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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1998 COMMISSION FILE NO. 333-27341
TELEX COMMUNICATIONS, INC.
(FORMERLY KNOWN AS EV INTERNATIONAL, INC.)
(Exact name of registrant as specified in its charter)
DELAWARE 52-201193
(State or other jurisdiction of (I.R.S. Employer
incorporation or Identification No.)
organization)
9600 ALDRICH AVENUE SOUTH, BLOOMINGTON, MINNESOTA 55420
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 884-4051
Securities registered pursuant to Section 12(b) of the Act
NONE
Securities registered pursuant to Section 12(g) of the Act
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s)), and (2) has been subject to such filing
requirements for the past 90 days. YES |X} NO |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K |X|
The aggregate market value of Common Stock held by non-affiliates on March 31,
1998 was $0.
As of March 31, 1998 there were 110 shares of Telex Communications, Inc. Common
Stock, $.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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TABLE OF CONTENTS TO FORM 10-K
Page
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PART I.......................................................................1
ITEM 1. BUSINESS......................................................1
ITEM 2. PRODUCTION AND FACILITIES....................................17
ITEM 3. LEGAL PROCEEDINGS............................................19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........19
PART II.....................................................................19
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS..........................................19
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA...........................21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..........................23
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK.........................................................31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................32
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE..........................32
PART III....................................................................32
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS.............................32
ITEM 11. EXECUTIVE COMPENSATION.......................................35
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT...................................................43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............44
PART IV.....................................................................47
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K..................................................47
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As used in this Form 10-K, unless otherwise indicated or the context
otherwise requires, references to (i) "Holdings" shall mean Telex Communications
Group, Inc., a Delaware corporation and the corporate parent of the Company;
(ii) "Old Telex" refers to the Delaware corporation formerly named Telex
Communications, Inc., a wholly-owned subsidiary of Holdings, and its
subsidiaries in respect of periods prior to the Mergers (as defined in Item 1.
Business); (iii) the "Company" shall mean Telex Communications, Inc., a Delaware
corporation formerly named EV International, Inc. ("EVI") and successor by
merger to Old Telex, and its subsidiaries and includes, as the context may
require, predecessor and successor companies; (iv) "Old EVI" shall mean EV
International, Inc. and its subsidiaries in respect of periods prior to the
Mergers and includes any predecessor companies; and (v) "EV Holdings" refers to
EVI Audio Holding, Inc., the direct parent company of EVI prior to the Mergers.
Unless otherwise indicated, all references to fiscal years in this Form 10-K are
to the fiscal years ending on last day of February of each year (e.g., Fiscal
1998 refers to the fiscal year ended February 28, 1998). Unless otherwise
indicated, all references to amounts reported for Fiscal 1994 through Fiscal
1996 are based on reclassified predecessor basis of accounting, all references
to amounts reported for Fiscal 1997 include the reclassified predecessor basis
of accounting for the period March 1, 1996 through February 10, 1997 and the
reclassified new basis of accounting for the period February 11, 1997 through
February 28, 1997. Such reclassified amounts conform to the Fiscal 1998
presentation. These reclassifications had no impact on the previously
reported operating profit, net income, EBITDA or shareholder's equity (See Note
(a) to Selected Historical Financial Data).
PART I
ITEM 1. BUSINESS
Corporate History:
The Company, formed as a result of the February 2, 1998 merger of Old
Telex and Old EVI (see Management's Discussion and Analysis of Financial
Condition and Results of Operations--"The Mergers"), is a leader in the design,
manufacture and marketing of sophisticated audio, wireless and multimedia
communications equipment to commercial, professional and industrial customers.
The Company provides high value-added communications products designed to meet
the specific needs of customers in commercial, professional and industrial
markets, and does not participate in the competitive retail consumer electronics
market. The Company offers a comprehensive range of products worldwide for
professional audio systems as well as for multimedia and other communications
product markets, including wired and wireless microphones, wired and wireless
intercom systems, mixing consoles, signal processors, amplifiers, loudspeaker
systems, headphones and headsets, tape duplication products, talking book
players, LCD projectors, wireless LAN and PCS antennas, hearing aids and
wireless assistive listening devices. 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 or transmitted, and by professional entertainers,
television and radio on-air talent, presenters, airline pilots and the hearing
impaired in order to facilitate speech or communications. The Company is a
wholly owned subsidiary of Holdings, a holding company whose assets prior to the
Mergers consisted primarily of its investment in Old Telex.
Prior to February 10, 1997, the business of Old EVI was conducted as part
of the business of Mark IV Industries, Inc. ("Mark IV"), through a number of
operating divisions and subsidiaries which made up Mark IV's professional audio
business, referred to in this Form 10-K as the Mark IV Audio Group. On February
10, 1997, pursuant to a purchase agreement dated December 12, 1996, an
acquisition subsidiary
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wholly owned by Greenwich Street Capital Partners, L.P. ("GSCP") and certain
affiliated investors acquired from Mark IV and one of its subsidiaries all of
the issued and outstanding capital stock of Gulton Industries, Inc. ("Gulton"),
the former parent of Old EVI, and each of its subsidiaries for an initial cash
purchase price of $151.5 million, plus $4.9 million in estimated adjustments
paid on the closing date, which aggregate amount is subject to further
post-closing adjustments. The acquisition subsidiary subsequently merged with
and into Gulton, and Gulton then merged with and into Old EVI, with Old EVI
continuing as the surviving corporation. The predecessor company of Old Telex
was founded in 1936 as a manufacturer and distributor of hearing aid products
and from 1973 to 1988, operated as a wholly owned subsidiary of the Telex
Corporation. In 1988, the Telex Corporation was purchased by Memorex Telex N.V.
("Memorex"). In May 1989, Memorex sold the assets that comprised the Company's
business to Holdings and Old Telex. On May 6, 1997, Old Telex completed a
recapitalization pursuant to an agreement among Old Telex, Holdings, GSCP and
certain other investors. Additional information on the Old EVI acquisition and
Old Telex recapitalization is set forth in Management's Discussion and Analysis
of Financial Condition and Results of Operations, which begins on page 23.
On February 2, 1998, Old EVI merged with Old Telex, a wholly owned
subsidiary of Holdings and an affiliate of GSCP, with Old EVI surviving (the
"Merger"). In the Merger, EVI changed its corporate name to "Telex
Communications, Inc." and in such capacity is referred to in this Form 10-K as
the "Company". The Merger was effected pursuant to an agreement and plan of
merger, dated January 29, 1998 (the "Merger Agreement") under which Greenwich I
LLC ("G-I"), a subsidiary wholly owned by GSCP and certain affiliated investors,
exchanged all of the issued and outstanding common and preferred stock of EVI
Holdings, the former parent of Old EVI, for 1,397,400 shares of common stock of
Holdings, par value $0.0005 per share (the "Common Stock") and 13,000 shares of
Series A Pay-in-Kind Preferred Stock, par value $0.01 per share, of Holdings,
respectively, and EVI Holdings was merged with and into Holdings, with Holdings
continuing as the surviving corporation (the "Parent Merger", and together with
the Merger, the "Mergers"). The Mergers have been accounted for essentially as a
pooling of interests from May 6, 1997, the date on which Old EVI and Old Telex
came under common control of GSCP, and the financial statements of the Company
for Fiscal 1998 accordingly include the results of Old Telex from May 6, 1997.
In connection with the Mergers, the Company determined to change its
fiscal year, effective as of March 31, 1998, from the last day of February to
March 31, the fiscal year historically utilized by Holdings. This report covers
the fiscal year ended February 28, 1998. The Company filed a Transition Report
on Form 10-K with the Securities and Exchange Commission (the "Commission") on
May 4, 1998, which report covered the business, operations and financial
operations of Old Telex from April 1, 1997 through February 2, 1998 immediately
prior to the Merger, but after giving effect to certain Merger-related
transactions. Such Transition Report contains disclosures concerning Old Telex
which may be helpful in better understanding the information concerning the
Company included in this Form 10-K.
The Company's principal executive office is currently located at 9600
Aldrich Avenue South, Bloomington, Minnesota 55420. The Company's telephone
number is (612) 884-4051.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company may have included certain forward-looking statements in this
Report and includes this provision pursuant to the "safe harbor" provisions of
the Private Securities Reform Act of 1995. Whenever, in this Report, the Company
or its management express an expectation or belief as to future results or
future events, while made in good faith and with a reasonable basis based on
information
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currently available to the Company's management, there is no assurance that the
statement of expectation or belief will be achieved or accomplished. Various
risk factors could cause actual results and events to vary significantly from
those expressed in any forward-looking statement. The following factors, in
addition to those discussed elsewhere in this Report, could affect the future
results of the Company, and could cause results to differ materially from those
expressed in such forward-looking statements: (i) the timely development and
market acceptance of new products; (ii) the financial resources of competitors
and the impact of competitive products and pricing; (iii) changes in general and
industry specific economic conditions on a national, regional or international
basis; (iv) changes in laws and regulations, including changes in accounting
standards; (v) the timing of the implementation of changes in operations to
effect cost savings; (vi) opportunities that may be presented to and pursued by
the Company following the Mergers; (vii) the Company's ability to access
external sources of capital; and (viii) such risks and uncertainties as are
detailed from time to time in the Company's Securities and Exchange Commission
reports and filings.
Segment Information:
Overview
Subsequent to the Mergers, the Company reorganized what had been
classified as Old Telex's four strategic business units and Old EVI's four
principal lines of business into the following two business segments:
(i) Professional Sound and Entertainment, which includes Old EVI's three
principal lines of business within the overall professional audio
market: (1) Fixed Installation; (2) Professional Music Retail; and
(3) Concert/Recording/Broadcast and Old Telex's Broadcast
Communications Systems and Sound Reinforcement product groups (these
businesses were previously part of Old Telex's Professional Sound
and Entertainment Group); and
(ii) Multimedia/Communications, which includes all of Old Telex's
Multimedia/Audio Communications, RF/Communications, and Hearing
Instruments Groups, the Tape Duplication product group from Old
Telex's Professional Sound and Entertainment Group and Old EVI's
Other Applications line of business, consisting of handheld
microphones and earphones for field and aircraft communications,
both military and civilian, equipment for high-speed duplication of
audio tapes, and components marketed to original equipment
manufacturers for incorporation into their products.
A more detailed discussion concerning the Company's two new business segments
follows.
Professional Sound and Entertainment
Professional Sound and Entertainment combines Old EVI's three principal
lines of business within the overall professional audio market (i.e., (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); and the Broadcast Communications Systems and Sound
Reinforcement product groups from Old Telex's Professional Sound and
Entertainment Group (i.e., advanced digital matrix intercoms used by
broadcasters, including all major television networks, to control production
communications; intercoms, headsets and wireless communications systems used by
professional, college and high school football teams and stadiums and
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other professional and school sports teams; and wired and wireless microphones
used in the education, sports, broadcast, music and religious markets).
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 theatres, 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 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 the 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 1998 through 2000.
Many cinemas periodically 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.
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. In addition, sales are also driven by
demand for smaller and lighter weight products which are easier to perform with
and transport.
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
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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.
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.
Broadcast Communications Systems. The Company is a leader in broadcast
communications equipment for end markets such as sports and broadcasting. The
Company produces a broad line of broadcast communications equipment. The
Company's smallest system, the Telex(R) Audiocom(R) modular intercom system, is
used by theaters, small sporting arenas, network affiliates and independent
cable channels for their communications needs. Typically, these systems are used
to link 20 to 30 people so they can communicate during an event or performance.
The Company's middle market offering, the RTS(TM) TW intercom system, is used by
larger broadcast network affiliates, larger sporting venues and production
studios. This system is also used in broadcast trucks as a remote, portable
studio for news gathering or sporting events, and typically provides
communications links for 50 to 60 people at a time. The Company's high-end
product, the RTS(TM) ADAM(TM) (Advanced Digital Audio Matrix) intercom system,
is used by the major networks in order to cover large events such as the
Olympics and the Superbowl. The ADAM(TM) system allowed NBC to provide
communications in any combination between 400 separate individuals -- from
person-to-person to one person to all four hundred at a touch of a button -- for
its 1996 Summer Olympics coverage. This system was also used by networks from
Australia, Finland, Canada, Japan, Korea and other countries for their Olympics'
coverage.
The Company also provides wired and wireless communication systems and
related components to the National Football League (the "NFL") as well as high
school and college teams and World, Canadian and Arena Football Leagues. In
1996, the Company began providing NFL, college and high school coaches with an
encrypted wireless intercom system, which allows the head coach to communicate
confidentially with their offensive and defensive coordinators on the side lines
and in the booths above the fields.
Sound Reinforcement. Sound Reinforcement is divided into two main product
groups: (i) wired and wireless microphones, which serve the professional needs
of sound contractors, entertainers, and speakers, and are used in a variety of
settings such as theaters, stadiums and hotels; and (ii) wireless assistive
listening devices, used by the hearing impaired to diminish the effects of
background noise and poor building acoustics in theaters, stadiums, court rooms
and other facilities using public address systems.
The Company believes that it offers one of the industry's most extensive
lines of wireless microphone, receiver and transmitter systems, including a wide
variety of handheld, lapel and guitar microphone options. The Company offers
microphones (including noise canceling) with a wide variety of directional
patterns to meet the needs for general sound reinforcement as well as the
specific needs of users such as drummers, vocalists and public address
announcers. Many of these lines incorporate the Company's Posi-Phase(TM) true
diversity antenna circuitry which produces a stronger signal for higher quality
sound over a longer distance without the signal dropouts or the switching noise
common in other
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systems. Some of the Company's wireless microphones also incorporate an advanced
proprietary multi-crystal tuning system that allows any specific frequency to be
used within the operating limits of the receiver. The crystal control and
associated radio frequency filtering provide superior radio frequency
performance and maximum protection from interference.
The second product group in Sound Reinforcement is wireless assistive
listening devices, sold to arenas, theaters, churches, funeral homes, hotels and
other public facilities. The Company's principal product in this product group
is the Telex(R) SoundMate(R) wireless assistive listening systems. Assistive
listening devices are now mandated by the Americans with Disabilities Act,
passed in 1994, which requires that assistive listening devices be provided to
all hearing impaired individuals free of charge at facilities using public
address systems. The Company believes that continued implementation of this law
and the aging of America's population should generate continued growth in this
market.
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 Professional Sound and
Entertainment product offerings and principal brands and the business lines to
which they relate. Management estimates that worldwide sales of its Telex and
Electro-Voice brands accounted for approximately 40% of the Professional Sound
and Entertainment segment's net sales in Fiscal 1998 and that the balance of
this segment's net sales are approximately evenly split among the Company's
other Professional Sound and Entertainment brands.
<TABLE>
<CAPTION>
Principal Brand Primary Products Business Line
--------------- ---------------- -------------
<S> <C> <C>
Telex Wired and wireless microphones, Fixed Installation
headsets, headphones, wireless assistive Professional Music Retail
listening devices Concert/Recording/Broadcast
RTS Intercoms, microphones, headsets Concert/Recording/Broadcast
Fixed Installation
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
</TABLE>
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<TABLE>
<CAPTION>
Principal Brand Primary Products Business Line
--------------- ---------------- -------------
<S> <C> <C>
Vega Wireless microphones Fixed Installation
Professional Music Retail
Concert/Recording/Broadcast
Other Applications
Fixed Installation
DDA Mixing consoles Concert/Recording/Broadcast
</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 Telex and Vega brand
names 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 and is targeted to the needs
of the working professional in broadcast and production, concert sound, live
theater, theme parks and related applications.
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 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
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"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."
Multimedia/Communications
Multimedia/Communications combines all of Old Telex's Multimedia/Audio
Communications, RF Communications and Hearing Instruments Groups, the Tape
Duplication product group from Old Telex's Professional Sound and Entertainment
Group and Old EVI's Other Applications line of business (consisting of handheld
microphones and earphones for field and aircraft communications, both military
and civilian, equipment for high-speed duplication of audio tapes, and
components to original equipment manufacturers for incorporation into their
products).
Within the Multimedia/Communications segment, the Company supplies
computer audio microphones, headsets and headphones used to facilitate voice
communications between computers and their users; LCD video and data projectors
used to make multimedia presentations; and aircraft intercoms, microphones and
headsets (including active noise reduction headsets) for use in high-noise
environments such as the cockpits of airplanes and helicopters. Customers for
computer audio microphones include a number of computer hardware and modem
manufacturers, such as Compaq, Hewlett-Packard, IBM and 3Com. In addition, the
Company sells its LCD projectors to corporate and educational training
specialists, while principal customers for the Company's aircraft products are
the major aircraft manufacturers and airlines, including Boeing, American
Airlines and Delta, as well as airport fixed base operators. Within this
segment, the Company also offers a broad line of acoustic accessories and
antennas for various communications needs and applications. The Company markets
such products to wireless local area network providers, public safety and law
enforcement groups (police, fire departments, emergency services, CIA, FBI and
the Secret Service) amateur radio, citizens band radio, land mobile radio,
telephony and various commercial, industrial and military markets. The Company
also produces audio products for the Library of Congress' talking book program
as well as a broad line of high value, technologically differentiated hearing
aids and other assistive listening devices for the hearing impaired including
in-the-ear, behind-the-ear and in-the-canal hearing aids, as well as FM wireless
auditory trainers and personal assistive listening devices. The Company's
patented Adaptive Compression(R) technology offers superior signal processing
and provides the user with superior intelligibility and understanding of speech
in the presence of background noise. The Company's hearing instruments business
dates back to 1936, making it one of the oldest hearing aid manufacturers in the
United States.
Within the Company's new Multimedia/Communications segment, the Company
targets nine principal product markets; (i) computer audio, (ii) tape
duplication, (iii) multimedia presentation/training, (iv) aviation
communications/other applications, (v) wireless LAN and PCS antennas, (vi)
talking book players, (vii) wireless communications, (viii) hearing aids and
(ix) wireless assistive listening devices.
Computer Audio. The Company believes that it is the largest supplier of
microphones, headphones and headsets to the computer industry, selling a full
line of headphones, headsets and group listening centers for use in the
classroom with computers, VCRs, CD-ROMs and laserdisc players. The Company
currently sells to most of the major computer manufacturers, with whom it enjoys
close working relationships, including Compaq, Gateway, Hewlett-Packard and IBM,
as well as dozens of other component and OEM manufacturers. In addition, the
Company serves the computer education market. The largest portion of the
Company's revenues in the computer audio market are generated from the sales of
computer microphones for sound and speech recognition. Many of the Company's
microphones are
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also sold to modem manufacturers, such as 3Com, who then package these
microphones with their modems, to ensure compatibility of the application to the
end-user.
Tape Duplication. The Company's cassette duplicators and copiers are
primarily used to copy the spoken word and serve two principal markets:
religious (houses of worship, missionaries and tape ministries) and training
programs/seminars (professional seminar presenters, self-improvement programs,
teachers, legal documentation and law enforcement). The Company produces a line
of high-speed audiocassette duplicators designed for "in-cassette" copying of
standard audiocassette tapes. This is in contrast to the high volume music
cassette duplication market, where bulk audiotape is copied before it is loaded
into the cassette cartridge. The current product line is comprised of four
models: the Replica(TM) and the Copyette(TM), simple portable units, the ACC
Series(TM), a duplicator that is expandable and capable of adjusting copy
quality, and the 6120 Series(TM), which is capable of duplicating open-reel and
cassette tapes and meets the needs of the professional recorder. These products
offer high speed tape handling, high frequency audio circuit designs and low
vibration mechanical drives at competitive prices within their respective
categories.
Multimedia Presentation/Training. The Multimedia Presentation/Training
product group manufactures and markets projection products, such as the
Firefly(TM), a lightweight portable data/video projector, and Caramate(R) slide
projector products, which are used in many types of educational, training
institutions and presentation settings, primarily for corporate and educational
markets. The Company's LCD projector line also includes other lightweight and
boardroom data/video projectors.
Aviation Communications/Other Applications. The Company supplies a broad
line of aviation communications headsets, intercoms and microphones to major
commercial and commuter airlines and pilots as well as to airframe
manufacturers. The Company's aviation communications products are known for
their design innovation, lightweight build, technological strength and product
value. The Company uses its ANR(R) (Active Noise Reduction) patented technology
in several of its designs. In addition, the Company produces hand-held
microphones and earphones for field and aircraft communications, both military
and civilian and sells its components to original equipment manufacturers for
incorporation into their products.
Wireless LAN and PCS Antennas. At the end of 1994, Old Telex entered the
wireless local area networks ("LAN") and personal communication systems ("PCS")
antenna markets to capitalize on the Company's antenna design and communications
technology expertise. The Company believes that wireless LAN and PCS technology
has broad-based applications in today's business world. End users include
corporations, retailers, warehouses and distribution centers. The Company's
products are used by a wide variety of companies to set up more efficient and
cost-effective LAN and PCS systems through wireless connections. As an example,
Sears has installed the Company's wireless LAN antennas to remotely connect its
cash registers to the store's main computer, which allows Sears to move the cash
registers as needed to meet demand without worrying about wires.
Talking Book. The Company produces a unique cassette player that is sold
to the Library of Congress ("LOC") for use in their talking book program for the
blind and physically handicapped. Under the talking book program, the LOC
distributes books on tape to the blind and physically handicapped, free of
charge, throughout the United States. The talking book players were designed
using special features for ease of use and facilitate playing the books back at
different speeds. A unique tape format ensures that these tapes cannot be played
on standard equipment. Old Telex began providing talking book players to the LOC
in 1969. In April 1998, the Company entered into a new contract with the LOC
with a maximum term of five years. While the revenue from this program in recent
years has been relatively stable, the
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<PAGE> 12
program supplies a steady source of cash flow. The talking book machines have
also been sold internationally to similar programs in Canada, New Zealand and
Australia.
Wireless Communications. The Company also produces a broad line of
wireless communications products such as headsets, microphones, antennas, and
rotors for three primary markets: public safety and law enforcement groups
(police, fire departments, emergency services, CIA, FBI and the Secret Service),
commercial truck drivers and amateur radio operators. The Company believes that
it has established a reputation within these markets for providing reliable
communications, which is the key requirement of most of its users. Many of the
Company's products, such as the Ear-Mike(TM) microphone/receiver system and the
Road King(R) CB microphones, have high brand name recognition within their
respective markets. The Company's wireless technology is driven by acoustics and
antenna design capabilities developed over Old Telex's 25-year history in the
military antenna business. The Company distributes wireless communications
products through over 1,100 dealers.
Hearing Aids. Hearing aid devices are generally segmented by ear
positioning and sound enhancement capabilities. Ear positioning takes two forms,
either in the ear or behind the ear. Sound enhancement is based on two types of
technologies, linear amplification, which only amplifies the sound, and
compression technology, which modifies the actual sound received by the user.
The Company believes that its patented compression technology, Adaptive
Compression(R), offers superior signal processing circuitry and provides the
user with superior intelligibility and understanding of speech in the presence
of noise. In October 1996, Old Telex introduced Threshold Compression(TM)
(patent pending), which has unique user volume control and user selectable
frequency abilities which, for example, allow the user to increase the volume of
conversations in the presence of background noise. The Company distributes its
hearing aids through 9,000 hearing instrument dispensers throughout the United
States.
The Company has recently created one of the smallest hearing aids
available in the marketplace, marketed under the Acapella(TM) name. The device
fits completely in the canal, making it essentially undetectable. The Acapella
hearing aids offer not only improved appearance but its compression technology
and advanced design offer superior sound as well. In addition, in October 1996,
Old Telex introduced a significantly improved soft shell hearing aid which has
met with significant success. Sold under the SoftWear(TM) and Sound
Advantage(TM) names, these hearing aids are composed of a new material that, due
to its flexibility, is more comfortable than hard plastic based molds.
Wireless Assistive Listening Systems. The Company also produces and
distributes wireless assistive listening systems, such as auditory trainers and
personal assistive listening devices for the hearing impaired, which help the
user in environments with high levels of background noise and poor building
acoustics. Auditory trainers allow the user to hear directly from a sound
source, such as a teacher, via wireless FM transmitters. Personal assistive
listening devices amplify a certain source, such as a speaker. The Company
serves the educational and consumer marketplaces for wireless assistive
listening systems by providing cost-effective, technologically differentiated,
and functionally superior products maintained by excellent customer service. The
Company's principal focus is on the educational market, where many schools and a
number of large city (such as New York and Los Angeles) and county school
systems use the Company's products.
As with hearing aid products, the Company believes that it is able to
differentiate its products from its competitors' products through higher ease of
product use and technologically strong design. Its ClassMate(R) line of auditory
trainers offers state-of-the-art RF/wireless designs, compression technology and
synthesized frequency selection in a wireless FM behind-the-ear device, which is
specially designed for older students who have rejected other models based on
the appearance of body-worn auditory trainers.
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<PAGE> 13
Prior to the Mergers, Old EVI operated in a single industry segment, the
professional audio market. Subsequent to the Mergers, the Company has
reorganized its principal lines of business into two new business units, as
described above, solely as a result of the addition of Old Telex's businesses in
connection with the Mergers. Financial information about the Company's two new
business units for Fiscal 1998 and for the period beginning February 11, 1997
and ended February 28, 1997 is set forth in Note 13 to the Consolidated
Financial Statements included elsewhere herein.
International Operations
The Company's products are marketed in over 80 countries worldwide, which
reduces the Company's dependence on any single geographic market. 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.
In Fiscal 1998, over 40% of the Company's net revenues consisted of sales made
outside the United States, predominantly in Western Europe and Asia. 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.
For Fiscal 1998, the Company had European sales of $65.7 million, Asia
Pacific sales of $47.8 million, Canadian sales of $8.3 million, and other
foreign sales of $10.7 million. See Note 13 and Note 6 to the Consolidated
Financial Statements.
Product Development
The Company believes that it is one of the most active developers of new
products in the industry. The Company has over 230 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 engineering 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 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.
The Company has a history of technological innovation and strong product
development and 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 Old EVI 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
11
<PAGE> 14
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 Old EVI 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.
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 sold into numerous
customer installations worldwide.
The Company has also recently implemented a number of strategic
initiatives to identify new market opportunities and to reduce its product
development cycle in order to facilitate the timely introduction of new and
enhanced products. The Company maintains close relationships with its
institutional customers to develop products that meet their requirements. For
example, the Company's computer audio microphone line was developed with product
specification input from Microsoft and Compaq. In connection with these
initiatives, the Company increased its investment in engineering and technology
and has implemented programs in several core technologies in such areas as
digital signal processing, wireless communications, application specific
integrated circuit design and active noise reduction technologies. This
increased investment in engineering and technology has enabled the Company to
design new products offering enhanced features, quality and reliability and
lower costs.
As of March 31, 1998, the Company's engineering and development
organization consisted of 189 employees located in seven locations around the
world, including 166 engineers, each of whom specializes in a certain type of
product and application. In Fiscal 1996, 1997 and 1998, engineering expenses
were $8.5 million, $8.5 million and, including $7.2 million of expenses of Old
Telex, $16.8 million, respectively.
Manufacturing
The Company manufactures most of the products it sells and most of the
active acoustic components that they contain. As of May 21, 1998, this is done
in fifteen facilities located in the United States, Mexico, Germany and Great
Britain. 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.
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<PAGE> 15
Management believes that the Company's integrated manufacturing
capabilities are important factors in maintaining and improving the quality,
performance, availability and cost of its 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 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.
Competition
The markets within the professional sound and entertainment and
multimedia/communications segments are both highly competitive and fragmented
and the Company faces meaningful competition in both segments and in most of its
product categories and markets. Management believes that it is one of a few
manufacturers that carry a comprehensive line of professional audio products and
that the key factors for the Company to maintain its position in its various
markets are the recognition of its various brand names, superior distribution
networks, large user base and large number of products, together with its
extensive experience in designing safe and reliable products, dealing with
regulatory agencies and servicing and repairing its products.
While many of the Company's current competitors are generally smaller than
the Company, certain of the Company's competitors are substantially larger than
the Company and have greater financial resources. The Company believes that its
major competitor in providing a full line of professional audio products is
Harmon International Industries, Incorporated, one of whose three segments
competes in the professional audio products market. Eastman Kodak is the major
provider in the slide projector market (Eastman Kodak is also the Company's
largest customer of its slide projectors). In the LCD projection market,
In-Focus Systems, Sharp Electronics and Proxima are the current market leaders.
Sony is the Company's only significant competitor in the tape duplication
market.
The Company believes the principal competitive factors within each of its
two business segments are the factors referred to above, as well as product
quality, product reliability, product features, reputation, distribution,
customer service and support, ability to meet delivery schedules, warranty terms
and price. The Company believes that it currently competes favorably overall
with respect to each of these principal competitive factors.
Patents, Trademarks and Licenses
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.
The Company owns several trademarks in the United States and various
foreign countries, including Adaptive Compression(R), Altec Lansing(R),
Audiocom(R), Caramate(R), ClassMate(R), Dynacord(R), Electro-Voice(R),
Hy-Gain(R), Klark-Teknik(R), MagnaByte(R), Manifold Technology(R), ProStar(R),
Road King(R),
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<PAGE> 16
SoundMate(R), University Sound(R) and Vega(R). A number of these trademarks
Company are identified with and important to the sale and marketing of the
Company's products. See "Professional Sound and Entertainment Brands and
Products."
The Company's operations are not dependent upon any single trademark other
than the Telex and Electro-Voice trademarks. A significant number of products
sold by the Company are sold under the Telex trademark pursuant to a
royalty-free license granted to the Company by Memorex Telex Corporation
("MTC"). On October 15, 1996, MTC filed a voluntary petition under Chapter 11 of
the United States Bankruptcy Code. While management does not believe that its
rights under such license will be materially impaired by such filing, the
Company's ability to enforce such license could be adversely affected by such
filing. In addition, the Company has licensed certain of its trademarks,
including the Altec Lansing trademark, for use on products such as consumer
audio products not otherwise manufactured by the Company, pursuant to a
perpetual, royalty-bearing license. From time to time the Company also has
granted patent or technology licenses to, and has licensed technology or patents
from, other parties. The amounts paid to or by the Company on an annual basis in
relation to its licensing activities have not been material.
The Company has not registered many of 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 is aware that, in
certain foreign jurisdictions, unaffiliated third parties have applied for and
or obtained registrations for marks identical with or similar to marks owned or
used by the Company. 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. The Company does not believe that any
of its products currently infringe upon the proprietary rights of third parties
in any material respect.
The Company's operations are not dependent to any significant extent on
any single or related group of patents, licenses, franchises or concessions. The
Company believes its most significant patents are four patents relating to high
output compression drivers, manifold technology products, variable intensity
horns and time division multiplex digital matrix intercom system which expire in
2003, 2006, 2009 and 2014, respectively. The Company also owns a number of
patents related to the design and manufacture of several of its products,
including headsets, headphones, boom-mounted microphones, various transducer
devices, multiple-band directional antennas, multimedia projectors, computer
audio microphones, adaptive compression circuitry for hearing aids and certain
intercom-related devices. The Company does not believe that the expiration of
any of its patents will have a material adverse effect on the Company's
financial condition or its results of operations.
Suppliers
The Company's extensive vertical integration enables it to manufacture
many of the parts for its products internally. Management believes this gives
the Company a competitive advantage in controlling quality and ensuring timely
availability of parts. The Company also purchases raw materials, assemblies and
components for its products from a variety of suppliers. Total purchases of such
items were $115.0 million for Fiscal 1998.
The Company's five largest suppliers in Fiscal 1998 accounted for 13% of
the total supplies purchased by the Company. The Company's largest single
supplier provides the Company with parts for its talking book program products
as well as components and supplies for various headsets and microphone products.
These supplies comprised 6.5% of the total cost of supplies purchased by the
Company in Fiscal
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<PAGE> 17
1998. This percentage is expected to decrease in Fiscal 1999 as the Company
begins to manufacture in its Mexico facility some of the headset products
historically purchased from this supplier. The Company has purchased products
from this supplier for 16 years. One of the Company's largest suppliers provides
parts and components used in certain products in the Company's LCD projector
products. The Company's purchases from this supplier constituted 2.4% of the
total cost of supplies purchased by the Company for Fiscal 1998.
One of the Company's largest suppliers has been a sole source supplier for
parts used in the manufacture of hearing aids for over 30 years. This supplier
provides these components to over 90.0% of all hearing aid manufacturers in the
United States. Although the Company believes that with adequate notice it can
secure, if necessary, alternate sources for these hearing aid parts, its
inability to obtain sufficient parts would have a material adverse effect on the
Company's results of operations. The Company's purchases from this supplier in
Fiscal 1998 comprised 1.9% of the total supplies purchased by the Company. The
Company believes that it could locate alternative sources of supply for these
components. Doing so, however, could result in increased development costs and
product shipment delays.
Backlog
As is the case with other companies in the Company's businesses, backlog
is not necessarily a meaningful indicator of the conditions of the business
since the Company typically receives and ships orders representing a major
portion of its quarterly non-contract revenues in the current quarter. As of
February 28, 1998, the Company had a backlog of approximately $30.4 million
compared to approximately $17.0 million as of February 28, 1997. Excluding the
impact of Old Telex, backlog as of February 28, 1998 was approximately $16.2
million.
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. Although management
believes that its current manufacturing operations comply in all material
respects with applicable environmental laws and regulations, environmental
legislation has been enacted and may in the future be enacted or interpreted to
create environmental liability with respect to the Company's facilities or
operations. The Company believes that compliance with federal, state and local
environmental protection laws and provisions should have no material adverse
effect on the operating income or financial condition of the Company.
The Company recently had Phase I Environmental Site Assessment and
Compliance Reviews conducted by a third-party environmental consultant at a
number 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 and the Company has
agreed it is a de minimis responsible party at a number of other currently or
formerly owned or utilized sites which have been designated as Superfund sites.
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
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<PAGE> 18
monitoring or remediation was necessary. Specifically, Mark IV has agreed to
indemnify the Company fully for environmental liabilities resulting from (i) any
operations, assets or business not related to the business of Old EVI prior to
the Acquisition Closing Date, (ii) certain Old EVI 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 or related to the business of the Company but at which Old
EVI presently or in the past has incurred environmental liability or for which
third parties have claimed Old EVI has responsibility.
The Company is party to a 1988 consent decree with the predecessor to the
Nebraska Department of Environmental Quality ("NDEQ") relating to the cleanup of
hazardous waste at the Company's Lincoln, Nebraska facility. In connection with
ongoing monitoring and cleanup activities at the site and on adjacent property,
the Company has received from the NDEQ three notices of noncompliance (all of
which related to the same underlying matter). The Company is in discussions with
the NDEQ regarding future actions but does not believe that the costs related to
its responsibilities at the site will result in a material adverse effect on the
Company's operating income or financial condition. NDEQ and the U.S.
Environmental Protection Agency also have requested the Company to take action
in connection with a post-closure permit and possibly to perform additional
remediation at the site. In December, 1997, the Company entered into an
Administrative Order on Consent with U.S.E.P.A. under the Resource Conservation
and Recovery Act to further investigate and remediate the Lincoln facility and
an adjoining property. The Company is not able at this time to determine the
amount of additional expenses, if any, that may be incurred by the Company as a
result of these actions.
Through February 28, 1998, the Company had accrued approximately $1.6
million over the life of the project for anticipated costs to be incurred for
the Lincoln, Nebraska cleanup activities, of which approximately $1.3 million
had been incurred. See Note 12 to the Consolidated Financial Statements of the
Company included elsewhere herein.
The Company estimates that it will incur, in Fiscal 1999, approximately
$150,000 of environmentally related capital expenditures in addition to those
costs associated with the Lincoln, Nebraska cleanup activities described above.
The Company also incurs approximately $30,000 per year of expenses associated
with the disposal of hazardous materials generated in conjunction with its
manufacturing processes.
Employees
As of March 31, 1998, the Company employed 2,979 persons worldwide, of
which 2,158 were employed in the United States, 192 were employed in the United
Kingdom, 332 were employed in Germany, 144 were employed in Mexico and 153 were
employed in other countries. On a functional basis, approximately 2,237 were
employed in manufacturing, 189 in engineering and product development, 387 in
sales and marketing and 166 in administration and finance.
As of March 31, 1998 the Company employed approximately 1,018 unionized
employees, of whom approximately 611 were in the United States, 265 were in
Germany and 142 were in Mexico. In the United States, employees at the Company's
manufacturing facilities in Newport, Tennessee; Sevierville, Tennessee;
Buchanan, Michigan; Mishawaka, Indiana; and Oklahoma City, Oklahoma are covered
by collective bargaining agreements that expire in June 2000, July 1998, June
2000, October 2000 and June 1998, respectively. The Company believes that there
are no significant impediments to renewing the Sevierville, Tennessee collective
bargaining agreement due to expire in July 1998. In addition, in April 1998, the
Company announced the closure of the Oklahoma City, Oklahoma facility, to be
completed in
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<PAGE> 19
the third quarter of Fiscal 1999, and the movement of its production and other
operations to the Company's other facilities. 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.
ITEM 2. PRODUCTION AND FACILITIES
The Company operates the manufacturing plants and facilities described in
the table below. Management believes that the Company's plants and facilities
are maintained in good condition and are suitable and adequate for its present
needs. Currently, the Company's manufacturing plants are operating at an average
of 75% of capacity based on a single shift.
<TABLE>
<CAPTION>
Size
Location Owned/Leased (square-feet) Facility Type
- - ---------------------- ------------ ------------- -------------------------------------
<S> <C> <C> <C>
United States:
Bloomington, Minnesota Owned 50,000 Corporate Headquarters/
Product Development/Sales Office
Blue Earth, Minnesota Owned 150,000 Manufacturing/Distribution
Buchanan, MI Owned 28,500 Product Development
Buchanan, MI Owned 144,000 Manufacturing/Sales/ Marketing/
Administration/Distribution/Service Center
Burnsville, Minnesota Owned 14 acres Vacant land
Glencoe, Minnesota Owned 100,000 Manufacturing
Lincoln, Nebraska Owned 120,000 Manufacturing/Distribution/Product
Development/Sales Office
Newport, TN Owned 49,000 Manufacturing
Oklahoma City, OK(a) Owned 143,000 Manufacturing/Product Development/
Distribution/Service Center
Rochester, Minnesota Owned 30,000 Manufacturing/Distribution
Sevierville, TN Owned 44,000 Manufacturing
Sun Valley, CA(b) Owned 27,000 Manufacturing/Sales/Marketing/
Administration/Product Development/
Distribution/Service Center
Austin, TX Leased 95,000 Manufacturing/Distribution
Buchanan, MI(c) Leased 9,600 Sales/Marketing/Distribution/Service Center
Burbank, California Leased 2,500 Sales Office
El Monte, CA Leased 23,000 Manufacturing/Sales/Marketing/
Administration/Product Development/
Distribution/Service Center
Mishawaka, IN Leased 20,000 Manufacturing
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
Size
Location Owned/Leased (square-feet) Facility Type
- - ---------------------- ------------ ------------- -------------------------------------
<S> <C> <C> <C>
Newport, TN Leased 40,000 Distribution
Sun Valley, CA(d) Leased 20,600 Distribution
International:
Gananoque, Ontario,
Canada(e) Owned 16,000 Sales/Marketing/Administration/
Distribution/Service Center
Straubing, Germany Owned 95,000 Manufacturing/Sales/ Marketing/
Administration/Product Development/
Distribution/Service Center
Guangzhou, China Leased 280 Sales/Marketing
Hermosillo, Sonora,
Mexico(f) Leased 32,500 Manufacturing
Hohenwarth, Germany Leased 7,600 Manufacturing
Ipsach, Switzerland Leased 3,400 Sales/Marketing/Administration/
Distribution/Service Center
Kidderminster, England Leased 35,000 Manufacturing/Sales/Marketing/
Administration/Product Development/
Distribution/Service Center
Kowloon, Hong Kong Leased 18,300 Sales/Marketing/Administration/
Distribution/Service Center
London, England Leased 200 Sales Office
Nagoya, Japan Leased 500 Sales/Marketing
Osaka, Japan Leased 1,200 Sales/Marketing
Paris, France Leased 3,500 Sales/Marketing/Administration/
Distribution/Service Center
Singapore Leased 2,300 Sales Office, Distribution and Service
Straubing, Germany Leased 10,700 Warehouse
Sydney, Australia Leased 8,000 Sales/Marketing/Administration/
Distribution/Service Center
Tokyo, Japan Leased 14,800 Sales/Marketing/Administration/
Distribution/Service Center
Toronto, Ontario, Canada Leased 4,000 Sales Office, Distribution
</TABLE>
- - ------------------
(a) In April 1998, the Company announced the closure of this facility, to be
completed in the third quarter of Fiscal 1999, and the movement of its
production and other operations to the Company's other facilities.
