with, disturb or terminate the rights of any tenant under any
Lease. By recordation of this Deed of Trust all subordinate lienholders and the
trustees and beneficiaries under subordinate deeds of trust are subject to and
notified of this provision, and any action taken by any such lienholder or
trustee or beneficiary contrary to this provision shall be null and void. Upon
the occurrence of any Event of Default, Beneficiary may, in its sole discretion
and without regard to the adequacy of its security under this Deed of Trust,
apply all or any part of any amounts on deposit with Beneficiary under this Deed
of Trust against all or any part of the Indebtedness. Any such application shall
not be construed to cure or waive any Default or Event of Default or invalidate
any act taken by Beneficiary on account of such Default or Event of Default.
24. Changes in Method of Taxation. In the event of the passage
after the date hereof of any law of any Governmental Authority deducting from
the value of the Premises for the purposes of taxation any lien or deed of trust
thereon, or changing in any way the laws for the taxation of mortgages or deeds
of trust or debts secured thereby for federal, state or local purposes, or the
manner of collection of any such taxes, and imposing a tax, either directly or
indirectly, on mortgages or deeds of trust or debts secured thereby, the holder
of this Deed of Trust shall have the right to declare
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<PAGE> 29
the Indebtedness due on a date to be specified by not less than 30 days' written
notice to be given to Grantor unless within such 30-day period Grantor shall
assume as an Obligation hereunder the payment of any tax so imposed until full
payment of the Indebtedness and such assumption shall be permitted by law.
25. Notices. All notices, requests, demands and other
communications hereunder shall be deemed to have been sufficiently given or
served when served in the same manner as set forth for notices in the Senior
Secured Credit Agreement. The Trustee's address for notices shall be the
Trustee's address given on the first page of this Deed of Trust.
26. No Oral Modification. This Deed of Trust may not be
changed or terminated orally. Any agreement made by Grantor and Beneficiary
after the date of this Deed of Trust relating to this Deed of Trust shall be
superior to the rights of the holder of any intervening or subordinate deed of
trust, lien or encumbrance. Trustee's execution of any written agreement between
Grantor and Beneficiary shall not be required for the effectiveness thereof as
between Grantor and Beneficiary.
27. Partial Invalidity. In the event any one or more of the
provisions contained in this Deed of Trust shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included. Notwithstanding to the contrary anything contained in this Deed of
Trust or in any provisions of the Indebtedness or Loan Documents, the
obligations of Grantor and of any other obligor under the Indebtedness or Loan
Documents shall be subject to the limitation that Beneficiary shall not charge,
take or receive, nor shall Grantor or any other obligor be obligated to pay to
Beneficiary, any amounts constituting interest or loan charges in excess of the
maximum rate or amount permitted by law to be charged by Beneficiary.
28. Grantor's Waiver of Rights. To the fullest extent
permitted by law, Grantor waives the benefit of all laws now existing or that
may subsequently be enacted providing for (i) any appraisement before sale of
any portion of the Trust Property, (ii) any extension of the time for the
enforcement of the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Trust Property from attachment, levy or sale under execution or
exemption from civil process. To the full extent Grantor may do so, Grantor
agrees that Grantor will not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, exemption, extension or redemption, or requiring
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foreclosure of this Deed of Trust before exercising any other remedy granted
hereunder and Grantor, for Grantor and its successors and assigns, and for any
and all persons ever claiming any interest in the Trust Property, to the extent
permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the secured indebtedness and marshalling in the event
of exercise by Trustee or Beneficiary of the power of sale or other rights
hereby created.
29. Remedies Not Exclusive. Beneficiary and Trustee shall be
entitled to enforce payment of the Indebtedness and performance of the
Obligations and to exercise all rights and powers under this Deed of Trust or
under any of the other Loan Documents or other agreement or any laws now or
hereafter in force, notwithstanding some or all of the Indebtedness and
Obligations may now or hereafter be otherwise secured, whether by deed of trust,
mortgage, security agreement, pledge, lien, assignment or otherwise. Neither the
acceptance of this Deed of Trust nor its enforcement, shall prejudice or in any
manner affect Beneficiary's or Trustee's right to realize upon or enforce any
other security now or hereafter held by Beneficiary or Trustee, it being agreed
that Beneficiary and Trustee shall be entitled to enforce this Deed of Trust and
any other security now or hereafter held by Beneficiary or Trustee in such order
and manner as Beneficiary may determine in its absolute discretion. No remedy
herein conferred upon or reserved to Trustee or Beneficiary is intended to be
exclusive of any other remedy herein or by law provided or permitted, but each
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. Every
power or remedy given by any of the Loan Documents to Beneficiary or Trustee or
to which either may otherwise be entitled, may be exercised, concurrently or
independently, from time to time and as often as may be deemed expedient by
Beneficiary or Trustee, as the case may be. In no event shall Beneficiary or
Trustee, in the exercise of the remedies provided in this Deed of Trust
(including, without limitation, in connection with the assignment of Rents, or
the appointment of a receiver and the entry of such receiver on to all or any
part of the Trust Property), be deemed a "mortgagee in possession," and neither
Beneficiary nor Trustee shall in any way be made liable for any act, either of
commission or omission, in connection with the exercise of such remedies.
30. Multiple Security. If (a) the Premises shall consist of
one or more parcels, whether or not contiguous and whether or not located in the
same county, or (b) in addition to this Deed of Trust, Beneficiary shall now or
hereafter hold or be the beneficiary of one or more additional mortgages, liens,
deeds of trust or other security (directly or indirectly) for the Indebtedness
upon other property in the State in which the Premises are located (whether or
not such property is owned by Grantor or by
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others) or (c) both the circumstances described in clauses (a) and (b) shall be
true, then to the fullest extent permitted by law, Beneficiary may, at its
election, commence or consolidate in a single trustee's sale or foreclosure
action all trustee's sale or foreclosure proceedings against all such collateral
securing the Indebtedness (including the Trust Property), which action may be
brought or consolidated in the courts of, or sale conducted in, any county in
which any of such collateral is located. Grantor acknowledges that the right to
maintain a consolidated trustee's sale or foreclosure action is a specific
inducement to Beneficiary to extend the Indebtedness, and Grantor expressly and
irrevocably waives any objections to the commencement or consolidation of the
foreclosure proceedings in a single action and any objections to the laying of
venue or based on the grounds of forum non conveniens which it may now or
hereafter have. Grantor further agrees that if Trustee or Beneficiary shall be
prosecuting one or more foreclosure or other proceedings against a portion of
the Trust Property or against any collateral other than the Trust Property,
which collateral directly or indirectly secures the Indebtedness, or if
Beneficiary shall have obtained a judgment of foreclosure and sale or similar
judgment against such collateral (or, in the case of a trustee's sale, shall
have met the statutory requirements therefor with respect to such collateral),
then, whether or not such proceedings are being maintained or judgments were
obtained in or outside the State in which the Premises are located, Beneficiary
may commence or continue any trustee's sale or foreclosure proceedings and
exercise its other remedies granted in this Deed of Trust against all or any
part of the Trust Property and Grantor waives any objections to the commencement
or continuation of a foreclosure of this Deed of Trust or exercise of any other
remedies hereunder based on such other proceedings or judgments, and waives any
right to seek to dismiss, stay, remove, transfer or consolidate either any
action under this Deed of Trust or such other proceedings on such basis. The
commencement or continuation of proceedings to sell the Trust Property in a
trustee's sale, to foreclose this Deed of Trust or the exercise of any other
rights hereunder or the recovery of any judgment by Beneficiary or the
occurrence of any sale by the Trustee in any such proceedings shall not
prejudice, limit or preclude Beneficiary's right to commence or continue one or
more trustee's sales, foreclosure or other proceedings or obtain a judgment
against (or, in the case of a trustee's sale, to meet the statutory requirements
for, any such sale of) any other collateral (either in or outside the State in
which the Real Estate is located) which directly or indirectly secures the
Indebtedness, and Grantor expressly waives any objections to the commencement
of, continuation of, or entry of a judgment in such other sales or proceedings
or exercise of any remedies in such sales or proceedings based upon any action
or judgment connected to this Deed of Trust, and Grantor also waives any right
to seek to dismiss, stay, remove, transfer or consolidate either such other
sales or proceedings or any sale or action under this Deed of Trust on such
basis. It is expressly understood and agreed that to the fullest extent
permitted by law,
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Beneficiary may, at its election, cause the sale of all collateral which is the
subject of a single trustee's sale or foreclosure action at either a single sale
or at multiple sales conducted simultaneously and take such other measures as
are appropriate in order to effect the agreement of the parties to dispose of
and administer all collateral securing the Indebtedness (directly or indirectly)
in the most economical and least time-consuming manner.