(b) In April 1998, the Company sold its Gauss audio cassette duplication
product line, the principal products manufactured at this site, and
announced the closure of the remaining operations conduced at this site,
to be completed in the third quarter of Fiscal 1999.
(c) In April 1998, the Company announced the closure of this facility, to be
completed in the second quarter of Fiscal 1999, and the movement of its
operations to the Company's other facilities.
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<PAGE> 21
(d) In December 1997, the Company announced the closure of this facility, to
be completed in the first quarter of Fiscal 1999, and the movement of its
operations of the Company's other facilities.
(e) In April 1998, the Company announced the closure of this facility, to be
completed in the first quarter of Fiscal 1999, and the movement of its
operations to the Company's other facilities.
(f) Subject to a five-year lease, scheduled to expire in 2001 if the Company
does not exercise its renewal option.
The Company is committed to achieving International Organization for
Standardization ("ISO") certification at all its principal manufacturing
facilities. The Sevierville, Tennessee and Kidderminster, England and
Hermosillo, Sonora, Mexico facilities have been certified under ISO 9002 and the
Rochester, Minnesota and the Straubing, Germany facilities have been certified
under ISO 9001. The Company's Newport, Tennessee facility is well into the
certification process and expects certification in 1998.
The city of Bloomington, Minnesota, has declared the Company's current
headquarters location to be an urban development zone. However, the city of
Bloomington has not notified the Company of any near-term need for the Company
to consider moving from its current site. Should the Company be required to move
in the future, the Company believes adequate rental facilities would be readily
available in the area.
ITEM 3. 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. 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 a party to any litigation which, if adversely
determined, would have a material adverse effect on the liquidity or results of
operations of the Company.
For a discussion of certain environmental matters, see "--Environmental
Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders of either
the Company or Holdings during the fourth quarter of Fiscal 1998.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
100% of the Company's common stock is held by Holdings. There is no
established public trading market for the Common Stock of Holdings. The Common
Stock of Holdings is not listed on any exchange and it is unlikely that an
active trading market will develop in the foreseeable future for such
securities.
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<PAGE> 22
Holdings has not paid dividends on its Common Stock and the ability of
Holdings and the Company to pay dividends of their respective common stock is
restricted under the Company's Senior Secured Credit Facility (as defined
herein) and the indentures governing the EVI Notes and the Telex Notes. Holdings
and the Company plan to use any retained earnings for working capital purposes
and to make payments under the agreements governing the Company's long-term
indebtedness.
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<PAGE> 23
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial data of the
Company for each of the five fiscal years during the period ended February 28,
1998. The statement of operations and balance sheet data set forth below are
derived from and should be read in conjunction with the Company's audited
consolidated financial statements and notes thereto included elsewhere in this
Form 10-K and "Management's Discussion and Analysis of Financial Condition and
Results of Operations". The statement of operations data for the period from
March 1, 1996 through February 10, 1997, the period from February 11, 1997
through February 28, 1997, and the fiscal year ended February 28, 1998 and the
balance sheet data as of February 28, 1998, are derived from and should be read
in conjunction with the Company's consolidated financial statements and notes
thereto included elsewhere herein which have been audited by Arthur Andersen
LLP, independent public accountants. The statement of operations data set forth
below with respect to the fiscal year ended February 29, 1996 are derived from
and should be read in conjunction with the Company's consolidated financial
statements and notes thereto included elsewhere herein which have been audited
by Coopers & Lybrand L.L.P., independent accountants. The selected historical
financial data with respect to Fiscal 1994 and Fiscal 1995 are derived from
consolidated financial statements of the Company which are not included herein.
The Mergers have been accounted for essentially as a pooling of interests from
May 6, 1997, the date on which Old EVI and Old Telex came under common control,
and the selected historical financial data below for Fiscal 1998 accordingly
includes the results of operations of Old Telex from May 6, 1997. The results of
operations and balance sheet data of Old Telex are not reflected in the data for
periods prior to May 6, 1997.
<TABLE>
<CAPTION>
Predecessor Basis of Accounting(a) New Basis of Accounting(k)
-------------------------------------------------- ---------------------------
Period from Period from
Fiscal Year Ended the Last Day of March 1, 1996, February 11, Fiscal Year
February through 1997, through Ended
----------------------------------- February 10, February 28, February 28,
1994 1995 1996 1997 1997 1998(b)
--------- -------- -------- ----------- ----------- -----------
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales ................................... $ 173.6 $ 185.3 $ 195.5 $ 177.1 $ 14.9 $ 315.5
Cost of sales ............................... 106.0 115.2 123.9 112.1 9.2 195.8
-------- -------- -------- -------- ------- --------
Gross profit ................................ 67.6 70.1 71.6 65.0 5.7 119.8
Engineering ................................. 5.8 6.6 8.5 8.0 0.5 16.8
Selling, general and administrative ......... 41.3 43.0 44.4 41.6 2.8 78.3
Restructuring charges ....................... -- -- -- -- -- 6.2
Corporate charges ........................... -- -- -- -- -- 2.1
Special charges (c) ......................... -- -- -- -- -- 2.2
Amortization of goodwill and other ..........
intangibles .............................. 0.9 1.0 1.0 0.9 0.1 3.1
-------- -------- -------- -------- ------- --------
Operating profit (d) ........................ 19.6 19.5 17.7 14.5 2.3 11.0
Interest expense ............................ -- -- -- -- 0.8 39.5
Recapitalization expense .................... -- -- -- -- -- 6.7
Other (income) expense ...................... -- -- 0.4(e) -- -- (0.1)
-------- -------- -------- -------- ------- --------
Income (loss) before income taxes ........... 19.6 19.5 18.1 14.5 1.5 (35.2)
Provision (benefit) for income taxes ........ 7.3 7.5 7.1 6.2 0.7 (1.4)
-------- -------- -------- -------- ------- --------
Income (loss) before extraordinary
items .................................... 12.3 12.0 11.0 8.3 0.8 (33.8)
Extraordinary loss from early retire-
ment of debt ............................. -- -- -- -- -- 20.6
-------- -------- -------- -------- ------- --------
Net income (loss) ........................... $ 12.3 $ 12.0 $ 11.0 $ 8.3 $ 0.8 $ (54.4)
======== ======== ======== ======== ======= ========
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
Predecessor Basis of Accounting(a) New Basis of Accounting(k)
-------------------------------------------------- ---------------------------
Period from Period from
Fiscal Year Ended the Last Day of March 1, 1996, February 11, Fiscal Year
February through 1997, through Ended
----------------------------------- February 10, February 28, February 28,
1994 1995 1996 1997 1997 1998(b)
--------- -------- -------- ----------- ----------- -----------
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Financial Data:
EBITDA (f) .................................. $ 24.0 $ 24.3 $ 22.8 $ 19.6 $ 2.7 $ 22.4(g)
EBITDA margin (h) ........................... 13.8% 13.1% 11.7% 11.1% 17.9% 7.1%
Capital expenditures ........................ $ 2.6 $ 4.6 $ 3.7 $ 3.3 $ 0.1 $ 9.3
Cash interest expense (i) ................... -- -- -- -- -- $ 38.4
Ratio of EBITDA to cash interest expense..... -- -- -- -- -- 0.6
Ratio of EBITDA minus capital
expenditures to cash interest
expense .................................. -- -- -- -- -- 0.3
Ratio of earnings to fixed charges (j) ...... -- -- -- -- -- 0.2
<CAPTION>
As of February 28,
1998
------------------
<S> <C>
Balance Sheet Data:
Working Capital............................................................................................... $ 71.2
Total assets.................................................................................................. 303.4
Total debt.................................................................................................... 352.3
Shareholder's deficit......................................................................................... (123.0)
</TABLE>
Notes to Selected Historical Financial Data
(a) Certain previously reported amounts have been reclassified to conform to
Fiscal 1998 presentation. These reclassifications had no impact on the
previously reported operating profit, net income, EBITDA or shareholder's
equity. Variable selling costs, such as freight and commissions paid to
sales representatives, previously included in cost of sales, are now
included in selling, general and administrative expenses. Additionally,
depreciation expense, previously combined with and reported as a separate
line item on the Statement of Operations as "depreciation and
amortization", is now allocated to cost of sales, engineering expense, and
selling, general and administrative expense.
(b) The financial data for Fiscal 1998 consists of the full year results of
operations for Old EVI and the results of operations of Old Telex for the
period from May 6, 1997 (the date on which both entities came under common
control) through February 28, 1998.
(c) Special charges consist of a non-cash impairment loss.
(d) Represents income from operations.
(e) Represents a one-time gain on the sale of land in Germany.
(f) 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.
(g) Included in the Fiscal 1998 EBITDA, as presented, are non-cash
compensation charges for stock options associated with the
Recapitalization, non-recurring charges for management cash bonus,
restructuring charges and the non-cash impairment loss described in note
(c) above. Not included in the Fiscal 1998 results, as presented, is the
pro forma impact of the Merger of Old Telex and Old EVI.
(h) Represents EBITDA as a percentage of net sales.
(i) Represents the interest expense exclusive of bank agency fees and
amortization of deferred financing costs.
(j) 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).
(k) The income statement and financial data for the periods after February 10,
1997 was prepared under the new basis of accounting, which includes
adjustments giving effect to the Acquisition under the purchase method of
accounting.
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<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's Discussion and Analysis may contain forward-looking
statements, including, without limitation, statements relating to the Company's
plans, strategies, objectives and expectations and are made pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Any such forward-looking statements involve known and unknown risks and
uncertainties and the Company's actual results may differ materially from those
forward-looking statements. The Company does not undertake to update, revise or
correct any of the forward-looking information contained in this document.
Readers are cautioned that such forward-looking statements should be read in
connection with the Company's disclosures under the heading "CAUTIONARY
STATEMENT FOR THE PURPOSES OF THE 'SAFE HARBOR' PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995" on page 2 of this Report on Form 10-K.
The following discussion and analysis of the financial condition and
results of operations covers periods both before and after completion of the
Transactions (as defined herein). As a result of the Transactions, the Company
has entered into new financing arrangements and has a different capital
structure than its predecessors, Old EVI and Old Telex. The results of
operations for the periods after February 10, 1997 were prepared under the new
basis of accounting, which includes adjustments giving effect to the Acquisition
under the purchase method of accounting. Accordingly, the results of operations
for Fiscal 1998, which are affected by such changes, are not comparable to the
results of operations for prior fiscal years which do not fully reflect the
impact of the Transactions. The results of operations for the fiscal year ended
February 28, 1997 are based on Old EVI's statement of income for the period
ended February 10, 1997, under the predecessor basis of accounting, and Old
EVI's statement of income for the eighteen-day period ended February 28, 1997,
under the new basis 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. Pursuant to the
Recapitalization of Old Telex on May 6, 1997, the historical basis of all assets
and liabilities was retained for financial reporting purposes, and the
repurchases of existing Holdings Common Stock and issuance of new Holdings
Common Stock have been accounted for as equity transactions. The Mergers have
been accounted for essentially as a pooling of interests from May 6, 1997, the
date on which Old EVI and Old Telex came under common control, and the financial
statements of the Company for Fiscal 1998 accordingly include the results of Old
Telex from May 6, 1997. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the consolidated financial statements and notes thereto contained elsewhere
herein.
The Transactions
The Acquisition. On February 10, 1997 (the "Acquisition Closing Date"),
pursuant to a purchase agreement dated December 12, 1996 (,as amended, the
"Purchase Agreement") an acquisition subsidiary wholly owned by GSCP and certain
affiliated investors acquired from Mark IV and one of its subsidiaries all of
the issued and outstanding capital stock of Gulton, the former parent of Old
EVI, and each of its subsidiaries for an initial cash purchase price of $151.5
million, plus $4.9 million in estimated adjustments paid on the closing date,
which aggregate amount is subject to further post-closing adjustments as
described below. The acquisition subsidiary subsequently merged with and into
the parent of Old EVI, and the parent then merged with and into Old EVI, with
Old EVI ultimately surviving (the "Acquisition"). Prior to the Acquisition
Closing Date, (i) EVI Audio LLC, a subsidiary wholly owned by GSCP and certain
affiliated investors, purchased all the issued and outstanding shares of common
stock and Pay-in-Kind Preferred Stock of EV Holdings for an aggregate amount of
$57.6 million and (ii) EV Holdings, a Delaware corporation organized by GSCP to
hold all the issued and outstanding stock of the EVI, contributed $57.6 million
to the Old EVI.
Financing for the Acquisition, and the related fees and expenses,
consisted of (i) $57.6 million of equity capital provided by GSCP and certain
affiliated investors, (ii) a $60.0 million senior credit facility (consisting of
a term loan and a revolving credit facility), and (iii) a $75.0 million senior
subordinated credit facility issued as interim financing by Chase Securities
Inc. and Smith Barney Inc., the initial
23
<PAGE> 26
purchasers of the EVI Existing Notes (as defined herein), and certain other
lenders. Of these amounts, $156.4 million was used for the purchase price for
the Acquisition and $10.4 million was used for financing and transaction fees
and expenses. Under the Purchase Agreement, the purchase price was subject to
adjustment on the basis of (i) the audited working capital and audited cash flow
of Old EVI 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 Old EVI and its subsidiaries), on the one hand, and Old EVI and its
subsidiaries, on the other hand, during the period between December 31, 1996 and
the Acquisition Closing Date. Based on these provisions Mark IV has requested a
purchase price increase of $405,000, which amount the Company is currently
disputing pursuant to the applicable provisions of the Purchase Agreement.
On March 24, 1997, Old EVI issued 11% Senior Subordinated Notes due 2007
in an aggregate principal amount of $100.0 million (the "EVI Existing Notes"),
all of which were subsequently exchanged in September, 1997 for a like principal
amount of new 11% Senior Subordinated Notes due 2007, Series A (together with
the EVI Existing Notes, the "EVI Notes"), in an offering registered under the
Securities Act of 1933, as amended (the "Securities Act"). The proceeds from the
EVI Notes were used to repay the $75.0 million of indebtedness under the interim
financing in its entirety and a portion of EVI's term loan. The foregoing
transactions, including the issuance of the EVI Notes, are referred to herein as
the "Acquisition Transactions." 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 February 10, 1997 (i.e., the Acquisition Closing Date).
In connection with the Acquisition, Mark IV and Old EVI entered into a
transition services agreement pursuant to which Mark IV agreed to provide
certain services, including accounting, tax planning, foreign currency hedging,
cash management and administering certain pension plan assets pending their
transfer to Old EVI, for a period not to exceed twelve months following the
Acquisition Closing Date. In Fiscal 1998, the Company paid an aggregate of
approximately $41,000 in fees for services provided pursuant to such transition
services agreement, which services terminated on January 31, 1998. In addition,
Mark IV and Old EVI entered into a sublease agreement with respect to certain
premises located in Austin, Texas and a non-exclusive, royalty-free license to
use certain names which incorporate the "Mark IV" name, including related
tooling and sales and marketing materials, and to sell products incorporating
such names for periods ranging from 18 to 36 months after the Acquisition
Closing Date.
The Recapitalization. On May 6, 1997 (the "Recapitalization Closing
Date"), Old Telex completed a recapitalization (the "Recapitalization") pursuant
to an Agreement (the "Recapitalization Agreement") among Old Telex, Greenwich
II, LLC ("G-II"), a Delaware limited liability company formed by GSCP and
certain other investors, and GST Acquisition Corp. ("GST"), a Delaware
corporation and a wholly owned subsidiary of G-II. In connection with the
Recapitalization, all of the shares of common stock of Holdings ("Holdings
Common Stock") and all options and warrants to acquire Holdings Common Stock
(other than certain shares of Holdings Common Stock and certain options to
acquire Holdings Common Stock owned by certain members of management of Old
Telex) were converted into the right to receive an aggregate amount of cash (the
"Recapitalization Consideration") equal to approximately $253.9 million. In
addition, in connection with the Recapitalization Agreement, certain shares of
Holdings Common Stock held by management of Old Telex (such shares, the
"Rollover Shares") and certain options to acquire additional shares of Holdings
Common Stock (the "Rollover Options"), with an aggregate value of approximately
$21.2 million (which represented approximately 14% of the equity of Holdings on
a non-diluted basis and approximately 20% on a fully diluted basis) were
retained by such managers. In connection with the Recapitalization, Old Telex
completed (i) a tender offer (the "Tender Offer") to repurchase all of Old
Telex's then outstanding 12% Senior Notes due 2004, in aggregate principal
amount of $100.0 million, for $118.3 million (including premium and consent fees
along with accrued interest), and (ii) a solicitation of consents with respect
to certain amendments to the indenture pursuant to which such notes were issued.
The Recapitalization, the financing thereof (including the issuance by Old Telex
of 10 1/2% Senior Subordinated Notes due 2007 (the "Existing Telex Notes") to
Chase Securities, Inc., Morgan Stanley & Co. Incorporated and Smith Barney,
Inc.), the Tender Offer and the payment of the
24
<PAGE> 27
related fees and expenses are herein referred to as the "Recapitalization
Transaction." See "The Recapitalization" and "Interests of Certain Persons."
The Recapitalization was financed by (i) $108.4 million of new equity
provided by GSCP and certain other co-investors, (ii) the Rollover Shares and
Rollover Options valued at $21.2 million, (iii) a $140.0 million senior secured
credit facility (the "Senior Secured Credit Facility") with The Chase Manhattan
Bank, Morgan Stanley Senior Funding, Inc. and certain other lenders, consisting
of (a) a $115.0 million term loan facility (the "Term Loan Facility"), and (b) a
$25.0 million revolving credit facility (the "Revolving Credit Facility"), (iv)
$125.0 million of Existing Telex Notes and (v) $36.5 million of available cash
of Old Telex. Of the $108.4 million of new equity contributed by GSCP and
certain other co-investors, $25.2 million consisted of proceeds from the
issuance by GST (a predecessor of Holdings) of Deferred Pay Subordinated
Debentures due 2009 (the "GST Subordinated Debentures").
Pursuant to the Recapitalization of Old Telex on May 6, 1997, the
historical basis of all assets and liabilities was retained for financial
reporting purposes, and the repurchases of existing Holdings Common Stock and
issuance of new Holdings Common Stock have been accounted for as equity
transactions.
In October 1997, Old Telex completed an exchange offer of $125 million
aggregate principal amount of new 10 1/2% Senior Subordinated Notes Due 2007,
Series A (the "New Telex Notes"), which were registered under the Securities
Act, for a like principal amount of the Existing Telex Notes (together with the
New Telex Notes, the "Telex Notes"). All of the Existing Telex Notes were
tendered and accepted for exchange.
The Mergers. On February 2, 1998, Old EVI merged with Old Telex, a wholly
owned subsidiary of Holdings and an affiliate of GSCP, with Old EVI surviving.
In the Merger, Old EVI changed its corporate name to "Telex Communications,
Inc." The Merger was effected pursuant to an agreement and plan of merger, dated
January 29, 1998 under which Greenwich I LLC ("G-I"), a subsidiary wholly owned
by GSCP and certain affiliated investors, exchanged all of the issued and
outstanding common and preferred stock of EVI Holdings, the former parent of Old
EVI, for 1,397,400 shares of Holdings' Common Stock, and 13,000 shares of
Holdings' Series A Pay-in-Kind Preferred Stock, respectively, and EVI Holdings
was merged with and into Holdings, with Holdings continuing as the surviving
corporation. The Mergers have been accounted for essentially as a pooling of
interests from May 6, 1997, the date on which Old EVI and Old Telex came under
common control, and the financial statements of the Company for Fiscal 1998
accordingly include the results of Old Telex from May 6, 1997. Immediately prior
to the Mergers, approximately $12.7 million of indebtedness outstanding under
Old EVI's senior credit facility was paid in full and Old EVI's senior credit
facility was terminated. Such indebtedness, together with $0.4 million of
certain fees and expenses associated with the Mergers, was repaid by utilizing
free cash at closing from Old EVI of $3.8 million and by borrowings under Old
Telex's Revolving Credit Facility of approximately $9.3 million. The EVI Notes
remain outstanding following the Mergers.
The Acquisition Transactions, the Recapitalization Transaction, and the
Mergers are referred to herein collectively as the "Transactions."
Overview
The Company, formed as a result of the February 2, 1998 merger of Old
Telex and Old EVI (see "The Mergers"), is a leader in the design, manufacture
and marketing of sophisticated audio, wireless and multimedia communications
equipment to commercial, professional and industrial customers. The Company
provides high value-added communications products designed to meet the specific
needs of customers in commercial, professional and industrial markets, and does
not participate in the competitive retail consumer electronics market. The
Company offers a comprehensive range of products worldwide for professional
audio systems as well as for multimedia and other communications product
markets, including wired and wireless microphones, wired and wireless intercom
systems, mixing consoles, signal
25
<PAGE> 28
processors, amplifiers, loudspeaker systems, headphones and headsets, tape
duplication products, talking book players, LCD projectors, wireless LAN and PCS
antennas, hearing aids and wireless assistive listening devices.
Subsequent to the Mergers, the Company has reorganized its business into
two business segments: Professional Sound and Entertainment and
Multimedia/Communications. Prior to the Mergers, essentially all of the
Company's business consisted of Old EVI's three principal lines of business
within the overall professional audio market: Fixed Installation, Professional
Music Retail and Concert/Recording/Broadcast. These businesses now comprise a
part of the Company's Professional Sound and Entertainment business segment. In
addition, as a result of the Mergers, the Multimedia/Communications business
segment (consisting mostly of businesses of Old Telex) accounts for a greater
proportion of the Company's business.
The Mergers contributed $137.4 million to Fiscal 1998 reported sales,
approximately one-third of which is attributable to the Professional Sound and
Entertainment business segment and approximately two-thirds of which is
attributable to the Multimedia/Communications business segment. As a result of
the Mergers, the Professional Sound and Entertainment business segment accounted
for approximately 68% of the Company's Fiscal 1998 reported sales, down from
approximately 93% in Fiscal 1997. The corresponding proportions for
Multimedia/Communications business segment were 32% and 7%.
Over 40% of the Company's sales are made internationally, in over 80
countries. The Company conducts its foreign sales through its foreign
subsidiaries in Germany, Japan, Hong Kong, the United Kingdom, Canada,
Australia, Switzerland, Singapore and France, and exports products from its
manufacturing locations in the U.S., Germany, the United Kingdom and Mexico for
sales through its independent distributors and dealers in other countries.
Overall, the Company's business is not subject to significant seasonal
fluctuations. 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 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, Singapore, and Hong Kong. In addition, the Company conducts business in
local currency in many countries, the most significant of which are Germany, the
United Kingdom, Japan, Singapore, Hong Kong, Canada, Australia, Switzerland and
France. Exposure to U.S. dollar/German mark and U.S. dollar/British pound
exchange rate volatility is mitigated to some extent by the Company's ability to
source its production needs with existing manufacturing capacity in Germany and
Great Britain, and the exposure to U.S. dollar/Japanese yen exchange rate
volatility is to some extent mitigated by sourcing products denominated in yen
from Japan or through contractual provisions in sales agreements with certain
customers. Nevertheless, the Company has a direct and continuing exposure to
both positive and negative foreign currency movements.
The Company reports the foreign exchange gains or losses on transactions
as part of other (income) expense. Gains and losses on translation of foreign
currency denominated balance sheets are classified as currency translation
adjustments and are included as part of the shareholders' equity. The Company's
predecessor financial statements (i.e., Old EVI's financial statements) excluded
realized foreign currency transaction gains and losses since these were viewed
as an integral part of Mark IV's consolidated risk management.
26
<PAGE> 29
Results of Operations
Year Ended February 28, 1998 Compared to Year Ended February 28, 1997
Net Sales. The Company's net sales increased $123.5 million, or 64.3%,
from $192.0 million in Fiscal 1997 to $315.5 million in Fiscal 1998. Of this
amount, Old Telex contributed $137.5 million. Excluding the impact of Old Telex,
net sales decreased $14.0 million, or 7.3%, from $192.0 million in Fiscal 1997
to $178.1 million in Fiscal 1998, primarily as a result of a decrease in the
Company's net sales to customers outside of the U.S. Excluding the impact of Old
Telex, net sales to customers in the U.S. increased $5.8, or 7.3%, from $79.6
million in Fiscal 1997 to $85.4 million in Fiscal 1998. Excluding the impact of
Old Telex, net sales to customers outside of the United States decreased $19.8
million, or 17.6%, from $112.5 million in Fiscal 1997 to $92.7 million in Fiscal
1998. The decrease in net sales to customers outside of the U.S. was due in part
to the stronger U.S. dollar, principally against the German mark and Japanese
yen, which reduced the foreign currency denominated translated sales, and to the
weak economies in Japan and in certain other Asian countries. Excluding the
impact of Old Telex, the stronger U.S. dollar reduced foreign currency
denominated translated sales by approximately $7.8 million in Fiscal 1998.
As a result of the Merger, a greater proportion of the Company's sales mix
is now from the Multimedia/Communications business segment. The Professional
Sound and Entertainment business segment accounted for approximately 68% of the
Fiscal 1998 reported net sales, down from approximately 93% in Fiscal 1997. The
Multimedia/Communications business segment sales accounted for approximately 32%
of the Fiscal 1998 reported net sales, up from approximately 7% in Fiscal 1997.
Net sales in the Company's Professional Sound and Entertainment segment
increased $36.6 million, or 20.6%, from $177.9 million in Fiscal 1997 to $214.5
million in Fiscal 1998. Excluding the impact of Old Telex, this segment's net
sales decreased $13.2 million, or 7.3%, from net sales of $177.9 million in
Fiscal 1997 to $164.7 million in Fiscal 1998 . This decrease is attributed
primarily to the decrease, as described above, in net sales to customers outside
of the U.S.
Net sales in the Company's Multimedia/Communications segment increased
$86.9 million, or 614.6%, from $14.1 million in Fiscal 1997 to $101.0 million in
Fiscal 1998. Excluding the impact of Old Telex, this segment's net sales
decreased $0.7 million, or 5.2%, from $14.1 million in Fiscal 1997 to $13.4
million in Fiscal 1998.
Gross Profit. The Company's gross profit increased $48.9 million, or
69.0%, from $70.9 million in Fiscal 1997 to $119.8 million in Fiscal 1998. As a
percentage of sales, the gross margin rate improved from 36.9% in Fiscal 1997 to
38.0% in Fiscal 1998. Excluding the impact of Old Telex, the Company's gross
profit decreased $9.1 million, or 12.9%, and its gross margin rate declined from
36.9% in Fiscal 1997 to 34.7% in Fiscal 1998. The decline in the gross margin
rate is attributed mainly to the unfavorable movement in exchange rates, the
Company's aggressive pricing strategy employed to maintain its foreign market
positions, and a delay in the introduction of certain new products. The
unfavorable movement in exchange rates primarily affected the gross margin rates
on sales made in Japan and Germany due to the higher costs of goods that were
produced in the U.S. and the U.K.
Engineering. The Company's engineering expenses increased $8.3 million, or
97.7%, from $8.5 million, or 4.4% of net sales in Fiscal 1997 to $16.8 million,
or 5.3% of net sales, in Fiscal 1998. Excluding the impact of Old Telex,
engineering expenses increased $1.1 million, or 12.5%, from $8.5 million in
Fiscal 1997 to $9.6 million in Fiscal 1998. The increase in spending rate is
attributable primarily to the increase in outside development costs incurred to
accelerate new product development.
Selling, General and Administrative. Selling, general and administrative
expenses increased $33.8 million, or 76.0%, from $44.5 million, or 23.2% of net
sales, in Fiscal 1997 to $78.3 million, or 24.8% of net sales, in Fiscal 1998.
Included in the Fiscal 1998 selling, general and administrative
27
<PAGE> 30
expenses, as described below, are $36.8 million attributed to Old Telex.
Excluding the impact of Old Telex, selling, general and administrative expenses
decreased $3.0 million, or 6.8%, from $44.5 million in Fiscal 1997 to $41.5
million in Fiscal 1998. The decrease was primarily due to spending restraints in
Fiscal 1998.
Fiscal 1998 selling, general and administrative expenses attributed to Old
Telex were $36.8 million. Included in these expenses were $12.5 million of costs
related to the Recapitalization consisting of charges for changes in the
Rollover Options, new options grants and special management bonus compensation.
Compensation expense of $7.4 million related to the extension of terms on the
Rollover Options was recognized in Fiscal 1998. In addition, as part of the
Recapitalization Transactions, the Company granted options to purchase shares of
Holdings' Common Stock at a discount from fair value to certain management
employees. The total discount of $9.2 million will be recognized as compensation
expense over the vesting or performance period of the options, generally three
to five years. In Fiscal 1998, the Company recognized $3.0 million of
compensation expense related to these option grants.
Restructuring Charges. In the fourth quarter of Fiscal 1998 the Company
recorded a pre-tax restructuring charge of $6.2 million attributable to the
Merger-related consolidation of certain product lines, and the consolidation of
certain of its worldwide manufacturing, engineering, distribution, marketing,
service and administrative operations to reduce costs, to better utilize the
available manufacturing and operating capacity and to enhance competitiveness.
The consolidation will include the closure of some facilities and will also
include the transfer of a portion of the work from certain facilities to the
Company's remaining locations. The Company expects to complete substantially all
of the restructuring of the operations by early Fiscal 2000, and expects to
complete the sale and disposal of the owned facilities and equipment related to
those operations by late Fiscal 2000.
Included in the restructuring charges are $2.5 million associated with
severance pay for terminated employees, most of whom work in the facilities to
be closed or from which work is to be transferred to other locations, $2.8
million associated with write-down to fair market value of certain assets
(primarily inventories related to the products to be discontinued, and land,
building and equipment to be sold, made obsolete or redundant), and $0.9 million
associated with other costs.
Corporate Charges. Corporate charges of $2.1 million in Fiscal 1998
represent fees for consulting and management services provided by GCSP under a
management and services agreement.
Special Charges. In Fiscal 1998 the Company recognized an impairment loss
of $2.2 million, charged to operating income, in accordance to the provisions of
Statement of Financial Accounting Standards (SFAS) No. 121 "Accounting for
Impairment of Long-Lived Assets and Assets to be Disposed Of." SFAS 121 requires
impairment losses to be recorded on long-lived assets used in the operations
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
amount. The impairment loss is measured by comparing the fair value of the
assets, as determined by discounting the future cash flows at a market rate of
interest, to its carrying value.
Other (income) expense. The Company recorded a $1.0 million charge
attributed to foreign exchange loss, which was essentially offset by license fee
income. The foreign exchange loss was primarily due to the unfavorable exchange
rate movement in the German mark and Japanese yen against the U.S. dollar.
Recapitalization expense. The Company recorded a $6.7 million
recapitalization expense in Fiscal 1998, attributed to Old Telex. The charge
consists of fees for investment advisory, legal, audit and other professional
services attributed to the Recapitalization Transactions.
Interest (income) expense. Interest expense increased from $0.8 million in
Fiscal 1997 to $39.5 million in Fiscal 1998. The increase is attributed to $8.7
million of bank fees paid in connection with a bridge loan commitment related to
the Acquisition, $4.7 million related to write-off of deferred financing
28
<PAGE> 31
costs, $1.7 million of bank and other fees in connection with the Mergers, and
an increase in average outstanding indebtedness resulting from the Transactions.
Income Taxes. The Company's income tax benefit, excluding the $16.5
million income tax provision related to the net deferred tax asset valuation
allowance, was 32.1% of the pretax loss including the extraordinary item for
Fiscal 1998. The tax rate for Fiscal 1997 was 42.7%. The lower effective tax
rate for Fiscal 1998 is principally due to the nondeductibility of certain costs
related to the Recapitalization Transaction and the Mergers, and goodwill
amortization costs.
The Company has established a net deferred tax valuation allowance of
$16.5 million, charged to income tax provision for Fiscal 1998, due to the
uncertainty of the realization of future tax benefits. The realization of the
future tax benefits related to the deferred tax asset is dependent on many
factors, including the Company's ability to generate taxable income within the
net operating loss carryforward period. Management has considered these factors
in reaching its conclusion as to the valuation allowance for financial reporting
purposes.
Extraordinary Loss. In connection with the Transactions, the Company
recorded a pretax extraordinary loss of $20.6 million on the early retirement
of debt, consisting of bond premium, consent and tender fees, along with the
write-off of deferred financing costs associated with the repurchase and early
retirement in Old Telex's $100.0 million 12% Senior Notes due 2004 and the
termination of Old EVI's senior credit agreement.
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 Fiscal 1996 to $192.0 million in Fiscal 1997. During the comparable periods,
net sales to customers in the United States remained flat at $88.2 million, and
net sales of $103.9 million in Fiscal 1997 to customers outside the United
States decreased $3.4 million, or 3.2%, from $107.3 million in Fiscal 1996.
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 $0.7 million, or 1.0%, from $71.6
million in Fiscal 1996 to $70.9 million in Fiscal 1997. As a percentage of net
sales, the gross margin rate increased from 36.6% in Fiscal 1996 to 36.9% in
Fiscal 1997. Principal factors for this gross margin rate 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.
Engineering. Engineering expenses of $8.5 million in Fiscal 1997 were flat
with Fiscal 1996. As a percentage of net sales, engineering expenses increased
to 4.4% in Fiscal 1997 from 4.3% in Fiscal 1996. The Company continues to
emphasize the development of digital technologies, systems and products.
Selling, General and Administrative. Selling, general and administrative
expenses of $44.5 million in Fiscal 1997 were about flat with $44.3 million in
Fiscal 1996. As a percentage of net sales, selling, general and administrative
expenses increased to 23.2% in Fiscal 1997 from 22.7% in Fiscal 1996. The
expense rate increased 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, general
29
<PAGE> 32
and administrative functions from Oklahoma City, Oklahoma into Buchanan,
Michigan and from Ipsach, Switzerland into Straubing, Germany.
Income Taxes. The Company's provision for income taxes as a percentage of
income before provision for taxes was 42.7% for Fiscal 1997 compared to 39.2%
for Fiscal 1996. The higher rate principally relates to the amortization of
nondeductible goodwill recorded as a result of the Acquisition and certain other
nondeductible expenses.
Liquidity and Capital Resources
At February 28, 1998 the Company had cash and cash equivalents of $5.2
million compared to $7.0 million at February 28, 1997. The Company's principal
source of funds has consisted of cash generated from operating activities. Net
cash provided by operations in Fiscal 1998 was $8.8 million. Excluding the
impact of Old Telex, the Company's operations used $1.5 million of cash in
Fiscal 1998 compared with $4.9 million of cash provided by operations in Fiscal
1997. This increase in cash used by operations, exclusive of Old Telex, is
attributable primarily to lower operating profit, an increase in interest
expense and other expenses related to the Transactions, and an increase in
inventory, partially offset by a decrease in receivables.
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
$8.9 million in Fiscal 1998 compared with $3.4 million in Fiscal 1997. Excluding
the impact of Old Telex, Fiscal 1998 capital expenditures were $4.8 million.
This increase in capital expenditures from Fiscal 1997 is attributed primarily
to investments in equipment to improve operating efficiencies. The Company
estimates its annual maintenance levels of capital expenditures to be
approximately $6.3 million. The Company's ability to make capital expenditures
is subject to certain restrictions under its Senior Secured Credit Facility.
The Company's consolidated indebtedness increased $242.3 million from
$110.0 million at February 28, 1997 to $352.3 million at February 28, 1998. The
increase in indebtedness was due primarily to the indebtedness of Old Telex,
which was assumed by the Company in the Merger.
The Company's liquidity needs arise primarily from debt service on
indebtedness incurred in connection with the Transactions, working capital needs
and capital expenditure requirements. The Company incurred substantial
indebtedness in connection with the Acquisition Transactions and the
Recapitalization Transaction and its related debt service obligations represent
significant liquidity requirements for the Company.
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. Prior to the consummation of
the Acquisition Transactions, Old EVI 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.
The Company's current credit facilities include the Senior Secured Credit
Facility consisting of the Term Loan Facility of $115.0 million and the
Revolving Credit Facility, subject to certain borrowing base limitations, of
$25.0 million, and foreign working capital lines, subject to certain
limitations, of $4.7 million. In certain instances the foreign working capital
lines are secured by a lien on foreign real property, leaseholds, accounts
receivable and inventory or are guaranteed by another subsidiary.
As of February 28, 1998, $10.1 million of the Company's $115.0 million
Term Loan Facility is payable in the next 12 months. Of such amount, $1.9
million was paid on March 2, 1998. In addition, the Company had $10.5 million
outstanding under the Revolving Credit Facility, and $0.4 million outstanding
under the foreign working capital lines. Net availability at February 28, 1998
under the Revolving Credit
30
<PAGE> 33
Facility, computed by deducting approximately $7.6 million of open letters of
credit and applying applicable borrowing base limitations, totaled $10.6
million. Outstanding balances under substantially all of these credit facilities
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 the prevailing interest rates. The effective
interest rate under these credit facilities in Fiscal 1998 was 8.5%.
In addition, pursuant to the Term Loan Facility, the Company is required
to make permanent principal payments under (i) the $50.0 million Tranche A Term
Loan Facility, $8.0 million, $8.0 million, $9.0 million, $13.0 million and $8.5
million of which is payable in each of Fiscal 1999, 2000, 2001, 2002 and 2003
(which has a final maturity date of November 6, 2002), respectively, and (ii)
the $65.0 million Tranche B Term Loan Facility, $0.5 million, $0.5 million, $0.5
million, $0.5 million, $12.8 million, $31.3 million and $18.8 million of which
is payable in each of Fiscal 1999, 2000, 2001, 2002, 2003, 2004 and 2005 (which
has a final maturity date of November 6, 2004), respectively. In addition, under
the terms of the Senior Secured Credit Facility, the Company is required to make
mandatory prepayments with (i) non-ordinary asset sale proceeds, (ii) any
additional indebtedness and equity proceeds (with certain exceptions) and (iii)
with 75% of the excess cash flow of the Company and its subsidiaries for each
fiscal year commencing on April 1, 1997, and each fiscal year thereafter.
The Company expects to generate cash flow from expected cost-savings
attributable to expected Merger-related restructurings and from the receipt of
$7.2 million net operating loss tax benefit for which tax returns were filed in
late April 1998. In addition, the Company has arranged a $4.0 million
intercompany line of credit with Holdings, and is seeking to replace the working
capital lines of Old EVI's former subsidiaries with a foreign working capital
facility to be secured by the Company's foreign assets. Under the Senior Secured
Credit Facility and the indentures governing the EVI Notes and the Telex Notes,
the Company's foreign subsidiaries are permitted to obtain working capital
lines, subject to certain restrictions. As of February 28, 1998 the Company had
the ability to borrow approximately $19.0 million against foreign working
capital, subject to certain restrictions, of which approximately $4.7 million
was being utilized.
The Company believes that these additional sources of funds, together with
the Company's Revolving Credit Facility and cash from operations will be
adequate to meet its debt service and principal payment requirements, capital
expenditure needs, working capital requirements, and the funding needed for the
restructuring and other related expenditures attributed to the Mergers. However,
no assurance can be given in this regard, because, among other reasons, the
foreign working capital facility may not be obtained, and working capital
requirements and other circumstances may change. The Company's future
performance and its ability to service its obligations will also be subject to
future economic conditions and to financial, business and other factors, many of
which are beyond the Company's control.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Management of Foreign Currency Risk
The Company enters into forward exchange contracts to hedge inventory
purchases denominated in Japanese yen on a continuing basis for periods
consistent with its inventory purchase commitments. It does not engage in
currency speculation. The Company's foreign exchange contracts do not subject
the Company to risk due to exchange rate movements because gains and losses on
these contracts offset losses and gains on the inventory purchase commitments.
These foreign exchange contracts typically have maturity dates which do not
exceed one year and require the Company to exchange U.S. dollars for Japanese
yen at maturity, at rates agreed to at the inception of the contracts. As of
February 28, 1998, the Company had no foreign currency forward exchange
contracts outstanding.
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<PAGE> 34
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Reports of Independent Public Accountants, Report of Independent
Accountants, Consolidated Financial Statements and Supplementary Data required
by Item 8 are set forth immediately following the signature page of this report
and are hereby incorporated herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in or disagreements with the Company's independent
public accountants on accounting or financial disclosure.
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the name, age and position, as of March 31,
1998, of each of the executive officers and directors of the Company.
<TABLE>
<CAPTION>
Name Age Position
- - --------------------------------------------------------------------------------
<S> <C> <C>
John L. Hale*................ 57 Chairman of the Board of Directors (the
"Board"), President and Chief Executive
Officer
John T. Hislop*.............. 57 Vice President, Chief Financial
Officer, Treasurer and Assistant
Secretary
John A. Palleschi*........... 47 Vice President, Corporate Development,
General Counsel and Secretary
Joseph P. Winebarger......... 49 Vice President, Engineering, Customer
Services and Information Systems
Dan M. Dantzler.............. 49 Vice President and President,
Professional Sound and Entertainment
Group
Glen E. Cavanaugh............ 54 Vice President and President,
Multimedia/Communications Group
Paul A. McGuire.............. 56 Vice President, Sales & Marketing,
Professional Sound and Entertainment
Group
Roger H. Gaines.............. 56 Vice President, Manufacturing
F. Davis Merrey, Jr.......... 57 Vice President, UK operations
Jeffrey J. Rosen............. 48 Director
Edgar S. Woolard, Jr......... 64 Director
Evan M. Marks................ 40 Director
Christopher P. Forester...... 47 Director
Alfred C. Eckert III......... 50 Director
Keith W. Abell............... 41 Director
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
Name Age Position
- - --------------------------------------------------------------------------------
<S> <C> <C>
Christine K. Vanden Beukel*.. 27 Director, Assistant Secretary and
Assistant Treasurer
</TABLE>
- - ------------------
* Executive holds same position with Holdings
Mr. Hale is Chairman of the Board, President and Chief Executive Officer
of the Company, having served Old Telex in such capacity since October 1991.
Prior to October 1991, he served as President, Chief Executive Officer and a
director of Fibronics International Inc., a provider of fiber optic and other
communication products and services. From June 1985 to November 1986, Mr. Hale
was President and Chief Executive Officer of Intelogic Trace, Inc., a computer
and communications service company. From September 1980 to March 1985, Mr. Hale
served as President and Chief Executive Officer of Inforex, Inc., a worldwide
supplier of computer systems and local area networks. From February 1978 to
September 1980, and from September 1982 to June 1985, Mr. Hale was,
respectively, a Vice President and Executive Vice President at Datapoint
Corporation, the parent of Inforex, Inc., a manufacturer of computers and
telecommunications equipment.
Mr. Hislop is Vice President, Chief Financial Officer, Treasurer and
Assistant Secretary of the Company, having served Old Telex in such capacity
since May 1993. Prior to joining Old Telex, Mr. Hislop was with Fibronics
International Inc., where he served as Joint Chief Executive Officer from 1992
to 1993 and as Corporate Vice President and Chief Financial Officer from 1989
through 1991. From 1987 to 1989, Mr. Hislop served as a partner of Management
Resources Inc., a management consulting group. From 1985 to 1987, Mr. Hislop was
Vice President, Chief Financial Officer and Treasurer of Intelogic Trace, Inc.
From 1973 to 1985, he served as a Vice President and Controller of Datapoint
Corporation.
Mr. Palleschi is Vice President, Corporate Development, General Counsel
and Secretary of the Company, having served Old Telex in such capacity since
January 1995. Prior to January 1995, Mr. Palleschi was Vice President,
Administration, General Counsel and Secretary of Old Telex and served in such
capacity since June 1989. Prior to joining Old Telex, Mr. Palleschi was Director
of Corporate Development for Memorex from March 1988 to June 1989. From June
1984 to March 1988, Mr. Palleschi was International Counsel, Telex Computer
Products, Inc., a subsidiary of Telex Corp. From 1981 to 1984, Mr. Palleschi
also served as an attorney with Digital Equipment Corporation and Raytheon
Corporation.
Mr. Winebarger has been Vice President responsible for Old Telex's
Information Systems since January 1995 and for Old Telex's Engineering Services,
Quality Assurance and Sales Administration operations since April 1993 and
continues in such capacity with Telex. Prior to April 1993, Mr. Winebarger was
Vice President, Engineering of Telex and served in such capacity with Old Telex
since September 1987. From January to September 1987, he was corporate Director
of Advanced Development, Telex Computer Products, Inc. Prior to 1987, Mr.
Winebarger was Acting Vice President, Engineering, then Vice President,
Engineering for Telex Data Systems, a division of Telex Computer Products, Inc.
Mr. Dantzler has served as Vice President and President of Telex's
Professional Sound and Entertainment Group since February 1998. From September
1997 to February 1998, Mr. Dantzler served as Acting President and Chief
Executive Officer of Old EVI and from May 1994 to September 1997 served as Vice
President and President of Old Telex's RF/Communications Group. Prior to May
1994, Mr. Dantzler was Vice President and General Manager of Old Telex's
Professional Sound and Entertainment Group. From February 1992 to April 1993, he
served as Staff Vice President. Prior to February 1992, Mr. Dantzler was Vice
President, Sales for Old Telex. From 1983 to 1989, Mr. Dantzler served as
General Manager of the Hy-Gain Division of Old Telex where he was responsible
for the design and production of antennas and wireless microphones. From 1967 to
1982, Mr. Dantzler held various engineering positions with Old Telex and
Hy-Gain.
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<PAGE> 36
Mr. Cavanaugh has been Vice President and President of Telex's
Multimedia/Communications Group since February 1998. Mr. Cavanaugh joined Telex
in April 1993 as Vice President and President of Old Telex's
Multimedia/Communications Group and was appointed president of the Group in May
1994. Prior to joining Old Telex, Mr. Cavanaugh was Senior Vice President, Sales
and Marketing of Applied Voice Technology, Inc., which he joined in 1990. From
1988 to 1990, he was a principal at Columbia Management Consulting. Mr.
Cavanaugh also served as Senior Vice President, Marketing for Applied
Communications, Inc. from 1987 to 1988, and, from 1983 to 1987, as Vice
President, Marketing at ISC Systems Corporation. From 1981 to 1983, he served as
Vice President and General Manager of Evans and Sutherland Computer Corporation.
From 1976 to 1981, Mr. Cavanaugh was Vice President, Marketing for Datapoint
Corporation.
Mr. McGuire has been Vice President, Sales and Marketing of Telex's
Professional Sound and Entertainment Group since February 1998. From May 1997 to
February 1998, Mr. McGuire served as Acting Co-Chief Executive Officer of Old
EVI prior to which he was Vice President of Old EVI with responsibility for
sales and marketing. He joined Electro-Voice, Incorporated, a predecessor of
EVI, 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.
Mr. Gaines is Vice President, Manufacturing of the Company, having served
in such capacity since 1991. From May 1997 to February 1998, Mr. Gaines also
served as Acting Co-Chief Executive Officer of EVI. He joined Electro-Voice,
Incorporated, a predecessor of EVI, in 1981. In 1991, he was appointed Vice
President of Manufacturing of Mark IV Audio, Inc.
Mr. Merrey has served as Vice President, UK Operations since August 1997.
From April 1994 to August 1997, Mr. Merrey served as Vice President of Research
and Development of Electro-Voice, Incorporated, a predecessor of EVI. He joined
Electro-Voice, Incorporated in 1976. In 1985, he was appointed President of
Altec Lansing Corporation, a subsidiary of Gulton Industries, Inc.
Mr. Rosen became a director of the Company on January 29, 1998. He also
served as Director of Old Telex from December 1993 to May 6, 1997. He is a
partner of the law firm O'Melveny & Myers. Mr. Rosen has been a partner of
O'Melveny & Myers since 1987.
Mr. Woolard became a director of the Company on January 29, 1998. Mr.
Woolard is the former 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 Apple Computer.
Mr. Marks became a director on December 23, 1997. He is the managing
principal of Alben Asset Management, L.L.C., a private investment company based
in New York. Prior to forming Alben, Mr. Marks was in partnership with George
Soros from 1992 to 1998 as the president of G. Soros Realty, Inc., which
invested in real estate globally. Prior to his association with Soros, Mr. Marks
was a principal in the real estate investment group of Lazard Freres & Co.
Mr. Forester became a director on December 23, 1997. Mr. Forester has been
retired since 1995. From 1993 to 1995, Mr. Forester was Managing Director of the
technology industry group of Merrill Lynch & Co. From 1977 to 1993, Mr. Forester
worked in the Corporate Finance Department, Investment Banking Division of
Goldman, Sachs & Co. where he was a General Partner from 1988 to 1993.
Mr. Eckert became a director of the Company on the Recapitalization
Closing Date. 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
34
<PAGE> 37
is a director of Day International Group, Inc., Eastgate Group Limited, IPC
Magazines, Georgia Gulf Corporation and HBO & Company.
Mr. Abell became a director of the Company on December 23, 1997. Mr. Abell
joined GSCP at its inception in 1994. From 1990 to 1994, Mr. Abell was with the
Blackstone Group, most recently as a Managing Director.
Ms. Vanden Beukel became a director of the Company on December 23, 1997.
Ms. Vanden Beukel joined GSCP at its inception in 1994. Ms. Vanden Beukel
previously worked in the investment banking division of Smith Barney Inc. Ms.
Vanden Beukel is also a director of Day International Group, Inc.
ITEM 11. EXECUTIVE COMPENSATION
Director Compensation
Directors who are not employees of the Company or GSCP are paid $1,500 for
each Board meeting attended. The Company paid Mr. Woolard a consulting fee of
$50,000 for services rendered prior to the time he became a director of the
Company. In addition, the Company has granted Messrs. Marks, Forester, Woolard
and Rosen warrants representing the right to purchase 5,484, 5,484, 10,783, and
5,484 shares, respectively, of Common Stock of Holdings, subject to certain
anti-dilution provisions, at an exercise price of $31.93 per share. A portion of
these warrants became exercisable on grant; the remainder will become
exercisable over time through 2001, provided in each case, that the holder of
the warrant is a director of the Company on the date of exercise. Directors who
are employees of the Company or GSCP receive no separate compensation for their
services as directors. All of the Company's directors are entitled to
reimbursement of their reasonable out-of-pocket expenses in connection with
their travel to and attendance at meetings of the Board. Currently three of the
Company's directors are employees of GSCP, to which the Company pays fees for
management and financial consulting services. See Item 13, "Certain
Relationships and Related Transactions."
Executive Compensation
The following table sets forth the annual and long-term compensation with
respect to all compensation paid or accrued by the Company for services rendered
in all capacities for the Fiscal Years indicated below by its Chief Executive
Officer and each of the other four most highly compensated executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation(a) Compensation
------------------------------ ------------
Number of
Shares All Other
Fiscal Salary Bonus Underlying Compensation
Name and Principal Position Year ($)(b) ($)(c) Options(d) $(e)
--------------------------- ---- ------ ------ ---------- -----------
<S> <C> <C> <C> <C> <C>
John L. Hale................................... 1998 324,250 1,015,317 299,320
Chairman of the Board, President and 1997 312,006 212,456 -- --
Chief Executive Officer 1996 297,115 175,407 160,000 --
John T. Hislop................................. 1998 157,199 160,776 69,340
Vice President, Chief Financial Officer, 1997 149,865 100,267 -- --
Treasurer and Assistant Secretary 1996 140,742 118,038 -- --
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
Long Term
Annual Compensation(a) Compensation
------------------------------ ------------
Number of
Shares All Other
Fiscal Salary Bonus Underlying Compensation
Name and Principal Position Year ($)(b) ($)(c) Options(d) $(e)
--------------------------- ---- ------ ------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Dan M. Dantzler................................ 1998 129,423 120,632 24,100
Vice President and President, 1997 124,950 80,065 -- --
Professional Sound and Entertainment 1996 118,058 62,948 -- --
Joseph P. Winebarger........................... 1998 130,923 132,172 21,560 --
Vice President, Engineering, Customer 1997 126,485 64,720 -- --
Services and Information Systems 1996 118,038 69,637 -- --
John A. Palleschi..............................
Vice President, Corporate 1998 136,825 241,634 82,620
Development, General Counsel and 1997 129,536 87,843 -- --
Secretary 1996 119,993 73,439 16,000 --
</TABLE>
- - ------------------
(a) For the fiscal year ended February 28, 1998, the only type of Other Annual
Compensation for each of the named executive officers was in the form of
perquisites and was less than the level required for reporting.
(b) Amounts shown include cash compensation earned and received, amounts
earned but deferred, and amounts earned but deferred and paid in the
subsequent fiscal year.
(c) Amounts shown for each Fiscal Year are awards under the plan that were
earned in such Fiscal Year and paid in the subsequent fiscal year.
Effective on the Recapitalization Closing Date, bonuses will be paid
pursuant to new bonus programs. See "The Annual Bonus Programs." Amounts
shown for Fiscal Year 1998 represent the special bonuses paid under the
Annual Bonus Programs. Bonuses earned under the new bonus plans during
Fiscal 1998 will be based on the twelve month period ending March 31, 1998
and calculated upon completion of the audit for the fiscal year ended
March 31, 1998. Such bonuses are reported by the Company for Fiscal Year
1998 and will be paid in Fiscal 1999. Amounts shown for Fiscal 1996 and
1997 represent bonuses under the Fiscal 1996 and 1997 management incentive
plan. The plan was open to the executive officers and other key employees
designated by the President and Chief Executive Officer and approved by
the Board. Under the plan, individual awards were based upon performance
measured by established Old Telex and individual objectives and on a
discretionary evaluation by the President and Chief Executive Officer for
awards other than the objectives and on a discretionary evaluation by the
President and Chief Executive Officer for awards other than the President
and Chief Executive Officer's. Distributions under the plans are made
within 30 days following the completion of the audit for the fiscal year
in which such compensation is earned. The management incentive plans
provide for a bonus target of 50.0% of base salary, although maximum
awards can exceed such targets. The maximum award for Fiscal 1997 for the
named executive officers was 75.0% of base salary for Fiscal 1997.
(d) All Options for Fiscal 1998 were granted under the 1997 Stock Option Plan
on the Recapitalization Closing Date. Options granted in Fiscal 1996 are
fully vested and exercisable and are governed by the terms of the 1997
Stock Option Plan. Amounts are adjusted to reflect the 20-for-1 stock
split effected by Holdings effective as of June 25, 1997.
Option Grants During Fiscal 1998
The following table sets forth information on the options to acquire
Common Stock of Holdings granted to the named executive officers during Fiscal
1998 and the potential realizable value of each grant:
36
<PAGE> 39
Option Grants During Fiscal 1998
<TABLE>
<CAPTION>
Potential Realizable Value
Number of % of Total at Assumed Annual Rates
Shares Options of Stock Price Appreciation
Underlying Granted To for Option Term(c)
Options Employees in Exercise Expiration --------------------------------
Name Granted(a) Fiscal 1998 Price(b) Date 5% 10%
---------------- ---------- ----------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
John L. Hale 213,160(d) 53.5% $ 7.98 05/06/07 $ 9,385,435 $15,952,894
86,160(e) 54.3% $ 31.93 05/06/07 $ 1,730,093 $ 4,384,682
-------- ----------- -----------
299,320 $11,115,528 $20,337,576
John T. Hislop 48,080(d) 12.1% $ 7.98 05/06/07 $ 2,116,962 $ 3,598,307
21,260(e) 13.4% $ 31.93 05/06/07 $ 426,901 $ 1,081,921
-------- ----------- -----------
69,340 $ 2,543,863 $ 4,680,228
Dan M. Dantzler 18,840(d) 4.7% $ 7.98 05/06/07 $ 829,525 $ 1,409,986
5,260(e) 3.3% $ 31.93 05/06/07 $ 105,621 $ 267,681
-------- ----------- -----------
24,100 $ 935,146 $ 1,677,667
Joseph P. Winebarger 17,540(d) 4.4% $ 7.98 05/06/07 $ 772,286 $ 1,312,698
4,020(e) 2.5% $ 31.93 05/06/07 $ 80,722 $ 204,578
-------- ----------- -----------
21,560 $ 853,008 $ 1,517,276
John A. Palleschi 57,360(d) 14.4% $ 7.98 05/06/07 $ 2,525,561 $ 4,292,822
25,260(e) 15.9% $ 31.93 05/06/07 $ 507,221 $ 1,285,481
-------- ----------- -----------
82,620 $ 3,032,782 $ 5,578,303
</TABLE>
- - -----------------
(a) All Options were granted under the Company's 1997 Stock Option Plan.
Amounts are adjusted to reflect the 20-for-1 stock split effected by
Holdings effective as of June 25, 1997.
(b) The exercise price of $7.98 per share is $23.95 less than the fair market
value at the time of grant. The total discount of $9.4 million will be
recognized as compensation expense over the vesting or performance period
of the options, generally from three to five years.
(c) The 5% and 10% assumed annual compound rates of stock price appreciation
from the assumed price of $31.93 per share are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of future Common Stock prices.
(d) Includes Initial Option Grants, which vest over a three period beginning
on the date of grant, and Performance Option Grants, which vest over a
five year period upon achievement of certain annual performance objectives
and, notwithstanding the achievement of such performance objectives, upon
the seventh anniversary of the date of grant. On May 6, 1997 (the
Recapitalization Closing Date) Mr. Hale was granted 107,100 shares and
106,060 shares under the Initial Option Grant and the Performance Option
Grant, respectively; Mr. Hislop was granted 18,700 shares and 29,380
shares under the Initial Option Grant and the Performance Option Grant,
respectively; Mr. Dantzler was granted 12,000 shares and 6,800 shares
under the Initial Option Grant and the Performance Option Grant,
respectively; Mr. Winebarger was granted 12,270 shares and 4,820 shares
under the Initial Option Grant and the Performance Option Grant,
respectively; and Mr. Palleschi was granted 26,240 shares and 31,120
shares under the Initial Option Grant and the Performance Option Grant,
respectively.
(e) Includes Super Performance Options granted on May 6, 1997 (the
Recapitalization Closing Date), which vest on the fifth anniversary of the
date of grant or upon a Change of Control (as defined in the 1997 Stock
Option Plan) on the achievement of certain long-term performance
objectives, and, notwithstanding the achievement of such performance
objectives, on the seventh anniversary of the grant date.
Stock Option Exercises and Value at February 28, 1998
The following table provides information with respect to the executive
officers of the Company listed in the Summary Compensation Table above
concerning stock options exercised during the period ended February 28, 1998 and
options to acquire Common Stock of Holdings held by the named executive officers
as of February 28, 1998. No stock appreciation rights have been granted under
any incentive plan.
37
<PAGE> 40
Aggregated Option Exercises During Fiscal 1998
and Option Values at February 28, 1998
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Number of Underlying Unexercised In the Money
Shares Value Options Options
Acquired on Realized Exercisable/ Exercisable/
Name Exercise ($)(a) Unexercisable Unexercisable($)(b)
- - -------------------------- ---------- ------------ -------------------- ------------------
<S> <C> <C> <C> <C>
John L. Hale.............. 147,920 $ 4,723,012 118,805/266,595 3,291,274/4,321,418
John T. Hislop............ 127,920 $ 4,087,422 52,680/63,640 1,728,878/1,016,272
Dan M. Dantzler........... 25,580 $ 816,757 18,070/20,450 546,839/363,801
Joseph P. Winebarger...... 17,800 $ 568,345 16,070/17,690 481,379/327,397
John A. Palleschi......... 35,840 $ 1,144,353 28,175/74,605 779,220/1,181,813
</TABLE>
- - ---------------
(a) The per share value of the underlying securities at exercise date minus
the exercise or base price of "in the money" options. Per share value is
based upon the value determined in accordance with Company practice.
(b) Per share value is based on $31.93 per share less exercise prices.
Old Telex 1997 Stock Option Plan
Effective on the Recapitalization Closing Date, key employees of the
Company, including the executive officers named in the Summary Compensation
Table, participate in a new option plan (the "Option Plan"). Options granted
prior to the Recapitalization Closing Date are also governed by the terms of the
Option Plan.
General Terms. Under the Option Plan, key employees (other than the Chief
Executive Officer) selected by the Chief Executive Officer and approved by the
Board of Directors of Holdings (the "Holdings Board") will receive non-qualified
options to purchase shares of Holdings Common Stock. The Chief Executive
Officer's participation will be determined by Holdings Board. Holdings Board
will be responsible for administering the Plan. The maximum number of shares of
Holdings Common Stock that may be issued under the Option Plan is 19% of the
outstanding common stock of Holdings on the Recapitalization Closing Date, on a
fully diluted basis and taking into account the issuance of all shares of common
stock issuable under the Option Plan, but excluding certain shares that may be
granted upon exercise of certain warrants. Upon the occurrence of certain
events, such as a stock dividend or a stock split, appropriate adjustments will
be made in the number of shares that may be issued under the Option Plan in the
future and in the number of shares and price per share under all outstanding
grants made before the event. If any grant is for any reason canceled,
terminated or otherwise settled without the issuance of some or all of the
shares of common stock subject to the grant, such shares will be available for
future grants.
Holdings Board may terminate, suspend or amend the Option Plan but such
termination, suspension or amendment may not adversely affect any stock options
then outstanding under the Option Plan without the consent of the recipients
thereof. Unless terminated by action of Holdings Board, the Option Plan will
continue in effect until the tenth anniversary of the Recapitalization Closing
Date, but stock options granted prior to such date shall continue in effect
until they expire in accordance with their terms.
Stock Option Grants. Under the Option Plan, Holdings Board may grant
non-qualified options that vest over a three-year period, commencing on the
grant date, at an exercise price equal to 25% of the Recapitalization
Consideration (the "Initial Option Grants"), performance-based options that vest
over a five-year period on the achievement of certain annual performance
objectives at an exercise price equal to 25% of the Recapitalization
Consideration (the "Performance Option Grants"), or performance-based options
that vest on the fifth anniversary of the grant date or upon a Change in Control
(as defined in the Option Plan) on the achievement of certain long-term
performance objectives, at an exercise price equal to the Recapitalization
Consideration (the "Super Performance Grants"). Notwithstanding the satisfaction
of any performance goals, all performance options will vest on the seventh
anniversary of their grant date.
38
<PAGE> 41
To exercise an option, the grantee may pay the exercise price in cash or,
if permitted by Holdings Board, by delivering on the date of exercise other
shares of common stock of Holdings having an aggregate fair market value equal
to the exercise price of the option. The term of each option will be fixed by
Holdings Board but may not be more than ten years from its date of grant.
Termination of Employment. In the event of termination of employment of a
grantee by reason of disability, death, retirement at or after age 65 or
termination for good reason (as defined in the Stockholders Agreement), any
options exercisable at the date of such termination will remain exercisable
until the tenth anniversary of the grant date. Any options not then exercisable
will be forfeited. In the event of a termination of employment of a grantee for
cause, any outstanding options, whether exercisable or unexercisable, will be
forfeited. In the event of a termination of employment of a grantee for any
reason other than death, disability, retirement for good reason or cause, any
options exercisable at the date of such termination will remain exercisable for
a period of 90 days (or if earlier the expiration of the options).
Change in Control. Upon a Change in Control (as defined in the Option
Plan), each outstanding option will be cancelled for a cash payment equal to the
excess, if any, of the Change in Control Price (as defined in the Option Plan)
over the exercise price for the option unless the Holdings Board determines in
good faith that alternative options having substantially equivalent or better
rights, terms, conditions and economic value will be awarded to grantees, and
such alternative options provide that if the grantee is involuntarily terminated
within two years following a Change in Control, all restrictions on the
alternative options will lapse.
Grants to Executives. On the Recapitalization Closing Date, (i) Mr. Hale
was granted 107,100 shares, 106,060 shares and 86,160 shares under the Initial
Option Grant, the Performance Option Grant and the Super Performance Option
Grant, respectively, (ii) Mr. Hislop was granted 18,700 shares, 29,380 shares
and 21,260 shares under the Initial Option Grant, the Performance Option Grant
and the Super Performance Option Grant, respectively, (iii) Mr. Dantzler was
granted 12,000 shares, 6,840 shares and 5,260 shares under the Initial Option
Grant, the Performance Option Grant and the Super Performance Option Grant,
respectively, (iv) Mr. Winebarger was granted 12,270 shares, 4,820 shares and
4,020 shares under the Initial Option Grant, the Performance Option Grant and
the Super Performance Option Grant, respectively, and (v) Mr. Palleschi was
granted 26,240 shares, 31,120 shares and 25,260 shares under the Initial Option
Grant, the Performance Option Grant and the Super Performance Option Grant,
respectively. The number of shares reflect the 20-for-1 stock split that became
effective as of June 25, 1997.
As a result of the new option plan arrangements for the executive officers
named above as well as all other covered executives and employees, the Company
will incur estimated non-cash compensation charges of $1.1 million, and $0.3
million in Fiscal 1999 and 2000, respectively.
The Annual Bonus Programs
The Company has adopted an annual bonus plan for the Company's management
employees that provides that participants in such plan are entitled to an annual
bonus based on achieving certain annual projected earnings performance targets.
Under the terms of the plan, participants are eligible to receive an annual
bonus of between 25% and 100% of base salary depending on the level of
achievement of the performance targets. The Company has also adopted an
additional annual cash bonus plan whereby Messrs. Hale, Hislop, Dantzler,
Winebarger and Palleschi may receive additional annual incentive awards in each
of the first five years following the Recapitalization Closing Date if certain
annual performance targets are achieved. The maximum aggregate awards Messrs.
Hale, Hislop, Dantzler, Winebarger and Palleschi may receive over such five year
period under the additional plan is up to $1.7 million, $0.4 million, $0.1
million, $0.2 million and $0.5 million, respectively. In total, the Company may
incur estimated total cash compensation charges in connection with this
additional cash bonus plan for the executive officers named above as well as all
other covered executives and employees of $0.4 million.
39
<PAGE> 42
$0.2 million, $0.1 million, $0.1 million and $0.1 million, in Fiscal 1999, 2000,
2001 and 2002, respectively.
Possible Restructuring of Option Plan
The Company and its senior management team are discussing a possible
restructuring of some aspects of the Option Plan. While the precise terms of any
such restructuring have not been established, and will, in any event, be subject
to a number of conditions, including approval by the Company's Board of
Directors, the Company currently expects that all of the previously granted
Performance Grant Options and Super Performance Grant Options would be
terminated in any such restructuring and replaced by two new series of options.
If any such restructuring is ultimately implemented, the Company will disclose
the precise terms of the Company's revised option plan (and provide any related
disclosure) when and as required by The Securities and Exchange Act of 1934, as
amended.
Severance Program
The Company has approved a severance program which will provide that a
severance benefit equal to the sum of (i) one times base salary plus the most
recent annual bonus and (ii) a pro rata portion of the highest bonus payable
over the three most recent fiscal years, will be payable to certain management
employees, including Mr. Cavanaugh if his employment is terminated without cause
or for good reason within 24 months following the Recapitalization Closing Date
or the employee is required to relocate within 12 months following the
Recapitalization Closing Date. Payment of any severance amounts will be made in
equal biweekly installments. The amount of any severance payments will be
reduced to avoid the payment being deemed an "excess parachute payment" within
the meaning of Section 280G of the Code. Outplacement services and continued
health benefits will also be available under the program. The employees will be
subject to non-compete agreements for the 12 month period following termination
of employment and non-disclosure of trade secrets restrictions.
Retirement Benefits
Old EVI Defined Contribution Plan
The Company maintains the EV International, Inc. Savings and Retirement
Plan (the "Savings Plans"), 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.
40
<PAGE> 43
Old Telex Pension Plan
The Company maintains a defined benefit pension plan (the "Pension Plan")
qualified under the Code that provides a defined benefit upon retirement to the
Company's eligible employees. Under the terms of the Pension Plan, benefits are
determined by the average earnings during the highest five consecutive years of
the final ten consecutive years of service with the total remuneration covered
by the plan consisting of base salary, commission, overtime and bonuses paid to
each participant. The formula provides benefits in the form of a straight-life
annuity equal to a percentage of such average annual earnings times years of
benefit service plus a percentage of the excess of the average annual earnings
over the social security wage base (as determined at age 65) times years of
benefit service.
The following table lists annual benefits under the Pension Plan for the
average annual earnings and years of credited service shown for a participant
retiring at the normal retirement age of 65. A participant does not accrue
additional benefits under the Pension Plan after 35 years of credited service.
Pension Plan Table
<TABLE>
<CAPTION>
Years of Service
--------------------------------------------------------
Remuneration 15 20 25 30 35
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000 $26,002 $34,670 $43,337 $52,004 $60,672
150,000 31,552 42,070 52,587 63,104 73,622
175,000 33,127 44,170 55,212 66,254 77,297
200,000 34,252 45,670 57,087 68,504 79,922
225,000 35,377 47,170 58,962 70,754 82,547
250,000 35,865 47,820 59,775 71,730 83,685
300,000 35,865 47,820 59,775 71,730 83,685
400,000 35,865 47,820 59,775 71,730 83,685
500,000 35,865 47,820 59,775 71,730 83,685
</TABLE>
The full years of credited service as of February 28, 1998 for the
executive officers named in the Summary Compensation Table above are as follows:
Mr. Hale, 6; Mr. Hislop, 4; Mr. Dantzler, 20; Mr. Winebarger, 23; and Mr.
Palleschi, 14. Mr. Hale is also entitled to an additional benefit from the
Company upon termination of employment based upon the formula for benefits under
the Pension Plan.
Benefits shown on the table are not subject to reduction for social
security benefits or other offset amounts. For plan years beginning in 1995 and
thereafter, annual compensation taken into account for purposes of calculating
benefits is limited to $160,000 (as adjusted in future years to reflect
inflation); however, prior years' compensation taken into account may exceed
that amount. The examples of benefits payable in the above table are supplied
for illustration only.
Employment Agreements
John L. Hale, John T. Hislop and John A. Palleschi each entered into
five-year employment agreements with Holdings effective at the Recapitalization
Closing Date (each an "Employment Agreement" and collectively, the "Employment
Agreements"), which automatically extend for successive annual periods. Pursuant
to such Employment Agreements, each officer will receive (i) a base annual
salary of $312,000, $150,000 and $129,000, respectively, and (ii) a special
bonus of $160,405, $11,506 and $32,176, respectively, thirty days after the
Recapitalization Closing Date and on each of the next four anniversaries of the
date of the initial payment, provided that on the date such special bonus is due
GSCP or its affiliates control 50% or more of the voting power of the Company's
outstanding voting securities and there has not occurred an initial public
offering of Holdings Common Stock. In addition, each officer will be entitled to
receive certain perquisites and to participate in (a) a management incentive
compensation plan, pursuant to which each executive may be awarded up to 100% of
his base annual salary, if certain
41
<PAGE> 44
performance objectives are achieved and (b) a cash bonus plan, as described
above under "--The Annual Bonus Program," pursuant to which Mr. Hale, Mr. Hislop
and Mr. Palleschi may receive an aggregate incentive award of up to
approximately $2.1 million, $0.5 million and $0.6 million, respectively, during
the first five years following the Recapitalization Closing Date, in each case
if certain performance objectives are achieved. Mr. Hale's Employment Agreement
is terminable by the Company on 30 days' written notice (or immediately for
cause) and on 60 days' written notice by Mr. Hale, whereupon the Company shall
pay to Mr. Hale (1) all compensation, benefits and perquisites accrued under his
Employment Agreement through the effective date of his termination of
employment, (2) the remaining installments of the special bonus provided for in
clause (ii) above, payable only to the extent and at such times as Mr. Hale
would otherwise be entitled to such special bonus in accordance with the terms
of such clause and (3) three times the base salary provided for in clause (i)
above, at the rate being paid at the date of termination, plus three times the
most recent fiscal year's incentive bonus compensation provided for in clause
(a) above, plus a pro rata portion of the highest incentive bonus payable under
clause (a) above in the three most recent fiscal years. Each of Mr. Hislop's and
Mr. Palleschi's Employment Agreements are terminable by the Company on 30 days'
written notice (or immediately for cause). If Mr. Hislop's or Mr. Palleschi's
employment is terminated by the Company for any reason other than for cause or
the death or disability of the executive or if the executive's employment is
terminated by him for Good Reason (as defined in the Employment Agreements)
during the period of employment but prior to a Change in Control (as defined in
the Employment Agreements), the Company shall pay the executive (x) all
compensation, benefits and perquisites accrued under the applicable Employment
Agreement through the effective date of his termination of employment, (y) a
severance allowance equal to the sum of (1) two times the base salary provided
for in clause (i) above, at the rate being paid at the date of termination if
the termination occurs prior to the second anniversary of the Recapitalization
Closing Date and one year's base salary at the rate being paid at the time of
the termination of the executive's employment if the termination occurs after
the second anniversary of the Recapitalization Closing Date, (2) two times the
most recent fiscal year's incentive bonus compensation provided for in clause
(a) above and (3) a pro rata portion of the highest incentive bonus payable
under clause (a) above in the three most recent fiscal years and (z) the
remaining installments of the special bonus provided for in clause (ii) above
payable only to the extent and at such times as the executive would otherwise be
entitled to the special bonus in accordance with such clause. The executive may
terminate his employment under his Employment Agreement at any time during the
period of employment upon 60 days' written notice to the Company, and, without
regard to whether such termination occurs prior to a Change in Control, and the
executive shall be paid (1) all compensation, benefits and perquisites accrued
under his Employment Agreement through the effective date of his termination of
employment plus (2) the remaining installments of the special bonus provided for
in clause (ii) above, payable only to the extent and at such times as the
executive would otherwise be entitled to such special bonus under such clause.
The Employment Agreements also contain standard restrictive covenants relating
to competition and confidentiality.
Old EVI 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 Old EVI was terminated.
Under employment agreements with the Company, Messrs. Pabst and Bolstetter were
entitled to compensation upon their departure from the Company. Pursuant to such
employment agreements during the course of employment, Messrs. Pabst and
Bolstetter were entitled to, among other items, an annual 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 Messrs. Pabst
and Bolstetter ceased upon the termination of their respective employment except
that each (a) is 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
Messrs. Pabst and Bolstetter under their Employment Agreements shall be paid by
Mark IV, as provided in such Employment Agreements and the Purchase Agreement.
Mr. Graham is entitled to receive severance payments pursuant to a severance
agreement with Mark IV which are paid by Mark IV.
42
<PAGE> 45
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Ownership of Capital Stock
The authorized common stock of the Company as of March 31, 1998 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 are owned by Holdings. The
authorized Common Stock of Holdings as of March 31, 1998 consists of 7,000,000
shares of Common Stock, par value $.0005 per share, of which 4,438,140 shares
are issued and outstanding and 200,000 shares of Series A Pay-in-Kind Preferred
Stock, par value $0.01 per share, (the "Preferred Stock") of which 13,000 shares
are issued and outstanding. Except for 433,240 Rollover Shares (as defined
herein), which are owned by current and former management and certain shares
held by a former director of Holdings and Telex, all of the issued and
outstanding Common Stock of Holdings is owned by Greenwich I, LLC and Greenwich
II, LLC and all of the issued and outstanding Preferred Stock is owned by
Greenwich I, LLC.
The following table sets forth the beneficial ownership of the limited
liability company interests of each of Greenwich I, LLC and Greenwich II, LLC,
each of which is affiliated with GSCP.
<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, Connecticut
06183-2030. The person is an indirect wholly owned subsidiary of
Travelers.
43
<PAGE> 46
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information with respect to the beneficial
ownership of Holdings Common Stock and Options as of May 21, 1998 by (i) each
person who is known by the Company to beneficially own more than 5% of Holdings
Common Stock, (ii) each director of the Company, (iii) each officer of the
Company listed in the Summary Compensation Table above and (iv) by all directors
and executive officers as a group. Except as otherwise indicated, beneficial
ownership includes both voting and investment power with respect to the Holdings
Common Stock shown.
<TABLE>
<CAPTION>
Number of Shares
Number of Shares Underlying Options Percent of
Name of Beneficial Owner(a) Beneficially Owned Beneficially Owned(a) Class
--------------------------- ------------------ --------------------- -----
<S> <C> <C> <C>
Greenwich II, LLC(b)..................................... 2,605,060 -- 58.7%
Greenwich I, LLC(b)...................................... 1,397,400 -- 31.5%
John L. Hale............................................. 243,680 127,730 8.1%
John T. Hislop........................................... 17,480 54,240 1.6%
Dan M. Dantzler.......................................... 37,740 19,072 1.3%
Joseph P. Winebarger..................................... 46,540 17,132 1.4%
John A. Palleschi........................................ 48,880 30,362 1.8%
Alfred C. Eckert III(c).................................. -- -- 0.0%
Jeffrey J. Rosen......................................... -- 783 0.0%
Edgar S. Woolard, Jr..................................... -- 3,595 0.0%
Evan M. Marks............................................ -- 1,828 0.0%
Christopher P. Forester.................................. -- 1,828 0.0%
Keith W. Abell(c)........................................ -- -- 0.0%
Christine K. Vanden Beukel(c)............................ -- -- 0.0%
All directors and officers as a group (16) persons(b)(c). 415,800 324,054 15.9%
</TABLE>
- - -------------
(a) The shares listed include shares of Holdings Common Stock that may be
acquired upon exercise of presently exercisable options to acquire
Holdings Common Stock, and all such options that will become exercisable
within 60 days from the date on which such information is given.
(b) See "Ownership of Capital Stock" for information concerning the ownership
of limited liability company interests of Greenwich I, LLC and Greenwich
II, LLC.
(c) Does not include any of the 4,002,460 shares of Holdings Common Stock
beneficially owned by Greenwich I LLC and Greenwich II LLC, which Messrs.
Eckert and Abell and Ms. Vanden Beukel may be deemed to beneficially own
by virtue of their affiliation with GSCP. Mr. Eckert, Mr. Abell and Ms.
Vanden Beukel disclaim any such beneficial ownership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a summary of the structure of the Recapitalization and
certain provisions of the Recapitalization Agreement. This summary does not
purport to be complete and is qualified in its entirety by reference to the
Recapitalization Agreement, a copy of which is available upon request from the
Company.
On the Recapitalization Closing Date, Old Telex completed the
Recapitalization pursuant to the Recapitalization Agreement. In connection with
the Recapitalization, all of the shares of Holdings Common Stock and all options
and warrants to acquire Holdings Common Stock (other than certain shares of
Holdings Common Stock and certain options to acquire Holdings Common Stock owned
by certain members of management of the Company) were converted into the right
to receive Recapitalization
44
<PAGE> 47
Consideration equal to approximately $253.9 million. In addition, in connection
with the Recapitalization Agreement, the Rollover Shares and the Rollover
Options, with an aggregate value of approximately $21.2 million (which
represented approximately 20% of the fully diluted equity of Holdings, giving
effect to the Rollover Options) were retained by certain members of management
of the Company. In connection with the Recapitalization, Old Telex completed (i)
the Tender Offer to repurchase all of Old Telex's then outstanding 12% Senior
Notes due 2004, in aggregate principal amount of $100.0 million, and (ii) a
solicitation of consents with respect to certain amendments to the indenture
pursuant to which such notes were issued.
Capitalization of GST
GST was capitalized by $83.2 million of equity provided by GSCP and
certain co-investors and $25.2 million of proceeds provided by the issuance of
the GST Subordinated Debentures. The GST Subordinated Debentures (which are now
obligations of Holdings) will mature in 2009, bear non-cash interest at a rate
of 15% compounded quarterly, and are redeemable at the option of the issuer with
various premiums up to maturity. If the GST Subordinated Debentures are redeemed
or repaid following the fifth anniversary of their issuance, a portion of the
redemption/repayment amount will be payable in warrants to purchase Holdings
Common Stock. The terms pursuant to which the GST Subordinated Debentures were
issued contain a number of negative covenants that, among other things, restrict
the ability of the Company to dispose of assets; incur additional indebtedness
(including preferred stock); guarantee obligations; create liens; 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; conduct transactions with affiliates; and make
investments, loans or advances.
Stockholders and Registration Rights Agreement
In connection with the Recapitalization, all members of the Company's
senior management who own any Rollover Shares or Rollover Options (the
"Management Stockholders") entered into a Stockholders and Registration Rights
Agreement (the "Stockholders Agreement"), under which such Management
Stockholder agreed that he or she shall not, without the prior written consent
of Holdings, directly or indirectly, sell, pledge, mortgage, hypothecate, give,
transfer, create a security interest in or lien on, place in trust (voting or
otherwise), assign or in any other way encumber or dispose of any shares of
Holdings Common Stock now or hereafter beneficially owned by such Management
Stockholder. In addition, under the Stockholders Agreement, if a Management
Stockholder's employment is terminated, such Management Stockholder shall have
the right to sell, and Holdings shall also have the right to purchase all of the
shares of Holdings Common Stock owned by such Management Stockholder, and all of
the options to acquire Holding Common Stock owned by such Management
Stockholder, at prices calculated in accordance with, and subject to certain
other terms and conditions set forth in, the terms of the Stockholders
Agreement. The Stockholders Agreement also creates certain conventional "drag"
and "tag" rights with respect to the shares of Holdings Common Stock owned by
the Management Stockholders. The Stockholders Agreement also provides that at
any time after the effectiveness of the Mergers, G-II shall have the right to
make up to four requests that Holdings effect a public offering under the
Securities Act pursuant to a Stockholder Registration Statement of any of the
shares of Holdings Common Stock owned by G-I and G-II with certain limitations
and that Holdings shall pay all registration expenses in connection with each
registration of shares of Holdings Common Stock pursuant to the Stockholders
Agreement.