31. Successors and Assigns. All covenants of Grantor contained
in this Deed of Trust are imposed solely and exclusively for the benefit of
Beneficiary and Trustee and their respective successors and assigns, and no
other person or entity shall have standing to require compliance with such
covenants or be deemed, under any circumstances, to be a beneficiary of such
covenants, any or all of which may be freely waived in whole or in part by
Beneficiary or Trustee at any time if in the sole discretion of either of them
such waiver is deemed advisable. All such covenants of Grantor shall run with
the land and bind Grantor, the successors and assigns of Grantor (and each of
them) and all subsequent owners, encumbrancers and tenants of the Trust
Property, and shall inure to the benefit of Beneficiary, Trustee and their
respective successors and assigns. Without limiting the generality of the
foregoing, any successor to Trustee appointed by Beneficiary shall succeed to
all rights of Trustee as if such successor had been originally named as Trustee
hereunder. The word "Grantor" shall be construed as if it read "Grantors"
whenever the sense of this Deed of Trust so requires and if there shall be more
than one Grantor, the obligations of the Grantors shall be joint and several.
32. No Waivers, etc. Any failure by Beneficiary to insist upon
the strict performance by Grantor of any of the terms and provisions of this
Deed of Trust shall not be deemed to be a waiver of any of the terms and
provisions hereof, and Beneficiary or Trustee, notwithstanding any such failure,
shall have the right thereafter to insist upon the strict performance by Grantor
of any and all of the terms and provisions of this Deed of Trust to be performed
by Grantor. Beneficiary may release, regardless of consideration and without the
necessity for any notice to or consent by the beneficiary of any subordinate
deed of trust or the holder of any subordinate lien on the Trust Property, any
part of the security held for the obligations secured by this Deed of Trust
without, as to the remainder of the security, in anywise impairing or affecting
this Deed of Trust or the priority of this Deed of Trust over any subordinate
lien or deed of trust.
33. Governing Law, etc. This Deed of Trust shall be governed
by and construed in accordance with the laws of the State in which the Premises
are located, except that Grantor expressly acknowledges that by its terms the
Senior Secured Credit
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<PAGE> 33
Agreement shall be governed and construed in accordance with the laws of the
State of New York, without regard to principles of conflict of law, and for
purposes of consistency, Grantor agrees that in any in personam proceeding
related to this Deed of Trust the rights of the parties to this Deed of Trust
shall also be governed by and construed in accordance with the laws of the State
of New York governing contracts made and to be performed in that State, without
regard to principles of conflict of law.
34. WAIVER OF TRIAL BY JURY. GRANTOR, TRUSTEE AND BENEFICIARY
EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY ACTION,
CLAIM, SUIT OR PROCEEDING RELATING TO THIS DEED OF TRUST AND FOR ANY
COUNTERCLAIM BROUGHT THEREIN.
35. Certain Definitions. Unless the context clearly indicates
a contrary intent or unless otherwise specifically provided herein, words used
in this Deed of Trust shall be used interchangeably in singular or plural form
and the word "Grantor" shall mean "each Grantor or any subsequent owner or
owners of the Trust Property or any part thereof or interest therein," the word
"Beneficiary" shall mean "Beneficiary or any successor Administrative Agent,"
the word "Trustee" shall mean "Trustee and any successor trustee hereunder," the
word "Notes" shall mean "the notes that may from time to time be given pursuant
to the terms of the Senior Secured Credit Agreement or any other evidence of
indebtedness secured by this Deed of Trust," the word "person" shall include any
individual, corporation, partnership, trust, unincorporated association,
government, governmental authority, or other entity, and the words "Trust
Property" shall include any portion of the Trust Property or interest therein.
Whenever the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa. The captions in this
Deed of Trust are for convenience or reference only and in no way limit or
amplify the provisions hereof.
36. Reconveyance of Deed Of Trust. Upon payment in full of the
Indebtedness, the termination of all Commitments under the Senior Secured Credit
Agreement secured hereby and the compliance with the Obligations then required
to be complied with, Beneficiary shall release the encumbrance of this Deed of
Trust. If any of the Trust Property shall be sold, transferred or otherwise
disposed of by Grantor in a transaction expressly permitted by the Senior
Secured Credit Agreement, then Beneficiary shall execute and deliver, and shall
cause Trustee to execute and deliver to Grantor (at the sole cost and expense of
Grantor) all releases, reconveyances or other documents reasonably necessary or
desirable for the release of such Trust Property from the encumbrance of this
Deed of Trust.
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37. Conflict With Senior Secured Credit Agreement. In the
event of any conflict or inconsistency between the terms and provisions of this
Deed of Trust and the terms and provisions of the Senior Secured Credit
Agreement, the terms and provisions of the Senior Secured Credit Agreement shall
govern, other than with respect to the Section of this Deed of Trust captioned
"Governing Law, etc.". By their execution of the Senior Secured Credit
Agreement, each Lender hereby agrees that it shall not have the right to
institute any suit for enforcement of Notes or any other Indebtedness secured by
this Deed of Trust or any other Security Document, if and to the extent that the
institution or prosecution thereof or the entry of judgment therein would, under
applicable law, result in the surrender, impairment, waiver or loss of the Lien
of this Deed of Trust or any other Security Document or impede or delay the
enforcement of the Lien of this Deed of Trust or any other Security Document.
38. Receipt of Copy. Grantor acknowledges that it has received
a true copy of this Deed of Trust.
39. Notice Pursuant to Section 47-28-104 of Tennessee Code
Annotated. This Deed of Trust secures future advances which are "obligatory
advances" as defined in the aforesaid statute. This Deed of Trust is for
commercial purposes as defined in said statute.
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This Deed of Trust has been duly executed by Grantor as of the
date first above written.
Signed, sealed and EV INTERNATIONAL, INC.
delivered in our
presence: By: /s/ CHRISTINE K. VANDEN BEUKEL
-------------------------------
Name: Christine K. Vanden Beukel
Title: Vice President, Secretary and
Treasurer
/s/ GINGER BALLARD
- ---------------------------------
Name: Ginger Ballard
/s/ ARON GOSER
- ---------------------------------
Name: Aron Goser
34
<PAGE> 36
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
Personally appeared before me, Christine K. Vanden Beukel,
with whom I am personally acquainted (or proved to me on the basis of
satisfactory evidence) and who, upon oath, acknowledged herself to be the V.P.,
Secretary and Treasurer of EV INTERNATIONAL, INC., the within named bargainor, a
Delaware corporation, and that he as such V.P., Secretary and Treasurer, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained by signing the name of the corporation by himself as such V.P.,
Secretary and Treasurer.
WITNESS my hand and seal at office this 10th day of February,
1997.
/s/ NANCY L. LOMAZZO
________________________________
Notary Public
My commission expires:
June 3, 1998
______________________
(embossed seal) NANCY L. LOMAZZO
Notary Public, State of New York
No. 31-5061123
Qualified in New York County
Commission Expires June 3, 1998
<PAGE> 37
1201 Dolly Parton Parkway
Sevierville, TN 37862
Sevier County
Schedule A
Legal Description
SITUATE, LYING AND BEING in the Fifth (5th) Civil District of Sevier County,
Tennessee, and being more fully described as follows:
BEGINNING on an iron pin at a point where the southern edge of the right of way
of U.S. Highway 411 and Tennessee Highway 35 intersects with the eastern edge of
a 30 foot easement for water to Cherokee Textile Mills and the Industrial Park
access road; thence with the southern right of way of U.S. Highway 411 and
Tennessee Highway 35, North 89 deg. 14 min, East, 802.8 feet to a concrete right
of way monument a corner to the Sevier County Industrial Park and John R.
Burchfiel; thence with the line of John R. Burchfiel, South 8 deg. 48 min. West,
273 feet to a stake; thence continuing with the line of John R. Burchfiel, South
8 deg. 48 min. West 273 feet to a stake; thence continuing with the line of John
R. Burchfiel, South 4 deg. 05 min. East, 610.5 feet to an iron pin a corner to
the Buford Brown tract; thence with the line of Buford Brown, North 77 deg. 07
min. West, 707.5 feet to an iron pin in the eastern edge of the 30 foot easement
for water to Cherokee Mills and the Industrial Park access road; thence with the
eastern edge of the 30 foot easement for water to Cherokee Mills and the
Industrial Park access road, North 8 deg. 50 min West, 720.4 feet to the
BEGINNING.
BEING the same property conveyed to Electro-Voice of Tennessee, Inc. by
deed dated August 30, 1985, from Industrial Development Board of Sevier
County, Tennessee, of record in Deed Book 355 at Page 177, Register's
Office, Sevier County, Tennessee.
<PAGE> 1
EXHIBIT 12
EV INTERNATIONAL, INC.
COMPUTATION OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Predecessor basis of accounting New basis of accounting
------------------------------------------------------------- ----------------------------------
Fiscal year ended the last day of February Period from Period from
------------------------------------------ March 1, 1996 -- February 11, 1997 -- Pro Forma
1993 1994 1995 1996 February 10, 1997 February 28, 1997 Fiscal 1997
-------- ------ ------ ------ ----------------- -------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income from operations before
income taxes $ 19.4 $ 19.6 $ 19.5 $ 17.7 $ 14.5 $ 1.5 $ 1.9
Add: Fixed charges per below 0.5 0.5 0.5 0.6 0.6 0.8 13.9
------- ------- ------- ------- ------- ------- --------
Earnings for computation purposes $ 19.9 $ 20.1 $ 20.0 $ 18.3 $ 15.1 $ 2.3 $ 15.8
Fixed charges:
Interest on indebtedness -- -- -- -- -- 0.8 13.3
Portion of rent expense
representative of the
interest factor(1) 0.5 0.5 0.5 0.6 0.6 0.0 0.6
------- ------- ------- ------- ------- ------- --------
Fixed charges for computation
purposes 0.5 0.5 0.5 0.6 0.6 0.8 13.9
Ratio of earnings to fixed
charges(2) 2.9 to 1 1.1 to 1
</TABLE>
- -------------------
(1) Approximation of one-third of annual rent expense used to represent interest
factor.
(2) The ratio of earnings to fixed charges is not meaningful for any periods
prior to the Acquisition due to the absence of interest expense in the
Company's financial statements.
<PAGE> 1
Exhibit 21
List of Subsidiaries
The operating subsidiaries and divisions of the Company are as follows:
Altec Lansing International
Audio Consultants Co., Ltd.
Cetec International Limited
Dearden Davies Associates Limited
Dynacord S.A.
EVI Audio (U.K.) PLC
EVI Audio Japan Ltd.
EVI Audio France S.A.
EVI Audio (Hong Kong) Limited
EVI Audio (Aust.) Pty.
EVI Audio Canada Inc.
EVI Holding (Deutschland) GmbH
EVI Audio GmbH
Mark IV Audio (Europe) A.G.
Nivenfield (1992) Limited
Rebis Audio Limited
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTS
We consent to the inclusion in this registration statement on Form S-4 (File
No. _______) of our report dated August 7, 1996 (except as to the effects of
the reorganization discussed in Note 1 for which the date is February 10,
1997), on our audits of the consolidated financial statements of EV
International, Inc. We also consent to the reference to our firm under the
caption "Experts."
Coopers & Lybrand L.L.P.
Rochester, New York
May 16, 1997
<PAGE> 1
Exhibit 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
dated May 14, 1997 as regards (i) the audited consolidated financial statements
of EV International, Inc. as of February 28, 1997 and for the period from
February 11, 1997 through February 28, 1997 (new basis of accounting), and (ii)
the audited consolidated statements of income and cash flows for the period for
March 1, 1996 through February 10, 1997 (predecessor basis of accounting), and
to all references to our Firm included in or made a part of this registration
statement.
ARTHUR ANDERSEN LLP
May 16, 1997
<PAGE> 1
Exhibit 23(c)
APPRAISAL ECONOMICS INC.
CONSENT OF APPRAISAL ECONOMICS INC.
As experts in the field of solvency appraisal, we hereby consent to the use of
our opinion dated February 10, 1997 as regard to the solvency of EV
International, Inc. as of February 10, 1997, and to all references to our FIRM
included in or made part of this registration statement.
APPRAISAL ECONOMICS INC.
May 14, 1997
<PAGE> 1
CONFORMED COPY
EXHIBIT 25
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) | |
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
EV INTERNATIONAL, INC.
(Exact name of obligor as specified in its charter)
Delaware 52-2011193
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
602 Cecil Street
Buchanan, Michigan 49107
(Address of principal executive offices) (Zip code)
----------------------
11% Senior Subordinated Notes due 2007, Series A
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Name Address
- -----------------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit
1 to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 2nd day of May, 1997.
THE BANK OF NEW YORK
By: /S/ MARY LAGUMINA
----------------------------
Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
1996, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ............................... $ 4,404,522
Interest-bearing balances ....................... 732,833
Securities:
Held-to-maturity securities ..................... 789,964
Available-for-sale securities ................... 2,005,509
Federal funds sold in domestic offices of the bank:
Federal funds sold ................................ 3,364,838
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................28,728,602
LESS: Allowance for loan and
lease losses ..............584,525
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve ................ 28,143,648
Assets held in trading accounts ................... 1,004,242
Premises and fixed assets (including
capitalized leases) ............................. 605,668
Other real estate owned ........................... 41,238
Investments in unconsolidated
subsidiaries and associated
companies ....................................... 205,031
Customers' liability to this bank on
acceptances outstanding ......................... 949,154
Intangible assets ................................. 490,524
Other assets ...................................... 1,305,839
------------
Total assets ...................................... $ 44,043,010
============
LIABILITIES
Deposits:
In domestic offices ............................. $ 20,441,318
Noninterest-bearing .......8,158,472
Interest-bearing .........12,282,846
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ................ 11,710,903
Noninterest-bearing ..........46,182
Interest-bearing .........11,664,721
Federal funds purchased in
domestic offices of the
bank:
Federal funds purchased ......................... 1,565,288
Demand notes issued to the U.S. ...................
Treasury ........................................ 293,186
Trading liabilities ............................... 826,856
Other borrowed money:
With original maturity of one year
or less ....................................... 2,103,443
With original maturity of more than
one year ...................................... 20,766
Bank's liability on acceptances exe-
cuted and outstanding ........................... 951,116
Subordinated notes and debentures ................. 1,020,400
Other liabilities ................................. 1,522,884
------------
Total liabilities ................................. 40,456,160
------------
EQUITY CAPITAL
Common stock ...................................... 942,284
Surplus ........................................... 525,666
Undivided profits and capital
reserves ........................................ 2,129,376
Net unrealized holding gains
(losses) on available-for-sale
securities ...................................... (2,073)
Cumulative foreign currency transla-
tion adjustments ................................ (8,403)
------------
Total equity capital .............................. 3,586,850
------------
Total liabilities and equity
capital ......................................... $ 44,043,010
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )
<PAGE> 1
Exhibit 99.1
[FORM OF LETTER OF TRANSMITTAL]
EV INTERNATIONAL, INC.
OFFER TO EXCHANGE ITS 11% SENIOR SUBORDINATED NOTES
DUE 2007, SERIES A, ("NEW NOTES"), WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT, FOR ANY AND ALL OUTSTANDING 11% SENIOR SUBORDINATED NOTES DUE
2007 ("EXISTING NOTES"), PURSUANT TO THE PROSPECTUS DATED ____________, 1997
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________,
1997 OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER MAY BE EXTENDED
(THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE.
To: _________________________________________________, Exchange Agent
By Mail: By Facsimile:
(For Eligible Institutions Only)
Attention:
By Overnight Courier or By Hand to 4:30 p.m.:
By Hand after 4:30 p.m.:
Attention: Attention:
For Information Call:
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER
THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX BELOW
______________________
List below the Existing Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the certificate number(s)
and principal amount of Existing Notes should be listed on a separate signed
schedule affixed hereto.
<TABLE>
<CAPTION>
Description of Existing Notes (1) (2) (3)
Tendered (4)
Principal Amount of
Aggregate Existing Notes Tendered
Principal Aggregate Principal in Exchange for
Name(s) and Address(es) of Certificate Amount of Amount of Existing certificated New
Registered Holder(s) Numbers(s)* Existing Notes Notes Tendered** Notes***
<S> <C> <C> <C> <C>
</TABLE>
- ----------
* Need not be completed by book-entry holders.
** Unless otherwise indicated in this column, the holder will be deemed to
have tendered the full aggregate principal amount represented by such
Existing Notes.
*** Unless otherwise indicated, the holder will be deemed to have tendered
Existing Notes in exchange for a beneficial interest in one or more
fully registered global notes, which will be deposited with, or on
behalf of, The Depository Trust Company ("DTC") and registered in the
name of Cede & Co., its nominee.
<PAGE> 2
The undersigned acknowledges that he, she or it has received
and reviewed the Prospectus, dated ____________, 1997 (the "Prospectus"), of EV
international, Inc. a Delaware corporation ("EV International"), and this Letter
of Transmittal (the "Letter of Transmittal"), which together constitute EV
International's offer (the "Exchange Offer") to exchange up to $100,000,000
aggregate principal amount of its New Notes, which will have been registered
under the Securities Act of 1933, for a like principal amount of its outstanding
Existing Notes. The New Notes and the Existing Notes are collectively referred
to as the "Notes." Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
The undersigned has completed the appropriate boxes above and
below and signed this Letter of Transmittal to indicate the action the
undersigned desires to take with respect to the Exchange Offer.
This Letter of Transmittal is to be used either if
certificates of Existing Notes are to be forwarded herewith or if delivery of
Existing Notes is to be made by book-entry transfer to an account maintained by
the Exchange Agent at DTC, pursuant to the procedures set forth in "The Exchange
Offer--Procedures for Tendering" in the Prospectus. Delivery of this Letter of
Transmittal and any other required documents should be made to the Exchange
Agent. Delivery of documents to a book-entry transfer facility does not
constitute delivery to the Exchange Agent.