Interest of Certain Persons
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. The general
partner of GSCP is Greenwich Street Capital Partners, Inc., a wholly-owned
subsidiary of The Travelers Group, Inc ("Travelers"). Messr. Eckert is the
President of GSCP and a director of Holdings and the Company; Messr. Abell and
Ms. Vanden Beukel are principals of GSCP and directors of Holdings and of
45
<PAGE> 48
the Company. See Item 10. Directors and Officers of the Registrant. GSCP and
certain co-investors affiliated with Travelers purchased $57.6 million of equity
in Old EVI in connection with the Acquisition and $108.4 of equity in Old Telex
in connection with the Recapitalization.
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 aggregate annual fee of $1,715,000, payable quarterly in arrears,
plus Greenwich's reasonable out-of-pocket costs and expenses. This engagement
will be in effect until the earlier to occur of the fifth anniversary of the
Acquisition Closing Date or the date on which GSCP no longer owns, directly or
indirectly, any shares of the capital stock of G-II, and may be earlier
terminated by Greenwich in its discretion. In connection with the Mergers, the
services agreement which previously had been entered into by Greenwich and Old
Telex and assumed by the Company in the Merger was amended to reduce the term
thereof from a maximum of ten years to a maximum of five years. In conjunction
with such amendment, the services agreement between Greenwich and Old EVI that
had been in effect prior to the Mergers was terminated.
In addition, Greenwich received $1.5 million in fees on the Acquisition
Closing Date, and $2.5 million in fees on the Recapitalization Closing Date, for
providing services relating to the structuring and management of the Acquisition
(including the management compensation package related thereto) and the
Recapitalization Transactions, respectively and is entitled to receive
reimbursement for its reasonable out-of-pocket costs and expenses relating to
its provision of such services.
In addition, Holdings has agreed to indemnify Greenwich, GSCP, and their
respective directors, officers, partners, employees, agents, representatives and
control persons against certain liabilities arising under the federal securities
laws, liabilities arising out of the performance of the consulting agreement and
certain other claims and liabilities.
GSCP and Smith Barney, Inc. are both affiliated companies of Travelers. An
affiliate of Chase Securities Inc. is a limited partner in GSCP. Chase
Securities Inc. is an affiliate of The Chase Manhattan Bank ("Chase"), which is
the administrative agent and a lender to the Company under the Senior Secured
Credit Facility. Chase Securities Inc. acted as a Dealer Manager in connection
with Old Telex's Tender Offer. Chase and Smith Barney Inc. provided interim
financing to Old EVI in connection with the Acquisition. Chase has received and
will receive customary fees in connection with the Senior Secured Credit
Facility and Chase and Smith Barney Inc. received customary fees in connection
with such interim financing, as well as their proportionate shares of repayment
by Old EVI of amounts outstanding under the interim financing and Old EVI's
senior credit facility from the proceeds of the offering of the EVI Notes. Chase
Securities Inc. and Chase or their affiliates participate from time to time in
various financing and banking transactions for GSCP and its affiliates. Princes
Gate Investors II, L.P., an investment fund affiliated with Morgan Stanley & Co.
Incorporated, together with certain affiliated investors, are the owners of the
GST Subordinated Debentures.
Management
In connection with the Recapitalization Transactions, an aggregate of
811,520, 175,540, 113,780, 106,680 and 168,960 of the shares of Holdings Common
Stock and options to acquire shares of Holdings Common Stock held by Messrs.
Hale, Hislop, Dantzler, Winebarger and Palleschi, respectively, were converted
into the right to receive an aggregate of $25.6 million, $5.5 million, $2.8
million, $3.3 million and $5.4 million in cash, respectively. In addition, in
connection with the Recapitalization Transactions, an aggregate of 329,760,
64,460, 52,160, 58,740 and 69,040 of the shares of Holdings Common Stock and
options to acquire shares of Holdings Common Stock held by Messrs. Hale, Hislop,
Dantzler, Winebarger and Palleschi, respectively, were retained by such
individuals.
46
<PAGE> 49
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) The following documents are filed as a part of this report: Page
----
1. Financial Statements:
Consolidated Financial Statements (New Basis of Accounting)
Report of Independent Public Accountants............................53
Consolidated Balance Sheets as of February 28, 1998 and 1997........54
Consolidated Statements of Operations for the year ended
February 28, 1998 and for the period from February 11, 1997
through February 28, 1997...........................................55
Consolidated Statements of Shareholder's Equity (Deficit)
for the year ended February 28, 1998 and for the period from
February 11, 1997 through February 28, 1997.........................56
Consolidated Statements of Cash Flows for the year ended
February 28, 1998 and for the period from February 11, 1997
through February 28, 1997...........................................57
Notes to Consolidated Financial Statements..........................58
Consolidated Financial Statements (Predecessor Basis of Accounting)
Report of Independent Public Accountants............................79
Report of Independent Accountants...................................80
Consolidated Statements of Income and Retained Earnings for
the period from March 1, 1996 through February 10, 1997 and for
the year ended February 29, 1996....................................81
Consolidated Statements of Cash Flows for the period from
March 1, 1996 through February 10, 1997 and for the year ended
February 29, 1996...................................................82
Notes to Consolidated Financial Statements..........................83
2. Financial Statement Schedule:
All schedules have been omitted because they are inapplicable, not
required, or the information is included elsewhere in the financial
statements or notes thereto.
3. The Exhibits are listed in the Exhibit Index required by Item 601 of the
Regulation S-K at Item (c) below and included immediately following the
Consolidated Financial Statements. The Exhibit Index is incorporated
herein by reference.
(b) On January 8, 1998, Old EVI filed a Current Report on Form 8-K with the
Securities and Exchange Commission reporting that Old EVI had announced
their intent to merge with Old Telex. On April 21, 1998, the Company filed
Current Report on Form 8-K reporting the Mergers, which Form 8-K included
the following financial statements: Unaudited Pro Forma Condensed Statement
of Operations for the year ended February 28, 1997 for Old EVI and March 31,
1997 for Old Telex, respectively; Unaudited Pro Forma Condensed Statement of
Operations for the nine months ended November 30, 1997 for Old EVI and
December 31, 1997 for Old Telex, respectively; Unaudited Pro Forma
47
<PAGE> 50
Condensed Balance Sheet as of November 30, 1997 and December 31, 1997 for
Old Telex, respectively; and Notes to the Unaudited Pro Forma Condensed
Financial Statements.
(c) The Exhibit Index and required Exhibits are included following the
Consolidated Financial Statements. The Company will furnish to any security
holder, upon written request, any exhibit listed in the accompanying Exhibit
Index upon payment by such security holder of the Company's reasonable
expenses in furnishing any such exhibit.
(d) The Index to Consolidated Financial Statements is included following the
signature page of this report.
48
<PAGE> 51
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT:
The Company has not sent to its security holders an annual report covering
the fiscal year ended February 28, 1998 nor any proxy material relating to any
annual or other meeting of security holders. The indentures governing the EVI
Notes and the Telex Notes require the Company to provide to the holders of such
notes with such annual reports and such information, documents and other reports
as are specified in Sections 13 and 15(d) of the Securities Exchange Act of
1934, as amended.
49
<PAGE> 52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, as of the 29th day of
May 1998.
TELEX COMMUNICATIONS, INC.
By: /s/ John L. Hale
----------------------------------
John L. Hale, President and
Chief Executive Officer
Power of Attorney
Each person whose signature appears below constitutes and appoints, JOHN
L. HALE and JOHN T. HISLOP his true and lawful attorneys-in-fact and agents,
each acting alone, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign this Annual
Report on Form 10-K 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, each acting alone, 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 person, hereby ratifying and confirming all
said attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- - --------- ----- ----
/s/ John L. Hale President, Chief Executive May 29, 1998
- - ------------------------------- Officer and Chairman of the
John L. Hale Board of Directors (principal
executive officer)
/s/ John T. Hislop Vice President, Chief Financial May 29, 1998
- - ------------------------------- Officer, Treasurer and Assistant
John T. Hislop Secretary (principal financial
and accounting officer)
/s/ Jeffrey J. Rosen Director May 29, 1998
- - ------------------------------
Jeffrey J. Rosen
50
<PAGE> 53
/s/ Edgar S. Woolard, Jr. Director May 29, 1998
- - ------------------------------
Edgar S. Woolard, Jr.
/s/ Evan M. Marks Director May 29, 1998
- - ------------------------------
Evan M. Marks
/s/ Christopher P. Forester Director May 29, 1998
- - ------------------------------
Christopher P. Forester
/s/ Alfred C. Eckert III Director May 29, 1998
- - ------------------------------
Alfred C. Eckert III
/s/ Keith W. Abell Director May 29, 1998
- - ------------------------------
Keith W. Abell
/s/ Christine K. Vanden Beukel Director May 29, 1998
- - ------------------------------
Christine K. Vanden Beukel
51
<PAGE> 54
TELEX COMMUNICATIONS, INC.
INDEX OF FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
CONSOLIDATED FINANCIAL STATEMENTS (NEW BASIS OF ACCOUNTING)
Page
----
Report of Independent Public Accountants....................................53
Consolidated Balance Sheets as of February 28, 1998 and 1997................54
Consolidated Statements of Operations for the year ended
February 28, 1998 and for the period from February 11, 1997
through February 28, 1997...............................................55
Consolidated Statements of Shareholder's Equity (Deficit) for the
year ended February 28, 1998 and for the period from February 11,
1997 through February 28, 1997..........................................56
Consolidated Statements of Cash Flows for the year ended February 28,
1998 and for the period from February 11, 1997 through February
28, 1997................................................................57
Notes to Consolidated Financial Statements..................................58
CONSOLIDATED FINANCIAL STATEMENTS
(PREDECESSOR BASIS OF ACCOUNTING)
Report of Independent Public Accountants....................................79
Report of Independent Accountants...........................................80
Consolidated Statements of Income and Retained Earnings for the
period from March 1, 1996 through February 10, 1997 and for the
year ended February 29, 1996............................................81
Consolidated Statements of Cash Flows for the period from March 1,
1996 through February 10, 1997 and for the year ended
February 29, 1996.......................................................82
Notes to Consolidated Financial Statements..................................83
52
<PAGE> 55
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Telex Communications, Inc.:
We have audited the accompanying consolidated balance sheets of Telex
Communications, Inc. (a Delaware corporation formerly known as EV International,
Inc.) and subsidiaries as of February 28, 1998 and 1997, and the related
consolidated statements of operations, shareholder's equity (deficit), and cash
flows for the year ended February 28, 1998 and for the period from February 11,
1997 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Telex Communications, Inc.
and subsidiaries as of February 28, 1998 and 1997 and the results of their
operations and their cash flows for the year ended February 28, 1998 and for the
period from February 11, 1997 through February 28, 1997, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
May 26, 1998
53
<PAGE> 56
TELEX COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
February 28, February 28,
1998 1997
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents ...................... $ 5,163 $ 7,044
Accounts receivable, net of allowance for
doubtful accounts
(1998--$2,876; 1997--$2,203) ............... 59,106 42,856
Inventories .................................... 81,945 51,141
Other current assets ........................... 15,511 7,926
--------- ---------
Total current assets ....................... 161,725 108,967
Property, plant and equipment, net ................. 50,942 31,411
Deferred financing costs and other, net ............ 12,186 7,224
Intangible assets, net ............................. 78,568 60,513
--------- ---------
$ 303,421 $ 208,115
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Revolving line of credit ....................... $ 12,339 $ --
Current maturities of long-term debt ........... 10,125 1,000
Accounts payable ............................... 21,039 15,250
Accrued wages and benefits ..................... 11,155 6,726
Accrued interest ............................... 10,828 625
Other accrued liabilities ...................... 20,956 6,831
Income taxes ................................... 4,062 997
--------- ---------
Total current liabilities .................. 90,504 31,429
Long-term debt ..................................... 329,875 109,000
Other long-term liabilities ........................ 6,051 9,294
--------- ---------
Total liabilities .............................. 426,430 149,723
--------- ---------
Commitments and contingencies (Note 12)
Shareholder's equity (deficit):
Common stock, $.01 par value, 1,000
shares authorized, 110
shares issued and outstanding .............. -- --
Capital in excess of par ....................... 3,009 57,600
Cumulative translation adjustment .............. 1,506 (49)
Retained earnings (accumulated deficit) ........ (127,524) 841
--------- ---------
Total shareholder's equity (deficit) ....... (123,009) 58,392
--------- ---------
$ 303,421 $ 208,115
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
54
<PAGE> 57
TELEX COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
For the Period from
February 11, 1997
Year Ended Through
February 28, 1998 February 28, 1997
----------------- -------------------
<S> <C> <C>
Net sales .................................. $ 315,544 $ 14,916
Cost of sales .............................. 195,776 9,254
--------- ---------
Gross profit ........................... 119,768 5,662
--------- ---------
Operating expenses:
Engineering ............................ 16,810 471
Selling, general and administrative .... 78,251 2,755
Restructuring charges .................. 6,222 --
Corporate charges ...................... 2,123 37
Special charges ........................ 2,231 --
Amortization of goodwill and other
intangibles ........................... 3,128 54
--------- ---------
108,765 3,317
--------- ---------
Operating profit ........................... 11,003 2,345
Interest expense ........................... 39,535 843
Recapitalization expense ................... 6,710 --
Other (income) expense ..................... (84) 10
--------- ---------
Income (loss) before income taxes
and extraordinary item ................. (35,158) 1,492
Provision (benefit) for income taxes ....... (1,371) 651
--------- ---------
Income (loss) before extraordinary item .... (33,787) 841
Extraordinary loss from early
retirement of debt...................... 20,579 --
--------- ---------
Net income (loss) .......................... $ (54,366) $ 841
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
55
<PAGE> 58
TELEX COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
(In thousands, except share data)
<TABLE>
<CAPTION>
Retained Share-
Common Stock Capital in Cumulative Earnings holder's
------------------ Excess of Translation (Accumulated Equity
Shares Amount Par Adjustment Deficit) (Deficit)
------ ------ ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at February 10, 1997 ............. -- $ -- $ -- $ -- $ -- $ --
Initial capitalization ................. 110 -- 57,600 -- -- 57,600
Cumulative translation
adjustment .......................... -- -- -- (49) -- (49)
Net income ............................. -- -- -- -- 841 841
--------- ----- --------- --------- --------- ---------
Balance at February 28, 1997 ............. 110 -- 57,600 (49) 841 58,392
Equity from merger (Note 2) ............ -- -- 20,001 (27) (13,156) 6,818
Equity contribution .................... -- -- 108,353 -- -- 108,353
Change in terms of rollover
options ............................. -- -- 7,410 -- (309) 7,101
Repurchase of common stock
and outstanding options ............. -- -- (193,364) -- (60,534) (253,898)
Vesting of new options ................. -- -- 3,009 -- -- 3,009
Cumulative translation
adjustment .......................... -- -- -- 1,582 -- 1,582
Net loss ............................... -- -- -- -- (54,366) (54,366)
--------- ----- --------- --------- --------- ---------
Balance at February 28, 1998 ............. 110 $ -- $ 3,009 $ 1,506 $(127,524) $(123,009)
========= ===== ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
56
<PAGE> 59
TELEX COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the
period from
February 11
Year Ended Through
February 28, February 28,
1998 1997
------------ ------------
<S> <C> <C>
Operating activities:
Net income (loss) ................................ $ (54,366) $ 841
Adjustments to reconcile net income (loss)
to cash flows from
operations:
Depreciation ................................. 8,223 331
Amortization of intangibles and deferred
financing costs ............................. 4,711 234
Provision for bad debts ...................... 891 --
Write-off of deferred financing costs ........ 4,737 --
Recapitalization costs incurred .............. 6,710 --
Restructuring and special charges ............ 8,453 --
Extraordinary loss on early retirement of debt 20,579 --
Stock option compensation expense ............ 10,419 --
Deferred income taxes ........................ 6,332 --
Change in operating assets and liabilities:
Income taxes ............................. (12,169) 691
Accounts receivable ...................... 9,781 (4,846)
Inventories .............................. (6,851) 1,855
Other current assets ..................... 1,008 94
Accounts payable and accrued liabilities . 2,032 537
Other non-current liabilities ............ (1,681) (99)
--------- ---------
Net cash provided by (used in) operating
activities .................................. 8,809 (362)
--------- ---------
Investing activities:
Cash paid for acquisition, net of cash acquired .. -- (154,615)
Additions to property, plant and equipment ....... (8,878) (67)
Additions to equipment leased to customers ....... (372) --
--------- ---------
Net cash used in investing activities ........ (9,250) (154,682)
--------- ---------
Financing activities:
Proceeds from issuance of long-term debt ......... 340,000 110,000
Borrowings under revolving line of credit, net ... 12,339 --
Repurchase of long-term debt and payment of fees . (225,093) --
Proceeds from equity contribution ................ 108,353 57,600
Proceeds from merger with Old Telex .............. 34,753 --
Repurchase of common stock and outstanding options (253,898) --
Payments for deferred financing costs ............ (12,312) (5,595)
Recapitalization costs incurred .................. (6,710) --
Other ............................................ (309) --
--------- ---------
Net cash provided by (used in) financing
activities .................................. (2,877) 162,005
--------- ---------
Effect of exchange rate changes on cash and
cash equivalents .................................... 1,437 83
--------- ---------
Cash and cash equivalents:
Net increase (decrease) .......................... (1,881) 7,044
Beginning of period .............................. 7,044 --
--------- ---------
End of period .................................... $ 5,163 $ 7,044
========= =========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest ..................................... $ 26,891 $ --
========= =========
Income taxes, net ............................ $ 868 $ --
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
57
<PAGE> 60
TELEX COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Telex Communications, Inc., formerly known as EV International, Inc.
("Telex" or the "Company"), a Delaware corporation, is a wholly-owned subsidiary
of Telex Communications Group, Inc. ("Holdings"). The Company, formed as a
result of the February 2, 1998 merger of Old Telex and Old EVI, is a leader in
the design, manufacture and marketing of sophisticated audio, wireless and
multimedia communications equipment to commercial, professional and industrial
customers. The Company provides high value-added communications products
designed to meet the specific needs of customers in commercial, professional and
industrial markets, and does not participate in the competitive retail consumer
electronics market. The Company offers a comprehensive range of products
worldwide for professional audio systems as well as for multimedia and other
communications product markets, including wired and wireless microphones, wired
and wireless intercom systems, mixing consoles, signal processors, amplifiers,
loudspeaker systems, headphones and headsets, tape duplication products, talking
book players, LCD projectors, wireless LAN and PCS antennas, hearing aids and
wireless assistive listening devices. 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 or transmitted, and by professional entertainers,
television and radio on-air talent, presenters, airline pilots and the hearing
impaired in order to facilitate speech or communications.
Principles of consolidation
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. Ultimate results could differ from those estimates.
Cash and cash equivalents
All temporary investments with an original maturity of three months or
less at the time of purchase are considered cash equivalents. These investments
are considered available for sale and are carried at cost, which approximates
fair value.
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<PAGE> 61
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and include amounts for materials, labor and overhead.
Property, plant and equipment
Property, plant and equipment are recorded 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 operations. Depreciation of property, plant and equipment
is computed principally by the straight-line method over the estimated useful
lives of the assets as follows:
<TABLE>
<S> <C>
Buildings and improvements 5 to 31 years
Machinery and equipment 1.5 to 12 years
</TABLE>
Beginning in Fiscal 1998, the Company capitalized certain software
implementation costs. Prior to Fiscal 1998, such costs were not significant.
Direct internal and all external implementation costs and purchased software
have been capitalized and depreciated using the straight-line method over the
estimated useful lives, ranging from two to five years. As of February 28, 1998,
software implementation costs of $6.4 million have been capitalized and are
included in equipment and construction in progress. The Company expenses
reengineering costs as incurred.
Deferred financing costs
Deferred financing costs represent costs incurred by Old EVI and Old Telex
to issue the EVI Notes and the Telex Notes (together, the Senior Subordinated
Notes) and to secure the Senior Secured Credit Facility and are being amortized
over the terms of the related debt.
Intangible assets
Intangible assets are amortized on a straight-line basis over their
estimated useful lives, as follows:
<TABLE>
<S> <C>
Patents and engineering drawings 5-10 years
Dealer and distributor lists 15 years
Goodwill 40 years
Other intangibles 3-5 years
</TABLE>
Long-lived assets
The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for Impairment of Long-Lived Assets and
Assets to be Disposed Of," which requires impairment losses to be recorded on
long-lived assets used in the operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. The impairment loss is
measured by comparing the fair value of the assets, as determined by discounting
the future cash flows at a market rate of interest, to its carrying amount.
Revenue recognition
Revenues from product sales are recognized at the time of shipment.
Revenues from the sale of hearing instrument extended warranty contracts are
recognized ratably over the life of the contracts.
59
<PAGE> 62
Warranty costs
The Company warrants certain of its products for workmanship and
performance for periods of generally up to one year. The accrual for warranty
costs is based on expected average repair costs and return rates developed by
the Company using historical data.
Product development costs
Engineering costs associated with the development of new products and
changes to existing products are charged to operations as incurred ($16.8
million for the year ended February 28, 1998 and $0.5 million for the period
from February 11, 1997, through February 28, 1997).
Advertising expenses
Advertising costs are expensed when incurred. Advertising costs for the
year ended February 28, 1998 and the period from February 11, 1997 through
February 28, 1997 were $7.9 million and $0.2 million, respectively.
Income taxes
The Company accounts for income taxes utilizing the liability method.
Deferred income taxes are primarily recorded to reflect the tax consequences of
differences between the tax and the financial reporting bases of assets and
liabilities. The Company's tax provision is calculated on a separate company
basis, and the Company's taxable income is included in the consolidated federal
income tax return of Holdings.
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
shareholder's equity. Foreign exchange transaction gains and losses realized
during the year ended February 28, 1998 and 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, are recorded in other (income) expense.
Concentrations, risks and uncertainties
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 Sound and Entertainment market. The
Company's future results in this segment will depend, in
60
<PAGE> 63
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 in the Company's financial resources will not adversely affect its
ability to develop and implement technological advances.
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 Pacific. 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, 1998, 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.
Reclassifications
Certain prior-period amounts have been reclassified to conform to the year
ended February 28, 1998 presentation. These reclassifications had no impact on
the previously reported operating income, net income or shareholder's equity as
previously reported.
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<PAGE> 64
2. TRANSACTIONS
Acquisition
On February 10, 1997 (the "Acquisition Closing Date"), pursuant to a
purchase agreement dated December 12, 1996 (the "Purchase Agreement") an
acquisition subsidiary wholly owned by GSCP and certain affiliated investors
acquired from Mark IV and one of its subsidiaries all of the issued and
outstanding capital stock of Gulton Industries, Inc. ("Gulton"), the former
parent of Old EVI, and each of its subsidiaries for an initial cash purchase
price of $151.5 million, plus $4.9 million in estimated adjustments paid on the
closing date, which aggregate amount was subject to further post-closing
adjustments as described herein. The acquisition subsidiary subsequently merged
with and into the parent of Old EVI, and the parent then merged with and into
Old EVI, with Old EVI ultimately surviving (the "Acquisition"). Prior to the
Acquisition Closing Date, (i) EVI Audio LLC, a subsidiary wholly owned by GSCP
and certain affiliated investors, purchased all the issued and outstanding
shares of common stock and Pay-in-Kind Preferred Stock of EV Holdings for an
aggregate amount of $57.6 million and (ii) EV Holdings, a Delaware corporation
organized by GSCP to hold all the issued and outstanding stock of the EVI,
contributed $57.6 million to the Company.
Financing for the Acquisition, and the related fees and expenses,
consisted of (i) $57.6 million of equity capital provided by GSCP and certain
affiliated investors, (ii) a $60.0 million senior credit facility (consisting of
a term loan and a revolving credit facility), and (iii) a $75.0 million senior
subordinated credit facility issued as interim financing by Chase Securities
Inc. and Smith Barney Inc., the initial purchasers of the EVI Existing Notes (as
defined herein), and certain other lenders. Of these amounts, $156.4 million was
used for the purchase price for the Acquisition and $10.4 million was used for
financing and transaction fees and expenses. Under the Purchase Agreement, the
purchase price was 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. Based on
these provisions Mark IV has requested a purchase price increase of $405,000,
which amount the Company is currently disputing pursuant to the applicable
provisions of the Purchase Agreement.
On March 24, 1997, Old EVI issued 11% Senior Subordinated Notes due 2007
in an aggregate principal amount of $100 million (the "EVI Existing Notes"), all
of which were subsequently exchanged in September, 1997 for a like principal
amount of new 11% Senior Subordinated Notes due 2007, Series A (together with
the EVI Existing Notes, the "EVI Notes"), in an offering registered under the
Securities Act of 1933, as amended (the "Securities Act"). The proceeds from the
EVI Notes were used to repay the $75.0 million of indebtedness under the interim
financing in its entirety and a portion of EVI's term loan. The foregoing
transactions, including the issuance of the EVI Notes, are referred to herein as
the "Acquisition Transactions." The Acquisition was accounted for using the
purchase method of accounting which established a new basis 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
February 10, 1997 (i.e., the Acquisition Closing Date).
In connection with the Acquisition, Mark IV and the Company entered into a
transition services agreement pursuant to which Mark IV agreed to provide
certain services, including accounting, tax planning, foreign currency hedging,
cash management and administering certain pension plan assets pending their
transfer to the Company, for a period not to exceed twelve months following the
Acquisition Closing Date. In Fiscal 1998, the Company paid an aggregate of
approximately $41,000 in fees for services provided pursuant to such transition
services agreement, which services terminated on January 31, 1998. In addition,
Mark IV and the Company entered into sublease agreement with respect to certain
premises located in Austin, Texas and a non-exclusive,
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<PAGE> 65
royalty-free license to use certain names which incorporate the "Mark IV" name,
including related tooling and sales and marketing materials, and to sell
products incorporating such names for periods ranging from 18 to 36 months after
the Acquisition Closing Date.
Recapitalization
On May 6, 1997 (the "Recapitalization Closing Date"), Old Telex completed
a recapitalization (the "Recapitalization") pursuant to an Agreement (the
"Recapitalization Agreement") among Old Telex, Greenwich II, LLC ("G-II"), a
Delaware limited liability company formed by GSCP and certain other investors,
and GST Acquisition Corp. ("GST"), a Delaware corporation and a wholly owned
subsidiary of G-II. In connection with the Recapitalization, all of the shares
of common stock of Holdings ("Holdings Common Stock") and all options and
warrants to acquire Holdings Common Stock (other than certain shares of Holdings
Common Stock and certain options to acquire Holdings Common Stock owned by
certain members of management of Old Telex) were converted into the right to
receive an aggregate amount of cash (the "Recapitalization Consideration") equal
to approximately $253.9 million. In addition, in connection with the
Recapitalization Agreement, certain shares of Holdings Common Stock held by
management of Old Telex (such shares, the "Rollover Shares") and certain options
to acquire additional shares of Holdings Common Stock (the "Rollover Options"),
with an aggregate value of approximately $21.2 million (which represented
approximately 14% of the equity of Holdings on a non-diluted basis and
approximately 20% on a fully diluted basis) were retained by such managers. In
connection with the Recapitalization, Old Telex completed (i) a tender offer
(the "Tender Offer") to repurchase all of Old Telex's then outstanding 12%
Senior Notes due 2004, in aggregate principal amount of $100.0 million, for
$118.3 million (including premium and consent fees along with accrued interest),
and (ii) a solicitation of consents with respect to certain amendments to the
indenture pursuant to which such notes were issued. The Recapitalization, the
financing thereof (including the issuance by Old Telex of 10 1/2% Senior
Subordinated Notes due 2007 (the "Existing Telex Notes") to Chase Securities,
Inc., Morgan Stanley & Co. Incorporated and Smith Barney, Inc.), the Tender
Offer and the payment of the related fees and expenses are herein referred to as
the "Recapitalization Transaction." See "The Recapitalization" and "Interests of
Certain Persons."
The Recapitalization was financed by (i) $108.4 million of new equity
provided by GSCP and certain other co-investors, (ii) the Rollover Shares and
Rollover Options valued at $21.2 million, (iii) a $140.0 million senior secured
credit facility (the "Senior Secured Credit Facility") with The Chase Manhattan
Bank, Morgan Stanley Senior Funding, Inc. and certain other lenders, consisting
of (a) a $115.0 million term loan facility (the "Term Loan Facility"), and (b) a
$25.0 million revolving credit facility (the "Revolving Credit Facility"), (iv)
$125.0 million of Existing Telex Notes and (v) $36.5 million of available cash
of Old Telex. Of the $108.4 million of new equity contributed by GSCP and
certain other co-investors, $25.2 million consisted of proceeds from the
issuance of Deferred Pay Subordinated Debentures due 2009 (the "GST Subordinated
Debentures") contributed by GST to Old Telex in connection with the
Recapitalization.
Pursuant to the Recapitalization, the historical basis of all assets and
liabilities was retained for financial reporting purposes, and the repurchases
of existing Holdings Common Stock and issuance of new Holdings Common Stock have
been accounted for as equity transactions.
In October 1997, Old Telex completed an exchange offer of $125 million
aggregate principal amount of new 10 1/2% Senior Subordinated Notes Due 2007,
Series A (the "New Telex Notes"), which were registered under the Securities
Act, for a like principal amount of the Existing Telex Notes (together with the
New Telex Notes, the "Telex Notes"). All of the Existing Telex Notes were
tendered and accepted for exchange.
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<PAGE> 66
The Mergers
On February 2, 1998, Old EVI merged with Old Telex, a wholly owned
subsidiary of Holdings and an affiliate of GSCP, with Old EVI surviving. In the
Merger, Old EVI changed its corporate name to "Telex Communications, Inc." The
Merger was effected pursuant to an agreement and plan of merger, dated January
29, 1998 under which Greenwich I LLC ("G-I"), a subsidiary wholly owned by GSCP
and certain affiliated investors, exchanged all of the issued and outstanding
common and preferred stock of EVI Holdings, the former parent of Old EVI, for
1,397,400 shares of Holdings' Common Stock, and 13,000 shares of Holdings'
Series A Pay-in-Kind Preferred Stock, respectively, and EVI Holdings was merged
with and into Holdings, with Holdings continuing as the surviving corporation.
The Mergers have been accounted for essentially as a pooling of interests from
May 6, 1997, the date on which Old EVI and Old Telex came under common control,
and the financial statements of the Company for Fiscal 1998 include the results
of Old Telex from May 6, 1997. Immediately prior to the Mergers, approximately
$12.7 million of indebtedness outstanding under Old EVI's senior credit facility
was paid in full and Old EVI's senior credit facility was terminated. Such
indebtedness, together with $0.4 million of certain fees and expenses associated
with the Mergers, was repaid by utilizing free cash at closing from Old EVI of
$3.8 million and by borrowings under the Company's Revolving Credit Facility of
approximately $9.3 million. The EVI Notes remain outstanding following the
Mergers.
Pro Forma Results of Transactions (Unaudited)
Pro forma statements of operations are presented below for the years ended
February 28, 1998 and 1997, as if the Acquisition of Old EVI, the offering by
Old EVI of the EVI Notes, the Recapitalization of Old Telex (including the
offering by Old Telex of the Telex Notes) and the Merger of Old Telex with and
into EVI had occurred at the beginning of Fiscal 1997. 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
(in thousands).
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Full Year Full Year
Ended Ended
February 28, February 28,
1998 1997
As Adjusted As Adjusted
------------ -----------
<S> <C> <C>
Net sales.................................... $ 345,211 $ 362,927
Operating income(a).......................... 24,082 43,416
Net income (loss)(a)......................... (15,491) 3,911
</TABLE>
- - -----------
(a) Included in Fiscal 1998 operating income and net income (loss) as
presented, are non-cash compensation charges for stock options associated with
the Recapitalization, non-recurring charges for management cash bonus,
restructuring charges and non-cash impairment loss described in Note 3 below.
3. RESTRUCTURING AND SPECIAL CHARGES
Restructuring Charges
In the fourth quarter of Fiscal 1998, the Company recorded a pre-tax
restructuring charge of $6.2 million attributable to the Merger-related
consolidation of certain product lines, and the consolidation of certain of its
worldwide manufacturing, engineering, distribution, marketing, service and
administrative operations to reduce costs, to better utilize the available
manufacturing and operating capacity and to enhance competitiveness. The
consolidation will include the closure of some facilities and will also include
the transfer of a portion of the work from certain facilities to the Company's
remaining locations. The Company expects
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<PAGE> 67
to complete substantially all of the restructuring of the operations by early
Fiscal 2000, and expects to complete the sale and disposal of the owned
facilities and equipment related to those operations by late Fiscal 2000.
Included in the restructuring charges are $2.5 million associated with
severance pay for terminated employees, most of whom work in the facilities to
be closed or from which work is to be transferred to other locations, $2.8
million associated with reserves established for the write-down to fair market
value of certain assets (primarily inventories related to the products to be
discontinued, and land, building and equipment to be sold, made obsolete or
redundant), and $0.9 million associated with other costs. As of February 28,
1998, the Company has not incurred any cash related restructuring costs.
Long-lived Asset Impairment.
For the year ended February 28, 1998, the Company recognized an impairment
loss of $2.2 million against operating income for certain intangible assets,
including dealer and distributor lists, patents and engineering drawings and
goodwill as a result of changed business conditions for certain product lines
within the Company's two business segments. Considerable management judgment is
necessary to estimate future cash flows. Accordingly, it is reasonably possible
that the estimated discounted future cash flows may change in the near term
resulting in the need to write these or other long-lived assets down further.
4. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
February 28,
-----------------------
1998 1997
-------- --------
<S> <C> <C>
Raw materials.................................. $ 37,653 $ 19,830
Work in progress............................... 10,314 7,104
Finished goods................................. 33,978 24,207
-------- --------
$ 81,945 $ 51,141
======== ========
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
February 28,
-------------------------
1998 1997
-------- --------
<S> <C> <C>
Land ......................................... $ 2,888 $ 3,583
Buildings and improvements ................... 23,409 4,217
Machinery and equipment ...................... 85,852 23,867
Construction in progress ..................... 3,053 --
-------- --------
115,202 31,667
Less accumulated depreciation ................ 64,260 256
-------- --------
$ 50,942 $ 31,411
======== ========
</TABLE>
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6. INTANGIBLE ASSETS
Intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
February 28,
-------------------------
1998 1997
-------- --------
<S> <C> <C>
Goodwill ....................................... $83,052 $60,588
Dealer and distributor lists ................... 5,626 --
Patents and engineering drawings ............... 5,762 --
Other intangibles .............................. 2,805 --
------- -------
97,245 60,588
Less accumulated amortization .................. 18,677 75
------- -------
$78,568 $60,513
======= =======
</TABLE>
7. DEBT
Revolving Lines of Credit
In May 1997, the Company entered into the Revolving Credit Facility, as
part of the Senior Secured Credit Facility. Under this Facility, the Company may
make borrowings of up to $25.0 million, subject to a borrowing base calculation.
Interest on outstanding borrowings is calculated, at the Company's option, using
the bank's prime rate or LIBOR plus specified margins. The revolving line of
credit expires November 30, 2002. The facility requires an annual commitment fee
of 0.5% of the unused portion of the commitment. Borrowings are secured by
accounts receivable and inventory. The Company had letters of credit outstanding
in the amount of $7.6 million at February 28, 1998 reducing the availability
under the facility. Net availability at February 28, 1998 under the Revolving
Credit Facility totaled $10.6 million, after applying applicable borrowing base
limitations.
Certain foreign subsidiaries of the Company have entered into agreements
with banks to provide for local working capital needs. As of February 28, 1998
and 1997, the total aggregate availability of these arrangements, including
letter of credit issuance, was $4.7 million and $4.4 million, respectively. The
rates of interest in effect on these facilities as of February 28, 1998, ranged
from 1.9% to 9.3%, 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.
Long-term debt
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
February 28,
-------------------------
1998 1997
-------- --------
<S> <C> <C>
Senior Subordinated Notes, due May 1, 2007,
bearing interest of 10 1/2%
payable semiannually, unsecured .................. $125,000 $ --
Senior Subordinated Notes, due March 15, 2007,
bearing interest of 11%
payable semiannually, unsecured .................. 100,000 --
</TABLE>
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<PAGE> 69
<TABLE>
<CAPTION>
February 28,
-------------------------
1998 1997
-------- --------
<S> <C> <C>
Senior Secured Credit Facility (Term Loan Facility)
o Term Loan A, due in quarterly
installments through November 30,
2002, bearing interest at LIBOR
plus 2.5% (8.19% at February 28,
1998) payable semiannually,
secured by substantially all
assets of the Company ........... 50,000 --
o Term Loan B, due in quarterly
installments through November 30,
2004, bearing interest at LIBOR
plus 3.0% (8.69% at February 28,
1998) payable semiannually,
secured by substantially all
assets of the Company ........... 65,000 --
Senior Subordinated Credit Facility
(repaid during year) .................. -- 75,000
Term Loan (repaid during year) ......... -- 35,000
-------- --------
340,000 110,000
Less current portion ........ 10,125 1,000
-------- --------
$329,875 $109,000
======== ========
</TABLE>
The Senior Subordinated Notes and the Senior Secured Credit Facility
contain certain financial and non-financial restrictive covenants, including
limitations on: additional indebtedness, payment of dividends, certain
investments, sale of assets and consolidations, mergers, transfers of all or
substantially all of the Company's assets and capital expenditures, subject to
certain qualifications and exceptions. The Company was in compliance with or had
received waivers for all covenants related to the Senior Subordinated Notes and
Senior Secured Credit Facility as of February 28, 1998.
Aggregate annual maturities of long-term debt are as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ended February 28,
-----------------------
<S> <C>
1999(a)................. $ 10,125
2000.................... 8,500
2001.................... 9,250
2002.................... 12,500
2003.................... 18,375
Thereafter.............. 281,250
--------
$340,000
========
</TABLE>
(a) As of February 28, 1998, $10.1 million of the Company's Term Loan Facility
is payable in the next twelve months. Of such amount, $1.9 million was due
on February 28, 1998 and was payable, and was paid on March 2, 1998.
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8. INCOME TAXES
Significant components of the provision (benefit) for income taxes
attributable to income (loss) including the extraordinary item are as follows
(in thousands):
<TABLE>
<CAPTION>
Period from February 11,
Year Ended 1997 Through
February 28, 1998 February 28, 1997
----------------- -----------------
<S> <C> <C>
Current:
Federal ....................... $(7,209) $ 277
State ......................... -- --
Foreign ....................... (494) 374
------- -------
(7,703) 651
Deferred ......................... 6,332 --
------- -------
$(1,371) $ 651
======= =======
</TABLE>
A reconciliation of the income taxes computed at the federal statutory
rate to the Company's income tax provision (benefit) including the
extraordinary loss is as follows (in thousands):
<TABLE>
<CAPTION>
Period from February 11,
Year Ended 1997 Through
February 28, 1998 February 28, 1997
----------------- -----------------
<S> <C> <C>
Federal provision (benefit) at
statutory rate ................... $(18,950) $ 502
State provision (benefit), net
of federal tax ................... (1,843) 38
Amortization and write-off of
goodwill ......................... 1,430 29
Change in deferred tax asset
valuation allowance and other
income tax accruals .............. 16,533 --
Recapitalization costs ............ 2,522 --
Foreign tax rate differences ...... (814) 82
Other ............................. (249) --
-------- --------
$ (1,371) $ 651
======== ========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows (in thousands):
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<PAGE> 71
<TABLE>
<CAPTION>
February 28,
-------------------------
1998 1997
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation ....................... $ 7,440 $ 6,624
Unremitted foreign earnings ...................... -- 1,650
-------- --------
Total deferred tax liabilities ................ 7,440 8,274
-------- --------
Deferred tax assets:
Compensation related ............................. 3,942 --
Book over tax amortization ....................... 3,666 --
Pension .......................................... 1,123 --
Inventory reserves ............................... 2,473 1,140
Accounts receivable allowance .................... 1,028 118
Deferred revenue ................................. 191 --
Vacation accrual ................................. 1,125 --
Warranty reserves ................................ 1,055 1,290
Restructuring reserves ........................... 2,931 --
Tax loss carryforward ............................ 4,475 --
Other ............................................ 2,302 614
-------- --------
Total deferred tax assets ..................... 24,311 3,162
Valuation allowance for deferred tax assets ...... (16,533) --
-------- --------
Net deferred tax assets ....................... 7,778 3,162
-------- --------
Net deferred tax assets (liabilities) ............ $ 338 $ (5,112)
======== ========
</TABLE>
The Company has established a net deferred tax valuation allowance of
$16.5 million, charged to the income tax provision for the year ended February
28, 1998, due to the uncertainty of the realization of future tax benefits. The
realization of the future tax benefits related to the deferred tax asset is
dependent on many factors, including the Company's ability to generate taxable
income within the net operating loss carryforward period. Management has
considered these factors in reaching its conclusion as to the valuation
allowance for financial reporting purposes.