Holders whose Existing Notes are not immediately available or
who cannot deliver their Existing Notes and all other documents required hereby
to the Exchange Agent on or prior to the Expiration Date must tender their
Existing Notes according to the guaranteed delivery procedure set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering." See
Instruction 1.
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED TO THE
EXCHANGE AGENT IN EXCHANGE FOR CERTIFICATED NEW NOTES.
Unless the undersigned (I) has completed item (4) in the box entitled
"Description of Existing Notes Tendered" and (ii) has checked the box above, the
undersigned will be deemed to have tendered Existing Notes in exchange for a
beneficial interest in one or more fully registered global certificates, which
will be deposited with, or on behalf of, DTC and registered in the name of Cede
& Co., its nominee. Beneficial interests in such registered global certificates
will be shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants. See "Book-Entry, Delivery and Form" as
set forth in the Prospectus.
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK-
ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ________________ [ ] The Depository Trust Company
Account Number _________________________________________________________________
Transaction Code Number ________________________________________________________
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT
AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) ___________________________________________________
Window Ticket Number (if any) __________________________________________________
Date of Execution of Notice of Guaranteed Delivery _____________________________
Name of Eligible Institution that Guaranteed Delivery __________________________
If delivered by book-entry transfer:
Account Number __________________ Transaction Code Number ______________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER MAKING A MARKET IN EXISTING NOTES
WITH EV INTERNATIONAL'S PRIOR WRITTEN CONSENT AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS MADE THERETO WITHIN 90 DAYS AFTER THE EXPIRATION DATE:
Name
Address ________________________________________________________________________
2
<PAGE> 3
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to conditions of the Exchange Offer, the
undersigned hereby tenders to EV International the aggregate principal amount of
Existing Notes indicated above. Subject to, and effective upon, the acceptance
for exchange of Existing Notes tendered hereby, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Exchange Agent, as agent of
EV International, all right, title and interest in and to such Existing Notes as
are being tendered hereby, and irrevocably constitutes and appoints the Exchange
Agent as the agent and attorney-in-fact of the undersigned to cause the Existing
Notes tendered hereby to be transferred and exchanged.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, sell, assign and transfer the
Existing Notes tendered hereby and to acquire the New Notes issuable upon the
exchange of such tendered Existing Preferred Stock, and that the Exchange Agent,
as agent of EV International, will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim when the same are accepted by the Exchange Agent,
as agent of EV International. The undersigned will, upon request, execute and
deliver any additional documents deemed by EV International or the Exchange
Agent to be necessary or desirable to complete the exchange, sale, assignment
and transfer of the Existing Notes tendered hereby.
The undersigned also acknowledges that this Exchange Offer is being
made in reliance on the interpretation of the staff of the Securities and
Exchange Commission (the "SEC"), as set forth in Exxon Capital Holdings
Corporation (available May 13, 1988) or similar no-action letters issued to
third parties. Based on such interpretation of the staff of the SEC set forth in
such no-action letters, EV International believes that the New Notes issued in
exchange for the Existing Notes pursuant to the Exchange Offer may be offered
for resale, resold and otherwise transferred by a holder thereof (other than any
such holder that is an "affiliate" of EV International within the meaning of
Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"))
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that (i) such New Notes are acquired in the
ordinary course of such holder's business, (ii) at the time of the commencement
of the Exchange Offer such holder has no arrangement with any person to
participate in a distribution of the New Notes and (iii) such holder is not
engaged in, and does not intend to engage, in a distribution of the New Notes.
By tendering Existing Notes in exchange for New Notes, each holder will
represent to the Company that: (i) it is not such an affiliate of the Company,
(ii) any New Notes to be received by it will be acquired in the ordinary course
of business and (iii) at the time of the commencement of the Exchange Offer it
had no arrangement with any person to participate in a distribution of the New
Notes. If the undersigned is not a broker-dealer or is a broker-dealer but will
not receive New Notes for its own account in exchange for Existing Notes, the
undersigned represents that it is not engaged in, and does not intend to engage
in, a distribution of New Notes.
If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Existing Notes, where such Existing Notes were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The SEC has taken the position that such broker-dealers may fulfill their
prospectus delivery requirements with respect to the New Notes (other than a
resale of New Notes received in exchange for an unsold allotment from the
original sale of the
3
<PAGE> 4
Existing Notes) with the Prospectus. The Prospectus, as it may be amended or
supplemented from time to time, may be used by such broker-dealers for a period
of time, starting on the Expiration Date and ending on the close of business 90
days after the Expiration date in connection with the sale or transfer of such
New Notes. EV International has agreed that, for such period of time, it will
make the Prospectus (as it may be amended or supplemented) available to a
broker-dealer which, with EV International's prior written consent, makes a
market in the Existing Notes and receives New Notes pursuant to the Exchange
Offer (each a "Participating Broker-Dealer") for use in connection with any
resale of such New Notes. By acceptance of the Exchange Offer, each
broker-dealer that receives New Notes pursuant to the Exchange Offer hereby
acknowledges and agrees to notify EV International prior to using the Prospectus
in connection with the sale or transfer of New Notes and that, upon receipt of
notice from EV International of the happening of any event which makes any
statement in the Prospectus untrue in any material respect or which requires the
making of any changes in the Prospectus in order to make the statements therein
not misleading, such broker-dealer will suspend use of the Prospectus until (i)
EV International has amended or supplemented the Prospectus to correct such
misstatement or omission and (ii) either the Company has furnished copies of the
amended or supplemented Prospectus to such broker-dealer or, if EV International
has not otherwise agreed to furnish such copies and declines to do so after such
broker-dealer so requests, such broker-dealer has obtained a copy of such
amended or supplemented Prospectus as filed with the SEC. EV International
agrees to deliver such notice and such amended or supplemented Prospectus
promptly to any Participating Broker-Dealer that has so notified EV
International. Except as described above, the Prospectus may not be used for or
in connection with an offer to resell, a resale or any other retransfer of New
Notes.
The undersigned represents that (i) the New Notes acquired pursuant
to the Exchange Offer are being obtained in the ordinary course of such holder's
business, (ii) such holder has no arrangements with any person to participate
in the distribution of such New Notes or, if such holder intends to participate
in the Exchange Offer for the purpose of distributing the New Notes, such holder
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, and (iii) (x) such holder is not (a) a
broker-dealer that will receive New Notes for its own account in exchange for
Existing Notes that were acquired as a result of market-making activities or
other trading activities, or (b) an "affiliate," as defined in Rule 405 under
the Securities Act, of EV International or (y) if such holder is such a
broker-dealer or an affiliate, such holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
The undersigned, if a California resident, hereby further represents
and warrants that the undersigned (or the beneficial owner of the Existing Notes
tendered hereby, if not the undersigned) (i) is a bank, savings and loan
association, trust company, insurance company, investment company registered
under the Investment Company Act of 1940, pension or profit-sharing trust (other
than a pension or profit-sharing trust of EV International, a self-employed
individual retirement plan, or individual retirement account), a corporation
which has a net worth on a consolidated basis according to its most recent
audited financial statements of not less than $14,000,000, or a wholly owned
subsidiary of any of the foregoing, and (ii) is acquiring the New Notes for its
own account for investment purposes (or for the account of the beneficial owner
of such New Notes for investment purposes).
All authority conferred or agreed to be conferred in this Letter of
Transmittal and every obligation of the undersigned hereunder shall be binding
upon the successors, assigns, heirs, executors, administrators, trustees in
bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned. This
tender may be
4
<PAGE> 5
withdrawn only in accordance with the procedures set forth in the instructions
contained in this Letter of Transmittal.
The undersigned understands that tenders of the Existing Notes
pursuant to any one of the procedures described under "The Exchange
Offer--Procedures for Tendering" in the Prospectus and in the instructions
hereto will constitute a binding agreement between the undersigned and EV
International in accordance with the terms and subject to the conditions of the
Exchange Offer.
The undersigned understands that if its Existing Notes are accepted
for exchange, interest on the New Notes will accrue from the last interest
payment date on which interest was paid on the Existing Notes surrendered in
exchange thereof, or if no interest has been paid, from the original date of
issuance of the Existing Notes.
The undersigned recognizes that unless the holder of Existing Notes
(i) completes item (4) of the Box entitled "Description of Existing Notes
Tendered" above and (ii) checks the box entitled "Check here if tendered shares
of Existing Notes are being delivered to the Exchange Agent in exchange for
certificated New Notes" above, such holder, when tendering such Existing Notes,
will be deemed to have tendered such Existing Notes in exchange for a beneficial
interest in one or more fully registered global certificates, which will be
deposited with, or on behalf of, DTC and registered in the name of Cede & Co.,
its nominee. Beneficial interests in such registered global certificates will be
shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants. See "Book-Entry, Delivery and Form" in
the Prospectus.