In addition, the Company has not recognized any income tax benefit
related to the excess of the market price over the exercise price of the
exercised options of $27.6 million. The income tax benefit once realized, will
be credited to shareholder's equity.
Prior to the merger of Old Telex and Old EVI, Old Telex received a
settlement offer from the IRS with respect to the amortization of its
intangibles for the taxable years 1990, 1991 and 1992. Old Telex reviewed the
IRS settlement offer and determined not to accept it. Any adjustment imposed by
the IRS relating to the intangible assets would not likely result in a material
adjustment to the Company's operations, because it would be recorded principally
as an adjustment to goodwill.
A deferred tax liability attributable to unremitted earnings existing at
the Acquisition Closing Date was established at the acquisition date. Subsequent
to the Acquisition, accumulated and current unremitted earnings of the Company's
foreign subsidiaries are deemed to be reinvested in each country and are not
expected to be remitted.
69
<PAGE> 72
9. RELATED PARTY TRANSACTIONS
Holdings' principal asset is its investment in the Company and, therefore,
Holdings is dependent on the operations of the Company for its cash flow needs.
However, there are no agreements between the Company and Holdings requiring the
transfer of funds from the Company to Holdings. The Senior Subordinated Notes
and the provisions of the indenture agreements pursuant to which the Senior
Subordinated Notes were issued restrict Telex's payment of dividends, loans or
advances to its affiliates.
The Company pays fees to Holdings' majority shareholder for management
services in the amount of $1.7 million annually. For the year ended February 28,
1998, the Company recorded a charge to operations of $2.1 million for such fees.
Income taxes payable and receivable include tax benefits related to
Holdings as the Company makes all tax payments for the consolidated group and
amounts recorded are included within other long-term liabilities on the
consolidated balance sheets.
10. RETIREMENT PLANS
The Company has a noncontributory defined benefit pension plan.
Eligibility, vesting and benefit formula provisions of the plan are based on
years of service and average final compensation. Pension costs are funded
annually subject to limitations.
The components of pension cost are as follows (in thousands):
<TABLE>
<CAPTION>
Period from
February 11,
Year Ended 1997 through
February 28, February 28,
1998 1997
-------- --------
<S> <C> <C>
Service cost for benefits earned during the period . $ 1,452 $ 16
Interest cost on projected benefit obligation ...... 1,659 --
Actual return on plan assets ....................... (5,731) --
Net amortization and deferral ...................... 4,476 --
-------- --------
Net pension cost ................................... $ 1,856 $ 16
======== ========
</TABLE>
70
<PAGE> 73
The following table presents the funded status of the above plan as
recognized in the consolidated balance sheets (in thousands):
<TABLE>
<CAPTION>
February 28,
-------------------------
1998 1997
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefits ................................. $20,616 $ 15
Nonvested benefits .............................. 318 1
-------- --------
Accumulated benefit obligation ..................... 20,934 16
Effect of projected pay increases .................. 6,756 --
-------- --------
Projected benefit obligation ....................... 27,690 16
Less plan assets at market value ........................ 22,609 --
-------- --------
Projected benefit obligation in excess of plan assets 5,081 16
Less unrecognized net loss .............................. 1,060 --
Less unrecognized net transition obligation ............. 122 --
Less unrecognized prior service cost .................... 8 --
Additional minimum liability ....................... 80 --
-------- --------
Pension liability accrued .......................... $ 3,971 $ 16
======== ========
</TABLE>
Assumptions used in the accounting for the defined benefit plan were as
follows:
<TABLE>
<CAPTION>
February 28,
-------------------------
1998 1997
-------- --------
<S> <C> <C>
Weighted average discount rate ..................... 7.0% 7.5%
Rate of increase in future compensation levels ..... 4.5% 0.0%
Expected long-term rate of return on plan assets ... 9.0% N/A
</TABLE>
Plan assets consist primarily of equity and debt securities and cash
equivalents.
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
$917 at February 28, 1998, 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 2.4% and 1.1%, respectively. For the year
ended February 28, 1998 and the period from February 10, 1997 through February
28, 1997, the Company charged $274 and $5, respectively, to expense for this
plan.
71
<PAGE> 74
11. POSTRETIREMENT BENEFITS
The Company is required to provide health and life insurance benefits to
certain employees of its U.S. operations upon retirement. Contributions required
to be paid by the employees towards the cost of such plans are a flat dollar
amount per month in certain instances, or a range from 25% to 100% of the cost
of such plans in other instances.
Net postretirement benefit expense included the following components (in
thousands):
<TABLE>
<CAPTION>
Period from
February 11,
Year Ended 1997 through
February 28, February 28,
1998 1997
-------- --------
<S> <C> <C>
Service cost ....................................... $ 21.5 $ 0.7
Interest cost ...................................... 33.6 1.3
Actual return on plan assets ....................... -- --
Net amortization and deferral ...................... 2.1 --
-------- --------
Net periodic postretirement benefit expense ........ 57.2 $ 2.0
======== ========
Accumulated postretirement benefit obligations:
Retirees ........................................... $ -- $ --
Fully eligible active plan participants ............ 124.1 126.0
Other active plan participants ..................... 277.6 219.0
-------- --------
401.7 345.0
Fair value of plan assets .......................... -- --
-------- --------
Excess of accumulated postretirement benefit
obligations over plan assets ..................... 508.5 345.0
Unrecognized prior service cost .................... -- --
Unrecognized net loss (gain) ....................... 106.8 --
Unrecognized net transition obligation (asset) ..... -- --
-------- --------
Accrued postretirement benefit cost ................ $ 401.7 $ 345.0
======== ========
</TABLE>
The assumed health care cost trend rate used in measuring the benefit
obligation is 8% for the year ended February 28, 1998, declining at a rate of
1.5% per year to an ultimate rate of 5.0% in 2000. The weighted average discount
rate used in determining the benefit obligation at February 28, 1998, is 7.75%.
The Company does not provide any post-employment benefits which would
require accrual under Statement of Financial Accounting Standards No. 112.
12. COMMITMENTS AND CONTINGENCIES
Litigation
The Company is a party to various legal actions in the normal course of
business. The Company believes that it is not currently party to any litigation
which, if adversely determined, would have a material adverse effect on the
consolidated financial position or results of operations of the Company.
72
<PAGE> 75
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, 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's environmentally related expenditures for the year ended
February 28, 1998 and for 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 position 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 position or results of operations of the
Company.
Employment contracts
The Company has employment contracts with certain key executives that
require the Company to pay severance or salary continuance pay equal to amounts
ranging from nine to twelve months' salary in the event such executives are
terminated without cause.
Lease commitments
At February 28, 1998, the Company had various noncancellable operating
leases for manufacturing, distribution and office buildings, warehouse space and
equipment.
73
<PAGE> 76
Approximate future minimum rental commitments under all noncancelable
operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended February 28,
-----------------------
<S> <C>
1999................................... $2,231
2000................................... 1,813
2001................................... 1,453
2002................................... 258
2003................................... 232
2004 and thereafter.................... 802
------
Total minimum lease commitments........ $6,789
======
</TABLE>
13. SEGMENT INFORMATION
Subsequent to the Mergers, the Company reorganized what had been
classified as Old Telex's four strategic business units and Old EVI's four
principal lines of business into the following two business segments:
Professional Sound and Entertainment and Multimedia/Communications.
(i) Professional Sound and Entertainment, which includes Old EVI's three
principal lines of business within the overall professional audio
market: (1) Fixed Installation; (2) Professional Music Retail; and
(3) Concert/Recording/ Broadcast and Old Telex's Broadcast
Communications Systems and Sound Reinforcement product groups (these
businesses were previously part of Old Telex's Professional Sound and
Entertainment Group); and
(ii) Multimedia/Communications, which includes all of Old Telex's
Multimedia/Audio Communications, RF/Communications, and Hearing
Instruments Groups, the Tape Duplication product group from Old
Telex's Professional Sound and Entertainment Group and Old EVI's
Other Applications line of business, consisting of handheld
microphones and earphones for field and aircraft communications, both
military and civilian, equipment for high-speed duplication of audio
tapes, and components marketed to original equipment manufacturers
for incorporation into their products.
The amounts in the tables below have been restated to coincide with the
new business segments. Individual product line results comprising each segment
have not been restated, and the Company has applied consistent allocation
methodologies to determine those results.
74
<PAGE> 77
<TABLE>
<CAPTION>
Period from February 11, 1997
Year Ended February 28, 1998 through February 28, 1997
---------------------------------------- ----------------------------------------
Professional Professional
Sound and Multimedia/ Sound and Multimedia/
Entertainment Communications Corporate Entertainment Communications Corporate
---------------------------- --------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated customers:
North America ........................... $ 125,149 $ 101,008 $ -- $ 7,599 $ 796 $ --
Europe .................................. 51,961 -- -- 2,952 -- --
Asia and other foreign .................. 37,426 -- -- 3,569 -- --
--------- --------- --------- --------- --------- ---------
Total net sales to customers .......... $ 214,536 $ 101,008 $ -- $ 14,120 $ 796 $ --
========= ========= ========= ========= ========= =========
Operating income (loss):
North America ........................... $ 8,984 $ 5,544 $ (4,791) $ 1,579 $ 120 $ (100)
Europe .................................. 1,042 -- -- 375 --
Asia and other foreign .................. 224 -- -- 371 --
--------- --------- --------- --------- --------- ---------
Total operating income (loss) ...... $ 10,250(a) $ 5,544(a) $ (4,791)(a) $ 2,325 $ 120 $ (100)
========= ========= ========= ========= ========= =========
Depreciation and amortization:
North America ........................... $ 4,093 $ 2,363 $ 3,387 $ 205 $ 13 $ 10
Europe .................................. 872 -- -- 33 -- --
Asia and other foreign .................. 636 -- -- 70 -- --
--------- --------- --------- --------- --------- ---------
Total depreciation and
amortization .................... $ 5,601 $ 2,363 $ 3,387 $ 308 $ 13 $ 10
========= ========= ========= ========= ========= =========
Capital expenditures:
North America ........................... $ 4,131 $ 1,793 $ 2,566 $ 47 $ -- $ 10
Europe .................................. 561 -- -- 5 -- --
Asia and other foreign .................. 199 -- -- 5 -- --
--------- --------- --------- --------- --------- ---------
Total capital expenditures ......... $ 4,891 $ 1,793 $ 2,566 $ 57 $ -- $ 10
========= ========= ========= ========= ========= =========
<CAPTION>
As of February 28, 1998 As of February 28, 1997
---------------------------------------- ----------------------------------------
Professional Professional
Sound and Multimedia/ Sound and Multimedia/
Entertainment Communications Corporate Entertainment Communications Corporate
------------- -------------- --------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Identifiable assets:
North America ........................... $ 80,734 $ 47,989 $ 110,047 $ 47,758 $ 8,446 $ 82,205
Europe .................................. 39,491 -- -- 42,580 --
Asia and other foreign .................. 25,160 -- -- 27,126 --
--------- --------- --------- --------- --------- ---------
Total identifiable assets .......... $ 145,385 $ 47,989 $ 110,047 $ 117,464 $ 8,446 $ 82,205
========= ========= ========= ========= ========= =========
</TABLE>
(a) Included in operating income (loss) are restructuring charges of $5,431,
$667 and $124 and special charges of $280, $1,951 and zero, for Professional
Sound and Entertainment, Multimedia/Communication and Corporate,
respectively.
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 $39,380 and $761 for
the year ended February 28, 1998 and for the period from February 11, 1997,
through February 28, 1997, respectively. Sales from the Company's subsidiaries
in Canada, Singapore, United Kingdom, Hong Kong, Germany, France, Switzerland,
Japan and Australia accounted for approximately 75%, and 50% of the total
international sales for the year ended February 28, 1998 and the period from
February 11, 1997 through February 28, 1997, respectively. Substantially all of
the Company's international sales are transacted in United States dollars. The
Company's operating profits on export sales are comparable to those realized on
domestic sales.
Corporate identifiable assets and capital expenditures relate principally
to the Company's investment in information systems and corporate facilities, as
well as cost in excess of net assets acquired included in intangible assets and
deferred financing costs.
75
<PAGE> 78
14. EQUITY
Stock Split
On June 25, 1997, Holdings' board of directors approved a 20-for-1 stock
split of all Holdings' outstanding common stock. All common stock options have
been restated for the period presented to reflect the common stock split.
Stock Compensation Plans
In Fiscal 1992, Holdings granted options to purchase up to 821,280 shares
of Holdings common stock at an exercise price of $0.0005 per share to the new
Chairman, President and Chief Executive Officer of the Company. Options
exercised during Fiscal 1998 were 14,000 and as of February 28, 1998, all such
options have been exercised.
In Fiscal 1993, Holdings and the Company adopted a non-qualified option
plan, the 1993 Stock Option Plan, which, as amended, authorized the issuance of
options to purchase shares of Holdings common stock, at exercise prices ranging
from $0.075 to $2.80 per share, to key employees; as of May 6, 1997, 242,000
options were granted and fully vested. Effective as of the Recapitalization
Closing Date, all options granted under the 1993 Stock Option plan became
subject to the terms of the 1997 Stock Option Plan.
The 1997 Stock Option Plan authorizes the issuance of up to 769,460 shares
of Holdings common stock, of which 557,000 have been granted. The exercise price
of these options ranges from $7.98 to $31.93. The non-qualified options may be
granted to certain key employees, directors and independent contractors of the
Company or Holdings.
A summary of the Company's stock option activity, and related information
for the period from May 6, 1997 (the date on which both entities came under
common control) through February 28, 1998, is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Options Exercise Price
------- --------------
<S> <C> <C>
Beginning of period ............................. 242,000 $ 1.27
Granted ......................................... 557,020 14.80
Exercised ....................................... (873) 7.98
Canceled ........................................ (17,587) 17.63
--------
End of period ................................... 780,560 10.61
========
Exercisable at end of period .................... 289,500 2.37
========
Available for future grants ..................... 212,440
========
</TABLE>
Exercise prices for options outstanding as of February 28, 1998 range from
$0.075 to $31.93. The weighted average remaining contractual life of those
options is 9.3 years as of February 28, 1998.
76
<PAGE> 79
Compensation expense has been recognized for options granted below fair market
value as of the date of grant over their respective vesting periods.
In accordance with the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," the Company has
chosen to continue to apply Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock option plans, and, accordingly, recognizes compensation
expense to the extent that the market price of the common stock exceeds the
option price on the date of grant.
The fair value of each option granted is estimated as of the date of grant
using the Black-Scholes single option-pricing model using a risk-free interest
rate of 6.57% and no expected dividend yield. Had compensation expense for stock
options been determined based on the fair value method (instead of the intrinsic
value method) at the grant dates for the awards, the Company's net loss for the
year ended February 28, 1998, would have increased by $970,000. The effects of
applying the fair value method of measuring compensation expense for the periods
presented is not likely to be representative of the effects of future years in
part because the fair value method was applied only to stock options granted
after February 28, 1995.
Warrants
Certain directors of the Company have been granted warrants representing
the right to purchase up to 27,235 shares of common stock of Holdings, at an
exercise price of $31.93 per share. A portion of these warrants became
exercisable on the date of grant, whereas the remainder will become exercisable
through 2001, provided in each case that the holder of the warrant is a director
of the Company on the date of exercise.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practical to estimate
fair value.
Cash and cash equivalents, accounts receivable, accounts payable and
revolving line of credit:
The carrying amount approximates fair value because of the short maturity
of these instruments.
Long-term debt:
The fair value of the Company's long-term debt approximates fair value
because of the variability of the interest cost associated with these
instruments. The fair value of the Company's Senior Subordinated Notes is
estimated based on quoted market rates for the notes.
The estimated fair values of the Company's financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
February 28, 1998 February 28, 1997
--------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents .......... $ 5,163 $ 5,163 $ 7,044 $ 7,044
Accounts receivable ................ 59,106 59,106 42,856 42,856
Accounts payable ................... 21,039 21,039 15,250 15,250
Revolving line of credit ........... 12,339 12,339 -- --
Long-term debt, excluding Senior
Subordinated Notes ............... 115,000 115,000 110,000 110,000
Senior Subordinated Notes .......... 225,000 208,000 -- --
</TABLE>
77
<PAGE> 80
16. SUPPLEMENTAL DISCLOSURES TO THE CONSOLIDATED STATEMENT OF CASH
FLOWS
For the period from February 11, 1997, through February 28, 1997, the 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>
17. SUBSEQUENT EVENT
Sale of Business
In April, 1998 the Company sold the assets, exclusive of the land and
building, of Gauss, its California-based high-speed, bin-loop, tape duplication
business and operations, for $0.7 million subject to certain adjustments
attributed to changes in working capital. The Company does not expect the sale
to have a material impact on its consolidated financial position and results of
operations.
78
<PAGE> 81
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 includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. An audit also includes examining on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. 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
79
<PAGE> 82
REPORT OF INDEPENDENT ACCOUNTANTS
To the Management of
EV International, Inc.
We have audited the accompanying consolidated statements of income and retained
earnings, and cash flows of EV International, Inc. (the "Company") for the year
ended February 29, 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of their operations and their
cash flows for the year 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)
80
<PAGE> 83
EV INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(In thousands)
<TABLE>
<CAPTION>
For the
Period from
March 1, 1996 For the
Through Year Ended
February 10, February 29,
1997 1996
----------------- ---------
<S> <C> <C>
Net sales ....................................... $ 177,100 $ 195,500
Cost of sales ................................... 112,100 123,900
--------- ---------
Gross profit .................................. 65,000 71,600
--------- ---------
Operating expenses:
Engineering ................................... 8,000 8,500
Selling, general and administrative ........... 41,600 44,400
Amortization of goodwill ...................... 900 1,000
--------- ---------
50,500 53,900
--------- ---------
Operating profit ................................ 14,500 17,700
Gain on sale of assets .......................... -- 400
--------- ---------
Income before taxes ........................... 14,500 18,100
Provision for income taxes ...................... 6,200 7,100
--------- ---------
Net income .................................... 8,300 11,000
Retained earnings, at the beginning of the year . 133,000 118,700
Cash transfers (to) from Parent, net and
adjustments resulting from the acquisition
(see Note 1) .............................. (2,000) 3,300
--------- ---------
Retained earnings, at the end of the period ..... $ 139,300 $ 133,000
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
81
<PAGE> 84
EV INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the
Period from
March 1, 1996 For the
Through Year Ended
February 10, February 29,
1997 1996
----------------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income ....................................... $ 8,300 $ 11,000
Items not affecting cash:
Depreciation and amortization ................ 5,100 5,100
Deferred income tax (benefit) ................ 700 (300)
Changes in assets and liabilities
Accounts receivable .......................... (500) (5,100)
Inventories .................................. (2,100) (8,500)
Other assets ................................. (2,500) (100)
Accounts payable ............................. (800) 300
Other liabilities ............................ (2,900) (2,000)
-------- --------
Net cash provided by operating
activities .......................... 5,300 400
-------- --------
Cash Flows From Investing Activities to
purchase equipment ........................... (3,300) (3,700)
-------- --------
Net cash transferred from (to) Parent and
adjustments resulting from the
acquisition (see Note 1) ................. $ (2,000) $ 3,300
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
82
<PAGE> 85
EV INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
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:
83
<PAGE> 86
Property, Plant and Equipment
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. Depreciation expense was approximately $4,200 for
the period from March 1, 1996 through February 10, 1997 and $4,100 in
fiscal 1996.
Cost in Excess of Net Assets Acquired ("Goodwill")
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. Amortization expense was
approximately $900 for the period from March 1, 1996 through February 10,
1997, and $1,000 in fiscal 1996.
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 $7,700 for the period from March 1, 1996 through February
10, 1997, and $8,200 in the fiscal year 1996.
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.
2. INCOME TAXES
Income before taxes and the related provision for income taxes for the
period from March 1, 1996 through February 10, 1997, and for fiscal 1996,
consist of the following:
84
<PAGE> 87
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Income before taxes:
United States ................................... $ 10,700 $ 10,600
Foreign ......................................... 3,800 7,500
-------- --------
Total income before taxes ................... $ 14,500 $ 18,100
======== ========
Provision for income taxes:
Currently payable-
United States ................................ $ 4,700 $ 5,300
Foreign ...................................... 800 2,100
-------- --------
Total currently payable ..................... 5,500 7,400
-------- --------
Deferred-
United States ................................ 200 (600)
Foreign ...................................... 500 300
-------- --------
Total deferred income tax (benefit) ......... 700 (300)
-------- --------
Total provision for income taxes ............ $ 6,200 $ 7,100
======== ========
</TABLE>
The provision for income taxes for the period from March 1, 1996 through
February 10, 1997 and, for fiscal year 1996, differs from the amount computed
using the U.S. statutory income tax rate as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Expected tax at U.S. statutory income tax
rate ............................................ $ 5,100 $ 6,300
Permanent differences .............................. 600 200
State and local income taxes ....................... 600 400
Foreign tax rate differences ....................... (100) 200
-------- --------
Total provision for income taxes ................... $ 6,200 $ 7,100
======== ========
</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.
3. 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 $350 for the period from March 1, 1996 through February 10, 1997,
and approximately $400 in fiscal 1996. 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 $170 for the period from March 1,
1996 through February 10, 1997, and approximately $200 for these plans in fiscal
1996.
85
<PAGE> 88
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 Company recognized an expense of
approximately $100 for these plans for the period from March 1, 1996 through
February 10, 1997 and approximately $100 in fiscal 1996.
4. 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 Company's postretirement benefit expense on the accrual method for the
period from March 1 through February 10, 1997, and for fiscal 1996 includes the
following components:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Service cost-benefits earned during the period ..... $ 5 $ 10
Interest cost on the APBO .......................... 15 130
-------- --------
Total expense .................................. $ 20 $ 140
======== ========
</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. 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.
5. 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 the EPA as the sole
Potentially Responsible Person at this site. The remediation required by the EPA
has been
86
<PAGE> 89
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.
6. 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 the
period from March 1,1996 through February 10, 1997, and for fiscal 1996 is as
follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net sales to customers:
United States .................................. $111,000 $125,700
Foreign ........................................ 96,300 107,300
Eliminations ................................... (30,300) (37,500)
-------- --------
Total net sales to customers ................. $177,100 $195,500
======== ========
Operating income:
United States .................................. $ 10,700 $ 12,800
Foreign ........................................ 3,800 7,100
Eliminations ................................... (2,000) (2,200)
-------- --------
Total operating income ....................... $ 14,500 $ 17,700
======== ========
</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 $8,160 for the period
from March 1, 1996 through February 10, 1997, and approximately $8,100 in fiscal
1996.
7. 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 $450 for the period from March 1, 1996
through February 10, 1997 and approximately $234 in Fiscal 1996.
87
<PAGE> 90
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
TELEX COMMUNICATIONS, INC.
(Commission File Number: 333-27341)
---------------------------------
EXHIBIT INDEX
for
Form 10-K
---------------------------------
Exhibit
Number Description of Document
- - ------- -----------------------
2(a) - Exchange Agreement and Plan of Merger, dated as of January 29,
1998, among Greenwich I LLC, Greenwich II LLC, EVI Audio Holdings,
Inc., Telex Communications Group, Inc. ("Holdings"), Telex
Communications, Inc. ("Old Telex") and EV International, Inc.
(incorporated by reference to Exhibit 2 to Old Telex's Quarterly
Report on Form 10-Q for nine months ended December 31, 1997, filed
with the Commission on February 17, 1998, Registration No.
333-30679).
2(b) - Recapitalization Agreement and Plan of Merger, dated March 4, 1997,
among Greenwich II LLC ("G-II"), GST Acquisition Corp. ("GST") and
Old Telex (incorporated by reference to Exhibit 2(a) to the Old
Telex's Registration Statement on Form S-4, filed with the
Commission on September 5, 1997, Registration No. 333-30679).
2(c) - Amendment No. 1 to the Recapitalization Agreement and Plan of
Merger, dated as of April 17, 1997 (incorporated by reference to
Exhibit 2(b) to Old Telex's Registration Statement on Form S-4,
Registration No. 333-30679).
2(d) - Amendment No. 2 to the Recapitalization Agreement and Plan of
Merger, dated as of April 25, 1997 (incorporated by reference to
Exhibit 2(c) to Old Telex's Registration Statement on Form S-4,
Registration No. 333-30679).
2(e) - Purchase Agreement, dated December 12, 1996, among Gulton
Acquisition Corp., Mark IV Industries, Inc., and Mark IV PLC, and
Gulton Industries, Inc. (incorporated by reference to Exhibit 2(a)
to the Registrant's Registration statement on Form S-4, filed with
the Commission on July 30, 1997, Registration No. 333-27341).
3(a) - Amended and Restated Certificate of Incorporation of Telex
Communications, Inc., dated February 2, 1998 (filed as an exhibit
hereto).
3(b) - By-laws of the Company, as amended (incorporated by reference to
Exhibit 3(b) to Old Telex's Registration Statement on Form S-4,
Registration No. 333-30679).
4(a) - Indenture, dated March 24, 1997, between Old EVI and The Bank of
New York, as Trustee (incorporated by reference to Exhibit 4(a) to
the Registrant's Registration statement on Form S-4, filed with the
Commission on July 30, 1997, Registration No. 333-27341).
(i)
<PAGE> 91
4(b) - Indenture (the "Telex Indenture"), dated as of May 6, 1997, among
Old Telex and Manufacturers and Traders Trust Company (incorporated
by reference to Exhibit 4(a) to Old Telex's Registration Statement
on Form S-4, Registration No. 333-30679).
4(c) - The First Supplemental Indenture, dated May 6, 1997, to the Telex
Indenture (incorporated by reference to Exhibit 4(b) to Old Telex's
Registration Statement on Form S-4, Registration No. 333-30679).
4(d) - Second Supplemental Indenture, dated as of February 2, 1998, made
by Old EVI in favor of Manufacturers and Traders Trust Company, as
trustee (incorporated by reference to Exhibit 2 to Old Telex's
Quarterly Report on Form 10-Q for nine months ended December 31,
1997, filed with the Commission on February 17, 1998, Registration
No. 333-30679).
4(e) - Credit Agreement (the "Credit Agreement"), dated May 6, 1997, among
Old Telex, 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") (incorporated by reference to
Exhibit 4(d) to Old Telex's Registration Statement on Form S-4,
Registration No. 333-30679).
4(f) - The Assignment and Assumption Agreement, dated May 6, 1997, made by
Old Telex, and Telex Communications Group, Inc. in favor of the
Administrative Agent for the benefit of the Senior Lenders
(incorporated by reference to Exhibit 4(e) to Old Telex's
Registration Statement on Form S-4, Registration No. 333-30679).
4(g) - Guarantee and Collateral Agreement, dated May 6, 1997, made by Old
Telex and Telex Communications Group, Inc. in favor of the
Administrative Agent for the benefit of the Senior Lenders and
certain other secured parties (incorporated by reference to Exhibit
4(f) to Old Telex's Registration Statement on Form S-4,
Registration No. 333-30679).
4(h) - Patent and Trademark Security Agreement, dated March 6, 1997, made
by Old Telex in favor of the Administrative Agent for the benefit
of the Senior Lenders under the Credit Agreement (incorporated by
reference to Exhibit 4(g) to Old Telex's Registration Statement on
Form S-4, Registration No. 333-30679).
4(i) - Amendment No. 1 to the Telex Communications, Inc. Credit Agreement,
dated as of January 29, 1998, among Telex Communications, Inc., The
Chase Manhattan Bank, as Administrative Agent, Morgan Stanley
Senior Funding, Inc. and the several banks and other financial
institutions from time to time party thereto (incorporated by
reference to Exhibit 2 to Old Telex's Quarterly Report on Form 10-Q
for nine months ended December 31, 1997, filed with the Commission
on February 17, 1998, Registration No. 333-30679).
10(a) - Amended and Restated Stockholders Agreement, dated March 4, 1997,
among Old Telex, G-II and the Stockholders set forth on Schedule A
thereto (incorporated by reference to Exhibit 10(a) to Old Telex's
Registration Statement on Form S-4, Registration No. 333-30679).
10(b) - Trademark License Agreement, dated May 25, 1989, by and between
Memorex Telex Corporation and Old Telex, relating to the "Telex"
name (incorporated by reference to Exhibit 10(b) to Old Telex's
Registration Statement on Form S-4, Registration No. 333-30679).
(ii)
<PAGE> 92
10(c) - Consulting Agreement, dated February 6, 1997, among EVI Audio
Holding, Inc., the Company, and Greenwich Street Capital Partners,
Inc. (incorporated by reference to Exhibit 10(a) the Registrant's
Registration statement on Form S-4, filed with the Commission on
July 30, 1997, Registration No. 333-27341).
10(d) - Consulting Agreement, dated May 6, 1997, between Greenwich Street
Capital Partners, Inc. ("GSCP Inc."), Holdings and G-II
(incorporated by reference to Exhibit 10(c) to Old Telex's
Registration Statement on Form S-4, Registration No. 333-30679).
10(e) - Form of Amendment, dated May 1, 1998, to the Consulting Agreement,
dated May 6, 1997, between GSCP Inc., Holdings and G-II (filed as
an exhibit hereto).
10(f) - Indemnification Agreement, dated May 6, 1997, between GSCP Inc.,
Holdings and G-II (incorporated by reference to Exhibit 10(d) to
Old Telex's Registration Statement on Form S-4, Registration No.
333-30679).
*10(g)- Fee Agreement, dated May 6, 1997, between GSCP Inc. and Holdings
(incorporated by reference to Exhibit 10(e) to Old Telex's
Registration Statement on Form S-4, Registration No. 333-30679).
*10(h)- Employment Agreement, dated December 11, 1996, between Gulton
Acquisition Corp. and Robert Pabst (incorporated by reference
Exhibit 10(b) to the Registrant's Registration statement on Form
S-4, filed with the Commission on July 30, 1997, Registration No.
333-27341).
*10(i)- Employment Agreement, dated December 11, 1996, between Gulton
Acquisition Corp. and Paul McGuire (incorporated by reference to
Exhibit 10(c) to the Registrant's Registration statement on Form
S-4, filed with the Commission on July 30, 1997, Registration No.
333- 27341).
*10(j)- Employment Agreement, dated December 11, 1996, between Gulton
Acquisition Corp. and John Bolstetter (incorporated by reference to
Exhibit 10(d) to the Registrant's Registration statement on Form
S-4, filed with the Commission on July 30, 1997, Registration No.
333- 27341).
*10(k)- Employment Agreement, dated March 4, 1997, between Holdings, Old
Telex and John L. Hale (incorporated by reference to Exhibit 10(f)
to Old Telex's Registration Statement on Form S-4, Registration No.
333-30679).
*10(l)- Employment Agreement, dated March 4, 1997, between Holdings, Old
Telex and John A. Palleschi (incorporated by reference to Exhibit
10(g) to Old Telex's Registration Statement on Form S-4,
Registration No. 333-30679).
*10(m)- Employment Agreement, dated March 4, 1997, between Holdings, Old
Telex and John T. Hislop (incorporated by reference to Exhibit
10(h) to Old Telex's Registration Statement on Form S-4,
Registration No. 333-30679).
*10(n)- 1997 Telex Communications Group, Inc. Stock Option Plan
(incorporated by reference to Exhibits 10(h), 10(i) and 10(j) to
Old Telex's Registration Statement on Form S-4, Registration No.
333-30679).
(iii)
<PAGE> 93
*10(o)- Telex Communications Group, Inc. Cash Bonus Plan (incorporated by
reference to Exhibits 10(h), 10(i) and 10(j) to Old Telex's
Registration Statement on Form S-4, Registration No. 333-30679.
*10(p)- Telex Communications Group, Inc. Management Cash Compensation Plan
(incorporated by reference to Exhibits 10(f), 10(g) and 10(h) to
Old Telex's Registration Statement on Form S-4, Registration No.
333-30679.
*10(q)- Warrant, dated April 7, 1998, issued by Holdings to Jeffrey Rosen,
and form of amendment thereto (filed as an exhibit hereto).
*10(r)- Warrant, dated April 7, 1998, issued by Holdings to Christopher
Forester, and form of amendment thereto (filed as an exhibit
hereto).
*10(s)- Warrant, dated April 7, 1998, issued by Holdings to Edgar S.
Woolard, Jr., and form of amendment thereto (filed as an exhibit
hereto).
*10(t)- Warrant, dated April 7, 1998, issued by Holdings to Evan Marks, and
form of amendment thereto (filed as an exhibit hereto).
10(u) - Tradename and Trademark License Agreement, dated February 10, 1997,
between Gulton Industries, Inc. and Mark IV Industries, Inc.
(incorporated by reference to Exhibit 10 (e) to the Registrant's
Registration statement on Form S-4, filed with the Commission on
July 30, 1997, Registration No. 333-27341).
10(v) - Transition Services Agreement, dated February 10, 1997, between
Gulton Industries, Inc. and Mark IV Industries, Inc.(incorporated
by reference to Exhibit 10(f) to the Registrant's Registration
statement on Form S-4, filed with the Commission on July 30, 1997,
Registration No. 333-27341).
10(w) - Software License Agreement, dated February 10, 1997, between Gulton
Industries, Inc. and Mark IV Industries, Inc. (incorporated by
reference to Exhibit 10(g) to the Registrant's Registration
statement on Form S-4, filed with the Commission on July 30, 1997,
Registration No. 333-27341).]
*10(x)- 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 (incorporated by reference to Exhibit 10(h) to
the Registrant's Registration statement on Form S-4, filed with the
Commission on July 30, 1997, Registration No. 333-27341).
*10(y)- 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 (incorporated by reference to
Exhibit 10(i) to the Registrant's Registration statement on Form
S-4, filed with the Commission on July 30, 1997, Registration No.
333-27341).
(iv)
<PAGE> 94
*10(z)- 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 (incorporated by reference to
Exhibit 10(j) to the Registrant's Registration statement on Form
S-4, filed with the Commission on July 30, 1997, Registration No.
333- 27341).
10(aa)- 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 (incorporated by reference to Exhibit 10(k) to the
Registrant's Registration statement on Form S-4, filed with the
Commission on July 30, 1997, Registration No. 333-27341).
10(bb)- Mortgage (or deed of trust), dated May 6, 1997, from Old Telex, as
Mortgagor, to the Administrative Agent, with respect to
Bloomington, Minnesota (incorporated by reference to Exhibit 10(i)
to Old Telex's Registration Statement on Form S-4, Registration No.
333-30679).
10(cc)- Mortgage (or deed of trust), dated May 6, 1997, from Old Telex, as
Mortgagor, to the Administrative Agent, with respect to Blue Earth,
Minnesota (incorporated by reference to Exhibit 10(j) to Old
Telex's Registration Statement on Form S-4, Registration No.
333-30679).
10(dd)- Mortgage (or deed of trust), dated May 6, 1997, from Old Telex, as
Mortgagor, to the Administrative Agent, with respect to Glen Cove,
Minnesota (incorporated by reference to Exhibit 10(k) to Old
Telex's Registration Statement on Form S-4, Registration No.
333-30679).
10(ee)- Mortgage (or deed of trust), dated May 6, 1997, from Old Telex, as
Mortgagor, to the Administrative Agent, with respect to Rochester,
Minnesota (incorporated by reference to Exhibit 10(l) to Old
Telex's Registration Statement on Form S-4, Registration No.
333-30679).
10(ff)- Mortgage (or deed of trust), dated May 6, 1997, from Old Telex, as
Mortgagor, to the Administrative Agent, with respect to Lincoln,
Nebraska (incorporated by reference to Exhibit 10(m) to Old Telex's
Registration Statement on Form S-4, Registration No. 333-30679).
10(gg)- Mortgage (or deed of trust), dated February 2, 1998, from Telex
Communications, Inc., as Mortgagor, to the Administrative Agent,
with respect to Sun Valley, CA (filed as an exhibit hereto).
10(hh)- Mortgage (or deed of trust), dated February 2, 1998, from Telex
Communications, Inc., as Mortgagor, to the Administrative Agent,
with respect to Sylmar, CA (filed as an exhibit hereto).
10(ii)- Mortgage (or deed of trust), dated February 2, 1998, from Telex
Communications, Inc., as Mortgagor, to the Administrative Agent,
with respect to Buchanan, MI (Cecil Street) (filed as an exhibit
hereto).
10(jj)- Mortgage (or deed of trust), dated February 2, 1998, from Telex
Communications, Inc., as Mortgagor, to the Administrative Agent,
with respect to Buchanan, MI (Front Street). (filed as an exhibit
hereto).
(v)
<PAGE> 95
10(kk)- Mortgage (or deed of trust), dated February 2, 1998, from Telex
Communications, Inc., as Mortgagor, to the Administrative Agent,
with respect to Oklahoma City, OK (filed as an exhibit hereto).
10(ll)- Mortgage (or deed of trust), dated February 2, 1998, from Telex
Communications, Inc., as Mortgagor, to the Administrative Agent,
with respect to Newport, TN (filed as an exhibit hereto).
10(mm)- Mortgage (or deed of trust), dated February 2, 1998, from Telex
Communications, Inc., as Mortgagor, to the Administrative Agent,
with respect to Sevierville, TN (filed as an exhibit hereto).
12(a) - Computation of Ratio of Earnings to Fixed Charges (filed as an
exhibit hereto).
12(b) - Computation of EBITDA to Interest Expense (filed as an exhibit
hereto).
21 - List of Subsidiaries (filed as an exhibit hereto).
24 - Power of Attorney (included on signature pages to this Form 10-K).
27 - Financial Data Schedule (filed as an exhibit hereto).
- - ----------------
* Denotes management contract, executive compensation plan, or arrangement.
(vi)
<PAGE> 1
RESTATED CERTIFICATE OF INCORPORATION
OF
TELEX COMMUNICATIONS, INC.
1. The name of this corporation (hereinafter referred to as
the "Corporation") is:
TELEX COMMUNICATIONS, INC.
2. The period of duration of the Corporation shall be
perpetual.
3. The address of the Corporation's registered office in the
State of Delaware is Corporation Service Company, 1013 Centre Road, Wilmington,
New Castle County, Delaware 19805, and the name of its registered agent at said
address is The Corporation Service Company.
4. The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
5. The Corporation shall have authority to issue 1000 shares
of Common Stock, par value of $0.01 per share (the "Common Stock").
6. The shares of Common Stock shall entitle the holders
thereof to one vote per share on all matters upon which such stockholders have
the right to vote.
7. The Board of Directors is hereby empowered to authorize by
resolution or resolutions from time to time the issuance of one or more classes
or series of Preferred Stock and to fix the designations, powers, preferences
and relative participating, optional or other rights, if any, and the
qualifications, limitations or restrictions thereof, if any, with respect to
each such class or series of Preferred Stock and the number of shares
constituting each such class or series, and to increase or decrease the number
of shares of any such class or series to the extent permitted by the General
Corporation Law of Delaware.
<PAGE> 2
8. All of the powers of the Corporation, insofar as the same
may be lawfully vested by this Certificate of Incorporation in the Board of
Directors, are hereby conferred upon the Board of Directors of the Corporation.
Elections of directors need not be by ballot unless the Bylaws of this
Corporation shall so provide.
9. The stockholders and Board of Directors shall have power,
if the Bylaws so provide, to hold their meetings and to keep the books,
documents and papers of the Corporation without the State of Delaware except
such as are required by the law of the State of Delaware to be kept in the State
of Delaware.