The undersigned recognizes that, under certain circumstances set
forth in the Prospectus under "The Exchange Offer--Conditions," EV International
may not be required to accept for exchange any of the Existing Notes tendered.
Existing Notes not accepted for exchange or withdrawn will be returned to the
undersigned at the address set forth below unless otherwise indicated under
"Special Delivery Instructions" below.
The undersigned acknowledges that by tendering the Existing Notes
pursuant to any one of the procedures described under "The Exchange
Offer--Procedures for Tendering" in the Prospectus and in the instructions
hereto, the undersigned agrees that once the Exchange Offer is consummated, EV
International shall not be obligated to file or prepare a Shelf Registration
Statement (as defined in the Exchange and Registration Rights Agreement, dated
as of March 24, 1997, as amended (the "Exchange and Registration Rights
Agreement"), among EV International and the Initial Purchasers, or take any
other action provided in Sections 2 or 3 of the Exchange and Registration Rights
Agreement with respect to a Shelf Registration Statement, and the undersigned
hereby waives any requirement of the Exchange and Registration Rights Agreement
that EV International files, prepares or takes any other action relating to a
Shelf Registration Statement once the Exchange Offer is consummated.
All questions as to the validity, form, eligibility (including time
of receipt) and acceptability of any tender will be determined by EV
International, in its sole discretion, and such determination will be final and
binding. Unless waived by EV International, irregularities and defects must be
cured by the Expiration Date. EV International shall not be obligated to give
notice of any defects or irregularities in tenders and shall not incur any
liability for failure to give any such notice.
Unless otherwise indicated herein in the box entitled "Special
Issuance Instructions" below, the undersigned hereby requests that the New Notes
(and, if applicable, substitute certificates representing Existing Notes for any
Existing Notes not exchanged) be issued in the name of the
5
<PAGE> 6
undersigned. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, the undersigned hereby requests that the
New Notes (and, if applicable, substitute certificates representing Existing
Notes for any Existing Notes not exchanged) be sent to the undersigned at the
address shown above in the box entitled "Description of Existing Notes
Tendered."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF
EXISTING NOTES TENDERED" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE
TENDERED THE EXISTING NOTES AS SET FORTH IN SUCH BOX(ES) ABOVE.
6
<PAGE> 7
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
X ___________________________________ ___________________________________
X ___________________________________ ___________________________________
Signature(s) of Owner(s) Date
Area Code and Telephone Number _________________________________
If a holder is tendering any Existing Notes, this Letter of Transmittal must be
signed by the registered holders(s) as the name(s) appear(s) on the
certificate(s) for the Existing Notes or by any person(s) authorized to become
registered holders(s) by endorsements and documents transmitted herewith. If
signature is by a trustee, executor, administrator, guardian, officer or other
person acting in a fiduciary or representative capacity, please set forth full
title below. See Instruction 3.
Name(s): _____________________________________________________________
______________________________________________________________________
(Please Type or Print)
Capacity: ____________________________________________________________
Address: _____________________________________________________________
______________________________________________________________________
(Include Zip Code)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution: _____________________________________________
(Authorized Signature)
______________________________________________________________________
(Title)
______________________________________________________________________
(Name of Firm)
Dated: _______________________________________________________________
<PAGE> 8
SPECIAL ISSUANCE INSTRUCTIONS (See
Instructions 3 and 4)
To be completed ONLY if New Notes (and, if applicable, substitute
certificates representing Existing Notes for any Existing Notes not exchanged)
are to be issued in the name of and sent to someone other than the person or
persons whose signature(s) appear(s) on this Letter of Transmittal above.
Issue New Notes to:
Name(s): ...................................................................
...................................................................
(Please Type or Print)
...................................................................
(Please Type or Print)
Address: ...................................................................
...................................................................
(Zip Code)
(Complete Substitute Form W-9)
SPECIAL DELIVERY INSTRUCTIONS (See
Instructions 3 and 4)
To be completed ONLY if certificates for New Notes (and, if
applicable, substitute certificates representing Existing Notes for any Existing
Notes not exchanged) are to be sent to someone other than the person or persons
whose signature(s) appear(s) on this Letter of Transmittal above or to such
person or persons at an address other than shown in the box entitled
"Description of Existing Notes Tendered" on this Letter of Transmittal above.
Mail New Notes to:
Name(s) ...................................................................
...................................................................
(Please Type or Print)
...................................................................
(Please Type or Print)
Address: ...................................................................
...................................................................
(Zip Code)
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH,
THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH THE
CERTIFICATE(S) FOR EXISTING NOTES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER OF
SUCH EXISTING NOTES AND
<PAGE> 9
ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
<PAGE> 10
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: EV INTERNATIONAL, INC.
<TABLE>
<S> <C> <C>
SUBSTITUTE Part I--Taxpayer Identification Number
FORM W-9 Enter your taxpayer identification number in the
DEPARTMENT OF THE TREASURY appropriate box. For most individuals, this is your
INTERNAL REVENUE SERVICE social security number. If you do not have a num- ------------------------------------
ber, see how to obtain a "TIN" in the enclosed Social Security Number
Guidelines.
OR
NOTE: If the account is in more than one name, see
the chart on page 2 of the enclosed Guidelines to ------------------------------------
determine what number to give. Employer Identification Number
- ------------------------------------------------------------------------------------------------------------------------
Part II--For Payees Exempt from Backup Withholding (See enclosed Guidelines)
------------------------------------------------------------------------------------------
PAYOR'S REQUEST FOR TAXPAYER CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
IDENTIFICATION NUMBER (TIN)
AND CERTIFICATION (1) the number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject
to backup withholding as a result of a failure to report all interest
or dividends or the IRS has notified me that I am no longer subject to
backup withholding.
------------------------------------------------------------------------------------------
SIGNATURE DATE
--------------------------- ----------------------------------------------
</TABLE>
Certification Guidelines--You must cross out item (2) of the above certification
if you have been notified by the IRS that you are subject to backup withholding
because of underreporting of interest or dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2).
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification
Number has not been issued to me, and that I mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a Taxpayer Identification Number to the payer, 31 percent of all
payments made to me on account of the New Preferred Stock shall be retained
until I provide a Taxpayer Identification Number to the payer and that, if I do
not provide my Taxpayer Identification Number within sixty (60) days, such
retained amounts shall be remitted to the Internal Revenue Service as backup
withholding and 31 percent of all reportable payments made to me thereafter will
be withheld and remitted to the Internal Revenue Service until I provide a
Taxpayer Identification Number.
SIGNATURE DATE
---------------------- -----------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE NEW
NOTES . PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
<PAGE> 11
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND EXISTING NOTES; GUARANTEED
DELIVERY PROCEDURE
The Letter of Transmittal is to be used to forward, and must accompany,
all certificates representing Existing Notes tendered pursuant to the Exchange
Offer. Certificates representing the Existing Notes in proper form for transfer
(or a confirmation of book-entry transfer of such Existing Notes into the
Exchange Agent's account at the book-entry transfer facility) as well as a
properly completed and duly executed copy of this Letter of Transmittal and all
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Existing Notes tendered must be in integral
multiples of $1000.
The method of delivery of this Letter of Transmittal, the Existing
Notes and all other required documents is at the election and risk of the
tendering holders, but the delivery will be deemed made only when actually
received or confirmed by the Exchange Agent. If such delivery is by mail, it is
recommended that registered or certified mail properly insured, with return
receipt requested, be used. In all cases, sufficient time should be allowed to
permit timely delivery.
If a holder desires to tender Existing Notes and such holder's Existing
Notes are not immediately available or time will not permit such holder's Letter
of Transmittal, Existing Notes (or a confirmation of book-entry transfer of
Existing Notes into the Exchange Agent's account at the book-entry transfer
facility) or other required documents to reach the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date, or such holder cannot complete
the procedure of book-entry transfer on a timely basis, such holder may
nevertheless tender Existing Notes if:
(a) such tender is made by or through an Eligible Institution
(as defined below);
(b) the Exchange Agent has received from such Eligible
Institution prior to 5:00 p.m., New York City time, on the Expiration
Date, a properly completed and duly executed Letter of Transmittal (of
facsimile thereof) and Notice of Guaranteed Delivery, substantially in
the form provided by EV International (by facsimile transmission, mail
or hand delivery), setting forth the name and address of the holder of
such Existing Notes and the principal amount of Existing Notes
tendered, stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange ("NYSE")
trading days after the execution of the Notice of Guaranteed Delivery,
a Book-Entry Confirmation and any other documents required by this
Letter of Transmittal and the instructions hereto, will be deposited by
such Eligible Institution with the Exchange Agent; and
(c) a Book-Entry Confirmation and all other required documents
required by the Letter of Transmittal are received by the Exchange
Agent within three NYSE trading days after the Notice of Guaranteed
Delivery.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Existing
Preferred Stock (or a timely confirmation of a book-entry transfer of Existing
Notes into the Exchange Agent's account at the book-entry transfer
<PAGE> 12
facility) or a Notice of Guaranteed Delivery from an Eligible Institution is
received by the Exchange Agent.