10. The incorporator and his mailing address are as follows:
John W. Heiderscheit, III
O'Melveny & Myers
555 13th Street, N.W.
Suite 500 West
Washington, D.C. 20004-1109
11. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
alter or repeal the Bylaws of the Corporation.
12. The Corporation shall indemnify its officers, directors,
employees and agents to the full extent permitted by the General Corporation Law
of Delaware.
13. No member of the Board of Directors of the Corporation
shall have any personal liability to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that the
foregoing 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 Title 8,
Delaware Code, or (iv) for any transaction from which the director derived an
improper personal benefit.
14. The Corporation reserves the right to amend and repeal any
provision contained in this Certificate of Incorporation in the manner
prescribed by the law of the State of Delaware.
2
<PAGE> 1
Exhibit 10(e)
AMENDMENT TO CONSULTING AGREEMENT
This AMENDMENT dated as of May 1, 1998 to the Consulting
Agreement (the "Consulting Agreement") dated as of May 6, 1997 between Telex
Communications Group, Inc. (the "Company"), as successor to GST Acquisition
Corp., Inc., and Greenwich Street Capital Partners, Inc. ("Greenwich").
W I T N E S S E T H :
WHEREAS, Section 5(a)(i) of the Consulting Agreement provides
that the Consulting Agreement will terminate upon, the earlier to occur of (i)
the tenth anniversary of the date thereof 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 the Company;
WHEREAS, Greenwich and the Company have agreed to amend the
Consulting Agreement so that the outside termination date thereof is the fifth
anniversary of the date of such Consulting Agreement;
NOW, THEREFORE, the Consulting Agreement is hereby amended,
pursuant to Section 14 thereof, by mutual agreement of the parties thereto as
follows:
1. Section 5(a) is amended and restated in its entirety to
read as follows:
"This Agreement shall be in effect until, and shall
terminate upon, the earlier to occur of (i) the fifth
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 the Company, and
<PAGE> 2
may be earlier terminated by Greenwich, in its sole
discretion, upon 15 days' prior written notice to the
Company".
IN WITNESS WHEREOF, the parties have duly executed this
Amendment as of the date first above written.
TELEX COMMUNICATIONS GROUP, INC.
By:____________________________________
Name:
Title:
GREENWICH STREET CAPITAL PARTNERS, INC.
By:____________________________________
Name:
Title:
2
<PAGE> 1
Exhibit 10(q)
Warrant to Purchase 5,484 Shares
of Common Stock at $.01 per Share
INCORPORATED UNDER THE LAWS OF THE STATE
OF DELAWARE
TELEX COMMUNICATIONS GROUP INC.
-----------------------
THE SECURITIES EVIDENCED BY THIS WARRANT OR ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT
BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, ASSIGNED OR OTHERWISE
ENCUMBERED OR DISPOSED OF WITHOUT COMPLIANCE WITH THE PROVISIONS OF,
AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, SECTION 7 OF THIS
WARRANT AND THE SECURITIES ACT AND APPLICABLE STATE SECURITIES' LAW.
TELEX COMMUNICATIONS GROUP, INC., a Delaware corporation (the
"Company"), certifies that, for value received, Jeff Rosen (the "Holder"), is
entitled to purchase, until the close of business on February 2, 2008 (the
"Termination Date"), 5,484 shares of Common Stock, par value $0.01 per share of
the Company ("Common Stock"), at a price of $31.93 per share (the "Warrant
Price"); subject, however, to the provisions and upon the terms and conditions
hereinafter set forth.
1. Exercisability of Warrant.
(a) This Warrant shall become exercisable as follows:
<PAGE> 2
(i) This Warrant shall become exercisable for 783 shares of
Common Stock (as adjusted as provided herein) on January 28,
1998;
(ii) This Warrant shall become exercisable for an
additional 1,828 shares of Common Stock (as adjusted as
provided herein) on January 28, 1999, provided Mr. Rosen is a
director of the the Company or the Company's wholly-owned
subsidiary, Telex Communications, Inc. ("TCI") on such date;
(iii) This Warrant shall become exercisable for an
additional 1,828 shares of Common Stock (as adjusted as
provided herein) on January 28, 2000, provided Mr. Rosen is a
director of the Company or TCI on such date; and
(iv) This Warrant shall become exercisable for an
additional 1,045 shares of Common Stock (as adjusted as
provided herein) on January 28, 2001, provided Mr. Rosen is a
director of the Company or TCI on such date.
(b) Subject to the foregoing and the other terms and
conditions hereof, this Warrant may be exercised in whole or in part at any time
until the earlier to occur of (i) the 180th day after the date on which Mr.
Rosen ceases to be a director of the Company for any reason and (ii) the
Termination Date. If Mr. Rosen ceases to be a director of the Company or TCI on
or prior to any of the applicable dates set forth in Section 1 hereof, this
Warrant shall be cancelled and of no further force of effect with respect to the
shares of Common Stock for which this Warrant would otherwise become exercisable
on such date.
2. Method of Exercise; Payment; Issuance of New Warrant.
(a) This Warrant may be exercised by the Holder, in whole or
in part, by the surrender of this Warrant,
2
<PAGE> 3
properly endorsed, at the principal office of the Company in Minneapolis,
Minnesota, Attention: Secretary, and by (i) the payment to the Company of the
Warrant Price in respect of the Common Stock being purchased, and (ii) delivery
to the Company of the form of subscription attached hereto (or a reasonable
facsimile thereof).
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the business day on which
(i) this Warrant shall have been surrendered to the Company, (ii) the Company
shall have received payment of the Warrant Price in respect of the Common Stock
being purchased and (iii) the Company shall have received the form of
subscription agreement attached hereto, all as provided in this Section 2, and
at such time the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such exercise
shall be deemed to have become the holder or holders of record thereof.
(c) In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of Common Stock so purchased shall be
delivered at the Company's expense (including the payment by the Company of any
applicable issuance taxes) to the Holder within five (5) business days after the
rights represented by this Warrant shall have been so exercised, and unless this
Warrant has expired, a new Warrant of like tenor representing the number of
shares of Common Stock, if any, with respect to which this Warrant shall not
then have been exercised, shall also be issued to the Holder within such time.
3. Stock Fully Paid; Reservation of Shares. The Company
covenants and agrees that all shares which may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable and free from all liens. The
Company further covenants and agrees that during the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have
3
<PAGE> 4
authorized, and reserved for the purpose of the issue upon exercise of the
purchase rights evidenced by this Warrant, at least the maximum number of shares
of its Common Stock as are then issuable upon the exercise of the rights
represented by this Warrant.
4. Fractional Shares. No fractional shares of Common Stock
will be issued in connection with any exercise hereunder but in lieu of such
fractional shares, the Company shall make a cash payment therefor to the Holder
in an amount equal to the fair market value of such fraction.
5. Number of Shares Receivable Upon Exercise. The number and
kind of securities receivable upon the exercise of this Warrant is subject to
adjustment upon the happening of the events specified in this Section 5.
(a) Stock Dividends, Stock Splits, Etc. In case the Company
shall (i) declare or pay a dividend on the Common Stock in shares of any class
of capital stock or make a distribution to holders of the Common Stock in shares
of any class of capital stock, (ii) subdivide the outstanding Common Stock into
a greater number of shares of Common Stock, (iii) combine the outstanding Common
Stock into a smaller number of shares of Common Stock or (iv) issue by
reclassification of the shares of Common Stock other securities of the Company
(including any such reclassification in connection with a consolidation, merger
or other business combination in which the Company is the surviving
corporation), the number and kind of shares of capital stock or securities
purchasable and issuable upon exercise of the Warrants shall be adjusted so that
the Holder, upon exercise thereof, shall be entitled to receive the number and
kind of shares of capital stock and other securities of the Company that the
Holder would have owned or have been entitled to receive after the happening of
any of the events described above had the Warrants been exercised in full and
the relevant shares of Common Stock issued in the name of the Holder immediately
prior to the happening of such event or, if applicable, any record date with
respect thereto. An
4
<PAGE> 5
adjustment made pursuant to this paragraph (a) shall become effective on the
date of the dividend payment, subdivision, combination or issuance retroactive
to the record date with respect thereto, if any, for such event. Such adjustment
shall be made successively whenever such an issuance is made.
(b) Accountants' Report as to Adjustments. In each case of any
adjustment or readjustment in the number of shares of Common Stock or other
securities issuable upon exercise of this Warrant, the Company at its expense
will promptly compute such adjustment or readjustment in accordance with the
terms hereof and, upon the reasonable request of the Holder, cause independent
public accountants of recognized national standing selected by the Company
(which may be the regular auditors of the Company) to verify such computation
and prepare a report setting forth such adjustment or readjustment and showing
in reasonable detail the method of calculation thereof and the facts upon which
such adjustment or readjustment is based. The Company will forthwith mail a copy
of each such report to the Holder of this Warrant. The Company will also keep
copies of all such reports at its principal office, and will cause the same to
be available for inspection at such office during normal business hours by the
Holder of this Warrant or any prospective purchaser of a Warrant designated in
writing by the Holder.
(c) No Impairment. The Company will not permit the par value
of any shares of Common Stock receivable upon the exercise of any Warrant to be
increased to an amount that exceeds the amount payable therefor upon such
exercise and will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant from time
to time.
(d) Exercise of Warrant in the Event of a Consolidation,
Merger, Sale of Assets, Reorganization, Etc. (i) In the event of any merger,
consolidation or other
5
<PAGE> 6
acquisition or business combination in which the Company is not the surviving
corporation or in which all of the outstanding Common Stock is converted into,
acquired or exchanged for securities, cash or property or in the event of the
sale or other disposition of all or substantially all the assets of the Company,
the successor, parent or purchasing person, as the case may be, shall deliver
to the Holder an undertaking that such Holder shall have the right thereafter
upon payment of the Warrant Price to purchase upon exercise of each Warrant the
kind and amount of securities, cash and property which the Holder would have
owned or have been entitled to receive upon the happening of such merger,
consolidation, acquisition, business combination or sale had each Warrant been
exercised and the relevant shares of Common Stock issued in the name of the
Holder immediately prior to the relevant record date, if any, or the occurrence
of such merger, consolidation, acquisition, business combination or sale. Such
undertaking shall provide for adjustments, which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Section 5(d).
The Company will not effect any transaction of the type referred to in this
Section 5(d) unless the successor or purchasing person delivers such
undertaking. The provisions of this Section 5(d) shall similarly apply to
successive mergers, consolidations, business combinations and sales or
transfers.
(ii) Upon any liquidation, dissolution or winding up of the
Company, the Holder shall receive such cash or property (less the Warrant Price)
which the Holder would have been entitled to receive upon the happening of such
liquidation, dissolution or winding up had the Warrants been exercised in full
and the shares of Common Stock in respect of such exercise issued immediately
prior to the occurrence of such liquidation, dissolution or winding up.
6. Issuance of Common Stock to GSCP. The Company shall not
issue any shares of Common Stock or any other capital stock of the Company to
Greenwich Street Capital Partners, L.P. ("GSCP") or any of GSCP's affiliates
6
<PAGE> 7
in any transaction or any series of related transactions for an aggregate
consideration of $25,000,000 or greater unless (i) the terms of such issuance
are no less favorable in all material respects to the Company than those that
could be obtained at the time of such issuance in a comparable arm's-length
transaction with a person or entity which is not an affiliate of the Company and
(ii) the Company has obtained a written fairness opinion of an investment
banking firm or independent appraiser or accounting firm, in either case that is
nationally recognized in the United States of America, stating that the terms of
such issuance are fair to the Company from a financial point of view.
7. Restrictions on Transfer. (a) Subject to Section 7(b)
hereof, the Holder shall not, without the prior written consent of the Company,
directly or indirectly, sell, pledge, mortgage, hypothecate, give, transfer,
create a security interest in or lien on, place in trust (voting or otherwise),
assign or in any other way encumber or dispose of (hereinafter, "Transfer") this
Warrant or any of the shares of Common Stock issuable upon exercise of this
Warrant now or hereafter owned by the Holder, or any interest therein or rights
relating thereto.
(b) The restrictions in Section 7(a) hereof shall terminate
upon a Public Offering (as defined below) and shall not apply or in any way
restrict any transfer of this Warrant or any of the shares of Common Stock
issuable upon exercise of this Warrant so long as the Holder at all times
retains all voting rights with respect to all such shares. The term "Public
Offering" means an underwritten public offering of any issued shares of Common
Stock of the Company (whether alone or in conjunction with any security public
offering) which produces net cash proceeds for the Company of at least
$75,000,000 and after which established public trading market exists for such
Common Stock.
8. Amendments and Waivers. Any term of this Warrant may be
amended or modified or the observance of any term of this Warrant may be waived
(either generally or in a
7
<PAGE> 8
particular instance) only with the written consent of the Company and the Holder
of this Warrant.
9. Assignment. The provisions of this Warrant shall be binding
upon and inure to the benefit of the Holder, its successors and assigns by way
of merger, consolidation or operation of law, and each third party transferee of
this Warrant, provided that (i) the Holder shall have delivered to the Company
the form of assignment attached hereto; and (ii) in the case of any third party
transferee, such transferee shall have delivered to the Company a valid
agreement of assumption of the restriction on transfer specified in Section 7.
10. Exchange of Warrant. Upon surrender for exchange of this
Warrant, properly endorsed, at the principal office of the Company, the Company
at its expense will issue and deliver to or upon the order of the Holder a new
Warrant or Warrants of like tenor, in the name of such Holder or as such Holder
(upon payment by such Holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for the number of shares
of Common Stock called for on the face of this Warrant.
11. Replacement of Warrant. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction of any Warrant, upon delivery of an indemnity bond in such
reasonable amount as the Company may determine, or, in the case of any such
mutilation, upon the surrender of such Warrant for cancellation to the Company
at its principal office, the Company at its expense will execute and deliver, in
lieu thereof, a new Warrant, of like tenor. Any Warrant in lieu of which any
such new Warrant has been so executed and delivered by the Company shall not be
deemed to be an outstanding Warrant for any purpose.
8
<PAGE> 9
12. Remedies. The Company stipulates that the remedies at law
of the Holder of this Warrant in the event of any default by the Company in the
performance of or in compliance with any of the terms of this Warrant are not
and will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise without
the requirement of the posting of a bond.
13. No Rights or Liabilities as Stockholder. Nothing contained
in this Warrant shall be construed as conferring upon the Holder any rights as a
stockholder of the Company (except to the extent that shares of Common Stock are
issued to such Holder pursuant to this Warrant or such Holder otherwise owns any
shares of Common Stock) or as imposing any liabilities on such Holder to
purchase any securities or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors or stockholders of the
Company or otherwise.
14. Notices. All notices and other communications under this
Warrant shall be in writing and shall be mailed by registered or certified mail,
return receipt requested, or by facsimile transmission, addressed (1) if to the
Holder, at the registered address or the facsimile number of such Holder as set
forth in the register kept at the principal office of the Company, and (2) if to
the Company, to the attention of the Secretary at its principal office, or to
its facsimile number, Attention: Secretary, provided that the exercise of any
Warrant shall be effected in the manner provided in Section 2.
15. Miscellaneous. THIS WARRANT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY
9
<PAGE> 10
THE LAWS OF THE STATE OF DELAWARE. The headings in this Warrant are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.
DATED as of April 7, 1998.
TELEX COMMUNICATIONS GROUP, INC.
By: /s/ Christine K. Vanden Beukel
-------------------------------
Name: Christine K. Vanden Beukel
--------------------------
Title: Assistant Secretary
-------------------------
10
<PAGE> 11
FORM OF SUBSCRIPTION
[To be signed only upon exercise of the Warrant]
TO TELEX COMMUNICATIONS GROUP, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _________* shares of Common Stock of TELEX COMMUNICATIONS
GROUP, INC. and herewith makes payment of $______ therefor, and requests that
the certificates for such shares be issued in the name of, and delivered to,
________________________________, whose address is
_________________________________________________________.
Dated: _________________
___________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
___________________________________
(Address)
____________________
* Insert here the number of shares called for on the face of the Warrant
(or, in the case of a partial exercise, the portion thereof as to which
the Warrant is being exercised), in either case without making any
11
<PAGE> 12
adjustment for additional shares of the Common Stock or any other stock
or other securities or property or cash which, pursuant to the
adjustment provisions referred to in the Warrant, may be deliverable
upon exercise. In the case of a partial exercise, a new Warrant or
Warrants will be issued and delivered, representing the unexercised
portion of such Warrant, all as provided in the Warrant.
12
<PAGE> 13
FORM OF ASSIGNMENT
[To be signed only upon transfer of the Warrant]
For value received, the undersigned hereby sells, assigns and
transfers unto _________________________________ the rights represented by the
within Warrant to purchase _______ shares of Common Stock of TELEX
COMMUNICATIONS GROUP, INC. (the "Company") to which the within Warrant relates,
and appoints _______________________ Attorney to transfer such rights on the
books of TELEX COMMUNICATIONS GROUP, INC. with full power of substitution in the
premises; it being understood and agreed that notwithstanding such assignment
and transfer, the undersigned shall retain, and shall at all times be entitled
to exercise, all voting rights with respect to all shares of Common Stock
issuable upon exercise of this Warrant.
Dated: _________________
______________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
______________________________
(Address)
Signed in the presence of:
_____________________________
13
<PAGE> 14
May __, 1998
Jeffrey J. Rosen, Esq.
O'Melveny & Meyers
153 East 53rd Street, 53rd Floor
New York, NY 10022
Dear Mr. Rosen:
Warrant Supplement
We refer to your Warrant (the "Warrant"), dated April 7, 1998,
to purchase 5,484 shares of Common Stock ("Common Stock"), par value $.01 per
share, of Telex Communications Group, Inc., a Delaware corporation (the
"Company"), at a price of $31.93 per share (the "Warrant Price").
As you know, subject to all of the other terms and conditions
set forth in the Warrant, the Warrant became exercisable for 783 shares of
Common Stock on January 28, 1998 and shall become exercisable for (i) an
additional 1,828 shares of Common Stock on January 28, 1999, provided you are a
director of the Company or the Company's wholly-owned subsidiary, Telex
Communications, Inc. ("TCI") on such date; (ii) an additional 1,828 shares of
Common Stock on January 28, 2000, provided you are a director of the Company or
TCI on such date; and (iii) an additional 1,045 shares of Common Stock on
January 28, 2001, provided you are a director of the Company or TCI on such
date.
This will confirm our additional agreement that
notwithstanding any provision in the Warrant to the contrary, in the event of
the occurrence of a Public Offering or a Change of Control (as each such term is
defined below) with respect to the Company at any time while you are a director
of the Company or TCI, all shares of Common Stock subject to the Warrant which
have not previously become exercisable
<PAGE> 15
under the Warrant shall thereupon become immediately exercisable in accordance
with the other terms and conditions of the Warrant.
For purposes of this Warrant Supplement, the following terms
shall have the following meanings:
(1) "Public Offering" means any registered primary or
secondary offering of Common Stock of the Company which produces aggregate gross
proceeds to the sellers of such Common Stock of at least fifty million dollars
and after which an established trading market for such shares shall exist.
(2) "Change of Control"shall have the meaning set forth in the
Stock Option Plan of the Company, dated May 6, 1997, as the same currently
exists or is hereafter amended.
Very truly yours,
TELEX COMMUNICATIONS GROUP, INC.
By:________________________________
Name:
Title:
2
<PAGE> 1
Exhibit 10(r)
Warrant to Purchase 5,484 Shares
of Common Stock at $.01 per Share
INCORPORATED UNDER THE LAWS OF THE STATE
OF DELAWARE
TELEX COMMUNICATIONS GROUP, INC.
THE SECURITIES EVIDENCED BY THIS WARRANT OR ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES
ACT") OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED, ASSIGNED OR OTHERWISE ENCUMBERED OR
DISPOSED OF WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND ARE OTHERWISE
RESTRICTED BY THE PROVISIONS OF, SECTION 7 OF THIS WARRANT AND THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES' LAW.
TELEX COMMUNICATIONS GROUP, INC., a Delaware corporation (the
"Company"), certifies that, for value received, Christopher Forester (the
"Holder"), is entitled to purchase, until the close of business on February 2,
2008 (the "Termination Date"), 5,484 shares of Common Stock, par value $0.01 per
share of the Company ("Common Stock"), at a price of $31.93 per share (the
"Warrant Price"); subject, however, to the provisions and upon the terms and
conditions hereinafter set forth.
1. Exercisability of Warrant.
(a) This Warrant shall become exercisable as follows:
<PAGE> 2
(i) This Warrant shall become exercisable for 1,828 shares of
Common Stock (as adjusted as provided herein) on December 23, 1997;
(ii) This Warrant shall become exercisable for an additional
1,828 shares of Common Stock (as adjusted as provided herein) on
December 23, 1998, provided Mr. Forester is a director of the
Company or the Company's wholly-owned subsidiary, Telex
Communications, Inc. ("TCI"), on such date; and
(iii) This Warrant shall become exercisable for an additional
1,828 shares of Common Stock (as adjusted as provided herein) on
December 23, 1999, provided Mr. Forester is a director of the
Company or TCI on such date.
(b) Subject to the foregoing and the other terms and conditions
hereof, this Warrant may be exercised in whole or in part at any time until the
earlier to occur of (i) the 180th day after the date on which Mr. Forester
ceases to be a director of the Company for any reason and (ii) the Termination
Date. If Mr. Forester ceases to be a director of the Company or TCI on or prior
to any of the applicable dates set forth in Section 1 hereof, this Warrant shall
be cancelled and of no further force of effect with respect to the shares of
Common Stock for which this Warrant would otherwise become exercisable on such
date.
2. Method of Exercise; Payment; Issuance of New Warrant.
(a) This Warrant may be exercised by the Holder, in whole or in
part, by the surrender of this Warrant, properly endorsed, at the principal
office of the Company in Minneapolis, Minnesota, Attention: Secretary, and by
(i) the payment to the Company of the Warrant Price in respect of the Common
Stock being purchased, and (ii) delivery to the Company of the form of
subscription attached hereto (or a reasonable facsimile thereof).
2
<PAGE> 3
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the business day on which
(i) this Warrant shall have been surrendered to the Company, (ii) the Company
shall have received payment of the Warrant Price in respect of the Common Stock
being purchased and (iii) the Company shall have received the form of
subscription agreement attached hereto, all as provided in this Section 2, and
at such time the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such exercise
shall be deemed to have become the holder or holders of record thereof.
(c) In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of Common Stock so purchased shall be
delivered at the Company's expense (including the payment by the Company of any
applicable issuance taxes) to the Holder within five (5) business days after the
rights represented by this Warrant shall have been so exercised, and unless this
Warrant has expired, a new Warrant of like tenor representing the number of
shares of Common Stock, if any, with respect to which this Warrant shall not
then have been exercised, shall also be issued to the Holder within such time.
3. Stock Fully Paid; Reservation of Shares. The Company covenants
and agrees that all shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable and free from all liens. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of the issue upon exercise of the
purchase rights evidenced by this Warrant, at least the maximum number of shares
of its Common Stock as are then issuable upon the exercise of the rights
represented by this Warrant.
3
<PAGE> 4
4. Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder but in lieu of such fractional
shares, the Company shall make a cash payment therefor to the Holder in an
amount equal to the fair market value of such fraction.
5. Number of Shares Receivable Upon Exercise. The number and kind of
securities receivable upon the exercise of this Warrant is subject to adjustment
upon the happening of the events specified in this Section 5.
(a) Stock Dividends, Stock Splits, Etc. In case the Company shall
(i) declare or pay a dividend on the Common Stock in shares of any class of
capital stock or make a distribution to holders of the Common Stock in shares of
any class of capital stock, (ii) subdivide the outstanding Common Stock into a
greater number of shares of Common Stock, (iii) combine the outstanding Common
Stock into a smaller number of shares of Common Stock or (iv) issue by
reclassification of the shares of Common Stock other securities of the Company
(including any such reclassification in connection with a consolidation, merger
or other business combination in which the Company is the surviving
corporation), the number and kind of shares of capital stock or securities
purchasable and issuable upon exercise of the Warrants shall be adjusted so that
the Holder, upon exercise thereof, shall be entitled to receive the number and
kind of shares of capital stock and other securities of the Company that the
Holder would have owned or have been entitled to receive after the happening of
any of the events described above had the Warrants been exercised in full and
the relevant shares of Common Stock issued in the name of the Holder immediately
prior to the happening of such event or, if applicable, any record date with
respect thereto. An adjustment made pursuant to this paragraph (a) shall become
effective on the date of the dividend payment, subdivision, combination or
issuance retroactive to the record date with respect thereto, if any, for such
event. Such adjustment shall be made successively whenever such an issuance is
made.
4
<PAGE> 5
(b) Accountants' Report as to Adjustments. In each case of any
adjustment or readjustment in the number of shares of Common Stock or other
securities issuable upon exercise of this Warrant, the Company at its expense
will promptly compute such adjustment or readjustment in accordance with the
terms hereof and, upon the reasonable request of the Holder, cause independent
public accountants of recognized national standing selected by the Company
(which may be the regular auditors of the Company) to verify such computation
and prepare a report setting forth such adjustment or readjustment and showing
in reasonable detail the method of calculation thereof and the facts upon which
such adjustment or readjustment is based. The Company will forthwith mail a copy
of each such report to the Holder of this Warrant. The Company will also keep
copies of all such reports at its principal office, and will cause the same to
be available for inspection at such office during normal business hours by the
Holder of this Warrant or any prospective purchaser of a Warrant designated in
writing by the Holder.
(c) No Impairment. The Company will not permit the par value of any
shares of Common Stock receivable upon the exercise of any Warrant to be
increased to an amount that exceeds the amount payable therefor upon such
exercise and will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant from time
to time.
(d) Exercise of Warrant in the Event of a Consolidation, Merger,
Sale of Assets, Reorganization, Etc. (i) In the event of any merger,
consolidation or other acquisition or business combination in which the Company
is not the surviving corporation or in which all of the out standing Common
Stock is converted into, acquired or exchanged for securities, cash or property
or in the event of the sale or other disposition of all or substantially all the
assets of the Company, the successor, parent or purchasing person, as the case
may be, shall deliver to the
5
<PAGE> 6
Holder an undertaking that such Holder shall have the right thereafter upon
payment of the Warrant Price to purchase upon exercise of each Warrant the kind
and amount of securities, cash and property which the Holder would have owned
or have been entitled to receive upon the happening of such merger,
consolidation, acquisition, business combination or sale had each Warrant been
exercised and the relevant shares of Common Stock issued in the name of the
Holder immediately prior to the relevant record date, if any, or the occurrence
of such merger, consolidation, acquisition, business combination or sale. Such
undertaking shall provide for adjustments, which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Section 5(d).
The Company will not effect any transaction of the type referred to in this
Section 5(d) unless the successor or purchasing person delivers such
undertaking. The provisions of this Section 5(d) shall similarly apply to
successive mergers, consolidations, business combinations and sales or
transfers.
(ii) Upon any liquidation, dissolution or winding up of the Company,
the Holder shall receive such cash or property (less the Warrant Price) which
the Holder would have been entitled to receive upon the happening of such
liquidation, dissolution or winding up had the Warrants been exercised in full
and the shares of Common Stock in respect of such exercise issued immediately
prior to the occurrence of such liquidation, dissolution or winding up.
6. Issuance of Common Stock to GSCP. The Company shall not issue any
shares of Common Stock or any other capital stock of the Company to Greenwich
Street Capital Partners, L.P. ("GSCP") or any of GSCP's affiliates in any
transaction or any series of related transactions for an aggregate consideration
of $25,000,000 or greater unless (i) the terms of such issuance are no less
favorable in all material respects to the Company than those that could be
obtained at the time of such issuance in a comparable arm's-length transaction
with a person or entity which is not an affiliate of the Company and (ii) the
Company has obtained a
6
<PAGE> 7
written fairness opinion of an investment banking firm or independent appraiser
or accounting firm, in either case that is nationally recognized in the United
States of America, stating that the terms of such issuance are fair to the
Company from a financial point of view.
7. Restrictions on Transfer. (a) Subject to Section 7(b) hereof, the
Holder shall not, without the prior written consent of the Company, directly or
indirectly, sell, pledge, mortgage, hypothecate, give, transfer, create a
security interest in or lien on, place in trust (voting or otherwise), assign or
in any other way encumber or dispose of (hereinafter, "Transfer") this Warrant
or any of the shares of Common Stock issuable upon exercise of this Warrant now
or hereafter owned by the Holder, or any interest therein or rights relating
thereto.
(b) The restrictions in Section 7(a) hereof shall terminate upon a
Public Offering (as defined below) and shall not apply or in any way restrict
any transfer of this Warrant or any of the shares of Common Stock issuable upon
exercise of this Warrant so long as the Holder at all times retains all voting
rights with respect to all such shares. The term "Public Offering" means an
underwritten public offering of any issued shares of Common Stock of the Company
(whether alone or in conjunction with any security public offering) which
produces net cash proceeds for the Company of at least $75,000,000 and after
which established public trading market exists for such Common Stock.
8. Amendments and Waivers. Any term of this Warrant may be amended
or modified or the observance of any term of this Warrant may be waived (either
generally or in a particular instance) only with the written consent of the
Company and the Holder of this Warrant.
9. Assignment. The provisions of this Warrant shall be binding upon
and inure to the benefit of the Holder, its successors and assigns by way of
merger, consolidation or operation of law, and each third party
7
<PAGE> 8
transferee of this Warrant, provided that (i) the Holder shall have delivered to
the Company the form of assignment attached hereto; and (ii) in the case of any
third party transferee, such transferee shall have delivered to the Company a
valid agreement of assumption of the restriction on transfer specified in
Section 7.
10. Exchange of Warrant. Upon surrender for exchange of this
Warrant, properly endorsed, at the principal office of the Company, the Company
at its expense will issue and deliver to or upon the order of the Holder a new
Warrant or Warrants of like tenor, in the name of such Holder or as such Holder
(upon payment by such Holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for the number of shares
of Common Stock called for on the face of this Warrant.
11. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
upon delivery of an indemnity bond in such reasonable amount as the Company may
determine, or, in the case of any such mutilation, upon the surrender of such
Warrant for cancellation to the Company at its principal office, the Company at
its expense will execute and deliver, in lieu thereof, a new Warrant, of like
tenor. Any Warrant in lieu of which any such new Warrant has been so executed
and delivered by the Company shall not be deemed to be an outstanding Warrant
for any purpose.
12. Remedies. The Company stipulates that the remedies at law of the
Holder of this Warrant in the event of any default by the Company in the
performance of or in compliance with any of the terms of this Warrant are not
and will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a
8
<PAGE> 9
violation of any of the terms hereof or otherwise without the requirement of the
posting of a bond.
13. No Rights or Liabilities as Stockholder. Nothing contained in
this Warrant shall be construed as conferring upon the Holder any rights as a
stockholder of the Company (except to the extent that shares of Common Stock are
issued to such Holder pursuant to this Warrant or such Holder otherwise owns any
shares of Common Stock) or as imposing any liabilities on such Holder to
purchase any securities or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors or stockholders of the
Company or otherwise.
14. Notices. All notices and other communications under this
Warrant shall be in writing and shall be mailed by registered or certified mail,
return receipt requested, or by facsimile transmission, addressed (1) if to the
Holder, at the registered address or the facsimile number of such Holder as set
forth in the register kept at the principal office of the Company, and (2) if to
the Company, to the attention of the Secretary at its principal office, or to
its facsimile number, Attention: Secretary, provided that the exercise of any
Warrant shall be effected in the manner provided in Section 2.
15. Miscellaneous. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. The headings
in this Warrant are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof.
9
<PAGE> 10
DATED as of April 7, 1998.
TELEX COMMUNICATIONS GROUP, INC.
By: /s/ Christine K. Vanden Beukel
-------------------------------
Name: Christine K. Vanden Beukel
--------------------------
Title: Assistant Secretary
-------------------------
10
<PAGE> 11
FORM OF SUBSCRIPTION
[To be signed only upon exercise of the Warrant]
TO TELEX COMMUNICATIONS GROUP, INC.
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, ____________* shares of Common Stock of TELEX
COMMUNICATIONS GROUP, INC. and herewith makes payment of $___________ therefor,
and requests that the certificates for such shares be issued in the name of, and
delivered to, ________________________________, whose address is
____________________________________________.
Dated: _________________
______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
______________________________________
(Address)
__________________
* Insert here the number of shares called for on the face of the Warrant
(or, in the case of a partial exercise, the portion thereof as to which
the Warrant is being exercised), in either case without making any
11
<PAGE> 12
adjustment for additional shares of the Common Stock or any other stock or
other securities or property or cash which, pursuant to the adjustment
provisions referred to in the Warrant, may be deliverable upon exercise.
In the case of a partial exercise, a new Warrant or Warrants will be
issued and delivered, representing the unexercised portion of such
Warrant, all as provided in the Warrant.
12
<PAGE> 13
FORM OF ASSIGNMENT
[To be signed only upon transfer of the Warrant]
For value received, the undersigned hereby sells, assigns and
transfers unto _________________________________ the rights represented by the
within Warrant to purchase _______ shares of Common Stock of TELEX
COMMUNICATIONS GROUP, INC. (the "Company") to which the within Warrant relates,
and appoints _______________________ Attorney to transfer such rights on the
books of TELEX COMMUNICATIONS GROUP, INC. with full power of substitution in the
premises; it being understood and agreed that notwithstanding such assignment
and transfer, the undersigned shall retain, and shall at all times be entitled
to exercise, all voting rights with respect to all shares of Common Stock
issuable upon exercise of this Warrant.
Dated: _________________
______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
______________________________________
(Address)
Signed in the presence of:
___________________________
13
<PAGE> 14
May __, 1998
Christopher P. Forester
Three Manhattan Avenue
Rye, New York 10580
Dear Mr. Forester:
Warrant Supplement
We refer to your Warrant (the "Warrant"), dated April 7, 1998, to
purchase 5,484 shares of Common Stock ("Common Stock"), par value $.01 per
share, of Telex Communications Group, Inc., a Delaware corporation (the
"Company"), at a price of $31.93 per share (the "Warrant Price").
As you know, subject to all of the other terms and conditions set
forth in the Warrant, the Warrant became exercisable for 1,828 shares of Common
Stock on December 23, 1997 and shall become exercisable for (i) an additional
1,828 shares of Common Stock on December 23, 1998, provided you are a director
of the Company or the Company's wholly-owned subsidiary, Telex Communications,
Inc. ("TCI") on such date; and (ii) an additional 1,828 shares of Common Stock
on December 23, 1999, provided you are a director of the Company or TCI on such
date.
This will confirm our additional agreement that notwithstanding any
provision in the Warrant to the contrary, in the event of the occurrence of a
Public Offering or a Change of Control (as each such term is defined below) with
respect to the Company at any time while you are a director of the Company or
TCI, all shares of Common Stock subject to the Warrant which have not previously
become exercisable shall thereupon become immediately exercisable in accordance
with the other terms and conditions of the Warrant.
<PAGE> 15
For purposes of this Warrant Supplement, the following terms shall
have the following meanings:
(1) "Public Offering" means any registered primary or secondary
offering of Common Stock of the Company which produces aggregate gross proceeds
to the sellers of such Common Stock of at least fifty million dollars, and after
which an established trading market for such shares shall exist.
(2) "Change of Control" shall have the meaning set forth in the
Stock Option Plan of the Company, dated May 6, 1997, as the same currently
exists or is hereafter amended.
Very truly yours,
TELEX COMMUNICATIONS GROUP, INC.
By:___________________________________
Name:
Title:
2
<PAGE> 1
Exhibit 10(s)
Warrant to Purchase 2,349 Shares
of Common Stock at $.01 per Share
INCORPORATED UNDER THE LAWS OF THE STATE
OF DELAWARE
TELEX COMMUNICATIONS GROUP, INC.
THE SECURITIES EVIDENCED BY THIS WARRANT OR ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES
ACT") OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED, ASSIGNED OR OTHERWISE ENCUMBERED OR
DISPOSED OF WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND ARE OTHERWISE
RESTRICTED BY THE PROVISIONS OF, SECTION 7 OF THIS WARRANT AND THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES' LAW.
TELEX COMMUNICATIONS GROUP, INC., a Delaware corporation (the
"Company"), certifies that, for value received, Edgar S. Woolard (the "Holder"),
is entitled to purchase, until the close of business on February 2, 2008 (the
"Termination Date"), 2,349 shares of Common Stock, par value $0.01 per share of
the Company ("Common Stock"), at a price of $31.93 per share (the "Warrant
Price"); subject, however, to the provisions and upon the terms and conditions
hereinafter set forth.
1. Exercisability of Warrant.
(a) This Warrant shall become exercisable as follows:
<PAGE> 2
(i) This Warrant shall become exercisable for 783 shares of
Common Stock (as adjusted as provided herein) on January 28, 1998;
(ii) This Warrant shall become exercisable for an additional
783 shares of Common Stock (as adjusted as provided herein) on
January 28, 1999, provided Mr. Woolard is a director of the Company
or the Company's wholly-owned subsidiary, Telex Communications, Inc.
("TCI") on such date; and
(iii) This Warrant shall become exercisable for an additional
783 shares of Common Stock (as adjusted as provided herein) on
January 28, 2000, provided Mr. Woolard is a director of the Company
or TCI on such date.
(b) Subject to the foregoing and the other terms and conditions
hereof, this Warrant may be exercised in whole or in part at any time until the
earlier to occur of (i) the 180th day after the date on which Mr. Woolard ceases
to be a director of the Company for any reason and (ii) the Termination Date. If
Mr. Woolard ceases to be a director of the Company or TCI on or prior to any of
the applicable dates set forth in Section 1 hereof, this Warrant shall be
cancelled and of no further force of effect with respect to the shares of Common
Stock for which this Warrant would otherwise become exercisable on such date.
2. Method of Exercise; Payment; Issuance of New Warrant.
(a) This Warrant may be exercised by the Holder, in whole or in
part, by the surrender of this Warrant, properly endorsed, at the principal
office of the Company in Minneapolis, Minnesota, Attention: Secretary, and by
(i) the payment to the Company of the Warrant Price in respect of the Common
Stock being purchased, and (ii) delivery to the Company of the form of
subscription attached hereto (or a reasonable facsimile thereof).
2
<PAGE> 3
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the business day on which
(i) this Warrant shall have been surrendered to the Company, (ii) the Company
shall have received payment of the Warrant Price in respect of the Common Stock
being purchased and (iii) the Company shall have received the form of
subscription agreement attached hereto, all as provided in this Section 2, and
at such time the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such exercise
shall be deemed to have become the holder or holders of record thereof.
(c) In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of Common Stock so purchased shall be
delivered at the Company's expense (including the payment by the Company of any
applicable issuance taxes) to the Holder within five (5) business days after the
rights represented by this Warrant shall have been so exercised, and unless this
Warrant has expired, a new Warrant of like tenor representing the number of
shares of Common Stock, if any, with respect to which this Warrant shall not
then have been exercised, shall also be issued to the Holder within such time.
3. Stock Fully Paid; Reservation of Shares. The Company covenants
and agrees that all shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable and free from all liens. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of the issue upon exercise of the
purchase rights evidenced by this Warrant, at least the maximum number of shares
of its Common Stock as are then issuable upon the exercise of the rights
represented by this Warrant.
3
<PAGE> 4
4. Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder but in lieu of such fractional
shares, the Company shall make a cash payment therefor to the Holder in an
amount equal to the fair market value of such fraction.
5. Number of Shares Receivable Upon Exercise. The number and kind of
securities receivable upon the exercise of this Warrant is subject to adjustment
upon the happening of the events specified in this Section 5.
(a) Stock Dividends, Stock Splits, Etc. In case the Company shall
(i) declare or pay a dividend on the Common Stock in shares of any class of
capital stock or make a distribution to holders of the Common Stock in shares of
any class of capital stock, (ii) subdivide the outstanding Common Stock into a
greater number of shares of Common Stock, (iii) combine the outstanding Common
Stock into a smaller number of shares of Common Stock or (iv) issue by
reclassification of the shares of Common Stock other securities of the Company
(including any such reclassification in connection with a consolidation, merger
or other business combination in which the Company is the surviving
corporation), the number and kind of shares of capital stock or securities
purchasable and issuable upon exercise of the Warrants shall be adjusted so that
the Holder, upon exercise thereof, shall be entitled to receive the number and
kind of shares of capital stock and other securities of the Company that the
Holder would have owned or have been entitled to receive after the happening of
any of the events described above had the Warrants been exercised in full and
the relevant shares of Common Stock issued in the name of the Holder immediately
prior to the happening of such event or, if applicable, any record date with
respect thereto. An adjustment made pursuant to this paragraph (a) shall become
effective on the date of the dividend payment, subdivision, combination or
issuance retroactive to the record date with respect thereto, if any, for such
event. Such adjustment shall be made successively whenever such an issuance is
made.