See "The Exchange Offer" in the Prospectus.
2. WITHDRAWALS
Any holder may withdraw a tender of Existing Notes prior to 5:00 p.m.,
New York City time on the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the Exchange Agent prior to
5:00 p.m., New York City time on the Expiration Date at one of its addresses set
forth herein. Any such notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility from which the Existing Notes
was tendered, identify the aggregate liquidation preference of the Existing
Notes to be withdrawn, and specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Existing Notes
and otherwise comply with the procedures of such facility. The Exchange Agent
will return properly withdrawn Existing Notes as soon as practicable following
receipt of notice of withdrawal. All questions as to the validity (including
time of receipt) of notices of withdrawals will be determined by EV
International, in its sole discretion, and such determination will be final and
binding on all parties. See "The Exchange Offer--Withdrawal of Tenders" in the
Prospectus. If Existing Notes have been tendered pursuant to the procedures for
book-entry transfer, any notice of withdrawal must specify the name and number
of the participant's account at DTC to be credited with the withdrawn Existing
Notes or otherwise comply with DTC's procedures. See "The Exchange
Offer-Withdrawal of Tenders" in the Prospectus.
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES
If this Letter of Transmittal is signed by the registered holder of the
Existing Notes tendered hereby, the signature must correspond exactly with the
name as written on the face of the certificates without any change whatsoever.
If any tendered Existing Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered Existing Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal as there are different
registrations of certificates.
If this Letter of Transmittal or any Existing Notes or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should indicate when signing, and unless
waived by EV International, proper evidence satisfactory to EV International of
their authority so to act must be submitted.
The signatures on this Letter of Transmittal or a notice of withdrawal,
as the case may be, must be guaranteed unless the Existing Notes surrendered for
exchange pursuant thereto are tendered (I) by a registered holder of the
Existing Notes who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in this Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that the
signatures in this Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantees must be by a firm
2
<PAGE> 13
which is a member of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc., or by a commercial bank or
trust company having an office or correspondent in the United States, or an
"eligible institution" within the meaning of Rule 17Ad-15 of the Securities
Exchange Act of 1934, as amended (each an "Eligible Institution"). If Existing
Notes are registered in the name of a person other than the signer of this
Letter of Transmittal, the Existing Notes surrendered for exchange must be
endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by EV International in
its sole discretion, duly executed by the registered holder with the signature
thereon guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS
Tendering holders of Existing Notes should indicate in the applicable
box the name and address to which New Notes issued pursuant to the Exchange
Offer are to be issued or sent, if different from the name or address of the
person signing this Letter of Transmittal. In the case of issuance in a
different name, the employer identification or social security number of the
person named must also be indicated. If no such instructions are given, any New
Notes will be issued in the name of, and delivered to, the name or address of
the person signing this Letter of Transmittal and any Existing Notes not
accepted for exchange will be returned to the name or address of the person
signing this Letter of Transmittal.
5. BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9
Under the federal income tax laws, payments that may be made by EV
International on account of New Notes issued pursuant to the Exchange Offer may
be subject to backup withholding at the rate of 31%. In order to avoid such
backup withholding, each tendering holder should complete and sign the
Substitute Form W-9 included in this Letter of Transmittal and either (a)
provide the correct taxpayer identification number ("TIN") and certify, under
penalties of perjury, that the TIN provided is correct and that (i) the holder
has not been notified by the Internal Revenue Service (the "IRS") that the
holder is subject to backup withholding as a result of failure to report all
interest or dividends or (ii) the IRS has notified the holder that the holder is
no longer subject to backup withholding; or (b) provide an adequate basis for
exemption. If the tendering holder has not been issued a TIN and has applied for
one, or intends to apply for one in the near future, such holder should write
"Applied For" in the space provided for the TIN in Part I of the Substitute Form
W-9, sign and date the Substitute Form W-9 and sign the Certificate of Payee
Awaiting Taxpayer Identification Number. If "Applied For" is written in Part I,
EV International (or the Transfer Agent with respect to the New Notes or a
broker or custodian) may still withhold 31% of the amount of any payments made
on account of the New Notes until the holder furnishes EV International or the
Transfer Agent with Respect to the New Notes, broker or custodian with its TIN.
In general, if a holder is an individual, the taxpayer identification number is
the Social Security number of such individual. If the Exchange Agent or EV
International is not provided with the correct TIN, the holder may be subject to
a $50 penalty imposed by the IRS. Certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, such holder must submit a statement (generally,
IRS Form W-8), signed under penalties of perjury, attesting to that individual's
exempt status. Such statements can be obtained from the Exchange Agent. For
further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if Existing Notes are registered in more than one name), consult the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
3
<PAGE> 14
Failure to complete the Substitute Form W-9 will not, by itself, cause
Existing Notes to be deemed invalidly tendered, but may require EV International
or the Transfer Agent with respect to the New Notes, broker or custodian to
withhold 31% of the amount of any payments made on account of the New Notes.
Backup withholding is not an additional federal income tax. Rather, the federal
income tax liability of a person subject to backup withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained from the IRS.
6. TRANSFER TAXES
EV International will pay all transfer taxes, if any, applicable to the
transfer of Existing Notes to it or its order pursuant to the Exchange Offer.
If, however, New Notes and/or substitute Existing Notes not exchanged are to be
delivered to, or are to be registered or issued in the name of, any person other
than the registered holder of the Existing Notes tendered hereby, or if tendered
Existing Notes are registered in the name of any person other than the person
signing this Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the transfer of Existing Notes to EV International or its
order pursuant to the Exchange Offer, the amount of any such transfer taxes
(whether imposed on the registered holder or any other person) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted herewith, the amount of such transfer taxes
will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Existing Notes specified in this Letter
of Transmittal.
7. WAIVER OF CONDITIONS
EV International reserves the absolute right to waive satisfaction of
any or all conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Existing Notes, by execution of this Letter
of Transmittal, shall waive any right to receive notice of the acceptance of
their Existing Notes for exchange.
EV International nor any other person is obligated to give notice of
defects or irregularities in any tender, nor shall any of them incur any
liability for failure to give any such notice.
9. INADEQUATE SPACE
If the space provided herein is inadequate, the aggregate principal
amount of Existing Notes being tendered and the certificate number or numbers
(if available) should be listed on a separate schedule attached hereto and
separately signed by all parties required to sign this Letter of Transmittal.
10. MUTILATED, LOST, STOLEN OR DESTROYED EXISTING NOTES
Any holder whose Existing Preferred Stock have been mutilated, lost,
stolen or destroyed should contact the Exchange Agent at the address indicated
above for further instructions.
4
<PAGE> 15
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number indicated
above.
5
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
EV INTERNATIONAL, INC.
11% SENIOR SUBORDINATED NOTES DUE 2007
This form must be used by a holder of the 11% Senior
subordinated Notes due 2007 (the "Existing Notes") of EV international, Inc., a
Delaware corporation ("EV International, Inc."), that wishes to tender Existing
Notes to the Exchange Agent pursuant to the guaranteed delivery procedures
described in "The Exchange Offer--Procedures for Tendering" of the Prospectus
dated _______________, 1997 (the "Prospectus") and in Instruction 1 to the
accompanying Letter of Transmittal. Any holder that wishes to tender Existing
Notes pursuant to such guaranteed delivery procedures must ensure that the
Exchange Agent receives this Notice of Guaranteed Delivery prior to 5:00 p.m.,
New York City time, on the Expiration Date of the Exchange Offer. Capitalized
terms not defined herein have the meaning ascribed to them in the Prospectus or
the Letter of Transmittal.
To: _______________________________, Exchange Agent
By Mail: By Facsimile:
Attention: (For Eligible Institutions Only)
By Overnight Courier or By Hand to 4:30 p.m.:
By Hand after 4:30 p.m.:
Attention:
Attention:
For Information Call:
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to EV International, upon the
terms and subject to the conditions set forth in the Prospectus and the related
Letter of Transmittal, receipt of which is hereby acknowledged, the principal
amount of Existing Notes specified below pursuant to the guaranteed delivery
procedures set forth in the Prospectus and in Instruction 1 of the Letter of
Transmittal. The undersigned hereby tenders the Existing Notes listed below:
<PAGE> 2
<TABLE>
Certificate Number(s) (if known) of
Existing Preferred Stock or Account Aggregate Principal Amount Aggregate Principal
Number at the Book-Entry Facility Represented Amount Tendered
<S> <C> <C>
</TABLE>
All authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
SIGN HERE
Name of Registered or Acting Holder: ___________________________________________
Signature(s): __________________________________________________________________
Name(s) (please print): ________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Date: __________________________________________________________________________
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered
national securities exchange or of the National Associates of Securities
Dealers, Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended, guarantees deposit with the Exchange Agent of the
Letter of Transmittal (or facsimile thereof), together with the Existing Notes
tendered hereby in proper form for transfer (or confirmation of the book-entry
transfers of such Existing Notes into the Exchange Agent's account at the
book-entry transfer facility described in the Prospectus under the caption "The
Exchange Offer--Procedures for Tendering" and in the Letter of Transmittal) and
any other required documents, all by 5:00 p.m., New York City time, on the fifth
business day following the Expiration Date.