4
<PAGE> 5
(b) Accountants' Report as to Adjustments. In each case of any
adjustment or readjustment in the number of shares of Common Stock or other
securities issuable upon exercise of this Warrant, the Company at its expense
will promptly compute such adjustment or readjustment in accordance with the
terms hereof and, upon the reasonable request of the Holder, cause independent
public accountants of recognized national standing selected by the Company
(which may be the regular auditors of the Company) to verify such computation
and prepare a report setting forth such adjustment or readjustment and showing
in reasonable detail the method of calculation thereof and the facts upon which
such adjustment or readjustment is based. The Company will forthwith mail a copy
of each such report to the Holder of this Warrant. The Company will also keep
copies of all such reports at its principal office, and will cause the same to
be available for inspection at such office during normal business hours by the
Holder of this Warrant or any prospective purchaser of a Warrant designated in
writing by the Holder.
(c) No Impairment. The Company will not permit the par value of any
shares of Common Stock receivable upon the exercise of any Warrant to be
increased to an amount that exceeds the amount payable therefor upon such
exercise and will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant from time
to time.
(d) Exercise of Warrant in the Event of a Consolidation, Merger,
Sale of Assets, Reorganization, Etc. (i) In the event of any merger,
consolidation or other acquisition or business combination in which the Company
is not the surviving corporation or in which all of the outstanding Common Stock
is converted into, acquired or exchanged for securities, cash or property or in
the event of the sale or other disposition of all or substantially all the
assets of the Company, the successor, parent or purchasing person, as the case
may be, shall deliver to the
5
<PAGE> 6
Holder an undertaking that such Holder shall have the right thereafter upon
payment of the Warrant Price to purchase upon exercise of each Warrant the kind
and amount of securities, cash and property which the Holder would have owned
or have been entitled to receive upon the happening of such merger,
consolidation, acquisition, business combination or sale had each Warrant been
exercised and the relevant shares of Common Stock issued in the name of the
Holder immediately prior to the relevant record date, if any, or the occurrence
of such merger, consolidation, acquisition, business combination or sale. Such
undertaking shall provide for adjustments, which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Section 5(d).
The Company will not effect any transaction of the type referred to in this
Section 5(d) unless the successor or purchasing person delivers such
undertaking. The provisions of this Section 5(d) shall similarly apply to
successive mergers, consolidations, business combinations and sales or
transfers.
(ii) Upon any liquidation, dissolution or winding up of the Company,
the Holder shall receive such cash or property (less the Warrant Price) which
the Holder would have been entitled to receive upon the happening of such
liquidation, dissolution or winding up had the Warrants been exercised in full
and the shares of Common Stock in respect of such exercise issued immediately
prior to the occurrence of such liquidation, dissolution or winding up.
6. Issuance of Common Stock to GSCP. The Company shall not issue any
shares of Common Stock or any other capital stock of the Company to Greenwich
Street Capital Partners, L.P. ("GSCP") or any of GSCP's affiliates in any
transaction or any series of related transactions for an aggregate consideration
of $25,000,000 or greater unless (i) the terms of such issuance are no less
favorable in all material respects to the Company than those that could be
obtained at the time of such issuance in a comparable arm's-length transaction
with a person or entity which is not an affiliate of the Company and (ii) the
Company has obtained a
6
<PAGE> 7
written fairness opinion of an investment banking firm or independent appraiser
or accounting firm, in either case that is nationally recognized in the United
States of America, stating that the terms of such issuance are fair to the
Company from a financial point of view.
7. Restrictions on Transfer. (a) Subject to Section 7(b) hereof, the
Holder shall not, without the prior written consent of the Company, directly or
indirectly, sell, pledge, mortgage, hypothecate, give, transfer, create a
security interest in or lien on, place in trust (voting or otherwise), assign or
in any other way encumber or dispose of (hereinafter, "Transfer") this Warrant
or any of the shares of Common Stock issuable upon exercise of this Warrant now
or hereafter owned by the Holder, or any interest therein or rights relating
thereto.
(b) The restrictions in Section 7(a) hereof shall terminate upon a
Public Offering (as defined below) and shall not apply or in any way restrict
any transfer of this Warrant or any of the shares of Common Stock issuable upon
exercise of this Warrant so long as the Holder at all times retains all voting
rights with respect to all such shares. The term "Public Offering" means an
underwritten public offering of any issued shares of Common Stock of the Company
(whether alone or in conjunction with any security public offering) which
produces net cash proceeds for the Company of at least $75,000,000 and after
which established public trading market exists for such Common Stock.
8. Amendments and Waivers. Any term of this Warrant may be amended
or modified or the observance of any term of this Warrant may be waived (either
generally or in a particular instance) only with the written consent of the
Company and the Holder of this Warrant.
9. Assignment. The provisions of this Warrant shall be binding upon
and inure to the benefit of the Holder, its successors and assigns by way of
merger, consolidation or operation of law, and each third party
7
<PAGE> 8
transferee of this Warrant, provided that (i) the Holder shall have delivered to
the Company the form of assignment attached hereto; and (ii) in the case of any
third party transferee, such transferee shall have delivered to the Company a
valid agreement of assumption of the restriction on transfer specified in
Section 7.
10. Exchange of Warrant. Upon surrender for exchange of this
Warrant, properly endorsed, at the principal office of the Company, the Company
at its expense will issue and deliver to or upon the order of the Holder a new
Warrant or Warrants of like tenor, in the name of such Holder or as such Holder
(upon payment by such Holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for the number of shares
of Common Stock called for on the face of this Warrant.
11. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
upon delivery of an indemnity bond in such reasonable amount as the Company may
determine, or, in the case of any such mutilation, upon the surrender of such
Warrant for cancellation to the Company at its principal office, the Company at
its expense will execute and deliver, in lieu thereof, a new Warrant, of like
tenor. Any Warrant in lieu of which any such new Warrant has been so executed
and delivered by the Company shall not be deemed to be an outstanding Warrant
for any purpose.
12. Remedies. The Company stipulates that the remedies at law of the
Holder of this Warrant in the event of any default by the Company in the
performance of or in compliance with any of the terms of this Warrant are not
and will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a
8
<PAGE> 9
violation of any of the terms hereof or otherwise without the requirement of the
posting of a bond.
13. No Rights or Liabilities as Stockholder. Nothing contained in
this Warrant shall be construed as conferring upon the Holder any rights as a
stockholder of the Company (except to the extent that shares of Common Stock are
issued to such Holder pursuant to this Warrant or such Holder otherwise owns any
shares of Common Stock) or as imposing any liabilities on such Holder to
purchase any securities or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors or stockholders of the
Company or otherwise.
14. Notices. All notices and other communications under this
Warrant shall be in writing and shall be mailed by registered or certified mail,
return receipt requested, or by facsimile transmission, addressed (1) if to the
Holder, at the registered address or the facsimile number of such Holder as set
forth in the register kept at the principal office of the Company, and (2) if to
the Company, to the attention of the Secretary at its principal office, or to
its facsimile number, Attention: Secretary, provided that the exercise of any
Warrant shall be effected in the manner provided in Section 2.
15. Miscellaneous. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. The headings
in this Warrant are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof.
DATED as of April 7, 1998.
TELEX COMMUNICATIONS GROUP, INC.
By: /s/ Christine K. Vanden Beukel
-------------------------------
Name: Christine K. Vanden Beukel
--------------------------
Title: Assistant Secretary
-------------------------
9
<PAGE> 10
FORM OF SUBSCRIPTION
[To be signed only upon exercise of the Warrant]
TO TELEX COMMUNICATIONS GROUP, INC.
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, _____________* shares of Common Stock of TELEX
COMMUNICATIONS GROUP, INC. and herewith makes payment of $____________ therefor,
and requests that the certificates for such shares be issued in the name of, and
delivered to, ________________________________, whose address is
____________________________.
Dated: _________________
_______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
_______________________________________
(Address)
____________________
* Insert here the number of shares called for on the face of the Warrant
(or, in the case of a partial exercise, the portion thereof as to which
the Warrant is being exercised), in either case without making any
10
<PAGE> 11
adjustment for additional shares of the Common Stock or any other stock or
other securities or property or cash which, pursuant to the adjustment
provisions referred to in the Warrant, may be deliverable upon exercise.
In the case of a partial exercise, a new Warrant or Warrants will be
issued and delivered, representing the unexercised portion of such
Warrant, all as provided in the Warrant.
11
<PAGE> 12
FORM OF ASSIGNMENT
[To be signed only upon transfer of the Warrant]
For value received, the undersigned hereby sells, assigns and
transfers unto _________________________________ the rights represented by the
within Warrant to purchase _______ shares of Common Stock of TELEX
COMMUNICATIONS GROUP, INC. (the "Company") to which the within Warrant relates,
and appoints _______________________ Attorney to transfer such rights on the
books of TELEX COMMUNICATIONS GROUP, INC. with full power of substitution in the
premises; it being understood and agreed that notwithstanding such assignment
and transfer, the undersigned shall retain, and shall at all times be entitled
to exercise, all voting rights with respect to all shares of Common Stock
issuable upon exercise of this Warrant.
Dated: ________________
_______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
_______________________________________
(Address)
Signed in the presence of:
__________________________
12
<PAGE> 13
May __, 1998
Edgar S. Woolard
Dupont
9000 Dupont Building
1007 Market Street
Wilmington, Delaware 19898
Dear Mr. Woolard:
Warrant Supplement
We refer to your two separate Warrants, one dated August 19, 1997,
to purchase 513 shares of Common Stock of EVI Audio Holding, Inc., at a purchase
price of $521.56 per share (the "First Warrant"), and a second, dated April 7,
1998, to purchase 2,349 shares of Common Stock ("Common Stock"), par value $.01
per share, of Telex Communications Group, Inc., a Delaware corporation (the
"Company"), at a price of $31.93 per share (the "Second Warrant"; and, together
with the First Warrant, the "Warrants"). The First Warrant has been supplemented
by our previous undertaking, dated April 7, 1998, such that it now represents
the right to purchase 8,433.72 shares of Common Stock at a purchase price of
$31.73 per share.
As you know, subject to all of the other terms and conditions set
forth in the First Warrant, the First Warrant became exercisable for 2,811.24
shares of Common Stock on February 10, 1998 and shall become exercisable for (i)
an additional 2,811.24 shares of Common Stock on February 10, 1999, provided you
are a director of the Company or the Company's wholly-owned subsidiary, Telex
Communications, Inc. ("TCI") on such date; and (ii) an additional 2,811.24
shares of Common Stock on February 10, 2000, provided you are a director of the
Company or TCI on such date. As you also know, the Second Warrant became
exercisable for 783 shares of Common Stock on January 28, 1998 and shall become
exercisable for (i) an additional 783 shares of Common Stock on January 28,
1999, provided you are a director of the Company or TCI
<PAGE> 14
on such date; and (ii) an additional 783 shares of Common Stock on January 28,
2000, provided you are a director of the Company or TCI on such date.
This will confirm our additional agreement that notwithstanding any
provision in either Warrant to the contrary, in the event of the occurrence of a
Public Offering or a Change of Control (as each such term is defined below) with
respect to the Company at any time while you are a director of the Company or
TCI, all shares of Common Stock subject to either Warrant which have not
previously become exercisable shall thereupon become immediately exercisable in
accordance with the other terms and conditions of such Warrant.
For purposes of this Warrant Supplement, the following terms shall
have the following meanings:
(1) "Public Offering" means any registered primary or secondary
offering of Common Stock of the Company which produces aggregate gross proceeds
to the sellers of such Common Stock of at least fifty million dollars and after
which an established trading market for such shares shall exist.
(2) "Change of Control" shall have the meaning set forth in the
Stock Option Plan of the Company, dated May 6, 1997, as the same currently
exists or is hereafter amended.
Very truly yours,
TELEX COMMUNICATIONS GROUP, INC.
By:___________________________________
Name:
Title:
2
<PAGE> 1
Exhibit 10(t)
Warrant to Purchase 5,484 Shares
of Common Stock at $.01 per Share
INCORPORATED UNDER THE LAWS OF THE STATE
OF DELAWARE
TELEX COMMUNICATIONS GROUP, INC.
THE SECURITIES EVIDENCED BY THIS WARRANT OR ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT
BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, ASSIGNED OR OTHERWISE
ENCUMBERED OR DISPOSED OF WITHOUT COMPLIANCE WITH THE PROVISIONS OF,
AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, SECTION 7 OF THIS
WARRANT AND THE SECURITIES ACT AND APPLICABLE STATE SECURITIES' LAW.
TELEX COMMUNICATIONS GROUP, INC., a Delaware corporation (the
"Company"), certifies that, for value received, Evan Marks (the "Holder"), is
entitled to purchase, until the close of business on February 2, 2008 (the
"Termination Date"), 5,484 shares of Common Stock, par value $0.01 per share of
the Company ("Common Stock"), at a price of $31.93 per share (the "Warrant
Price"); subject, however, to the provisions and upon the terms and conditions
hereinafter set forth.
1. Exercisability of Warrant.
(a) This Warrant shall become exercisable as follows:
<PAGE> 2
(i) This Warrant shall become exercisable for 1,828
shares of Common Stock (as adjusted as provided herein) on
December 23, 1997;
(ii) This Warrant shall become exercisable for an
additional 1,828 shares of Common Stock (as adjusted as
provided herein) on December 23, 1998, provided Mr. Marks is a
director of the Company or the Company's wholly-owned
subsidiary, Telex Communications, Inc. ("TCI") on such date;
and
(iii) This Warrant shall become exercisable for an
additional 1,828 shares of Common Stock (as adjusted as
provided herein) on December 23, 1999, provided Mr. Marks is a
director of the Company or TCI on such date.
(b) Subject to the foregoing and the other terms and
conditions hereof, this Warrant may be exercised in whole or in part at any time
until the earlier to occur of (i) the 180th day after the date on which Mr.
Marks ceases to be a director of the Company for any reason and (ii) the
Termination Date. If Mr. Marks ceases to be a director of the Company or TCI on
or prior to any of the applicable dates set forth in Section 1 hereof, this
Warrant shall be cancelled and of no further force of effect with respect to the
shares of Common Stock for which this Warrant would otherwise become exercisable
on such date.
2. Method of Exercise; Payment; Issuance of New Warrant.
(a) This Warrant may be exercised by the Holder, in whole or
in part, by the surrender of this Warrant, properly endorsed, at the principal
office of the Company in Minneapolis, Minnesota, Attention: Secretary, and by
(i) the payment to the Company of the Warrant Price in respect of the Common
Stock being purchased, and (ii) delivery to the Company of the form of
subscription attached hereto (or a reasonable facsimile thereof).
2
<PAGE> 3
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the business day on which
(i) this Warrant shall have been surrendered to the Company, (ii) the Company
shall have received payment of the Warrant Price in respect of the Common Stock
being purchased and (iii) the Company shall have received the form of
subscription agreement attached hereto, all as provided in this Section 2, and
at such time the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such exercise
shall be deemed to have become the holder or holders of record thereof.
(c) In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of Common Stock so purchased shall be
delivered at the Company's expense (including the payment by the Company of any
applicable issuance taxes) to the Holder within five (5) business days after the
rights represented by this Warrant shall have been so exercised, and unless this
Warrant has expired, a new Warrant of like tenor representing the number of
shares of Common Stock, if any, with respect to which this Warrant shall not
then have been exercised, shall also be issued to the Holder within such time.
3. Stock Fully Paid; Reservation of Shares. The Company
covenants and agrees that all shares which may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable and free from all liens. The
Company further covenants and agrees that during the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have authorized, and reserved for the purpose of the issue upon exercise
of the purchase rights evidenced by this Warrant, at least the maximum number of
shares of its Common Stock as are then issuable upon the exercise of the rights
represented by this Warrant.
3
<PAGE> 4
4. Fractional Shares. No fractional shares of Common Stock
will be issued in connection with any exercise hereunder but in lieu of such
fractional shares, the Company shall make a cash payment therefor to the Holder
in an amount equal to the fair market value of such fraction.
5. Number of Shares Receivable Upon Exercise. The number and
kind of securities receivable upon the exercise of this Warrant is subject to
adjustment upon the happening of the events specified in this Section 5.
(a) Stock Dividends, Stock Splits, Etc. In case the Company
shall (i) declare or pay a dividend on the Common Stock in shares of any class
of capital stock or make a distribution to holders of the Common Stock in shares
of any class of capital stock, (ii) subdivide the outstanding Common Stock into
a greater number of shares of Common Stock, (iii) combine the outstanding Common
Stock into a smaller number of shares of Common Stock or (iv) issue by
reclassification of the shares of Common Stock other securities of the Company
(including any such reclassification in connection with a consolidation, merger
or other business combination in which the Company is the surviving
corporation), the number and kind of shares of capital stock or securities
purchasable and issuable upon exercise of the Warrants shall be adjusted so that
the Holder, upon exercise thereof, shall be entitled to receive the number and
kind of shares of capital stock and other securities of the Company that the
Holder would have owned or have been entitled to receive after the happening of
any of the events described above had the Warrants been exercised in full and
the relevant shares of Common Stock issued in the name of the Holder immediately
prior to the happening of such event or, if applicable, any record date with
respect thereto. An adjustment made pursuant to this paragraph (a) shall become
effective on the date of the dividend payment, subdivision, combination or
issuance retroactive to the record date with respect thereto, if any, for such
event. Such adjustment shall be made successively whenever such an issuance is
made.
4
<PAGE> 5
(b) Accountants' Report as to Adjustments. In each case of any
adjustment or readjustment in the number of shares of Common Stock or other
securities issuable upon exercise of this Warrant, the Company at its expense
will promptly compute such adjustment or readjustment in accordance with the
terms hereof and, upon the reasonable request of the Holder, cause independent
public accountants of recognized national standing selected by the Company
(which may be the regular auditors of the Company) to verify such computation
and prepare a report setting forth such adjustment or readjustment and showing
in reasonable detail the method of calculation thereof and the facts upon which
such adjustment or readjustment is based. The Company will forthwith mail a copy
of each such report to the Holder of this Warrant. The Company will also keep
copies of all such reports at its principal office, and will cause the same to
be available for inspection at such office during normal business hours by the
Holder of this Warrant or any prospective purchaser of a Warrant designated in
writing by the Holder.
(c) No Impairment. The Company will not permit the par value
of any shares of Common Stock receivable upon the exercise of any Warrant to be
increased to an amount that exceeds the amount payable therefor upon such
exercise and will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant from time
to time.
(d) Exercise of Warrant in the Event of a Consolidation,
Merger, Sale of Assets, Reorganization, Etc. (i) In the event of any merger,
consolidation or other acquisition or business combination in which the Company
is not the surviving corporation or in which all of the out standing Common
Stock is converted into, acquired or exchanged for securities, cash or property
or in the event of the sale or other disposition of all or substantially all the
assets of the Company, the successor, parent or purchasing person, as the case
may be, shall deliver to the
5
<PAGE> 6
Holder an undertaking that such Holder shall have the right thereafter upon
payment of the Warrant Price to purchase upon exercise of each Warrant the kind
and amount of securities, cash and property which the Holder would have owned or
have been entitled to receive upon the happening of such merger, consolidation,
acquisition, business combination or sale had each Warrant been exercised and
the relevant shares of Common Stock issued in the name of the Holder immediately
prior to the relevant record date, if any, or the occurrence of such merger,
consolidation, acquisition, business combination or sale. Such undertaking shall
provide for adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 5(d). The Company
will not effect any transaction of the type referred to in this Section 5(d)
unless the successor or purchasing person delivers such undertaking. The
provisions of this Section 5(d) shall similarly apply to successive mergers,
consolidations, business combinations and sales or transfers.
(ii) Upon any liquidation, dissolution or winding up of the
Company, the Holder shall receive such cash or property (less the Warrant Price)
which the Holder would have been entitled to receive upon the happening of such
liquidation, dissolution or winding up had the Warrants been exercised in full
and the shares of Common Stock in respect of such exercise issued immediately
prior to the occurrence of such liquidation, dissolution or winding up.
6. Issuance of Common Stock to GSCP. The Company shall not
issue any shares of Common Stock or any other capital stock of the Company to
Greenwich Street Capital Partners, L.P. ("GSCP") or any of GSCP's affiliates in
any transaction or any series of related transactions for an aggregate
consideration of $25,000,000 or greater unless (i) the terms of such issuance
are no less favorable in all material respects to the Company than those that
could be obtained at the time of such issuance in a comparable arm's-length
transaction with a person or entity which is not an affiliate of the Company and
(ii) the Company has obtained a
6
<PAGE> 7
written fairness opinion of an investment banking firm or independent appraiser
or accounting firm, in either case that is nationally recognized in the United
States of America, stating that the terms of such issuance are fair to the
Company from a financial point of view.
7. Restrictions on Transfer. (a) Subject to Section 7(b)
hereof, the Holder shall not, without the prior written consent of the Company,
directly or indirectly, sell, pledge, mortgage, hypothecate, give, transfer,
create a security interest in or lien on, place in trust (voting or otherwise),
assign or in any other way encumber or dispose of (hereinafter, "Transfer") this
Warrant or any of the shares of Common Stock issuable upon exercise of this
Warrant now or hereafter owned by the Holder, or any interest therein or rights
relating thereto.
(b) The restrictions in Section 7(a) hereof shall terminate
upon a Public Offering (as defined below) and shall not apply or in any way
restrict any transfer of this Warrant or any of the shares of Common Stock
issuable upon exercise of this Warrant so long as the Holder at all times
retains all voting rights with respect to all such shares. The term "Public
Offering" means an underwritten public offering of any issued shares of Common
Stock of the Company (whether alone or in conjunction with any security public
offering) which produces net cash proceeds for the Company of at least
$75,000,000 and after which established public trading market exists for such
Common Stock.
8. Amendments and Waivers. Any term of this Warrant may be
amended or modified or the observance of any term of this Warrant may be waived
(either generally or in a particular instance) only with the written consent of
the Company and the Holder of this Warrant.
9. Assignment. The provisions of this Warrant shall be binding
upon and inure to the benefit of the Holder, its successors and assigns by way
of merger, consolidation or operation of law, and each third party
7
<PAGE> 8
transferee of this Warrant, provided that (i) the Holder shall have delivered to
the Company the form of assignment attached hereto; and (ii) in the case of any
third party transferee, such transferee shall have delivered to the Company a
valid agreement of assumption of the restriction on transfer specified in
Section 7.
10. Exchange of Warrant. Upon surrender for exchange of this
Warrant, properly endorsed, at the principal office of the Company, the Company
at its expense will issue and deliver to or upon the order of the Holder a new
Warrant or Warrants of like tenor, in the name of such Holder or as such Holder
(upon payment by such Holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for the number of shares
of Common Stock called for on the face of this Warrant.
11. Replacement of Warrant. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction of any Warrant, upon delivery of an indemnity bond in such
reasonable amount as the Company may determine, or, in the case of any such
mutilation, upon the surrender of such Warrant for cancellation to the Company
at its principal office, the Company at its expense will execute and deliver, in
lieu thereof, a new Warrant, of like tenor. Any Warrant in lieu of which any
such new Warrant has been so executed and delivered by the Company shall not be
deemed to be an outstanding Warrant for any purpose.
12. Remedies. The Company stipulates that the remedies at law
of the Holder of this Warrant in the event of any default by the Company in the
performance of or in compliance with any of the terms of this Warrant are not
and will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a
8
<PAGE> 9
violation of any of the terms hereof or otherwise without the requirement of the
posting of a bond.
13. No Rights or Liabilities as Stockholder. Nothing contained
in this Warrant shall be construed as conferring upon the Holder any rights as a
stockholder of the Company (except to the extent that shares of Common Stock are
issued to such Holder pursuant to this Warrant or such Holder otherwise owns any
shares of Common Stock) or as imposing any liabilities on such Holder to
purchase any securities or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors or stockholders of the
Company or otherwise.
14. Notices. All notices and other communications under this
Warrant shall be in writing and shall be mailed by registered or certified mail,
return receipt requested, or by facsimile transmission, addressed (1) if to the
Holder, at the registered address or the facsimile number of such Holder as set
forth in the register kept at the principal office of the Company, and (2) if to
the Company, to the attention of the Secretary at its principal office, or to
its facsimile number, Attention: Secretary, provided that the exercise of any
Warrant shall be effected in the manner provided in Section 2.
15. Miscellaneous. THIS WARRANT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
The headings in this Warrant are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof.
9
<PAGE> 10
DATED as of April 7, 1998.
TELEX COMMUNICATIONS GROUP, INC.
By: /s/ Christine K. Vanden Beukel
-------------------------------
Name: Christine K. Vanden Beukel
--------------------------
Title: Assistant Secretary
-------------------------
10
<PAGE> 11
FORM OF SUBSCRIPTION
[To be signed only upon exercise of the Warrant]
TO TELEX COMMUNICATIONS GROUP, INC.
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, _________* shares of Common Stock of TELEX
COMMUNICATIONS GROUP, INC. and herewith makes payment of $______ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to, ________________________________, whose address is _____________
______________________________________________________________________________
Dated: _________________
_____________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
_____________________________
(Address)
___________________
* Insert here the number of shares called for on the face of the Warrant
(or, in the case of a partial exercise, the portion thereof as to which
the Warrant is being exercised), in either case without making any
11
<PAGE> 12
adjustment for additional shares of the Common Stock or any other stock
or other securities or property or cash which, pursuant to the
adjustment provisions referred to in the Warrant, may be deliverable
upon exercise. In the case of a partial exercise, a new Warrant or
Warrants will be issued and delivered, representing the unexercised
portion of such Warrant, all as provided in the Warrant.
12
<PAGE> 13
FORM OF ASSIGNMENT
[To be signed only upon transfer of the Warrant]
For value received, the undersigned hereby sells, assigns and
transfers unto _________________________________ the rights represented by the
within Warrant to purchase _______ shares of Common Stock of TELEX
COMMUNICATIONS GROUP, INC. (the "Company") to which the within Warrant relates,
and appoints _______________________ Attorney to transfer such rights on the
books of TELEX COMMUNICATIONS GROUP, INC. with full power of substitution in the
premises; it being understood and agreed that notwithstanding such assignment
and transfer, the undersigned shall retain, and shall at all times be entitled
to exercise, all voting rights with respect to all shares of Common Stock
issuable upon exercise of this Warrant.
Dated: _________________
_____________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
_____________________________
(Address)
Signed in the presence of:
_____________________________
13
<PAGE> 14
May __, 1998
Evan M. Marks
Alebn Asset Management, LLC
885 Third Avenue, Suite 2800
New York, NY 10022
Dear Mr. Marks:
Warrant Supplement
We refer to your Warrant (the "Warrant"), dated April 7, 1998, to
purchase 5,484 shares of Common Stock ("Common Stock"), par value $.01 per
share, of Telex Communications Group, Inc., a Delaware corporation (the
"Company"), at a price of $31.93 per share (the "Warrant Price").
As you know, subject to all of the other terms and conditions set
forth in the Warrant, the Warrant became exercisable for 1,828 shares of Common
Stock on December 23, 1997 and shall become exercisable for (i) an additional
1,828 shares of Common Stock on December 23, 1998, provided you are a director
of the Company or the Company's wholly-owned subsidiary, Telex Communications,
Inc. ("TCI") on such date; and (ii) an additional 1,828 shares of Common Stock
on December 23, 1999, provided you are a director of the Company or TCI on such
date.
This will confirm our additional agreement that notwithstanding any
provision in the Warrant to the contrary, in the event of the occurrence of a
Public Offering or a Change of Control (as each such term is defined below) with
respect to the Company at any time while you are a director of the Company or
TCI, all shares of Common Stock subject to the Warrant which have not previously
become exercisable shall thereupon become immediately exercisable in accordance
with the other terms and conditions of the Warrant.
<PAGE> 15
For purposes of this Warrant Supplement, the following terms shall
have the following meanings:
(1) "Public Offering" means any registered primary or secondary
offering of Common Stock of the Company which produces aggregate gross proceeds
to the sellers of such Common Stock of at least fifty million dollars, and after
which an established trading market for such shares shall exist.
(2) "Change of Control" shall have the meaning set forth in the
Stock Option Plan of the Company, dated May 6, 1997, as the same currently
exists or is hereafter amended.
Very truly yours,
TELEX COMMUNICATIONS GROUP, INC.
By:
----------------------------------
Name:
Title:
2
<PAGE> 1
Exhibit 10(gg)
[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: Dennis Daniel Kiely, 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
TELEX COMMUNICATIONS, 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 2, 1998
<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 2, 1998, is made by TELEX COMMUNICATIONS,
INC., a Delaware corporation, formerly known as EV International, Inc.
("Grantor"), whose address is 9600 Aldrich Avenue South, Bloomington, MN 55420,
to CHICAGO TITLE INSURANCE COMPANY, a Missouri 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 May 6, 1997 among GST Acquisition Corp., Morgan Stanley Senior
Funding, Inc. ("Morgan Stanley") and Beneficiary, as amended by Amendment No. 1
dated as of February 2, 1998 (the "Amendment") among Grantor, Morgan Stanley and
Beneficiary (as the same may be further amended, supplemented, waived or
otherwise modified from time to time the "Credit Agreement"). 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 other wise defined herein shall have the meanings assigned thereto
in the Credit Agreement.
Background
A. Pursuant to an Exchange Agreement, dated as of January 30, 1998
(together with all other documents delivered in connection therewith, the
"Telex/EVI Merger Documents"), EV International, Inc. ("EVI") and Telex
Communications, Inc., a Delaware corporation, have effectuated a merger of Telex
Communications, Inc. with and into EVI, with EVI continuing as the surviving
corporation, in the process changing its name to Telex Communications, Inc.
B. 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").
C. Pursuant to the terms of the 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
<PAGE> 3
2
Letter(s) of Credit for the account of the Borrower upon the terms and subject
to the conditions set forth in the 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.
D. It is a condition precedent to the effectiveness of the Amendment that
Grantor executes and delivers this Deed of Trust.
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 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 May 6, 1997 between Telex Communications. Inc.,
Telex Communications Group, Inc., TCI Holdings Corp. 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 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 Credit Agreement, the Loans, this Deed of Trust, the
Guarantee, any other document securing payment of the Indebtedness (the
"Security Documents") and any amend-
<PAGE> 4
3
ments, supplements, extensions, renewals, restatements, replacements or
modifications of any of the foregoing (the 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 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 fore going, 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,
<PAGE> 5
4
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 off site, 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 other wise, 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;
<PAGE> 6
5
(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 govern mental 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 "Reconveyance of Deed of Trust".
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
<PAGE> 7
6
issued to Beneficiary to insure the lien of this Deed of Trust and Liens
expressly permitted under the 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 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 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 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.
<PAGE> 8
7
4. Payment of Taxes and Other Impositions. (a) Except as expressly
permitted under the 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 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
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
<PAGE> 9
8
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,
wind storm, 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 the
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 opera-
<PAGE> 10
9
tions. 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, occur ring on, in or about the
Premises and the adjoining streets, sidewalks and passage ways, 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 ease 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
<PAGE> 11
10
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 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
<PAGE> 12
11
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 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 reason able 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.
<PAGE> 13
12
(f) (i) If the Trust Property, or any part thereof, shall be
destroyed or dam aged 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 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 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 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
<PAGE> 14
13
shall be obligated to use such proceeds to restore or repair the Trust
Property to the extent required by subsection 7.5 of the 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, 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 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 Credit Agreement, Grantor shall not
sell, transfer, convey or assign all or any portion of, or any interest in, the
Trust Property.
<PAGE> 15
14
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 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 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 reason able 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 night to inspect and
make copies, to the extent reason able, of all books, contracts and records of
Grantor relating to the Trust Property.
(c) Except as permitted under subsection 7.3 of the 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
proceeds, as provided above in subsec-
<PAGE> 16
15
tion 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 reason able discretion, and as are customarily imposed by
constriction 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 is may be otherwise expressly permitted under
the 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
(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.
<PAGE> 17
16
(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, counter claims, 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 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 lan-
<PAGE> 18
17
guage 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 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 Credit Agreement, this Deed of Trust and the other Security Documents shall
become due and payable as provided in the 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 actions, each of which may be pursued concurrently or
otherwise, at such time and in such manner as Beneficiary may deter mine, in its
sole discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary:
<PAGE> 19
18
(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 deter mine. 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 night 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 simul-
<PAGE> 20
19
taneously, 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;
(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
<PAGE> 21
20
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 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 Credit Agreement and
other instruments evidencing the Indebtedness being applied pro rata based
on the amount of principal due under the Notes, the 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
<PAGE> 22
21
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.
(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.
<PAGE> 23
22
(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 acknowledgment
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 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
liabilities 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
<PAGE> 24
23
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 or other manager 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 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
<PAGE> 25
24
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 night 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.
<PAGE> 26
25
(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 fall 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 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
<PAGE> 27
26
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.
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 there by 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
<PAGE> 28
27
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
here under shall be deemed to have been sufficiently given or served when served
in the same manner as set forth for notices in the 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 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,
evaluation, appraisement, stay of execution, notice of
<PAGE> 29
28
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 fore closure 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 acknowl-
<PAGE> 30
29
edges 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, 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.
<PAGE> 31
30
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 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 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.
<PAGE> 32
31
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 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 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 n a transaction expressly permitted by the 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 Credit Amendment. 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 Credit Agreement, the terms and provisions of the
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 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
<PAGE> 33
32
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.
This Deed of Trust has been duty executed by Grantor as of the date
first above written.
Signed, sealed and delivered TELEX COMMUNICATIONS, INC.
in our presence:
By:
---------------------------
Name:
Title:
- - ----------------------------------
Name:
- - ----------------------------------
Name:
<PAGE> 34
33
STATE OF MINNESOTA)
: ss.:
COUNTY OF DAKOTA )
On this 2nd day of February in the year 1998 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> 35
34
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> 36
35
SCHEDULE A
LOT 1 OF TRACT NO. 31653, IN THE CITY OF LOS ANGELES, 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
[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: Dennis Daniel Kiely, 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
TELEX COMMUNICATIONS, 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 2, 1998
<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 2, 1998, is made by TELEX
COMMUNICATIONS, INC., a Delaware corporation, formerly known as EV
International, Inc. ("Grantor"), whose address is 9600 Aldrich Avenue South,
Bloomington, MN 55420, to CHICAGO TITLE INSURANCE COMPANY, a Missouri
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 May 6, 1997 among GST Acquisition Corp.,
Morgan Stanley Senior Funding, Inc. ("Morgan Stanley") and Beneficiary, as
amended by Amendment No. 1 dated as of February 2, 1998 (the "Amendment") among
Grantor, Morgan Stanley and Beneficiary (as the same may be further amended,
supplemented, waived or otherwise modified from time to time the "Credit
Agreement"). 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 Credit Agreement.
Background
A. Pursuant to an Exchange Agreement, dated as of January 30, 1998
(together with all other documents delivered in connection therewith, the
"Telex/EVI Merger Documents"), EV International, Inc. ("EVI") and Telex
Communications, Inc., a Delaware corporation, have effectuated a merger of Telex
Communications, Inc. with and into EVI, with EVI continuing as the surviving
corporation, in the process changing its name to Telex Communications, Inc.
B. 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").
C. Pursuant to the terms of the 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
<PAGE> 3
2
the conditions set forth in the 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.
D. It is a condition precedent to the effectiveness of the Amendment
that Grantor executes and delivers this Deed of Trust.
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 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 May 6, 1997 between Telex Communications, Inc.,
Telex Communications Group, Inc., TCI Holdings Corp. 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 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
<PAGE> 4
3
the 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
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 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,
<PAGE> 5
4
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 Grantor relating to the Real Estate or
Equipment, (ii) any such insurance policies, (iii) all proceeds of any
such insurance policies (including
<PAGE> 6
5
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
<PAGE> 7
6
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 "Reconveyance of Deed of Trust".
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 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 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".
<PAGE> 8
7
(b) From and after the date of this Deed of Trust, except as
expressly permitted under the 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 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 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
<PAGE> 9
8
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
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);
<PAGE> 10
9
(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
<PAGE> 11
10
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
(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
<PAGE> 12
11
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
<PAGE> 13
12
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 Credit
<PAGE> 14
13
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 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 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 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.
<PAGE> 15
14
(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 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 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 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 Credit
<PAGE> 16
15
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 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
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
<PAGE> 17
16
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 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
(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
<PAGE> 18
17
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 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
<PAGE> 19
18
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 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 Credit Agreement, this Deed of Trust and the other Security Documents shall
become due and payable as provided in the 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 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:
<PAGE> 20
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(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
<PAGE> 21
20
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;
(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
<PAGE> 22
21
(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 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 Credit Agreement and other
instruments evidencing the Indebtedness being applied pro rata based on
the amount of principal due under the Notes, the 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.
<PAGE> 23
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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.
(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
<PAGE> 24
23
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 acknowledgment
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 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.
<PAGE> 25
24
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 or other manager 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 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
<PAGE> 26
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.
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
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
<PAGE> 27
26
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 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.
<PAGE> 28
27
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 night 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
<PAGE> 29
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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 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
<PAGE> 30
29
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 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
<PAGE> 31
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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 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
<PAGE> 32
31
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 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.
<PAGE> 33
32
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 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 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
<PAGE> 34
33
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 of 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 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 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 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 Credit Agreement, the terms and provisions of the
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 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> 35
34
This Deed of Trust has been duly executed by Grantor as of the date
first above written.
Signed, sealed and TELEX COMMUNICATIONS, INC.
delivered in our
presence: By:
--------------------------
Name:
Title:
- - ------------------------------
Name:
- - ------------------------------
Name:
<PAGE> 36
STATE OF MINNESOTA )
: ss.:
COUNTY OF DAKOTA )
On this 2nd day of February in the year 1998 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> 37
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> 38
SCHEDULE A
LOT 4 OF TRACT NO. 32284, IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 1055 PAGES 37 TO 39 INCLUSIVE
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, 1955 IN BOOK 48272 PAGE 384, OFFICIAL RECORDS.
<PAGE> 1
Exhibit 10(ii)
MORTGAGE
from
TELEX COMMUNICATIONS, INC., Mortgagor
to
THE CHASE MANHATTAN BANK, as Administrative Agent, Mortgagee
DATED AS OF FEBRUARY 2, 1998
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.).
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.: Dennis Daniel Kiely, Esq.
<PAGE> 2
MORTGAGE
THIS MORTGAGE, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT
AND FIXTURE FILING, dated as of February 2, 1998, is made by TELEX
COMMUNICATIONS, INC., a Delaware corporation (formerly known as EV
International, Inc. ("Mortgagor"), whose address is 9600 Aldrich Avenue South,
Bloomington, MN 55420, 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 May 6, 1997 among GST Acquisition Corp., Morgan
Stanley Senior Funding, Inc. ("Morgan Stanley") and Beneficiary, as amended by
Amendment No. 1 dated as of February 2, 1998 (the "Amendment") among Grantor,
Morgan Stanley and Mortgagee (as the same may be further amended, supplemented,
waived or otherwise modified from time to time the "Credit Agreement").
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 Credit Agreement.
Background
A. Pursuant to an Exchange Agreement, dated as of January 30, 1998
(together with all other documents delivered in connection therewith, the
"Telex/EVI Merger Documents"), EV International, Inc. ("EVI") and Telex
Communications, Inc., a Delaware corporation, have effectuated a merger of Telex
Communications, Inc. with and into EVI, with EVI continuing as the surviving
corporation, in the process changing its name to Telex Communications, Inc.
B. 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").
C. Pursuant to the terms of the 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 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.
<PAGE> 3
2
D. It is a condition precedent to the effectiveness of the Amendment
that Mortgagor executes and delivers this Deed of Trust.
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 use under, out
of, or in connection with, the 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 May 6, 1997 between Telex Communications, Inc.,
Telex Communications Group, Inc., TCI Holdings Corp. 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 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 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 Credit Agreement, the Loans, the Letters of Credit, this
Mortgage, the Guarantee, that certain Assignment of Rents of even date
herewith (the "Assignment of Rents") 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");
<PAGE> 4
3
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, 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,
<PAGE> 5
4
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 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
<PAGE> 6
5
(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".
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 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.
<PAGE> 7
6
2. Payment of Indebtedness. Mortgagor shall pay the Indebtedness at
the times and places and in the manner specified in the 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 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 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
<PAGE> 8
7
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
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
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.
<PAGE> 9
8
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);
(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;
<PAGE> 10
9
(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 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
<PAGE> 11
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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
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 property 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 Mortgagee in writing
that all the requirements of this Mortgage governing insurance have been
satisfied.
<PAGE> 12
11
(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
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
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,
<PAGE> 13
12
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 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 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 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 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
<PAGE> 14
13
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 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 Credit Agreement, Mortgagor 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 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 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.
<PAGE> 15
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(c) Except as permitted under subsection 7.3 of the 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 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 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;
<PAGE> 16
15
(ii) promptly enforce all of the material provisions of the Lease on
the part of the lease 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;
(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
<PAGE> 17
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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 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 Rights 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 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 other amounts payable with respect to the Loans, the Letters of Credit,
the Credit
<PAGE> 18
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Agreement, this Mortgage and the other Security Documents shall become due and
payable as provided in the 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 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), (D) exercise its rights under the Assignment of
Rents in accordance with applicable Michigan statutes, or (E) 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 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
<PAGE> 19
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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 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
<PAGE> 20
19
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 night 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 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
<PAGE> 21
20
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
required by law). Any such receiver or receivers or other manager 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,
<PAGE> 22
21
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.
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'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
<PAGE> 23
22
(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. 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.
21. 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.
<PAGE> 24
23
22. 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.
23. 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 Credit Agreement.
24. 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.
25. 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.
26. 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
<PAGE> 25
24
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.
27. 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 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.
28. 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 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.
<PAGE> 26
25
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.
29. 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.
<PAGE> 27
26
30. 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 ter 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.
31. 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
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.
32. 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.
33. 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 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.
34. Release of Mortgage. Upon payment in full of the Indebtedness,
the termination of all Commitments under the Credit Agreement secured hereby and
the compliance with the Obligations then required to be complied with, Mortgagee
shall
<PAGE> 28
27
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 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.
35. Conflict With 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 Credit Agreement, the terms and provisions of the Credit
Agreement shall govern, other than with respect to the Section of this Mortgage
captioned "Governing Law, etc.". By their execution of the 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.
36. Receipt of Copy. Mortgagor acknowledges that it has received a
true copy of this Mortgage.
This Mortgage has been duly executed by Mortgagor as of the date
first above written.
Signed, sealed and delivered in TELEX COMMUNICATIONS, INC.
our presence:
By:
-------------------------------
- - -------------------------------- Name:
Name: Title:
- - --------------------------------
Name:
<PAGE> 29
State of )
: ss.:
County of )
The foregoing instrument was acknowledged before me this ______ day
of ______________, ____ by ____________________________ as ___________________
of TELEX COMMUNICATIONS, INC., a Delaware corporation, on behalf of the
corporation.
____________________________________________
Notary Public
My commission expires:
_____________________________
[SEAL]
<PAGE> 30
1 of 3
SCHEDULE A
Lots 28, 29, 30, 31, 32, 33, 34 and part of vacated Jordan Street, RYNEARSON'S
ADDITION TO THE VILLAGE OF BUCHANAN, according to the plat thereof, recorded
June 3, 1867, in Volume 27 of Deeds, page 493; Lots 29, 168, 167, 30, 31, 32,
166, 88 and part of vacated Sylvan Avenue, LIBERTY HEIGHTS ADDITION TO THE
VILLAGE OF BUCHANAN, according to the plat thereof, recorded July 24,1918, in
Volume 6 of plats, page 6; and part of the Northwest quarter of Section 36,
Township 7 South, Range 18 West, all described as follows: Commencing at the
West quarter corner of said Section 36, thence East, on the East and West
quarter line of said Section 36 a distance of 513.54 feet, thence North 00
degrees 29 minutes 32 seconds East 64.56 feet (deeded North 00 degrees 37
minutes East 64.56 feet) to the place of beginning of the parcel of land herein
described, thence continuing North 00 degrees 29 minutes 32 seconds East (deeded
North 00 degrees 37 minutes East), on the East line of Lots 26 and 27,
RYNEARSON'S ADDITION TO THE VILLAGE OF BUCHANAN, 141.24 feet to the Southeast
corner of Lot 28, of said Rynearson's Addition, thence North 89 degrees 35
minutes 43 seconds West, on the South line of said Lot 28, a distance of 132.00
feet to the Southwest corner of said Lot 28, thence North 00 degrees 29 minutes
32 seconds East, on the East right of way line of Berrien Street, 495.00 feet to
the Northwest corner of Lot 34, of said Rynearson's Addition, thence South 89
degrees 35 minutes 43 seconds East, on the North line of said Lot 34, a distance
of 132.00 feet to the Northeast corner of said Lot 34, thence South 00 degrees
29 minutes 32 seconds West, on the West line of Lots 27 and 28, of said Liberty
Heights Addition to the Village of Buchanan, 71.16 feet to the Northwest corner
of Lot 29, of said Liberty Heights Addition, thence South 89 degrees 30 minutes
28 seconds East (deeded East) on the North line of said Lot 29, a distance of
188.00 feet to the Northwest corner of Lot 30, of said Liberty Heights Addition,
thence North 00 degrees 29 minutes 32 seconds East, on the East right of way
line of Sylvan Avenue, 24.74 feet, thence Northeasterly, on said East right of
way line, 57.96 feet on a 36.00-foot radius curve to the left whose chord bears
North 00 degrees 29 minutes 32 seconds East 51.90 feet, thence North 00 degrees
29 minutes 32 seconds East 51.90 feet, thence North 00 degrees 29 minutes 32
seconds East, on said East right of way line, 23.36 feet to the Northwest corner
of Lot 32, said Liberty Heights Addition, thence South 89 degrees 30 minutes 28
seconds East, on the North line of said Lot 32, a distance of 138.00 feet to the
Northeast corner of said Lot 32, thence South 00 degrees 29 minutes 32 seconds
West, on the East line of Lots 31 and 32, of said Liberty Heights Addition,
100.00 feet to the Northwest corner of Lot 88, of said Liberty Heights addition,
thence South 89 degrees 30 minutes 28 seconds East (deeded East) on the North
line of said Lot 88, a distance of 138.00 feet to the Northeast corner of said
Lot 88, thence South 00 degrees 29 minutes 32 seconds West (deeded South 00
degrees 27 minutes West) on the West right of way line of Cecil Avenue, 100.00
feet to the South right of way line of Jordan Street, thence South 89 degrees 30
minutes 28 seconds East, on said right of way line, 326.00 feet (deeded South 89
degrees 29 minutes East 326.05 feet) to the West right of way line of Liberty
Avenue, thence South 00 degrees 29 minutes 32 seconds West, on said West right
of way line, 472.86 feet (deeded South 00 degrees 38 minutes West 469.15 feet)
to the North right of way
<PAGE> 31
2 of 3
line of Carroll Street, thence West, on said North right of way line, 737.23
feet (deeded 748.52 feet), thence North 74 degrees 32 minutes 58 seconds West,
on said North right of way line, 54.65 feet (deeded North 71 degrees 05 minutes
West 43.18 feet) to the place of beginning;
Also that part of the Southwest quarter of Section 36, Township 7 South, Range
18 West, described as follows: Commencing at a point on the East and West
quarter line of said Section 36 that is 713.42 feet East of the West quarter
corner of said Section 36, thence East, on said quarter line, 623.20 feet,
thence South 00 degrees 56 minutes 00 seconds West 259.00 feet, thence North 67
degrees 17 minutes 49 seconds West 670.97 feet (deeded North 67 degrees 19
minutes West 671.00 feet) to the place of beginning.
<PAGE> 32
3 of 3
Tax Item No. 11-58-0036-0259-01-03
Tax Item No. 11-58-4500-0031-00-7
Tax Item No. 11-58-6900-0028-00-2
Tax Item No. 11-58-6900-0033-01-4
Tax Item No. 11-06-0036-0009-00-1
Such property is located at 600 Cecil Avenue, City of Buchanan, Berrien County,
Michigan.
<PAGE> 1
MORTGAGE
from
TELEX COMMUNICATIONS, INC., Mortgagor
to
THE CHASE MANHATTAN BANK, as Administrative Agent, Mortgagee
DATED AS OF FEBRUARY 2,1998
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.).
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: Dennis Daniel Kiely, Esq.
<PAGE> 2
MICHIGAN
MORTGAGE
THIS MORTGAGE, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT
AND FIXTURE FILING, dated as of February 2, 1998, is made by TELEX
COMMUNICATIONS, INC., a Delaware corporation (formerly known as EV
International, Inc. ("MORTGAGOR"), whose address is 9600 Aldrich Avenue South,
Bloomington, MN 55420, 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 May 6, 1997 among GST Acquisition Corp., Morgan
Stanley Senior Funding, Inc. ("MORGAN STANLEY") and Beneficiary, as amended by
Amendment No. 1 dated as of February 2, 1998 (the "AMENDMENT") among Grantor,
Morgan Stanley and Mortgagee (as the same may be further amended, supplemented,
waived or otherwise modified from time to time the "CREDIT AGREEMENT").
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 Credit Agreement.
Background
A. Pursuant to an Exchange Agreement, dated as of January 30, 1998
(together with all other documents delivered in connection therewith, the
"TELEX/EVI MERGER DOCUMENTS"), EV International, Inc. ("EVI") and Telex
Communications, Inc., a Delaware corporation, have effectuated a merger of Telex
Communications, Inc. with and into EVI, with EVI continuing as the surviving
corporation, in the process changing its name to Telex Communications, Inc.
B. 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").
C. Pursuant to the terms of the 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
<PAGE> 3
2
the 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.
D. It is a condition precedent to the effectiveness of the Amendment
that Mortgagor executes and delivers this Deed of Trust.
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 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 May 6, 1997 between Telex Communications, Inc.,
Telex Communications Group, Inc., TCI Holdings Corp. 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 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 Credit Agreement, the Loans, this Mortgage, the
Guarantee, any other document securing
<PAGE> 4
3
payment of the Indebtedness (the "SECURITY DOCUMENTS") and any amendments,
supplements, extensions, renewals, restatements, replacements or
modifications of any of the foregoing (the Credit Agreement, the Loans,
the Letters of Credit, this Mortgage, the Guarantee, that certain
Assignment of Rents of even date herewith (the "Assignment of Rents") 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");
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
<PAGE> 5
4
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") 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)
<PAGE> 6
5
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 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".
<PAGE> 7
6
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 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 Mortgaged Property.
2. Payment of Indebtedness. Mortgagor shall pay the Indebtedness at
the times and places and in the manner specified in the 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 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
<PAGE> 8
7
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 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
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.
<PAGE> 9
8
(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
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);
(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;
<PAGE> 10
9
(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 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;
<PAGE> 11
10
(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 Premisses 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 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
<PAGE> 12
11
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 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
<PAGE> 13
12
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 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 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 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
<PAGE> 14
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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 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 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 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
<PAGE> 15
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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 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 Credit Agreement, Mortgagor 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 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 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.
<PAGE> 16
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(c) Except as permitted under subsection 7.3 of the 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 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 Credit Agreement.
(b) As to any Lease consented to by Mortgagee under subsection 11(a)
above, Mortgagor shall:
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(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;
(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
<PAGE> 18
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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 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
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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 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 other amounts payable with respect to the Loans, the Letters of Credit,
the Credit Agreement, this Mortgage and the other Security Documents shall
become due and payable as provided in the 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 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), (D) exercise its rights under the Assignment of
Rents in accordance with applicable Michigan statutes, or (E) 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
<PAGE> 20
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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 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.
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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 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.
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(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 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
required by law). Any such receiver or receivers or other manager shall have all
the usual powers and
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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.
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
<PAGE> 24
23
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 an 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 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
<PAGE> 25
24
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. 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.
21. 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.
22. 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.
<PAGE> 26
25
23. 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 Credit Agreement.
24. 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.
25. 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.
26. 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 declare due the whole of the secured indebtedness and
marshalling in the event of foreclosure of the liens hereby created.
27. 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
<PAGE> 27
26
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.
28. 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 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
<PAGE> 28
27
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.
29. 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.
30. 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
<PAGE> 29
28
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.
31. 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
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.
32. 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.
33. 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 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.
34. Release of Mortgage. Upon payment in full of the Indebtedness,
the termination of all Commitments under the Credit Agreement secured hereby and
the compliance with the Obligations then required to be complied with, Mortgagee
shall release
<PAGE> 30
29
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 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.
35. Conflict With 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 Credit Agreement, the terms and provisions of the Credit
Agreement shall govern, other than with respect to the Section of this Mortgage
captioned "Governing Law, etc.". By their execution of the 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.
36. Receipt of Copy. Mortgagor acknowledges that it has received a
true copy of this Mortgage.
<PAGE> 31
30
This Mortgage has been duly executed by Mortgagor as of the date
first above written.
Signed, sealed and TELEX COMMUNICATIONS, INC.
delivered in our
presence: By:______________________________________
Name: John A. Palleschi
Title: Vice President
___________________________
Name:
___________________________
Name:
<PAGE> 32
31
State of MINNESOTA )
: ss.:
County of DAKOTA )
The foregoing instrument was acknowledged before me this 2nd day of
February, 1998 by John A. Palleschi as Vice President of TELEX COMMUNICATIONS,
INC., a Delaware corporation, on behalf of the corporation.
___________________________
Notary Public
My commission expires:
___________________________
[SEAL]
<PAGE> 33
SCHEDULE A
That part of Blocks "A" and "D", CENTRAL ADDITION TO THE VILLAGE OF BUCHANAN,
according to the plat thereof, recorded February 1, 1867, in Volume 1 of plats,
page 8, and that part of the Northeast Quarter of Section 35, Township 7 South,
Range 18 West, described as follows: Commencing at the Northeast corner of said
Section 35, thence South 89 degrees 49 minutes 37 seconds West (deeded West) on
the North line of said Section 35 a distance of 399.90 feet, thence South 00
degrees 18 minutes 00 seconds West 33.00 feet to the intersection of the South
line of Front Street and the West line of Days Avenue and the point of beginning
of the land herein described, thence continuing South 00 degrees 18 minutes 00
seconds West on the West line of Days Avenue 230.25 feet to a brass monument,
thence North 89 degrees 45 minutes 00 seconds West 127.90 feet to a brass
monument, thence North 00 degrees 12 minutes 30 seconds East 113.04 feet to a
brass monument, thence North 69 degrees 57 minutes 00 seconds East 4.08 feet to
a brass monument, thence North 00 degrees 21 minutes 00 seconds East 15.23 feet
to a brass monument at the Southwest corner of said Lot 4, Block "A", said plat,
thence East on the South line of said Lot 4 a distance of 29.50 feet to a brass
monument at the Southeast corner of said Lot 4, thence North 00 degrees 21
minutes 00 seconds East 18.94 feet to the South wall of a brick building, thence
East 1.00 foot along said South wall to the Southeast corner of said building,
thence North 00 degrees 05 minutes 00 seconds West along the East wall of said
building 81.06 feet to the South line of Front Street, thence East on the South
line of Front Street 94.27 feet to the point of beginning.
Tax Item No. 11-58-1150-0001-00-5
Such property is located at 128 East Front Street, City of Buchanan, Berrien
County, Michigan.
<PAGE> 1
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: Dennis Daniel Kiely, Esq.
MORTGAGE, ASSIGNMENT OF RENTS AND LEASES AND SECURITY AGREEMENT
from
TELEX COMMUNICATIONS, INC., Mortgagor
to
THE CHASE MANHATTAN BANK, as Administrative Agent, Mortgagee
DATED AS OF FEBRUARY 2, 1998
<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 2, 1998, is made by TELEX COMMUNICATIONS, INC.,
a Delaware corporation, formerly known as EV International, Inc. ("MORTGAGOR"),
whose address is 9600 Aldrich Avenue South, Bloomington, MN 55420 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 May 6,
1997 among GST Acquisition Corp., Morgan Stanley Senior Funding, Inc. ("MORGAN
STANLEY") and Mortgagee, as amended by Amendment No. 1 dated as of February 2,
1998 (the "AMENDMENT") among Mortgagor, Morgan Stanley and Mortgagee (as the
same may be further amended, supplemented, waived or otherwise modified from
time to time the "CREDIT AGREEMENT"). 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 Credit Agreement.
Background
A. Pursuant to an Exchange Agreement, dated as of January 30,
1998 (together with all other documents delivered in connection therewith, the
"TELEX/EVI MERGER DOCUMENTS"), EV International, Inc. ("EVI") and Telex
Communications, Inc., a Delaware corporation, have effectuated a merger of Telex
Communications, Inc. with and into EVI, with EVI continuing as the surviving
corporation, in the process changing its name to Telex Communications, Inc.
B. 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").
C. Pursuant to the terms of the 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 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.
<PAGE> 3
2
D. It is a condition precedent to the effectiveness of the
Amendment that Mortgagor executes and delivers this Mortgage.
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 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 May 6, 1997 between Telex Communications, Inc., Telex
Communications Group, Inc., TCI Holdings Corp. 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 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 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 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, 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
<PAGE> 4
3
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.
NOTWITHSTANDING THE FOREGOING, THE MAXIMUM PRINCIPAL AMOUNT OF OBLIGATIONS
SECURED BY THIS MORTGAGE SHALL NOT EXCEED $5,000,000.
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, 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");
<PAGE> 5
4
(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 fight, 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 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
<PAGE> 6
5
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".
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 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 Mortgaged Property.
2. Payment of Indebtedness. Mortgagor shall pay the
Indebtedness at the times and places and in the manner specified in the 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
<PAGE> 7
6
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 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 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
<PAGE> 8
7
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 night 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 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 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
<PAGE> 9
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);
<PAGE> 10
8
(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 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
<PAGE> 11
9
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 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
<PAGE> 12
10
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 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
<PAGE> 13
11
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 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 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 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 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
<PAGE> 14
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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 Credit Agreement.
(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 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 Credit Agreement, Mortgagor 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 Credit
Agreement, Mortgagor shall repair, restore, replace or rebuild
<PAGE> 15
13
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 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 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 an 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
<PAGE> 16
14
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 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,
(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
<PAGE> 17
15
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 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.
<PAGE> 18
16
14. Events of Default. The occurrence of an Event of Default
under the 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 d 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 Credit Agreement, this Mortgage and the other Security Documents shall
become due and payable as provided in the 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 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
SectionSection 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 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
<PAGE> 19
17
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 proceeding, or to foreclose the security interest herein
granted to Mortgagee, Mortgagor hereby agrees to pay to Mortgagee, in
addition to all other sums due, all costs and expenses, including
reasonable attorneys 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 Mortgagee 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 is 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
<PAGE> 20
18
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 extent 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 thereto,
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 Mortgagee Property from and after the occurrence or an Event of
Default hereunder, upon demand for possession of 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 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
<PAGE> 21
19
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 proceedings or in connection with any exercise of the Power
of Sale), shall be entitled as a matter of night 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 or other
manager 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, (lv) 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
<PAGE> 22
20
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 night 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 Mortgage 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
<PAGE> 23
21
Mortgagee in taking any such action will be 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 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 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
<PAGE> 24
22
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 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.
<PAGE> 25
23
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 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 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
<PAGE> 26
24
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
Mortgaizee 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 ("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
<PAGE> 27
25
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 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
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
<PAGE> 28
26
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 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 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 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 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 Credit Agreement, the terms and provisions of
the Credit Agreement shall govern, other than with respect to the Section of
this Mortgage captioned "Governing Law, etc.". By their execution of the 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.
<PAGE> 29
27
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.
<PAGE> 30
28
This Mortgage has been duly executed by Mortgagor as of the
date first above written.
TELEX COMMUNICATIONS, INC.
"Mortgagor"
By:
Print or Type Name:
Title:
<PAGE> 31
29
STATE OF MINNESOTA )
: ss.:
COUNTY OF DAKOTA )
This instrument was acknowledged before me this 2nd day of
February 1998 by __________, _____ President of TELEX COMMUNICATIONS, INC., a
Delaware corporation, on behalf of the corporation.
Notary Public
Name:
My commission expires:
[SEAL]
<PAGE> 32
10500 West Reno Avenue
Oklahoma City, OK 73127
Canadian County
(page 1 of 2)
SCHEDULE A
Tract I:
A parcel of land being a part of Government Lot 4 in the Northwest Quarter,
Section 2, Township 11 North, Range 5 West, 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, Canadian County, Oklahoma (same being the intersection
of Reno Avenue and Sara Road); thence South 00(degree)16'56" West along the West
line of said Section 2 (Sara Road) for a distance of 561.75 feet; thence South
89(degree)56'42" East a distance of 241.33 feet to the point of beginning;
Thence South 89(degree)56'42" East a distance of 272.87 feet; Thence South
00(degree)16'56" West a distance of 120 feet; Thence North 89(degree)56'42" West
a distance of 272.87; Thence North 00(degree)16'56" East a distance of 120 feet
to the point of beginning.
Tract II:
A parcel or tract of land being part of Government Lot 4 in the Northwest
Quarter of Section 2, Township 11 North, Range 5 West of the I.M., 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 Section 2, T11N, R52 of the I.M., Canadian County, Oklahoma (same
point being the intersection of Sara Road and Reno Avenue), Thence South
00(degree)16'56" West along the West line of said Section 2 a distance of 561.75
feet; Thence South 89(degree)56'42" East along a line parallel to the North line
of said Section 2 a distance of 241.33 feet to the point or place of beginning;
Thence South 00(degree)16'56" West a distance of 120.00 feet; Thence South
89(degree)56'42" East a distance of 272.87 feet; Thence South 00(degree)16'56"
West a distance of 210.00 feet; Thence North 89(degree)56'42" West a distance of
514.20 feet; Thence North 00(degree)16'56" East a distance of 330.0 feet; Thence
South 89(degree)56'46" East a distance of 241.33 feet, more or less to the point
or place of beginning, LESS AND EXCEPT that portion conveyed to The State of
Oklahoma, under the warranty Deed recorded at Book 402, Page 272.
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 a distance of 1,325.41 feet to a
point; Thence South 89(degree)25'19" West a distance of 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 a distance of 236.50 feet to a point; Thence South 89(degree)56'42" East a
distance of 411.18 feet to a point; Thence North 00(degree)16'56" East a
distance of 330.00 feet to a point; Thence North 89(degree)56'42" West a
distance of 462.41 feet to a point; Thence North 08(degree)32'51" West a
distance of 11.68 feet to a point; Thence North 89(degree)43'04" West a distance
of 50.00 feet to a point on the West line of
-Continued-
<PAGE> 33
10500 West Reno Avenue
Oklahoma City, OK 73127
Canadian County
(page 2 of 2)
said Section Two (2); Thence North 00(degree)16'57" East a distance of 550.00
feet to the Point of Beginning.
-Continued-
<PAGE> 1
Exhibit 10(ll)
TENNESSEE
Prepared by, and when recorded, please return to:
Simpson Teacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
ATTN: Dennis Daniel Kiely, Esq.
DEED OF TRUST, ASSIGNMENT OF RENTS
AND LEASES AND SECURITY AGREEMENT
from
TELEX COMMUNICATIONS, 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 2, 1998
MAXIMUM PRINCIPAL INDEBTEDNESS FOR TENNESSEE
RECORDING TAX PURPOSES IS $15,000,000
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 2, 1998, is made by TELEX
COMMUNICATIONS, INC., a Delaware corporation, formerly known as EV
International, Inc. ("GRANTOR"), whose address is 9600 Aldrich Avenue South,
Bloomington, MN 55420 to JOE B. PITT, JR., a resident of Davidson County,
Tennessee, ("TRUSTEE"), 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 May 6, 1997 among GST Acquisition
Corp., Morgan Stanley Senior Funding, Inc. ("MORGAN STANLEY") and Beneficiary,
as amended by Amendment No. 1 dated as of February 2, 1998 (the "AMENDMENT")
among Grantor, Morgan Stanley and Beneficiary (as the same may be further
amended, supplemented, waived or otherwise modified from time to time the
"CREDIT AGREEMENT"). 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 Credit Agreement.
Background
A. Pursuant to an Exchange Agreement, dated as of January 30,
1998 (together with all other documents delivered in connection therewith, the
"TELEX/EVI MERGER DOCUMENTS"), EVI and Telex Communications, Inc., a Delaware
corporation, have effectuated a merger of Telex Communications, Inc. with and
into EV International, Inc. ("EVI"), with EVI continuing as the surviving
corporation, in the process changing its name to Telex Communications, Inc.
B. 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").
<PAGE> 3
C. Pursuant to the terms of the Credit Agreement, the Lenders
have agreed, among other things, to make the Loans in the maximum principal
amount not to exceed $150,000,000, having a maturity date of December 31, 2004,
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 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.
D. It is a condition precedent to the effectiveness of the
Amendment that Grantor executes and delivers this Deed of Trust.
Granting Clauses
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor agrees that to secured:
(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 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 May 6, 1997 between Telex Communications, Inc., Telex Communications
Group, TCI Holdings Corp. 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 Credit
Agreement) (the items set forth above being referred to collectively as
the "INDEBTEDNESS"); and
2
<PAGE> 4
(b) the performance of all covenants, agreements, obligations
and liabilities of Grantor (the "OBLIGATIONS") under or pursuant to the
provisions of the 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 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, 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, night, title, claim or demand whatsoever
of Grantor, in possession or expectancy, in and to the Real Estate or
any part thereof,
(C) all night, 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
3
<PAGE> 5
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 forgoing 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 an 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
4
<PAGE> 6
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 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
5
<PAGE> 7
performed or as otherwise expressly provided in the Section of this Deed of
Trust entitled "Reconveyance of Deed of Trust".
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 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 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 mark 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 Credit Agreement or herein, Grantor shall, not by
act or omission
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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 will 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 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 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 of title to interest in, or claim
upon the Premises subordinate to the lien of
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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 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),
(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,
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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 notation, 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);
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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 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
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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 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
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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 mal 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 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
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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 night to require Grantor to
repair or restore the Trust Property to the extent required by
subsection 7.5 of the 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 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 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, that (A) any such policy shall specify, or Grantor shall
furnish to Beneficiary a written statement from the insurer to 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
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Premises and the other Trust Property (B) each such blanket policy shall include
an indorsement 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 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 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 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 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
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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 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 Premise 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 proceeds, as provided above in subsection 5(f)(iii) above, and Grantor
agrees to execute any such assignment 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 Credit Agreement.
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(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 obligation, of
Grantor as lessor or the lessee thereunder;
(iv) exercise, within 5 business days after a reasonable
request by Beneficiary, any right 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
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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 charge in the provisions hereof; 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 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
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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 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 ind all other amounts payable with respect to the Loans, the
Letters of Credit, the Credit Agreement, this Deed of Trust and the other
Security Documents shall become due and payable as provided in the 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 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
weekly notices in some newspaper published in 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
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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 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
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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 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 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 limitations 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 an 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
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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.
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 or other manager 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.
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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
obligation herein mentioned, or (vi) make 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
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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 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 charge hereof.
(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, affecting the liability of any person for the payment
of the Indebtedness, and this Deed of Trust for endorsement, 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.
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(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 tinder 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
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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).
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
assign 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 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
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
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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 of 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 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
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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, 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.
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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
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.
34. WAIVER OF TRIAL BY JURY. GRANTOR, TRUSTEE AND
BENEFICIARY EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY
29
<PAGE> 31
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 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 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 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.
37. Conflict With 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 Credit Agreement, the terms and provisions
of the 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
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
30
<PAGE> 32
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.
This Deed of Trust has been duly executed by Grantor as of the
date first above written.
Signed, sealed and TELEX COMMUNICATIONS, INC.
delivered in our
presence: By:_______________________________
Name:
Title:
___________________________________
Name:
___________________________________
Name:
31
<PAGE> 33
STATE OF MINNESOTA )
: ss.:
COUNTY OF DAKOTA )
Personally appeared before
me,_____________________________________, with whom I am personally acquainted
(or proved to me on the basis of satisfactory evidence) and who, upon oath,
acknowledged himself to be the_____________________of TELEX COMMUNICATIONS,
INC., the within named bargainor, a Delaware corporation, and that he as such
____________________________, 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_______________________.
WITNESS my hand and seal at office this ___ day of February,
1998.
__________________________
Notary Public
My commission expires:
____________________________
(embossed seal)
32
<PAGE> 34
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 Est
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 the eastern
<PAGE> 35
366 Industrial Road
Newport, TN 37821
Cocke County
(page 2 of 2)
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 mi. 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.
<PAGE> 1
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: Dennis Daniel Kiely, Esq.
DEED OF TRUST, ASSIGNMENT OF RENTS
AND LEASES AND SECURITY AGREEMENT
from
TELEX COMMUNICATIONS, INC., Grantor
to
JOE B. PITT, JR., Trustee
for the use and
benefit of
THE CHASE MANHATTAN BANK, a, Administrative Agent, Beneficiary
DATED AS OF FEBRUARY 2, 1998
MAXIMUM PRINCIPAL INDEBTEDNESS FOR TENNESSEE
RECORDING TAX PURPOSES IS $15,000,000.
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 2, 1998, is made by TELEX
COMMUNICATIONS, INC., a Delaware corporation, formerly known as EV
International, Inc. ("GRANTOR"), whose address is 9600 Aldrich Avenue South,
Bloomington, MN 55420 to JOE B. PITT, JR., a resident of Davidson County,
Tennessee, ("TRUSTEE"), 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 May 6, 1997 among GST Acquisition
Corp., Morgan Stanley Senior Funding, Inc. ("Morgan Stanley") and Beneficiary,
as amended by Amendment No. 1 dated as of February 2, 1998 (the "AMENDMENT")
among Grantor, Morgan Stanley and Beneficiary (as the same may be further
amended, supplemented, waived or otherwise modified from time to time the
"CREDIT AGREEMENT"). 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 Credit Agreement.
Background
A. Pursuant to an Exchange Agreement, dated as of January 30,
1998 (together with all other documents delivered in connection therewith, the
"TELEX/EVI MERGER DOCUMENTS"), EVI and Telex Communications, Inc., a Delaware
corporation, have effectuated a merger of Telex Communications, Inc. with and
into EV International, Inc. ("EVI"), with EVI continuing as the surviving
corporation, in the process changing its name to Telex Communications, Inc.
B. 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").
<PAGE> 3
2
C. Pursuant to the terms of the Credit Agreement, the Lenders
have agreed, among other things, to make the Loans in the maximum principal
amount not to exceed $150,000,000, having a maturity date of December 31, 2004,
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 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.
D. It is a condition precedent to the effectiveness of the
Amendment that Grantor executes and delivers this Deed of Trust.
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 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 May 6, 1997 between Telex Communications, Inc., Telex Communications
Group, TCI Holdings Corp. and Beneficiary (the "GUARANTEE") of any
other document made, delivered or given in connection there with, 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
<PAGE> 4
3
Loan Party pursuant to the 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 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 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, 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
<PAGE> 5
4
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 fore going (collectively, as any
of 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");
<PAGE> 6
5
(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;
(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 "CON TRACTS"), (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;
<PAGE> 7
6
(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 "Reconveyance of Deed of Trust".
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 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 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 sub division 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
<PAGE> 8
7
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 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 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 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 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.
<PAGE> 9
8
(b) Nothing herein shall affect any night 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 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 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
<PAGE> 10
9
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, 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
<PAGE> 11
10
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
(ix) such other insurance in such amounts as Beneficiary may
reason ably 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
<PAGE> 12
11
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 this
Section, deliver a renewed policy or
<PAGE> 13
12
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
<PAGE> 14
13
over to Grantor; provided that Grantor shall, promptly after any such
damage, repair any such damage to the extent required by subsection 7.5
of the 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 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
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 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 assign able 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.
<PAGE> 15
14
(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 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 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 Credit
Agreement, Grantor shall repair, restore,
<PAGE> 16
15
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
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 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 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.
<PAGE> 17
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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 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
(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.
<PAGE> 18
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(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 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
<PAGE> 19
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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 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 Credit Agreement, this Deed of Trust and the other
Security Documents shall become due and payable as provided in the 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 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:
<PAGE> 20
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(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 venue 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 night 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 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 detective
in the opinion of the Beneficiary, such sale shall not exhaust the
power of sale hereunder and the
<PAGE> 21
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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 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 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 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
<PAGE> 22
21
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.
16. Right of Beneficial 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.
<PAGE> 23
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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 or other manager 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
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, tights, powers or remedies of Beneficiary or Trustee hereunder, and such
liens, rights, powers and remedies shall continue unimpaired.
<PAGE> 24
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(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 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.
<PAGE> 25
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20. Security Agreement under Uniform Commercial Code. (a) It
is the intention of the parties 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 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 expense 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
<PAGE> 26
25
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 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.
<PAGE> 27
26
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 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 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.
<PAGE> 28
27
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
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
<PAGE> 29
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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 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
<PAGE> 30
29
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
rights 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.
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
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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
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.
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 Credit Agreement or any other evidence of indebtedness
secured by this Deed of Trust," the word "person"
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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 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 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.
37. Conflict With 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 Credit Agreement, the terms and provisions
of the 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
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.
<PAGE> 33
This Deed of Trust has been duty executed by Grantor as of the
date first above written.
Signed, seated and TELEX COMMUNICATIONS, INC.
delivered in our
presence By: /s/ John A. Palleschi
-------------------------------------
Name: John A. Palleschi
Title: Vice President
/s/ Joe P. Winebarger
- - ------------------------
Name: Joe P. Winebarger
/s/ John Barthelemy
- - ------------------------
Name: John Barthelemy
<PAGE> 34
STATE OF MINNESOTA )
: ss.:
COUNTY OF DAKOTA )
Personally appeared before me, John A. Palleschi with whom I
am personally acquainted (or proved to me on the basis of satisfactory evidence)
and who, upon oath, acknowledged himself to be the Vice President of TELEX
COMMUNICATIONS, INC., the within named bargainor, a Delaware corporation, and
that he as such Vice President, 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 Vice President.
WITNESS my hand and seal at office this 2nd day of February,
1998.
/s/ Larry A. Hendrickson
-----------------------------
Notary Public
My commission expires:
January 31, 2000
(embossed seal)
<PAGE> 35
SCHEDULE A
Land situated in the Fifth (5th) Civil District of Sevier County, Tennessee,
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 intersect with the eastern edge of
a 30.0 foot easement for water to Cherokee Textile Mills and the Industrial Park
Access Road; thence with the southern right of way line 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 08 deg. 48 min. West
273.0 feet to a stake; thence continuing with the line of John R. Burchfiel,
South 04 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 30.0 foot easement for
water to Cherokee Textile Mills and the Industrial Park Access Road; thence with
the eastern edge of the 30.0 foot easement for water to Cherokee Textile Mills
and the Industrial Park Access Road, North 08 deg. 50 min. West 720.4 feet to
the point of beginning, as shown on survey of Jones Engineering Company, Sevier
County, Tennessee, dated February 11, 1965.
Being the same property conveyed to Electro-Voice of Tennessee, Inc. by deed
from Industrial Development Board of Sevier County, Tennessee, dated August 30,
1985, and of record in Warranty Deed Book 355, page 177, in the Sevier County,
Tennessee, Register of Deeds Office. For title reference also see Certificate of
Ownership and Merger of record in Miscellaneous Book 295, page 754, in the
Sevier County, Tennessee, Register of Deeds Office, merging Electro-Voice
Tennessee Incorporated into Electro-Voice, Incorporated, and notice of
Certificate of Ownership changing name of Electro-Voice, Incorporated to EV
International, Inc., of record in Miscellaneous Book 295, page 758, in the
Sevier County, Tennessee, Register of Deeds.
<PAGE> 1
Exhibit 12A
Schedule 12A
Telex Communications, Inc. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(In millions)
<TABLE>
<CAPTION>
New basis of accounting Predecessor basis of accounting
--------------------------------------- ------------------------------------------------
Fiscal Year Period from Period from Fiscal year ended the last day of
Ended February 11, March 1, 1996 February
February 28 through through ---------------------------------
1998 February 28, 1997 February 10, 1997 1996 1995 1994
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before
income taxes $ (35.2) $ 1.5 $ 14.5 $ 17.7 $ 19.5 $ 19.6
Interest expense 40.6 0.8 -- -- -- --
Interest portion of
rent expense 0.8 - 0.6 0.6 0.5 0.5
----------------------------------------------------------------------------------------------
Adjusted income before
income taxes $ 6.2 $ 2.3 $ 15.1 $ 18.3 $ 20.0 $ 20.1
----------------------------------------------------------------------------------------------
Fixed charges:
Interest expense $ 40.6 $ 0.8 $ - $ - $ - $ -
Interest portion of
rent expense 0.8 - 0.6 0.6 0.5 0.5
----------------------------------------------------------------------------------------------
Total fixed charges $ 41.4 $ 0.8 $ 0.6 $ 0.6 $ 0.5 $ 0.5
==============================================================================================
Ratio of earnings to
fixed charges(1) 0.1 2.9
==================================
</TABLE>
(1) The ratio of earnings to fixed charges is not meaningful for any periods
prior to February 11, 1997 due to the absence of interest expense in the
Company's Financial Statements.
Page 1
<PAGE> 1
Exhibit 12 B
SCHEDULE 12B
Telex Communications, Inc. and Subsidiaries
Computation of EBITDA to Interest Expense
(In millions)
<TABLE>
<CAPTION>
New basis of accounting Predecessor basis of accounting
------------------------------ ------------------------------------------------------
Fiscal Year Period from Period from Fiscal year ended the last day
Ended February 11, March 1, 1998 February
February 28 through through ---------------------------------
1998 February 28, 1997 February 10, 1997 1996 1995 1994
----------- ----------------- ----------------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
EBITDA(1) $22.4 $2.7 $19.6 $22.8 $24.3 $24.0
Interest Expense $39.5 $0.8 $ -- $ -- $ -- $ --
Ratio of EBITDA to interest expense 0.6 3.4 -- -- -- --
</TABLE>
(1) Included in Fiscal 1998 EBITDA, as presented, are non-cash compensation
charges for stock options associated with the Recapitalization,
non-recurring charges for management cash bonus, restructuring charges and
non-cash impairment loss. Not included in the Fiscal 1998 results, as
presented, is the proforma impact of the Merger of Old Telex and Old EVI.
Page 1
<PAGE> 1
Exhibit 21
Subsidiaries of Registrant
Jurisdiction of
Incorporation
---------------
TCI Exports, Ltd. Barbados
Telex Communications (SEA) PTE, Ltd. Singapore
Telex Communications (U.K.) Ltd. England
Telex Communications Ltd. Ontario, Canada
Telex Communications International, Ltd. Delaware
Saguaro Electronica, S.A. de C.V. Mexico
Altec Lansing, International England
Audio Consultants Co., Ltd. Hong Kong
Cetec International Limited England
Dearden Davies Associates Limited England
Dynacord S.A. France
EVI Audio (U.K.) PLC England
EVI Audio Japan Ltd. Japan
EVI Audio France S.A. France
EVI Audio (Honk Kong) Limited Hong Kong
EVI Audio International Holding Company, Inc. Delaware
EVI Audio (Aust.) Pty. Australia
EVI Audio Canada Inc. Canada (fed. reg.)
EVI Audio (Deutschland) GmbH Germany
EVI Audio GmbH Germany
EVI Audio (Switz.) A.G. Switzerland
Nivenfeld (1992) Limited England
Rebis Audio Limited England
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 5,163
<SECURITIES> 0
<RECEIVABLES> 59,106
<ALLOWANCES> 0
<INVENTORY> 81,945
<CURRENT-ASSETS> 161,725
<PP&E> 50,942
<DEPRECIATION> 0
<TOTAL-ASSETS> 303,421
<CURRENT-LIABILITIES> 90,504
<BONDS> 329,875
0
0
<COMMON> 0
<OTHER-SE> (123,009)
<TOTAL-LIABILITY-AND-EQUITY> 303,421
<SALES> 315,544
<TOTAL-REVENUES> 315,544
<CGS> 195,776
<TOTAL-COSTS> 108,765
<OTHER-EXPENSES> 6,626
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,535
<INCOME-PRETAX> (35,158)
<INCOME-TAX> (1,371)
<INCOME-CONTINUING> (33,787)
<DISCONTINUED> 0
<EXTRAORDINARY> 20,579
<CHANGES> 0
<NET-INCOME> (54,366)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