2
<PAGE> 3
SIGN HERE
Name of firm: __________________________________________________________________
Authorized Signature: __________________________________________________________
Name (please print): ___________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Date: __________________________________________________________________________
DO NOT SEND EXISTING NOTES WITH THIS FORM. ACTUAL SURRENDER OF EXISTING NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF
TRANSMITTAL.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly
completed and duly executed copy of this Notice of Guaranteed Delivery and any
other documents required by this Notice of Guaranteed Delivery must be received
by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New
York City time, on the Expiration Date. The method of delivery of this Notice of
Guaranteed Delivery and any other required documents to the Exchange Agent is at
the election and risk of the holder and the delivery will be deemed made only
when actually received by the Exchange Agent. If delivery is by mail, registered
or certified mail properly insured, with return receipt requested, is
recommended. In all cases sufficient time should be allowed to assure timely
delivery. For a description of the guaranteed delivery procedure, see
Instruction 1 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this
Notice of Guaranteed Delivery is signed by the registered holder(s) of the
Existing Notes referred to herein, the signature must correspond with the
name(s) written on the face of the Existing Notes without alteration,
enlargement, or any change whatsoever. If this Notice of Guaranteed Delivery is
signed by a participant of the book-entry transfer facility whose name appears
on a security position listing as the owner of Existing Notes, the signature
must correspond with the name shown on the security position listing as the
owner of the Existing Notes.
If this Notice of Guaranteed Delivery is signed by a person
other than the registered holder(s) of any Existing Notes listed or a
participant of the book-entry transfer facility, this Notice of Guaranteed
Delivery must be accompanied by appropriate bond powers, signed as the name of
the registered holder(s) appears on the Existing Notes or signed as the name of
the participant shown on the book-entry transfer facility's security position
listing.
3
<PAGE> 4
If this Notice of Guaranteed Delivery is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation,
or other person acting in a fiduciary or representative capacity, such person
should so indicate when signing.
3. Requests for Assistance or Additional Copies. Questions and
requests for assistance and requests for additional copies of the Prospectus may
be directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
4
<PAGE> 1
EXHIBIT 99.3
May ___, 1997
FORM OF
EXCHANGE AGENT AGREEMENT
The Bank of New York
Corporate Trust Trustee Administration
101 Barclay Street - 21st Floor
New York, New York 10286
Ladies and Gentlemen:
EV International, Inc. (the "Company") proposes to make an
offer (the "Exchange Offer") to exchange up to $100,000,000 aggregate principal
amount of its 11% Senior Subordinated Notes due 2007 (the "Existing Notes") for
a like principal amount of its 11% Senior Subordinated Notes due 2007, Series A
(the "New Notes") which will be registered under the Securities Act of 1933,
pursuant to a Registration Statement. The terms and conditions of the Exchange
Offer as currently contemplated are set forth in a prospectus, dated May __,
1997 (the "Prospectus"), proposed to be distributed to all record holders of the
Existing Notes. The Existing Notes and the New Notes are collectively referred
to herein as the "Notes".
The Company hereby appoints The Bank of New York to act as
exchange agent (the "Exchange Agent") in connection with the Exchange Offer.
References hereinafter to "you" shall refer to The Bank of New York.
The Exchange Offer is expected to be commenced by the Company
on or about May ___, 1997. The Letter of Transmittal accompanying the
Prospectus (or in the case of book entry securities, the ATOP system) is to be
used by the holders of the Existing Notes to accept the Exchange Offer and
contains instructions with respect to the delivery of certificates for Existing
Notes tendered in connection therewith.
<PAGE> 2
The Exchange Offer shall expire at 5:00 P.M., New York City
time, on May __, 1997 or on such later date or time to which the Company may
extend the Exchange Offer (the "Expiration Date"). Subject to the terms and
conditions set forth in the Prospectus, the Company expressly reserves the right
to extend the Exchange Offer from time to time and may extend the Exchange Offer
by giving oral (confirmed in writing) or written notice to you before 9:00 A.M.,
New York City time, on the business day following the previously scheduled
Expiration Date.
The Company expressly reserves the right to delay acceptance
of any Existing Notes, to amend the Exchange Offer, or to extend or terminate
the Exchange Offer and not to accept for exchange any Existing Notes not
previously accepted for exchange, upon the occurrence of any of the conditions
of the Exchange Offer specified in the Prospectus under the caption "The
Exchange Offer -- Conditions." The Company will give oral or written notice of
any amendment, termination or nonacceptance to you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act
in accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned ["The
Exchange Offer"] or as specifically set forth herein; provided, however, that in
no way will your general duty to act in good faith be discharged by the
foregoing.
2. You will establish an account with respect to the Existing
Notes at The Depository Trust Company (the "Book-Entry Transfer Facility") for
purposes of the Exchange Offer within two business days after the date of the
Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of the
Existing Notes by causing the Book-Entry Transfer Facility to transfer such
Existing Notes into your
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account in accordance with the Book-Entry Transfer Facility's procedure for such
transfer.
3. You are to examine each of the Letters of Transmittal and
certificates for Existing Notes (or confirmation of book-entry transfer into
your account at the Book-Entry Transfer Facility) and any other documents
delivered or mailed to you by or for holders of the Existing Notes to ascertain
whether: (i) the Letters of Transmittal and any such other documents are duly
executed and properly completed in accordance with instructions set forth
therein and (ii) the Existing Notes have otherwise been properly tendered. In
each case where the Letter of Transmittal or any other document has been
improperly completed or executed or any of the certificates for Existing Notes
are not in proper form for transfer or some other irregularity in connection
with the acceptance of the Exchange Offer exists, you will endeavor to inform
the presenters of the need for fulfillment of all requirements and to take any
other action as may be necessary or advisable to cause such irregularity to be
corrected.
4. With the approval of the President or any Vice President of
the Company (such approval, if given orally, to be confirmed in writing) or any
other party designated by such an officer in writing, you are authorized to
waive any irregularities in connection with any tender of Existing Notes
pursuant to the Exchange Offer.
5. Tenders of Existing Notes may be made only as set forth in
the Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer -- Procedures for Tendering", and Existing Notes shall be
considered properly tendered to you only when tendered in accordance with the
procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Existing
Notes which the President or any Vice President of the Company shall approve as
having been properly tendered shall be considered to be properly tendered (such
approval, if given orally, shall be confirmed in writing).
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6. You shall advise the Company with respect to any Existing
Notes received subsequent to the Expiration Date and accept its instructions
with respect to disposition of such Existing Notes.
7. You shall accept tenders:
(a) in cases where the Existing Notes are registered in two
or more names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a representative capacity
only when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Existing
Notes provided that customary transfer requirements, including any applicable
transfer taxes, are fulfilled.
You shall accept partial tenders of Existing Notes where so
indicated and as permitted in the Letter of Transmittal and deliver
certificates for Existing Notes to the transfer agent for split-up and return
any untendered Existing Notes to the holder (or such other person as may be
designated in the Letter of Transmittal) as promptly as practicable after
expiration or termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to
the Exchange Offer, the Company will notify you (such notice if given orally, to
be confirmed in writing) of its acceptance, promptly after the Expiration Date,
of all Existing Notes properly tendered and you, on behalf of the Company, will
exchange such Existing Notes for New Notes and cause such Existing Notes to be
cancelled. Delivery of New Notes will be made on behalf of the Company by you at
the rate of $1,000 principal amount of New Notes for each $1,000 principal
amount of the corresponding series of Existing Notes tendered promptly after
notice (such notice if given orally, to be confirmed in writing) of acceptance
of said Existing Notes by the Company; provided, however, that in all cases,
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Existing Notes tendered pursuant to the Exchange Offer will be exchanged only
after timely receipt by you of certificates for such Existing Notes (or
confirmation of book-entry transfer into your account at the Book-Entry Transfer
Facility), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees and any other required
documents. You shall issue New Notes only in denominations of $1,000 or any
integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable,
except that, subject to the terms and upon the conditions set forth in the
Prospectus and the Letter of Transmittal, Existing Notes tendered pursuant to
the Exchange Offer may be withdrawn at any time prior to the Expiration Date.
10. The Company shall not be required to exchange any Existing
Notes tendered if any of the conditions set forth in the Exchange Offer are not
met. Notice of any decision by the Company not to exchange any Existing Notes
tendered shall be given (and confirmed in writing) by the Company to you.
11. If, pursuant to the Exchange Offer, the Company does not
accept for exchange all or part of the Existing Notes tendered because of an
invalid tender, the occurrence of certain other events set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions" or otherwise,
you shall as soon as practicable after the expiration or termination of the
Exchange Offer return those certificates for unaccepted Existing Notes (or
effect appropriate book-entry transfer), together with any related required
documents and the Letters of Transmittal relating thereto that are in your
possession, to the persons who deposited them.
12. All certificates for reissued Existing Notes, unaccepted
Existing Notes or for New Notes shall be forwarded by first-class certified
mail, return receipt requested.
13. You are not authorized to pay or offer to pay any
concessions, commissions or solicitation fees to any broker, dealer, bank or
other persons or to engage or utilize any person to solicit tenders.
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14. As Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those
specifically set forth herein or as may be subsequently agreed to in writing by
you and the Company;
(b) will be regarded as making no representations and having
no responsibilities as to the validity, sufficiency, value or genuineness of
any of the certificates or the Existing Notes represented thereby deposited with
you pursuant to the Exchange Offer, and will not be required to and will make
no representation as to the validity, value or genuineness of the Exchange
Offer;
(c) shall not be obligated to take any legal action hereunder
which might in your reasonable judgment involve any expense or liability,
unless you shall have been furnished with reasonable indemnity;
(d) may reasonably rely on and shall be protected in acting
in reliance upon any certificate, instrument, opinion, notice, letter, telegram
or other document or security delivered to you and reasonably believed by you
to be genuine and to have been signed by the proper party or parties;
(e) may reasonably act upon any tender, statement, request,
comment, agreement or other instrument whatsoever not only as to its due
execution and validity and effectiveness of its provisions, but also as to the
truth and accuracy of any information contained therein, which you shall in good
faith believe to be genuine or to have been signed or represented by a proper
person or persons;
(f) may rely on and shall be protected in acting upon written
or oral instructions from any officer of the Company;
(g) may consult with your counsel with respect to any
questions relating to your duties and responsibilities and the advice or opinion
of such counsel shall be full and
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complete authorization and protection in respect of any action taken, suffered
or omitted to be taken by you hereunder in good faith and in accordance with the
advice or opinion of such counsel; and
(h) shall not advise any person tendering Existing Notes
pursuant to the Exchange Offer as to the wisdom of making such tender or as to
the market value or decline or appreciation in market value of any Existing
Notes.
15. You shall take such action as may from time to time be
requested by the Company or its counsel (and such other action as you may
reasonably deem appropriate) to furnish copies of the Prospectus, Letter of
Transmittal and the Notice of Guaranteed Delivery (as defined in the Prospectus)
or such other forms as may be approved from time to time by the Company, to all
persons requesting such documents and to accept and comply with telephone
requests for information relating to the Exchange Offer, provided that such
information shall relate only to the procedures for accepting (or withdrawing
from) the Exchange Offer. The Company will furnish you with copies of such
documents at your request. All other requests for information relating to the
Exchange Offer shall be directed to the Company, Attention:___________________.
16. You shall advise by facsimile transmission or telephone,
and promptly thereafter confirm in writing to the President of the Company and
such other person or persons as it may request, daily (and more frequently
during the week immediately preceding the Expiration Date and if otherwise
requested) up to and including the Expiration Date, as to the number of Existing
Notes which have been tendered pursuant to the Exchange Offer and the items
received by you pursuant to this Agreement, separately reporting and giving
cumulative totals as to items properly received and items improperly received.
In addition, you will also inform, and cooperate in making available to, the
Company or any such other person or persons upon oral request made from time to
time prior to the Expiration Date of such other information as it or he or she
reasonably requests. Such cooperation shall include, without limitation, the
granting by you to the Company and such person
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as the Company may request of access to those persons on your staff who are
responsible for receiving tenders, in order to ensure that immediately prior to
the Expiration Date the Company shall have received information in sufficient
detail to enable it to decide whether to extend the Exchange Offer. You shall
prepare a final list of all persons whose tenders were accepted, the aggregate
principal amount of Existing Notes tendered, the aggregate principal amount of
Existing Notes accepted and deliver said list to the Company.
17. Letters of Transmittal and Notices of Guaranteed Delivery
shall be stamped by you as to the date and the time of receipt thereof and shall
be preserved by you for a period of time at least equal to the period of time
you preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Company.
18. You hereby expressly waive any lien, encumbrance or right
of set-off whatsoever that you may have with respect to funds deposited with you
for the payment of transfer taxes by reasons of amounts, if any, borrowed by
the Company, or any of its subsidiaries or affiliates pursuant to any loan or
credit agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you
shall be entitled to such compensation as set forth on Schedule I attached
hereto.
20. You hereby acknowledge receipt of the Prospectus and the
Letter of Transmittal and further acknowledge that you have examined each of
them. Any inconsistency between this Agreement, on the one hand, and the
Prospectus and the Letter of Transmittal (as they may be amended from time to
time), on the other hand, shall be resolved in favor of the latter two
documents, except with respect to the duties, liabilities and indemnification of
you as Exchange Agent, which shall be controlled by this Agreement.
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21. The Company covenants and agrees to indemnify and hold you
harmless in your capacity as Exchange Agent hereunder against any loss,
liability, cost or expense, including attorneys' fees and expenses, arising out
of or in connection with any act, omission, delay or refusal made by you in
reliance upon any signature, endorsement, assignment, certificate, order,
request, notice, instruction or other instrument or document reasonably believed
by you to be valid, genuine and sufficient and in accepting any tender or
effecting any transfer of Existing Notes reasonably believed by you in good
faith to be authorized, and in delaying or refusing in good faith to accept any
tenders or effect any transfer of Existing Notes; provided, however, that the
Company shall not be liable for indemnification or otherwise for any loss,
liability, cost or expense to the extent arising out of your gross negligence or
willful misconduct. In no case shall the Company be liable under this indemnity
with respect to any claim against you unless the Company shall be notified by
you, by letter or cable or by facsimile confirmed by letter, of the written
assertion of a claim against you or of any other action commenced against you,
promptly after you shall have received any such written assertion or notice of
commencement of action. The Company shall be entitled to participate at its own
expense in the defense of any such claim or other action, and, if the Company so
elects, the Company shall assume the defense of any suit brought to enforce any
such claim. In the event that the Company shall assume the defense of any such
suit, the Company shall not be liable for the fees and expenses of any
additional counsel thereafter retained by you so long as the Company shall
retain counsel satisfactory to you to defend such suit.
22. You shall arrange to comply with all requirements under
the tax laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that you are required to deduct 31% on
payments to holders who have not supplied their correct Taxpayer Identification
Number or required certification. Such funds will be turned over to the Internal
Revenue Service in accordance with applicable regulations.
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23. You shall deliver or cause to be delivered, in a timely
manner to each governmental authority to which any transfer taxes are payable in
respect of the exchange of Existing Notes, your check in the amount of all
transfer taxes so payable, and the Company shall reimburse you for the amount of
any and all transfer taxes payable in respect of the exchange of Existing
Notes; provided, however, that you shall reimburse the Company for amounts
refunded to you in respect of your payment of any such transfer taxes, at such
time as such refund is received by you.
24. This Agreement and your appointment as Exchange Agent
hereunder shall be construed and enforced in accordance with the laws of the
State of New York applicable to agreements made and to be performed entirely
within such state, and without regard to conflicts of law principles, and shall
inure to the benefit of, and the obligations created hereby shall be binding
upon, the successors and assigns of each of the parties hereto.
25. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
26. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
27. This Agreement shall not be deemed or construed to be
modified, amended, rescinded, cancelled or waived, in whole or in part, except
by a written instrument signed by a duly authorized representative of the party
to be charged. This Agreement may not be modified orally.
28. Unless otherwise provided herein, all notices, requests
and other communications to any party hereunder shall be in writing (including
facsimile or similar writing) and shall be given to such party, addressed to it,
at its address or telecopy number set forth below:
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If to the Company:
EV International, Inc.
602 Cecil Street
Buchanan, Michigan 49107
Facsimile: (212) 695-4709
Attention:
If to the Exchange Agent:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Trustee
Administration
29. Unless terminated earlier by the parties hereto, this
Agreement shall terminate 90 days following the Expiration Date. Notwithstanding
the foregoing, Paragraphs 19, 21 and 23 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly deliver to
the Company any certificates for Notes, funds or property then held by you as
Exchange Agent under this Agreement.
30. This Agreement shall be binding and effective as of the
date hereof.
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Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
EV INTERNATIONAL, INC.
By:______________________________
Name:
Title:
Accepted as of the date
first above written:
THE BANK OF NEW YORK, as Exchange Agent
By:______________________________
Name:
Title:
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SCHEDULE I
FEES
